Re Broad and Secretary, Department of Family and Community Services
[2003] AATA 1017
•10 October 2003
Administrative
Appeals
Tribunal
DECISION AND REASONS FOR DECISION [2003] AATA 1017
ADMINISTRATIVE APPEALS TRIBUNAL )
) No Q2003/516
GENERAL ADMINISTRATIVE DIVISION ) Re WAYNE BROAD Applicant
And
SECRETARY, DEPARTMENT OF FAMILY AND COMMUNITY SERVICES
Respondent
DECISION
Tribunal Mr R G Kenny, Member Date10 October 2003
PlaceBrisbane
Decision The Tribunal affirms the decision under review. ...................(Sgd)......................
R G Kenny
Member
CATCHWORDS
SOCIAL SECURITY – lump sum compensation payment – payment by way of compensation – compensation affected payment – lump sum preclusion period and calculation thereof – whether amount foregone by insurer part of lump sum - whether to treat part of lump sum as not having been made – special circumstances
Social Security Act 1991 ss 17, 1169, 1170, 1171, 1184K
Social Security Legislation Amendment Act (No 1) 1995Beadle v Director-General of Social Security (1985) 60 ALR 225
Department of Social Security v Banks (1990) 20 ALD 19 362
Groth v Secretary, Department of Social Security (1995) 40 ALD 541Re Navrital and Secretary, Department of Family and Community Services (2002) 69 ALD 777
Re Beadle and Director-General of Social Security (1984) 1 AAR 362
REASONS FOR DECISION
10 October 2003 Mr R G Kenny, Member The Application
1. On 2 August 2002, Wayne Broad (the applicant) entered into a Deed of Discharge with his former employer, Gay Constructions, and Workcover Queensland (WorkCover) in respect of a claim for compensation by him in relation to a workplace injury sustained by him on 1 September 1998. In accordance with that deed, he was to receive a lump sum payment of $232,500.
2. The applicant had been paid periodic compensation payments from WorkCover after his injury until 22 June 1999 and then disability support pension in accordance with the Social Security Act 1991 (the Act). On 12 September 2002, Centrelink, on behalf of the Department of Family and Community Services (the respondent), claimed recovery of an amount of $22,223.47 from WorkCover, representing the disability support pension payments paid by Centrelink to the applicant from 22 June 1999 until 9 September 2003. Centrelink’s calculations of that recovery amount were based on 50% of $261,695.92 comprising the settlement sum of a total of $232,500 together with an amount that Workcover agreed to forego of $50,419.45 less the periodic WorkCover payments of $21,223.53. Centrelink applied the formula, as provided for in the relevant provisions of the Act (see below), to that sum. It determined that a preclusion period of 220 weeks was applicable to the applicant and that this equated with the amount of $22,223.47 claimed from WorkCover.
3. That decision was affirmed by an authorised review officer on 23 April 2003 and, in turn, by the Social Security Appeals Tribunal on 20 May 2003. On 25 June 2003, the applicant sought review of that decision by the Administrative Appeals Tribunal (the Tribunal).
Appearances
4. The applicant did not attend the hearing but spoke to the Tribunal by telephone. He was not represented. Mr S Letch appeared on behalf of the respondent.
5. At the hearing, the documents prepared in accordance with section 37 of the Administrative Appeals Tribunal Act 1975 (the T documents: T1–T39) were taken into evidence as Exhibit 1.
Issues, Legislation and Background
6. The Act makes provision for the respondent to impose a period of preclusion from receipt of income support payments in certain situations where a person has received lump sum compensation for injury. The provision relevant to payability of such payments during a preclusion period reads:
“1169(1) If:
(a) a person receives or claims a compensation affected payment; and
(b) the person receives a lump sum compensation payment;
the compensation affected payment is not payable to the person in relation to any day or days in the lump sum preclusion period.”
7. The term compensation affected payment is defined in sub-section 17(1) of the Act and includes disability support pension. The term lump sum compensation payment is not defined in the Act but the term compensation is defined in sub-section 17(2) which reads:
“Subject to subsection (2B), for the purposes of this Act, compensation means:
(a) a payment of damages; or
(b) a payment under a scheme of insurance or compensation under a Commonwealth, State or Territory law, including a payment under a contract entered into under such a scheme; or
(c) a payment (with or without admission of liability) in settlement of a claim for damages or a claim under such an insurance scheme; or
(d) any other compensation or damages payment;
(whether the payment is in the form of a lump sum or in the form of a series of periodic payments and whether it is made within or outside Australia) that is made wholly or partly in respect of lost earnings or lost capacity to earn resulting from personal injury.”
8. Since its amendment in 1995, the Act has made provision for separate lump sum payments made to a person in relation to injuries arising from the same event to be treated as a single sum. The provision was in sub-section 17(2B) of the Act but, since amendment from 20 September 2001, the provision is now in section 1171 of the Act which reads:
“(1) If:
(a) a person receives 2 or more lump sum payments in relation to the same event that gave rise to an entitlement of the person to compensation (the multiple payments); and
(b) at least one of the multiple payments is made wholly or partly in respect of lost earnings or lost capacity to earn;
the following paragraphs have effect for the purposes of this Act and the Administration Act:
(c) the person is taken to have received one lump sum compensation payment (the single payment) of an amount equal to the sum of the multiple payments;
(d) the single payment is taken to have been received by the person:
(i) on the day on which he or she received the last of the multiple payments; or
(ii) if the multiple payments were all received on the same day, on that day.
(2) A payment is not a lump sum payment for the purposes of paragraph (1)(a) if it relates exclusively to arrears of periodic compensation.”
9. The component of the lump sum that may be taken into account is referred to as the compensation part of a lump sum which term is defined in the Act as follows:
“17(3) Subject to subsection (4), for the purposes of this Act, the compensation part of a lump sum compensation payment is:
(a) 50% of the payment if the following circumstances apply:
(i) the payment is made (either with or without admission of liability) in settlement of a claim that is, in whole or in part, related to a disease, injury or condition; and
(ii) the claim was settled, either by consent judgment being entered in respect of the settlement or otherwise; or
(ab) 50% of the payment if the following circumstances apply:
(i) the payment represents that part of a person's entitlement to periodic compensation payments that the person has chosen to receive in the form of a lump sum; and
(ii) the entitlement to periodic compensation payments arose from the settlement (either with or without admission of liability) of a claim that is, in whole or in part, related to a disease, injury or condition; and
(iii) the claim was settled, either by consent judgment being entered in respect of the settlement or otherwise; or
(b) if those circumstances do not apply—so much of the payment as is, in the Secretary's opinion, in respect of lost earnings or lost capacity to earn.
17(3A) Paragraph (3)(d) does not apply to a compensation payment if:
(a) the recipient has made contributions (for example, by way of insurance premiums) towards the payment; and
(b) the agreement under which the contributions are made does not provide for the amounts that would otherwise be payable under the agreement being reduced or not payable because the recipient is eligible for or receives payments under this Act that are compensation affected payments.”
10. Pursuant to sub-section 1170(1) of the Act, where periodic payments, as that term is defined in sub-section 17(1) of the Act, have been made, a lump sum preclusion period begins on the day after the last day of the periodic payment period. The length of that preclusion period is determined in accordance with the formula in sub-sections 1170(4) and (5) of the Act which read:
“(4) The number of weeks in the lump sum preclusion period in relation to a person is the number worked out under the formula:
Compensation part of lump sum
Income cut‑out amount
(5) If the number worked out under subsection (4) is not a whole number, the number is to be rounded down to the nearest whole number.”
11. The term income cut‑out amount is defined in sub-sections 17(1) and (8) of the Act. Sub-section 17(1) of the Act reads:
“income cut-out amount, in relation to a person who has received a compensation payment, means the amount worked out using the formula in subsection (8), as in force at the time when the compensation was received.”
12. Also, where periodic payments have been paid and then a lump sum is paid, sub-section 17(4) of the Act applies to remove the periodic payments from the calculation of the preclusion period. It reads:
“Where a person:
(a) has received periodic compensation payments; and
(b) after receiving those payments, receives a lump sum compensation payment (in this subsection called the LSP ); and
(c) because of receiving the LSP, becomes liable to repay an amount (in this subsection called the Repaid Periodic Compensation Payment — RPCP ) equal to the periodic compensation payments received;
then, for the purposes of subsection (3), the amount of the lump sum compensation payment is:
LSP – RPCP”
13. Where income support has been given during the period of preclusion, as in this case, the charge monies are able to be recovered directly from the insurer, in this case WorkCover, pursuant to the operation of the provisions in Part 3.14 of the Act.
14. The matters in issue relate to whether the quantum of the lump sum utilised in the application of the statutory formula, and which led to the preclusion period of 220 weeks, was correctly calculated and whether the applicant was qualified for a pensioner concession card during any such preclusion period.
Consideration
15. The facts in this case are not in dispute. The applicant sustained a workplace injury on 1 September 1998 and entered, on 2 August 2002, into a Deed of Discharge with his former employer and WorkCover in respect of a claim for compensation in accordance with which he was to receive a lump sum payment of $232,500. The deed contained the following clause:
“WorkCover acknowledges that it shall not be entitled to a refund out of the payments referred to in clauses 1 and 2 hereof in respect to Worker's Compensation benefits paid in relation to the injuries the subject of the claim in the sum of Fifty Thousand Four Hundred And Nineteen Dollars And Forty Five Cents ($50,419.45)..”
16. The amount foregone by WorkCover of $50,419.45 comprised payments made by WorkCover for items relating to care management of the applicant and the amount that the applicant was paid was the settlement sum of $232,500. The applicant was paid periodic compensation payments by WorkCover after his injury until 22 June 1999 and then disability support pension in accordance with the Act.
17. In calculating the amount to be recovered of $22,223.47, the respondent utilised the formula in sub-section 1170(4) of the Act and, in doing so, used the income cut-out amount of $592.50. In calculating the compensation part of the lump sum, it applied 50% to the total of $261,695.92 comprising the settlement sum of a total of $232,500 together with an amount that Workcover agreed to forego of $50,419.45 less the periodic WorkCover payments of $21,223.53.
18. It was contended by the applicant that the amount of $50,419.45 should not have been taken into account because he had consented in his agreement to receiving a sum of $232,500 and that should be the only amount to which the respondent should have applied the formula. He also contended that he was entitled to a pensioner concession card because the level of income that he was deemed to be getting by the respondent in adopting the cut-out amount of $592.50 was less than a level which he submitted was a relevant threshold for availability of the card ie an amount in the order of $620. He also contended that the preclusion period calculated by the respondent should have commenced on the date of his injury and not the date of cessation of his periodic compensation payments.
19. The purpose behind the introduction of the application of a formula to lump sum payments made in the settlement of a claim, as in this case, for common law damages, has been frequently stated and, in Department of Social Security v Banks (1990) 20 ALD 19, von Doussa J referred to the abuses of earlier compensation recovery provisions by manipulation of settlements to obscure the economic loss component in the compensation payment. The effect of the provisions of the Act outlined above is to deem 50% of a lump sum payment to be the compensation part and to have been made in respect of lost earnings or capacity to earn.
20. Not every lump sum that a person receives constitutes a lump sum compensation payment. For that to be so, it must come within the meaning of one of paragraphs (a) to (d) of the definition of compensation in sub-section 17(2) of the Act. That provision is set out above and the categories in that provision are:
(a)a payment of damages; or
(b)a payment under a scheme of insurance or compensation under a Commonwealth, State or Territory law, including a payment under a contract entered into under such a scheme; or
(c) a payment (with or without admission of liability) in settlement of a claim for damages or a claim under such an insurance scheme; or
(d)any other compensation or damages payment.
21. It is not disputed that the sum of $232,500 must be included in determining the lump sum preclusion period. Clearly, it falls within the terms of sub-section 17(2) of the Act. Also, it is accepted that the amount of periodic payments received by the applicant amounting to $21,223.53 must be deducted from the compensation amount in accordance with sub-section 17(4) of the Act.
22. The amount of $50,419.45 foregone by WorkCover related to payments for items such as hospital, medical, rehabilitation and disability expenses, respectively, which were made prior to the parties entering into the Deed of Discharge and were related to the discharge of statutory obligations of WorkCover.. I am satisfied that these come within paragraph 17(2)(b) of the Act. However, that, by itself, would not be sufficient for them to fall within the ambit of sub-section 17(2) because the provision also requires that a payment be made wholly or partly in respect of lost earnings or lost capacity to earn before sub-section 17(2) of the Act has application. That description is not necessarily applicable to the various forms of payments made by the respondent for those hospital, medical, rehabilitation and disability expenses which are unrelated to earnings. It was submitted by Mr Letch that, despite that conclusion, the payments comprising the amount of $50,419.45 may be characterised as being in relation to lost earnings or lost capacity to earn because of the effect of sub-section 1171(1) of the Act and in reliance on the decision of the Tribunal in Re Navrital and Secretary, Department of Family and Community Services (2002) 69 ALD 777.
23. In this case, it is not disputed that there was but one event which, under sub-section 17(5A) of the Act, was the applicant’s accident. Sub-section 1171(1) of the Act is satisfied where more than one payment was made in relation to one event and it deems the person to have received one lump sum comprising the total of the individual amounts. It deems that aggregate amount to be one lump sum compensation payment. In Re Navrital (above), the facts were not materially different from those of the applicant. However, the then equivalent of sub-section 1171(1) of the Act was sub-section 17(2B) which has since been repealed and which not only deemed that the various payments be aggregated into a single lump sum compensation payment, but also declared that the total lump sum was made wholly or partly in respect of lost earnings or lost capacity to earn. The Tribunal applied the formula to the aggregated sum in reliance on that provision. In its present form, sub-section 1171(1) of the Act only deems the various payments to be part of a single lump sum compensation payment.
24. Despite the difference in the wording between the former provision and sub-section 1171(1) of the Act, I am satisfied that the effect of the provisions is the same: see the Explanatory Memorandum to the Family and Community Services Legislation (Simplification and Other Measures) Bill 2001. Once the various payments are taken to be a single lump sum compensation payment, it is a single sum to which the formula in sub-section 1170(4) of the Act must be applied. Therefore, even though the payments for hospital, medical, and rehabilitation expenses were not actually for the purpose relating to lost earnings or capacity to earn, they will be deemed to have been received for that purpose by sub-section 1171(1) of the Act.
25. I am satisfied that the respondent correctly calculated the compensation part of the lump sum by applying the formula in sub-section 1170(4) of the Act to 50% to the total of $261,695.92 comprising the settlement sum of a total of $232,500 together with an amount that WorkCover agreed to forego of $50,419.45 less the periodic WorkCover payments of $21,223.53.
26. The applicant submitted that the relevant cut-out amount was one other than $592.50 but I am satisfied that the respondent correctly utilised the amount which, in accordance with sub-sections 17(1) and (8) of the Act, was appropriate at the time when the compensation was received.
27. I have also noted the applicant’s contentions concerning the pensioner concession card. That matter is provided for in sub-section 1061ZA(1) of the Act which provides that the applicant is qualified for a pensioner concession card on a particular day if a social security pension, which includes disability support pension, is payable to him for that day. In accordance with sub-section 1169(1) of the Act, the applicant’s disability support pension was not payable to him in relation to any day or days during the lump sum preclusion period. Accordingly, he was not able to have a pensioner concession card until his preclusion period finished.
28. Here, I am satisfied that the lump sum preclusion period of 220 weeks was calculated correctly by the respondent. That period commences, in accordance with sub-section 1170(1) of the Act, from the date when periodic compensation payments ended and I am satisfied that the amount to be recovered from WorkCover of $22,223.47 was also calculated correctly by the respondent.
29. Section 1184K of the Act makes provision for part of the compensation payment to be treated as if it were not made and this has the effect of reducing the preclusion period. It reads:
“(1) For the purposes of this Part, the Secretary may treat the whole or part of a compensation payment as:
(a) not having been made; or
(b) not liable to be made;
if the Secretary thinks it is appropriate to do so in the special circumstances of the case.”
30. The Act provides no guidance as to the meaning of the term special circumstances but the concept has been the subject of consideration in a range of legislative provisions relating to Social Security law. In Beadle v Director-General of Social Security (1985) 60 ALR 225, the Federal Court stated that it was not possible to lay down precise limits or precise rules for the meaning of the term as it is applied in the context of the Act. The Court indicated that this would depend upon the circumstances of each particular case but commented that, even though the term lacks precision, it was sufficiently understood “not to require judicial gloss" (at 228). There, the Court affirmed the decision of the Tribunal (Re Beadle and Director-General of Social Security(1984) 1 AAR 362) where (at 364) the Tribunal had acknowledged that the term was "incapable of precise or exhaustive definition" and that, to be special, the circumstances must be “unusual, uncommon or exceptional” and must have a “particular quality of unusualness that permits them to be described as special".
31. In Groth v Secretary, Department of Social Security (1995) 40 ALD 541, Kiefel J, after referring to the Federal Court's decision in Beadle, observed (at 545) that special circumstances:
“would require something to distinguish… [the]… case from others, to take it out of the usual or ordinary case. … It would of course follow that if one were to conclude that something unfair, unintended or unjust had occurred that there must be some feature out of the ordinary.”
32. The applicant did not make a submission in respect of special circumstances. He is currently in receipt of disability support pension again and has been re-issued with a pensioner concession card. He also advised the Tribunal that he has savings to his credit and I am satisfied that the discretion to treat a part of his compensation payment as not having been made should not be exercised.
Decision
33. The decision under review is affirmed.
I certify that the 33 preceding paragraphs are a true copy of the reasons for the decision herein of Mr R G Kenny, Member
Signed: Sarah Oliver
AssociateDate of Hearing 3 October 2003
Date of Decision 10 October 2003The Applicant appeared in person
For the Respondent Mr Letch, Departmental Advocate
6
3
0