Roby Haryanto and Secretary, Department of Social Services
[2014] AATA 481
[2014] AATA 481
Division GENERAL ADMINISTRATIVE DIVISION File Number(s)
2013/5655
Re
Roby Haryanto
APPLICANT
And
Secretary, Department of Social Services
RESPONDENT
DECISION
Tribunal Mr S. Webb, Member
Date 14 July 2014 Place Perth The decision under review is affirmed.
.....[sgd] S Webb…....................
Mr S. Webb, Member
SOCIAL SECURITY – claim for Newstart Allowance – compensation for work injury – payment of medical treatment and other expenses, periodic payments and lump sum compensation by previous employer’s insurer prior to settlement – transfer of liability – lump sum settlement of claim – reimbursement of previous employer’s insurer – periodic payments excluded from calculation of lump sum – compensation part of lump sum – calculation of preclusion period – no special circumstances – decision affirmed
Social Security Act 1991, s 17, 1164, 1169, 1170, 1171
Groth v Secretary, Department of Social Security (1995) 40 ALD 541
Re Fuller and Secretary, Department of Family and Communities Services [2004] AATA 615
Secretary, Department of Social Security v Banks (1990) 23 FCR 416
Secretary, Department of Social Security v Cunneen [1997] FCA 1033
Singh v Secretary, Department of Family and Community Services [2004] FCA 1685REASONS FOR DECISION
Mr S. Webb, Member
14 July 2014
Roby Haryanto was injured when he fell from a ladder in employment. He claimed and was paid weekly compensation, as well as a number of lump sum compensation payments. In view of this, a ‘lump sum preclusion period’ applied, during which he was precluded from obtaining ‘compensation affected’ social security payments, including Newstart Allowance. Before completion of the preclusion period, Mr Haryanto lodged a claim for Newstart Allowance. His claim was rejected. This decision was affirmed by the Social Security Appeals Tribunal. Mr Haryanto applied for review.
In order to determine Mr Haryanto’s claim for Newstart Allowance, it is necessary to determine whether a lump sum preclusion period applies under the Social Security Act 1991 (the Act) and, if so, whether there are special circumstances that render it appropriate to treat all or part of the lump sum compensation as not having been made. When deciding whether a preclusion period applies, it is necessary to determine –
(a)the amount of Mr Haryanto’s ‘lump sum compensation payment’ for the purposes of Part 3.14 of the Act;
(b)the ‘compensation part of a lump sum compensation payment’ for the purposes of s 17 of the Act;
(c)the duration of the resulting compensation preclusion period calculated under s 1170; and
(d)whether there are special circumstances for the purposes of s 1184K that render it appropriate to treat all or part of the compensation lump sum as not having been made, thereby reducing the duration of the preclusion period.
Lump sum compensation payment
On 4 July 2012, consent orders[1] were made in settlement of Mr Haryanto’s compensation claim against Cutting Edge Replacement Pty Ltd (Cutting Edge) and QBE Workers Compensation (NSW) Ltd (QBE) on behalf of its insured Fervour Pty Ltd (trading as Cranetech) (Fervour), which is no longer registered as a corporation. Mr Haryanto was awarded $611,500 against Cutting Edge and $486,347 against QBE, noting that he had received $360,000 in compensation payments paid to him or on his behalf by QBE on account of Fervour. And, furthermore, in respect of the award against Cutting Edge, Cutting Edge was to pay Mr Haryanto the sum of $373,000 and QBE the sum of $238,500. Mr Haryanto was to retain the sum of $121,500 from compensation payments in full settlement of his claim against QBE.
[1] T6.
At first blush, considering these arrangements, the total amount of the compensation settlement award might appear to be $1,097,847. But Mr Haryanto’s previous lawyers informed Centrelink that his claim “settled for $611,500 inclusive of costs”[2]. As will appear, it is not established, and it should not be assumed, that either of these amounts is to be treated as Mr Haryanto’s ‘lump sum compensation payment’.
[2] T7 folio 20.
Of the $611,500 awarded against Cutting Edge, $238,500 was to be paid to QBE. This amount represents a partial reimbursement by Cutting Edge of payments previously made by QBE to Mr Haryanto. It is not presently established that Mr Haryanto received any part of this amount as compensation additional to that paid previously by QBE. I am satisfied that he did not.
Of the $486,347 awarded against QBE, it appears that Mr Haryanto was to retain $121,500 previously paid to him or on his behalf by QBE in full and final settlement of his claim against QBE. The consent orders record that Mr Haryanto received $360,000 in compensation previously paid to him or on his behalf by QBE. It is not presently established that Mr Haryanto received any further compensation pursuant to the consent order award against QBE. Once again, I am satisfied that he did not.
At this point it is important to observe that the award against QBE did not establish Mr Haryanto’s entitlement to payment of lump sum compensation in the amount of $486,347. It is probable that this amount was an accounting or quantification of amounts previously paid by QBE against Mr Haryanto’s claim. Mr Haryanto’s entitlement to and QBE’s liability for payment of compensation was established, and payments were made, well before the terms of settlement were perfected into the consent orders made by the Court.
There is some controversy about whether the $238,500 reimbursement to QBE and the $121,500 Mr Haryanto was previously paid by QBE (which he retained in full discharge of QBE’s liability) are to be treated as part of his ‘lump sum compensation payment’ for present purposes. It is necessary to consider the terms of the legislation.
For the purposes of the Act, ‘compensation’ is given meaning in s 17(2) -
(2) 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.
In the context of Part 3.14, ‘compensation’ is an amount that is received by a claimant. The compensation preclusion period provisions in ss 1169 and 1170 apply in respect of a lump sum compensation payment that is received by the person. The conception of receipt is given a broad meaning under s 17(5) –
(5) A person receives compensation whether he or she receives it directly or whether another person receives it, on behalf of, or at the direction of the first person.
The present evidence does not establish that the amount of $238,500 Cutting Edge paid to QBE was compensation received by, or on behalf of, or at the direction of Mr Haryanto - the Court’s consent order reflects a transfer of liability for Mr Haryanto’s compensation claim and reimbursement to QBE of amounts previously paid to him. Clauses 3, 4 and 5 of the terms of settlement set out agreed amounts and mechanisms for this purpose, including recovery of compensation previously paid to Mr Haryanto by QBE and retention by him of an amount of the compensation he was previously paid. These arrangements do not constitute additional compensation to Mr Haryanto, rather a reckoning and balancing of changing liabilities. Treating the Cutting Edge payment to QBE as compensation received by Mr Haryanto would serve to artificially inflate the amount of compensation awarded for his injury and the amount of the lump sum compensation he received.
I am satisfied that the $238,500 amount Cutting Edge was to pay to QBE is not additional compensation payable to Mr Haryanto over and above the compensation he had already received, directly or indirectly, from QBE. It is an amount that should be deducted under the terms of s 17(4).
As to the award of $486,347 against QBE and the amount of $121,500 previously paid to Mr Haryanto, which he is to retain under the terms of settlement, it is necessary to consider the manner and timing of all previous payments of compensation to Mr Haryanto in respect of his injury.
On this point, at hearing, I directed the Secretary to obtain further and better particulars from QBE of the calculation of the amount awarded against QBE in the consent order, as well as the amounts of compensation QBE paid to or on behalf of Mr Haryanto, the amount of previously paid compensation to be retained by Mr Haryanto under the terms of settlement, and the amount QBE recovered under the terms of settlement from Cutting Edge. In response, QBE produced a spreadsheet. As the particular information about the calculation of the award and the recovery from Cutting Edge was not able to be determined with any precision from the spreadsheet, further and better particulars were again sought from QBE; but none were forthcoming.
I will do the best I can with the present materials.
In the period from June 2006 to August 2012, QBE paid out $458,440.63 on Mr Haryanto’s compensation account[3]. This included periodic weekly compensation in lieu of wages from 23 June 2006 to 15 July 2012, totalling $203,588.42, and $76,210.41 in medical expenses. In June 2011, QBE paid Mr Haryanto two lump sums, totalling $83,125 - $17,500 for pain and suffering and $65,625 for permanent impairment. I note in passing that the lump sum for permanent impairment was reduced by $8,312.50, but this amount appears to have then been refunded to Mr Haryanto. Furthermore, QBE expended $87,766.43 in legal costs, investigations and related expenses. The remaining amount of $7,750.37 was expended on costs relating to travel, rehabilitation and other incidental items.
[3] Exhibit 2.
The Secretary contends that the amount of QBE’s legal costs and investigations do not constitute payments made to, for or on behalf of Mr Haryanto. There is insufficient evidence before me to determine this matter with any certainty. But I am inclined to accept the Secretary’s submission that the amount of these payments should be excluded for present purposes and the amount of $360,000 recorded in the consent orders as compensation previously received by Mr Haryanto should be applied. I accept the Secretary’s contention that the actual amount paid out by QBE after deduction of legal and related expenses ($370,674) may have been rounded to $360,000 for settlement purposes.
The difference between the amount QBE paid to Mr Haryanto ($458,440.63), as detailed and quantified in the spreadsheet in Exhibit 2, and the amount awarded against QBE under the consent order ($486,347) is at large. No explanation has been provided for this discrepancy. The materials provided by QBE do not address or clarify the point. The present evidence does not establish that Mr Haryanto was paid the balance of $27,906, or that he received this amount, directly or indirectly. On the present materials, I can go no further on this point. In these circumstances, I think the preferable course is to exclude this amount from calculation of Mr Haryanto’s lump sum compensation payment.
As to the two previous lump sum compensation payments Mr Haryanto received from QBE, there is no question that these lump sums were paid in respect of the same event that entitled Mr Haryanto to compensation. For this reason, under s 1171, they are not to be treated separately and must be included in the calculation of Mr Haryanto’s overall lump sum compensation payment amount.
Mr Haryanto says that he did not receive the total amount of compensation referred to in the consent orders, as a substantial amount was deducted for costs and a further amount was withheld to cover repayments to Medicare. I understand these arguments, and they raise a difficult issue about the meaning of ‘lump sum’ and ‘receives compensation’. Arguments of this kind were considered by Downes J in Re Fuller and Secretary, Department of Family and Communities Services at [15] to [22][4]. Issues of a similar character were addressed by Gray J in Singh v Secretary, Department of Family and Community Services at [38] to [40][5]. In both cases, earlier authorities were carefully considered, namely Secretary, Department of Social Security v Cunneen[6] and Secretary, Department of Social Security v Banks[7]. While Downes J raised some doubt about the construction of the term ‘lump sum’ applied in these cases, he did not depart from it but saw fit to remit an issue of fairness to the Secretary. The issue of fairness concerned the inclusion of costs when calculating a preclusion period.
[4] [2004] AATA 615.
[5] [2004] FCA 1685.
[6] [1997] FCA 1033.
[7] (1990) 23 FCR 416.
In Fuller’s case, an amount of costs was included in the settlement terms and that amount was included in the lump sum when calculating the duration of the preclusion period. In Mr Haryanto’s case, the consent orders provide that each party is to bear their own costs and his lump sum amount does not include an amount of costs.
Mr Haryanto’s costs amounted to $90,705.31[8].
[8] Exhibit 1.
Even though Mr Haryanto’s legal costs and disbursements were deducted from the final amount of compensation he was paid, subject to exclusions under the Act, it is the total amount awarded that must be applied when calculating the ‘lump sum’ for the purposes of s 17, 1169 and 1170 of the Social Security Act[9]. I am bound by the established authorities on this point.
[9] Re Fuller and Secretary, Department of Family and Community Services [2004] AATA 615.
Thus, on balance, I am reasonably satisfied that the total amount of Mr Haryanto’s lump sum compensation payment is $733,000. This amount is derived by adding the lump sum payment of $373,000 by Cutting Edge under the consent orders and the compensation amount of $360,000 recorded as having been previously received by Mr Haryanto from QBE. This result is consistent with the award of $611,500 against Cutting Edge and Mr Haryanto’s retention of $121,500 under the consent orders.
Compensation part of lump sum compensation payment
The compensation part of Mr Haryanto’s lump sum compensation payment is worked out under s 17(3).
As Mr Haryanto received $203,588.42 from QBE in periodic compensation payments, and it is probable that this amount was repaid to QBE under the consent orders, under s 17(4) this amount is to be subtracted from the lump sum compensation amount ($733,000) when applying s 17(3). The resulting amount is $529,411.58. Under s 17(3) the compensation part of this lump sum amount is 50 percent – an amount of $264,705.79.
It is this amount that is to be applied when calculating the applicable lump sum preclusion period.
Preclusion period
The applicable preclusion period is to be worked out under s 1170.
Under s 1170(1), the preclusion period commences on the day following the last day on which Mr Haryanto was paid weekly compensation for lost earnings. As Mr Haryanto was paid periodic compensation until 15 July 2012, the preclusion period starts on 16 July 2012.
The duration of the preclusion period is calculated in weeks using the formula, ‘compensation part of lump sum ÷ income cut out amount’.
The compensation part of the lump sum is $264,705.79, and the applicable income cut out amount. In this case, the income cut out amount is $831.50. Applying the formula, the duration of the preclusion period is 318 weeks. This means the preclusion period ends on 19 August 2018.
Mr Haryanto says that the preclusion period is too long and it is not fair, as he received only part of the compensation. That may be so, but the duration of the preclusion period must be worked out under the legislation. If there is an issue of unfairness, it may be appropriately dealt with and relief may be available if special circumstances exist to enliven the discretion conferred by s 1184K.
In sum on this point, under s 1169, Mr Haryanto is subject to a lump sum preclusion period commencing on 16 July 2012 and ending on 19 August 2018.
Special circumstances
The duration of the preclusion period may be reduced under s 1184K, if there are special circumstances that render it appropriate to do so.
Mr Haryanto says that his poor health, the dire financial situation in which he finds himself, the unfairness of calculating the preclusion period on the basis of compensation he did not receive, before legal and other costs were deducted, and including compensation that was paid for medical treatments years ago, are special circumstances that justify exercise of the discretion to reduce the length of the preclusion period.
The Secretary says there are no special circumstances in Mr Haryanto’s case setting it apart from others, such that the preclusion period should be reduced.
The term ‘special circumstances’ has no special meaning under the Act. It has been considered in many cases, some of which have been referred to in submissions of the parties. It is not necessary to trawl through these cases. For special circumstances to exist, there must be some feature of Mr Haryanto’s case that takes it out of the usual course. As Keifel J said in Groth v Secretary, Department of Social Security[10] -
“…it would require something to distinguish Mr Groth’s 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”[11]
[10] (1995) 40 ALD 541.
[11] Ibid, at 545.
Nonetheless, caution is required to ensure that the discretion is not exercised in a manner that is not consistent with, or that frustrates, the objects and purposes of the Act. In a case such as this, those objects are to prevent a person obtaining income support from two sources at the same time unless special circumstances exist.
Considering the evidence, it appears that Mr Haryanto expended $200,000 of his compensation settlement monies purchasing a house under the Shared Equity Home Loan Scheme administered by the State Housing Commission of Western Australia (the Housing Authority) with a mortgage to Keystart Loans Ltd[12]. Under this arrangement, Mr Haryanto and his wife have a 60 percent interest and the Housing Authority has a 40 percent interest in the house at Langford, Western Australia.
[12] Co-Owners Deed in Exhibit 3.
Mr Haryanto told me that the terms of the Keystart loan prevent him from selling his share of the property and realising his equity to address his financial difficulties. He has produced no evidence to support this contention. I have considered the Co-Owner’s Deed and note that clause 8 addresses the ‘Sale of Your Interest’. This and related clauses do not prevent Mr Haryanto from selling his interest if he chooses to do so, although he would be required to serve notice of such intent on the Housing Authority.
Mr Haryanto explained his financial circumstances in some detail, and he set out the historical circumstances that led to his present circumstances, including moving from Sydney (where he was injured) for safety reasons, following a number of alleged robberies.
Mr Haryanto’s assets include the 60 percent equity with his wife in their home, a 1999 Prado motor vehicle registered in his wife’s name, and a trade trailer. His liabilities include the joint mortgage to Keystart Loans Ltd, a loan over the motor vehicle and small debts to his friends and his daughter’s school. His assets exceed his liabilities.
I accept that Mr Haryanto suffers from a number of ailments, including pain in his back, hands and ankles, numbness in his hands, arthritis and Type II Diabetes on a background of thyroid cancer that was successfully treated in the 1980s. He receives treatment for these conditions and he has a Low Income Health Care Card.
On his evidence, his wife’s health is poor, she contracted Hepatitis C and she is awaiting an operation to remove a kidney stone. This notwithstanding, Mr Haryanto told me that she is in part time employment as a cleaner, working 17 or 18 hours per week and earning $17.30 per hour. She obtains Centrelink payments as a carer (approximately $623 per fortnight) and Family Tax Benefit (approximately $580 per fortnight). They have two children, a son and a daughter. The daughter attends a private religious school. He pays for extra tuition for his children. He told me that he expends approximately $3,000 on education costs, but he owes the school $500.
Mr Haryanto told me that he has no income and no money, and he has a poor credit rating. He has attempted to find work, but his efforts have not been successful. But for the equity in his home, he has nothing left from his compensation settlement. Following settlement of his claim, and once legal costs and Medicare withholdings were deducted, he spent approximately –
$200,000 to the cost of purchasing his home;
$4,600 purchasing a motor vehicle;
$2,000 repaying a friend;
$10,000 purchasing furniture;
$10,000 visiting his wife’s family, and making payments to her family, in Indonesia; and
$2,500 purchasing a trade trailer.
Subsequently, he has borrowed $1,000 from friends and $1,500 from his son in Sydney. He also purchased a flat screen television for $900. On Mr Haryanto’s evidence and the figures he provided, I accept that he and his wife are in straitened financial circumstances, and they are struggling to make ends meet. Mr Haryanto told me that he cannot afford chiropractic and dental treatments he requires, and necessary repairs to his home, which he cannot undertake himself.
This notwithstanding, Mr Haryanto and his wife each have life insurance policies. He has not yet decided to change the Prado motor vehicle (which is in his wife’s name) for a smaller vehicle that is cheaper to run. He acknowledged that he is able to access a certain number of chiropractic or physiotherapy treatments each year under Medicare. He has not yet sold his trade trailer, which he says he cannot use. He told me that he considered moving to a cheaper home, but could not find a suitable home in close proximity to his daughter’s religious school. In any event, he was unable to obtain a loan in respect of a cheaper home he identified in Gosnells.
As to Mr Haryanto’s submissions about the deduction of his legal and other costs from his compensation settlement, I am satisfied that there is nothing unusual or unfair about this. The consent orders clearly specify that each party must bear their own costs. It was on those terms that Mr Haryanto agreed to settle his claim. The amount of compensation he obtained under the settlement was paid to his lawyer, who deducted monies for which Mr Haryanto was liable. The present evidence does not establish or suggest that anything untoward took place, or that these arrangements were unfair to Mr Haryanto.
In sum, I am not persuaded that any of these circumstances, separately or in combination, constitute ‘special circumstances’ that make it appropriate to treat any part of Mr Haryanto’s compensation payment as not having been made for the purposes of s 1184K.
While I accept that Mr Haryanto’s circumstances are difficult, on balance, they do not set his case apart from others. Many are those who experience financial and health difficulties following settlement of compensation claims. Mr Haryanto has assets and choices that many others do not, and with his wife’s support he is able to make ends meet, albeit with some difficulty. To my mind, having regard to the purposes of the compensation recovery provisions in Part 3.14 of the Act, and the interests of others who are subject to lump sum preclusion periods, I am not satisfied that the discretion conferred by s 1184K should be exercised in the circumstances of Mr Haryanto’s case.
Decision
The decision under review is affirmed.
I certify that the preceding 51 (fifty -one) paragraphs are a true copy of the reasons for the decision herein of Mr S. Webb, Member ...(Sgd) T Freeman...................
Associate
Dated 14 July 2014
Date of hearing
Date final submissions received
2 April 2014
24 June 2014
Applicant In person Advocate for the Respondent Allyson Ladhams Solicitors for the Respondent Australian Government Solicitor
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