Savage; Secretary, Department of Employment and Workplace Relations and
[2007] AATA 1477
•28 June 2007
Administrative Appeals Tribunal
DECISION AND REASONS FOR DECISION [2007] AATA 1477
ADMINISTRATIVE APPEALS TRIBUNAL )
) No Q200700020
GENERAL ADMINISTRATIVE DIVISION ) Re SECRETARY, DEPARTMENT OF EMPLOYMENT AND WORKPLACE RELATIONS Applicant
And
DAVID SAVAGE
Respondent
DECISION
Tribunal Dr KS Levy RFD, Senior Member Date28 June 2007
PlaceBrisbane
Decision The decision under review is set aside and in particular:
(i) The amount received in settlement by Mr Savage was a single lump sum compensation payment;
(ii) The charges and preclusion periods calculated by Centrelink are affirmed. The preclusion period commences on 9 April 2005 and ends on 20 July 2007;
(iii) There are no special circumstances which justifies a reduction of the preclusion period.
.................[Sgd].............................
Senior Member
CATCHWORDS
SOCIAL SECURITY – compensation lump sum – preclusion period imposed by Centrelink – applicant received compensation for a work-related back injury – whether there is one or two preclusion periods applicable to the applicant – special circumstances
Social Security Act 1991 (Cth) ss 17, 1169, 1170, 1171,1184K
Secretary, Department of Social Security v Banks (1990) 20 ALD 19
Groth v Secretary, Department of Social Security (1995) 40 ALD 541Re Ivovic and Director-General of Social Services (1981) 3 ALN 61
Haidar v Department of Social Security (1998) 52 ALD 255
Danilo Guerrero and Secretary, Department of Social Security (AAT 9603, 13 July 1994)
Davy and Secretary, Department of Employment and Workplace Relations (2007) 94 ALD 693
Secretary, Department of Family and Community Services v Chamberlain (2002) 68 ALD 357REASONS FOR DECISION
28 June 2007 Dr KS Levy RFD Senior Member Introduction
1. David Savage suffered three back injuries in the course of his employment. The first of these was not the subject of a claim for compensation. The second and third injuries resulted in payments from WorkCover and subsequently, he received Newstart Allowance and Disability Support Pension. He also sought damages for compensation and loss of income - this claim being settled for a lump sum amount of $150,000.00.
2. As a consequence of this settlement, the law provides that social security benefits should be recovered and a “preclusion period” be applied so that Mr Savage cannot seek social security benefits for a period determined by the legislation. Centrelink determined that Mr Savage was required by law to repay $14,261.60 for Newstart Allowance and Disability Support Pension relevant to part of the period covered by his lump sum compensation. In addition, it determined a preclusion period in accordance with the legislation was also applicable.
3. The respondent was not required for cross-examination. The hearing proceeded on the basis of submissions from the applicant’s counsel and only the documentation lodged with the Tribunal’s registry and which had been available to the respondent has been considered.
Issues
4. The Tribunal is asked to determine the following questions:
(i) Whether Mr Savage received a single compensation lump sum or two compensation lump sums?
(ii) In applying the Tribunal’s decision in relation to question 1, is the amount and preclusion period determined by Centrelink, correctly calculated?
(iii) Whether there are “special circumstances” which justifies a reduction of the preclusion period for Mr Savage?
Evidence
5. Mr Savage has been the subject of three back injuries which are relevant to the present circumstances. He worked as a plumber and drainer on the Gold Coast and suffered a back injury in about late 2002. He could not work for 13 weeks and received no pay for that period. He did not make a WorkCover claim as he believed (incorrectly) his employment status was that of a contractor. Six (6) months later, on 9 May 2003, Mr Savage was lifting a machine onto a truck when he accidentally fell and the machine fell on him. His back was again injured and he was again incapacitated for work for a number of weeks. A WorkCover claim was lodged in respect of this injury.
6. Upon returning to work, his employer assigned him to light duties. On 30 August 2004, he was required to dig a trench and when separating some pipes, he suffered a further back injury. This incident resulted in him making a second WorkCover claim.
7. Mr Savage pursued a compensation claim against his employer and WorkCover Queensland. Those two organisations settled with Mr Savage for a full and final settlement of $150,000.00 to cover both claims. (T29, folio 109). While there were statutory benefits totalling $48,299.92 from WorkCover it was acknowledged that these could not be recovered from Mr Savage. Out of the lump sum settlement amount, he incurred legal professional fees of $38,959.14; legal disbursements of $9,866.02; a Medicare refund of $5,041.50 and a refund to Centrelink of $14,261.60 for the provision of a Newstart Allowance and Disability Support Pension. There was clearly a further deduction of $15,470.60 from the settlement amount although it was not clear the reason for this deduction. In any event, Mr Savage received $66,401.14 in settlement of his claim and he signed a “release and discharge” on 28 February 2006.
8. On 16 March 2006 Centrelink determined that a compensation charge in the amount of $14,261.60 was to be imposed, and recovered this amount from Mr Savage at the time of his lump sum settlement. This amount represented the amount of social security benefits in the form of Newstart Allowance and Disability Support Pension paid to him for the period 9 April 2005 to 14 March 2006. In addition, it determined also on 16 March 2006, that Mr Savage was subject to a compensation lump sum preclusion period from 9 April 2005 to 20 July 2007. Mr Savage sought a review of those two latter decisions, but they were affirmed by the Original Decision Maker on 3 November 2006 and subsequently by an Authorised Review Officer on 23 November 2006.
9. The Social Security Appeals Tribunal (SSAT) considered an appeal by Mr Savage against those determinations. It decided that the two injuries referable to the compensation payment should be regarded as having two separate preclusion periods for the purposes of Part 3.14 of the Social Security Act 1991 - one running for 115 weeks from 20 August 2003 and the other running for four weeks from 9 April 2005. It then set aside the original decision of Centrelink and referred the matter back to Centrelink for reconsideration in accordance with a direction that the charge be re-calculated in light of its decision. The respondent in that decision, the Secretary, Department of Employment and Workplace Relations, has now appealed to this Tribunal. The respondent did not attend the hearing. The commencement of the hearing was delayed to give the respondent an opportunity to be present. He was subsequently contacted by the hearing room attendant and Mr Savage advised that following a phone call that morning to staff at the courthouse, he believed that the hearing had been cancelled. The Tribunal was told that the applicant’s legal representatives were present and heard a telephone conversation between the hearing room attendant and Mr Savage, which was to the effect that while Mr Savage would be available by telephone if necessary, the evidence he had to put was in his statement and/or contained in the papers.
Consideration
10. The decisions by Centrelink, as varied by the SSAT, emanate from s 1169(1) of the Social Security Act 1991. That section provides that a person who receives a lump sum compensation payment for any part of a statutorily calculated preclusion period is not entitled to a compensation affected payment. The Newstart Allowance and Disability Support Pension amount received by Mr Savage are “compensation affected payments” as defined by s 17(1) of the Social Security Act 1991. These payments are “compensation” as defined in s 17(2)(c) as follows:
“a payment” (with or without admission of liability) in settlement of a claim for damages or a claim under such an insurance scheme;
…
(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.
11. In assessing the compensation charge and the lump sum preclusion period, the definitional provisions are set out in ss 17(3) and 17(4) of the Social Security Act 1991. Relevantly these are:
Compensation part of a lump sum
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
17(4) 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:
12. The “payment” in s 17(3)(a) is not defined. On the face of it, it might be seen to be the actual lump sum payment, in this case, $150,000.00. But it is apparent that the settlement amount between Mr Savage and WorkCover and the employer, is clear of the WorkCover statutory benefits of $48,299.92. Therefore, as the object of legislation is to avoid double dipping, those statutory benefits are to be taken into account for the purposes of determining the statutory formula for the compensation part of a lump sum compensation payment, despite the fact that Centrelink is not entitled to a refund of those benefits. This is confirmed by the definition of “compensation” in s 17(2).
13. What then is the amount of the lump sum compensation payment for the purpose of s 17(3)? This is defined in s 17(4) as:
Lump sum compensation payment (LSP) - Repaid periodic compensation payment (RPCP)
= $198,299.92 - $35,097.60 = $163,202.32.
14. The SSAT viewed this calculation as the deeming of a lump sum from the apportionment of two separate payments – one for the amount of $156,824.63 in respect of the accident on 9 May 2003 and the other for the amount of $ 6,377.69 in respect of the accident on 30 August 2004. It held that this calculation could only occur by the application of s 1171. Centrelink argues that s 1171 has no application, as there was only one lump sum payment.
15. I do not agree that s 1171 applies. It otherwise requires a constructive or notional apportionment of two separate payments merely because there were two separate injuries. Plainly there were two injuries but the claim and the payment in fact covered both injuries. To apply a notional apportionment seems to be artificial and contrary to the facts. Any such apportionment does not alter the fact that the settlement amount was a single lump sum payment (Secretary, Department of Social Security v Banks (1990) 20 ALD 19).
What then is the applicable preclusion period ?
16. The relevant statutory provisions to determine the lump sum preclusion period in this case are:
Lump sum preclusion period
1170(1) Subject to subsection (2), if a person receives both periodic compensation payments and a lump sum compensation payment, the lump sum preclusion period is the period that:
(a) begins on the day following the last day of the periodic payments period or, where there is more than one periodic payments period, the day following the last day of the last periodic payments period; and
(b) ends at the end of the number of weeks worked out under subsections (4) and (5).
…
1170(4) The number of weeks in the lump sum preclusion period in relation to a person is the number worked out using the formula:
1170(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.
17. The application of those provisions consequent upon the determination above that there has been a single lump sum compensation payment, means that the last day of the last periodic payment period specified in s 1170(1)(a) (the commencement date) is 9 April 2005. The period is to end following the calculations in s 1170 (4) and (5). In this case, the number of weeks of the preclusion period, which must be calculated in order to determine the end date in s 1170(1)(b), is as follows:
Number of weeks = Compensation part of lump sum
Income cut out amount
= 50% x $163, 202.32
$680.38= $81, 601.16
$680.38= 119.93 weeks.
18. Therefore, the preclusion period is to be 119 weeks commencing on 9 April 2005. The period therefore ends on 20 July 2007.
19. It is apparent that the calculation of the lump sum compensation payment and the preclusion period is based on a formula, so as to try and arrive at some administratively convenient method of avoiding double dipping, whilst also maintaining some degree of uniformity in the application of what might otherwise result in widely variable outcomes for similar sets of circumstances. This has been described as an ”arbitrary formula” which does not measure the “actual coincidence” between the dates of receipt of pension payments and the dates on which a person was entitled to receive damages or compensation for an inability to work. The application of the statutory formula results in “a concept of presumed coincidence”. (See von Doussa J in Secretary, Department of Social Security v Banks [supra]).
20. The SSAT, in apportioning the lump sum payment into two separate amounts according to the two separate injuries of Mr Savage, resulted in the determination of two preclusion periods - one for each injury. It then held that these two periods ran concurrently as they commenced on the day following when the periodic payments ceased with respect to the first claim. In other words, the preclusion period commenced after the first injury, that is, from 20 August 2003, a date much earlier than would apply under a single lump sum compensation payment, as occurred in this case.
21. Nevertheless, as there is one settlement amount and therefore one lump sum compensation payment, s 1170(1)(a) is clear in its requirements that the lump sum preclusion period is to commence on the day following the last day of the last periodic payments period. In this case, I find that –
(i)There has been one Lump Sum Compensation Amount; and
(ii)The calculation of the Lump Sum Compensation Amount and the Preclusion periods as calculated by the Original Decision Maker are correct.
Are there special circumstances?
22. The relevant statutory provision pertaining to this question is found in s 1184K(1). This subsection states that:
Secretary may disregard some payments
1184K(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.
23. The Secretary, Department of Employment and Workplace Relations argues, in this respect, that there are no special circumstances relating to Mr Savage’s situation. However, Mr Savage in his statement of 30 March 2007 outlines the difficulties he has experienced and argues that the Tribunal should be sympathetic through a finding that his case does constitute “special circumstances”. It is true that his statement reveals several examples which would demonstrate that he does not enjoy many of the frugal comforts of life at the present time.
24. Mr Savage’s statement shows that his lump sum compensation amount of $66,401.14 (net after repayment of statutory expenses) has been exhausted over a seven month period following his signing of the release and discharge on 28 February 2006. This amount was spent generally as follows-
·Paid off daughter’s debt $7,000.00
·Amounts taken by his daughter and her boyfriend, said to be $1,200.00
·Arrears of child maintenance $12,000.00
·Various debts to real estate agent and a friend $12,000.00
·Solicitors fees re: Superannuation fund $5,000.00
·Medication ($200 x 30 fortnights) = $6,000.00
·Car $12,000.00
25. These expenses amount to $55,000.00, which is the majority of his net compensation payment. It is to be noted that the first four items in the previous paragraph amount to almost half of the lump sum compensation payment and relate to matters to his personal circumstances which may be due to financial management arising from before and during the period of his injury and since that time. It is noted that Centrelink has an Office of Financial Information Service (FIS) which was advised to Mr Savage and to his solicitors. I note that he maintains that his solicitors had not provided information to him, particularly as to the likelihood of his incurring a preclusion period and having to repay certain statutory amounts, but in the light of the number of estimates requested by the solicitors prior to the settlement. I do not accept that this is a likely occurrence.
26. The question here is whether there are “special circumstances” in a legal sense. All such cases generally depict unfortunate circumstances where an applicant has some financial hardship. Within that category, there must however be some circumstances which sets it apart from the usual or ordinary case (see Groth v Secretary, Department of Social Security (1995) 40 ALD 541 at 545 per Kiefel J). It is clear that the legislation is designed to prevent “double dipping” but that the legislation makes provision for the harshness of such a strict application of those principles, where the circumstances demonstrate that moderation of the strict application is justifiable (see Re Ivovic and Director-General of Social Services (1981) 3 ALN 61). In other words, all or part of the amount included in the statutory formula may be treated as not having been made, but only if there are “special circumstances” (see Haidar v Department of Social Security (1998) 52 ALD 255).
27. In respect of whether Mr Savage knew of the likely imposition of the preclusion period, Mr Dube, advocate for the Secretary, Department of Employment and Workplace Relations, submitted that in addition to Centrelink providing three separate estimates of a preclusion period and charges prior to settlement, he pointed to Centrelink’s letter dated 23 September 2004 wherein Mr Savage was notified directly by Centrelink of that likelihood. Counsel also refers to clauses 3.3 and 4.1 of the Release and Discharge which also puts Mr Savage on notice about that likelihood. Also, in respect of whether the legal advisors failed to tell Mr Savage of that potential liability, such failure is not of itself a special circumstance (see Danilo Guerrero and Secretary, Department of Social Security (AAT 9603, 13 July 1994) at 15).
28. Counsel also referred me to Davy and Secretary, Department of Employment and Workplace Relations (2007) 94 ALD 693. There, the Tribunal considered a case of where a recipient of Disability Support Pension had been deceived by his father and had not necessarily received all of the benefits to which he was entitled. Nevertheless, it was held in that case that requiring repayment was not unfair as it merely accorded with the strict requirement (and expectation) of the legislation.
29. That case also referred to the decision of the Federal Court of Australia in Secretary, Department of Family and Community Services v Chamberlain (2002) 116 FCR 348. The court there heard that the re-payment would be unfair to an applicant where she had to repay more than she received in compensation. However, the court held that this was not relevant and was not a “special circumstance” or “one out of the ordinary”. The court went on to declare that the statutory objectives must be considered and assume precedence over any consideration about economic loss. That decision is based on the fact that economic loss considerations are not relevant in considering a compensation amount because the statutory formula has supplanted those considerations.
30. In balancing the statutory principles with the applicant’s circumstances, I find there are no “special circumstances” which would justify regarding some of the compensation payment as not having been made. The use of the lump sum compensation amount by the applicant is a matter for Mr Savage and in part reflects his personal circumstances over a period of time (eg arrears of child maintenance). While I acknowledge that he has had some difficulties and has incurred significant expenses in relation to medication, they do not constitute “special circumstances”.
31. In the circumstances, I determine the questions put to the Tribunal as follows:
i) The amount received in settlement by Mr Savage was a single lump sum compensation payment;
ii) The charges and preclusion periods calculated by Centrelink are affirmed. The preclusion period commences on 9 April 2005 and ends on 20 July 2007;
iii) There are no special circumstances which justifies a reduction of the preclusion period.
I certify that the 31 preceding paragraphs are a true copy of the reasons for the decision herein of Dr KS Levy, Senior Member.
Signed: .....................................................................................
Legal Research OfficerDate/s of Hearing 26 April 2007
Date of Decision 28 June 2007
Applicant Mr B Dube, Sparke Helmore
Respondent Mr Savage (non-appearance)
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