Sawyer and Secretary, Department of Family and Community Services
[2002] AATA 451
•14 June 2002
DECISION AND REASONS FOR DECISION [2002] AATA 451
ADMINISTRATIVE APPEALS TRIBUNAL )
) No Q2001/1106
GENERAL ADMINISTRATIVE DIVISION )
Re TINA SAWYER
Applicant
And SECRETARY, DEPARTMENT OF FAMILY AND COMMUNITY SERVICES COMCARE
Respondent
DECISION
Tribunal Mr R G Kenny, Member
Date14 June 2002
PlaceBrisbane
Decision The Tribunal sets aside the decision under review and substitutes its decision that, in accordance with sub-section 1184(1) of the Social Security Act 1991, an amount of the compensation paid to the applicant should be disregarded; that such amount be that which would result in disability support pension payments to the applicant in the amount of $11,167.70; and that the matter be remitted to the respondent for the relevant calculation of the preclusion period to be made.
..................(Sgnd)...................
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 - retrospective operation of provisions - special circumstances
Social Security Act 1947 (Cth) s 152
Social Security Act 1991 (Cth) ss 17(1),(2),(2B),(3),(4); 1165(1A),(5),(8),(9); 1184(1)
Social Security Legislation Amendment Act (No 1) 1995 (Cth)
WorkCover Queensland Act 1996 (Qld) s 10
Department of Social Security v Banks (1990) 20 ALD 19
Fisher v Hebburn Ltd (1960) 105 CLR 188
Maxwell v Murphy (1957) 96 CLR 26
Re Nolan and Secretary, Department of Family and Community Services [2000] AATA 361
Reid v Secretary, Department of Family and Community Services (2001) 33 AAR 269
Robertson v City of Nunawading [1973] VR 819
Re Secretary, Department of Social Security and Kilinc (1993) 19 AAR 58
Secretary, Department of Family and Community Services v Reid (2000) 32 AAR 347
Haidar v Secretary, Department of Social Security (1998) 28 AAR 288
Kertland v Secretary, Department of Family and Community Services (1999) 57 ALD 600
Re Ivovic and Director-General of Social Services (1981) 3 ALN 95
Beadle v Director-General of Social Security (1985) 60 ALR 225
Re Males and Department of Family and Community Services (1999) 57 ALD 793
Re Price and Secretary, Department of Family and Community Services [2001] AATA 177
Re Robinson and Secretary, Department of Family and Community Services (1999) 29 AAR 274
REASONS FOR DECISION
14 June 2002 Mr R G Kenny, Member
The Application
On 21 May 2001, Tina Sawyer (the applicant), the State of Queensland and Workcover Queensland (WorkCover) entered into a Deed of Discharge in respect of a claim for compensation by the applicant in relation to a workplace injury sustained by her on 11 April 1991. In accordance with that deed, she was to receive a lump sum payment of $475,000.
The applicant had been paid periodic compensation payments by WorkCover after her injury until 24 September 1992 and then disability support pension, in accordance with the terms of the Social Security Act 1991 (the Act), by Centrelink. On 23 April 2001, Centrelink claimed recovery of an amount of $75,995.67 from WorkCover, representing the disability support pension payments paid by Centrelink to the applicant in the preclusion period from 25 September 1992 until 2 February 2001. Centrelink's calculations of that recovery amount were based on 50% of a total of $516,899.40 less the periodic WorkCover payments of $25,130.26. The final amount comprised the applicant's lump sum payment of $475,000 together with previous WorkCover payments for expenses totalling $41,899.90 and Centrelink applied the formula, as provided for in the relevant provisions of the Social Security Act 1991 (the Act) (see below), to that sum. It determined that a preclusion period of 436 weeks was applicable to the applicant and that this equated with the amount of $75,995.67 claimed from WorkCover.
Centrelink's decision was affirmed on 30 October 2001 by the Social Security Appeals Tribunal and, on 4 December 2001, the applicant sought review of that decision by the Administrative Appeals Tribunal (the Tribunal).
AppearancesThe applicant did not attend the hearing but was represented by her solicitor, Mr S McGhie. Mr R McQuinlan appeared on behalf of the Secretary, Department of Family and Community Services (the respondent).
At the hearing, the following material was taken into evidence from
the applicant:
exhibit 1 – documents prepared in accordance with section 37 of the Administrative Appeals Tribunal Act 1975 (the T documents: T1 – T31); and
exhibit A1 – documents comprising Centrelink letters dated 6 April 2001 and 11 April 2001; and an Estimate of Social Security Charge/Preclusion.
the respondent:
exhibit R1 – documents comprising a statement of facts and contentions dated 22 March 2002; an undated WorkCover letter; a Deed of Discharge between the applicant, the State of Queensland and WorkCover dated 21 May 2001; and Payment Details of Claim from WorkCover;
exhibit R2 – Centrelink benefit and payment records from October 1992 to April 2001.
Issues, Legislation and Background
The Act makes provision for Centrelink 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 the determination of a preclusion period in this case reads:
"1165(1A) If:
(a) a person receives or claims a compensation affected payment; and
(b) the person is not a member of a couple; and
(c) the person receives a lump sum compensation payment (whether before or after the person receives or claims the compensation affected payment) on or after 20 March 1997;
no compensation affected payment is payable to the person for the new lump sum preclusion period."
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:
"17(2) 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) that is:
(e) made wholly or partly in respect of lost earnings or lost capacity to earn; and
(f) made either within or outside Australia."
The Act makes 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. In that regard, sub-section 17(2B) of the Act reads:
"17(2B) For the purposes of this Act, if:
(a) a person receives more than one lump sum payment, whether simultaneously or at different times, in relation to one or more injuries arising from the same event (see subsection (5A)); and
(b) at least one of the payments is made wholly or partly in respect of lost earnings or lost capacity to earn;
the person is taken to receive one lump sum compensation payment, made wholly or partly in respect of lost earnings or lost capacity to earn, of an amount equal to the sum of those lump sum payments."
The component of the lump sum that may be taken into account in calculating a preclusion period is referred to as the "compensation part of a lump sum" which term is defined in the Act as follows:
"17(3) 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 1165(5) 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 1165(8) and (9) of the Act which reads:
"1165(8) If a compensation lump sum is received on or after 20 March 1997, the number of weeks in the preclusion period is the number worked out under the following formula:
Compensation part of lump sum
Income cut-out amount1165(9) If the number worked out under subsection (4) or (8) 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. 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:
"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:
LSP – RPCP"
12. There is provision for part of a compensation payment to be disregarded where sub-section 1184(1) of the Act applies. It reads:
"1184(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."
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 following facts are not in dispute.
15. The applicant received periodic compensation payments from WorkCover from the time of her injury until 24 September 1992 in the amount of $25,130.36. She received income support in the form of disability support pension from Centrelink thereafter and these payments were continuing as at 1 February 2001. By Deed of Discharge (see exhibit R1) between the applicant, WorkCover and the State of Queensland, she was to be paid a compensation lump sum of $475,000 (see clause 1) and her reasonable costs (see clause 2). Clause 3 of that deed reads:
"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 proceedings in the sum of FORTY ONE THOUSAND EIGHT HUNDRED AND NINETY NINE DOLLARS AND NINETY CENTS ($41,899.90)."
16. The amount of $41,899.90 referred to in clause 3 of the deed comprised the amounts listed below (see exhibit R1) and Mr McQuinlan and Mr McGhie agreed that these amounts were paid to the applicant prior to the end of September 1992. They also agreed that the amount relating to disability expenses was for loss of function in accordance with a statutory scale rather than loss of earning capacity:
item $
weekly benefit 25130.26
hospital expenses 0.00
medical expenses 2990.08
other expenses 460.95
rehabilitation expenses 9753.11
disability expenses 3565.50
cost of claim 41899.90
17. In response to a request from Mr McGhie for an estimate of charge and preclusion period for the applicant, based on an estimated settlement amount of $475,000, Centrelink advised by letter dated 6 April 2001 (see exhibit A1) that the repayment amount was likely to be $62,029.63. As indicated by the date stamp theron, that letter was received by him on 10 April 2001.
18. In a further letter, dated 11 April 2001 (see exhibit A1), Centrelink nominated a repayment amount of $68,710.96 which was based on a settlement amount of $449,869.74. That letter purported, by its opening sentence, to be in response to a further request for another estimate of charge and preclusion period for the applicant. The settlement amount referred to in that letter represents the lump sum of $475,000 minus the amount of $25,130.26 in periodic payments received by the applicant. Mr McGhie said that this letter had not been requested by him and Mr McQuinlan agreed that there was no information in the respondent's files to indicate that it had been requested by Mr McGhie. Mr McGhie submitted that the applicant may have had a conversation with a Centrelink officer about the amount of repayment. As indicated by the date stamp on the letter, it was received by Mr McGhie on 17 April 2001.
19. Mr McGhie said that the only Centrelink information that he had available to him during his negotiations with WorkCover was the letter of 6 April 2001 and he said that the content of that letter was relied upon by him in deciding the amount at which the applicant's claim should be settled.
20. On 17 April 2001, a Crown Law Legal Officer advised Centrelink (see T13) that the State of Queensland was to pay the applicant the sum of $475,000 "clear of the Workcover refund ($41,899.90)…". On 23 April 2001, Centrelink advised that it calculated a repayment amount on the basis of an amount of $491,769.14 comprising the settlement sum of $475,000 plus the WorkCover refund of $41,899.90 minus the periodic WorkCover payments of $25,130.26. Applying the statutory formula and adopting $562.75 as the relevant income cut-out amount for that formula, Centrelink calculated the preclusion period to be from 25 September 1992 to 1 February 2001 and determined that the repayment amount relating to that period was $75,995.67.
21. The matters that are in issue are:
(a)whether the quantum of the lump sum utilised in the application of the statutory formula, and which led to the preclusion period from 25 September 1992 to 1 February 2001, was correctly calculated;
(b)whether, in the event that the length of the preclusion period was correctly calculated, that it equates with $75,995.67 in income support payments made to the applicant; and
(c)whether there are special circumstances in the case whereby any amount of the lump sum above $475,000 should be disregarded.
Applicant's Case
22. Mr McGhie submitted that there were three bases to adopt a different means of calculating the preclusion period. The first of these was to apply the formula to the amount of damages paid to the applicant in the amount of $475,000 only. The second was to adopt that figure because of an estoppel which arose out of Centrelink's letter of 6 April 2001. The third was to apply the special circumstances of the case in accordance with sub-section 1184(1) of the Act.
23. Mr McGhie submitted that there was no basis for Centrelink to add the amount of $41,899.90 to the lump sum of $475,000 nominated in the Deed of Discharge. He said these monies were foregone by WorkCover and that this was specifically stated in the deed and in the letter from Crown Law (T13) so that the lump sum was paid to the applicant "clear of the WorkCover refund of $41,889.90". He referred to the Tribunal decision of Re Nolan and Secretary, Department of Family and Community Services [2000] AATA 361 as authority for adopting that approach.
24. In relation to the letter of 6 April 2001, Mr McGhie submitted that Centrelink stated therein that the amount of the repayment that they would be seeking was $62,029.03 and he said that Centrelink should be held to that amount. It was provided on the basis of correct information having been given about the likely amount of the lump sum viz $475,000. The applicant had relied on the information given in that letter in making her decision on whether or not to accept the offer from Crown Law and WorkCover. He said that he had followed a long-standing procedure in his dealings with Centrelink by advising the likely settlement amount and then relying on the response from Centrelink as to the amount that would be withheld in relation to any preclusion period. He submitted that to allow Centrelink to change the amount in the way that it had done would undermine confidence in the procedure. He argued that the amount nominated in the Centrelink letter could not be regarded as a mere estimate because it was calculated on the precise amount of what the settlement was.
25. In relation to Centrelink's letter of 11 April 2001, Mr McGhie was not aware of the reason that this was sent to the applicant. He could not recall whether it was received before a settlement figure was negotiated with WorkCover but noted that, in 2001, the Easter period was Friday 13 April to Monday 16 April 2001. He submitted that this may have affected the timing of postal delivery of the Centrelink letter. He also noted that the letter from Crown Law to Centrelink advising the settlement details was dated 17 April 2001 and believed that he had reached agreement with WorkCover about the amount of the settlement on that day. He also said that, in those negotiations, reliance had been placed on the Centrelink letter of 6 April 2001 and that there had been only a short period available for the negotiation to be completed.
26. Mr McGhie also submitted that, if the amount of the lump sum was correctly calculated by Centrelink, the Tribunal should find that there were special circumstances in the case whereby any amount above $475,000 should be disregarded. The special circumstance was the fact of being notified by Centrelink that the repayment amount would only be $62,029.63 rather than $75,995.67.
27. Further, Mr McGhie submitted that, in the event that the amount of the lump sum was correctly calculated by Centrelink, there was a discrepancy in equating $75,995.67 with disability support pension payments in the period from 25 September 1992 until 1 February 2001 when, in the letter of 6 April 2001, the much smaller amount of $62,029.63 was declared to be referrable to a period from 25 September 1992 until 26 October 2000. The latter period was only some 15 weeks shorter than the former and would not account for such a discrepency of almost $14,000 in the respective repayment amounts.
Respondent's Case
28. Mr McQuinlan conceded that the case of Re Nolan and Secretary, Department of Family and Community Services contained propositions of law which supported the first of the matters raised by the applicant viz that the amount foregone by WorkCover of $41,889.90 should not be added to the settlement sum of $475,000. He acknowledged that the decision, that of a senior member of the Tribunal, had not been appealed but submitted that the decision had always been considered by the Department to have been wrong on the issue of whether or not foregone sums could be included as part of the lump sum for calculating a preclusion period. He submitted that it should not be followed and that the approach adopted in that case was not consistent with the Federal Court decision of Department of Social Security v Banks (1990) 20 ALD 19 where von Doussa J said:
"The expression 'the lump sum payment...made...in settlement of a claim' is apt to describe the total amount which is payable as the monetary consideration passing from the party on whose behalf the payment is to be made to the recipient in exchange for a release from the claim."
29. Mr McQuinlan submitted that payment or consideration need not be pecuniary in nature, and may cover various methods of discharging an obligation and that this could, for example, be by a promise to undertake a particular course of action. Even so, the undertaking given by WorkCover to forego recovery of an amount otherwise recoverable constituted pecuniary consideration in the sense that there was a direct monetary benefit to the applicant. Therefore, he submitted, the amount of forebearance can properly be considered compensation for the purposes of Act.
30. Mr McQuinlan noted that, in this case, the defendant in the common law damages claim was the State of Queensland and that the insurer was the State instrumentality Workcover. He submitted that this was an explanation of why WorkCover did not seek to recover the monies previously paid. Essentially, they were the same entity. He submitted that such an approach would be very unlikely if the insurer was a private organisation because, in that situation, the monies would not have been foregone and would all be taken into account when calculating the overall quantum of the lump sum. He submitted that it was appropriate that all persons should be treated equally regardless of who the insurer was and that the only way of achieving that outcome was for the foregone component to be added in.
31. On the matter of the Centrelink letter of 6 April 2001, Mr McQuinlan submitted that the amount referred to as the repayment amount was an estimate only and clearly identified as such by the terms of the letter. For that reason, he submitted, no form of estoppel could arise from the letter.
32. In respect of the relationship between the length of the preclusion period and the alleged amount paid to the applicant during that period, Mr McQuinlan referred to the benefit and payment records from October 1992 until April 2001 (see exhibit R2) as supporting the correctness of the calculation of the amount of $75,995.67 for the period of 436 weeks of preclusion. He submitted that the estimate in the 6 April 2001 letter did not correctly include all payments to the applicant and attributed this to the method by which the data was stored and to incomplete records being retrieved. He said that, prior to April 1996, the data was stored on microfiche rather than on computer.
33. In relation to the letter of 11 April 2001, Mr McQuinlan said that there was no record of what had triggered the sending of it. He also submitted that the estimate in that letter correctly identified all of the payments to the applicant and that it did not have any of the inaccuracies which gave rise to the incorrect amount in the earlier Centrelink letter.
34. Mr McQuinlan also submitted that the notification of the estimate of the repayment amount of $62,029.63 did not constitute a special circumstance to justify the disregarding of any part of the compensation lump sum.
Consideration
35. Many of the facts in this case are not in dispute and I find them to be as summarised in paragraphs 15 to 18 of these reasons. I also find that Mr McGhie did not have the letter dated 11 April 2001 in his possession, on or before 17 April 2001, when he was in settlement negotiations with WorkCover and that he conducted those negotiations in reliance on the information set out in the letter of 6 April 2001.
The Various Sums Received
36. 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 (above) von Doussa J referred to the abuses of earlier compensation recovery provisions by the 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.
37. In the Banks case, the court was applying sub-section 152(2) of the Social Security Act 1947 and, after noting that the term "lump sum" was not defined in that Act, von Doussa J said (at 24-25):
"A 'lump sum' payment is simply one which includes a number of items. Where a payment by way of compensation consists of the aggregate of several amounts which could have been paid separately or at different times the payment is one of a lump sum. A payment the total of which is arrived at by adding amounts for different heads of loss would also be a lump sum payment.
A 'payment by way of compensation' as defined in s152(2)(a) includes periodic payments. A 'payment by way of compensation' need not be a final payment. There could be a 'lump sum payment by way of compensation' attracting the provisions of s152(2)(c) which did not have the characteristic of a final payment intended to conclude the liability of the party on whose behalf the payment is made. Thus, the provisions of s152(2)(c)(ii) could apply to an interim assessment of damages made under s30b of the Supreme Court Act 1935 (SA).
A notion of finality however is introduced in s152(2)(c)(i) by the requirement that the lump sum payment be one 'in settlement of a claim...'. The expression 'the lump sum payment...made...in settlement of a claim' is apt to describe the total amount which is payable as the monetary consideration passing from the party on whose behalf the payment is to be made to the recipient in exchange for a release from the claim. The reference to a judgment by consent in cl (A) of subpara (i) provides a further guide to the broad meaning of the expression 'the lump sum payment'. Where a judgment is entered, the underlying claim or cause of action merges in the judgment. The judgment sum in the case of a payment by way of damages on a claim that includes a claim related to disease or injury, will usually be a once and for all amount paid in discharge of all legal liability of the defendant. In subpara (i) a 'lump sum payment...in settlement of a claim' is a compendious expression encompassing the total amount paid in settlement of the claim. However the expression 'settlement of a claim' in s152(2)(a)(i) does not necessarily require that the payment be in settlement of all claims between the recipient of the payment and the party on whose behalf it is made…"
38. The provision under consideration in that case was essentially the same as sub-section 17(2) of the Act where the term "lump sum" is still not defined. The judgement of von Doussa J is concerned with what constitutes a lump sum. Clearly, the settlement amount of $475,000 constitutes a lump sum in this case. The amounts which made up the sum foregone by WorkCover, apart from that relating to periodic payments, also comprise one or several lump sums which were paid to the applicant for her to discharge obligations for expenses incurred for hospital, medical and rehabilitation matters.
39. 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 those paragraphs read:
(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.
40. The settlement amount of $475,000 falls within paragraph 17(2)(c) of the Act. The periodic sums are not to be taken into account but the other amounts, ie those for hospital, medical, rehabilitation and disability expenses, respectively, come within paragraphs 17(2)(b) or (c) of the Act as payments under a scheme of insurance. However, that, by itself, would not be sufficient for them to fall within the ambit of sub-section 17(2) because paragraph (e) of that provision additionally 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 applies to the settlement sum of $475,000 but is not applicable to the various forms of payments made to the applicant for those hospital, medical, rehabilitation and disability expenses.
41. In Re Nolan and Secretary, Department of Family and Community Services (above), the facts were not materially different from those of the present case. There, by Deed of Discharge, the employer and WorkCover agreed to pay the sum of $70,000 to Mr Nolan and, in a clause identical to that in the present case, acknowledged that it was not entitled to a refund of the following previously paid sums:
item $
weekly benefit 24,293.00
hospital expenses 4,632.00
medical expenses 9,689.00
other expenses 854.00
Rehabilitation expenses 2,070.00
disability expenses 7,268.00
cost of claim 48,807.00
42. In Nolan's case, the Senior Member noted von Doussa J's comments but held that the term "lump sum" did not extend to the amount of $48,807.00 which had been foregone by WorkCover and said (at paras 38 and 39):
"38. I have a different view of the dicta of von Doussa J to that put for the applicant. When his Honour said at page 25 that the expression lump sum payment made in settlement of a claim is apt to describe the total amount which is payable as the monetary consideration passing from the party his Honour was referring to, on the facts of this case, the $70,000 payable under the deed of discharge. By referring to monetary consideration I do not understand his Honour to be referring to a waiver of a charge. Nor, with respect, do I think the words 'payment in settlement of a claim' can embrace waiver of a charge not involving a payment to, in this case, the respondent.
39. Even if I be wrong in this I take the view that it would be contrary to the intention of the legislation that expenses for medical, hospital and rehabilitation treatment incurred by WorkCover Queensland during the period the respondent was on periodical compensation payments and in respect of which WorkCover has a right to recover from an award of damages etc should be deemed to be a portion of a compensation payment to the respondent. There is no question of any payment to the respondent or on behalf of the respondent; the expenditure relates to a period outside any lump sum preclusion period because of the operation of section 17(4) of the Act and the expenditure was incurred by the Workers' Compensation Board in the course of performing its statutory functions and because the respondent was injured in the course of his employment. While there is a benefit to the respondent that the expenditure was incurred it was incurred for the purpose of statutory obligations. Different considerations apply in relation to the disability settlement payment. That is a separate lump sum compensation payment for the purposes of the Act and for which a lump sum preclusion period would apply if the payment included compensation for lost earnings or economic loss. It did not. It follows that no issues arises in relation to the payment of that amount to the respondent by the Workers' Compensation Board in 1995. To now seek to take that amount into account again, as the applicant does, must be seen to be 'double dipping'."
43. I agree with that reasoning in relation to the nature of the payments made prior to the parties entering into the Deed of Discharge as being related to the discharge of statutory obligations of WorkCover. These obligations in relation to compensation are set out in Chapters 3 and 4 of the WorkCover Queensland Act 1996 and the term "compensation" is defined in section 10 of that Act in terms quite different from those of sub-section 17(2) of the Act. Section 10 reads:
"10. 'Compensation' is compensation under this Act, that is, amounts for a worker's injury payable under chapters 3 and 4 by WorkCover or a self-insurer to a worker, a dependant of a deceased worker or anyone else, and includes compensation paid or payable under a former Act."
44. The types of payments under the WorkCover Act may relate to disability expenses and injury management matters such as hospital, medical, and rehabilitation expenses. Such payments are not made "wholly or partly in respect of lost earnings or lost capacity to earn". They are unrelated to earnings. Payments are also able to be made for weekly earnings under Chapter 3 of the WorkCover Act but it is not disputed that these are to be disregarded in calculating the preclusion period under the Act because of the operation of sub-section 17(4) thereof.
45. Despite my conclusion that the payments for hospital, medical, and rehabilitation expenses may be characterised as being for the discharge of the statutory obligations of WorkCover rather than as actually being in relation to lost earnings or lost capacity to earn, this does not mean that they fall outside the ambit of consideration when calculating a preclusion period. Whilst a single payment must meet the definition of "compensation" in sub-section 17(2) of the Act, that is not so for payments previously made. That is the effect of sub-section 17(2B) of the Act. It refers to the receipt of more than one lump sum payment in relation to an injury for the same event. In this case, it is not disputed and I so find that there was but the one event which, under sub-section 17(5A) of the Act, was the applicant's accident.
46. Where sub-section 17(2B) of the Act is satisfied, that provision 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, made wholly or partly in respect of lost earnings or lost capacity to earn". 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 17(2B) of the Act provided that provision has application.
47. Sub-section 17(2B) of the Act was enacted with effect from 1 July 1995 by the Social Security Legislation Amendment Act (No 1) 1995 (Act No 104 of 1995) and was introduced, as the Explanatory Memorandum indicates, to overcome a trend in compensation cases decided by the Tribunal whereby the compensation recovery provisions were avoided by splitting compensation settlements into two or more payments, only one of which (usually relatively small) was expressed to represent lost earnings or earning capacity: see Re Secretary, Department of Social Security and Kilinc(1993) 19 AAR 58 which was referred to in that Memorandum as an example of the trend.
48. Sub-section 17(2B) of the Act was not in operation prior to 1992 when the payments totalling $41,899.90 were made to the applicant and Mr McGhie has submitted that to apply the provision in this case would be to apply it retrospectively. There is a well established presumption against giving legislation a retrospective effect when to do so would impact on acquired rights: see Maxwell v Murphy (1957) 96 CLR 261 per Dixon CJ at 267 and Fisher v Hebburn Ltd (1960) 105 CLR 188 per Fullagar J at 194. However, to apply sub-section 17(2B) of the Act to sums received prior to July 1995 is not to give the provision retrospective effect. The sums have been received and the applicant's right to those sums does not change. Rather, it is the characterisation of the purpose for which those sums were received that is changed by the provision which deems them to have been made wholly or partly in respect of lost earnings or lost capacity to earn. The provision is remedial in nature and to limit its operation to sums paid after the commencement would require the inclusion of qualifying words into paragraph 17(2B)(a) so that it would read:
"If a person receives more than one lump sum payment, whether simultaneously or at different times after July 1995…"
49. There is no justification for importing that limitation into the provision which, rather than impacting on acquired rights, takes account of past events as criteria for making an adjustment to future payments. A similar analysis was applied, in relation to section 1163A of the Act, by von Doussa J in the Federal Court in Secretary, Department of Family and Community Services v Reid (2000) 32 AAR 347 at 354. This was affirmed by a majority of the Full Federal Court (Branson and Mansfield JJ; Lindgren J dissenting) in Reid v Secretary, Department of Family and Community Services (2001) 33 AAR 269. There, the majority noted the following comment of the Victorian Supreme Court in Robertson v City of Nunawading [1973] VR 819 at 824 in relation to the principle that legislation is presumed not to operate retrospectively:
"The principle is not concerned with the case where the enactment under consideration merely takes account of antecedent facts and circumstances as a basis for what it prescribes in the future, and it does no more than that."
50. Here, sub-section 17(2B) of the Act enables previous payments to be taken into account as a basis for the application of the statutory formula. It is applied to the sums received for medical, rehabilitation, and other expenses totalling $16,769.64, along with the sum of $475,000, for the purposes of calculating the period of preclusion under section 1165 of the Act. It was on that basis that the decision under review was made and this led to the preclusion period of 436 weeks and social security charge of $75,995.67.
The Letter of 6 April 2001
51. In relation to the submission by Mr McGhie concerning the letter of 6 April 2001, I am reasonably satisfied that no estoppel arises such as would bind Centrelink to the amount of recoverable charge nominated therein of $62,029.63. This is because the letter from Centrelink was expressed in terms that it was an estimate only. It was based on a settlement figure of $475,000 and included the following paragraphs:
"The settlement amount in this letter may vary from the figure you nominated. Any ealier lump sum settlement for the same event may have been added and past periodic compensation may have been deducted where it is required to be repaid from the settlement. Based on an estimated settlement amount of $475,000 and the compensation part amount of $237,000, the repayment amount is likely to be $62,029.63 and the preclusion period is likely to be 25 September 1992 to 26 October 2000…
A refund is not required at this time. You should also be aware that Centrelink will calculate the actual preclusion period and send you a formal recovery notice when the amount of compensation to be paid is known."
52. In significantly different terms are the letters of Centrelink dated 23 April 2001 to WorkCover (see T19) and to the applicant (see T17). Each of those letters advised that the actual recoverable amount was $75,995.67; the former declared that it was a notice under section 1179 of the Act; and the latter referred to the notice to WorkCover and advised that it pertained to the recovery procedures under Part 3.14 of the Act.
53. Interestingly, the letter to the applicant made reference only to the lump sum of $475,000 but nominated the compensation part of that lump sum as $245,884.57 and also advised that Centrelink was able to take into account other lump sums that she received. As noted above, the sum of $245,884.57 is 50% of the total of the individual amounts received by the applicant rather than of the settlement sum of $475,000.
54. I have noted the submission of Mr McQuinlan in relation to the possible reason for WorkCover's decision to forego recovery of the monies paid to the applicant. However, no evidence was led on that matter. Nevertheless, I note, from the terms of the deed in Nolan where WorkCover adopted the same approach, that it would seem that the employer was an entity called Mastercare.
Special Circumstances
55. The final issue is whether or not there are special circumstances in this case whereby any amount above $475,000 should be disregarded as part of the lump sum compensation payment. The special circumstance nominated by Mr McGhie was the erroneous means utilised by Centrelink in calculating the repayment amount of $62,029.63, rather than $75,995.67, and communicating this to the applicant by the letter of 6 April 2001.
56. Exhibit R2 sets out the payment records relied on by Centrelink in formulating both the final charge amount and the charge amount nominated in the 6 April 2001 and 11 April 2001 letters. The following table is a summary of them:
column 1 start date column 2 end date column 3 final calculation of charge column 4 estimate of charge on 6 April 2001 column 5 estimate of charge on 11 April 2001
1 Oct 1992 14 Oct 1992 140.95 140.95 140.95
17 Dec 1992 17 Dec 1992 1,862.60 1,862.60 1,862.60
30 Dec 1992 30 Dec 1992 311.30 306.10 311.30
14 Jan 1992 14 Jan 1992 317.30 8.00 317.30
28 Jan 1993 25 Mar 1993 1,586.50 1,560.50 1,586.50
7 Apr 1993 7 Apr 1993 317.30 312.10 317.30
22 Apr 1993 1 Jul 1993 1,903.80 1,872.60 1,903.80
15 Jul 1993 9 Sep 1993 1,586.50 1,560.50 1,586.50
23 Sep 1993 23 Sep 1993 317.30 8.40 317.30
7 Oct 1993 2 Dec 1993 1,607.00 --- 1,607.00
16 Dec 1993 10 Mar 1994 2,249.80 2,213.40 2,249.80
24 Mar 1994 24 Mar 1994 321.40 8.40 321.40
7 Apr 1994 7 Apr 1994 323.30 --- 323.30
21 Apr 1994 21 Apr 1994 323.30 --- 323.30
5 May 1994 30 Jun 1994 1,616.50 --- 1,616.50
14 Jul 1994 14 Jul 1994 323.30 8.40 323.30
28 Jul 1994 28 Jul 1994 323.30 --- 323.30
11 Aug 1994 8 Sep 1994 969.90 318.10 969.90
22 Sep 1994 22 Sep 1994 326.80 8.80 326.80
6 Oct 1994 15 Dec 1994 1,960.80 --- 1,960.80
29 Dec 1994 12 Jan 1995 653.60 643.20 653.60
25 Jan 1995 25 Jan 1995 326.80 321.60 326.80
9 Feb 1995 23 Feb 1995 653.60 643.20 653.60
9 Mar 1995 9 Mar 1995 321.60 321.60 321.60
23 Mar 1995 23 Mar 1995 331.30 8.80 331.30
6 Apr 1995 29 Jun 1995 2,319.10 --- 2,319.10
13 Jul 1995 7 Sep 1995 1,656.50 1,656.50 1,656.50
21 Sep 1995 28 Dec 1995 2,728.80 2,728.80 2,728.80
11 Jan 1996 7 Mar 1996 1,706.50 1,706.50 1,706.50
21 Mar 1996 19 Sep 1996 4,872.00 4,872.00 4,872.00
3 Oct 1996 6 Mar 1997 4,221.60 4,221.60 4,221.60
20 Mar 1997 19 Mar 1998 9,536.40 9,536.40 9,536.40
2 Apr 1998 17 Sep 1998 4,680.00 4,680.00 4,680.00
1 Oct 1998 18 Mar 1999 4,715.10 4,715.10 4,715.10
1 Apr 1999 24 Jun 1999 2,567.60 2,567.60 2,567.60
25 Jun 1999 19 Sep 1999 2,279.39 2,279.39 2,279.39
20 Sep 1999 19 Mar 2000 4,834.70 4,834.70 4,834.70
20 Mar 2000 18 May 2000 not applicable not applicable 1,617.42
30 Jun 2000 2,776.57 2,776.57 not applicable
1 Jul 2000 19 Sep 2000 2,270.88 2,270.80 not applicable
20 Sep 2000 26 Oct 2000 not applicable 1,056.34 not applicable
31 Dec 2000 2,940.64 not applicable not applicable
1 Jan 2001 1 Feb 2001 914.04 not applicable not applicable
75,995.67 62,029.63 68,710.96
57. I am reasonably satisfied that the amounts in column 3 of that table represent the actual amounts paid to the applicant in the form of disability support pension in the preclusion period nominated by Centrelink. Many of the amounts in column 4 of that table differ from their counterparts in columns 3 and 5. The amounts are identical from mid-1995 to 19 September 2000 and this may be due to the system of record keeping that was employed after computerisation was implemented. Any differences in the entries after 20 March 2000 are attributable to the different end-dates of the preclusion periods. From 20 September 2000, the applicant was paid $1056.34 in the period ending 26 October 2000 and $3,854.68 in the period ending 1 February 2001. Clearly, those periods overlap and, as the preclusion period was correctly calculated to end on 1 February 2001, the higher amount is to be included in substitution for the lesser amount.
58. If Centrelink had correctly accessed the payment information on its files in preparation of the letter of 6 April 2001, it would have relied, until 19 September 2000, on the amounts in column 3 and 5 rather than on those in column 4. By relying on the incorrect information, Centrelink, in its letter of 6 April 2001, under-estimated the repayment amount by $11,167.70. The estimate should have been $73,197.33 for the period from 25 September 1992 until 26 October 2000. The difference between that amount and the amount of $75,995.67 reclaimed by Centrelink for the period 25 September 1992 until 1 February 2001 is $2,798.34. That sum more appropriately reflects the difference in disability support pension payments for the additional 14 weeks calculated in relation to the larger sum.
59. The Act provides no definition of "special circumstances" but the phrase has been judicially considered on many occasions. In Haidar v Secretary, Department of Social Security(1998) 28 AAR 288, Hill J referred to the purpose of the scheme under consideration here as being the avoidance of a situation where a claimant is entitled both to social security benefits and to compensation benefits in the nature of income through lump sum payments. Hill J then considered the discretion in sub-section 1184(1) of the Act and said (at 297):
"However, the legislature was conscious of the possible harshness of a rule structured in an arbitrary way. Section 1184, therefore, provided the means whereby the Secretary or, in the event ultimately of an appeal to the Administrative Appeals Tribunal, that Tribunal, could alleviate the harshness of the statutory provision in an appropriate case but only where there were special circumstances. The question of what constitutes special circumstances has been the subject of a number of decisions of this Court. It suffices here to say no more than that something is required which would take the matter out of the usual ordinary case: Groth v Secretary, Department of Social Security (1995) 40 ALD 541 at545 per Kiefel J, Secretary Department of Social Security v Ellis (1997) 46 ALD 1 at 5 per Carr J."
60. That approach was adopted by Merkel J In Kertland v Secretary, Department of Family and Community Services(1999) 57 ALD 600 at 608. There, His Honour referred to several decisions in relation to the meaning of the term "special circumstances" including Re Ivovic and Director-General of Social Services (1981) 3 ALN 95 where the Tribunal had stated that use of the word "special" is intended to allow the decision-maker the fullest opportunity to consider the particular circumstances of each case; and Beadle v Director-General of Social Security(1985) 60 ALR 225 where the Full Federal Court observed (at 228) that the phrase "special circumstances", although lacking precision, is sufficiently understood so as "not to require judicial gloss" and also that special circumstances would usually include events that rendered the operation of the statute in a particular case "unfair or inappropriate".
61. In Re Males and Secretary, Department of Family and Community Services(1999) 57 ALD 793, the Tribunal commented that the decision of Beadle (above) continues to be the most useful starting point in considering the concept of "special circumstances" noting:
"…that the Full Federal Court acknowledged that circumstances need not be unique to be 'special' but 'they must have a particular quality of unusualness that permits them to be described as special'. The court also said that the word 'special' in its context 'looks to circumstances which are unusual, uncommon or exceptional' and whether those circumstances exist will be dependent upon the context where a determination needs to be made as to whether the circumstances are different from 'the usual run of cases'."
62. In Re Price and Secretary, Department of Family and Community Services [2001] AATA 177 (9 March 2001), the solicitor acting for the applicant who had been injured in a work-related accident completed a form seeking a quote as to the preclusion period which would apply and any subsequent repayments which would have to be made. On the form, the solicitor omitted information as to the workers' compensation payments which his client had received and, although Centrelink had the correct information on its files, it acted only on the information on the form. It advised the solicitor of a preclusion period which meant that there would be no compensation charge owing. Mr Price agreed to settle his claim with his employers on the basis of that information. Subsequently, Centrelink officially calculated the preclusion period referring to the information in its files, declared a longer preclusion period and imposed a compensation charge of $23,649.60. The Tribunal exercised its discretion under sub-section 1184(1) of the Act stating:
"One would certainly hope that the disregarding of relevant information within Centrelink's possession when giving advice is an 'unusual', 'uncommon' or 'exceptional' occurrence for Centrelink. Mr Price had provided all of the relevant information to Centrelink when he applied for his disability pension. Although the solicitors forwarded an incomplete form to Centrelink when seeking the quote, Centrelink failed to check their computer to ensure that they had the complete information required."
63. Re Robinson and Secretary, Department of Family and Community Services (1999) 29 AAR 274 was also concerned with advice given by a Departmental officer in relation to a final payback figure and a preclusion period. The officer was in receipt of the relevant information from the solicitor who relied on the advice which was incorrect. The Tribunal decided the matter by making an adjustment to the length of the preclusion period and did not need to decide the matter of special circumstances. Nevertheless, it found that such circumstances existed. The Tribunal said (at 283-284):
"The Department had the information available to it to give consistent advice. The determination of the benefit preclusion period and a final pay back figure can not be calculated under the Act until the amount of the settlement or court award is known. The Department is commonly asked for final payback figures or an assessment of the maximum amount of any repayment obligation, over the telephone at the court door in the course of settlement negotiations. This places officers of the Department in a difficult position; one in which [Ms C] found herself. In practice solicitors rely upon the Department to provide accurate payback figures, as the length of the preclusion period and amount of benefit paid to their clients in the relevant period is not necessarily known by them. There is often no opportunity for that advice to be put in writing, and it is not appropriate or practical to defer settlements until that can be done.
In my opinion it was reasonable for Mr Robinson's legal advisers to have acted upon [Ms C's] telephone advice. It follows that in my opinion this is not a case as to which it can be said that Mr Robinson's appropriate remedy is against his solicitors.
I find that the circumstances outlined above, namely the inconsistent advice given by the Department, that Mr Robinson's legal advisers acted on the advice that they reasonably believed to be correct, are special circumstances to warrant the exercise of a discretion under subsection 1184(1) of the Act. I take into account the impact it had on Mr Robinson's decision to accept the settlement offer, and the likelihood of a better settlement figure being negotiated if what the Department regards as being the correct advice, was given at the relevant time."
64. In the applicant's case, the advice was in the formal letter of 6 April 2001 rather than merely by telephone and was made on the basis of incorrect data. The matter was one which was capable of ready correction as was seen by the appropriate data being relied on in the letter prepared only five days later. There was reliance on the advice given by Centrelink and I find that it was reasonable for Mr McGhie to rely on it. A reading of the letter would not reveal the errors made by Centrelink in calculating the amount as that could only be done through an analysis of the information in exhibit R2 and reproduced in the table (above in para 56).
65. I am reasonably satisfied that the incorrect calculation of the amounts of income support paid to the applicant, relied upon by Centrelink to calculate the charge amount detailed to the applicant in the letter of 6 April 2001, is a special circumstance in the same way as that term was applied in the Price and Robinson cases and, in the special circumstances of the flawed basis of making the calculations by Centrelink in this case, I am reasonably satisfied that part of the lump-sum received by the applicant should be disregarded.
66. It is not open to the Tribunal to calculate a new preclusion period. An approach that has received judicial endorsement is for the Tribunal to determine that such amount of the monies paid to the applicant be disregarded as will reduce the charge amount to a certain figure: see Smith (above) and Kertland (above) at 609-610. The error by Centrelink in calculating the charge amount as set out in the letter of 6 April 2001 was made by omitting payments totalling $11,167.70 from the income support payments made to the applicant. The amount of the compensation payments that should be disregarded in accordance with sub-section 1184(1) of the Act is such an amount as would result in disability support pension payments to the applicant in that amount ie $11,167.70.
Decision
67. The Tribunal sets aside the decision under review and substitutes its decision that, in accordance with sub-section 1184(1) of the Act, an amount of the compensation paid to the applicant should be disregarded; that such amount be that which would result in disability support pension payments to the applicant in the amount of $11,167.70; and that the matter be remitted to the respondent for the relevant calculation of the preclusion period to be made.
I certify that the preceding 67 paragraphs are a true copy of the reasons for the decision herein of Mr R G Kenny, Member
Signed: Sarah Oliver
AssociateDates of Hearing 25 March 2002 and 21 May 2002
Date of Decision 14 June 2002
Solicitor for the Applicant Mr S McGhie, Richardson McGhie
Solicitor for the Respondent Mr R McQuinlan, Departmental Advocate
Key Legal Topics
Areas of Law
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Administrative Law
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Social Security Law
Legal Concepts
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Jurisdiction
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Statutory Interpretation
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Compensatory Damages
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Unconscionable Conduct
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Limitation Periods
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