Secretary, Department of Education, Employment and Workplace Relations and Shorne Walters
[2012] AATA 701
•11 October 2012
[2012] AATA 701
Division GENERAL ADMINISTRATIVE DIVISION File Number
2011/4735
Re
Secretary, Department of Education, Employment and Workplace Relations
APPLICANT
And
Shorne Walters
RESPONDENT
Decision
Tribunal Senior Member K Bean
Date 11 October 2012 Place Adelaide The decision under review is set aside and in substitution for that decision it is decided that:
(a) the compensation preclusion period arising from Mr Walters’ receipt of a compensation lump sum arising from his injury sustained on 6 September 2006 is 44 weeks commencing on 1 February 2007, as determined by the Authorised Review Officer;
(b) the compensation preclusion period arising from Mr Walters’ receipt of lump sum compensation payments attributable to his injuries sustained on 6 April 2005 is to be re-determined on the basis that the "compensation part" of the relevant lump sum is $51,242.89, and the compensation preclusion period commences on 16 May 2010; and
(c) the questions of whether the discretion conferred by s 1184K of the Social Security Act 1991 should be exercised, and whether any debt owed by Mr Walters as a consequence of this decision should be waived or written off, are remitted to the applicant to be reconsidered in accordance with these Reasons, and in particular paragraphs 77 to 79.
..........................[Sgd]..............................................
Senior Member K Bean
Catchwords
SOCIAL SECURITY – Receipt of lump sum compensation payments – Determination of compensation preclusion periods – Whether arrears of income maintenance properly included in compensation lump sums giving rise to preclusion periods – Whether redemption lump sum relates to more than one event – Commencement of second preclusion period – Whether exercise of discretions conferred by s 1184K and s 1237AAD should be remitted where debt amount unknown – Decision under review set aside and exercise of relevant discretions remitted for consideration once debt amount known.
Legislation
Social Security Act (Cth) 1991, ss 17, 1160, 1164, 1169, 1170, 1171, 1184K, 1237AAD
Cases
Secretary to the Department of Social Security v Cunneen (1997) 78 FCR 576
Singh v Secretary, Department of Family & Community Services (2004) 142 FCR 232
Savage v Department of Employment and Workplace Relations (2008) 216 FLR 78REASONS FOR DECISION
Senior Member K Bean
11 October 2012
introduction
The respondent, Mr Walters, has unfortunately suffered a number of work related injuries while working for different employers in the period since 2005. Most relevantly, he suffered injuries on 6 April 2005, 6 September 2006 and 11 March 2008. He has been paid compensation in respect of each of these injuries. However, in respect of some of the injuries, Mr Walters also received social security benefits for periods in respect of which he subsequently received compensation, or in circumstances where the later receipt of a compensation lump sum potentially operated to disentitle him from receipt of benefits he had received.
As a result of these events, it was determined by an officer of Centrelink that Mr Walters was subject to preclusion periods during which he was not entitled to receive social security benefits, potentially resulting in him being liable to repay some of the social security benefits he had received. Mr Walters challenged that original decision and it was subsequently determined by an Authorised Review Officer (ARO) that he was subject to two preclusion periods, commencing on 16 June 2005 and 1 February 2007 respectively.
Following a request by Mr Walters for review of that decision, the Social Security Appeals Tribunal (SSAT) determined that Mr Walters was subject to one preclusion period of 59 weeks from 15 May 2010 to 2 July 2011.[1] However the Secretary, being the applicant in this matter, has now sought review of that decision by this Tribunal, contending that the ARO’s decision was correct and Mr Walters is in fact subject to two separate preclusion periods, from 16 June 2005 to 26 July 2006 and from 1 February 2007 to 5 December 2007.
[1] T2/3.
In addition to contending that the SSAT’s decision as to the applicable preclusion period was correct, Mr Walters also contends that some of the compensation paid to him should be treated as not having been paid due to the existence of “special circumstances” within the meaning of s 1184K of the Social Security Act 1991 (the Act), and the preclusion periods otherwise applicable to him should accordingly be reduced.
issues
The issues before me therefore are:
(a)Whether Mr Walters is subject to a compensation preclusion period and, if so, what is the length of that preclusion period or those preclusion periods? and
(b)Are there “special circumstances” within the meaning of s 1184K of the Act which make it appropriate to treat the whole or part of any of his compensation payments as not having been made, thus reducing the resulting preclusion period?
Before addressing those issues, I will first outline the applicable legislative scheme.
legislative scheme
Part 3.14 of the Act provides for the effect of compensation recovery on certain social security benefits. Section 1160(1) of the Act provides for the general effect of that Part of the Act. It provides as follows:
“1160(1)This Part operates in certain specified circumstances to do one or more of the following:
(a)reduce a person’s compensation affected payment;
(b)render a person’s compensation affected payment not payable;
(c)require the repayment of some or all of a person’s compensation affected payment;
because of the receipt of compensation by the person or the person’s partner.”
Section 1169 of the Act provides that a compensation affected payment is not payable during a lump sum preclusion period. It provides as follows:
“1169(1) If:
(a)a person receives or claims a compensation affected payment; and
(b) the person receives a lump sum compensation payment;
the compensation affected payment is not payable to the person in relation to any day or days in the lump sum preclusion period.
(2) In this section:
lump sum compensation payment does not include a lump sum payment:
(a) to which section 1164 applies; or
(b)that relates only to arrears of periodic compensation payments.”
Section 17(1) of the Act defines the expression “compensation affected payment”, and newstart allowance is included in that definition.
Section 17(2) of the Act defines “compensation” and provides as follows:
“17(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.”
Section 17(3) of the Act provides an artificial statutory formula for determining the “compensation part of a lump sum compensation payment”. It provides relevantly as follows:
“17(3) Subject to subsection (4), for the purposes of this Act, the compensation part of a lump sum compensation payment is:
(a)50% of the payment if the following circumstances apply:
(i) the payment is made (either with or without admission of liability) in settlement of a claim that is, in whole or in part, related to a disease, injury or condition; and
(ii) the claim was settled, either by consent judgment being entered in respect of the settlement or otherwise; or
(ab) 50% of the payment if the following circumstances apply:
(i) the payment represents that part of a person’s entitlement to periodic compensation payments that the person has chosen to receive in the form of a lump sum; and
(ii) the entitlement to periodic compensation payments arose from the settlement (either with or without admission of liability) of a claim that is, in whole or in part, related to a disease, injury or condition; and
(iii) the claim was settled, either by consent judgment being entered in respect of the settlement of otherwise;
…”
Section 17(4A) also provides:
“For the purposes of this Act, a payment of arrears of periodic compensation payments is not a lump sum compensation payment.”
Section 1170 provides for the calculation of the lump sum preclusion period, including where a person receives both periodic payments and a lump sum compensation payment. Sub section 1170(1) provides that where a person receives both periodic compensation payments and a lump sum compensation payment, the lump sum preclusion period “begins on the day following the last day of the periodic payments period …” and s 1170(2) provides that where a person chooses to receive part of an entitlement to periodic compensation payments in the form of a lump sum, the lump sum preclusion period “begins on the first day on which the person’s periodic compensation payment is a reduced payment because of that choice …”. As to termination of lump sum preclusion periods generally, s 1170(4) provides that the number of weeks is arrived at by dividing the compensation part of a lump sum by the “income cut out amount”.
Section 1171 also requires that, where more than one lump sum is received and one of the lump sums relates to lost earnings or lost capacity to earn, both lump sums must be taken into account. It provides as follows:
“1171 Deemed lump sum payment arising from separate payments
(1)If:
(a)a person receives 2 or more lump sum payments in relation to the same event that gave rise to an entitlement of the person to compensation (the multiple payments); and
(b)at least one of the multiple payments is made wholly or partly in respect of lost earnings or lost capacity to earn;
the following paragraphs have effect for the purposes of this Act and the Administration Act:
(c)the person is taken to have received one lump sum compensation payment (the single payment) of an amount equal to the sum of the multiple payments;
(d)the single payment is taken to have been received by the person:
(i) on the day on which he or she received the last of the multiple payments; or
(ii) if the multiple payments were all received on the same day, on that day.
(2)A payment is not a lump sum payment for the purposes of paragraph (1)(a) if it relates exclusively to arrears of periodic compensation.”
Section 1164 provides that particular types of lump sums, being those which represent an aggregation of what would otherwise have been an entitlement to periodic payments, are to be treated differently. It provides:
“1164 Certain lump sums to be treated as though they were received as periodic compensation payments
If:
(a) a person was entitled to periodic compensation payments under a law of a State or Territory; and
(b)the person’s entitlement to the periodic payments was converted under the law of the State or Territory into an entitlement to a lump sum; and
(c)the lump sum was calculated by reference to a period;
this Part applies to the person as if:
(d)the person had not received:
(i) the lump sum; or
(ii) if the lump sum was to be paid in instalments—any of the instalments; and
(e)the person had received in each fortnight during the period a periodic compensation payment equal to:
where:
lump sum amount is the amount of the lump sum referred to in paragraph (b);
number of fortnights in the period is the number of whole fortnights in the period referred to in paragraph (c).”
The above provisions must, however, be read subject to s 1184K of the Act which I have referred to above. That section authorises the Secretary (and this Tribunal, standing in the shoes of the Secretary) to disregard the whole or part of a compensation payment in certain circumstances. Section 1184K(1) provides as follows:
“1184KSecretary may disregard some payments
(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.”
It is in the above statutory context therefore that I propose to proceed to address the issues identified above.
What compensation preclusion periodS applY to Mr Walters?
The compensation settlements
There was no dispute between the parties as to the compensation payments received by Mr Walters or the circumstances in which those payments were made.
Mr Walters relevantly received three compensation payments as a result of settlement of his compensation claims.
The first settlement was arrived at in July 2006.[2] This settlement related to a neck injury sustained by Mr Walters on 6 April 2005 as well as a depression claim made on 1 January 2005. Pursuant to the settlement, Mr Walters was entitled to be paid in relation to his neck injury:
(a)Medical expenses plus arrears of weekly payments of $576.92 per week from 6 April 2005 to 6 April 2006,[3] plus interest; and
(b)$10,176.00 pursuant to s 43 of the Workers Rehabilitation and Compensation Act 1986 (SA) (the State Act) based on an assessment of a ten per cent loss of function of the neck and cervical spine.[4]
[2] T6/53A.
[3] T6/53A.
[4] T6/53A.
His claim for depression was also accepted on the basis that he was entitled to payment for medical expenses only. The total amount payable to Mr Walters as a result of this settlement was $30,209.44, including arrears of $18,802.46 and interest of $1,230.98.[5]
[5] T6/68A.
The second settlement was entered into in May 2008.[6] This related to Mr Walters’ claim for compensation for a condition of dermatitis caused by exposure to chemicals at work, made on 12 September 2006. Under the terms of that settlement, Mr Walters was entitled to receive compensation in respect of:
(a)weekly payments and medical expenses from 6 September 2006 to 1 February 2008, based on average weekly earnings of $831.44, plus interest (totalling $54 682.35);[7]
(b)a s 43 lump sum payment for impairment and disfigurement in the amount of $8,315.88;[8] and
(c)costs fixed at $4,000.00 plus reasonable disbursements, to be agreed or taxed.
[6] T7/67.
[7] T9/91.
[8] T9/93.
The total amount payable to Mr Walters as a result of this settlement was $66,998.23.
The third settlement entered into by Mr Walters was arrived at in April 2010.[9] On the face of the settlement documentation, this settlement related to a number of injuries suffered by Mr Walters, including the neck injury sustained on 6 April 2005, a lower back injury suffered on the same date and the dermatitis suffered in September 2006. Pursuant to the settlement, Mr Walters’ entitlements to ongoing weekly payments were redeemed pursuant to s 42 of the State Act by way of a lump sum payment of $70,000.00, comprised of $69,500.00 for future income maintenance and $500.00 for future medical expenses. This settlement also contemplated that Mr Walters would receive ongoing weekly payments between the date of the settlement and the date the redemption was paid.
[9] T6/57A.
The total amount to which Mr Walters entitled as a result of this settlement was $70,000.00, plus the total amount of the additional weekly payments referred to immediately above.
It is also apparent from the material that Mr Walters suffered a low back strain at work on 11 March 2008.[10] Mr Walters was paid weekly payments in respect of that injury, however as part of the overall settlement reached in April 2010, it was agreed that liability existed in respect of that injury for medical expenses only.[11] As a result, Mr Walters agreed to repay the weekly payments he had received in respect of that injury, totalling $10,785.65. As part of the separate agreement relating to that matter, he was also found to be entitled to costs of $18,000.00.[12]
[10] T6/83A.
[11] T8/79.
[12] T8/80.
The ARO’s Approach
In calculating the compensation lump sum preclusion periods which applied to Mr Walters, the ARO assessed the amounts paid against each of the relevant injuries, being the injury of 6 April 2005, the injury of 6 September 2006 and the injury of 11 March 2008. I consider that approach to be correct, as the Act, particularly in provisions such as s 1171, discloses an intention that lump sums will only be aggregated where they relate to the same injury or event. Payments in respect of different injuries are required to be assessed separately.
In respect to Mr Walters’ injury of 6 April 2005, the ARO concluded that:
(a)Mr Walters had been paid periodic compensation until 15 June 2005;
(b)He received compensation of $30,209.44 on 25 July 2006;
(c)He received compensation of $71,625.96 on 16 April 2010 (including the additional weekly payments); and
(d)The total compensation paid as a lump sum was $101,835.40.
The ARO also deducted the $10,785.65 which had been repaid to WorkCover in respect of Mr Walters’ 2008 back injury, to give a total lump sum of $91,049.75.
Pursuant to s 17 of the Act, the ARO treated the whole of this amount as being “compensation” within the meaning of the Act and applied the “fifty per cent rule” provided for in s 17(3) to arrive at a compensation part of the lump sum of $45,524.88, being fifty per cent of the total amount.
The ARO then applied the appropriate income cut out amount to give a preclusion period of 58 weeks, commencing on 16 June 2005, being the day after the ARO considered that periodic compensation payments had ceased.[13]
[13] T5/46.
With respect to Mr Walters’ injury of 6 September 2006, the ARO concluded that:
(a)Mr Walters had been paid periodic compensation to 31 January 2007;
(b)Mr Walters was granted newstart allowance and paid from 1 February 2007 to 17 April 2008;
(c)He was paid a total compensation amount of $66,998.23 (as a result of the second settlement);
(d)Pursuant to the fifty per cent rule contained in s 17, half of this amount was the compensation part of the lump sum, being $33,499.12; and
(e)After application of the relevant divisor, this gave rise to a preclusion period of 44 weeks commencing on 1 February 2007, being the day after periodic compensation ceased.[14]
[14] T5/46.
With respect to Mr Walters’ injury of 11 March 2008, the ARO found that:
(a)he had been paid periodic compensation totalling $10,785.65;
(b)that he had subsequently been found to be entitled to medical expenses only; and
(c)that he had repaid the amount of $10,785.65 to WorkCover from the compensation settlement he received on 16 April 2010.[15]
[15] T5/46.
Accordingly, the ARO deducted that amount from the compensation received by Mr Walters in respect of the injury sustained on 6 April 2005.
The SSAT’s decision
The SSAT found that the two payments of arrears of income maintenance should not have been included as part of the lump sum payments received by Mr Walters,[16] stating that:
“Arrears payments of income maintenance however do count as “income” for the purpose of the income test for NSA but only if the person is receiving NSA “at the time of an event that gives rise to an entitlement…to compensation”, i.e. as at the date of the injury or injuries: see section 1068-G8A of the Act.”[17]
[16] T2/9.
[17] T2/9.
The SSAT ultimately concluded that Mr Walters should be treated as having received one single lump sum consisting of the redemption payment of $70,000.00 and the two s 43 lump sums, of $10,176.00 and $8,315.88 respectively, and the $4,000.00 in legal costs.[18] As outlined above, that approach led the SSAT to conclude that Mr Walters was subject to a single preclusion period, from 15 May 2010 to 2 July 2011.
[18] T2/11.
The SSAT also explained in its Reasons that it considered the preclusion period should commence from 15 May 2010 since, pursuant to the 2010 settlement, Mr Walters had received further periodic payments[19] between 16 April 2010 and 14 May 2010, and under the terms of s 1170(1), the preclusion period should commence from the end of the “last periodic payments period.”
[19] At T2/13.
The parties’ contentions
The Secretary contended that the ARO’s approach was correct. In particular, the Secretary contended that the ARO was correct to treat the total of the lump sum amounts received by Mr Walters in July 2006 and April 2010 as a lump sum arising from separate payments in respect of the April 2005 injury, pursuant to s 1171 of the Act. The Secretary also contended that the ARO was correct to include the payments of arrears of periodic payments contained within the July 2006 and May 2008 settlements as part of the applicable compensation lump sum payments used to calculate the compensation preclusion periods.
However Ms Tsoundarou, who appeared on behalf of Mr Walters, submitted that the approach taken by the ARO was incorrect. In particular, she submitted that the ARO wrongly included the arrears payments received by Mr Walters as part of the lumps sums to which regard was had in calculating his preclusion periods. Further, she pointed out that on the face of the documentation the 2010 settlement appeared to relate to a number of different injuries and she submitted that that settlement should accordingly be attributed to each of the relevant injuries and not only to the April 2005 injury.
The treatment of the arrears
In relation to the treatment of the arrears, Ms Tsoundarou, directed my attention to s 17(4A) of the Act, which provides that a payment of arrears of periodic payments is not a lump sum compensation payment. Ms Tsoundarou pointed out that the first settlement arrived at in July 2006 related primarily to arrears of income maintenance or periodic payments and submitted that those arrears should not have been included as part of a lump sum compensation payment for the purposes of the Act. She also pointed out that, in respect of the first settlement, other than the arrears of income maintenance, there was no other economic loss component in the settlement which would attract the operation of the compensation preclusion provisions. She accordingly submitted that the first settlement did not constitute a lump sum compensation payment for the purposes of the Act and therefore did not give rise to a preclusion period.
In relation to the second settlement, Ms Tsoundarou also contended that as this related only to arrears of weekly payments and a lump sum for non-economic loss, it was not caught by s 17(2) or subject to s 17(3).
In response to these arguments however, the Secretary directed my attention to a number of Federal Court decisions which have considered the interaction between relevant provisions in the Act, including s 17(3) and (4A) and s 1171.
In particular, the Secretary relied upon the decision of Foster J in Secretary to the Department of Social Security v Cunneen (1997) 78 FCR 576 in which the Court considered the meaning and application of s 17(4A). In relation to that issue, Foster J observed as follows (at p. 581):
“I should state, at the outset, that I am satisfied that s 17(4A) should not be given the extended meaning accepted by the Tribunal. Reference to the Explanatory Memorandum in relation to the Social Security Legislation Amendment Bill 1992 (Cth) which introduced the section into the legislation makes it sufficiently clear in my opinion that the legislative intention was to address a situation of confusion which had resulted from conflicting approaches taken in the Tribunal. The purpose of the provision was to ensure that where a payment was simply a total of previously unpaid periodic payments it would not, thereby, acquire the characterisation of a "lump sum compensation". The section, in my view, was not intended to apply where a payment of arrears of periodic compensation did not stand alone but was included as a component in a larger "lump sum" payable as "compensation" within the meaning of s 17(2).”
The Secretary also directed my attention to the decision of Gray J in Singh v Secretary, Department of Family and Community Services (2004) 142 FCR 232 in which his Honour agreed with and followed the judgment of Foster J, observing (at [38]-[40]):
“It is not easy to reconcile the complex provisions of the Social Security Act bearing on this case. The Tribunal and the federal magistrate accepted the respondent’s argument that s 17(4A) operated to exclude from any aggregation of lump sums, pursuant to s 17(2B) the amount required to be paid pursuant to the judgment of the County Court in respect of arrears of weekly compensation. Certainly, because that amount was a payment of arrears of periodic compensation payments, s 17(4A) would operate to ensure that, standing alone, the amount could not be regarded as a lump sum compensation payment. Section 17(2B) is not concerned with aggregating lump sum compensation payments, as that four-word term is used throughout s 17. Rather, s 17(2B) provides a method of calculating a single lump sum compensation payment, where more than one lump sum is received. I do not regard s 17(4A) as operating to deprive the amount of the arrears of periodic compensation of its character as a lump sum, which it certainly was, as distinct from its character as a lump sum compensation payment, a technical term.
In taking this view, I rely on Cunneen. In the passage from the judgment of Foster J, which I have quoted at [33], his Honour described the course taken by the Tribunal in that case. It was an approach of considering separately the payments made by the insurer, applying s 17(4A) to the payment that was solely in respect of arrears of weekly payments, and excluding that payment from consideration. Foster J held that this approach was wrong. His Honour took the view that the total amount received should be regarded as a single lump sum compensation payment, and that the elements of the total sum should not be viewed in isolation. The provisions of the Social Security Act should be applied to the total sum received, and the character of that total sum should be determined accordingly. If only part of the total sum consisted of compensation for weekly payments, then s 17(4A) would not apply.
In my view, the conclusion reached by Foster J in Cunneen is consistent with the effect of s 17(2B) of the Social Security Act. Section 17(2B) required that all of the sums received by the appellant should be aggregated to determine the full extent of his lump sum compensation payment. Section 17(4A) should not have been applied first to the payment of $129 382.92, so as to exclude it from calculation on the basis that it was not, by itself, a lump sum compensation payment. It was always a lump sum payment, and was required to be aggregated with the other lump sum payment, or payments, before the character of the total sum could be determined. Once this was done, the total sum did not fall within s 17(4A), because it included more than just arrears of weekly payments.”
In reliance on these authorities, the Secretary contended that the ARO was correct to have regard to the arrears payments in calculating the preclusion periods, since in each case the arrears payment was part of a larger lump sum including other components as well as the arrears payment.
Characterisation of the third settlement
As I have alluded to above, the parties also took different positions on the question of characterisation of final settlement, of $70,000.00.
Ms Tsoundarou contended that as this settlement related to all of Mr Walters’ injuries, rather than being assigned only to the 2005 injury, it should have been broken down and attributed to each of the compensable events to which it related. She directed my attention to the decision of Federal Magistrate Wilson in Savage v Department of Employment and Workplace Relations (2008) 216 FLR 78 in which Federal Magistrate Wilson also confronted a situation in which a payment of damages had been made in respect of two different incidents. Federal Magistrate Wilson referred in his reasons to s 17(5A) of the Act, which provides as follows (at [23]):
“For the purposes of subsection (2B) of this section and Part 3.14, the event that gives rise to a person’s entitlement to compensation for a disease, injury or condition is:
a) if the disease, injury or condition was caused by an accident — the accident; or
b) in any other case — the disease, injury or condition first becoming apparent;
and is not, for example, the decision or settlement under which the compensation is payable.”
He went on to observe (at [25]-[26]):
“…the express recognition in s.17(5A) of the Act, that a nexus needs to exist between the event giving rise to a claim and the entitlement to compensation remains important when further considering the question of the proper construction of s.1170 of the Act.
The appellant’s third argument focuses on the use, in ss.1169(1)(b), 1170(1) and (2) of the Act of the singular “a” before the words “lump sum”. The calculation in s.1170 presupposes that there is one payment. However, there is no reason in principle why the calculation cannot be done more than once if there are more than one lump sum payments. The appellant argues, in effect, that the Tribunal’s reasoning at paragraph [21] is erroneous. Simply because there is one settlement amount does not mean that there is necessarily only one lump sum payment for the purpose of s.1170. Section 17(5A) draws a distinction between the settlement and the event giving rise to compensation. It follows, in my opinion, that there can be one settlement of two claims for compensation arising from two events. That is what occurred in the present case.”
He went to observe as follows (at [33]-[34]):
“Reference to a practical example illustrates the error in the Tribunal’s reasoning. Assume a manual worker suffered a serious injury to his leg in his employment with employer A for which he received worker’s compensation payments for a lengthy period, and then payments of social security benefits. The worker returns to work, in a sedentary capacity (being the only work he is able to do after the first injury) with employer B. He suffers an injury to his brain that renders him unable to work at all. He receives workers’ compensation payments following this injury. Both employers are insured by the same insurer. The worker brings a claim for common law damages in respect of both events in one set of court proceedings. The insurer settles the proceedings by the payment of one amount. On the construction favoured by the Tribunal, and the respondent, this one payment would be a single lump sum payment of compensation. But it is plainly not. It is a single payment, comprising a lump sum for the compensation to which the worker is entitled for the first injury, and a lump sum for the compensation to which the worker is entitled for the second injury.
It might then be said that Centrelink has no way of knowing how the settlement sum should be apportioned. It is not a matter, as the Tribunal has said, of applying a notional or artificial apportionment. Centrelink has the power, under s.192 Social Security (Administration) Act 1999, to require the recipient of lump sum compensation to provide information that would enable the apportionment to be made. The failure to obtain that information would be of Centrelink’s choosing. If a single settlement is reached involving multiple claims then Centrelink will have to request such information as is necessary to enable it to calculate a lump sum preclusion period in respect of each separate claim”.
He continued later in his Reasons as follows (at [37] and [41]):
“The various amendments to the Act, and the reasons for those amendments, are not undermined by the construction I favour. As the appellant submits, the legislative history of the relevant provisions is a permissible aid to their construction. The legislation has been progressively tightened to avoid claimants minimising the economic loss components of damages settlements so as to reduce any preclusion period, and the amount of any refund. That would not be adversely affected by a construction that permits more than one lump sum payment. Rather, the construction I favour enhances the intent of the legislation, which is that a person not receive social security benefits during the period (or periods) that he has been compensated for a loss of his earning capacity. To start a preclusion period from the day following the last receipt of compensation benefits for the last of a series of injuries ignores that the person is being compensated for loss of earning capacity during earlier periods, and may well have received social security benefits during those earlier times. Indeed, the construction advocated by the respondent would work a real injustice where the last injury was a trivial one, but a large settlement was achieved including compensation for earlier, more serious, injuries.
...
I therefore conclude that, properly construed, ss.1169 and 1170 of the Act admit of a settlement consisting of more than one lump sum payment. In those circumstances, Centrelink is required to calculate separately the amount of refund and the preclusion period for each event giving rise to a claim for compensation.”
Ultimately, the Secretary did not dispute the proposition that compensation paid in respect of different injuries or events must be assessed separately. However the Secretary contended that, as a matter of fact and on the proper construction of the documentation, the 2010 redemption was paid solely in respect of the April 2005 accident (which apparently resulted in injuries to both Mr Walters’ back and neck).
Partly in reliance on additional material filed with the Secretary’s submissions after the hearing, the Secretary submitted that the material obtained from the relevant insurer showed that, notwithstanding the terms of the actual settlement agreement, the 2010 settlement in fact related only to the 2005 accident. In particular, the Secretary pointed to a schedule provided by the insurer to the Centrelink Compensation Recovery Section in which the $70,000.00 amount agreed to on 13 May 2010 was attributed to the 6 April 2005 accident, together with the amount of $10,176.00 agreed to in July 2006. The Secretary also relied upon “screen shots” produced by the insurer showing that the redemption amount of $69,500.00 was paid against claim 05827069/05, which related to the 2005 injury.
Ms Tsoundarou disputed this characterisation, pointing to the fact that in a different Centrelink form the insurer had been asked (in relation to the 2010 settlement) whether the claimant had received “any other lump sum compensation payments for this claim?” to which the insurer responded “yes” and provided details of the April 2005 and June 2006 “s 43” payments. Ms Tsoundarou contended that this drew a “nexus between the 2005, 2006 and 2008 injuries”. She also relied upon the terms of the relevant redemption agreement, which referred to six separate injuries and discharged the insurer from liability to make any further payments, apparently in respect of all of those injuries.
Consideration
In addressing these contentions I propose to first consider the question of the proper treatment of the arrears, before proceeding to consider the correct characterisation of the redemption lump sum. After having done so, I will also address some additional issues not specifically referred to by the parties.
Treatment of the arrears
Having regard to the authorities referred to above, it is clear in my view that s 17(4A) and the related provisions (s 1169(2)(b) and s 1171(2)) do not have the effect that a lump sum paid in respect of arrears of periodic payments should not be regarded as part of a “lump sum compensation payment” if it is part of a larger lump sum. It is clear from the reasoning of the Court in Cunneen in particular that the provision is only intended to apply where the lump sum in question relates only to arrears of periodic payments. In this matter, the first and second settlements clearly included components that were attributable to arrears of weekly payments. However they each also contained other components and accordingly s 17(4A) did not have the effect that together with those other components, they should not be regarded as part of a “lump sum compensation payment”.
I accordingly accept the Secretary’s contentions as to the proper application of s 17(4A) to the circumstances of this matter. It also follows that I consider the approach taken by the SSAT, of excluding the arrears payments from the relevant compensation lump sums, to have been incorrect. In this regard, I consider the ARO was correct to include each of the periodic payment lump sums as part of the compensation lump sums to which regard was required to be had in calculating the compensation preclusion periods.
Characterisation of the redemption payment
In relation to the third settlement, of $70,000, as I have noted above, the question arises of whether the ARO was correct to treat the whole of that amount as relating to Mr Walters’ accident of 6 April 2005 only.
Having regard to the reasoning of Federal Magistrate Wilson in Savage, which is binding on me and which I respectfully adopt, it is clear in my view that if the lump sum paid to Mr Walters in 2010 in fact related to more than one event, it must be attributed to those events respectively, and I note that both parties ultimately agreed with that proposition. However the further issue which arises on the material is whether, as a matter of fact, the 2010 settlement did relate only to the back and neck injuries apparently both suffered on 6 April 2005.
In addition to the material to which I was referred by the parties, there is other material before me which is relevant to that question. This includes the formal order of the South Australian Workers Compensation Tribunal, which relevantly provided as follows:
“1.The decision of the compensating authority dated 22 February 2010 is set aside, and substituted by the following:
1.1 The worker’s claim for a lower back injury on 6 April 2005 is accepted for income maintenance and reasonable medical expenses. The worker has no entitlement to arrears but from the date of the orders is entitled to weekly payments at the rate of $541.99 per week until lawfully adjusted, reduced, discontinued or redeemed in accordance with the provisions of the Act.
2.The issues in Dispute between the parties are expanded pursuant to section 88DA of the Workers Rehabilitation and Compensation Act, 1986 (“the Act”) and Rule 16(10) of the Workers Compensation Tribunal Rules 2005 to the extent necessary to enable the following Orders to be made.
3.The worker has no further or other entitlement to lump sum compensation pursuant to section 43 of the Act with respect to: disabilities sustained on 6 April 2005; any other disability sustained or arising from employment with the employer on any other date, any aggravation, acceleration, exacerbation, deterioration or recurrence of any said disability or any sequelae to any said disability.”[20]
That order also indicated that it was noted by the Tribunal that “the above orders are part of a wider agreement between the parties which also incorporates the following terms”, with the following being part of what was noted by the Tribunal:
“1.The compensating authority and the worker have agreed to a redemption of the workers entitlements to future payments of income maintenance and medical expenses pursuant to section 42 of the Act by payment of a capital lump sum of $70,000 with a section 35(5) deemed weekly payment of $541.99, and the above Orders are made in reliance upon that agreement. If either party should resile from that agreement, the other is at liberty to apply to have the above Orders set aside and upon doing so, each party shall them be restored to the position it was in prior to the above Orders being made.
2.The worker has no further or other entitlement of compensation except for the entitlements specifically outlined above as the above Orders and these additional clauses are intended to constitute a full and final satisfaction of all the worker’s entitlements to any species of compensation under the Act for any compensable disability arising from employment with any registered employer to date.”
[20] T6/79A.
In addition, the insurer provided additional information to Centrelink on or about 3 May 2010 indicating that income maintenance had ceased to be paid in respect of all of the six injuries referred to in the redemption agreement, with the most recent payments of income maintenance having ceased on 18 October 2008 in respect of the injury of 11 March 2008.[21]
[21] T6/90A.
It is not easy to reconcile all of the relevant information, some of which appears to be conflicting. Having carefully considered all of it however, together with the submissions of the parties, I have concluded that the information available supports a conclusion that whilst the overall settlement between the parties related to all of Mr Walters’ injuries, and reflected an understanding that the insurer was discharged from further liability in respect of any of those injuries, as a matter of formal legal liability, the redemption was paid in respect of the back and neck injuries sustained by Mr Walters in the April 2005 accident only. In other words, in exchange for a general discharge of all liability for past and current claims, the insurer agreed to pay a redemption in respect of the April 2005 event only.
In my view that construction of the documentation is supported in particular by the formal order of the Tribunal, finding an ongoing liability for weekly payments in respect of the 6 April 2005 injuries of $541.99, which precisely coincides with the basis on which the redemption was calculated.[22] In addition, it is consistent with the additional material obtained after the hearing and relied upon by the Secretary, which shows that in the insurer’s internal records, the redemption was recorded as having been paid against the 6 April 2005 accident.
[22] T6/80A.
I have accordingly concluded that the Secretary’s submissions on this issue should be accepted, and the ARO was correct to treat the lump sum of $70,000.00 (and the additional weekly payments) as having been paid only in respect of the back and neck injuries suffered as a result of the accident of 6 April 2005.
For completeness, I should also indicate that I have considered whether or not s 1164 applies to the redemption payment. However as the payment does not appear to have been calculated “by reference to a period” I am satisfied that that provision does not apply to the redemption lump sum of $69,500.00 paid in respect of future income maintenance.
Other issues
Whilst the parties did not specifically address this issue, I have also considered the correctness of the ARO’s treatment of Mr Walters’ refund to the insurer of the weekly payments paid to him in respect of the March 2008 injury. I have concluded that the ARO was in error in deducting an amount received by Mr Walters in respect of the injury of 11 March 2008 from the lump sum Mr Walters received in relation to the accident of 6 April 2005. As those payments related to a separate event, I consider that they should have been dealt with separately under the Act. Further, as Mr Walters received weekly payments in respect of that injury which were subsequently refunded in full, the net amount of relevant compensation he received in respect of the 2008 injury was nil. Therefore in my view, neither the receipt of the weekly payments nor the refund of them, are relevant to determining the compensation preclusion periods which apply to Mr Walters.
I also consider that the ARO was in error in determining that the preclusion period arising from first and third settlements should commence from 16 June 2005. Pursuant to s 1171 of the Act, it is clear that the first and third settlements, which each related to the same event, must be added together, and that the whole of resulting lump sum is taken to have been received on the day that the last lump sum was received. It is also clear that, pursuant to s 1170, the preclusion period commences, relevantly, on the day following the last day of the last periodic payments period,[23] or on the day on which Mr Walters’ periodic payments were first reduced because of a choice to receive his periodic payments in a lump sum.[24]
[23] s 1170(1)(a).
[24] s 1170(2).
As the SSAT noted, part of the 2010 settlement agreement was that Mr Walters was to be paid periodic payments of $541.99 from 16 April 2010 until the date the redemption was paid.[25] The SSAT also recorded that in an email to it dated 31 May 2010, the insurer advised that it had paid $2,276.35 to Mr Walters’ solicitors on 31 May 2010, in respect of income maintenance for the period 16 April 2010 to 14 May 2010.[26] The SSAT noted that this was consistent with the solicitor’s trust account, which also showed the redemption lump sum as having been paid on 14 May 2010.[27] As the SSAT pointed out, it therefore follows that the preclusion period arising from the first and third settlements should commence from 16 May 2010, being the day after the last periodic payments period, and also the first day on which Mr Walters’ periodic payments were reduced by his choice to receive the redemption.
[25] T6/62A.
[26] T2/13.
[27] T9/88.
It also follows from the above that the ARO should have taken the amount of $72,276.35 as being the total amount received in respect of the 2010 settlement, rather than $71,625.96. The ARO added to the $70,000.00 redemption an amount of $1625.96, being an estimate of what the arrears of periodic payments paid after 16 May 2010 would be.[28] However, as noted by the SSAT, the actual arrears amount was $2,276.35, and therefore that is the amount which should be used in calculating the preclusion period.
[28] T10/150.
As this arrears payment was in effect part of the 2010 settlement (though it was paid on a different date), consistently with the reasoning of the Federal Court in Singh and Cunneen, that amount should be added to the other lump sum amount of $70,000.00 to give the total lump sum payment made in respect of the 2010 settlement of $72,276.35. Adding that amount to the amount paid in the first settlement, of $30,209.44, gives a total lump sum of $102,485.79, of which the “compensation part of the lump sum” is $51,242.89.
Conclusion
In summary therefore, I consider the ARO was correct not to exclude the arrears amounts from the relevant lump sum compensation payments. I also consider the ARO was correct to attribute the whole of the lump sum amount received on or about 16 April 2010 to Mr Walters’ injuries of 6 April 2005.
I therefore consider the correct approach to determining the compensation preclusion periods applicable to Mr Walters to be that followed by the ARO, with the exception that:
(a)the ARO should not have deducted the amount refunded by Mr Walters in respect of his 2008 back injury from his 2010 settlement;
(b)the compensation preclusion period in respect of compensation received in relation to the April 2005 injuries should commence on 16 May 2010; and
(c)the total amount of the 2010 settlement should have been taken to be $72,276.35.
It will accordingly be necessary for the preclusion period arising from the 2006 and 2010 settlements to be re-determined consistently with my conclusions.
the “special circumstances” issue
It is clear that the preclusion period arising from the second settlement is in the past, and it is likely that once it is re-determined, the preclusion period arising from the first and third settlements will also be in the past. Therefore whilst those preclusion periods probably will not operate to prevent Mr Walters from receiving payments in the future, they may well give rise to a debt which he will be required to repay.
I have no reliable information before me as to the likely amount of that debt. On the basis of the approach she took, and having regard to amounts already received by Centrelink, the ARO determined that, with respect to the injuries of 6 April 2005, Mr Walters was in fact owed $693.77.[29] In other words, on the approach taken by the ARO, she found that Centrelink had in fact deducted too much from Mr Walters’ 2010 settlement. The ARO also concluded that the amount received by Centrelink in respect of the 6 September 2006 injury, of $11,646.43, was correct. However as a result of my conclusions above, the second preclusion period will start from a much later date and this may give rise to a larger debt. In addition, as I understand it the SSAT decision has been implemented, and therefore some of the amounts Mr Walters had previously paid to Centrelink in respect of the preclusion periods determined by the ARO may have subsequently been refunded to him. If that has occurred, the amount of any debt Mr Walters owes is likely to be larger than it would otherwise have been as a result of implementation of the SSAT decision.
[29] T5/46.
In respect of any debt which does arise from this decision, both s 1184K of the Act and s 1237AAD (which provides for debts to be waived in “special circumstances”) will be potentially applicable to that debt. However, as was noted by the SSAT, a decision in relation to waiver of a debt is not generally made until a debt has actually been raised. The ARO did not raise a debt to be paid by Mr Walters, and nor did the SSAT decision affirm or give rise to any quantified debt. As I have noted above, it is impossible for me to determine on the material before me the amount of any debt which will be owed by Mr Walters as a result of my decision.
Therefore, although I consider I have jurisdiction to consider whether part of the compensation paid to Mr Walters should be treated as not having been paid in the context of s 1184K of the Act, I have concluded that in all the circumstances it is more appropriate for me to remit the question of whether there are “special circumstances” within the meaning of s 1184K, and whether any debt should be waived pursuant to s 1237AAD, to the Secretary. My reasons for reaching that conclusion include the following:
(a)as I have explained above, I am not in a position to ascertain what the amount of any debt owed by Mr Walters will be, or indeed to ascertain with certainty whether he owes a debt;
(b)although I received evidence and submissions directed to the question of “special circumstances”, most of that material was directed to Mr Walters’ current circumstances, rather than issues relating to the compensation settlements themselves;
(c)although the final submissions were only received on 20 July this year, the hearing, at which evidence was given as to Mr Walters’ current circumstances, took place in December last year;
(d)at that time Mr Walters and his partner, Ms Cannon, were living in a caravan and were expecting a child;
(e)it is likely that their circumstances have changed significantly since the hearing and there may be additional matters which should be considered in the context of determining whether any debt owed by Mr Walters should be reduced or waived; and
(f)this approach will also allow simultaneous consideration to be given to whether there are any grounds upon which the any debt should be written off, for example due to lack of capacity to pay the debt, pursuant to s 1236 of the Act.
For these reasons, I have concluded that I should remit to the Secretary the question of whether the discretion in s 1184K or s 1237AAD should be exercised in this matter, once the amount of any debt owed by Mr Walters is known.
For completeness I note that a number of matters were put forward before me as potentially constituting “special circumstances” either individually or in combination. These included:
(a)Mr Walters’ overall financial and housing situation, including the fact at the time of the hearing Mr Walters and his partner were living in a caravan in the backyard of a friend’s house, which Ms Tsoundarou submitted did not constitute stable housing;
(b)the fact that Mr Walters and his partner were expecting a baby (which by now will have arrived) with all of the associated expenses;
(c)the stress to Mr Walters and his partner caused by the alleged removal of their other children by a State government agency, Families SA;
(d)the fact that their housing situation prevented them from seeking the return of those children from Families SA;
(e)the fact that Mr Walters faced a risk of possible incarceration if he failed to pay court fines which were owing;
(f)the length of time which had elapsed since Mr Walters received some of the compensation lump sums in question; and
(g)the fact that the second settlement included an amount of $4,000.00 for legal costs.
In my view, each of the above matters is potentially relevant to the question of whether there are “special circumstances” which justify reducing the preclusion periods or waiving some or all of any debt owed by Mr Walters. Accordingly the decision-maker reconsidering that issue should have regard to each of those matters, insofar as they remain relevant, together with any other or new matters put forward by Mr Walters as potentially constituting “special circumstances”.
In light of my conclusion concerning the treatment of the amount refunded by Mr Walters to WorkCover (of $10,785.65), consideration should also be given to whether, if he had not been in receipt of weekly payments of compensation in respect of his back injury of 11 March 2008 (which he subsequently refunded), Mr Walters would have been entitled to receive social security benefits during the period when he was receiving those weekly payments. If so, that fact is also potentially relevant to whether his circumstances are “special”, and should be taken into account by the decision-maker considering the question of whether “special circumstances” are present.
decision
The decision under review is set aside and in substitution for that decision it is decided that:
(a)the compensation preclusion period arising from Mr Walters’ receipt of a compensation lump sum arising from his injury sustained on 6 September 2006 is 44 weeks commencing on 1 February 2007, as determined by the Authorised Review Officer;
(b)the compensation preclusion period arising from Mr Walters’ receipt of lump sum compensation payments attributable to his injuries sustained on 6 April 2005 is to be re-determined on the basis that the “compensation part” of the relevant lump sum is $51,242.89, and the compensation preclusion period commences on 16 May 2010; and
(c)the questions of whether the discretion conferred by s 1184K of the Social Security Act 1991 should be exercised, and whether any debt owed by Mr Walters as a consequence of this decision should be waived or written off, are remitted to the applicant to be reconsidered in accordance with these Reasons, and in particular paragraphs 77 to 79.
I certify that the preceding 80 (eighty) paragraphs are a true copy of the reasons for the decision herein of Senior Member K Bean. ......................[Sgd]..................................................
Administrative Assistant
Dated 11 October 2012
Date(s) of hearing 14 December 2011 Date final submissions received 20 July 2012 Advocate for the Applicant Ms M Welfare, Program Litigation and Review Branch Advocate for the Respondent Ms A Tsoundarou Solicitors for the Respondent Welfare Rights Centre (SA) Inc
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