Secretary, Department of Employment, Education and Workplace Relations and Shields

[2011] AATA 156

Administrative Appeals Tribunal

DECISION AND REASONS FOR DECISION [2011] AATA 156

ADMINISTRATIVE APPEALS TRIBUNAL      )

)          No 2010/4084

GENERAL ADMINISTRATIVE  DIVISION		)
Re		Secretary, Department of Employment, Education and Workplace Relations

Applicant

And Grahame Shields 

Respondent

DECISION

Tribunal Ms N Bell, Senior Member 

Date9 March 2011

PlaceSydney

Decision The Tribunal sets aside the reviewable decision of 3 September 2010 and instead decides that Mr Shields is subject to a compensation preclusion period from 10 January 2009 until 28 March 2014.

....................[sgd]...............................

Ms N Bell, Senior Member

CATCHWORDS – Social Security - Compensation - lump sum payments – Austudy - preclusion period – arrears of periodic payments

Social Security Act 1991

Workers’ Compensation Act 1987 (NSW)

REASONS FOR DECISION

Ms N Bell, Senior Member            

1.      

Grahame Shields suffered a work related injury in August 1989. In

October 2006, Mr Shields received a lump sum compensation payment of $244,230.03. In January 2009, he received another compensation payment of $180,000. In February 2010, Mr Shields’ application for Austudy was refused on the basis that he was subject to a compensation preclusion period from

10 January 2009 to 28 March 2014. The Social Security Appeals Tribunal set aside this decision and instead decided that the compensation preclusion period be recalculated with the arrears of periodic compensation received by him in October 2006 excluded. The Secretary now appeals the SSAT’s decision to this Tribunal.

2. The issues for me to consider are therefore whether the compensation preclusion period prescribed by section 1169(1) of the Social Security Act 1991 has been correctly calculated and whether there are any special circumstances of the kind that warrant exercise of the discretion in section 1184K of the Act.

was the compensation preclusion period correctly calculated by the secretary?

3.      Section 1169 of the Act precludes, for a period, the payment of compensation affected payments, including Austudy, when a lump sum compensation payment has been received. This is called a lump sum preclusion period. The identification of the lump sum compensation payment is prescribed, relevantly, in section 1171(1) of the Act as follows:

(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.

4.      Section 17(2) provides that a compensation payment includes any payment of damages, payments made under an insurance scheme or any payment for settlement of a claim for damages.

5.      Section 17(4A) provides “the payment of arrears of periodic compensation payments is not a lump sum compensation payment”. Similarly, section 1169(2)(b) provides:

"lump sum compensation payment" does not include a lump sum payment:

…

(b)  that relates only to arrears of periodic compensation payments.

6.       The cumulative effect of both these sections is that a payment made exclusively for the payment of areas of periodic compensation is not to be used in calculating the preclusion period. This is in accord with the Federal Court’s judgment in Secretary, to the Department of Social Security v Cunneen (1997) 48 ALD 251 in which Foster J said:

The purpose of the provision [174A] 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).

7.      Before the Tribunal were the Workers Compensation Commission consent orders made on 16 October 2006 which stipulate, among other things, the following:

1. Award for the Applicant for weekly compensation for $300.00 per week from 5 August 1993 to 10 October 2005 and for $350.00 per week from 11 October 2005 to date and continuing.

…..

…I note that the parties have agreed the following: That the Respondent pay the Applicant lump sum compensation under s66 as follows:

1.$3275.62 in respect of an additional 10% loss of the use of the right leg at or above the knee.

2.$3275.62 in respect of an additional 10% loss of the use of the left leg at or above the knee.

3.$3811.64 in respect of an additional 6% loss of the use of the right arm at or above the elbow.

4.$4192.80 in respect of an additional 8% permanent impairment of the back.

5.$5241.00 in respect of 40% permanent impairment of the pelvis.

6.$6363.52 in respect of 15.5% loss of use of sexual organs.

8.      

The first payment of $244,230.03 received in October 2006 was not exclusively for the payment of areas of periodic compensation but also related to compensation for permanent impairment pursuant to section 66 of the Workers’ Compensation Act 1987 (NSW). In addition, on 23 October 2006, the insurer for

Mr Shield’s former employer, QBE, wrote to Centrelink advising of the settlement and identifying an amount of $8,843.65 paid for pain and suffering pursuant to section 67 of that Act.

9. The second payment of $180,000 in January 2009 was made following a commutation agreement filed with the Workers Compensation Commission pursuant to section 87F of the Workers Compensation Act 1987 (NSW). This is not a payment of arrears of periodic compensation.

10.     Accordingly, as neither of the payments was exclusively a payment for arrears of periodic compensation, the total of both payments must be used for the calculation of the preclusion period: section 1171(1)(b) & (c) of the Social Security Act 1991.

11.     A QBE summary sheet indicates that Mr Shields was paid weekly payments until 9 January 2009. The preclusion period therefore commences the day after the last payment Mr Shields received, being 10 January 2009.

12.     Section 1170 of the Act prescribes a formula for the calculation of the preclusion period for which a social security payment may not be paid. The formula operates by dividing 50% of the combination of the lump sums, in this case the combination of payments $244,230.03 and $180,000, by the income cut out amount, that is, the maximum amount a person may earn before a social security payment is no longer payable. In this case, that income cut out amount is $778.88. The resulting figure is 272 - that is, 272 weeks, being from 10 January 2009 until 28 March 2014   for which period Mr Shields is precluded from receiving a social security payment.

are there any special circumstances?

13.     Section 1184K of the Act provides for a discretion to shorten a preclusion period by disregarding all or part of the compensation lump sum if appropriate in the special circumstances of a case. Special circumstances are circumstances that are unusual or extraordinary.

14.     

Mr Shields contended that he was in severe financial hardship. I note that

Mr and Mrs Shields’ total household income amounts to $762.00 per fortnight in the form of a disability support pension received by Mrs Shields and other related Centrelink payments. From this amount, Mr Shields said that he pays $246 per fortnight in rent and $30 in additional debt repayments. He said that both he and his wife have very serious health issues that require medication and medical treatment, some of which is not covered by the pharmaceutical benefits scheme. I note that

Mr and Mrs Shields are holders of pensioner concession cards and health care cards. Mr Shields said that his non-PBS medication amounted to $96 per week.

Mr Shields said that he receives no support from his children, with whom he no longer talks.

15.     Mr Sheilds agreed with the summary in the SSAT’s decision as to his expenditure of his lump sum compensation:

(a)$30-$50,000 on Bond University tuition fees to study law – he later withdrew to care for his sick wife;

(b)$50,000 to his stepson for maintenance to his grandchildren’s home;

(c)$20-30,000 on a 14 day Pacific cruise in 2006;

(d)$30,000 on medical costs for Mr Shield’s wife;

(e)$35,000 on the purchase of a 28 foot motorboat.

16.     Mr Shields said that he recently sold his wife’s Mercedes for $12,000, which was applied to various credit card debts. As to the boat that Mr Shields purchased for approximately $35,000, he said that he had been unable to sell it in the six weeks before the hearing of this application.

17.     The aim of the legislation is to avoid the double payment of people who have been compensated for injuries. (See Groth v Secretary, Department of Social Security (1995) 40 ALD 541). While I accept that the Shields’ household income is limited and Mr Shields has to pay ongoing medication costs, Mr Shields’ circumstances do not amount to ‘special circumstances’. They are not unusual or extraordinary. It is not unusual or extraordinary for a person in receipt of a compensation lump sum to have ongoing medication and living costs. Much of the compensation that Mr Shields received was spent on other things, including University fees, a cruise, a boat and his stepson’s renovations.

18.     I note that Mr Shields provided a written submission following the hearing of his application. He referred to dictionary definitions of the term “wages”. I note that the calculations required to be made under the Social Security Act 1991 do not involve the notion of wages.

Conclusion

19.     The Tribunal sets aside the reviewable decision of 3 September 2010 and instead decides that Mr Shields is subject to a compensation preclusion period from 10 January 2009 until 28 March 2014.

I certify that the 19 preceding paragraphs are a true copy of the reasons for the decision herein of Ms N Bell, Senior Member

Signed: ................[sgd]..............................................................
  Associate

Dates of Hearing  17 January 2011
Date of Decision  9 March 2011
Solicitor for the Applicant          Ms Pankaj Sharma, Centrelink Legal Services
Representative Respondent     Unrepresented