Secretary, Department of Social Security v Sword

[1991] FCA 199

Re: SECRETARY, DEPARTMENT OF SOCIAL SECURITY
And: DAVID SWORD
No. V G235 of 1990
FED No. 199
Social Security
(1991) Aust Torts Reports 81-101
23 ALD 52/13 AAR 383

COURT

IN THE FEDERAL COURT OF AUSTRALIA

VICTORIA DISTRICT REGISTRY
GENERAL DIVISION
Gray J.(1)

CATCHWORDS

Social Security - pension - preclusion as a result of lump sum payment of compensation - calculation of preclusion period - whether compensation for past economic loss should be taken into account - whether result absurd or unreasonable - whether payments of pension after receipt of compensation should be disregarded.

Words and phrases - "in respect of an incapacity for work" - "the last of those payments".

Social Security Act 1947 ss. 152, 153.

Compensation (Commonwealth Government Employees) Act 1971.

Acts Interpretation Act 1901 s.15AB.

Social Security Amendment Act 1988.

HEARING

MELBOURNE

#DATE 22:4:1991

Counsel for the applicant: Mr K. Bell

Solicitor for the applicant: Australian Government Solicitor

Counsel for the respondent: Mr A. Cavanough

Solicitor for the respondent: Ryan Carlisle Thomas

ORDER

1. The appeal is allowed.

2. The decision of the Administrative Appeals Tribunal is set aside.

3. For the decision of the Administrative Appeals Tribunal is substituted a decision that the respondent is disentitled to receive an invalid pension in respect of the period from 11th May 1989 until 16th January 1991.

4. The cross appeal is dismissed.

NOTE: Settlement and entry of orders is dealt with by O.36 of the Federal Court Rules.

JUDGE1

This appeal from a decision of a senior member of the Administrative Appeals Tribunal raises two short questions of construction of s.152 of the Social Security Act 1947. That section contains definitions for the purposes of s.153 of the Act, which diminishes the right of a person to receive a pension in certain circumstances. It is necessary to set out the relevant provisions of s. 153:

"153(1) Where a person...who is qualified to receive a pension receives or has received (whether before or after becoming so qualified) -

(a)...

(b) a lump sum payment by way of compensation, then -

(c)...

(d) in a case to which paragraph (b) applies - a pension is not payable to the person...at any time during the lump sum payment period."

Section 152(2) of the Act contains several relevant definitions. They are as follows:

"(2) In this Part -

(a) a reference to a payment by way of compensation is a reference to -

(i) a payment by way of damages;

(ii) a payment under a scheme of insurance or compensation provided for by a law of the Commonwealth or of a State or Territory, including a payment under a contract entered into pursuant to such a scheme;

(iii) a payment, whether with or without admission of liability, in settlement of a claim under such a scheme or of a claim for damages; or

(iv) any other payment in the nature of compensation or damages, other than a payment for which the recipient has made contributions, whether made within or outside Australia, being a payment received on or after 1 May 1987 that is, in whole or in part, in respect of an incapacity for work;

(b)...

(c) a reference to the compensation part of a lump sum payment by way of compensation is a reference to:

(i) if the lump sum payment was made (whether with or without admission of liability) in settlement of a claim that is, in whole or in part, related to disease or injury and:

(A) in a case where a judgment by consent was entered in respect of the settlement - the judgment was entered on or after 9 February 1988; or

(B) in any other case - the settlement was made or entered into on or after 9 February 1988; 50% of the lump sum payment; or

(ii) in any other case - so much of the lump sum payment as is, in the opinion of the Secretary, in respect of an incapacity for work;

(d)...

(e) a reference to the lump sum payment period, in relation to a lump sum payment by way of compensation, is a reference to the number of weeks, beginning on the first day of the period in respect of which the payment was or is to be made, ascertained by dividing the compensation part of the lump sum payment by the estimate last published by the Australian Statistician before the lump sum became payable of the average total weekly earnings of all male employees in Australia for a particular month.

(3) The reference in paragraph (2)(e) to the first day of the period in respect of which a lump sum payment was or is to be made is a reference to -

(a) in a case to which paragraph (b) does not apply - the day on which the relevant incapacity for work commenced; or

(b) in a case where periodical payments by way of compensation were made in respect of the incapacity - the day after the day on which the last of those payments was made."

1. The respondent was an employee of the Commonwealth of Australia in February 1984, at which time he suffered injuries at work. He received weekly payments of compensation in respect of his injuries, pursuant to the Compensation (Commonwealth Government Employees) Act 1971. He also sued the Commonwealth of Australia at common law, claiming damages for negligence. On 28th September 1987, an agreement was reached to settle the common law claim for a total sum of $64,260.00, plus costs. The settlement sum was paid to the respondent's solicitors on 9th November 1987. Notwithstanding the settlement, weekly payments of compensation continued to be made to the respondent until 10th May 1989. The learned senior member assumed that these payments were made in error and there is some evidence to support that assumption.

2. On 9th February 1989, the respondent applied for an invalid pension. On 27th April 1989 a determination was made that he was eighty-five per cent permanently incapacitated for work, and therefore qualified for an invalid pension, apart from the question of any "preclusion period", resulting from his receipt of the settlement moneys.

3. On 30th May 1989, a delegate of the applicant determined that the respondent was precluded from receiving his pension from 11th May 1989 until 3rd April 1991. In doing so, the delegate formed the opinion, for the purposes of s.152(2)(c)(ii) of the Act, that seventy per cent of the settlement sum was in respect of an incapacity for work. This decision was subsequently reviewed at the respondent's request. On 21st July 1989, the delegate decided that $40,000.00 of the settlement sum was in respect of an incapacity for work. Based on this sum, the lump sum payment period, for the purposes of s.152(2)(e) was calculated as being from 11th May 1989 until 16th January 1991.

4. The respondent appealed to the Social Security Appeals Tribunal, which found that $30,000.00 of the settlement sum was properly to be regarded as in respect of an incapacity for work. It therefore decided to reduce the preclusion period, so that it expired on 15th August 1990. The applicant sought review of that decision by the Administrative Appeals Tribunal, which decided to affirm the decision under review. The applicant appealed to this Court.

5. The calculation of the sums of $40,000.00 and $30,000.00 arose because of the somewhat unusual circumstance that evidence was available of the manner in which the settlement sum had been calculated. It was asserted by the respondent's former employer that the settlement sum was made up of $24,260.00 for pain and suffering, $10,000.00 for past economic loss and $30,000.00 for future economic loss. These figures were accepted by both parties to this proceeding as reflecting accurately the manner in which the settlement sum was calculated.

6. It was common ground that the portion of the settlement sum paid in respect of pain and suffering was not to be regarded as payment in respect of an incapacity for work. The controversy between the parties is as to whether the whole of the remaining $40,000.00 was treated correctly by the delegate as being in respect of an incapacity for work, or whether only $30,000.00 (the amount paid in respect of future economic loss) should be so treated. The latter was the view taken by the Social Security Appeals Tribunal and the Administrative Appeals Tribunal.

7. The learned senior member reached the conclusion that the sum of $10,000.00, received by the respondent in respect of economic loss suffered by him prior to settlement of his common law claim, fell within the literal meaning of the words "payment...in respect of an incapacity for work" in s.152(2)(c)(ii) of the Social Security Act 1947. This conclusion was undoubtedly correct. The learned senior member proceeded, however, to refer to s.15AB of the Acts Interpretation Act 1901, and to examine the record of speeches made on the second reading of the bill which became the Social Security Amendment Act 1988 (Act No. 58 of 1988), which brought ss.152 and 153 of the Social Security Act 1947 into their present form. As well as referring to the speech of the relevant minister, the learned senior member referred to a speech by one of the government members in the debate. In accordance with these speeches, he characterised the purpose of the amending Act as being the avoidance of what had apparently been widespread collusion in the settlement of claims for personal injuries, designed to conceal the payment of sums in respect of economic loss. The speeches were in terms of the justice of requiring repayment of social security benefits received prior to the receipt of lump sum compensation, and the need to take into account part of a lump sum received, when estimating future entitlements to social security benefits. The learned senior member was unable to find in the debate on the second reading of the bill any indication of any intention that so much of a lump sum as represented past incapacity should be taken into account in respect of future social security entitlements. He therefore held that, if s.152(2)(c)(ii) were to be construed as requiring that result, it would produce an absurd and unreasonable result.

8. The basis on which the learned senior member invoked s.15AB of the Acts Interpretation Act 1901 is unclear. In his own words, he referred to the parliamentary debates "in an attempt to confirm the meaning of the provision". This suggests that he consulted the parliamentary debates under s.15AB(1)(a), under which such material may be used to confirm that the meaning of the provision is the ordinary meaning conveyed by the text, taking into account its context in the Act and the purpose or object underlying the Act. In the view of the learned senior member, the ordinary meaning was apparently not confirmed by reference to the parliamentary debates. He then drew upon the parliamentary debates in reasoning to the conclusion that the result contemplated would be absurd or unreasonable.

9. I have serious doubts whether this method of reasoning is legitimate. Under s.15AB(1)(b) of the Acts Interpretation Act 1901, resort to extrinsic material is only permitted when a conclusion has been reached that a legislative provision is ambiguous or obscure, or that the ordinary meaning produces a result that is "manifestly absurd or is unreasonable". If reference to extrinsic material for the purpose referred to in s.15AB(1)(a) does not provide confirmation that the ordinary meaning is intended, a question arises whether the extrinsic material itself can be used to reach a conclusion that the provision falls within para. (b). This question was not fully argued. I doubt that extrinsic material referred to for the purpose of confirming that the correct meaning is the ordinary meaning, but which does not confirm that proposition, can then be used for the purpose of creating an ambiguity or obscurity, or for construing the provision as producing a result that is manifestly absurd or is unreasonable. It is unnecessary to decide this question, because it is apparent from an examination of the provisions inserted into the Social Security Act 1947 by Act No. 58 of 1988 that the conclusion reached by the learned senior member was wrong.

10. There is no inherent absurdity or unreasonableness in requiring that the whole of a lump sum received by a person in respect of compensation for economic loss, both past and future, should be taken into account in determining the future entitlement of that person to social security benefits. It is true that there may be a certain arbitrariness in the way in which a lump sum is taken into account. The parliament clearly did not shrink from arbitrariness in adopting the fifty per cent rule, which is applicable in respect of lump sum payments made after 9th February 1988. See s.152(2)(c)(i) of the Social Security Act 1947. It is also clear that, in a case in which social security benefits have been received by a person prior to receipt of the lump sum payment, no recovery by the Commonwealth is possible where the lump sum payment is taken into account with respect to future entitlements. See s.153(2)(c) and (3)(c). The attention of the learned senior member does not appear to have been drawn to these provisions.

11. There is therefore nothing in the terms of the Act itself to suggest that any meaning other than the ordinary meaning of s.152(2)(c)(ii) is intended. There is no ambiguity, and no more than the usual amount of obscurity which arises from the complexity of modern legislation. Nor is there manifest absurdity or unreasonableness. The learned senior member appears to have fallen into the trap of allowing his own views as to the justice of the case to persuade him as to the absurdity or unreasonableness of the provision which produces it. If resort to the parliamentary debates were possible, the failure to mention the specific fact situation which has arisen in the present case, is, at the very least, an uncertain guide to the intention of parliament.

12. In my view, the course taken by the delegate of the applicant in the first place was the correct one, and the Social Security Appeals Tribunal and the Administrative Appeals Tribunal both fell into error.

13. Counsel for the respondent did not concede the incorrectness of the learned senior member's reasoning, but did not argue in support of it. Instead, he argued a point raised by a cross appeal, which was heard by consent, although lodged out of time. The cross appeal related to the calculation under s.152(2)(e) and (3)(b) of the Social Security Act 1947 of the lump sum payment period in respect of someone who had received periodical payments by way of compensation. Particular reference was made to the concluding words of para. (b), namely, "the day on which the last of those payments was made". On the argument of counsel for the respondent, this phrase must mean the day of the making of the last payment prior to the payment of the lump sum. If this were not so, the argument ran, it would never be possible to say that the lump sum payment period had begun, as periodical payments in respect of an incapacity might occur at any time in the future. Even if such payments lapsed, they might recommence at a later date. The argument concentrated on the use of the past tense in s.152(3)(b), in contrast with the use of both past and present tenses in the introductory words to sub-s.(3).

14. I am not persuaded that the phrase "the last of those payments" must mean the last of those payments relative to some particular point of time. In the ordinary case, in which a lump sum by way of compensation for personal injuries is received, no periodical payment will be made after its receipt. Even if periodical payments continue for a time, it will generally be safe to say when they stop that the last payment has occurred. It is true that, in theory at least, payments could recommence. If they do, it might be proper to say that the last payment has not occurred, and to make any necessary adjustments with respect to social security benefits received in the meantime. That result would produce less arbitrariness and less illogicality than fixing the last payment in every case as the last prior to receipt of lump sum compensation. In my view, the last payment referred to is just that, i.e. the last payment of periodical payments received by a person. The use of the past tense in s.152(3)(b) is a natural one; at the time when the calculation of the lump sum period is made, the last payment will always have been in the past.

15. Both the reasoning of the learned senior member and the argument on the cross appeal involve the notional insertion of additional words into each of the relevant legislative provisions, in order to qualify the ordinary meanings of those provisions. In my view, neither insertion would be proper.

16. It is therefore appropriate to allow the appeal and to set aside the decision of the Administrative Appeals Tribunal. In substitution therefor, it should be ordered that the respondent is disentitled to an invalid pension from 11th May 1989 until 16th January 1991. The cross-appeal must be dismissed. By agreement of the parties, there will be no order as to costs.