Secretary, Dept of Social Security v Lee

The Secretary of the Department of Social Security (the appellant) appealed to the Full Federal Court against a decision of a single judge of that court. The appeal concerned the interpretation of provisions within the *Social Security Act 1991* (Cth) relating to the assessment of a person's entitlement to a disability support pension. The primary dispute revolved around whether certain payments received by the respondent, Mr. Lee, constituted income for the purposes of calculating his pension entitlement.

The central legal issue before the Full Federal Court was whether payments made to Mr. Lee under a settlement agreement with his former employer, arising from a work-related injury, were to be characterised as income or as a lump sum payment for the purposes of the *Social Security Act 1991*. Specifically, the court had to determine if these payments fell within the definition of "income" as defined in section 8 of the Act, or if they were to be treated as a lump sum payment for the purposes of the Act's provisions concerning assets and income streams.

The Full Federal Court, comprising Brennan CJ, Toohey and Gummow JJ, reasoned that the nature of the payments was crucial. They held that the settlement payments, which compensated Mr. Lee for a loss of earning capacity and future economic loss, were not to be treated as income in the ordinary sense. Instead, the court found that these payments were capital in nature, representing compensation for a capital loss, and therefore did not fall within the definition of income under section 8 of the Act. The court applied the principle that payments made to compensate for a loss of capital are not income, even if they are received periodically.

The appeal was dismissed, with the Full Federal Court affirming the decision of the single judge.