Secretary of the Department of Family and Community Services v Sammut - [1999] FCA 1735

FEDERAL COURT OF AUSTRALIA
Secretary of the Department of Family & Community Services v Sammut [1999] FCA 1735
ADMINISTRATIVE LAW – discretionary powers – loss of benefit entitlement for preclusion period where lump sum compensation received – discretion to reduce preclusion period – whether adequate reasons provided – whether error in identification of amount repayable
SOCIAL WELFARE AND SECURITY – job search and sickness allowance – loss of benefit entitlement for preclusion period where lump sum compensation received – discretion to reduce preclusion period – ethical duty of solicitors concerning compensation settlements
Administrative Appeals Tribunal Act 1975 (Cth)
Social Security Act 1991 (Cth) ss 17, 23, 1165(2AA), 1166, 1184
Trimboli v Secretary, Department of Social Security (1989) 86 ALR 64, followed
Secretary, Department of Social Security v Ellis (1997) 46 ALD 1, followed
Haidar v Secretary, Department of Social Security (1998) 157 ALR 359, followed
SECRETARY OF THE DEPARTMENT OF FAMILY AND COMMUNITY SERVICES v ANNETTE SAMMUT
N 683 of 1999
BRANSON J
SYDNEY
15 DECEMBER 1999

IN THE FEDERAL COURT OF AUSTRALIA

NEW SOUTH WALES DISTRICT REGISTRY

N 683 of 1999

BETWEEN:

SECRETARY OF THE DEPARTMENT OF FAMILY AND COMMUNITY SERVICES
Applicant

AND:

ANNETTE SAMMUT
Respondent

JUDGE:

BRANSON J

DATE OF ORDER:

15 DECEMBER 1999

WHERE MADE:

SYDNEY

THE COURT ORDERS THAT:
1.The decision of the Administrative Appeals Tribunal (“the Tribunal”) be set aside.

2.The matter be remitted to the Tribunal to be heard and decided according to law.

3.The Tribunal to be at liberty to hear further evidence.

Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.

IN THE FEDERAL COURT OF AUSTRALIA

NEW SOUTH WALES DISTRICT REGISTRY

N 683 of 1999

BETWEEN:

SECRETARY OF THE DEPARTMENT OF FAMILY AND COMMUNITY SERVICES
Applicant

AND:

ANNETTE SAMMUT
Respondent

JUDGE:

BRANSON J

DATE:

15 DECEMBER 1999

PLACE:

SYDNEY

REASONS FOR JUDGMENT
INTRODUCTION

This is an “appeal” pursuant to s 44 of the Administrative Appeals Tribunal Act 1975 (Cth) from a decision of the Administrative Appeals Tribunal (“the Tribunal”) given on 16 June 1999.
The Tribunal set aside a decision of the Social Security Appeals Tribunal which had affirmed a decision of an authorised review officer. The authorised review officer had affirmed a decision of a delegate of the Chief Executive Officer of Centrelink dated 3 September 1997 to recover from a lump sum compensation settlement paid to the respondent an amount of $7,965.83 reflecting job search allowance and sickness allowance benefits paid to the respondent in the period 24 November 1993 to 28 March 1995.
FACTS
The respondent (“Ms Sammut”) was injured in a two-car accident on 24 November 1993. Legal proceedings were instituted on her behalf against the driver of the other car. In such proceedings it was claimed that:
“The Plaintiff has suffered a loss of earnings and a loss of earning capacity particulars of which will be provided.”
The defendant did not admit the truth of the above claim.
The legal proceedings instituted by Ms Sammut were settled on 14 August 1997 on the basis that an amount of $56,500 be paid to Ms Sammut. The solicitor acting for Ms Sammut advised Centrelink that the settlement sum had been agreed to by her client on the basis that it did not include any amount as compensation for economic loss. The solicitors for the insurers of the defendant in the proceedings took the view that the settlement sum reflected an allowance of $1,300 for economic loss and they so advised Centrelink. Centrelink accepted this advice.
It is not in dispute that Ms Sammut received payments of job search allowance and sickness allowance during the period 24 November 1993 to 28 March 1995 in a total amount of $7,965.83. Her husband received no relevant social security payments. The applicant did not seek to argue before me that the amount of $56,500 paid to her was not a compensation payment within the meaning of the Act.
Ms Sammut and her husband own a home with an approximate value of $300,000. A mortgage on the home secures repayment of a debt of $30,000. At the time of the hearing before the Tribunal, Ms Sammut had outstanding credit card debts and other expenses of approximately $4,000 and she had approximately $2,000 in her bank account.
The Tribunal accepted that Ms Sammut suffers from panic attacks, anxiety and agoraphobia and remains under psychiatric care. It also noted that she complains of chronic neck/back and leg pain.
LEGISLATION
Sections 17 and 23 of the Social Security Act 1991 (Cth) (“the Act”) have the effect that the job search allowance and the sickness allowance paid to Ms Sammut during the period 24 November 1993 to 28 March 1995 were “compensation affected payments” within the meaning of s 1165(2AA) of the Act (see paras (c) and (k) of the definition of “compensation affected payment” (s 17(1)), para (ha) of the definition of “former payment type” (s 17(1)), and para (c) of the definition of “social security benefit” (s 23(1)).
Section 17(2) of the Act provides, so far as it here relevant, that compensation means:
“(a) a payment of damages; or
(b)….
(c)a payment (with or without admission of liability) in settlement of a claim for damages …; or
(d)….
(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.”
Section 1165(2AA) of the Act relevantly provides:
“… if:
(a)a person receives or claims a compensation affected payment; and
(b)the person is 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.”
It is not in dispute that the new lump sum preclusion period in Ms Sammut’s case commenced on the day of her accident, namely 24 November 1993, and ended on 28 March 1995.
Section 1166(1) and (2) of the Act provides:
“1166(1) If:
(a)a person receives a lump sum compensation payment; and
(b)the person receives payments of a compensation affected payment for the lump sum preclusion period;
the Secretary may, by written notice to the person, determine that the person is liable to pay the Commonwealth the amount specified in the notice.
1166(2)Subject to subsection (5), the amount specified in the notice is the recoverable amount and is worked out under subsections 5(3), (4), (4A), (4B) and (4C).”
It is not in dispute that the recoverable amount in Ms Sammut’s case has been properly calculated in accordance with s 1166(4) in the sum of $7,965.83, being the sum of the payment of the compensation affected payments made to her for the new lump sum preclusion period.
The crucial provision of the Act for present purposes is s 1184(1) which provides:
“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 appropriate to do so in the special circumstances of the case.”
REASONS OF THE TRIBUNAL
The Tribunal determined that “compensation affected payments” had been made to Ms Sammut during the “new lump sum preclusion period” in an aggregate amount of $7,965.83. As is mentioned above, this determination is not now challenged by Ms Sammut.
The Tribunal concluded:
“that the legal process surrounding [Ms Sammut’s] consent compensation settlement has not served [her] interest; that the processes undertaken by her solicitor in this process may have been insufficient; that [Ms Sammut] may have course (sic) to a legal redress against her solicitor; that to access this redress [Ms Sammut] would assume both financial cost and stress; that further imposition of stress is not conducive to resolution of [Ms Sammut’s] psychiatric condition; that cost is something that she can only afford by sale or further mortgage of her house, with a consequential deterioration in her financial affairs, which, in turn, would cause increasing stress upon [her] and that particular litigation by [Ms Sammut] in such circumstances may not necessarily be successful.”
The Tribunal found that:
“in the particular circumstances of this matter, special circumstances exist and arise from the failure of [Ms Sammut’s] solicitor to negotiate a settlement in which ‘economic loss’ as a component was clearly excluded.”
The Tribunal dealt with the consequences of its finding that “special circumstances” existed in Ms Sammut’s case in the following paragraph from its written reasons for decision:
“63. The Tribunal, having concluded that special circumstances exist, believes that the part of the compensation payment relating to ‘economic loss’ as (sic) not having been made and/or is not liable to be made. As a consequence [Ms Sammut] is entitled to a return of $7,965.83, an amount already paid to the Respondent.”
CONSIDERATION
I consider that there is a real possibility that some words have accidentally been omitted from para 63 of the Tribunal’s written reasons for decision. However, the written reasons for decision have been certified as a true copy of the reasons for decision of the member who constituted the Tribunal and no corrigendum has apparently been issued. Neither party suggested that it would be appropriate for me to do other than act on the basis that para 63 is expressed in the terms intended by the Tribunal.
On that basis alone, it seems to me, it is necessary for this matter to be remitted to the Tribunal for further consideration. Paragraph 63 of the Tribunal’s written reasons for decision are crucial to the determination of the Tribunal. Yet the paragraph does not make grammatical or logical sense.
Section 1184(1) of the Act plainly calls for a two stage decision-making process. First, does the case have “special circumstances” within the meaning of the subsection. Secondly, if it does, should the Secretary (or other relevant decision maker) in the exercise of his or her discretion, treat either the whole or some part of the compensation payment as not having been made or as not liable to be made (Trimboli v Secretary, Department of Social Security (1989) 86 ALR 64 per Hill J at 74, with whom in this regard Woodward and Beaumont JJ agreed; Secretary, Department of Social Security v Ellis (1997) 46 ALD 1 at 6; Haidar v Secretary, Department of Social Security (1998) 157 ALR 359 at 362).
Nothing in the written reasons for decision of the Tribunal as certified suggest that the Tribunal engaged in the two stage decision making process called for by s 1184(1) of the Act. Further, it is not clear from such reasons whether the Tribunal gave consideration to whether, assuming that the case was one which it found called for the exercise of its discretion, it would be appropriate to treat either the whole, or merely some part, of the compensation payment as not having been made.
In addition, to the extent that any process of reasoning can be extracted from para 63 of the Tribunal’s written reasons for decision, it appears that the Tribunal assumed that if that part of the compensation payment which related to economic loss (ie presumably, $1,300) were treated as not having been paid, Ms Sammut would be entitled to the return of the amount of $7,965.83 which she has repaid to the respondent. However, for the amount of $7,965.83 to be repayable to Ms Sammut under the Act the whole of the settlement sum of $56,500 would have to be treated as not having been paid to her (ss 1165(2AA) and 1165(7)).
The decision of the Tribunal must for the above reasons be set aside and the matter remitted to be heard and decided again according to law. The discretionary nature of the decision required to be made by the Tribunal makes it appropriate for the Tribunal to be free to hear further evidence should it consider it appropriate to do so.
In conclusion, I note that the applicant directed strong criticism to the approach taken by the Tribunal in considering whether the case was one in which there were special circumstances. The matter will now have to be heard and decided again. Detailed examination of the Tribunal’s consideration of the issue of special circumstances is therefore unnecessary.
Nonetheless, I consider it appropriate to observe that it would be inconsistent with a solicitor’s ethical responsibilities to seek to clothe a compensation payment made to his or her client with a false character for the purpose of evading the operation of the Act. That is, if to a solicitor’s knowledge a compensation payment was made wholly or in part in respect of lost earnings or lost capacity to earn (s 17(2) of the Act), it would not be ethical for him or her to seek to obtain from the paying party a written statement that the payment did not include any economic loss component for the purpose of assisting his or her client to avoid the operation of Part 3.14 of the Act (which is concerned with compensation recovery).
Moreover, in the circumstances of this case, it was not open to the Tribunal to assume, as it appears that it did, that the amount of compensation that Ms Sammut would have been offered had her solicitor explicitly abandoned her claim for damages for loss of earnings and loss of earning capacity would have been $56,500 (ie the amount actually received by her). Conversely, it was not open to the Tribunal to assume that Ms Sammut would not have settled her legal proceeding for the sum of $56,500 had she been advised by her solicitor that the settlement sum would be treated by the respondent as including an economic loss component. The above issues could have been, but apparently were not, the subject of evidence before the Tribunal. In the circumstances, the Tribunal was not in a position to make findings concerning them.

I certify that the preceding twenty-seven (27) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Branson.
Associate:
Dated: 15 December 1999

Counsel for the Applicant: Mr T. Reilly

Solicitor for the Applicant: Australian Government Solicitor

Counsel for the Respondent: Mr D. Ash

Date of Hearing: 21 October 1999

Date of Judgment: 15 December 1999

IN THE FEDERAL COURT OF AUSTRALIA
NEW SOUTH WALES DISTRICT REGISTRY	N 683 of 1999

BETWEEN:	SECRETARY OF THE DEPARTMENT OF FAMILY AND COMMUNITY SERVICES Applicant
AND:	ANNETTE SAMMUT Respondent
JUDGE:	BRANSON J
DATE OF ORDER:	15 DECEMBER 1999
WHERE MADE:	SYDNEY

JUDGE:	BRANSON J
DATE:	15 DECEMBER 1999
PLACE:	SYDNEY

Counsel for the Applicant:	Mr T. Reilly
Solicitor for the Applicant:	Australian Government Solicitor
Counsel for the Respondent:	Mr D. Ash
Date of Hearing:	21 October 1999
Date of Judgment:	15 December 1999