Secretary to the Department of Social Security v Littlejohn, W

[1989] FCA 813

NOT FOR DISTRIBUTION

IN THE FEDERAL COURT OF AUSTRALIA )

1

VICTORIA DISTRICT REGISTRY	1	No. VG 155 of 1989
1
GENERAL DIVISION	)

ON APPEAL FROM THE GENERAL ADMINISTRATIVE DIVISION OF THE ADMINISTRATIVE APPEALS TRIBUNAL

BETWEEN:  SECRETARY TO TXE DEPARTMENT
OF SOCIAL SECURITY

(Applicant)

A!!:  WILLI.U4 LITTLEJOHN
(Respondent)

Coram: Ryan J
Date: 21 December 1989

Place: Melbourne

REASaNS FOR JUDGMENT

This is an appeal pursuant to s.44 of the Administrative Appeals Trikmal Act 1975 from a decisron of the Admlnistrative Appezls Tribunal ( "the A.A.T.")

constituted by Mr Deputy ?resident Thompson. The decision whlch the A.A.T. had been required to review was made by a delegate of the presenc zpplrcant, the Secretary to the Department of Social Securrcy ("the Secretary"). The effect of that decision was that ;he Secretary should recover from the present respondent, Mr Littlejohn, the full amount of $5,346.70 paid to hlm as a sickness benefit under

REGISTRY

the Social Security Act 1947 ("the Act").

2 2 DEC 1989

AUSTRALIA PRINCIPAL

The A.A.T. set aside the Secretary's decision, and therefore removed the obligation on the respondent to repay any of thls amount. The Secretary has appealed to this Court pursuant to s.44 of the Ahinistrative Appeals Tribunal Act 1975 on a question of law from the decislon of the A.A.T.

Mr Littlelohn suffered an injury to his lower back and

coccyx in 1983 when he fell from a scaffold whlle working as an industrial painter for Sunshine Painting Service Pty Ltd. From the time of the accident untll 25 May 1984, he was absent from work for some perlods, the duration of which is not clear. During this time he experienced pain in his back and sustained an lnjury to his right shoulder. This second injury forced him to cease working altogether as an industrial painter, and he has not worked slnce.

Mr Littlejohn commenced to recelve sickness benefits from the Department of Social Securlty on 2 July 1984, and continued to receive them until 15 February 1985. In all he received $5,346.70.

On 1 November 1984, vhlle still in receipt of sickness benefits, Mr Littlejohn lodged a claim for workers' compensation under the V~ctorian workers' Compensation Act. The application was on a standard form, and in that part of lt in which the applicant pas required to indicate the nature of compensation or other rellef clalmed, there had been inserted:

"a) Weekly payments from 25.2.84 to date and

continuing"

The workers1 compensation claim was settled by the parties on 4 December 1985, the terms of settlement being embodied in a consent award of the Accident Compensation Tribunal. The relevant parts of the award for the purposes of the present proceedings were:

"IT IS ORDERED BY COSSENT that the Respondent pay the Applicant reasonable medical and like expenses to date, amount reserved, all other claims to past com~ensarion and future medical and like expenses be dismissed.

IT IS FURTHER ORDERED BY CONSENT that the Respondent pay the Applicant the sum of TWENTY THOUSAND DOLLARS ($20.000) in full settlement of - -. - . - - - - . -

all other forms of'future~compensation in respect of all injuries arising out of or in the course of the Applicani's employment with the Respondent."

On 10 April 1987, a Eelegate of the Secretary wrote to

Mr Littlejohn notifying h:m of his decision to recover the full amount of the sickness benefit payments under s.l15B(3) of the ~ c t (as it then was:, and requesting the repayment of that amount. Section 115B(3) provided that:

"Where the Secretary is of the opinion that a payment by way of a lump sum, or a series of

periodical payments, received on or before 30

June 1986 by a person who is, or has been, in receipt of sickness benefit in respect of an incapacity (whether the payment was, or all or any of the payments were, received before, durlng or after the close of the period of receipt of sickness benefit) is a payment that is, or are payments one or mort of which is or are, in whole or in part, a paylent or payments by way of compensation in res?ect of that incapacity, the secretary may, by notlce in writing served by post or personally on the person, direct the person to pay to ihe Commonwealth an amount specified in the norice, being an amount equal to

-

(a)	thc amount of sickness benefit received by the person in respect of that incapacity; or
(b)	the amount of the lump sum payment or periodical jayment or payments or such part of thac amount or of those amounts as, in the opinion of the Secretary, relates to chat incapacity,

whichever is the lesser amount."

"Payment by way of compensation" as used in s.llSB(3) was defined as follows in s.115(2) of the Act:

"115. (2) In this Division -

(a) a refere~ce

to a payment by way of

compensacion shall be read as a
reference to -

(I)

a paymenc by way of damages;

(ii)

a paymecc under a scheme of insurance or compexsation provided for by a law of a Stace or Territory, including a payment -mder a contract entered into In pursuance of such a scheme;

(iii)

a paymenc, whether with or without admissicn of liability, in settlement of a claim for damages or of a clalm under 2 scheme referred to in sub-parsgraph (11); or

(iv)

any otter payment that, in the opinion of the Secretary, is a payment in the nature of compensatlon

or damagss, other than a payment for

which the person who has received, is recelvlnq or is qualified or entitled to recezve the payment has made

contribu~ions; "

Mr Littlejohn appealed to the Social Security Appeals
Tribunal, which on 2 Buqusc 1988 recommended that h ~ s appeal
be upheld. However, on 15 September 1988, another delegate

reaffirmed the decision of =he previous delegate. On 14 April 1989, that decrsion, as I have earlier mentioned, was set aside by the A.A.T.

Neither party to these proceedings disputed the fact that the $20,000 pard to MC Littlejohn was a "payment" within the meaning of s.115(2)(a) (as it then was). The main issue in the A.A.T. concerned tte correctness of the declsion of the delegate of the Secrezary that the compensation payment made to Mr Littlejohn was wholly related to the incapacity for which the sickness benefits had been pald.

The learned Deputy President rev~ewed two earlier decisions of the A.A.T. In Re Cocks and The Secretary, Department of Social Securitv (unreported, 7 February 1989) and Re Castronuovo and Dir-ctor-General of Social Security (1984) 5 ALN N344 as well as the declsion of a Full Court of this Court in Secretary tc Department of Social Security v Siviero (1986) 68 A.L.R. 147. In the light of those authorities, he concluded:

The facts must be sxamined to see whether the

payment was made unfer a scheme OF compensation.

If on the face of f ~ e award it appears that the payment was so made but it is established that there was no factuzl basis for the award to be made under the schew, so that the tribunal which purported to make ic could not properly have done so, the Secretary c=, in my opinion, 'go behindr it and form an oplozon that rt was some other payment of compensarion. He can then further examine the facts arci form an opinion as to what the incapacity was in respect of which it was made. That is what the Tribunal did in Re Castronuovo. That, I am satisfied, is what it dEi also in Re Cocks.

17. But, if on the face of the award it was made

under a scheme of compensacion provided by a law of a State and the facts known at the time when it was made provided a basis on whlch it could have been made under the scheme, the Secretary cannot investigate 'he merits of the award and, in effect, substiiuie his own terms for those of the actual award. He must act reasonably in forming any opinion under section 115B(3). That being so, if it is apparent that the payment has In fact been made under a scheme of compensation, he cannot properly form an opinion that the payment was not made under such a scheme; nor can this Tribunal."

As I understood it, neither party to the appeal made any

criticism of the reasonin? of the A.A.T. which led to the

conclusion that the papent of $20,000 received by Mr Littlejohn was a "payment by way of compensation" within the meaning of s.l15B(3) of tke Social Security Act 1947 as in force at the relevant tine. However, the appl~cant Secretary contended that the A.A.T. erred in regarding the Secretary (and the A.A.T. itself) as being unable to go behind the consent award of the Accident Compensation Tribunal when decidlng whether the opinion could be formed, as contemplated by s.l15B(3) of the Social Security Act, that the payment of

$20,000 was in whole or in part in respect of the Incapacity

in respect of which Mr Littlejohn had been in receipt of

question appears from these paragraphs of its decision:	sickness benefit. The reasoning of the A.A.T. on that	"19. In this case the medical practitioners whose
reports were available to the parties when they reached their agrteaent, and when the Accident Compensation Tribunal made its award, were not unanimous as to the applicant's future incapacity. Mr King and Mr Silley considered that he would suffer parcial incapacity for the rest of his life. The scatement of the respondent as to the reasons for the decision under review Include a reference to the fact that, as the result of telephone contact with the insurers, there was information which indicated that the award was 'for redezgtion onlyr, i.e. in respect of future payments. One letter sent to the applicant's solicltors by the solicitors for the employer and ~ t s insurer mlght be understood to indlcate that some of the amount agreed in the compromise was rn respect of the petiod before the date of the award. Xowever, it is by no means certain that that is what the writer intended by what he wrote. Thero is nothing else to lndicate that the terms of the Accldent Compensation Tribunal's award were not what the parties had agreed. There was evxdence on whlch the Trlbunal could reasonably h~ve made an award of future weekly compensation. $20,000 was not so large an amount that the Tribunal could not reasonably have set it as the lump sum by which such compensation might be redeemed. The evidence, therefore, does not establish that the Accident Compensation Tribunal had no power to make the award. Consequently, I find that in this case the Tribunal cannot reasonably form an opinion that the payment was 'any other payment in the nature of compensation' pzid in respect of incapacity suffered before the date of the award. As to the need for a payment 3y way of compensation to be for incapacity duriig the same period as that for which the slckness beneflt was aid. see Re - Piatkowski and Secrttary to the bepa;tment of
Socral Securlty (1967) 12 ALD 291. "

In Platkowski's case a Full Bench of the A.A.T. held that the phrase ''that iicapacity' In s.l15B(3) is "the incapacity which existed during the period for which speclal beneflt was paid". That coistruction it was said "appears to accord with oblter dicta of Davles J in Siviero at 155 of his

judgment wlth which Keely J and Fisher J agreed".

Mr Lenczner for the agplicant, however, contended that s.llSB(3) required the Secretary to examine the sum of $20,000 in much the same W+? as a common law court making an assessment of damages and determine whether there is "a component somewhere in uat $20,000 which is properly referable to the incapacizy which is the subject of the

slckness benefit". In carrying out that examination, Mr Lenczner contended, the Secretary was not constrained by the way in which the parties to the consent award had characterized the matters to whlch the lump sum compensation was referable. Rather, so ic was argued, the Secretary could rewrite the agreement of the parties so as to apportion such part as he regarded as fair to the lncapaclty which had attracted sickness benefit.

I accept that the pnrase "in respect of", where twice

appearing in s.l15B(3) of the Act, has a wlde import

connoting any connection or relation between the incapacity and the payment by way of compensation on the one hand, and the incapaclty and the recelpt of sickness benefit on the other hand; see e.g. Trusiees Executors & Agency Co. Ltd. v Reilly [l9411 V.L.R. 110 a= 111, a passage approved by Taylor J in State Government Insurance Offlce (Queensland) v Crittenden (1966) 117 C.i.3. 412 at 416. However, as was held in Secretary to Department of Social Security v Siviero

(supea) at 155, for the nacessary connection or relation to

exist, the incapacrty nusi be the same. Incapacity in this

context has both a causal 2nd a temporal aspect. Depending on	the point at which it is examined, the temporal aspect may be
referable to a speclfic or finite period, or may be indeterminate. The incapaclty in respect of which Mr Lrttlejohn received the sickness benefit was for a finite period (presumably because, as suggested in Siviero at 169 the incapacity was then thought to be of a temporary nature) from 2 July 1984 to 15 February 1985. According to its terms, the consent award of the :~ccldcnt Compcnsaton Tribunal, on the other hand, was in respect of an incapacity enuring for an indeterminate period from 4 December 1985 until Mr ~ittlejohn should recover from his injuries or die. Prima facie, therefore, the tem~oral aspect of the Incapacity in respect of which the sickness benefit had been recelved was not the same as, or even partly CO-extensive with, the temporal aspect of the incapacity for which the payment of
compensation was to be made.
Accordingly, wichout more it was not open to the Secretary to form the opinion that the sum of $20,000 stipulated in the consent award was a payment by way of compensation in respect of ihe same incapacity ln respect of which the sickness benefit had been received. However, the A.A.T. clearly considered -dhether there were further facts which could lead the Secreiary to form a different opinion from that to which he was 5ound to come upon an examination of the consent award standing alone. That was the point of its examination of the medical opinions and other matters set out in paragraph 19 of its decision which is reproduced at
pp. 6-7 of these reasons.
In conducting that examination, the A.A.T. saw itself as following the approach laid down by a Full Bench of the same Tribunal (Hartigan J, Yr Deputy President Jennings Q.c. and Mr Kiosoglous, Senior Member) in Re Cocks and The Secretary, Department of Social Security (supra). In that case, the Full Bench observed at p.7 that:

"for recovery to be effected by the Department, [under s.llSB(3)I Lte questlon will always be whether the opinlon which the delegate must hold was in all the circumstances reasonable such as to allow section 1 1 3 to be lnvoked. Furthermore, that will in part require the proof of any facts relevant to the formation of the opinion to be proved on the balance of probabilities."

Then, after referring to McDonald v Director-General of Social Security (1982-1984) 6 A.L.D. 6 at 11, and Re Hennessy and Others v Secretary, Decartment of Social Security (1985)

7 ALN ~ 1 1 3 , the Full Bench continued, lbid:

"The ex~stence	of a consent order of a Court and the relevance it has to identity of incapacity are therefore only cwo potential issues amongst many that will be relevant when considering whether or not the opinion can be held at all.
... Where an order is made by the Industrial
Court pursuant to s.69 then that order ordinarily should not include an amount which has regard to past periods of incapacity arising out of the same Injury up ta the time of assessment. Similarly, where a= order is made by consent, under s.69, then asain, ordinarily, the amount agreed upon by the parties should not include an amount which has regard to past periods of incapacity arising aut of the same injury up to the trme of agreement/assessment. Where though there is evidence to suggest that an order, which has been made by ei~her of these two alternative methods, refers to +U amount in respect of past periods prior to -he time of assessment and
which the assessmex is being made then the arising out of the same injury in respect of
delegate (as may tnis Tribunal) may have regard to that evidence wken considering the effect of s.115B of the Act. The clear intention of s.115~
of the Act is to recover from a person who has received a Sickness Benefit that Benefit when they have subsequenzly recovered compensat~on in respect of the same incapacity. If therefore the delegate is of the opinlon that there has been such a double paymex (in the sense just referred to) then to the extent of such double payment any money pald by the Department is recoverable. However, the delegate must be satisfied that there has been a docble payment in respect of the same incapacity kefore the Department can recover. Thereln lies a hurdle for the delegate. In many cases the cask of obtaining sufficient
evidence to enable the delegate to form the necessary op~nion is at the least a very difficult one. In tie case of a ludgment of the industrial Court after a contested hearing it would be unlikely ttat the delegate in forming an oprnion one way or che other would depart from the decislon of that Court in the absence of other evidence. Fitere, however, there 1s a consent order like -he type in question then the task of the delegate is, to the extent that it is possible havrng regzrd to all the circumstances, to identify the basis upon whlch the compensation was paid in order to identify [for] what incapacity the payment was to effect compensation. That, of course, is made difficult by the delegate's alsost complete dependence upon the information rect~ved from the parties to the consent order as well as such other sources which bear upon that subfect. In the absence of the delegate having suffic~ent information to form the requisite opinicn then the Department cannot recover under s.1155."

The Full Bench then examined in some detail the
reasoning of the Full Courz in Sivlero (-1, in the course

of whlch it quoted thls exzract from the ludgment of Davles J

"I cannot percelve a factual situation which would

support the terms cf that award. However, the parties to the com~ensation proceedings did not agree upon a faccuzl substratum for the award. They agreed upon tze terms of an award and the South Australian ine~strial Court made that award by consent. Neither the Administrative Appeals

Tribunal nor this court was asked to go behlnd	the terms of the a;iitrd. Nor is there any basis
for dolng so."

immediately after Clat quotation the Full Bench

continued, at p.10:

"The terms of Danes J. judgment suggests to us that His Honour had difficulty in accepting the basis upon which the award of compensation was made. However, in tke absence of a request to go behind the terms of the award or any apparent basis for doing so, the question of the Tribunal's power to look behind the terms of the consent order did ncc arise for decision in that case. we are of the view that the effect of this passage is to confirm the difficulty that was faced by both the Tribunal and the Full Federal Court in Sivierors Case having regard to the particular facts of Slviero's Case. We do not believe that the passage set out above precludes the delegate from ever going behind the terms of a consent order. In support of that

interpretation we are conscious of the effect in

law that consent oreers have. A consent order at its highest refleccs no more than what the parties agreed upon in order to settle a matter in dispute. As a mztter of law only the partles to a consent order are bound by it. This Tribunal is certainly not bond by such an order."

After referring to authorities on the place to be accorded by administrative tribunals to the doctrine of issue estoppel, the Full Bench ldentlfied the issue before it as being "does this Tribunal have the requisite opinion having regard to all the evidencs in the case, including the facc that a consent order in certain terms was made in a dispute between the applicant and tis employer?". It then went on to indicate its understanding of the principles to be applied in

resolving that issue, obsernng at p. 12:

"what we are propcsing is that in order to complete its review of the delegate's decision it is necessary that chis Tribunal, as must the delegate when fornlag any opinion, examine all

relevant orders of an Industrial tribunal, and	the evidence that --=S available, including any
made by consent or ccherwise."

An application of thcse principles led the Full Bench

to find:

"17. In the case kefore us the delegate made

every effort to ascertain the basis upon which the settlement figure was based. He was obviously alerted to do so by material whlch strongly suggested that t e applicant suffered no permanent incapacity. If that were so then the settlement arrived at between the parties

reflects an incorrccc view of thc factual basis relating to the incapacity. we are satisfied that howsoever described in the settlement the paymenc of compensatron vzs in respect of the same incapacity for which Sickness Benefrts were paid."

In the paragraphs wt~ch then follow, the Full Bench reviewed the evidence, includrng medical evldence which, rn its vrew, compelled the ccnclusion expressed as follows at pp. 14-15 of the decrslon:

"20. we find on the halance of probabilities that there is no evidence of a permanent injury of the right wrist. We find on the balance of probabilities that ziere is no evldence of any permanent injury a= all which would support a s.69 consent order. We find on the balance of probabilitres that the only evidence led demonstrates a temparary incapacrty to the right wrist. Sickness Benefits were paid in respect of that same incapacity. We find that no matter how described the injur;- in respect of which Sickness Benefits were paid is the same injury in respect of which compensatian was received. In the lrght of our frndlngs, I= s.115B terms, we conclude that there is iden~icy of incapacity; see Siviero at pp. 157-160. We would merely note that any inabrlity to point ro such identlty would defeat the reasonableness of the delegate's opinion and the Department's ability to recover. If it matters we would also find that the parties by their settlement incorrectly categorised the incapacity suffered by the applicant.

21. On the balance cf probabllrties we are of the

opinion that the asplicant, Mr G.D. Cocks, has	received, by way of a lump sum payment,
compensation in respect of the same incapacity for which the applicant had received Sickness Benefit. On the balance of probabilities we are also of the opinicn that the payment of that compensation was nzde in respect of the same period of incapacizy for which the applicant received Sickness Benefit; namely as a result of the rnlury to his wrist of 5 October, 1984. Accordingly, this lribunal is satisfied and so finds on the balance of probabilities that in the matter before it thtre is sufficient evidence for the Tribunal to form an opinion and it does so form the opinion tkat the compensation for loss of earnings for pas= incapacity of the applicant had been included as a component in the consent
order for the Lump sum compensation payment of 21 August, 1985. It follows, therefore, that the Sickness Benefits paid to the applicant are
recoverable. "
In my view, it was o:en to the A.A.T. to find, as it

apparently dld, that there was no, or insufficient, evidence to suggest that the papent of $20,000 required by the consent award of the Accidenc Compensation Tribunal referred to past periods of incapacicy to which Mr Littlejohn had been subject. It is true that part of the consideration for the payment which was identifiable on the face of the award was Mr ~ittlejohn's consent to che dismissal of "all other claims to past compensation" including weekly payments for the incapacity in respect of vhich he had received payments of slckness benefit. However, that does not entail the consequence that the paynent of the sum of $20,000 was partly in respect of that incapacicy.

Unlike the applicant in Cocks1 Case, Mr Littlejohn clearly suffered a permanent incapacity. Therefore, the consent award which, on ics face, compensated him for the effects of that incapaclcy arising only after the date of the

factual basis relating to chat incapacity". Conversely, the	award, cannot be said to reflect ''an incorrect view of the
A.A.T. could not be satisfled that "howsoever described in
the settlement, the payment of compensation was in respect of the same incapacity for v~ich the sickness beneflts were pald" .
For thc reasons whlch I have already indicated, it was open to the A.A.T. to find chat there was no identlty between the incapacity for which M r Littlejohn received compensation and that for which he received sickness benefits. As the Full Bench of the A.A.T. noted in Cocks, an inabillcy to point to such identity operates to Cafeat the Department's ability to recover.

The Act as in force at the relevant time lmposed no

obligation on a person who had received slckness benefits to

recover any payment by way of compensation in respect of the incapacity to which the sickness benefits were referable. It was only if such a perSan consciously or inadvertently recovered a payment by way of compensation wholly or partly in respect of the same inc~pacity that a right accrued to the Commonwealth to recoup tke whole or part of the amount received. By contrast, s.151 of the Act in its present form, which effectively replaced s.115B after its repeal, allows the Secretary to create a ckarge in respect of moneys paid to a person by way of sickness benefit over a payment by way of compensation irrespective c5 how that person and his or her

employer's liability to nakz the payment has been admitted or	employer characterize ths payment, and even before the
determined.

In the present case, ihe A.A.T. made a finding, which I

conslder to have been open to it, that "$20,000 was not so large an amount that the (Accident Compensation) Tribunal could not reasonably have set it as the lump sum by which

such (future wcckly) compensation might be rcdcemed". Given that finding it would have been artificial in the extreme for the A.A.T. to have itself attempted, having regard to the state of the evidence before it, to appropriate some part of the $20,000 as having bee3 by way of compensation for the past incapacity for whrch Xr Littlejohn had received sickness benefits. Of necessity, there was no scope for the A.A.T. to make its own assessment, ia an amount other than $20,000, of the total compensation ap2ropriate for Mr Littlejohn's past and future incapacity. I= was therefore not demonstrably wrong for it to have declrned, in the face of the express agreement between Mr Littlejohn and his employer, to impute some arbitrarily selected part of the $20,000 as referable to the past incapacity.

For these reasons the application by way of appeal from the decision of the A.A.T. must be dismissed with costs.

I certify that this and the preceding

fifteen (15) pages are a true copy of

the Reasons for Judgment of His
Eo=our Mr Justice Ryan.

Associate: