Sydneywide Distributors Pty Ltd v Red Bull Australia Pty Ltd

[2002] FCAFC 207

FEDERAL COURT OF AUSTRALIA

Secretary, Department of Family & Community Services v Mourilyan

[2002] FCAFC 207

SOCIAL SECURITY - entitlement to Disability Support Pension - whether interest awarded on past loss of earnings is compensation made wholly or partly in respect of lost earnings or lost capacity to earn – construction of s 17(2) of the Social Security Act 1991 (Cth) – whether there existed a discernible rational relationship between the interest awarded and the respondent’s past loss of earnings.

WORDS AND PHRASES – “in respect of”

Social Security Act 1991 (Cth), ss 17(2), 17(3), 17(4), 1163, 1164, 1165(2AA), 1165(5), 1165(8), 1165(9), 1179, 1184
Social Security Act 1947 (Cth)
Workers’ Compensation Act 1990 (Qld)
WorkCover Queensland Act 1996 (Qld)
Supreme Court Act 1995 (Qld), s 47(1)

Hungerfords v Walker (1988) 171 CLR 125 – discussed
The Trustees Executors & Agency Co Ltd v Reilly [1941] VLR 110 – cited
State Government Insurance Office (Queensland) v Crittenden (1966) 117 CLR 412 – referred to
McDowell v Baker (1979) 26 ALR 277 – referred to
State Government Insurance Office v Rees (1979) 144 CLR 549 – discussed
Secretary, Department of Social Security v a’Beckett (1990) 26 FCR 349 – discussed
MBP (SA) Pty Ltd v Gogic (1991) 171 CLR 657 – referred to
Batchelor v Burke (1981) 148 CLR 448 – referred to

Technical Products Pty Ltd v State Government Insurance Office (Queensland) (1989) 167 CLR 45 - discussed

SECRETARY, DEPARTMENT OF FAMILY & COMMUNITY SERVICES v KEVIN MOURILYAN

Q.273 of 2001

HEEREY, MANSFIELD & HELY JJ
3 JULY 2002
ADELAIDE (HEARD IN BRISBANE)

IN THE FEDERAL COURT OF AUSTRALIA
QUEENSLAND DISTRICT REGISTRY	Q273 OF 2001

ON APPEAL FROM A JUDGE OF THE FEDERAL COURT OF AUSTRALIA

BETWEEN:	SECRETARY, DEPARTMENT OF FAMILY & COMMUNITY SERVICES APPELLANT
AND:	KEVIN MOURILYAN RESPONDENT
JUDGES:	HEEREY, MANSFIELD & HELY JJ
DATE OF ORDER:	3 JULY 2002
WHERE MADE:	ADELAIDE (HEARD IN BRISBANE)

THE COURT ORDERS THAT:

1.The appeal is allowed.

2.The application is remitted to the Administrative Appeals Tribunal to further consider that part of the application concerning s 1184 of the Social Security Act 1991 (Cth).

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

IN THE FEDERAL COURT OF AUSTRALIA
QUEENSLAND DISTRICT REGISTRY	Q273 OF 2001

ON APPEAL FROM A JUDGE OF THE FEDERAL COURT OF AUSTRALIA

BETWEEN:	SECRETARY, DEPARTMENT OF FAMILY & COMMUNITY SERVICES APPELLANT
AND:	KEVIN MOURILYAN RESPONDENT
JUDGES:	HEEREY, MANSFIELD & HELY JJ
DATE:	3 JULY 2002
PLACE:	ADELAIDE (HEARD IN BRISBANE)

REASONS FOR JUDGMENT

BACKGROUND

1. This is an appeal from a decision of a judge of the Court given on 12 November 2001. It concerns the construction of s 17(2) and s 17(3) of the Social Security Act 1991 (Cth) (the SS Act). His Honour dismissed an application by way of appeal from the Administrative Appeals Tribunal (the Tribunal) given on 23 November 2000.

2. To identify the issue, it is necessary to refer to certain facts.  They are not contentious.  They are taken largely from the reasons of the judge at first instance.

3. The respondent suffered work-related injuries on 2 December 1993.  He alleged negligence in the circumstances surrounding his injury.  He brought a claim for damages for personal injuries.  On 26 August 1998, judgment was given in that claim following trial for $201,620.10. The reasons for decision are not in the material available to the Tribunal or to the Court.  The respondent’s solicitor provided information that the judgment comprised the following elements:

“Past economic loss	$115,200.00
Interest on past economic loss	$16,107.00
General damages	$35,000.00
Griffith v Kerkemeyer (gratuitous services)	$18,746.00
Interest on Griffith v Kerkemeyer	$1,747.00
Fox v Wood	$8,042.75
Special Damages	$6,320.61
Interest thereon	$456.65
Total	$201,620.01
Less amount repayable to WorkCover Queensland	$78,410.76
Nett judgment	$123,209.25”

1. The respondent was entitled to, and received, benefits under the Workers’ Compensation Act 1990 (Qld) and later under its replacement the WorkCover Queensland Act 1996 (Qld) in respect of his injuries. Those benefits totalled $78,410.76, including weekly payments of compensation for incapacity for work totalling $44,677.28. The weekly payments were made up to 14 June 1996. Pursuant to the WorkCover Queensland Act, the total compensation payments were deducted from the judgment sum and repaid to WorkCover Queensland.

2. The issue before the Court concerns the period during which, by reason of s 1165(2AA) of the SS Act, the respondent was disentitled from receiving a Disability Support Pension (DSP). It arises only in relation to the elements of the award of damages for “past economic loss” of $115,200 and “interest thereon” of $16,107. It is common ground that the “past economic loss” refers to the amount allowed for loss of earning capacity from the time of the injuries to the judgment. No amount was allowed for loss of earning capacity after judgment. The material does not disclose how the sum of $115,200 was arrived at. It is also common ground that the sum of $16,107 was ordered under s 47(1) of the Supreme Court Act 1995 (Qld). It provides:

   “In any proceedings in respect of a cause of action … in a court of record for the recovery of money (including proceedings for debt, damages or the value of goods) the court may order that there shall be included in the sum for which judgment is given interest at such rate as it thinks fit on the whole or any part of that sum for the whole or any part of the period between the date when the cause of action arose and the date of the judgment.”

   It was not awarded as part of the loss suffered by the respondent:  cp Hungerfords v Walker (1988) 171 CLR 125 (Hungerfords), but as interest payable on the award of damages for being deprived of the use of the damages for past loss of earning capacity until the judgment.  Brennan and Deane JJ explained the difference between those two types of interest in Hungerfords at 152. There is no material to indicate how the interest awarded for the damages for past loss of earning capacity was calculated.

3. Following the termination of his weekly compensation payments, the respondent was granted a DSP under the SS Act on 27 June 1996. It is unclear at what rate the DSP was paid, or over what period. It is implicit in these proceedings that he has maintained a claim to an entitlement to the DSP. The respondent had received DSP payments totalling $15,838.24 to the time of the judgment on 26 August 1998. That sum was repaid to the appellant from the damages awarded, pursuant to s 1179 of the SS Act.

   THE LEGISLATION

4. Because the respondent is “a member of a couple”, the provision applicable to his circumstances is s 1165(2AA). It provides:

   “Subject to subsection (2B), 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.”

   Section 1165(2B) has no relevant application. Section 17(1) defines “compensation affected payment” to include the DSP. Consequently, if the damages awarded to the respondent amounted to “a lump sum compensation payment”, he was disentitled by s 1165(2AA) from receiving a DSP for the “new lump sum preclusion period”.

5. Section 1165(5) provides the means for determining the new lump sum preclusion period. It is in the following terms:

   “If periodic compensation payments are made in respect of the lost earnings or lost earning capacity, the new lump sum preclusion period is the period that:

   (a)begins on the day after the last day of the periodic payment period; and

   (b)ends after the number of weeks worked out under subsections (8) and (9).”

6. Because the respondent received weekly payments of compensation until 14 June 1996, the commencement of the new lump sum preclusion period runs from 15 June 1996. It ends after the number of weeks worked out under s 1165(8) and (9). Subsection (9) simply directs that, if the lump sum preclusion period calculated under s 1165(8) is not a whole number, the number is to be rounded down to the nearest whole number.

7. Section 1165(8) provides:

   “If a compensation lump sum is received on or after 20 March 1997, the number of weeks in the preclusion period is the number worked out under the following formula:

   Compensation part of lump sum
   Income cut-out amount.”

8. The issue in the case is the amount of the “compensation part of lump sum” to be used to calculate the number of weeks in the preclusion period.  The income cut-out amount is determined in accordance with s 17(1) and is acknowledged for present purposes to be $410.

9. The “compensation part of the lump sum” was calculated by reference to the definitions in s 17(2) and s 17(3) of the SS Act. They provide:

   “17(2) For the purposes of this Act, compensation means:

   (a)a payment of damages; or

   (b)a payment under a scheme of insurance or compensation under a Commonwealth, State or Territory law, including a payment under a contract entered into under such a scheme; or

   (c)a payment (with or without admission of liability) in settlement of a claim for damages or a claim under such an insurance scheme; or

   (d)any other compensation or damages payment;

   (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.

   17(3)   For the purposes of this Act, the compensation part of a lump sum compensation payment is:

   (a)50% of the payment if the following circumstances apply:

   (i)the payment is made (either with or without admission of liability) in settlement of a claim that is, in whole or in part, related to a disease, injury or condition; and

   (ii)the claim was settled, either by consent judgement being entered in respect of the settlement or otherwise, on or after 9 February 1998; or

   (ab)     50% of the payment if the following circumstances apply:

   (i)the payment represents that part of a person’s entitlement to periodic compensation payments that the person has chosen to receive in the form or a lump sum; and

   (ii)the entitlement to periodic compensation payments arose from the settlement (either with or without admission of liability) of a claim that is, in whole or in part, related to a disease, injury or condition; and

   (iii)the claim was settled, either by consent judgement being entered in respect of the settlement or otherwise, on or after 9 February 1998; or

   (b)if those circumstances do not apply – so much of the payment as is, in the Secretary’s opinion, in respect of lost earnings or lost capacity to earn.”

10. In this matter, a delegate of the appellant upon review determined the compensation made wholly or partly in respect of lost earnings or lost capacity to earn to be $131,307 comprising the amount awarded for past economic loss of $115,200 plus the amount awarded under s 47(1) of the Supreme Court Act of $16,107 for interest on that sum. Pursuant to s 17(4) of the SS Act, the amount of $44,677.28 was deducted from that amount. That subsection directs the amount of periodic compensation payments which were repayable to WorkCover Queensland to be deducted for the purposes of s 17(3). The compensation part of the lump sum was therefore $86.629.72. The preclusion period was then calculated under s 1165(8) and (9) to be 211 weeks, and the new lump sum preclusion period in accordance with s 1165(5) was the period 15 June 1996 to 29 June 2000. The respondent had to repay the DSP paid to the time of the judgment on 26 August 1998 totalling $15,838.24 under s 1179 of the SS Act, and remained ineligible for a DSP payment then until 29 June 2000. The delegate also decided that it was not appropriate to treat the whole or any part of the compensation payment as not having been made in the particular circumstances: s 1184.

11. That decision was affirmed by the Social Security Appeals Tribunal on 5 May 1999.

12. The respondent sought review of that decision by the Tribunal. On 23 November 2000 it set aside the decision. It determined that the interest awarded on past loss of earnings of $16,107 is not, in terms of ss 17(2) and (3), in respect of lost earnings or lost capacity to earn and it remitted the matter to the respondent to recalculate the lump sum preclusion period taking into account the Tribunal’s decision. As a matter of arithmetic, the lump sum preclusion period then becomes 172 weeks and the new lump sum preclusion period runs from 15 June 1996 to about 5 October 1999.

13. The Tribunal also addressed the respondent’s claim under s 1184(1). It 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 is appropriate to do so in the special circumstances of the case.”

    The Tribunal concluded that the result of the application of s 1165 is “both unfair and unintended and constitutes special circumstances”.  Counsel for both the appellant and the respondent agreed that finding was made not simply because, on the Tribunal’s calculations, the net amount available to the respondent after expenses associated with his damages claim, if fully applied as a weekly amount over the preclusion period previously fixed of 211 weeks, was less than the “income cut-out amount” of $410 under s 17(1).  They accepted that the Tribunal should have then undertaken the task of determining whether all or some part of that payment should be treated as not having been made in the special circumstances.  It did not do so.  The parties accept that, in the event that the appeal is successful, the matter should be remitted to the Tribunal to address that issue.  It may be that there are further findings that the Tribunal may need to make to perform that function.  There were a number of matters raised by the respondent about which the Tribunal appears not yet to have made specific findings, or to have indicated that it is not necessary to do so.

14. The appeal from the Tribunal’s decision to the Court ultimately was confined to the question whether the interest awarded on past loss of earnings was compensation under s 17(2) and (3) made wholly or partly in respect of lost earnings or lost capacity to earn. If it had that character, the Tribunal would have erred in its view that no part of it was in respect of lost earnings.

    THE JUDGMENT AT FIRST INSTANCE

15. The learned judge at first instance, after noting that the connecting phrase “in respect of” is broad, concluded that s 17(3)(b) should be confined to any amount paid in respect of lost earnings or lost capacity to earn.  His Honour adopted the narrower of two alternative constructions.  The alternative construction in his view, and the practical difference between them, is conveniently described in the following passage from his Honour’s reasons at [18]:

    “On one view, even a remote connection between lost earnings or capacity and any part of a payment would be sufficient nexus to justify the Secretary in forming the relevant opinion.  Alternatively, it may be that the Secretary must identify an amount as having been “paid” in respect of such loss.  The practical difference between the two approaches is that the former would include an amount merely because it was calculated by reference to lost earnings or the value of lost capacity, while the latter approach would require that the amount be, in effect, compensation for such loss.  The latter view does not require any narrowing of the natural width of the expression “in respect of”, other than by reference to the use of the word “payment” in conjunction with it.”

    His Honour pointed out the potential for the broader construction to catch other components of an award of damages for personal injuries within the scope of s 17(2) and (3) and of other “potential anomalies”, and that the broad approach might deprive a successful plaintiff of the benefits of damages awarded for other purposes. The first “anomaly” was that, because interest awarded on past loss of earning capacity might not be awarded on that past loss during the period in which weekly compensation payments were made, there is no necessary connection between an award of interest and any actual amounts paid under the SS Act or by way of weekly payments of compensation. The second anomaly was that the interest awarded may be calculated at a rate which reflects the lost opportunity to use the moneys which would have been received as earnings but for the injury, that is interest awarded as damages in accordance with Hungerfords, and that to include such damages within the amounts awarded “in respect of lost earnings or lost capacity to earn” would deprive the plaintiff of the benefit of such compensation.  His Honour considered it unlikely that the legislature intended that consequence.

    CONSIDERATION OF CONTENTIONS

16. The phrase “in respect of” designates some connection between damages awarded to the respondent or some part of them and the lost earnings or lost capacity to earn of the respondent arising from his injuries on 2 December 1993.  The issue to be determined requires consideration of the nature of that nexus.

17. The words “in respect of” were said by Mann CJ in The Trustees Executors & Agency Co. Ltd v Reilly [1941] VLR 110 at 111 to:

    “ … have the widest possible meaning of any expression intended to convey some connection or relation between the two subject-matters to which the words refer.”

    That passage was cited with approval by Gibbs J in State Government Insurance Office (Queensland) v Crittenden (1966) 117 CLR 412 at 416, and by his Honour in McDowell v Baker (1979) 26 ALR 277 at 282.

18. However, as Stephen J pointed out in State Government Insurance Office v Rees (1979) 144 CLR 549 at 553, the identification of the nexus which the words “in respect of” connotes is not discerned in analysis of those words in the abstract. They are capable of describing relationships over a very wide range of proximity. Stephen J at 553-554, and Mason J (with whom Gibbs and Aickin JJ agreed) at 561, pointed out that the meaning to be ascribed to the words “in respect of” depends upon the context in which they are found.

19. Section 1165 is in Part 3.14 of the Act dealing with compensation recovery. The general effect of Part 3.14 is identified by s 1163. Section 1163(1) makes it clear that the entitlement of the respondent to the DSP under the Act may be affected by the entitlement to or receipt of damages from a third party. In the case of a lump sum award of damages, s 1163(3) provides that the DSP:

    “ … might cease to be payable for a period (based on the amount of the lump sum) and some or all of the payments of [the DSP] might be repayable.”

    In certain circumstances, the appellant may require a person in receipt of benefits under the Act to take action to pursue an entitlement to damages or compensation from a third party: s 1164. The consequences of the receipt of an award of damages or compensation from a third party are then specified in s 1165, in conjunction with the relevant definitions in s 17 of the Act.

20. There is, in the case of lump sum payments of damages or compensation, no condition that there is an actual coincidence between a period during which the DSP payments (or other “compensation affected payments” under the Act) were or are to be made and a period during which the recipient of those payments recovers or is entitled to recover damages or compensation for loss of earnings or for loss of earning capacity. Section 1165(2AA), and the other subsections of s 1165 which apply to circumstances different from those of the respondent, and the definition of the “compensation part of a lump sum compensation payment” in s 17(3), are not predicated upon any such correspondence of entitlement periods. In Secretary, Department of Social Security v a’Beckett (1990) 26 FCR 349, von Doussa J had to consider the ancestors of Part 3.14 of the Act in the Social Security Act 1947 (Cth). His Honour at 359 described the legislature as having introduced a “concept of presumed coincidence in time by applying an arbitrary formula” to fix a “lump sum payment period”, so that the:

    “ … scheme for preclusion and recovery then operates only during the lump sum payment period as if the pensioner were receiving periodical payments sufficient to eliminate the pension entitlement.”

    It is not necessary to refer to those earlier provisions. Section 1165 now operates in the same general way, although the formula for determining “the compensation part of a lump sum compensation payment” specified in s 17(3) might be seen as removing certain of the arbitrariness which was applied under the previous legislation. The determination of the relevant preclusion period under s 1165(8) is the result of the application of that formula to the amount determined under s 17(3), subject to any deduction from that amount made under s 17(4) of periodic compensation payments refundable under legislation such as the WorkCover Queensland Act.

1. The intention of the scheme in Part 3.14 of the Act is to preclude recovery of the DSP or other “compensation affected payments,” and to permit recovery of those payments, under the Act during the preclusion period because there is a presumed correspondence between the period of entitlement to the DSP or the “compensation affected payments” and the preclusion period calculated by reference to the “compensation part of a lump sum compensation payment”. It is in that sense that the scheme of preventing double payments operates.

2. There is no legislative mandate, in the light of that analysis, for restricting the meaning of the words “in respect of” in s 17(3)(b) of the Act so as to exclude from consideration interest which has been awarded under s 47(1) of the Supreme Court Act. That interest was awarded because the respondent had been deprived of the use of the monies awarded for past loss of earnings from the times when he would have received earnings to the date of the judgment. Such interest has a direct relationship between the damages awarded to the respondent and his lost earnings. It is compensation for the loss or detriment in being kept out of the interest he might have earned on his earnings in the period to the judgment: see MBP (SA) Pty Ltd v Gogic (1991) 171 CLR 657 at 663; Batchelor v Burke (1981) 148 CLR 448 at 455. It thus reflects an attempt to put the respondent, in relation to his past loss of earnings, in the position he would have been in but for his injuries.

3. In Technical Products Pty Ltd v State Government Insurance Office (Queensland) (1989) 167 CLR 45, a workman was injured due to the negligence of his employer when he fell from a pallet on the tines of a fork-lift while loading goods into a container on the back of a trailer. The Court held that the employer was not entitled to indemnity from the insurer of the trailer because it was not “liable by way of damages in respect of ” the trailer. Brennan, Deane and Gaudron JJ said at 47:

   “The words ‘in respect of’ have a very wide meaning.  Indeed, they have a chameleon-like quality in that they commonly reflect the context in which they appear.  The nexus between legal liability and motor vehicle which their use introduces in s.3(1) is a broad one which is not susceptible of precise definition.  That nexus will not, however, exist unless there be some discernible and rational link between the basis of legal liability and the particular motor vehicle.”

   Their Honours found on the facts no such “discernible rational relationship” between the employer’s legal liability and the trailer.  Dawson J agreed, and at 51 concluded in the context of indemnity obligation that “a merely coincidental or extraneous connection between” the liability and the trailer was insufficient to enliven the obligation to indemnify.

4. In this matter, the provisions to which the Court has referred do not suggest any narrower measure of the nexus required by the words “in respect of” than was applied in that case. The purpose of Part 3.14 of the Act and s 17(3) require a discernible rational relationship between the particular element of the damages awarded and the respondent’s past loss of earnings. Such a relationship clearly exists. The interest so awarded was calculated by reference to the respondent’s past loss of earnings. It was not calculated by reference to any other head of damages awarded. Allowances for interest on other heads of damages were separately awarded. It was part of the sum awarded to put the respondent in the position he would have been in, in respect of his past loss of earnings, had he not suffered his injuries. It would, in our judgment fail to give effect to the intention of those provisions to construe the words “in respect of ” in s 17(3)(b) so as to exclude the interest expressly awarded under s 47(1) of the Supreme Court Act on the amount awarded for past loss of earnings.

5. In the Court’s judgment, it is not appropriate to endeavour to define the words “in respect of ” in s 17(3)(b) in isolation from the particular factual situation now before the Court. Questions whether s 17(3)(b) would catch an amount awarded by way of general damages explicitly for lost job satisfaction caused by a change of employment as a result of injury, or for pain and suffering caused by an injured person continuing to work with a disability, or would catch some parts of an award for damages allowed for the need to receive services provided voluntarily in part so that an injured person could continue to work, are matters which should be addressed in the particular circumstances of each case. Similarly, the application of s 17(3)(b) to circumstances where the award of interest is made because an injured person has lost the opportunity to utilise funds which, but for the injury, that person would or may have utilised in a particular way should await the particular case arising.

6. In this matter, for the reasons given, in the Court’s judgment, the interest awarded on past economic loss is a payment which was in respect of the past economic loss of the respondent.

7. Consequently, we consider that the appeal should be allowed. The orders of the judge at first instance should be set aside. The determination of the Tribunal that the payment of interest of $16,107 on past economic loss is not in respect of lost earnings or lost capacity to earn is also set aside. As the parties are agreed that it is, in the event, necessary for the Tribunal to further consider the application of s 1184 of the Act to the particular circumstances, the application is remitted to the Tribunal for that purpose.

I certify that the preceding thirty (30) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Court.

Associate:

Dated:             3 July 2002

Counsel for the Applicant:	Mr G O’Sullivan
Solicitor for the Applicant:	Welfare Rights Centre
Counsel for the Respondent:	Mr PE Smith
Solicitor for the Respondent:	Australian Government Solicitor
Date of Hearing:	16 May 2002
Date of Judgment:	3 July 2002