Watsemwa and Secretary, Department of Education, Employment and Workplace Relations
[2010] AATA 1028
•20 December 2010
Administrative Appeals Tribunal
DECISION AND REASONS FOR DECISION [2010] AATA 1028
ADMINISTRATIVE APPEALS TRIBUNAL )
) No. 2010/1113
GENERAL ADMINISTRATIVE DIVISION ) Re CATHERINE watsemwa Applicant
And
SECRETARY, DEPARTMENT OF EDUCATION, EMPLOYMENT AND WORKPLACE RELATIONS
Respondent
DECISION
Tribunal Ms N Isenberg, Senior Member Date20 December 2010
PlaceSydney
Decision The decision under review is affirmed. ......................[sgd]........................
Ms N Isenberg
Senior Member
CATCHWORDS
SOCIAL SECURITY – lump sum workers’ compensation payment – preclusion period – whether special circumstances exist to justify the exercise of the discretion to disregard all or part of the compensation payment being made –– decision under review affirmed
Social Security Act 1991 (Cth) ss 17, 17(2), 17(3)(b), 1169, 1184K(1)
Kirkbright v Secretary, Department of Family and Community Services (2000) 65 ALD 211
Beadle v Director-General of Social Security (1985) 7 ALD 670
Department of Social Security v Hulls and Others (1991) 22 ALD 570
Haidar v Secretary Department of Social Security (1998) 52 ALD 255
Groth v Secretary, Department of Social Security (1995) 40 ALD 541
Secretary, Department of Social Security v Ellis (1997) 46 ALD 1
REASONS FOR DECISION
20 December 2010 Ms N Isenberg, Senior Member DECISION UNDER REVIEW
1. Centrelink imposed on Ms Watsemwa a compensation preclusion period from 26 July 2006 to 19 April 2011 and, as a consequence, decided to recover a compensation charge of $27,688.18 representing the payment of "compensation affected payments", namely sickness allowance and newstart allowance, paid to Ms Watsemwa during the preclusion period. That decision was affirmed by the Social Security Appeals Tribunal (SSAT) on 8 March 2010
BACKGROUND
2. On 12 February 2006 Ms Watsemwa, now aged 47, was injured in a motor vehicle accident on the way to work. She claimed worker's compensation and was granted periodical compensation from 12 February 2006 to 25 July 2006. She subsequently claimed sickness allowance from Centrelink and this was paid from 20 October 2006 to 17 April 2007. She was then paid, instead, newstart allowance from 8 June 2007 until 2 April 2009,.
3. On 12 March 2009 Ms Watsemwa settled her compensation claim and was awarded a gross lump sum of $400,000. Centrelink then calculated a compensation lump sum preclusion period in accordance with the statutory formula (see below). After costs were deducted by her solicitor, Ms Watsemwa received a net amount of $249,379.55 on or about 6 May 2009.
LEGISLATION
4. Section 1169 of the Social Security Act 1991 (Cth) (the Act) deals with compensation affected payments during a lump sum preclusion period. Subsection 1169(1) relevantly provides:
(1) If:
(a) a person receives or claims a compensation affected payment; and
(b) the person receives a lump sum compensation payment;
the compensation affected payment is not payable to the person in relation to any day or days in the lump sum preclusion period.
5. Section 17 of the Act contains the definition of compensation. It is defined to include a payment of damages, or a payment in settlement of a claim for damages, that is made in respect of lost earnings or lost capacity to earn resulting from personal injury (section 17(2)). Section 17 also contains the law in respect to how much of the compensation payment is to be applied to the calculation of the preclusion period. If payment is made by way of settlement, either by consent judgement or otherwise, then 50 per cent of the payment is assessable (section 17(3)(a)). Alternatively, the compensation part will be determined from however much of the payment as is, in the Secretary’s opinion, in respect of lost earnings or lost capacity to earn, or both (section 17(3)(b)).
6. Briefly, the scheme of the legislation is aimed at preventing those receiving lump sum compensation payments for loss of income from receiving benefits from the public purse. In this case, received for economic loss. This amount is the “compensation part of the lump sum” and is then used, by application of a statutory formula, to calculate a period of time during which a person will not be eligible to receive Centrelink payments. This is called “the preclusion period”. If, during the preclusion period, the person has received Centrelink payments, then the Act creates a statutory charge over the settlement funds to the extent of the payments made. The licensed insurer is obliged to pay the amount of the charge to Centrelink in priority to payments to the person entitled to the benefit of the settlement. Solicitors routinely make enquiries of Centrelink prior to any settlement to ascertain the preclusion period and the amount of any statutory charge.
7. The Act provides potential relief from the strict application of the compensation preclusion period, by giving the Secretary a discretion to disregard the whole or part of the compensation payment in “special circumstances”, as follows:
1184K Secretary may disregard some payments
(1)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.
ISSUE BEFORE THE TRIBUNAL
·Was the compensation preclusion period and compensation charge amount correctly calculated?
·Are there any special circumstances that would warrant a reduction in the length of the preclusion period and a corresponding reduction in the amount of the compensation charge recovered?
8. Ms Watsemwa gave some evidence about the issue of the calculation of the preclusion period, but ultimately there was no dispute that if the statutory formula were applied to her circumstances, a preclusion period would result from 26 July 2006 to 19 April 2011, and that this would also result in a compensation charge of $27,688.18.
CONSIDERATION
9. The Applicant’s case was that the application of the statutory formula was unfair. It was the Secretary’s position that there are no special circumstances in Ms Watsemwa’s case, such that the discretion to disregard parts of the compensation payments pursuant to section 1184K of the Act should be exercised.
10. In summary, Ms Watsemwa’s evidence was that she has about $150,000 in two bank accounts, that she has expenses of about $1,000 per week and that, at her present rate of expenditure, which is conservative, the money will be completely gone in three years.
11. She also said that because she had to comply with Centrelink newstart allowance ‘rules’ and had to look for work, instead of recuperating, her condition deteriorated, although there was no medical evidence to that effect. She said she sees a chiropractor twice a week, but, curiously, there was no provision for these fees in her schedule of ongoing weekly expenses. No surgery is planned. She said she has lost the ability to work and has ‘lost her future’. She said she has applied for some 30 jobs, without success, as she tells prospective employers of her limitations.
12. Ms Watsemwa has the care of a 16 year old daughter who is still at school, and who receives youth allowance. It was unclear if her son, aged 21 and who is said to have a ‘mental condition’, lives with her; and Ms Watsemwa alleged that Centrelink has forbidden her to speak with him. She said she minds her grandchildren through the day, but it was unclear from her evidence if she was paid by her daughter to do so, or if this is to offset the loan of about $5,000 which the daughter has given her.
13. I reviewed the decision in Kirkbright v Secretary, Department of Family and Community Services (2000) 65 ALD 211, where Mansfield J said (at 217) that section 1184 (as it then was) is designed specifically to enable the Department to ameliorate such unfairness or injustice which results upon the strict application of the Act.
14. The discretion to disregard the whole or part of a compensation payment can be exercised where application of the usual rules would lead to a result that is unfair or inappropriate (see Beadle v Director-General of Social Security (1985) 7 ALD 670 and Secretary, Department of Social Security v Hulls and Others (1991) 22 ALD 570). The Federal Court in Secretary, Department of Social Security v Smith (1991) 30 FCR 56 (Smith) held that it is appropriate for the discretion (under section 156 as it then was) to be used where the arbitrary nature of the “50% rule” results in unfairness in a particular case.
15. Special circumstances do not have to be statistically “extreme” or “unique”, it is sufficient if there is something that takes the matter out of the usual ordinary case, (see Haidar v Secretary Department of Social Security (1998) 52 ALD 255 at 265), in which Hill J cited the earlier Federal Court cases of Groth v Secretary, Department of Social Security (1995) 40 ALD 541 and Secretary, Department of Social Security v Ellis (1997) 46 ALD 1).
16. I accept that Ms Watsemwa has been careful with the capital amount she received from her compensation payment, and has not frittered it away on holidays or other frivolous purchases. For that she is to be commended. She presently has about $150,000 in the bank: this is a position far more comfortable than the majority of social security recipients and, for that matter, probably most of the community at large.
17. She is currently spending at the rate of $1,000 per week, supporting herself, and partially supporting her teenage daughter and possibly her son, who may or may not be partially disabled. I do not think her level of expenditure, while conservative, was necessarily quite as frugal as she suggested in her schedule of expenditure.
Ms Watsemwa’s solicitor submitted that Ms Watsemwa was in severe financial hardship. I do not agree. It is true that at her present rate of spending the $150,000 would be exhausted in three years. However, at the end of the preclusion period in April next year, only some four months away, she will again be eligible for social security benefits.
18. Ms Watsemwa said she just wanted ‘a fair go’. Doussa J in Smith identified that fairness was central to the intended operation of the legislative scheme dealing with compensation affected payments, at 61:
“…the provisions…are intended to operate together as a fair balance of the interests of the recipient of the payment with the competing interests of others in the community whose needs must be met as far as possible from a finite budget allocation for social security measures.”
19. The purpose of workers’ compensation is not to provide an injured employee with a nest egg for the future, as Ms Watsemwa appears to think. The scheme in relation to compensation affected payments is to avoid a situation in which a person receives “double payments for an inability to exercise an earning capacity” (Smith at 60). In making provision for future economic loss, the settlement figure anticipates that the injured worker will apply those funds to living expenses as if the injured worker were still working. That is precisely what has occurred. However, by the time Ms Watsemwa’s preclusion period ends she will, in fact, if she continues at her present rate of expenditure, still have acquired something of a nest egg.
20. I find that Ms Watsemwa’s circumstances are not such that the discretion to treat the whole or part of a compensation payment as not having been made should be exercised in her favour.
DECISION
21. The decision under review is affirmed.
I certify that the 21 preceding paragraphs are a true copy of the reasons for the decision herein of Ms N Isenberg, Senior Member.
Signed: ................................[sgd].....................................................
AssociateDate of Hearing 25 October 2010
Date of Decision 20 December 2010
Solicitor for the Applicant Mr R Balzola
Advocate for the Respondent Mr B Slattery
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