Stern and Department of Family and Community Services [1999] AATA 54 (11 January 1999)

Last Updated: 11 February 1999

Administrative

Appeals

Tribunal

DECISION AND REASONS FOR DECISION [1999] AATA 54

ADMINISTRATIVE APPEALS TRIBUNAL )

) N o N1998/249

GENERAL ADMINISTRATIVE DIVISION )

Re RODNEY STERN

Applicant

And SECRETARY, DEPARTMENT OF FAMILY AND COMMUNITY SERVICES

Respondent

DECISION

Tribunal Senior Member M. D. Allen

Date 11 January 1999

Place Sydney

ADMINISTRATIVE APPEALS TRIBUNAL )

) No N1998/249

GENERAL ADMINISTRATIVE DIVISION )

Re: RODNEY STERN

Applicant

And: SECRETARY, DEPARTMENT OF FAMILY AND COMMUNITY SERVICES

Respondent

DECISION

Tribunal Senior Member M.D. Allen

Date 11 January 1999

Place Sydney

Decision FOR the reasons given orally at the conclusion of the hearing in this matter the decision under review is set aside and the Tribunal substitutes in lieu thereof its decision, viz:

THAT the settlement obtained by the Applicant in the sum of $80,000.00 for common law damages was not a payment of compensation as that term is defined in subsection 17(2) of the Social Security Act 1991;

AND THAT if the said payment were a compensation payment pursuant to section 1184 of the said Act the whole of that payment is treated as not having been made.

(Sgd) M. D. ALLEN

.............................

Senior Member

CATCHWORDS

SOCIAL SECURITY - Preclusion period following settlement of action for common law damages. Applicant in receipt of Disability Support Pension prior to incident giving rise to common law action. No connection between disabilities giving rise to entitlement to Disability Support Pension and injuries sustained in incident. Special circumstances therefore existed and no preclusion period imposed. Also settlement not a compensation settlement.

Social Security Act 1991 - ss.17(2), (3), ss.1163(3), ss.1165(2AA)

Secretary, Department of Social Security v a'Beckett 12 AAR 212

Secretary, Department of Social Security v Ellis 24 AAR 535

Groth v Secretary, Department of Social Security, 40 ALD 541

Re Fowles v Secretary, Department of Social Security 38 ALD 152

REASONS FOR DECISION

2 February 1999 Senior Member M. D. Allen

1. At the conclusion of the hearing of the above matter the terms of the decision intended to be made and the reasons therefor were stated orally. After service upon the Applicant of a copy of the decision that was in fact made the Applicant, through his Solicitors and pursuant to Sub-section 43(2A) of the Administrative Appeals Tribunal Act 1975, requested the Tribunal to furnish to the Applicant a statement in writing of the reasons of the Tribunal for its decision.

2. The oral reasons for decision have been transcribed by Auscript, the Commonwealth Reporting Service. Whereas those oral reasons may reflect the inelegance of an extempore decision, they are in fact the reasons for the said decision.

3. The said transcript is annexed hereunto and furnished to the Applicant and to the Respondent as it is the reasons for the Tribunal's decision.

I certify that this and the preceding page are a true copy of the decision and reasons for decision herein of:

Senior Member M D Allen

Signed: Ian Taylor

....................................................................................

Associate

Date/s of Hearing 11 January 1999

Date of Decision 11 January 1999

Counsel for the Applicant Ms E Kennedy

Solicitor for Applicant Carroll & O'Dea

Counsel for the Respondent N/A

Advocate for the Respondent Mr J Kenny,

Centrelink - Administrative Law

DRAFT DECISION

ADMINISTRATIVE APPEALS TRIBUNAL

Matter No N98/249

By MR M.D. ALLEN, Senior Member

STERN and DEPARTMENT OF FAMILY AND COMMUNITY SERVICES

SYDNEY, MONDAY, 11 JANUARY 1999

MR ALLEN: By application lodged the 3rd day of March 1998 the applicant sought review of the decision by a Social Security Appeals Tribunal dated 28 January 1998 which affirmed a prior decision that the sum of $12,429.60 was recoverable from the applicant pursuant to subsection 1163(3) and subsection 1165(2AA) of the Social Security Act 1991 as amended. Subsection 1163(3) reads:

If the compensation is a lump sum compensation payment the compensation affected payment 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 compensation affected payment might be repayable.

Whereas section 1165(2AA) reads:

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.

The term, compensation affected payment, is defined in subsection 17(1) to include inter alia a disability support pension.

It was common ground between the parties that the applicant had been granted disability support pension on 29 July 1993 for the conditions of post polio syndrome and hepatitis C. On or about 31 March 1996 the applicant suffered a fall whilst in a Woolworths supermarket and suffered a broken femur. He consulted solicitors and they commenced proceedings in the New South Wales District Court claiming damages against Woolworths Limited. That action was settled on the bases that the sum of $80,000 was paid to the applicant, that sum was inclusive of costs and outgoings.

As a result of that settlement the respondent department imposed a preclusion period upon the applicant's disability support pension and required repayment to it of the sum of $12,429.60. I must point out

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in fairness to the respondent that that sum was discounted as it was realised that a 50 per cent preclusion as required by the legislation would not accurately reflect the realities of the settlement.

When this matter came on for hearing before me today the applicant's counsel, Ms Kennedy, submitted that no part of that sum should have been recovered from the applicant on four bases. It is convenient to deal with those bases seriatim.

The first submission was that there was no economic loss component in the settlement. Subsection (2) of section 17 states:

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 without Australia.

Subsection (3) of section 17 then reads:

For the purposes of this Act the compensation part of a lump sum compensation payment is: (a) 50 per cent of the payment if the following circumstances apply.

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

(2) the claim was settled either by consent judgment being entered in respect of the settlement or otherwise on or after 9 February 1988.

Evidence as to the settlement negotiations which took place when the applicant's matter was before a District Court arbitrator was given by the applicant and his then solicitor who is now a member of the New South Wales Bar, Mr McGee. That evidence can be summed up by stating that counsel had advised on quantum stating that there was no likelihood of obtaining any component of an award of damages for economic loss, the applicant at the time of his fall being on a disability support pension.

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I accept the evidence of Mr McGee that at arbitration they had no material upon which to found or sustain a claim for loss of earnings. True it was that the applicant had put in train steps to start up a business concerned with computers but this was at that time quite ephemeral. His two hours a week of counselling was not taken into the equation and it appears that he had not lost much time from that activity.

The respondent points to the fact that a claim for loss of earnings was made in the District Court pleadings and exhibit 4, a notation by counsel as to quantum, refers to loss of earnings. I regard these however as more of the nature of an ambit claim and accept that there was no evidence to support them had the matter gone to hearing. If one has regard to the actual claims re loss of earnings they are vague and lack a particularity. Unfortunately the solicitors for the defendant, Ebsworth & Ebsworth, have refused to co-operate with the applicant's solicitors; why, I do not know. It strikes me as unethical for a firm of solicitors not to supply information in a matter such as this where the giving of that information can have no repercussions on either them or their client, whether that information advantage either an applicant or a respondent.

It is clear from prior cases that section 17 and its precursors were inserted into Social Security legislation in order to avoid settlements structured so as to avoid preclusion periods which in turn were enacted so as to prevent so-called "double dipping", that is to say where a person received both a Social Security pension for incapacity to work and an award of damages for loss of income. Compare for example judgment of his Honour, Justice Von Doussa, in Secretary, Department of Social Security v a'Beckett, 12AAR212 at 223. His Honour said:

In my opinion the intention of the scheme for preclusion and recovery is to prevent double payments arising from that part of a payment by way of compensation which is fairly to be characterised as damages or compensation for an incapacity for work.

In that same case discussing settlements his Honour said commencing at page 224:

I now turn to the facts of the present case. The task of the delegate and of the Tribunal was to apply in a sensible way the words of the definition to the primary facts as found drawing such inferences as fairly arose from those facts. Where a claim for damages or compensation is settled after negotiation between the parties for a global sum it will frequently be

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impossible to dissect that sum into component parts in any meaningful way. It will frequently be impossible to determine as a matter of hard fact that a particular amount or even an approximate amount was included for a particular head of loss. A claim may have one belief about the merits or the lack of them or a particular head of claim put forward on his behalf whilst the party paying might have quite another view. Where liability is in issue a claimant might accept a modest offer believing perhaps on facts unknown to the other side that a particular head of loss will not be proved if the matter proceeds to trial.

On the other hand the party making the payment might provisionally allocate a substantial sum to that particular head when calculating an offer and then markedly discount the calculation to reflect a view that the claimant could fail altogether or in a negligence action is partly to blame. These considerations in my opinion render an exercise of the kind undertaken by the Tribunal in the present case where primary consideration is given to the beliefs of the claimant and his advisers an unhelpful one.

In the present case the evidence of the respondent and his solicitor could throw little light on the defendant's reasons for making the payment. There is no reason arising from the objects of part 27 of the Social Security Act which would make the views of the pensioner and his solicitor any more significant than those of the party making the payment in settlement of the claim on the contrary. In many cases there maybe reason to suspect that the pensioner's evidence could be less than objective about the component parts of a settlement.

The difficulties which may arise if primary attention is given to the pensioner statements as to the components of a global settlement, or even to statements formally recorded in documents signed by both sides to the settlement have been adverted to in the secondary material connected with the bills to amend the Social Security Act introduced in parliament in 1979 and 1988 to which reference is made in Secretary, Department of Social Security v Banks. Unfortunately experience has shown that such statements are at times incapable of rational explanation and are the product of manipulation by the parties to obscure the true position. This is not to say the evidence of the parties as to the course of negotiations is irrelevant. It is not, but it is only a part of the total picture and often will be of little assistance in determining if any part of a payment made in settlement of a claim is in part a payment in respect of an incapacity for work.

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Usually the more objective evidence available about the nature and extent of the injury and the events which followed it, for example, the duration of absences from work, actual loss of wages, changes in work activity and the like will provide a more reliable guide than the asserted beliefs of the claimant as to how the settlement sum was arrived at. Ordinarily statements by the claimant asserting a loss resulting from an impaired capacity for work made in circumstances where those statements can reasonably be regarded as having been made to influence a defendant to pay will be entitled to substantial weight.

Foremost amongst such statements will be formal particulars of claim. The formal particulars of claim identify the subject matter of the claim presented by the pensioner. he particular facts in a'Beckett's case as related by his Honour show the difficulties which do exist. Here however the applicant was in receipt of disability support pension when he had his accident. It is commonsense that no allowance would be made in settlement negotiations by a defendant willing, but not desiring, to settle. Similarly, I accept future earnings are speculative with no hard evidence to justify them.

The matter which, in my opinion, most points to the lack of an economic component is Mr McGee's evidence of the remark, albeit informally, by the arbitrator to him and his counsel, namely, "You're no serious about the economic loss of claims". Any competent counsel hearing those remarks would have tailored his case accordingly.

I am conscious of the pertinent points made by Mr Kenny for the respondent as to matters which could and no doubt would have been put to an arbitrator on a formal hearing or a trial regarding economic loss. However, I accept the solicitor's assessment of the strength and weaknesses of their case and that the respondent was not offering any component for economic loss in settlement negotiations. Combined with the arbitrator's comments I am satisfied that this is a case were no element of economic loss, that is to say, lost earnings or loss of capacity to earn, was represented in the settlement amount. This being so subsection (2) of section 17 applies to the settlement and it is not a compensation settlement, and thus no preclusion period is applicable thereto.

Although difficult to dispose of the matter it is proper that I do on to discuss the other heads of agreement. The second submission by Ms Kennedy was that the disability support pension was not paid in respect of the injury suffered on 31 March 1996. As stated above, the applicant was granted disability support pension on 29 July 1993 for the conditions of post polio syndrome and hepatitis C. It is also

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clear that to impose a preclusion period as a result of an accident to a person already in receipt of a disability support pension for totally different conditions to that caused by the latter accident is to hand to the Commonwealth a windfall gain. The preclusion period is to overcome double dipping in the sense explained above, not to allow the Commonwealth to take part of a damages settlement for unconnected causes.

However, to my mind the words of subsection (3) of section 17 are clear and unambiguous, stating:

The compensation part of a lump sum compensation payment is 50 per cent of the payment if the following circumstances apply:

1. The payment is made in settlement of a claim that is in whole or part related to a disease, injury or condition.

Had it been intended to exempt non-connected damages actions it would have been easy enough to say so. I do however regard the fact that the damages were paid for an unconnected injury as a special circumstances that can be taken into account pursuant to subsection (1) of section 1184. Subsection (1) of section 1184 reads:

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.

I hope I do no disservice to Ms Kennedy's third and fourth heads of argument to say that both refer to the application of subsection (1) of section 1184. The term "special circumstances" was discussed by his Honour Carr J in Secretary, Department of Social Security v Ellis, 24 AAR, 535 at 539. His Honour said:

In Beedle v Director General of Social Security, 7 ALD 670, a full court of this court had to consider whether the Administrative Appeals Tribunal had erred in its interpretation of section 102(1)(a) of the Act which provided for an extension of time in which to claim family allowance in special circumstances. At 673-674 the full court said presumably in

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this context special circumstances must include events which would render the six months unfair or inappropriate. It would depend upon the circumstances of the particular case whether these constituted special circumstances. We do not think it is possible to lay down precise limits or precise rules. The matter is one for the director general bearing in mind the purposes for which the power is given. The phrase "special circumstances", although lacking precision, is sufficiently understood in our view no to require judicial gloss.

In Groth v Secretary, Department of Social Security, 40 ALD 541 at 545 Keefel J, after referring to Beedle said:

For present purposes it is sufficient to observe that it would require something to distinguish Mr Groth's case from others to take it out of the usual or ordinary case. That was I consider the only inquiry to be undertaken in this case.

It would of course follow that if one were to conclude that something unfair, unintended or unjust had occurred that there must be some feature out of the ordinary. The inquiry I have referred to would involve considering what would be the effect if the provision in question or the principle of liability it creates is applied.

I was also refer to Bulley J in re Fowles v Secretary, Department of Social Security 38 ALD 152 at 162 where he followed O'Loughlin J in Secretary, Department of Social Security v Hulls 22 ALD 570 who had stated:

The reference to special circumstances by reason of which a person liability should be realised requires in our view that there must exist in the circumstances of the case a factor or factors which justify the making of an exception in whole or in part to the principle of liability which the Act otherwise establishes. In the exercise of the discretion which section 115(4)A confers, the decision maker must have regard to whether by exercising the discretion in a particular case he will be achieving or frustrating ends or objects which are conformal with the scope and purpose of the Social Services Act 1947. Compare Water Conservation and Irrigation Commission New South Wales v Browning, 74 CLR 492 at 504 per Dixon J. Thus whilst keeping the dominant principle of section 115 in mind you must nevertheless be prepared to respond to the special circumstances of any particular case by reason of which strict enforcement of the liability created by the section would be unjust, unreasonable or otherwise inappropriate.

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To my mind the remarks by O'Loughlin specifically sum up this case. It is conformity with the legislation that an award of damages unconnected with the conditions for which the disability support pension was granted be regarded as special circumstances. An injured person's resort against a defendant for damages for pain and suffering should not be turned into a revenue gathering exercise by the Commonwealth.

Given this fact together with the applicant's circumstances of considerable debts and the probability of further operations as a result of his fall I am satisfied special circumstances exist sufficient to exercise the discretion vested by subsection 1 of section 1184 and release the applicant from payment of any part of the preclusion period. The decision under review will be set aside and the Tribunal substitutes in lieu thereof its decision, namely that the Secretary, the Department of Family and Community Services is to treat the whole of the compensation payment made to the applicant as not having been made.

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Printed on 13 January 1999 at 2:20pm [LCB]

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