Reid and Department of Family and Community Services [2000] AATA 549 (5 July 2000)

Last Updated: 31 July 2000

DECISION AND REASONS FOR DECISION [2000] AATA 549

ADMINISTRATIVE APPEALS TRIBUNAL )

) No. S1998/295

GENERAL ADMINISTRATIVE DIVISION )

Re KEVIN REID

Applicant

And SECRETARY, DEPARTMENT OF FAMILY AND COMMUNITY SERVICES

Respondent

DECISION

Tribunal Deputy President B.H. Burns

Date 5 July 2000

Place Adelaide

Decision The decision under review be set aside and the matter be remitted to the respondent for calculation of the old and new lump sum preclusion periods in accordance with these reasons.

.................(Signed)...............

Deputy President B.H. Burns

CATCHWORDS

SOCIAL SECURITY - loss of earning capacity compensation payment - application for disability support pension - application of direct deduction provisions in accordance with part 3.14 of the Social Security Act 1991 - s1165 held to apply rather than s1163A - definition of words "lump sum" - decision set aside.

Social Security Act 1991 - ss17(1), 1163, 1163A, 1165, 1168, 1184

Workers Rehabilitation and Compensation Act 1986 - s42A

Hill v Workers Rehabilitation and Compensation Corporation (1997) 191 LSJS 300

Secretary, Department of Social Security v Banks (1990) 20 ALD 19

Chahoud and Secretary, Department of Social Security (1992) 28 ALD 927

REASONS FOR DECISION

5 July 2000 Deputy President B.H. Burns

1. This is an application by Kevin Reid ("the applicant") for review of a decision of the Social Security Appeals Tribunal ("SSAT") dated 15 July 1998 which affirmed a decision of a delegate of the then Secretary, Department of Social Security (now Secretary, Department of Family and Community Services) ("the respondent") made on 6 March 1998, as affirmed by an authorised review officer on 4 June 1998 to reduce social security payments of the applicant to nil because of the application of the direct deduction provisions in accordance with Part 3.14 of the Social Security Act 1991 ("the Act).

2. The Tribunal had before it the documents lodged pursuant to s37 of the Administrative Appeals Tribunal Act 1975 (the "T" Documents) together with other documentary material tendered at the hearing including written submissions. Both parties also made oral submissions.

3. The applicant initially appeared in person, and was then represented by Mr E. Reinboth of counsel, and the respondent was represented by Ms L. Odgers, departmental advocate.

4. The Tribunal makes the following findings of fact which are not in dispute.

1) The applicant sustained a compensable disability (anxiety disorder) arising out of or in the course of his employment, and made a claim for compensation on 6 November 1990 (T3/34). The condition was compensable under the Workers Rehabilitation and Compensation Act 1986 (SA), ("the WRCA"), and weekly payments pursuant to s35 of the WRCA commenced from 6 November 1990 until 29 March 1995 (Exhibit A1 and "short history").

2) On 15 March 1995 WorkCover exercised its powers under s42A of the WRCA (T21/100) and informed the applicant that pursuant to s42A(4) of the WRCA it had decided to make an interim assessment of the applicant's loss of future earning capacity represented by a capital loss payment of $18,636.69 ("LOEC payment") for the period 30/3/95 to 27/3/96. WorkCover also informed the applicant that weekly payments of compensation would be discontinued from 29/3/95.

3) WorkCover made a series of four interim LOEC payments to the applicant.

* On or about 15 March 1995 the applicant received an interim LOEC payment of $18,636.69 for the period 30/3/95 to 27/3/96.

* On or about 26 March 1996 the applicant received an interim LOEC payment of $18,876.53 for the period 28/3/96 to 26/3/97.

* On or about 19 March 1997 the applicant received an interim LOEC payment of $19,056.46 for the period of 27/3/97 to 25/3/98.

* On or about 4 March 1998 the applicant received an interim LOEC payment of $19,329.00 for the period of 26/3/98 to 24/3/99.

4) On 30 January 1998 the applicant applied for a disability support pension (T23/132 and Exhibit R5).

5) On 6 March 1998 a delegate of the then Secretary, Department of Social Security made a decision to treat the interim LOEC payments of 19 March 1997 and 4 March 1998 as periodic compensation payments pursuant to s1163A of the Act. This decision brought s1168 of the Act into operation, thus reducing the applicant's disability support pension for those periods to nil (T6/38-39).

6) The decision of the delegate of 6 March 1998 was reconsidered and affirmed on 27 May 1998 (T12/54).

7) The applicant requested further reconsideration, and the decision of the delegate of 27 May 1998 was affirmed by an authorised review officer on 4 June 1998 (T14/58).

8) The applicant appealed to the SSAT on 17 June 1998 (T15/64), which handed down a decision on 15 July 1998 affirming the respondent's decision (T2/3).

9) On 12 August 1998 the applicant sought review by this Tribunal of the decision of the SSAT.

Relevant Legislation

5. The applicant's entitlement to LOEC payments derives from s42A of the WRCA, which is headed "Loss of earning capacity" and relevantly provides:

42A. (1) Where a worker suffers a compensable disability that results in incapacity for work for a period exceeding two years, the Corporation may assess the worker's loss of future earning capacity as a capital loss.

(2) In making the assessment, the following principles will be applied:

(a) the worker's notional weekly earnings (less an estimation of income tax) will be projected forward over the remainder of the worker's notional working life;

(b) in the case of partial incapacity, the amount the worker could earn in suitable employment that the worker has a reasonable prospect of obtaining by way of average weekly earnings (less an estimation of income tax) will be projected forward over the remainder of the worker's notional working life and subtracted from the amount projected under paragraph (a);

(c) the worker's capital loss will be taken to be 80 per cent of the present value of the loss indicated by the above projections (and in determining the present value of that loss a prescribed discount rate must be applied).

(3) For the purposes of subsection (2)--

(a) the projections referred to in that subsection will be made on the basis of rates of earnings current at the date of the assessment and without regard to possible future changes in those rates; and

(b) the worker's notional working life is the period over which the worker would have worked assuming that he or she had not been incapacitated and that period will be assessed having regard to the contingencies and vicissitudes of life that might in any event have prevented the worker from continuing in employment but the period will not, in any event, be taken to extend beyond the date on which weekly payments would (assuming no assessment of capital loss were made under this section) cease to be payable (see section 35(5)); and

(c) the following factors must be considered (and given fair and reasonable weight) in assessing what employment is suitable for a partially incapacitated worker--

(i) the nature and extent of the worker's disability; and

(ii) the worker's age, level of education and skills; and

(iii) the worker's experience in employment; and

(iv) the worker's ability to adapt to new employment; and

...

(4) The Corporation may make one or more interim assessments of loss as to nominated portions of the worker's notional working life before making a final assessment of loss under this section.

(5) An amount assessed under this section becomes due and payable from the date of the assessment but may be paid, at the discretion of the Corporation, in a single lump sum or in instalments that are actuarially equivalent to the lump sum (and in determining actuarial equivalence any principles, and any discount, decrement or inflation rates, prescribed by the regulations must be applied).

(6) Subject to subsection (7), where the Corporation pays or commences to pay compensation under this section, the worker ceases to be entitled to weekly payments under Division 4.

...

6. For the purposes of the Act, State based compensation payments may affect entitlements to Commonwealth social security payments. Part 3.14 of the Act, headed "Compensation recovery" contains certain provisions outlining the circumstances in which social security payments may be affected. The following provision is relevant:

1163 General effect of Part

1163(1) If a person...receives compensation, payments of a compensation affected payment to the person...might be affected under this Part.

...

1163(3) 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 compensation affected payment might be repayable.

...

1163(4) If the compensation is in the form of a series of periodic payments, the rate of the compensation affected payment might be reduced for the period for which the payments are received.

...

7. Section 17(1) of the Act relevantly lists a disability support pension as a compensation affected payment.

8. "Note 1" accompanying both sections 1163(3) and (4) states that "Under s1163A, certain lump sum payments may be treated as though they were received as periodic payments." Section 1163A (as amended and in force on 12 December 1995) provides as follows:

1163A Certain lump sums to be treated as though they were received as periodic payments

1163A(1) If:

(a) a person is entitled to periodic payments under a law of a State or Territory; and

(b) the person's entitlement to the periodic payments is converted under the law of the State or Territory into an entitlement to a lump sum; and

(c) the lump sum is calculated by reference to a period;

this Part applies to the person as if:

(e) the person had not received:

(i) the lump sum; or

(ii) if the lump sum is to be paid in instalments - any of the instalments; and

(f) the person had received in each fortnight during the period a periodic compensation payment equal to:

lump sum amount

number of fortnights in the period

where:

lump sum amount is the amount of the lump sum referred to in paragraph (b).

number of fortnights in the period is the number of whole fortnights in the period referred to in paragraph (c).

1163A(2) This section does not apply in respect of a lump sum to which a person is entitled if section 1165 applies in respect of the lump sum.

9. The version of s1163A operative as of 12 December 1995 has three major differences from its predecessor (as set out in Reprint No. 2 of 1 July 1995).

* First, subsection (1)(d) was omitted by amending Act No. 143, 1995 and was not substituted. This subsection in the preceding version of the Act read as follows:

(d) the lump sum is to be paid to the person in 2 or more instalments

* Secondly, subsection (1)(e) was substituted by the amending Act. The preceding version read as follows:

This Part applies to the person as if:

(e) the person had not received the instalments; and

* Thirdly, subsection (2) was inserted by the amending Act. The preceding version of s1163A of the Act made no reference to s1165.

10. Section 1163A, as amended, points out the possible relevance of s1165 namely, that if s1165 applies, then s1163A will not apply.

1165 Compensation affected payment not payable during lump sum preclusion period

Person not member of a couple - payment received before 20 March 1997

1165(1) Where:

(a) a person receives or claims a compensation affected payment; and

(b) the person is not 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) before 20 March 1997;

a compensation affected payment referred to in paragraph (a) is not payable to the person for the old lump sum preclusion period.

Note 1: For old lump sum preclusion period see subsections (3) to (4).

Note 2: A series of lump sum payments can be taken to be one lump sum compensation payment under subsection 17(2B).

Person not member of a couple-payment received on or after 20 March 1997

1165(1A) If:

(a) a person receives or claims a compensation affected payment; and

(b) the person is not 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.

Note 1: For new lump sum preclusion period see subsections (5) to (8).

Note 2: A series of lump sum payments can be taken to be one lump sum compensation payment under subsection 17(2B).

...

Old lump sum preclusion period

1165 (3) If periodic compensation payments are made in respect of the lost earnings or lost earning capacity, the old lump sum preclusion period is the period that:

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

(b) ends after the number of weeks specified in subsection (4).

Note: for periodic payments period see section 17.

1165 (3A) If a person chooses to receive part of an entitlement to periodic compensation payments in the form of a lump sum, the old lump sum preclusion period is the period that:

(a) begins on the first day on which the person's periodic compensation payment is a reduced payment because of that choice; and

(b) ends after the number of weeks specified in subsection (4).

...

1165 (4) The number of weeks in the old lump sum preclusion period is the number worked out under the following formula:

compensation part of lump sum

average weekly earnings

Note 1: for compensation part of lump sum see section 17.

Note 2: for average weekly earnings see section 17.

New lump sum preclusion period

1165 (5) 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).

Note: For periodic payments period see section 17.

1165 (6) If a person chooses to receive part of an entitlement to periodic compensation payments in the form of a lump sum, the new lump sum preclusion period is the period that:

(a) begins on the first day on which the person's periodic compensation payment is a reduced payment because of that choice; and

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

...

1165 (8) 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

Note 1: For compensation part of lump sum, see section 17.

Note 2: For income cut-out amount, see section 17.

...

11. If s1163A does apply, then s1168 becomes operative.

1168 Rate reduction of certain compensation affected payments where periodic compensation payments have been received

1168(1) Subject to subsections (4), (5), (6) and (7), if:

(a) a person, or the person's partner, receives a series of periodic compensation payments; and

(b) the person receives or claims a compensation affected payment for the periodic payments period; and

(c) the person was not, at the time of the event that gave rise to the entitlement of the person, or the person's partner, to the compensation, receiving a compensation affected payment referred to in paragraph (b);

the rate of the person's compensation affected payment is to be reduced, in accordance with this section, for the periodic payments period.

...

1168 (2) If the rate of a person's compensation affected payment is to be reduced under subsection (1), subsections (3), (3A) and (3B) are to be used to work out the person's reduced rate.

Note 1: If the fortnightly rate of periodic compensation is higher than the fortnightly rate of the compensation affected payment, the compensation affected payment will be reduced to nil for the periodic payments period.

...

1168 (3) If the person is not a member of a couple, the person's fortnightly rate of the compensation affected payment is reduced by the fortnightly rate of periodic compensation.

...

12. If s1168 of the Act is applicable then s1184 of the Act may still provide for relief from the effects of s1168 in special circumstances.

1184 Secretary may disregard some payments

1184(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.

...

Legal Issues in Dispute

13. The applicant contends that s1163A of the Act should not apply to his LOEC compensation payments of 19 March 1997 and 4 March 1998. Section 1163A treats certain types of lump sum compensation payments as periodic payments, which means that the compensation payment is then caught within the ambit of s1168 of the Act which applies direct deductions of compensation payments to the disability support pension. As the disability support pension is classified as a compensation affected payment under s17(1)(a) of the Act, the applicant's benefits were reduced to nil by virtue of s1168 of the Act.

14. There are three main issues in contention.

1) whether the pre-December 1995 version of s1163A or the current amended version of s1163A should be applied to the compensation payments;

2) whether the s42A LOEC payments or any of them should be considered as instalments; and

3) whether s1165 of the Act applies to the applicant's compensation payments instead of s1163A.

15. As to the first and second issues, the main relevant difference between the two versions of s1163A is that the pre-December 1995 version of s1163A contained requirement (d) which stipulated that compensation payments had to be paid in two or more instalments to be considered as periodic payments. The current amended version of s1163A has omitted requirement (d), thus one LOEC payment would be sufficient to bring s1163A into operation provided the other requirements of s1163A are satisfied. If the current version of s1163A applies, then the question as to whether the LOEC payments constituted instalments becomes irrelevant.

16. The Tribunal itself raised the third issue after noting that s1163A(2) states that this section will not apply to compensation payments to which s1165 applies. This raises a question of interpretation as to whether the applicant's LOEC payments fall within the definition of a "lump sum compensation payment" as stipulated by s1165(1)(c) of the Act. If s1165 were to apply, then this would result in the setting of a preclusion period during which the applicant would not be entitled to disability support pension.

Applicant's Submissions

17. The applicant submits that the pre-December 1995 version of s1163A ought to be applied to his situation rather than the current amended version of s1163A, and that the current version of s1163A does not operate retrospectively.

18. In support of the above submission, the applicant points to the fact that WorkCover made the decision on 15 March 1995 to convert his compensation payments from the periodic payments under s35 of the WRCA to the lump sum payments under s42A of the WRCA. The applicant submits that the timing of WorkCover's decision means that the pre-December 1995 version of s1163A should apply.

19. The applicant then sought to show that his LOEC compensation payments of 19 March 1997 and 4 March 1998 did not satisfy requirement (d) of s1163A. He submitted that WorkCover decided on 15 March 1995 to make a single and final assessment of his loss of earning capacity under s42A of the WRCA. The interim payments of 19 March 1997 and 4 March 1998 should not be construed as separate instalments of LOEC, but rather as components of the final assessment made by WorkCover in which they assumed an irrevocable obligation to pay the applicant a sum of money until retirement age.

20. The applicant relied on what Lander J had to say in Hill v Workers Rehabilitation and Compensation Corporation (1997) 191 LSJS 300 in submitting that interim assessments under the WRCA are not in the form of instalments. He quoted Justice Lander who said at p303

"Section 42A...assumes that an assessment will be made over the whole notional working life, although there may be interim assessments which will allow for interim payments."

21. The applicant also pointed to an opinion of the Commissioner of Taxation that his LOEC payments are intended to compensate for loss of earning capacity and not the loss of actual income, and is therefore non-taxable (Exhibit A2). The applicant used this opinion in support of his submission that he was not receiving periodical income, and was not double dipping by applying for a disability support pension.

22. The applicant made no submissions as to whether s1165 might apply instead of s1163A.

Respondent's Submissions

23. The respondent submitted that the current amended version of s1163A should apply to the applicant's compensation payments. The relevant law for determining whether the applicant is entitled to disability support pension payments is that which was in force at the time he applied for the pension on 30 January 1998. The respondent submitted that it is therefore irrelevant that WorkCover made its s42A decision before the December 1995 amendment to s1163A.

24. The respondent contended that the requirements of s1163A(1)(a) to (c) have been satisfied. The applicant was entitled to periodic payments under s35 of the WRCA, the entitlement to periodic payments was converted into an entitlement to a lump sum by virtue of s42A of the WRCA, and the lump sum LOEC payments were calculated by reference to a period.

25. The respondent also submitted that the s42A LOEC payments were interim assessment payments, the final quantum of the LOEC payments not yet having been determined by WorkCover. Each interim assessment was in itself a lump sum payment within the meaning of s1163A(1)(e). In support of this submission, the respondent referred to Secretary, Department of Social Security v Banks (1990) 20 ALD 19 at p24 where the Federal Court defined a lump sum as being "the aggregate of several amounts which could have been paid separately or at different times". The respondent also noted that in the case of Hill (supra) which the applicant relied upon, the court spoke of interim assessments as "lump sums".

26. The respondent submitted that in light of its interpretation of the phrase "lump sums", argument about the meaning of the word "instalments" is not necessary. While s1163A uses the word "instalments", it is in the context of lump sum payments being paid in instalments. As the final assessment under s42A has not yet been made, the payments already made cannot be "instalments" of a larger "lump sum".

27. The respondent submitted that Parliament's intention in relation to s1163A was to prevent people in receipt of lump sum compensation payments from double dipping by simultaneously applying for social security payments. The respondent also relied on Chahoud and Secretary, Department of Social Security (1992) 28 ALD 927 in support of the submission that Parliament's intention should be taken into account when interpreting the current version of s1163A.

28. The respondent also submitted that as s1163A had been correctly applied, s1168 then operated to deduct the periodic payments from the applicant's disability support pension, thus reducing it to nil. Moreover, the respondent submitted that there were no special circumstances of the case within the meaning of s1184 of the Act. There was no unreasonable or unjust outcome to the applicant in applying s1163A, whereas if the applicant's claim were to succeed he would be paid twice for the same injury, once by the insurer and once by the taxpayer.

29. In relation to the question of whether s1165 of the Act might apply to the applicant's compensation payments instead of s1163A of the Act, the respondent submitted that s1163A should still apply. The respondent submitted that the LOEC payments were not "lump sum compensation payments" for the purposes of s1165(1)(c) of the Act, because that section is concerned with one-off payments in full satisfaction of liability. The respondent further submitted that the applicant did not receive a one-off payment, but rather received a series of payments referable to particular closed periods of time and that s1163A is specifically designed to take into account compensation payments referrable to closed periods of time.

30. However, the respondent's alternative submission was that if the Tribunal did not accept the primary submission, then s1165 of the Act does apply. The respondent contends that the "compensation part of lump sum" for the purposes of sub-sections (4) and (8) would be 100% of the applicant's LOEC payment, because the totality of each payment was made in respect of the applicant's "lost capacity to earn".

Tribunal's findings, reasons and conclusion

31. The factual content of what is before the Tribunal is not in dispute.

32. On 6 November 1990 the applicant suffered a compensable disability arising from his employment resulting in incapacity for work. As a consequence he received compensation in the form of weekly payments by way of income maintenance pursuant to the WRCA. Those payments concluded on 29 March 1995 (T5). The weekly payments ceased as a consequence of an interim assessment made by WorkCover Corporation on or about 15 March 1995 for loss of the applicant's future earning capacity (T21/100). The interim assessment was made pursuant to s42A(4) of the WRCA and was for a period of 52 weeks from 30 March 1995 to 27 March 1996. The Corporation exercised its discretion pursuant to s42A(5) and paid the amount assessed in a single lump sum, rather than in instalments actuarially equivalent to the lump sum. The applicant's entitlement to weekly payments of income maintenance ceased upon payment of the lump sum ($18,636.69) pursuant to s42A(6) of the WRCA (T21/101). The entitlement to an assessment of loss of future earning capacity is substituted for the previous entitlement to weekly payments. (Hill (supra)). Further interim assessments were made and paid by way of lump sums for the following periods, namely, 28 March 1996 to 26 March 1997 ($18,876.53), 27 March 1997 to 25 March 1998 ($19,056.46) and 26 March 1998 to 24 March 1999 ($19,329.00).

33. On 30 January 1998 the applicant applied for a disability support pension which is a compensation payment pursuant to s17(1) of the Act. Part 3.14 of the Act (Division 1) cautions that compensation affected payments may be affected under this Part. The provisions in Part 3.14 which may affect the applicant's disability support pension are, for present purposes, ss1163A and 1165, as at the date when the applicant applied for disability support pension. Section 1163A does not apply in respect of a lump sum to which a person is entitled if s1165 applies in respect of the lump sum (s1163A(2)). The Tribunal now turns to the applicability or otherwise of s1165 to the facts of this case.

34. Section 1165(1) requires the fulfilment of paragraphs (a), (b) and (c) for disability support pension not to be payable to the applicant for what is described to be the old lump sum preclusion period and s1165(1A) has similar provisions which if fulfilled would preclude the applicant from being paid disability support pension for a period described as the new lump sum preclusion period. As to s1165(1) paragraphs (a) and (b), it is not in dispute that these requirements are clearly met by the applicant and the Tribunal so finds. Turning to paragraph (c), the question to be determined is as to whether any of the three LOEC payments received by the applicant prior to 20 March 1997 are "lump sum compensation payments". There can be no doubt that the three amounts in question are compensation payments. Section 17(2) defines "compensation" for the purposes of the Act and all four LOEC payments are payments under a scheme of compensation under a State law made wholly in respect of lost capacity to earn within Australia (see s17(2)(b)). The term "lump sum compensation payment" in s1165 is not defined for the purposes of the Act. However, the "compensation part of a lump sum compensation payment" is defined in s17(3) of the Act.

Compensation part of a lump sum

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 judgment being entered in respect of the settlement or otherwise, on or after 9 February 1988; 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 of 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 judgment being entered in respect of the settlement or otherwise, on or after 9 February 1988; 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.

35. In relation to paragraphs (a) and (ab) of s17(3), it is clear that the "compensation" part of "a lump sum compensation payment" is a payment made in settlement of a claim that is, in whole or in part, related to a disease, injury or condition, whereas paragraph (b) of s17(3) relates to a payment in respect of lost earnings or lost capacity to earn.

36. It is the view of the Tribunal that none of the four LOEC payments can be categorized as payments falling within paragraphs (a) or (ab) of s17(3). Those paragraphs are concerned with overall final settlement type situations where the payments include, in part, an amount or amounts in respect of lost earnings or lost capacity to earn (see definition of "compensation" in s17(2)), the aim of the 50% rule so called in paragraphs (a) and (ab) of s17(3) being intended to prevent abuse of the social security system through the manipulation of settlements of compensation claims so as to obscure the economic loss component in compensation payments. The four LOEC payments do not have the air of an overall final and complete settlement which is the focus of paragraphs (a) and (ab) of s17(3). These payments are but steps along the way to a final and complete settlement and only relate to loss of earning capacity.

37. Section 17(3)(b) applies, however, to circumstances not covered by paragraphs (a) and (ab). S17(3)(a) and (ab) allow for the 50% arbitrary rule of thumb approach on the basis that in overall settlements it can be expected that a significant proportion of the settlement will be for lost earnings and/or loss of earning capacity. Section 17(3)(b) enables the Secretary (and this Tribunal on review) to form an opinion in circumstances where paragraphs (a) and (ab) do not apply (which is the view of the Tribunal) as to how much of a payment is in respect of lost earnings or lost capacity to earn. There can be no doubt that the whole of each of the LOEC payments is in respect of lost capacity to earn as previously referred to in these reasons.

38. The Tribunal now turns to whether each of the four payments in question is a lump sum compensation payment for the purposes of s1165. "Lump sum" is not defined in the Act. The definition of the words "lump sum" was considered by Von Doussa J in Secretary, Department of Social Security v Banks (1990) 20 ALD 19 with respect to similar legislation. His Honour at p24 said

Where a payment by way of compensation consists of the aggregate of several amounts which could have been paid separately or at different times the payment is one of a lump sum.

Each of the four payments in question were paid by the exercise of the WorkCover Corporation's discretion pursuant to s42A(4) and (5)

42A.(4) The Corporation may make one or more interim assessments of loss as to nominated portions of the worker's notional working life before making a final assessment of loss under this section.

(5) An amount assessed under this section becomes due and payable from the date of the assessment but may be paid, at the discretion of the Corporation, in a single lump sum or in instalments that are actuarially equivalent to the lump sum (and in determining actuarial equivalence any principles, and any discount, decrement or inflation rates, prescribed by the regulations must be applied).

Each payment was the aggregation of instalments that were the actuarial equivalent to the lump sum.

39. Each of the four LOEC payments was a lump sum compensation payment for the purposes of s1165 of the Act and the Tribunal so finds. The Tribunal is of the view that the first three LOEC payments being lump sum compensation payments received by the applicant before 20 March 1997 and before he claimed a disability support pension are caught by s1165(1) of the Act. The remaining LOEC payment, i.e. the one received by the applicant on 4 March 1998, is a lump sum compensation payment to which s1165(1A) applies. Disability pension is not payable for certain periods, i.e. the old lump sum preclusion period with respect to the first three LOEC payments and for the new lump sum preclusion period regarding the last of the LOEC payments. (s1065(3) to (4) and s1065(5) to (8))

40. As the Tribunal has formed the view that s1165 does apply to each of the payments in question, then it follows that s1163A(1) cannot apply courtesy of s1163A(2).

41. Because of the submissions put to the Tribunal it is of the view that it would be preferable to indicate its views as to why it considers, on the facts of this case, s1163A is not applicable in any event. Section 1163A came into operation on 12 December 1995. One of the essential requirements of s1163A(1) is paragraph (a), namely, that the person in question "is entitled to periodic payments under a law of a State ...." There can be no doubt that prior to 29 March 1995 the applicant was entitled to weekly payments of compensation by way of income maintenance pursuant to Division 4 of the WRCA. Those payments are clearly "periodic payments" for the purposes of s1163A(1) of the Act. In March 1995 the WorkCover Corporation commenced to pay compensation under s42A of the WRCA and once that took place, then by virtue of s42A(6), the applicant ceased to be entitled to weekly payments - in other words, he ceased to be entitled to periodic payments for the purposes of s1163A(1)(a). It is submitted by the respondent that the term "is entitled" in s1163A(1)(a) includes "was entitled" and, similarly, that the term "is converted" in s1163A(1)(b) includes "was converted". In short, the respondent submits that s1163A(1) can have operation by drawing on events in the past, i.e. events which occurred prior to the section coming into operation. The Tribunal's opinion is that clear language must be used if it is intended that s1163A is to draw on events in the past. By way of contrast, it is useful to look to s1165(1) and (1A). There, by the use of clear language, Parliament has shown its intention to draw on events in the past, namely, by the use of the words "(whether before or after the person receives or claims the compensation affected payment)". No such language is evident in s1163A(1). Had Parliament intended the effect sought by the respondent, it could have readily done so as it did with respect to s1165(1) and (1A), but it has not done so and accordingly as one of the essential ingredients of s1163A(1) is missing, it can have no operation in the present case.

42. The Tribunal is also satisfied that there are no special circumstances such as to warrant treating the whole or part of any of the relevant lump sum compensation payments as not having been made.

43. The decision of the Tribunal is that the decision under review be set aside and the matter be remitted to the respondent for calculation of the old and new lump sum preclusion periods in accordance with these reasons.

I certify that the 43 preceding paragraphs are a true copy of the reasons for the decision herein of Deputy President B.H. Burns

Signed: .....................................................................................

Catherine Hutchins (Associate)

Date/s of Hearing 5July 1999, 6 October 1999

Date of Decision 5 July 2000

Counsel for the Applicant In Person together with Mr E Reinboth

Solicitor for the Applicant -

Counsel for the Respondent Ms L Odgers

Centrelink Departmental Advocate