Cioccia; Secretary, Department of Family and Community Services [2002] AATA 759 (2 July 2002)

Last Updated: 6 September 2002

DECISION AND REASONS FOR DECISION [2002] AATA 759

ADMINISTRATIVE APPEALS TRIBUNAL )

) No A2002/146

GENERAL ADMINISTRATIVE DIVISION )

Re Secretary, Department of Family and Community Services

Applicant

And Enrico Cioccia

Respondent

DECISION

Tribunal Mr G A Mowbray

Date 2 July 2002

Place Canberra

Decision For reasons given orally the Tribunal sets aside the decision made by the Social Security Appeals Tribunal on 24 December 2001, and remits the matter to the Secretary for reconsideration with a direction that the lump sum payment of $60,000 made as a result of the settlement of 14 July 2000 was not compensation as defined in section 17(2) of the Social Security Act 1991.

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

Member

CATCHWORDS

SOCIAL SECURITY - preclusion period - settlement of claim - lump sum payment - whether made wholly or partly in respect of lost earnings or lost capacity to earn

Social Security Act 1991 s17(2)

Secretary, Department of Social Security v a'Beckett (1990) 26 FCR 349; 12 AAR 212; 21 ALD 79

Re Cocks and Secretary, Department of Social Security (1989) 10 AAR 229n; 18 ALD 160

Re Cunneen and Secretary, Department of Social Security (1995) 39 ALD 440

Re Secretary, Department of Social Security and Philpott (AAT 12691, 10 March 1998)

Re Lawlor and Department of Family and Community Services (1999) 57 ALD 509

REASONS FOR DECISION

3 September 2002 Mr G A Mowbray

History of the Application

1. On 4 August 2000 Centrelink wrote to Enrico Cioccia to inform him that $10,884.60 of social security payments were to be repaid. This was because he was entitled to a lump sum compensation payment of $60,000. The money due to Centrelink was to be deducted by NRMA Insurance before the rest of the compensation payment was paid to Mr Cioccia. On 11 August 2000 Mr Cioccia's then solicitors Denniston & Day requested a review of the decision because

"In this case there was no money paid in the compensation sum for any lost earning or lost capacity to earn."

2. On 24 August 2000 Centrelink wrote to Mr Cioccia's solicitors implying that the decision would not be changed unless special circumstances were shown. The letter also set out the procedures for requesting further review. It is unclear whether the letter in fact contained a decision in itself. On 20 November 2000 Mr Cioccia rang Centrelink and asked for a review of its decision. On 30 November 2000 Centrelink affirmed its decision but also referred the matter to an authorised review officer who, on 9 January 2001, affirmed the decision.

3. Mr Cioccia then applied to the Social Security Appeals Tribunal (SSAT) for a review of the decision. On 24 December 2001 that Tribunal decided that $30,000 of his compensation payment was deemed to be the economic loss component but that $20,000 of that component should be disregarded due to the special circumstances of the case. On 17 January 2002, the Secretary of the Department of Family and Community Services applied to this Tribunal for a review of the SSAT's decision.

4. The hearing for this matter was held on 1 July 2002. The Secretary was represented by Mr Perdon of Centrelink and counsel for Mr Cioccia was Mr Anforth. Oral reasons for decision were given on the following day setting aside the decision under review. On 2 August 2002 the Tribunal received a request for written reasons for the decision pursuant to s 43(2A) of the Administrative Appeals Tribunal Act 1975 from Mr Neely of the Australian Government Solicitor who was now acting for the Secretary. Accordingly these written reasons have been prepared based on the oral reasons given on 2 July 2002 with appropriate minor editing.

Background

5. Mr Cioccia was injured in a motor accident on 13 November 1996. At the time of the accident he was on unemployment benefit and after the accident he received Newstart Allowance without any activity test requirements. He began receiving a Disability Support Pension in December 1997.

Legislation

6. The relevant provisions of the Social Security Act 1991 (the Act) in this matter are as follows. I accept Mr Perdon's assurance that although some of these provisions have been amended or repealed with effect from 20 September 2001, they still apply in this case by virtue of the transitional provisions in the amending legislation

"17 Compensation recovery definitions

(1) In this Act, unless the contrary intention appears:

...

"compensation" has the meaning given by subsection (2);

"compensation affected payment" means:

(aa) an age pension; or

(a) a disability support pension; or

(b) a parenting payment; or

(c) a social security benefit; or

(e) a disability support wife pension; or

(f) a carer payment; or

(g) a special needs disability support pension; or

(h) a special needs disability support wife pension; or

(i) mature age allowance; or

(j) mature age partner allowance; or

(k) a former payment type;

"compensation part", in relation to a lump sum compensation payment, has the meaning given by subsections (3) and (4);

...

(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 and whether it is made within or outside Australia) 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.

...

(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; 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; 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.

..."

"1165 Compensation affected payment not payable during lump sum preclusion period

...

(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.

...

(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

(9) If the number worked out under subsection (4) or (8) is not a whole number, the number is to be rounded down to the nearest whole number."

"1166 Person may have to repay amount where both lump sum and payments of compensation affected payment have been received

(1) If:

(a) a person receives a lump sum compensation payment; and

(b) the person receives payments of a compensation affected payment for the lump sum preclusion period;

the Secretary may, by written notice to the person, determine that the person is liable to pay to the Commonwealth the amount specified in the notice.

..."

"1184 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.

(2) If:

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

(b) the person's partner receives compensation; and

(c) the set of circumstances giving rise to the compensation are not related to the set of circumstances that give rise to the person's receipt of or claim for the compensation affected payment;

the fact that those 2 sets of circumstances are unrelated does not in itself constitute special circumstances for the purposes of subsection (1)."

Issues

7. There are two live issues before the Tribunal. First, did Mr Cioccia receive a payment in settlement of a claim for damages or a claim under an insurance scheme that was made wholly or in part in respect of lost earnings or lost capacity to earn? That is, was his $60,000 "compensation payment" "compensation" for the purposes of section 17(2) of the Act?

8. Secondly, if it was compensation should the whole or a part of the compensation payment be treated as not having been made due to the special circumstances of the case for the purposes of section 1184 as in force before September 2001?

Evidence

9. The Tribunal received "T-documents" lodged under section 37 of the Administrative Appeals Tribunal Act 1975 T1 to T30, Applicant's documents A1 and A2 and Respondent's document R1. Mr Cioccia gave oral evidence by telephone.

Consideration of Issues and Findings

Was the $60,000 lump sum compensation payment wholly or in part in respect of lost earnings or lost capacity to earn?

10. Section 17(2) relevantly provides

"For the purposes of this Act, compensation means:

...

(c) a payment (with or without admission of liability)...

... 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."

11. There are three elements in this provision. The element that is of concern to the Tribunal is that provided for in paragraph (e), whether the payment was made wholly or partly in respect of lost earnings or lost capacity to earn. Both parties agree that I must be satisfied on the balance of probabilities that the lump sum compensation payment contained this so-called "economic loss" component.

12. In Secretary, Department of Social Security v a'Beckett (1990) 26 FCR 349; 12 AAR 212; 21 ALD 79 Justice von Doussa said at 359-60 and 361-2; 223 and 225; 89 and 90-1

"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 incapacity for work...

...

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 among such statements will be formal particulars of claim. The formal particulars of claim identify the subject matter of the claim presented by the pensioner."

13. In Re Cocks and Secretary, Department of Social Security (1989) 10 AAR 229n; 18 ALD 160 the Tribunal said at [13]

"In many cases the task of obtaining sufficient evidence to enable the delegate to form the necessary opinion is at the least, a very difficult one... In the absence of the delegate having sufficient information to form the requisite opinion then the Department cannot recover under s 115B."

14. In Re Cunneen and Secretary, Department of Social Security (1995) 39 ALD 440 Senior Member Beddoe said at [29]

"As the Full Court made clear in Blunn v Cleaver [(1993) 31 ALD 28; 119 ALR 65] the statutory provisions here in question are to be interpreted taking into account that the perceived legislative intention is such as to require that all the provisions of Pt 3.14 operate according to the nature of the entitlement to the compensation payment rather than to the manner in which the payment is, in fact made (119 ALR 65 at 81; 31 ALD 28 at 42)."

15. In Re Secretary, Department of Social Security and Philpott (AAT 12691, 10 March 1998) the Tribunal said at [42]

"For a payment to be "compensation" with [sic] subsection 17(2) it needs to be "in respect of" lost earnings or lost capacity. Payments for "loss of earnings or lost capacity to earn" are distinguishable from compensation for functional impairment of the body, or for pain and suffering."

16. Finally in Re Lawlor and Department of Family and Community Services (1999) 57 ALD 509 Senior Member Kiosoglous said

"17. What is clear, is that the Tribunal needs to consider all the material before it, and decide whether or not there is such a component for loss of earnings or capacity to earn in the present matter. Mr Pugsley (counsel for the respondent) referred the Tribunal to the various claims made by the applicant... The actual terms of the settlement are ambiguous, in that they simply represent a payment in full satisfaction of any potential heads of claim.

18. The Tribunal must go behind this settlement therefore, and work out what it was in fact paid in respect of. In this regard, the Tribunal does not regard the actual claims made by the applicant to be particularly helpful. All that the fact that such claims include reference to economic loss tells this Tribunal, is that the applicant hoped to be able to receive money for these things. A plaintiff is able to claim many things but whether he or she in fact gets them is another matter entirely.

19. In this matter, the Tribunal must give due weight to the correspondence received by the respondent from the insurance company's solicitors...

...

22. In order for a compensation payment to be considered to include loss of earnings or earnings capacity, there must be more solid evidence of this intention than merely the fact that they were in the heads of claim. A plaintiff may claim damages because the sun wasn't shining and receive money in an out of court settlement to stop him taking such an action to court and therefore costing a defendant more money. This does not mean that he was paid because the sun didn't shine."

17. In the present matter the evidence is far from clear-cut. In support of the Secretary's view that there was an economic loss component in the lump sum payment I turn first to the particulars of the claim (T26, pages 88-92). Mr Perdon referred me under the heading "Particulars of Disabilities" to paragraphs (u) "Inability to train greyhounds" and (w) "Inability to carry out pre-injury activities such as shearing, tree pruning and work as a motor mechanic". He also referred me to paragraph 6 headed "Particulars of Economic Loss"

"As at the date of injury the plaintiff was working as a shearer and the plaintiff alleges that by reason of the subject injuries and disabilities he has been unable to attend to his pre-injury employment as a shearer/motor mechanic. In addition the plaintiff trained greyhounds in partnership with Lionel Harris however when Lionel Harris left the partnership in March 1998 and moved to Victoria the plaintiff was unable to perform the physical duties required which had hitherto been performed by Mr. Harris and the plaintiff elected not to renew his trainers licence.

The plaintiff's dog Rhumba Road won both his starts under the joint training regime referred to above and the plaintiff claims for this loss of earnings capacity.

In addition the plaintiff played lead guitar in the "Lynch Mob" band and earned $100.00 per night, all found, approximately 50 times per year. The plaintiff left the band shortly after the accident.

Further or in the alternative the plaintiff claims that by reason of the subject injuries and disabilities he has suffered a significant diminution in his earning capacity.

The plaintiff relies on comparable earnings of persons employed in a similar capacity shearing and/or performing the duties of a motor mechanic.

Further, or in the alternative, the plaintiff claims that by reason of the subject injuries and disabilities he has suffered a significant diminution in his earning capacity. [sic]"

18. Although this statement was never amended or withdrawn, Mr Cioccia indicated in his oral evidence that he was employed as a shearer for no more than a day and that he in fact made no income from his training of greyhounds.

19. Secondly Mr Perdon referred me to a letter (T18) in which Centrelink informed Mr Cioccia's solicitors

"I have been instructed by NRMA that your client matter settled with a component for economic loss."

20. Thirdly he referred me to a letter from the NRMA to Mr Cioccia dated 9 October 2001(T26, page 115)

"This letter is to advise that according to our file, the CTP settlement included a component (buffer) for past/future loss of earnings."

I note that there is no further explanation in this letter of the nature or amount of that component for economic loss.

21. Mr Perdon also referred to the fact that Mr Cioccia was only 40 years old at the time of the accident and thus had 25 years until the normal retirement age. Although he had had a heroin addiction, he had been placed on a methadone program and this was aimed at achieving or returning him to a productive life.

22. On the other hand the evidence to which I was referred by Mr Anforth in support of the case that there was no economic loss component in the lump sum payment included the following. First, the terms of settlement (T8) and in particular paragraph 5

"The Plaintiff acknowledges that he has been informed that he may be liable to pay amounts under the Health and Other Services (Compensation) Act 1995, Health and Other Services (Compensation) Care Charges Act 1995 (C'wealth) and/or Commonwealth Health and Other Services (Compensation) Consequential Services Act 1995 (C'wealth) and it is further acknowledged that the Plaintiff was notified of this obligation prior to any offer of settlement made."

Mr Anforth emphasised the lack of a reference to social security legislation in that paragraph.

23. In response Mr Perdon pointed to paragraph 2 of those terms of settlement which relevantly provides

"NRMA is authorised to deduct and/or pay from the said sum any monies repayable by the Plaintiff to any person or body in respect of... social services..."

However paragraph 2 appears to me to be a standard form paragraph included in documents of this kind whereas paragraph 5 is more specifically directed to the nature and circumstances of Mr Cioccia's case.

24. Mr Anforth referred me to the letter of 26 July 2000 from Mr Cioccia's solicitors to Messrs Moray & Agnew, the solicitors for NRMA (T26, page 95). In particular

"Would you please advise Centrelink that there was no calculation for economic loss in the settlement of this matter."

25. This letter was sent only 12 days after the settlement so it is relatively contemporaneous. It was not prompted by any Centrelink notice requiring repayment as it predates those notices. It could be compared, for instance, with a Centrelink file note on 4 September 2000 (T19, page 68) which records that

"Sue [from NRMA] advised that there is a claim for e[conomic] loss but [the applicant's] sol[icitor] did not want them to pay our charge." (emphasis added)

26. I was also referred to letters of 11 and 23 August from Mr Cioccia's solicitors to Centrelink (T15 and T16 respectively). Taking first the letter of 11 August 2000

"In this case there was no money paid in the compensation sum for any lost earning or lost capacity to earn.

The settlement was effected only on the basis of non economic loss for pain and suffering plus costs and disbursements.

The solicitors for the insurer refused to consider any payment for non [sic] economic loss as unfortunately Mr. Cioccia could not prove either a history of earning capacity before the accident nor could he prove any loss of capacity to earn."

And in the letter of 23 August 2000

"We confirm there was no part of the settlement representing economic loss."

27. In a further letter dated 4 December 2000 to Centrelink (T21) Mr Cioccia's solicitors wrote

"In respect of the above named's settlement he received no money by way of economic loss. The only component of the settlement was for his pain and suffering and costs.

He could not produce any evidence to prove that he had sustained any economic loss as a result of the accident, in fact for years before the accident he was in receipt of social security benefits as your records will show."

28. Mr Cioccia gave evidence before the Tribunal that in a conference with his solicitor and barrister a few weeks before settlement he was told that the economic loss claim would not succeed because there were no tax records. It is evident that Mr Cioccia was not employed for some years before the accident. He also gave evidence that earlier estimates of what he could get by way of compensation for his injuries were much higher.

29. There is other material within the evidence which is either ambiguous or where the issue of the existence of a component for lost earnings or capacity to earn is not addressed. At T4 and T5 there are what appear to be standard form letters from Centrelink to Mr Cioccia and his solicitors respectively. Each of them contains the following passage

"The preclusion period is calculated by dividing that part of the lump sum payment that is for lost earnings or lost capacity to earn (in most cases this will be 50 per cent of the lump sum) by the amount above which no pension is payable to a single person under the income test (currently $422.90 a week)." (emphasis added)

30. On 14 July 2000, that is on the day of settlement, Mr Cioccia's solicitors initially sought "estimates" from Centrelink for settlements of $160,000 and $100,000 and then later in the day rang back and asked for one only for $60,000 (T19, page 67). In my view this evidence is at very best ambiguous. It does not help the Tribunal determine whether or not those estimates up to $160,000 were supposed to include an economic loss component.

31. Mr Cioccia also gave evidence that the settlement was urgent. He was rung by his solicitor and was picked up by one of the solicitor's staff when he had no transport available, rather than waiting for the bus. He was told that he would have to pay something in the order of a few hundred dollars both to the Health Insurance Commission and apparently to Centrelink, but he was given no indication and had no idea why he had to pay anything to Centrelink. He also gave evidence that his solicitor had phone discussions in another room with the NRMA or the NRMA's solicitor.

32. At T7 there is reference to the NRMA advising Centrelink of the settlement. The second page, which is a Centrelink form completed by NRMA, gives no indication of whether or not there was an economic component.

33. On 4 August 2000 Centrelink sent NRMA a facsimile (T11) which says in part

"I refer to your request on 1/8/00 regarding the amount to be repaid to Centrelink in relation to Enrico Cioccia"

However this is a standard form document and there is no indication in any document before the Tribunal what the NRMA actually requested of Centrelink.

34. On 24 August 2000 Centrelink wrote to Mr Cioccia's solicitors in relation to the settlement (T17). There is no reference to any economic loss component. There is merely a statement that

"I have a copy of the Terms Of Settlements [sic] which clearly state that your client's matter settled by consent judgment for the amount of $60,000.00"

35. I have already referred to the fact that on 4 September 2000 NRMA is recorded (at T19, page 68) as having advised that there was a claim for economic loss, but not that there was any settlement for economic loss.

36. The evidence to which I have referred in paragraphs 29 to 35 is as I have demonstrated either ambiguous or does not directly address the particular issue of economic loss.

37. I have considered all this material very carefully. I am conscious of the need to look for objective indicators and not just rely on claimed beliefs. I note Mr Cioccia's very strong view that he would not have agreed to the settlement if it had included an economic loss component. This view was presented forcefully in his oral evidence. I am conscious of the possibility of self-serving statements being made by Mr Cioccia and his solicitors, but I have no evidence before me that Mr Day was other than an honest solicitor aware of his obligations to be truthful.

38. I am also aware that two individuals who could have provided assistance in this matter have not been available. First of all Mr Day, Mr Cioccia's solicitor, died not long after the events in question. Secondly the solicitor for NRMA from Messrs Moray & Agnew was not called.

39. I note also that Mr Cioccia had not held any real job for some years prior to the accident. I have no reason to disbelieve Mr Cioccia's evidence that he was told by his solicitor and his barrister that he had no case on economic loss, nor his evidence of his solicitor's view that NRMA's solicitor would not agree to any component for economic loss.

40. Against that, I have considered the evidence adduced by the Secretary.

41. Taking all this evidence into account, however, I am not satisfied on the balance of probabilities that the $60,000 lump sump payment contains a component for lost earnings or lost capacity to earn, that is an "economic loss component". I therefore find that the $60,000 payment, resulting from the settlement of 14 July 2000, does not amount to compensation for the purposes of section 17(2) of the Act.

42. It is therefore unnecessary for me to consider the second issue on special circumstances and the application of section 1184.

Decision

43. The Tribunal sets aside the reviewable decision of 24 December 2001 of the SSAT and remits the matter to the Secretary, with the direction that the $60,000 lump sum payment made as a result of a settlement of 14 July 2000 was not a payment of compensation as that term is defined in section 17(2) of the Act.

I certify that the 43 preceding paragraphs are a true copy of the reasons for the decision herein of Mr G A Mowbray

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

Associate

Date/s of Hearing 1 July 2002

Date of Decision 2 July 2002

Date of Written Reasons 3 September 2002

Solicitor for the Applicant Mr David Perdon, Centrelink Administrative Law Team

Counsel for the Respondent Mr Allan Anforth

Solicitor for the Respondent Welfare Rights and Legal Centre