Singh v Secretary, Department of Family & Community Services [2004] FCA 1685

FEDERAL COURT OF AUSTRALIA

Singh v Secretary, Department of Family & Community Services

[2004] FCA 1685

SOCIAL SECURITY – workplace injury – payments of sickness benefits, disability support pension and disability support wife pension – subsequent judgment requiring payment of arrears of periodic compensation payments and lump sum compensation in respect of injury – recoverability of social security payments already made – whether payments pursuant to judgment required to be treated as one lump sum – whether provisions relating to lump sum preclusion periods applied

WORDS AND PHRASES – ‘lump sum payment’ – ‘lump sum compensation payment’

Social Security Act 1991 (Cth) ss 17, 1163, 1165, 1166, 1168, 1170, 1174

Accident Compensation Act 1985 (Vic) s 98

Administrative Appeals Tribunal Act 1975 (Cth) s 44(1)

Federal Court of Australia Act 1976 (Cth) s 32AB

Federal Court Rules O 80

Secretary, Department of Social Security v Cunneen (1997) 48 ALD 251 followed

MOHINDER SINGH v SECRETARY, DEPARTMENT OF FAMILY AND COMMUNITY SERVICES (CENTRELINK)

V 1121 of 2003

GRAY J

23 DECEMBER 2003

MELBOURNE

IN THE FEDERAL COURT OF AUSTRALIA
VICTORIA DISTRICT REGISTRY	V 1121 of 2003

ON APPEAL FROM THE FEDERAL MAGISTRATES COURT OF AUSTRALIA

BETWEEN:	MOHINDER SINGH APPELLANT
AND:	SECRETARY, DEPARTMENT OF FAMILY AND COMMUNITY SERVICES (CENTRELINK) RESPONDENT
JUDGE:	GRAY J
DATE OF ORDER:	23 DECEMBER 2004
WHERE MADE:	MELBOURNE

THE COURT ORDERS THAT:

1. The appeal be dismissed.

2. The appellant pay the respondent’s costs of the appeal.

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

IN THE FEDERAL COURT OF AUSTRALIA
VICTORIA DISTRICT REGISTRY	V 1121 of 2003

ON APPEAL FROM THE FEDERAL MAGISTRATES COURT OF AUSTRALIA

BETWEEN:

MOHINDER SINGH

APPELLANT

AND:

SECRETARY, DEPARTMENT OF FAMILY AND COMMUNITY SERVICES (CENTRELINK)

RESPONDENT

JUDGE:	GRAY J
DATE:	23 DECEMBER 2004
PLACE:	MELBOURNE

REASONS FOR JUDGMENT

The nature and history of the proceeding

1 The central question in this appeal from a judgment of the Federal Magistrates Court is which of two sets of provisions in the Social Security Act 1991 (Cth) (‘the Social Security Act’) is applicable to the facts of the case. At stake is a sum of money, received by the appellant as disability support pension and sickness benefit, and by his wife, Ms Amarjit Kaur, as disability support wife pension. This sum was repaid by an insurer, liable to make payments to the appellant pursuant to the Accident Compensation Act 1985 (Vic) (‘the Accident Compensation Act’), consequent upon a demand for repayment made by a delegate of the respondent, the Secretary of the Department of Family and Community Services. The appellant contends that the provisions of the Social Security Act relating to lump sum preclusion periods should have been applied, and that their application would have reduced substantially the sum repaid, because there was no liability to repay money received during a lump sum preclusion period. If the provisions relied on by the respondent’s delegate, and which the respondent contends should be applied, are applied, then the total sum was repayable.

2 The appellant challenged the correctness of the delegate’s decision to demand repayment. The appellant did not succeed in obtaining a favourable decision from an Authorised Review Officer, or from the Social Security Appeals Tribunal. He appealed to the Administrative Appeals Tribunal (‘the Tribunal’). On 17 December 2002, the Tribunal published a written decision and reasons for decision, affirming the decision under review. The appellant then appealed to this Court, on a question of law, pursuant to s 44(1) of the Administrative Appeals Tribunal Act 1975 (Cth). On 19 March 2003, another judge transferred that appeal to the Federal Magistrates Court of Australia, pursuant to s 32AB of the Federal Court of Australia Act 1976 (Cth). The appellant attempted unsuccessfully to have a federal magistrate transfer the proceeding back to this Court. The Federal Magistrates Court judgment was delivered on 9 September 2003, dismissing the appeal with costs.

3 The appellant drew his own notice of appeal to this Court. Although referred to counsel in accordance with the scheme operated under O 80 of the Federal Court Rules, for representation generally, the appellant appeared in person on the hearing of the appeal. He was given very able assistance by his daughter.

The legislation

4 Section 17 of the Social Security Act, as applicable at the relevant times, contained a number of definitions relevant to compensation recovery. So far as relevant to this appeal, it provides:

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

...

compensation has the meaning given by subsection (2).

...

compensation affected payment means:

...

(a) a disability support pension; or

...

(e) a disability support wife pension

...

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

compensation payer means:

(a) a person who is liable to make a compensation payment; or

            (b)        an authority of a State or Territory that has determined that it
                        will make a payment by way of compensation to another
                        person, whether or not the authority is liable to make the
                        payment.

disability support wife pension means a wife pension for a woman
whose partner receives a disability support pension.

...

lump sum preclusion period means either an old lump sum
preclusion period within the meaning given by subsections 1165(3) to (4) (inclusive) or a new lump sum preclusion period within the meaning given by subsections 1165(5) to (8) (inclusive), as the case requires.

...

periodic payments period means:

(a) in relation to a series of periodic payments—the period in
respect of which the payments are, or are to be, made; and

            (b)        in relation to a payment of arrears of a series of periodic
                        payments—the period in respect of which those periodic
                        payments would have been made if they had not been made by
                        way of an arrears payment.

...

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

(a) a payment of damages; or

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

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

(d) any other compensation or damages payment;

(whether the payment is in the form of a lump sum or in the form of a
series of periodic payments) that is:

(e) made wholly or partly in respect of lost earnings or lost
capacity to earn; and

(f) made either within or outside Australia.

...

(2B) For the purposes of this Act, if:

            (a)        a person receives more than one lump sum payment, whether
                        simultaneously or at different times, in relation to one or more
                        injuries arising from the same event (see subsection (5A)); and

(b) at least one of the payments is made wholly or partly in respect
of lost earnings or lost capacity to earn;

            the person is taken to receive one lump sum compensation payment,
            made wholly or partly in respect of lost earnings or lost capacity to
            earn, of an amount equal to the sum of those lump sum payments.

(2C) A reference in paragraph (2B)(a) to an injury includes a reference to a
disease or condition.

...

(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.

...

(4) Where a person:

(a) has received periodic compensation payments; and

            (b)        after receiving those payments, receives a lump sum
                        compensation payment (in this subsection called the LSP);
                        and

            (c)        because of receiving the LSP, becomes liable to repay an
                        amount (in this subsection called the Repaid Periodic
                        Compensation Payment—RPCP) equal to the periodic
                        compensation payments received;

then, for the purposes of subsection (3), the amount of the lump sum
compensation payment is:

LSP — RPCP

(4A) For the purposes of this Act, a payment of arrears of periodic
compensation payments is not a lump sum compensation payment.

...

(5A)     For the purposes of subsection (2B) of this section and Part 3.14, the
            event that gives rise to a person’s entitlement to compensation for a
            disease, injury or condition is:

(a) if the disease, injury or condition was caused by an accident—
the accident; or

(b) in any other case—the disease, injury or condition first
becoming apparent;

and is not, for example, the decision or settlement under which the
compensation is payable.

(6) A reference in Part 3.14 to an insurer who is, under a contract of insurance, liable to indemnify a compensation payer or a potential compensation payer against a liability arising from a claim for compensation includes a reference to:

            (a)        an authority of a State or Territory that is liable to indemnify a
            compensation payer against such a liability, whether the
            authority is so liable under a contract, a law or otherwise; or

            (b)        an authority of a State or Territory that determines to make a
                        payment to indemnify a compensation payer against such a
                        liability, whether or not the authority is liable to do so.

(7) A reference in Part 3.14 to a person receiving a payment for a periodis a reference to a person receiving a compensation affected payment in respect of the period.’

5 Part 3.14 of the Social Security Act deals with compensation recovery. A general effect of Pt 3.14 is described in s 1163. So far as relevant to this proceeding, that section provides:

‘(1)      If a person is or may be entitled to or receives compensation, payments
            of a compensation affected payment to the person or the person’s
            partner might be affected under this Part.

...

(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 the compensation affected payment might be repayable.’

6 Section 1165 provides that a compensation affected payment is not payable during a lump sum preclusion period. Section 1165(2AA) provides:

‘Subject to subsection (2B), if:

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

(b) the person is a member of a couple; and

(c)        the person receives a lump sum compensation payment (whether
            before or after the person receives or claims the compensation affected
            payment) on or after 20 March 1997;

no compensation affected payment is payable to the person for the new lump sum preclusion period.’

7 Subsection (2B) is not relevant to this appeal, because it relates to persons receiving parenting payment. The new lump sum preclusion period, to which subs (2AA) refers is defined in s 1165(5) to (9):

‘(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.

(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).

(7) If neither subsection (5) nor (6) applies, the new lump sum
preclusion period is the period that:

(a) begins on the day on which the loss of earnings or loss of
earning capacity began; and

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

(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.

(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.’

8 Section 1166(1) provides:

‘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.’

9 By s 1166(2), the amount specified in the notice is the ‘recoverable amount’. The following subsections assist in determining how the ‘recoverable amount’ is to be calculated. Among those sections is s 1166(4A):

‘If:

(a) the person is a member of a couple; and

(b) the person receives a lump sum compensation payment before 20
March 1997; and

(c)        the person’s partner receives a compensation affected payment (other
            than a parenting payment), a youth training payment, or a
            compensation affected pension under the Veterans’ Entitlements Act,
            for the old lump sum preclusion period;

the recoverable amount is equal to the smaller of the following amounts:

(d) the compensation part of the lump sum compensation payment;

(e) the sum of:

(i) the payments of the compensation affected payment made to the
person for the old lump sum preclusion period; and

            (ii)        the payments of the compensation affected payment and (if
                        applicable) the payments of youth training payment or a
                        compensation affected pension under the Veterans’
                        Entitlements Act made to the person’s partner for the old lump
                        sum preclusion period.’

10 Section 1166(4C) provides:

‘If:

(a) the person is a member of a couple; and

(b) the person receives a lump sum compensation payment on or after
20 March 1997;

the recoverable amount is equal to the smaller of the following amounts:

(d) the sum of the payments of the compensation affected payment made to
the person for the new lump sum preclusion period.’

11 Section 1168 of the Social Security Act contains provisions for the reduction of the rate of a person’s compensation affected payment while the person, or the person’s partner, receives a series of periodic compensation payments. The manner and extent of the reductions calculated in accordance with the provisions of s 1168.

12 Section 1170(1) provides:

‘If:

(a) a person receives a series of periodic compensation payments; and

(b) the person receives payments of 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 to the compensation, receiving a
            compensation affected payment; and

(d) the payments referred to in paragraph (b) have not been reduced
under section 1168;

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.’

13 By s 1170(2), the amount specified in the notice is described as the ‘recoverable amount’. It is worked out under the subsequent subsections of s 1170. They include s 1170(4A):

‘Subject to subsection (4B), if:

(a) the person is a member of a couple; and

(b)       the person’s partner receives a compensation affected payment (other
            than parenting allowance), or a compensation affected pension under
            the Veterans’ Entitlements Act, for the periodic payments period;

the recoverable amount is equal to the smaller of the following amounts:

(d) the sum of:

            (i)         the payments of the compensation affected payment (excluding
                        any payments of parenting allowance) made to the person for
                        the periodic payments period; and

            (ii)        the payments of the compensation affected payment (excluding
                        any payments of parenting allowance) and (if applicable) the
                        payments of youth training allowance or compensation affected
                        pension under the Veterans’ Entitlements Act made to the
                        person’s partner for the periodic payments period.’

14 Subsection (4B) is not relevant, because it deals with persons in receipt of parenting payment.

15 Section 1174(1) provides:

‘If:

(a) a compensation payer:

(i) is liable to pay compensation to a person for a disease, injury
or condition of the person; or

            (ii)        has determined that a payment by way of compensation is to be
                        made to a person in respect of a disease, injury or condition of
                        the person; and

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

the Secretary may give written notice to the compensation payer that the Secretary proposes to recover the amount specified in the notice from the compensation payer.’

16 Subsection (3) provides that the amount specified in the notice is the ‘recoverable amount’ and is worked out under subsections (4), (5) and (6). Of these subsections, the one relevant to this case is subs (6), which provides:

‘If:

(a) the person claiming compensation is a member of a couple; and

(b) the person’s partner receives or claims a compensation affected
payment for either:

(i) the periodic payments period; or

(ii) if a lump sum compensation payment is received by the person
before 20 March 1997—the old lump sum preclusion period;

the recoverable amount is equal to the smallest of the following amounts:

(i) the payments of the compensation affected payment payable to
the person; and

            (ii)        the payments of the compensation affected payment and (if
                        applicable) amounts of youth training allowance or
                        compensation affected pension under the Veterans’
                        Entitlements Act payable to the person’s partner;

for the periodic payments period or old the [sic] lump sum preclusion
period;

(d) the compensation part of the lump sum payment or the sum of the
amount of the periodic compensation payments;

(e) the maximum amount that the compensation payer is liable to pay to
the person in relation to the matter at any time after receiving:

(i) a preliminary notice under section 1172 in relation to the
matter; or

            (ii)        if the compensation payer has not received a preliminary
                        notice—the recovery notice under this section in relation to
                        to the matter.’

The facts

17 On 2 January 1991, the appellant suffered a work-related injury, which has resulted in an ongoing medical condition. Between 12 June 1991 and 30 November 1993, following an admission of liability, the appellant received weekly compensation payments from an insurer, pursuant to the Accident Compensation Act.

18 Between 28 October 1991 and 6 December 1991, and between 1 October 1992 and 14 October 1992, the appellant also received sickness benefits, pursuant to the Social Security Act, totalling $262.80. After the cessation of his weekly compensation payments, from 16 December 1993 to 26 October 1999, the appellant received payments of disability support pension, pursuant to the Social Security Act, totalling $44 185.27. During the same period, the appellant’s wife, Ms Amarjit Kaur, received a total of $44 185.27 by way of disability support wife pension. The total amount received by the appellant and Ms Kaur up to 26 October 1999, pursuant to the Social Security Act, was $88 633.34.

19 On 10 March 1995, as a result of the settlement of a proceeding commenced by him, the appellant received a lump sum compensation payment of $55 153, pursuant to the table of maims in s 98 of the Accident Compensation Act.

20 Subsequently, the appellant commenced a further proceeding, seeking to undo the settlement of his claim, and to resume the payment of weekly compensation payments. On 20 October 1999, the County Court made an order requiring the insurer to pay to the appellant arrears of weekly compensation from 1 September 1992 to 20 October 1999, and for such payments to continue in accordance with law. In consequence of the judgment, the total sum of arrears of weekly compensation was $129 382.92. The appellant was also held to be entitled to receive a lump sum of $80 000, pursuant to the table of maims. From this was deducted the amount of $55 153, paid to the appellant as a result of the previous settlement. As a result, the appellant received a further sum of $24 847 on 22 November 1999.

21 On 4 November 1999, Centrelink advised the insurer that it was obliged to pay to Centrelink $88 633.34 in respect of payments of social security, received by the appellant and Ms Kaur, between 28 October 1991 and 26 October 1999. The insurer repaid this sum to Centrelink, out of monies it would otherwise have paid to the appellant, pursuant to the judgment of the County Court. Also on 4 November 1999, Centrelink advised the appellant of its decision to recover the amount directly from the insurer. Centrelink cancelled the appellant’s disability support pension and Ms Kaur’s wife pension, because the payment of weekly compensation precluded any such payments.

22 The appellant took other proceedings, attempting to show that he and his wife were living separately and apart under the one roof, and were therefore not a couple, at the relevant times. He was unsuccessful in those proceedings, and it is unnecessary to detail them.

The Tribunal’s decision

23 In its reasons for decision, the Tribunal found that the County Court’s judgment resulted in a liability to make weekly payments to the appellant, totalling $129 382.92, being arrears of weekly payments. The Tribunal accepted that the arrears payment was received as a periodic compensation payment wholly or partly in respect of lost earnings or capacity to earn, for the purposes of s 17(2)(e) of the Social Security Act. Relying on Secretary, Department of Social Security v Cunneen (1997) 48 ALD 251, as authority for the proposition that arrears of periodic compensation do not lose their character merely because they are paid as a total amount, the Tribunal accepted that s 17(4A) of the Social Security Act applied, and the payment of the arrears was not a lump sum compensation payment.

24 The Tribunal also looked at the question of preclusion periods under the Social Security Act. It held that the definition of ‘compensation affected payment’ in s 17(1) of the Social Security Act included both disability support pension and wife pension, so that payments received by the appellant and Ms Kaur were subject to adjustment after arrears of periodic payment were received. The sum paid to Ms Kaur as wife pension was an included payment, recoverable under s 1170(4A) and s 1174(6) of the Social Security Act. The Tribunal rejected the appellant’s submission that wife pension could not be recovered after March 1997. It said that, from that date, the receipt of a lump sum only affected the entitlement to social security of the person receiving compensation, not that of the person’s partner. These legislative changes did not affect the recovery of periodical compensation, whether or not received as arrears.

25 The Tribunal did not accept the submission of the appellant that ss 1165, 1166 and 1167 applied. It held that those sections refer to the manner in which preclusion periods operate, whilst ss 1168, 1169 and 1170 provide for the recovery of relevant amounts. In particular s 1170 allows recovery where both periodic compensation payments and payments of compensation affected payments have been received.

The judgment of the Federal Magistrates Court

26 In her reasons for judgment, the learned federal magistrate referred to the definition of ‘compensation affected payments’ in s 17(1), and to the fact that it included a disability support pension, a disability support wife pension and sickness benefits. Her Honour also referred to the definition of ‘compensation’, in s 17(2), as including periodic payments of compensation and arrears of periodic payments. She held that both of the payments made to the appellant prior to 30 November 1993, and the arrears of weekly compensation paid in 1999, fell within this definition. The social security payments made to both the appellant and Ms Kaur fell within the definition of ‘compensation affected payments’. Her Honour then said:

‘14.      Part 3.14 of the Act provides a person must repay any compensated
            affected payments if they also receive a periodic compensation
            payment for the same period. This legislative scheme was intended to
            ensure that persons compensated for their incapacity to work were not
            doubly compensated by also receiving payments under the Act.

...

17.       The applicant submitted that amendments to s 1165 of the Act effective
            20 March 1997 removed the applicant’s partner from the preclusion
            provisions. Thus, the AAT erred in affirming the decision that all wife
            pension paid after 20 March 1997 was recoverable.

18.       The applicant claimed that ss 1165, 1166 and 1167 of the Act applied.
            These sections refer to the manner in which preclusion periods operate
            whilst s 1168, 1169, and 1170 provide for the recovery of relevant
            amounts. In particular, s 1170 allows recovery where both periodic
            compensation payments and payments of compensation affected
            payments have been received.

19.       Section 17(4A) of the Act provides that a payment of arrears of
            periodic compensation is not a lump sum compensation payment. The
            AAT affirmed the decision it was reviewing because that section
            precludes the arrears payment from being subject to any “lump sum
            preclusion period”. The AAT confirmed in its reasons that arrears of
            periodic compensation do not lose their character merely because they

are paid as a lump sum (see Secretary to the Department of Social
Security v Cunneen (1997) 48 ALD 251).’

27 Her Honour held that the Social Security Act provided that the payment to be recovered from an insurer ordered to pay arrears of weekly payments for a specified period is the payment made to the wife or partner, as well as that made to the compensation recipient. The amendments relating to preclusion periods applied only to lump sum compensation payments. The appellant did not receive a relevant lump sum compensation payment. The award of arrears of weekly payments, pursuant to the judgment of the County Court, was not a component in a larger lump sum, within s 17(2). The wife’s pension was clearly recoverable, after 20 March 1997.

The appellant’s case

28 When the appellant filed his notice of appeal from the decision of the Tribunal, it characterised the question of law raised on the appeal as follows:

‘The Administrative Appeals Tribunal (AAT) decision is incorrect in law to affirm the decision of Centrelink to recover compensation affected payments under the Social Security Act 1991 (“the Act”) where Centrelink misrepresented and breached the law to recover wife pension in the recovery of compensation affected payments from the applicant’s backdated payments of compensation which was made in respect to applicant’s lost earnings or lost capacity to earn caught by the lump sum preclusion period.’

29 The ground of appeal was expressed as follows:

‘Since the amendment has been made to the legislative provisions (s.1165 of “the Act”) on 20 March 1997, partner or wife is removed from the preclusion provisions with the effect that the partner was not entitled to repay any pension income that happened to have been paid to him or her during the preclusion period (i.e. from 16 December 1993 to 26 October 1999).’

30 In his notice of appeal from the Federal Magistrates Court, the appellant characterised the error made by the federal magistrate and the Tribunal as stemming from the conclusion that arrears of periodic compensation payments are not a lump sum payment, for the purposes of the Social Security Act. He said that it was wrong to permit recovery of the payments of wife pension by disregarding the effect of the lump sum preclusion period provisions, and by relying on s 17(4A) as establishing that a payment of arrears of periodic compensation payment is not a lump sum compensation payment. The argument called in aid s 17(2B) and said that the Act did not prevent the arrears of periodic compensation payments from being subject to a lump sum preclusion period. Following the amendments to s 1165, operating from 20 March 1997, the partner or wife of the compensation recipient is removed from the lump sum preclusion provisions, with the effect that the partner or wife was not obliged to repay any social security benefit that happened to have been paid during the preclusion period.

31 The appellant’s submissions to the Court on the appeal can be summarised as follows. Both of the lump sum compensation payments of $129 382.92 and $80 000 (from which was deducted the $55 153 received under the earlier settlement) were awarded to him for the same event, under the Accident Compensation Act, being the injury he suffered on 2 January 1991. The payments fell within the definition of ‘compensation’ as they were made wholly or partly in respect of lost earnings or lost capacity to earn. Accordingly, s 17(2B) of the Social Security Act applied, so that the appellant was taken to receive one lump sum compensation payment, made wholly or partly in respect of lost earnings or lost capacity to earn, of an amount equal to the sum of those lump sum payments. As a consequence, s 17(3) applied, and the compensation part of the lump sum compensation payment was 50 per cent. Applying s 1165 to this aggregated payment, which was received after 20 March 1997, resulted in the calculation of a new lump sum preclusion period. Pursuant to s 1165(2AA), no compensation affected payment was payable for the new lump sum preclusion period. The appellant contended that he chose to receive part of an entitlement to periodic compensation payments in the form of a lump sum, so that the new lump sum preclusion period had to be calculated by reference to s 1165(6), and s 1165(8). According to the appellant, Centrelink should have applied the formula in s 1165(8), and divided the compensation part (50 per cent) of the lump sum compensation payment by the income cut out amount, to determine the number of weeks in the new lump sum preclusion period and to recover the compensation affected payments for the new lump sum preclusion period. Instead, Centrelink calculated the preclusion by dividing that part of the lump sum payment for lost earning or lost capacity to earn and not treating the lump sum payment of periodic compensation payments as being subject to a lump sum preclusion period, in order to reclaim the wife pension. This was done by treating the lump sum compensation payment as arrears of weekly payments, to reduce the compensation affected payment for the periodic payment period under s 1168(1) and to recover under s 1170(4A). The appellant contended that it was wrong to apply s 17(4A) for this purpose. Both the Tribunal and the federal magistrate were wrong to follow this reasoning.

32 The appellant relied on Cunneen as authority for the proposition that a payment of arrears of periodic compensation is a lump sum compensation payment if a person has chosen to receive the money as a lump sum as part of a settlement made after February 1988 of a claim stemming from a disease, injury or condition. He submitted that he had chosen to receive the money as a lump sum as part of settlement of his claim to periodic compensation payments from 1 September 1992 to 20 October 1999, so that the sum should be regarded as a lump sum compensation payment as defined by s 17(2)(e) of the Social Security Act.

The correct application of the Social Security Act

33 Cunneen was concerned with the fixing of a lump sum preclusion period pursuant to s 1165(4) of the Social Security Act. At 254, Foster J described the reasoning of the Tribunal as follows:

‘The Tribunal first considered the payment of $2,500 for partial incapacity from 18 August 1988 to 24 March 1994 made pursuant to s 40 of the Workers’ Compensation Act 1987 (NSW). It held that the payment was, in effect, a payment in arrears of $8.60 per week periodical compensation. Accordingly, s 17(4A) of the Act precluded a finding that it was a lump sum compensation payment. Therefore, although it was paid in respect of “lost earnings or lost capacity to earn” (s 17(2)(e)) it was proper to exclude it from the total amount received by Ms Cunneen under the Compensation Court award for the purpose of considering whether she had received “compensation” within the meaning of s 17(2) or whether the payment to her contained a “compensation part” in accordance with s 17(3).

Having made this exclusion, the Tribunal held that the remaining components of the total amount awarded could not qualify as payments wholly or partly in respect of lost earnings or lost earning capacity. The payments made pursuant to ss 66 and 67 of the Workers Compensation Act 1987 (NSW) respectively for permanent injuries in accordance with a table of maims and for pain and suffering could not so qualify, nor could the amounts awarded for medical expenses (pursuant to s 60 of that Act) nor the awards for interest and costs.

Accordingly, s 1165 was not brought into operation and no lump sum preclusion period should have been set, as Ms Cunneen’s lump sum payment did not include amounts for lost earnings or lost earning capacity.’

34 His Honour set aside the Tribunal’s decision. His Honour’s reasoning is set out in the following passage at 255 – 256, in which his Honour dealt with a submission made on behalf of the Secretary to the Department of Social Security:

‘Counsel’s basic submission was that the Tribunal had erred in law in determining what was a “lump sum compensation payment” for the purpose of the application of s 17(3). As a matter of construction, it should not have approached the question by first excluding the amount of $2,500 paid for arrears of weekly compensation and then considered whether the other items of the award could each properly be characterised as compensation within the meaning of s 17(2). The term “lump sum compensation payment” connoted the total sum paid under the Compensation Court award pursuant to the settlement. I was not, at first, attracted to this submission as it seemed not inappropriate to characterise each of the items making up the award as being in themselves lump sum compensation payments. If this were so then it was arguable that the Tribunal, insofar as it had available to it the T documents, had, at least implicitly, found as a fact that the amounts payable under each item other than the first were not paid “wholly or partly in respect of lost earnings or lost capacity to earn”. In these circumstances, it would not be open to this Court to re-open these factual findings even if, as put in an alternative submission for the applicant, the T documents demonstrated that this was not in truth the correct position. However, I have come to the conclusion that this is not, as a matter of construction, the correct view of the effect of the legislation and in particular of the term “lump sum compensation payment”. I am satisfied, as a result of a submission put to me by counsel for the Secretary, to which I shall now make reference, that this term must be taken as referring to the total amount paid to the respondent under the terms of settlement expressed in the award.

I should state, at the outset, that I am satisfied that s 17(4A) should not be given the extended meaning accepted by the Tribunal. Reference to the Explanatory Memorandum in relation to the Social Security Legislation Amendment Bill 1992 (Cth) which introduced the section into the legislation makes it sufficiently clear in my opinion that the legislative intention was to address a situation of confusion which had resulted from conflicting approaches taken in the Tribunal. The purpose of the provision was to ensure that where a payment was simply a total of previously unpaid periodic payments it would not, thereby, acquire the characterisation of a “lump sum compensation”. The section, in my view, was not intended to apply where a payment of arrears of periodic compensation did not stand alone but was included as a component in a larger “lump sum” payable as “compensation” within the meaning of s 17(2).

I have accepted the primary submission made by counsel for the Secretary, namely that it was an error of law on the part of the Tribunal to have, in effect, regarded each component of the total sum payable as being “lump sum compensation payments” in themselves. The proper construction of the legislation required that it characterise the total sum payable not the individual parts. If, having done so, the total sum qualified for the legislative description of a “lump sum compensation payment” then the provisions of s 17(3) would be applicable.

I have accepted this submission after considering the reasoning of von Doussa J in Secretary, Department of Social Security v Banks (1990) 23 FCR 416, a case relied upon by the Secretary. I am in respectful agreement with his Honour’s reasoning and consider it to be determinative of the present case. His Honour was considering an earlier version of the sections under consideration in the present case but, in my opinion, there is no relevantly significant difference between the provisions.’

35 In effect, the appellant’s submission in the present case requires that effect be given to s 17(2B) of the Social Security Act before s 17(4A) comes into play. The result of this reasoning would be that the amounts of $129 382.92 and $80 000 should be added together and treated as one lump sum. That lump sum would then be regarded as a single sum for the purposes of the calculation of a new lump sum preclusion period because the resulting lump sum would be partly in respect of lost earnings or lost capacity to earn, on the reasoning in Cunneen, the question would be whether the total sum qualified as a lump sum compensation payment, so that s 17(3) would apply. If that reasoning were followed, s 17(4A) would not apply, because the aggregated payment would not be a payment of arrears of periodic compensation payments.

36 The ‘extended meaning’ of s 17(4A), to which Foster J referred in Cunneen, appears to have been a meaning that would have required the treatment of a sum consisting partly of arrears of periodical compensation and partly of some other element or elements as not being a lump sum. His Honour was correct to reject such an approach. Section 17(4A) is
obviously intended to apply to a sum consisting only of arrears of periodic compensation payments.

37 The reasoning applied in the Tribunal and by the federal magistrate, and adopted by the respondent in argument on this appeal, requires that resort be had first to s 17(4A). Because the sum of $129 382.92 was a sum consisting of nothing other than arrears of periodic compensation payments, s 17(4A) provides that it cannot be treated as a lump sum compensation payment. The contention is that s 17(2B) does not apply, because s 17(4A) requires that that sum be disregarded if there is any aggregation to be done. The argument is that s 17(4A) compels the decision-maker to disregard the sum of $129 382.92 in the calculation of the compensation part of a lump sum compensation payment by the method required by s 17(3).

38 It is not easy to reconcile the complex provisions of the Social Security Act bearing on this case. The Tribunal and the federal magistrate accepted the respondent’s argument that s 17(4A) operated to exclude from any aggregation of lump sums, pursuant to s 17(2B) the amount required to be paid pursuant to the judgment of the County Court in respect of arrears of weekly compensation. Certainly, because that amount was a payment of arrears of periodic compensation payments, s 17(4A) would operate to ensure that, standing alone, the amount could not be regarded as a lump sum compensation payment. Section 17(2B) is not concerned with aggregating lump sum compensation payments, as that four-word term is used throughout s 17. Rather, s 17(2B) provides a method of calculating a single lump sum compensation payment, where more than one lump sum is received. I do not regard s 17(4A) as operating to deprive the amount of the arrears of periodic compensation of its character as a lump sum, which it certainly was, as distinct from its character as a lump sum compensation payment, a technical term.

39 In taking this view, I rely on Cunneen. In the passage from the judgment of Foster J, which I have quoted at [33], his Honour described the course taken by the Tribunal in that case. It was an approach of considering separately the payments made by the insurer, applying s 17(4A) to the payment that was solely in respect of arrears of weekly payments, and excluding that payment from consideration. Foster J held that this approach was wrong. His Honour took the view that the total amount received should be regarded as a single lump sum compensation payment, and that the elements of the total sum should not be viewed in isolation. The provisions of the Social Security Act should be applied to the total sum received, and the character of that total sum should be determined accordingly. If only part of the total sum consisted of compensation for weekly payments, then s 17(4A) would not apply.

40 In my view, the conclusion reached by Foster J in Cunneen is consistent with the effect of s 17(2B) of the Social Security Act. Section 17(2B) required that all of the sums received by the appellant should be aggregated to determine the full extent of his lump sum compensation payment. Section 17(4A) should not have been applied first to the payment of $129 382.92, so as to exclude it from calculation on the basis that it was not, by itself, a lump sum compensation payment. It was always a lump sum payment, and was required to be aggregated with the other lump sum payment, or payments, before the character of the total sum could be determined. Once this was done, the total sum did not fall within s 17(4A), because it included more than just arrears of weekly payments.

41 To this extent, the appellant’s argument succeeds and the Tribunal and the federal magistrate made an error in construing the provisions of s 17.

42 This does not necessarily mean that the rest of the appellant’s reasoning must be accepted. I do not accept that s 17(3)(a) or (ab) operated to require that only 50 per cent of the total sum should be treated as the compensation part of the lump sum compensation payment. Both of those paragraphs apply to cases that have been settled on the basis of the payment of a lump sum. They apply an arbitrary rule that, where a lump sum settlement means that there is no disclosure of the amount of the lump sum that is in respect of lost earnings or lost earning capacity, then half of the lump sum is to be treated as being paid in respect of lost earnings or lost capacity to earn. Where the payments have been made in consequence of a judgment of a court, and the specific calculations have been made or can be made, those provisions are inapplicable. They apply only to payments made in settlement of claims, and to elections to receive entitlements to periodic payments in lump sum form, respectively. Payments mandated by judgments do not answer these descriptions. Nor am I able to accept the appellant’s contention that he had ‘chosen to receive’ his entitlement to periodic compensation payments in the form of a lump sum, within the meaning of s 17(3)(ab)(i). The County Court had ordered the payment to him of arrears of periodic compensation payments, and the order could not be satisfied other than by payment of a lump sum.

43 The exclusion of s 17(3)(a) and (ab) from the process of reasoning brings into play s 17(3)(b) and s 17(4). Section 17(4) provides a formula for calculating the amount of the lump sum compensation payment for the purposes of s 17(3). It is applicable to the present case, because the appellant received periodic compensation payments and, after receiving those payments, received a lump sum compensation payment, as a result of which he became liable to repay an amount equal to the periodic compensation payments received. Because s 17(3)(a) and (ab) did not apply, it fell to the respondent, pursuant to s 17(3)(b), to determine how much of the lump sum compensation payment was in respect of lost earnings or lost capacity to earn. In fact, the County Court had already made this determination, so it would be unlikely that the respondent would take a different view.

44 The appellant’s liability to repay an amount equal to the periodic compensation payments received arose pursuant to s 1170(1) and (4A) of the Social Security Act. The sum of the periodic compensation payments exceeded the sum of the payments of disability support pension, social security benefit (which includes sickness benefit) and disability support wife pension (all of which are included in the definition of ‘compensation affected payment’ in s 17(1)). The recoverable amount fixed by s 1170(4A)(d) therefore amounted to the whole of the payments made under the Social Security Act to the appellant and Ms Kaur during the periodic payments period. It was therefore open to the Secretary to give a notice to the Victorian Workcover Authority, pursuant to s 1174 of the Social Security Act, seeking to recover the amount from the Victorian Workcover Authority as a compensation payer. In that case, s 1174(6) operated to require the recoverable amount to be calculated in accordance with its provisions. It should be noted that s 1174(6) contains no reference to a new lump sum preclusion period. This is in contrast to s 1174(4) and (5), neither of which is applicable to the present case. Section 1174(4) is inapplicable because the appellant was at all times a member of a couple. Section 1174(5) is inapplicable because Ms Kaur received a compensation affected payment for the periodic payments period.

45 Had it been necessary to calculate a new lump sum preclusion period, pursuant to s 1165, the relevant subsections would be subss (2AA) and (8). This is because the aggregated lump sum was received after 20 March 1997. The purpose of a new lump sum preclusion period would only be to fix a period after the payment of an aggregated lump sum during which payments of social security could not be made, or would be required to be reduced to the extent of the element of the lump sum designed to compensate for loss of future earning capacity. Those provisions are inapplicable here, because the appellant continued to receive periodical compensation payments in accordance with the judgment of the County Court after the date of that judgment. It was this ongoing payment that rendered him and Ms Kaur ineligible to receive further payments of social security after the date of the judgment. The appellant cannot therefore draw any comfort from the provisions relating to the calculation of lump sum preclusion periods in the present case.

Conclusion

46 Although both the Tribunal and the federal magistrate were in error in one respect, the error did not affect the result of the case. The claim made by the Secretary of the Department of Social Security against the Victorian Workcover Authority, for the full amount of disability support pension, sickness benefit and disability support wife pension paid to the appellant and Ms Kaur up to the date of the County Court judgment was a correct claim. The appellant’s appeal from the federal magistrate’s judgment must be dismissed. Although partially successful in his argument, the appellant has failed overall. No reason therefore
appears to depart from the usual rule that costs follow the event. The appellant should be ordered to pay the respondent’s costs of the appeal.

I certify that the preceding forty-six (46) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Gray.

Associate:

Dated: 23 December 2004

Counsel for the appellant:	The appellant appeared in person

Counsel for the respondent:	A McMahon

Solicitor for the respondent:	Sparke Helmore

Date of Hearing:	14 July 2004

Date of Judgment:	23 December 2004

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