FEDERAL COURT OF AUSTRALIA
Clark v Secretary, Department of Employment and
Workplace Relations [2007] FCA 1076
Held: Section 1170 does not require that the individual retain and have the benefit of both periodic compensation payments and lump sum payment, and the lump sum preclusion period does begin on the day following the last day of the periodic payments period even in the circumstances mentioned.
Social Security Act 1991 (Cth) ss 17, 1169, 1170, 1184K
An v Minister for Immigration and Citizenship [2007] FCAFC 97 cited
Collector of Customs v Agfa-Gavaert Limited (1996) 186 CLR 389 cited
Comcare v Etheridge (2006) 149 FLR 522 cited
Hope v Bathurst City Council (1980) 144 CLR 1 cited
Kertland v Secretary, Department of Family and Community Services (1999) 95 FCR 64 referred to
Minister for Immigration and Multicultural Affairs v Yusuf (2001) 206 CLR 323 followed
Secretary, Department of Family and Community Services v Chamberlain (2002) 116 FCR 348 followed
Secretary, Department of Social Security v Banks (1990) 20 ALD 19 cited
Secretary, Department of Social Security v Smith (1991) 30 FCR 56 referred to
GRAHAM THOMAS CLARK v SECRETARY, DEPARTMENT OF
EMPLOYMENT AND WORKPLACE RELATIONS
NSD 2515 OF 2006
LINDGREN J
25 JULY 2007
SYDNEY
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IN THE FEDERAL COURT OF AUSTRALIA |
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NEW SOUTH WALES DISTRICT REGISTRY |
NSD 2515 OF 2006 |
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ON APPEAL FROM THE ADMINISTRATIVE APPEALS TRIBUNAL
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BETWEEN: |
GRAHAM THOMAS CLARK Applicant
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AND: |
SECRETARY, DEPARTMENT OF EMPLOYMENT AND WORKPLACE RELATIONS Respondent
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LINDGREN J |
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DATE OF ORDER: |
25 JULY 2007 |
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WHERE MADE: |
SYDNEY |
THE COURT ORDERS THAT:
1. The application be dismissed.
2. The applicant pay the respondent’s costs.
Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.
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IN THE FEDERAL COURT OF AUSTRALIA |
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NEW SOUTH WALES DISTRICT REGISTRY |
NSD 2515 OF 2006 |
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ON APPEAL FROM THE ADMINISTRATIVE APPEALS TRIBUNAL
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BETWEEN: |
GRAHAM THOMAS CLARK Applicant
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AND: |
SECRETARY, DEPARTMENT OF EMPLOYMENT AND WORKPLACE RELATIONS Respondent
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JUDGE: |
LINDGREN J |
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DATE: |
25 JULY 2007 |
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PLACE: |
SYDNEY |
REASONS FOR JUDGMENT
INTRODUCTION
1 The applicant (Mr Clark) appeals from a decision of the Administrative Appeals Tribunal (AAT) given on 27 November 2006. The Tribunal affirmed a decision of the Social Security Appeals Tribunal (SSAT). On 28 March 2006, the SSAT had affirmed a decision made by an authorised review officer within the Department of the respondent (the Secretary) on 3 November 2005, that a “preclusion period” from 30 April 2005 to 15 February 2008 applied to Mr Clark. The significance of this decision is explained below.
2 Section 44(1) of the Administrative Appeals Tribunal Act 1975 (Cth) provides that a party to a proceeding before the AAT may appeal to this Court “on a question of law” from any decision of the AAT in that proceeding. By his amended notice of appeal filed in Court on the hearing, Mr Clark purports to raise three questions of law. The first question is:
Whether on the proper construction of s 1170(1) of the Social Security Act, 1991 in determining the commencement date of the preclusion period, it is to be implied in the words “receives both ...” that “periodic compensation payments” are retained.
(Original emphasis.)
3 The other two questions raised in the amended notice of appeal relate to a discretion given to the Secretary by s 1184K of the Social Security Act 1991 (Cth) (the SS Act), which provided:
For the purposes of this Part [Pt 3.14], 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.
The first of the two questions relating to s 1184K is whether, in the exercise of its discretion under that section, the AAT was bound to consider certain matters that are mentioned in the amended notice of appeal. The second of the s 1184K questions is whether the AAT “failed to provide sufficient reasons for not including relevant considerations in its determination”.
4 These two questions relating to s 1184K will not call for consideration if I should sustain the construction of the substantive provisions contended for by Mr Clark, and I will say nothing further in relation to them at this stage.
5 In my view, and contrary to the Secretary’s submission, the first question (relating to the construction of s 1170(1)) raised by Mr Clark is one of law: that question of law is whether the notion of receipt of two payments in a particular statutory provision signifies, as the Secretary submits, simply the historical event of their being received, or, as Mr Clark submits, something like “receipt and retention of them” or “being in receipt of them” or “continuing enjoyment of them”. The respondent cites Comcare v Etheridge (2006) 149 FCR 522 at [26]; Collector of Customs v Agfa-Gavaert Limited (1996) 186 CLR 389 (Agfa-Gavaert) at 395-396;and Hope v Bathurst City Council (1980) 144 CLR 1 at 7 in support of the proposition that the question set out at [2] above is not a question of law because the words “receives both” in s 1170(1) are used according to their ordinary meaning. Therefore, the respondent argues, the question of whether the facts as found by the AAT fall within the meaning of those words is a question of fact. However, the meaning of a non-technical English word can give rise to associated questions of law, such as whether the word is used in its (presumably one and only) ordinary non-technical sense, and, most importantly, whether, and if so how, the meaning of the word in a particular case is affected by the statutory context in which it occurs: see the discussion in Agfa-Gavaert 186 CLR 389 at 395ff, and An v Minister for Immigration and Citizenship [2007] FCAFC 97.
LEGISLATIVE AND FACTUAL BACKGROUND
6 Mr Clark was born on 29 April 1939. He was due to become entitled to “an age pension” upon reaching the retirement age of 65 years on 29 April 2004.
7 On 31 October 2000, Mr Clark ceased working as a haulage driver for Pasminco Limited (Pasminco) and Mountain Bulk Haulage Pty Ltd (Mountain Bulk) due to his suffering compensable lead and chemical poisoning arising out of his work.
8 In respect of the period 1 December 2000 to 2 November 2001 Mr Clark received “a social security benefit”, called a “Newstart” allowance. The amounts he was paid totalled $4,415.67.
9 From 2 November 2001, Mr Clark began to receive periodic compensation payments under the Workers Compensation Act 1987 (NSW) (the WC Act). For the purposes of the appeal, the parties agree that these payments were in respect of the period from 31 October 2000, the date of the injury. The workers’ compensation insurer that made the payments was Allianz Australia Workers’ Compensation (NSW) Ltd (Allianz). Allianz paid workers compensation totalling $88,082.18 to Mr Clark in respect of the period to 31 October 2000 to 29 April 2005. As to $4,415.67 of this sum, however, Allianz paid it to Mr Clark by refunding it on his behalf to Centrelink on 14 November 2001. Mr Clark was not entitled to receive both workers’ compensation and the social security benefit in respect of the same days: see s 1173 of the Act. Mr Clark’s receipt and later repayment of the social security benefit of $4,415.67 is therefore only of historical interest: it was “replaced” by the workers’ compensation totalling $88,082.18 paid to Mr Clark in respect of the period from 31 October 2000 to 29 April 2005.
10 Section 52 of the WC Act provided that if a person received an injury before reaching the retiring age, being the age at which the person would be eligible to receive an age pension under the SS Act, a weekly payment of compensation under the WC Act was not to be made in respect of any resulting period of incapacity for work occurring after the first anniversary of the date on which the person reached the retiring age. Since Mr Clark received his injury before reaching his retiring age of 65 years on 29 April 2004, a weekly payment of compensation was not to be made to him in respect of any period of incapacity for work occurring after 29 April 2005.
11 Mr Clark sued Pasminco and Mountain Bulk for damages at common law in the District Court of New South Wales. Allianz was the insurer providing indemnity to the defendants in respect of the claim. The action was settled “by consent and without admission of liability” on 10 March 2005 for $280,000.
12 Mr Clark’s common law claim included a claim for loss of earning capacity, and Allianz deducted and retained for itself the sum of $88,082.18, leaving Mr Clark with $191,917.82. In substance, the compensation that Mr Clark received for loss of earnings and loss of earning capacity thus came to reside in the lump sum payment of $280,000 alone.
13 In an Amended Statement of Particulars filed in the District Court proceeding on 31 January 2005, Mr Clark gave the following “Particulars of Economic Loss”:
Particulars of Economic Loss
At the time of injury the Plaintiff was employed by G. & A. Clark Tipper Hire Pty Ltd. The Plaintiff was a director of that company. The Plaintiff carried out truck driving services.
The Plaintiff’s average weekly earnings at the time of the injury were $600.00 gross per week. He has not engaged in gainful employment since October 2000. Since that time he has been unemployable on the open labour market.
The Plaintiff ceased work in October 2000 and has been incapacitated for work since then.
The Plaintiff makes a claim for past loss of income at the rate of $600.00 gross per week from October 2000 to age 65 and loss of superannuation at the rate of $54.00 per week for the same period.
Further or in the alternative the Plaintiff makes a claim for diminution in earning capacity on the open labour market available to him for both the past and the future.
The Plaintiff makes a claim for loss of superannuation for both the past and future.
The Plaintiff makes a claim pursuant to Fox v Wood [(1981) 148 CLR 438].
The claim for diminution in earning capacity is consistent with a claim extending beyond the claim for “past” loss of income.
14 Against the above facts, the relevant legislative provisions and their application to Mr Clark’s circumstances may now be considered.
15 Section 17 comprised definitions, the significance of which will now be noted.
16 Section 17(1) of the SS Act defined the expression “compensation affected payment” to mean any one of numerous forms of pensions, payments and allowances that are identified in the definition, including, relevantly, “a social security benefit” and “an age pension”.
17 The word “compensation” was defined in s 17(2) of the SS Act to include:
(c) a payment (with or without admission of liability) in settlement of a claim for damages ...;
(d) ...
(whether the payment is in the form of a lump sum or in the form of a series of periodic payments ...) that is made wholly or partly in respect of lost earnings or lost capacity to earn resulting from personal injury.
The expressions “lump sum compensation payment” and “periodic compensation payments” were not defined in s 17, but it is clear from the definition of “compensation” that the amount of $280,000 paid in settlement of Mr Clark’s claim for damages was a lump sum compensation payment, and that the payments that Allianz had made to him totalling $88,082.18 were periodic compensation payments.
18 Three other definitions in s 17(1) were as follows:
compensation part, in relation to a lump sum compensation payment, has the meaning given by subsections (3) and (4).
periodic payments period means:
(a) the period to which a periodic compensation payment, or a series of periodic compensation payments, relates; or
(b) in the case of a payment of arrears of periodic compensation payments—the period to which those payments would have related if they had not been made by way of an arrears payment.
receives compensation has the meaning given by subsection (5).
19 Sections 17(3)(a), (4) and (5) of the SS Act provided:
17(3) Subject to subsection (4), 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; ...
17(3A)...
17(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
17(4A)...
17(5) A person receives compensation whether he or she receives it directly or whether another person receives it, on behalf of, or at the direction of the first person.
20 There is no dispute as to the application of these definitions to the circumstances of the present case. Because:
· Mr Clark received periodic compensation payments of $88,082.18; and
· after receiving them, he received on 10 March 2005 a lump sum compensation payment of $280,000 (in subs (4), the LSP); and
· he then became liable to repay the amount ($88,082.18) of the periodical compensation payments (in subs (4), the RPCP – the parties agree that he became so liable by reason of s 151Z(1)(b) of the WC Act);
for the purposes of s 17(3) the amount of the lump sum compensation payment referred to in that subsection is the LSP of $280,000 minus the RPCP of $88,082.18, that is to say, $191,917.82. While the expression “lump sum compensation payment” generally in the Act refers to the whole $280,000, for the particular purposes of s 17(3) the expression refers to only $191,917.82.
21 When this last figure of $191,917.82 is fed into s 17(3)(a), we find that the “compensation part” of the lump sum compensation payment is 50 percent of that amount, that is to say, $95,958.91. As noted at [17] above, the expression “compensation part” is defined in s 17(1) in relation to a lump sum compensation payment as having the meaning given by subss (3) and (4).
22 It is now necessary to turn to Pt 3.14 of the SS Act, which is headed “Compensation recovery”. Section 1160, the first section in Pt 3.14, states that the Part operates in certain specified circumstances, relevantly, to “render a person’s compensation affected payment”, such as the age pension, not payable because of the receipt of compensation.
23 The primary question of law raised by the appeal turns on the construction of ss 1169 and 1170 of the SS Act. Those sections were as follows:
1169(1) If:
(a) a person receives or claims a compensation affected payment; and
(b) the person receives a lump sum compensation payment;
the compensation affected payment is not payable to the person in relation to any day or days in the lump sum preclusion period.
1169(2) In this section:
lump sum compensation payment does not include a lump sum payment:
(a) to which section 1164 applies; or
(b) that relates only to arrears of periodic compensation payments.
1170(1) Subject to subsection (2), if a person receives both periodic compensation payments and a lump sum compensation payment, the lump sum preclusion period is the period that:
(a) begins on the day following the last day of the periodic payments period or, where there is more than one periodic payments period, the day following the last day of the last periodic payments period; and
(b) ends at the end of the number of weeks worked out under subsections (4) and (5).
1170(2) If a person chooses to receive part of an entitlement to periodic compensation payments in the form of a lump sum, the 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 at the end of the number of weeks worked out under subsections (4) and (5).
1170(3) If neither of subsections (1) and (2) applies, the lump sum preclusion period is the period that:
(a) begins on the day on which the loss of earnings or loss of capacity to earn began; and
(b) ends at the end of the number of weeks worked out under subsections (4) and (5).
1170(4) The number of weeks in the lump sum preclusion period in relation to a person is the number worked out using the formula:
1170(5) If the number worked out under subsection (4) is not a whole number, the number is to be rounded down to the nearest whole number.
24 In terms of s 1169(1)(a), Mr Clark claims a “compensation affected payment” because he claims an age pension from 29 April 2004 (see the definition of “compensation affected payment” in s 17(1) of the SS Act discussed at [16] above). It is the refusal of an age pension that has given rise to this proceeding.
25 In terms of s 1169(1)(b), Mr Clark received a lump sum compensation payment of $280,000. Accordingly, a preclusion period applied to any entitlement he might otherwise have had to an age pension as from 29 April 2004. The question is how, and in particular from what date, the preclusion period is to be calculated.
26 Before turning to this question, I will discuss the length of the preclusion period. This preclusion period is expressed as a number of weeks worked out under subss (4) and (5) of s 1170. The “Compensation part of lump sum” which is the numerator in the fraction set out in s 1170(4) is the “compensation part of a lump sum compensation payment” referred to in s 17(3) of the SS Act (set out at [19] above), in Mr Clark’s case, $95,958.91. The “Income cut-out amount”, which is the denominator in that fraction, is defined in subss 17(1) and (8) of the SS Act, and it is agreed that in Mr Clark’s case that amount is $656.63. Accordingly, the formula in s 1170(4) gives 146 weeks. It is common ground that this is the length of the preclusion period in Mr Clark’s case.
27 I turn now to the critical subss (1) and (3) of s 1170.
28 The Secretary submits that the circumstances fall within subs (1) because, as a matter of historical fact, Mr Clark received both periodic compensation payments totalling $88,082.18 in respect of the period from 31 October 2000 to 29 April 2005, and (on 10 March 2005) a lump sum compensation payment of $280,000.
29 On this basis, s 1170(1) provides that the preclusion period of 146 weeks began on the day following the last day of the periodic payments period, that is to say, the day following 29 April 2005, that is to say, 30 April 2005. It is not disputed that a period of 146 weeks commencing on that date expires on 15 February 2008.
30 Mr Clark, on the other hand, submits that upon its proper construction, subs (1) of s 1170 applies only where a person receives and retains the benefit of both the periodic compensation payments and a lump sum compensation payment. Mr Clark submits he does not satisfy this description because the periodic compensation payments totalling $88,082.18 were repaid to Allianz out of the sum of $280,000, leaving him with only $191,917.82. Accordingly, Mr Clark submits, subs (1) does not apply and the applicable provision within s 1170 is subs (3). (It was not suggested by either party that subs (2) applies.) According to subs (3), the lump sum preclusion period began on the day on which Mr Clark’s loss of earnings or loss of earning capacity began, namely 31 October 2000. On this basis, the preclusion period of 146 weeks expired well before Mr Clark’s 65th birthday on 29 April 2004, and any entitlement he has to an age pension is unaffected.
CONSIDERATION
The first question – commencement date of the preclusion period
31 According to the Secretary’s argument, on the facts of the present case, there was no preclusion period from the day on which the loss of earnings or loss of capacity to earn began (31 October 2000) to the last day of the periodic payments period (29 April 2005) so that:
· in the absence of any other disentitling provision, any entitlement Mr Clark had to a compensation affected payment (such as the social security benefit) during that period would remain undiminished;
· the preclusion period of 146 weeks would commence on 30 April 2005 and terminate on 15 February 2008; and
· after 15 February 2008, all other things being equal, Mr Clark would become entitled to any compensation affected payment (such as an age pension) applicable in his circumstances then.
32 However, there was another disentitling provision. Section 1173 of the SS Act had the effect that because Mr Clark received periodic compensation payments in respect of the period from 31 October 2000 to 29 April 2005, he was not also entitled to a social security benefit in respect of any part of that period.
33 Although s 1170 uses the present tense, it is clearly referring to events that have already happened. If the words of s 1170 are taken in their ordinary meaning, it is clear that Mr Clark is a person who has received both periodic compensation payments ($88,082.18) and a lump sum compensation payment ($280,000). Counsel for Mr Clark submits that despite the ordinary meaning of the words, it could not have been Parliament’s intention that Mr Clark would be subject to a double preclusion period. I noted earlier (at [30]) the construction which he suggests. He concedes, however, that this would involve a “somewhat strange interpretation of this language [of the statute]”.
34 I do not think that the construction suggested by Mr Clark is correct, or that it is supported by the legislative policy that underlies the provision.
35 Because the plain meaning of the statutory language is the basis of the Secretary’s construction, which I accept, in the following discussion I must deal with the fundamental argument put on Mr Clark’s behalf that this construction produces such unjust results that it could not have been intended. Inevitably, in doing so, I will touch upon matters relevant to the s 1184K questions to be discussed later.
36 The fact that the periodic compensation payments have been repaid is already allowed for in the formulae stated in s 1170. The provisions of Div 3 are intended to apply in all cases where an LSP is received, whether or not it includes an RPCP. If it does not include an RPCP, the “compensation part” of the LSP is 50 percent of the total LSP unreduced, but if it does include an RPCP, the compensation part is 50 percent of only the balance remaining after the deduction of the RPCP. As a result, where the LSP does not include an RPCP, the lump sum preclusion period will be longer, but will start on the day on which the loss of earnings or loss of capacity to earn began. Where the LSP does include an RPCP, the preclusion period will be shorter, but will begin on the day following the last day of the periodic payments period.
37 This means that in Mr Clark’s case the numerator “Compensation part of lump sum” is 50 percent of $191,917.82, not 50 percentof $280,000. If it were the latter ($140,000), the lump sum preclusion period would be 213 weeks, rather than only 146 weeks. As it happens, even this result would be preferable from Mr Clark’s viewpoint to a preclusion period of 146 weeks commencing on 30 April 2005, as a period of 213 weeks commencing on 31 October 2000 would have expired around the end of November 2004. But it must be accepted that the legislature intended the statutory formula to apply to individuals placed as Mr Clark was.
38 It is inappropriate to regard Mr Clark as not having received and retained the sum of $88,082.18. He received that sum initially by way of the periodic compensation payments and later he received some unidentified amount in respect of his loss of earnings from 31 October 2001 apparently to 29 April 2004 (Mr Clark’s 65th birthday) as part of the lump sum compensation payment of $280,000. We simply do not know how the sum of $280,000 was arrived at. We know only how Mr Clark particularised his claim (see [13] above). There are, according to my calculation, approximately 181 weeks from 31 October 2000 to 29 April 2004. According to his particulars, Mr Clark claims to have suffered loss of earnings of $108,600 (181 x $600), or $118,374 (181 x $654) if lost superannuation is included, in respect of that period. Mr Clark was required by the WC Act to repay the periodic compensation payments totalling $88,082.18, leaving him with some $20,000 or $30,000 as the case may be, on account of “past loss of earnings” down to age 65 (29 April 2004). In addition, however, Mr Clark “further or in the alternative” claimed for diminution in earning capacity on the open labour market available to him for both the past and the future, which could have included a claim for diminution in capacity to earn beyond the age of 65.
39 What I have just said concerning Mr Clark’s claims is speculative but serves to emphasise the difficulty of knowing for certain how much out of an undissected settlement sum is for loss of earnings and loss of earning capacity.
40 If it were to be assumed that Mr Clark received as part of the LSP of $280,000 nothing more in respect of either loss of earnings or loss of earning capacity than the sum of $88,082.18, the construction supported by the Secretary produces a result that is unfair to Mr Clark. If, on the other hand, the sum of $280,000 included something more than that amount for either loss of earnings or loss of earning capacity, it would not necessarily do so.
41 It is useful to look at the policy considerations that informed the inclusion of the 50 percent rule in the SS Act. Provisions that were substantially the same as ss 17(3)(a) were introduced by the Social Security Amendment Act 1988 (Cth) (Act No 58 of 1988). The Second Reading Speech on the Bill set out the reason for the rule (Australia, House of Representatives, Debates (13 April 1988) Vol HR160, p 1497 (Mrs Kelly, Minister for Defence Science and Personnel)):
This Bill contains measures to improve the administration and integrity of the compensation recovery provisions. Where a person receives personal injury compensation that makes up for lost income the Social Security Act provides that pension or benefit may be reduced or recovered. This is one way in which social security expenditures are directed to those most in need.
Settlements of lump sum compensation particularly in the workers compensation jurisdiction are being manipulated to obscure the economic loss component and to avoid recovery of social security payments. To prevent this abuse, the Minister announced on 8 February 1988 that, for future personal injury settlements made by agreement or by consent order, 50 per cent of lump sum compensation will be deemed to be in respect of economic loss. This Bill gives effect to that proposal.
It is clear that the policy objective was to prevent manipulation to obscure the economic loss component in compensation payments and instead deem a flat 50 percent in all cases, with a reduced preclusion period to compensate for an RPCP component. In deciding Mr Clark’s case, the AAT had regard to this policy, citing the discussion of the amendments and the background to them by von Doussa J in Secretary, Department of Social Security v Banks (1990) 20 ALD 19.
42 The construction supported by Mr Clark would itself result in an anomaly in relation to a young person whose loss of earning capacity accounted for a large part of his or her lump sum compensation payment. Assume a settlement for an LSP of $2,000,000, that there was an RPCP of $200,000, and that, although not specified, the sum of $2,000,000 included $1,400,000 for loss of earning capacity. According to the s 17(3) and s 17(4) formulae, the compensation part of the LSP would be only $900,000. On what basis in fairness would the injured young person have a claim to have the preclusion period (calculated by reference to that amount) begin back on the date of the injury, rather than the day after the end of the period covered by the periodical compensation payments of $200,000? The arbitrary figure of $900,000 would already be an understatement of the amount received for loss of earnings and of earning capacity, and to adopt the date of the injury as the start of the preclusion period would only increase the “over generous” treatment of the injured young person. In a perfect world, the preclusion period would run from the date of injury until the sum of $1,400,000 was exhausted, and in Mr Clark’s case from 31 October 2000 until whatever amount was included in the sum of $280,000 for loss of earnings and of earning capacity was exhausted. But in an imperfect world in which settlement figures were being manipulated so as to understate the component for loss of earnings and of earning capacity, the legislature has solved the problem by the rough and ready 50 percent rule.
43 The provisions reflect a policy decision to treat that which remains after any repayment of any periodic compensation payments as relating, as to 50 percent, to loss of earnings or of earning capacity, in respect of the period after the expiry of the period covered by those payments. The provisions reflect an acceptance by the legislature that it is not practicable to achieve complete justice attuned to the circumstances of each individual case.
44 It may well be that in Mr Clark’s case, because of his age, the sum of $280,000 included no component, or only a very small component, for loss of his capacity to earn beyond age 65 (29 April 2004) and the statutory formula produces a result that is unfair to him, but if so, that result flows from a deliberate policy decision of the legislature favouring simplicity and efficiency of administration and reduction in administrative costs over attaining a fair result in each case considered on its individual merits.
45 For the above reasons I accept the construction advanced by the Secretary, and not that contended for by Mr Clark.
The second and third questions – s 1184K of the SS Act
46 I set out s 1184K of the SS Act at [3]. The reference in the section to “the special circumstances of the case” is a reference to circumstances of the case which make it unusual or out of the ordinary run. The notion is referable to some understanding of the usual or ordinary circumstances to which the provision in question was intended to apply.
47 Section 1184K, if enlivened, empowers the Secretary to treat the whole or part of “a compensation payment” as not having been made or not liable to be made. The power is a wide one, and refers to a “compensation payment”, that is to say, either a periodical compensation payment or a lump sum compensation payment.
48 Mr Clark raises in his amended notice of appeal the following two questions in relation to s 1184K:
1. Whether in the exercise of its discretion under s 1184K of the Social Security Act 1991 to determine that special circumstances exist, the Tribunal is bound to consider:
i. evidence concerning the unusual unfair or unjust consequences of applying s 1170(1);
ii. the expressed intention of s 17(4) that consideration of the total amount of “periodic compensation payments” is to be deducted from the “lump sum compensation”;
iii. that the object of the legislation to prevent “double dipping” is not necessarily achieved on an equitable basis and whether the appellant has been subject thereby to an unintended “double preclusion”;
iv. whether there was any unfairness resulting from the Appellant’s inability to claim economic loss compensation beyond his 65th birthday when coupled with the requirement that “period compensation payments” be “repaid” with respect to that period.
2. Whether in the exercise of its discretion under s 1184K of the Social Security Act 1991 to find that special circumstances exist, the Tribunal failed to provide sufficient reasons for not including relevant considerations in its determination.
49 I will deal with the second question first.
50 The relevant ground relied on is:
The Tribunal in the exercise of its discretion under s 1184K to determine that special circumstances exist, is bound to consider:
i. evidence concerning the unusual unfair or unjust consequences of applying s 1170(1);
ii. whether the policy underlying the expression in s 17(4) that the total amount of “periodic compensation payments” is to be deducted from “lump sum compensation” requires that consideration be given to treating the whole or part of the compensation payment as “not having been made”;
iii. whether the object of the legislation to prevent “double dipping” may have been achieved in this particular case on an inequitable basis.
51 Sections 43(2) and 43(2B) of the Administrative Appeals Tribunal Act 1975 (Cth) provide:
(2) Subject to this section and to sections 35 and 36D, the Tribunal shall give reasons either orally or in writing for its decision.
(2B) Where the Tribunal gives in writing the reasons for its decision, those reasons shall include its findings on material questions of fact and a reference to the evidence or other material on which those findings were based.
52 The Tribunal did give in writing its reasons for its decision and did include the findings it made on material questions of fact and references to the evidence or other material on which those findings were based.
53 Mr Clark’s submissions go to the merits of the Tribunal’s reasons. In Minister for Immigration and Multicultural Affairs v Yusuf (2001) 206 CLR 323 (Yusuf) at [67]–[69], McHugh, Gummow and Hayne JJ made clear that statutory obligations of the present kind require a statement of the administrative tribunal’s actual reasons and findings and references to the evidence or other material on which the findings were actually based (Yusuf 206 CLR 323 was concerned with s 430 of the Migration Act 1958 (Cth)).
54 It is not shown that the statement of “reasons for decision” provided by the Tribunal did not contain its actual reasons for its decision, did not include its actual findings on material questions of fact, and did not contain a reference to the evidence or other material on which those findings were actually based.
55 I turn now to the first question relating to s 1184K. According to the amended notice of appeal, Mr Clark relies on the following ground:
The Tribunal erred by not taking into account the following relevant matters:
i. the unusual unfair or unjust consequences of strict adherence to s 1170(1) in the circumstances of this case;
ii. the implication found in s 17(4) that consideration of the total amount of “periodic compensation payments” is to be deducted from the “lump sum compensation” upon its receipt thereby leaving the appellant in receipt of only one lump sum to the ultimate effect that “periodic compensation payments” have not been made;
iii. the unintended effect, when considering the objects of the legislation that if the Appellant had received “compensation affected payments” and not “periodic compensation payments”, that the commencement date of the preclusion period would then have commenced on 31 October 2000;
iv. the unfairness occasioned by the limitation placed on the Appellant’s claim for economic loss compensation after the age of 65 coupled with the requirement that “periodic compensation payments” calculated up to the age of 66 were deducted from the appellant’s “lump sum compensation”.
56 In its reasons, the AAT referred to Mr Clark’s financial circumstances and health, the fact that he had been legally represented during his settlement negotiations, and that advice had been sought from, and given by, Centrelink.
57 Mr Clark complains that the AAT failed to address the true nature of the “special circumstances” on which he relied, namely, that the very provision in s 1170 for a preclusion period worked unjustly in his case. Much of what I have said above in dealing with the first question is relevant to this complaint.
58 At the outset, it is not amiss to note that Centrelink sent Mr Clark a letter on 12 November 2001 advising him that if he received any payment of weekly compensation or a lump sum compensation payment, some or all of the Centrelink payments made to him since the date of his injury may have to be refunded to Centrelink, and that any compensation he received might also stop him from receiving Centrelink payments in the future.
59 As well, apparently on 10 March 2005, Mr Clark’s solicitors sent by fax to Centrelink a request for an estimate of the preclusion period for an estimated lump sum compensation payment of $280,000. The expected settlement date they gave to Centrelink was 15 March 2005. On 15 March 2005, Centrelink wrote to Mr Clark’s solicitors advising that on certain bases, the preclusion period was likely to be from 16 March 2005 to 14 April 2009. It will be noted that in fact the settlement took place on 10 March 2005, the date of the solicitors’ faxed inquiry.
60 It is not the case that the AAT omitted to consider the alleged unfairness. It stated in its reasons (at [31]–[32]):
31. ... He [Mr Hanrahan, counsel for Mr Clark] pointed to counsel, Mr R Ingram’s affidavit of 22 February 2006 (T27) in which Mr Ingram had deposed in relation to Mr Clark that the claim for future economic loss was to date from October 2000 only to age 65, and that was thus an inherent unfairness to the Applicant.
32. Mr Hanrahan also submitted that the preclusion period should have been calculated to begin on the day on which Mr Clark’s loss of earnings began, that is 31 October 2000, (rather than 29 April 2005), and that this would have been the case if he had claimed a compensation affected payment such as Newstart instead of having received periodic payments of workers compensation before the settlement at the District Court. Mr Hanrahan cited Coppard v Department of Family and Community Services[2003] AATA 640 (7 July 2003)in this regard, although I noted that the only issue in that case was whether the discretion to allow for a reduction in the preclusion period due to “special circumstances” should be exercised. It was in fact refused. I was mindful that in Aiken and Secretary Department of Employment and Workplace Relations [2006] AATA 195 (6 March 2006), the preclusion period commenced immediately after the injury Mrs Aiken received because she had been receiving age pension at that time which was refunded when the compensation payment was made and the preclusion period imposed.
61 The reference to Mr Ingram is a reference to Robert Ingram, barrister at law, who represented Mr Clark on his District Court claim against Pasminco and Mountain Bulk. In his affidavit sworn 22 February 2006, Mr Ingram stated that on 8 April 2003 he drafted a “Statement of Particulars” which included the following claims in respect of economic loss:
The plaintiff makes a claim for past loss of income from October 2000 to date at the rate of a comparable employee.
The plaintiff makes a claim for future loss of income to age 65 years at the rate of a comparable employee.
Further or in the alternative, the plaintiff makes a claim for diminution in earning capacity on the open labour market available to him for both the past and future.
In his affidavit, Mr Ingram asserted that at the time of drafting the particulars, Mr Clark was almost 64 years of age so that there was a claim for future loss to age 65 only.
62 Mr Ingram’s affidavit stated in paras 5 and 6:
5. The claim for a diminution in earning capacity is a claim for economic loss in the alternative by way of a “cushion” or lump sum should the loss not be able to be calculated by way of a weekly amount. This was intended to be limited, and in my experience in practice is confined, to the limit of 65 years as pleaded in this matter unless otherwise specified.
6. On 31 January 2005, an Amended Statement of Particulars was served on the defendants. The economic loss claim was the same as initially pleaded.
63 Mr Ingram said that he was briefed to appear on the hearing and did so on 10 March 2005 in the District Court at Newcastle. He stated that it was his practice to calculate the damages to which a plaintiff might be entitled by assessing each head of damage. He said he recalled calculating economic loss to age 65 and advising Mr Clark that he would not obtain any economic loss past that age if the matter went to a hearing. Mr Ingram said he recalled those matters because he remembered Mr Clark asking whether he “could continue with the aged pension after settlement”.
64 Although it was Mr Ingram’s usual practice to record his estimates in a handwritten schedule of damages which he would place in the brief and return to his instructing solicitor, in the present case his instructing solicitor informed him that the returned brief did not contain such a document, leaving him to conclude that he must have disposed of it instead.
65 I make three observations about Mr Ingram’s evidence. First, the particulars of economic loss expressed in the Amended Statement of Particulars filed on 31 January 2005 and set out at [13] above, were in a different form from those set out in Mr Ingram’s affidavit. However, they also referred to a claim for loss of income and loss of superannuation down to “age 65”, although, further or in the alternative, to a claim for diminution in any capacity on the open labour market.
66 The second observation is that Mr Ingram’s affidavit does not, of course, go to the state of mind of the representatives of the defendants in the District Court proceeding. We simply do not have an amount which it can be said was the agreed amount included in the sum of $280,000 as representing loss of earning or loss of earning capacity.
67 Third, evidence of the present kind represents an inquiry of the very kind against which the Parliament set its face in adopting the 50 percent rule (see [41] above).
68 In Secretary, Department of Family and Community Services v Chamberlain (2002) 116 FCR 348 (Chamberlain), Kiefel J addressed at some length the question of the circumstances that might be “special” within s 1184K. In particular, her Honour reviewed earlier cases and noted (at [32]) that two of them, Kertland v Secretary, Department of Family and Community Services (1999) 95 FCR 64 and Secretary, Department of Social Security v Smith (1991) 30 FCR 56, were “unusual” in that in them “it could be seen, objectively, that there could not have been a double payment”, so that “it might be concluded that the statutory assumption operated unjustly”. Her Honour thought that that situation would not often arise and set those cases apart from the usual.
69 In Chamberlain 116 FCR 348 itself, the effect of the statutory formula was that the applicant would have to pay back more than twice the amount that had been allocated to loss of earnings and of earning capacity in her lump sum settlement. Nonetheless, her Honour thought that such a factor would be present in many cases and was simply an aspect of the outworking of the formula. Her Honour considered that it could not, by itself, amount to “special circumstances”.
70 Like Mr Clark, Mrs Chamberlain was elderly. She was aged 60 years when, on 13 January 1999, she suffered personal injury in a motor vehicle accident. At the time she was in receipt of an age pension and she had previously received a disability support pension. She claimed to have been able and entitled to earn up to $50 per week from teaching music, without her pension entitlement being affected. Her claim was settled for $35,000 plus $4,000 for costs. The parties to the settlement allocated $31,500 to pain and suffering and medical expenses, and $3,500 to loss of earnings and of earning capacity.
71 Mrs Chamberlain had continued to receive the age pension from the time of the accident. At that time, it was ss 1165 and 1166 of the SS Act that provided for the lump sum preclusion period and refund in Mrs Chamberlain’s case, and s 1184 of the SS Act that provided for a discretion in the Secretary to treat the whole or part of a compensation payment as not having been made or not liable to be made if the Secretary should think it appropriate to do so “in the special circumstances of the case”. Under s 17(3)(a), the compensation part of the LSP was $17,500. The preclusion period was arrived at by dividing that sum by $422.90, giving a period of 41 weeks. The period ran from the date of the injury, 13 January 1999, to 26 October 1999. The statutory formula produced the result that in respect of that period, Mrs Chamberlain was liable to pay to the Commonwealth $7,643.36 – more than twice the sum of $3,500 mentioned above.
72 Kiefel J stated (at [34]–[35]):
[34] The basis for the Tribunal’s view [that “special circumstances” were established] was its acceptance of what the parties to the settlement said had been offered and accepted for the economic loss component. It was far less than the statute assumed to be the case in applying the formulae. Again, however, this will be so in many, if not most, cases to which the Act applies. Further, the extent of the difference from the basis upon which the parties acted could not provide the necessary “special circumstance”. The statute has selected a figure which may operate in an arbitrary way.
[35] The statutory objectives in utilising the formulae, referred to above, must also be borne in mind. It is not intended that a decision-maker be required to consider contentions about what part of the compensation reflected the economic loss component. That is so whether one has regard to the application of the formulae or the discretion under s 1184. The latter does not alter the objective and must be read in light of it.
73 Her Honour set aside the Tribunal’s decision.
74 If Chamberlain 116 FCR 348 is to be followed, the present application must be dismissed.
75 I respectfully agree with the approach that was taken by Kiefel J. The expression “special circumstances” in s 1184K does not embrace the circumstance that the 50 percent rule will yield a preclusion period beginning on a certain date that will or may be excessive, even grossly excessive, having regard to the component included in a lump sum settlement for loss of earnings or of earning capacity, to the age of the injured person, and perhaps to other circumstances.
76 Once one embarks on an inquiry of the kind that would be required in such a case, one is defeating the legislative intention. The Parliament must be taken to have contemplated as “usual” or “ordinary” the circumstances of people placed as Mr Clark is. In effect, by adopting the rough and ready 50 percent rule, the legislature has faced such people with a choice: not sue at all and to rely, instead, on such other entitlements as may be available; litigate to trial so that the Court will identify a figure for loss of earnings and of earning capacity; or settle subject to the operation of the 50 percent rule.
77 In the present case, Mr Clark must be taken to have decided against the former two courses. I do not know why he did so. In one sense, it seems unfair that Mr Clark should suffer a preclusion period until 15 February 2008, but I do not think that this constitutes “special circumstances” in the light of the legislative intention.
78 If the position were otherwise, the régime that was introduced in 1988 would be defeated because it would be again open to parties to a settlement to attribute an artificially low figure to loss of earnings and earning capacity, and to the injured person, through s 1184K of the SS Act, to initiate the very kind of investigation that it was the intention of the 1988 amending Act to eliminate.
79 For the above reasons, I do not think that the AAT erred in law in failing to exercise the discretion given by s 1184K of the SS Act.
CONCLUSION
80 The application should be dismissed with costs.
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I certify that the preceding eighty (80) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Lindgren. |
Associate:
Dated: 25 July 2007
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Counsel for the Applicant: |
Mr R Hanrahan |
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Solicitor for the Applicant: |
Taylor & Scott |
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Counsel for the Respondent: |
Mr D Jordan |
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Solicitor for the Respondent: |
DLA Phillips Fox |
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Date of Hearing: |
28 May 2007 |
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Date of Judgment: |
25 July 2007 |
