Editors --- "Compensation: arrears of periodic compensation; whether one or more lump sum receive" [2005] SocSecRpr 27; (2005) 7 Social Security Reporter, Article 27

• SINGH and SECRETARY TO THE DfaCS

---

Compensation: arrears of periodic compensation; whether one or more lump sum receive

SINGH and SECRETARY TO THE DfaCS

(Federal Court of Australia)

Compensation: arrears of periodic compensation, whether one or more lump sum received

SINGH and SECRETARY TO THE DFaCS

(Federal Court of

Australia)

Decided: 23December 2004, by Gray J.

Background:

On 2 January 1991 Singh suffered a work-related injury. Between 12 June 1991 and 30 November 1993 he received weekly compensation payments from the insurer, pursuant to the Accident Compensation Act 1985 (Vic).

For periods between 28 October1991 and 26 October 1999 Singh received $262.80 in sickness benefit payments and $44,185.27 in disability support pension payments. His wife received$44,185.27 in wife pension payments from 16 December 1993 to 26 October 1999.

On 10 March 1995 Singh received lump sum compensation of $55,153.

At a later date Singh commenced further proceedings 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 Singh arrears of weekly compensation from1 September 1992 to 20 October 1999, a total of $129,382.92, and for these payments to continue. Singh was also awarded a lump sum of $80,000.

On 4 November 1999 Centrelink told the insurer that it was obliged to pay to Centrelink $88,633.34 of the compensation in respect of sickness benefit, disability support pension and wife pension payments received by Singh and his wife between 28 October 1991 and 26October 1999. The insurer repaid this money. Singh and his wife’s payments stopped due to his weekly compensation.

Singh challenged the decision to recover $88,633.34 of his compensation payments. He argued that the lump sum compensation provisions of the Social Security Act 1991 (the Act) should have been applied in his case, which would have reduced the amount to be repaid to Centrelink.

The legislation

Section 17 of the Act provides for definitions of compensation recovery. Of particular relevance to this appeal were ss.17(2B) and(4):

(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.

......

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

Part 3.14 of the Act deals with compensation recovery.

The decisions of the AAT and Federal Magistrates Court

The AAT found that the arrears payments totalling $129,382.92 were periodic compensation payments wholly or partly in respect of lost earnings or lost capacity to earn. The AAT relied on Secretary, Department of Social Security v Cunneen[1997] FCA 1033; (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 AAT held that s.17(4A)applied and the payment of the arrears was not a lump sum.

The Federal

• Magistrates Court

held that the arrears of weekly payments was not a component of a larger lump sum, within s.17(2), and that Singh did not receive a relevant lump sum compensation payment.

Submissions

In his notice of appeal from the decision of the Federal

• Magistrates Court

, Singh submitted that the error of law made by the Federal Magistrate and the AAT was to conclude that the arrears of periodic compensation was not a lump sum payment for the purpose of the Act.

Singh’s arguments to the Court was that the lump sum compensation payments of $129,382.92and $80,000 were awarded for the same injury 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 a lost capacity to earn. Accordingly, s.17(2B) applied so that he was taken to have received one lump sum of compensation, of an amount equal to those lump sums. As a consequence s.17(3) applied and therefore s.17(4A) did not apply because the aggregate payment would not be a payment of arrears of periodic compensation payments. Singh then outlined his reasoning for how this led to the application of a more beneficial calculation of the amount of compensation recoverable under Part 3.14 of the Act. Namely, wife pension payments paid to his wife, after 20 March 1997, would not have been recoverable by Centrelink.

Discussion

The Court held that Singh’s submission required that effect be given to s.17(2B)of the Act before s.17(4A) comes into play. The Court went on to state:

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 s17(4A). Because the sum of $129 382.92 was a sum consisting of nothing other than arrears of periodic compensation payments, s17(4A) provides that it cannot be treated as a lump sum compensation payment. The contention is that s17(2B)does not apply, because s17(4A) requires that that sum be disregarded if there is any aggregation to be done. The argument is that s17(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 s17(3) (Reasons, para. 37)

The Court rejected this approach, stating that:

I do not regard s17(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.

In taking this view, I rely on Cunneen. In the passage from the judgment of Foster J...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 s17(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 s17(4A) would not apply.

In my view, the conclusion reached by Foster J in Cunneen is consistent with the effect of s17(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 s17(4A), because it included more than just arrears of weekly payments.

To this extent, the appellant’s argument succeeds and the Tribunal and the federal magistrate made an error in construing the provisions of s17 (Reasons, paras. 38-41)

The Court held that s.17(4A)of the Act had no application because Singh received a lump sum payment of$80,000, as well as the payment of $129,382.92, which led to s.17(2B) applying in this case.

Notwithstanding this conclusion, the Court found it could not accept all Singh’s reasoning. The Court concluded that Centrelink recovered the correct amount of compensation from Singh and his wife.

Formal decision

Although the Court held that the AAT and the Federal Magistrate were in error in one respect, the error did not affect the result of the case.

The Court held that Singh was liable to repay the whole of the disability support pension, sickness benefit and wife pension payments made to him and his wife during the periodic payments period.

The appeal was dismissed and Singh was ordered to pay the Department’s costs.

[J.F.]