Editors --- "Compensation preclusion period: medical condition and special circumstances" [2006] SocSecRpr 55; (2006) 8(4) Social Security Reporter, Article 12

• SECRETARY TO THE DEWR and DONALD
• Background
• Legislation
• Caselaw
• Findings
• Formal decision

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Compensation preclusion period: medical condition and special circumstances

SECRETARY TO THE DEWR and DONALD

Decided: 30th October 2006 by D.G. Jarvis

Background

Donald was injured at her place of work in a fall off a horse. After several weeks in a coma with a cerebral haemorrhage and nine months rehabilitation she was discharged to the at-home care of her husband who had given up his paid work. The care required was constant. Donald was unable to resume any of her former occupations. She had reduced memory, vision and speech and her mobility was limited. She was unable to rise after a fall and was at risk of epileptic events and Type 2 diabetes.

The damages claimed were $4.1 million for future medical expenses and $360,000 for economic loss. However, her claim was settled during the trial for $750,000 including $340,000 for litigation expenses and $46,295.72 reimbursement to Centrelink, as there were concerns about Donald’s ability to give the evidence required to establish negligence.

On 24 June 2005, a lump sum preclusion period was imposed by Centrelink for the period 28 June 2000 to 26 May 2011; the reimbursement amount equalling Centrelink pension payments to that date.

The decision was affirmed by an ARO and Donald appealed to the SSAT. On 3 November 2005, the SSAT set aside that decision, determining that the compensation preclusion period would end on the date of the SSAT decision plus one year, effectively removing four years and seven months from the original ten year and ten month preclusion period. The Secretary to the DEWR appealed to the AAT.

Legislation

The Social Security Act 1991 (the Act) sets out the scheme for determining the imposition of a preclusion period during which the recipient of a compensation lump sum will be ineligible to receipt social security payments. Section 1184(K) of the Act operates as a special circumstances provision, allowing the decision maker to disregard some or all of a compensation payment for the purposes of calculating social security entitlement.

Caselaw

Referring to Haidar v Sec. Department of Social Security [1998] FCA 994; (1998) 52 ALD 255, the Tribunal considered the intent of the legislation and the mischief the sections set out to avoid, noting there was an intention to prevent claimants receiving social security payments and compensation monies in the nature of income-replacement for the same period of time. The Tribunal said:

...I think it relevant to consider whether a proposed reduction in the preclusion period would result in a claimant who has settled his or her claim recovering both compensation for economic loss and social security benefits. (Reasons, para 60).

The Tribunal also accepted that application of the statutory formula might lead to recovery by the Department of more than the amount recovered for economic loss, accepting Kiefel J’s view expressed inSecretary, Department of Family and Community Services v Chamberlain, [2002] FCA 67; (2002) 116 FCR 348, that this of itself could not amount to a special circumstance.

In considering the amount of compensation payment to disregard, the Tribunal concurred with the SSAT’s reference to intuitive justice, agreeing with the Federal Court’s remarks in Secretary, Department of Social Security v Thompson, [1994] FCA 1477; 82 SSR 1205.

Findings

The Tribunal found no reason to disturb the decision of the SSAT.

The Respondent had, it determined, significant impairments which would require life-long, extensive carer support, as well as other periodic interventions. The Tribunal saw the need to build-in the cost of a potential, and otherwise unmet, need for care. By comparison, no allowance was made for extra costs associated with potential future medical conditions as those costs would likely be off-set by Medicare.

The Tribunal also found there was a need for periodic therapy and that if, for any reason, the husband was unable to continue in his role, ‘...due to the ordinary vicissitudes of life,’ significant additional expense would be involved in the provision of care to Donald and she might need to have recourse to her residual saved funds in the future.

In assessing whether the existing financial position and assets were a bar to the application ofs.1168(K), the Tribunal accepted the Applicant’s submission that, ‘compared to many other recipients of social security benefits’, Donald was not in financial hardship. However, the Tribunal went on to say:

the extent of financial hardship is only one of many considerations that need to be taken into account when considering whether special circumstances exist. (Reasons, para. 49)

The Tribunal went on to do its own calculations, based on the economic loss component of the settlement sum, as advised by Donald’s solicitor. Its method was to reduce the economic loss component by the amount claimed by Centrelink for payments already made, and then divide the remainder by the current rate of disability support pension, to arrive at a date beyond which Donald would have no specific income based support from either Centrelink or her compensation fund. The Tribunal found the date arrived at was before the compensation preclusion period end-date set by the SSAT and that this would not lead to any double-dipping.

The Tribunal was of the view that where the compromise has been court-sanctioned, the economic loss as quantified in the settlement should be used on the basis that the court ‘must have considered the various components, including economic loss, that made up the approved compromise amount’.

(Reasons, para. 61)

In dealing with Donald’s spending from the settlement sum and her resulting financial position, the Tribunal declined to criticize her purchase of a modest home, home improvements and a new, reliable motor vehicle. The Tribunal chose to compare Donald’s financial position with the permitted asset and income limits for disability support pension in determining the appropriateness of a reduction to the compensation preclusion period.

Formal decision

The Tribunal affirmed the decision of the SSAT.

[J.S.]