Editors --- "Compensation payment: whether claim settled by consent judgement or otherwise" [2009] SocSecRpr 18; (2009) 11(2) Social Security Reporter, Article 7

• KEZCHECK and SECRETARY TO THE DEEWR
• Background
• Legislation
• Issue
• Discussion
• Finding
• Formal decision

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Compensation payment: whether claim settled by consent judgement or otherwise

KEZCHECK and SECRETARY TO THE DEEWR

(2009/248)

Decided: 16th April 2009 by J. Kelly

Background

Kezchek was injured at work on 16 August 2002. The insurer accepted liability. On 3 May 2006, the NSW Motor Accidents Authority’s Claims Assessment and Resolution Service (CARS) assessed the value of the compensation claim as $267,368.44. CARS assessed the costs payable as $21,696.61. Kezchek accepted the amounts as assessed. The CARS assessment of compensation and costs was binding on the insurer because it had accepted liability.

In total, Kezchek received a lump sum payment of $115,903.02 (the compensation payment) being $91,398.07 in the hand in September 2006 and a refund from Medicare of $24,504.95 on or about July 2006.

The original decisionmaker (ODM) found that a compensation preclusion period ended on 3 June 2011. On review the ODM found special circumstances and the preclusion period was determined to end on 7 August 2009. This decision was affirmed by the authorised review officer and the SSAT.

Kezchek sought review of the SSAT decision of 21 November 2006 upholding Centrelink’s assessment of the preclusion period as a period of 167 weeks, starting on 27 May 2006 and ending on 7 August 2009.

Legislation

The construction of section 17(3) of the Social Security Act 1991 (the Act) was under consideration. Section 17(3) of the Act provides:

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; 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 capacity to earn, or both.

Issue

Centrelink applied s.17(3)(b) to work out the ‘compensation part’ of the lump sum compensation payment Kezchek received. On behalf of Kezchek it was contended that s.17(3)(a), ‘the 50% rule’, should have been applied because the matter was settled otherwise than by consent judgment, within the meaning of s.17(3)(a)(ii) of the Act.

The issue was whether Kezchek’s lump sum compensation payment fell into s.17(3)(a) or s.17(3)(b) of the Act. More particularly, the case turned on the meaning of s.17(3)(a)(ii).

Counsel for Kezchek argued that the award of a lump sum compensation payment which arose as a result of his acceptance of the CARS assessed value of the compensation claim and the costs payable was a settlement within the meaning of s.17(3)(a)(ii). It was argued that it was a settlement ‘otherwise’ than by a ‘consent judgment’ being entered. It was, in effect, a settlement as a result of a statutory scheme rather than by consent judgement and thereby fell into what was intended by the legislature by the use of the word ‘otherwise’.

Discussion

The AAT considered the statutory regime under which the compensation payment was made, the Motor Accidents Compensation Act 1999 (NSW) (the MAC Act). It noted in particular that there was

an independent claims assessor and cost penalties if the applicant chose not to accept the CARS assessment, contested the matter and failed to do significantly better. It also noted that the assessment was binding on the insurer once liability had been admitted.

The AAT also discussed the history and purpose of s.17 (3) of the Act quoting from the Secretary, Department of Social Security v Banks (1990) 23 FCR 416. In that case, von Doussa J

concluded that the current statutory construction was designed to stop an‘abuse of earlier provisions’ which was that settlements had been ‘manipulated to obscure the economic loss component in the compensation payment’.

Von Doussa J in the same case went on to contrast ‘a lump sum payment made in settlement of a claim’ to a ‘lump sum payment made pursuant to curial determination of a claim on the merits according to law’.

The AAT also considered various definitions of the words ‘settle’ and ‘settlement’ and concluded that they ‘refer to agreement negotiated between the parties resolving a claim or dispute’.

While Kezchek’s lumpsum compensation payment did not fit neatly into one of von Doussa J’s categories in Banks, the AAT reasoned that it did have some of the characteristics of a curial determination including independent assessment. It also did not meet the definition of a ‘settlement’ for the purposes of s.17(3)(a)(ii) of the Act and the economic loss component was not obscured. Part of the legislature’s intention when constructing s.17(3)(a) of the Act was to deal with lump sum compensation payments where the economic loss component was obscured.

Finding

The AAT concluded ‘that the payment was not the result of an agreement negotiated between the parties’ (Reasons, para. 33). It therefore fell into s.17(3)(b) for determination as to the compensation part of the lump sum.

Formal decision

The decision under review was affirmed.

[M.O.]