Editors --- "Disability support pension: compensation preclusion period; whether special circumstances; costs" [2009] SocSecRpr 3; (2009) 11(1) Social Security Reporter, Article 3

• SECRETARY TO THE DFHCSIA and DEACON
• Background
• The legislation
• The issues
• Discussion
• Special circumstances
• Formal decision

---

Disability support pension: compensation preclusion period; whether special circumstances; costs

SECRETARY TO THE DFHCSIA and DEACON

(2009/88)

Decided: 11th February 2009 by P. E. Hack

Background

Deacon was injured in a motor vehicle accident in July 1999 caused by an unknown driver. He commenced proceedings against the nominal defendant in respect of his injuries. The claim included a component for past and future economic loss. The action was settled on 18 December 2003 when Deacon agreed to accept a payment of $85,000.00 and costs of $11,115.75 in settlement of his claim. Deacon actually paid his lawyers $25,229.91 for costs and disbursements. Based on the calculation that the lump sum compensation payment was $96,115.75 and included a component for economic loss Centrelink made a decision that Deacon was precluded from receiving benefits from 14 July 1999to 19 December 2000. Centrelink recovered $16,372.60 out of the settlement sum paid to Deacon. That decision was affirmed by the authorised review officer and by the Social Security Appeals Tribunal.

The legislation

Section 1169 of the Social Security Act 1991 (‘the Act’) provides:

(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.

Deacon was in receipt of disability support pension(DSP) at the relevant time and DSP comes within the definition of ‘compensation affected payment’ in s 17(1) of the Act.

The term ‘compensation’ is explained in s 17(2) of the Act:

Subject to subsection (2B), 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...; 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;

... that is made wholly or partly in respect of lost earnings or lost capacity to earn resulting from personal injury.”

Deacon relied on sub-section 17(2B) of the Act which provides:

A payment under a law of the Commonwealth, a State or a Territory that provides for the payment of compensation for a criminal injury does not constitute compensation for the purposes of this Act.

Section 17(3) of the Act defines the ‘compensation part of a lump sum compensation payment’ as being:

(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.”

Section 1184K(1) of the Act allows the Secretary to treat all or part of a compensation payment as not having been made if it is appropriate to do so ‘in the special circumstances of the case’.

The issues

The first issue was whether the payment was ‘compensation’ within the meaning of subsection 17 of the Act. If so, whether there were special circumstances which would allow the Tribunal to treat all or part of the compensation payment as not having been made.

Discussion

There was no dispute and the Tribunal found that the payment made to Deacon was compensation within s.17(2)of the Act. It was a payment in settlement of a claim for damages under a scheme of insurance under a law of Queensland, the Motor Accident Insurance Act 1994 (Qld).

Deacon argued that the payment should be excluded because it was a ‘payment under a law of ... a State ... that provides for the payment of compensation for a criminal injury’. He argued that the acts of the unidentified driver that caused his injuries amounted to criminal offences under both the Criminal Code (Qld) and the Transport Operations (Road Use Management) Act 1995 (Qld).

The Tribunal did not accept this argument. It considered that the payment made to Deacon was not a payment under a law of the State but was a payment made to settle a claim in negligence, a common law cause of action. Further the Tribunal noted that the Motor Accident Insurance Act was not a law that provided for the payment of compensation for criminal injury. That function was performed by the Criminal Offence Victims Act 1995(Qld). The Motor Accident Insurance Act 1994 (Qld)created a scheme of compulsory insurance against claims for personal injury arising from wrongful acts or omissions in connection with motor vehicles.

Special circumstances

Although Deacon did not raise the issue of special circumstances the Tribunal took the view that it was required to consider any argument open to Deacon had he ‘the training or experience required to raise it’ .

The Tribunal considered that the amount recovered by Centrelink from the settlement sum in accordance with the Act far exceeded any reasonable assessment of the component for economic loss in the settlement. Deacon had been employed for no more than one month in the three years prior to the accident and had not been employed since.

The Tribunal concluded that the fact that there was a discrepancy between the result deemed by the legislation and an objective view of the settlement could not amount to special circumstances.

The Tribunal noted that people who obtain the benefit of an order, or settle a claim, where the amount of costs is to be determined in the future are treated more favourably than those who like Deacon agree to an amount of costs at the same time as the action is settled. In this case if Deacon had agreed to settle on the basis of $85,000 plus costs to be assessed only$85,000 would have been treated as compensation. However because the costs were agreed, those agreed costs were included in the amount treated as compensation.

The Tribunal noted that administrators owe a duty of fairness to treat people equally where the circumstances are relevantly identical. It considered that there was an element of unfairness in the differential treatment of these cases and concluded that the differential treatment could amount to a special circumstance.

In this case there was no suggestion that the amount of costs agreed and paid by Deacon was other than genuine and was more than twice the amount agreed for costs. The Tribunal took the view that the unfairness amounted to a special circumstance and in the exercise of its discretion to treat all or part of the sum as not having been received it concluded that the element of unfairness would be removed if an amount equal to the amount of costs contained in the settlement was treated as not having been made.

Formal decision

The decision under review was set aside and the Tribunal substituted a decision that $11,115 of the compensation paid to Deacon be treated as not having been made.

[C.E.]