Editors --- "Disability support pension: preclusion period; whether pension cancelled or suspended during preclusion period; whether new claim necessary" [2009] SocSecRpr 53; (2009) 11(4) Social Security Reporter, Article 16

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Disability support pension: preclusion period; whether pension cancelled or suspended during preclusion period; whether new claim necessary

MACDONALD v SECRETARY TO THE DFHCSIA

(Federal Court of Australia)

Decided: 8th October 2009 by Ryan J.

Background

Macdonald was granted disability support pension (DSP) on 7 March 2002 in relation to a back injury he sustained during the course of his employment. On 28 February 2005, he received $360,000 by way of compensation for his injury. Centrelink determined on 17 March 2005 that Macdonald would be subject to a preclusion period from 10 February 2001 to 13 May 2006. Macdonald was notified that his pension had been cancelled by letter dated 23 March 2005.

On 9 October 2006, Macdonald contacted Centrelink and sought the reinstatement of his DSP. On 19 October 2006, Macdonald underwent a Job Capacity Assessment, which found that Macdonald’s condition was temporary and Macdonald had the capacity to work 15 to 22 hours per week. Centrelink rejected the claim for DSP.

Macdonald sought a review of the decision, which was affirmed on internal review and by the SSAT. Macdonald then applied to the AAT for a review of the decision. The AAT affirmed the decision on 19 December 2007.

Macdonald appealed the AAT’s decision to the Federal Court of Australia (having been granted several extensions of time to appeal by the Court).

The issues

With the agreement of the parties, the Court was only considering a preliminary question, being whether Macdonald’s DSP granted on 7 March 2002 had been cancelled or suspended during the preclusion period.

If the grant of pension had only been suspended during the term of the preclusion period, there would be no need for the Court to consider the other questions of appeal raised by Macdonald.

Discussion

Macdonald’s counsel submitted that, by operation of s.123 of the Social Security (Administration) Act 1999 (the Administration Act), the pension initially granted to Macdonald on 7 March 2002 continued in existence until a further determination was made under one or other of ss.80, 81 or 82 of the Administration Act, or the pension ceased to be payable by force of one or other of ss.90, 91, 93, 94 or 95 of that Act. It was submitted that only s.80 applied in the circumstances of the present case. Section 80 empowers the Secretary to cancel or suspend a social security payment. That power is to be exercised if the Secretary is satisfied that the person is not, or was not, qualified for payment or was a person to whom the payment is not, or was not, payable.

Macdonald’s counsel contended that, as the Secretary had never purported to cancel or suspend the pension which had been granted to Macdonald on 7 March 2002, that pension remained payable and payments of instalments to Macdonald should have resumed after the expiration of the lump sum preclusion period.

Macdonald’s counsel further submitted that any decision purportedly made on the basis that the initial pension had been cancelled and that Macdonald needed to apply for a new pension was infected by an error of law.

Counsel for the Secretary, after raising jurisdictional concerns regarding the argument being advanced by Macdonald, submitted that the decision to cancel Macdonald’s pension was independently supportable. The Secretary relied on two letters sent to Macdonald - firstly, a letter advising of the grant of the pension dated 16 May 2002 (which the Court accepted was a notice under s.68(2)(a) of the Administration Act), and a letter advising Macdonald of the cancellation of the pension dated 23 March 2005.

Counsel for the Secretary submitted that s.93 of the Administration Act applied in this case, which provides for the automatic cancellation of a social security payment where the recipient gives notice of a change of circumstances by reason of which the person ceases to be qualified for the payment or the payment would cease to be payable.

It was submitted that, in the present case, Macdonald had been given notice under s.68(2) of the Administration Act of his obligation to inform Centrelink of an event or change of circumstance of the kind described in s.93(1)(b). The Secretary submitted that, by operation of s.93(1), Macdonald’s pension was automatically cancelled 14 days after his receipt on 25 February 2005 of the lump sum compensation.

The Court found the submissions advanced by the Secretary compelling. The Court noted that s.1169 of the Social Security Act 1991 (which provides that compensation affected payments are not payable during a lump sum preclusion period) says nothing about the suspension or revival of payments of installments of a pension affected by a lump sum payment. On the other hand, s.123(1) of the Administration Act expressly stipulates that a determination granting a claim for a social security payment continues in effect until, relevant, the payment ceases to be payable under s.93 of the Administration Act.

The Court found that, in the present case, Macdonald’s pension ceased to be payable upon its automatic cancellation pursuant to s.93 of the Administration Act, by force of Macdonald having given notice of a specified event or change of circumstances. The Court found that there was no scope for the Secretary to have determined, pursuant to s.80(1) of theAdministration Act that Macdonald’s pension was to be suspended, because of the operation of s.80(2). Section 80(2) provides that the Secretary cannot make a determination under s.80(1) if the payment has been cancelled or suspended by the operation of another provision of the social security law. The Court found that the operation of s.123(1) and s.93 of theAdministration Act precluded a determination under s.80(1) in this case.

The Court therefore concluded that the determination to grant DSP to Macdonald from 7 March 2002 only continued in effect until the pension ceased to be payable under s.93 of the Administration Act. On the evidence, this occurred, at the latest, on 12 March 2005, being the specified period of 14 days (the notification period) after Macdonald received his lump sum compensation payment.

Formal decision

The Court declared that Macdonald’s DSP granted from 7 March 2002 was cancelled with effect from, at the latest, 12 March 2005; and made programming directions for the hearing of any further questions of law raised on the appeal.

[S.O.]