Li v Secretary, Department of Social Services [2025] FCA 1617

1991Li v Secretary, Department of Social Services [2025] FCA 1617 | Case summary | Zoe

[12]

Ms Li is the mother of a child, and was approved to receive a parenting payment at the single rate from 22 July 2014. In addition, she received an income support bonus payments at various points from September 2014 until September 2016. Where a lump sum compensation payment is made to a person in receipt of a compensation affected payment, ss 1169 and 1170 of the Social Security Act 1991 (Cth) (SS Act) requires a calculation to be undertaken to determine the period during which the person should not receive, or should not have received, the compensation affected pension payment. This is referred to as the lump sum preclusion period. Where pension payments were made within that period, they become repayable. To carry out the calculation required by the SS Act, the Secretary, Department of Social Services (the Respondent) was required to identify the amount of the settlement sum paid to the Applicant (the Lump Sum). The Respondent (via its agency, Centrelink) determined that the Lump Sum was in the amount of $523,976.73. This Lump Sum included a substantial portion which had been paid in relation to legal fees and medical expenses. Ms Li argued that the amounts paid in relation to the legal fees and medical expenses should not be included in the calculation of the lump sum preclusion period because they were not received by her, or were received by her only in a transitory sense before being paid on to either lawyers or medical providers respectively.
The Applicant was successful before the Tribunal in arguing that the legal fees should be excluded; in respect of certain fees, because they were never "received" by her in the sense contemplated in s 1171(1), and in respect of other fees, because special circumstances existed such that the Tribunal ordered that those amounts be disregarded in the exercise of its discretion under s 1184K(1) of the SS Act. The Respondent alleged no error in relation to that aspect of the decision.
The Applicant was unsuccessful in arguing that medical expenses should be excluded, and appeals to this Court alleging error by the Tribunal in failing to properly consider that aspect of her application.
The Respondent concedes that there was an error in the Tribunal's decision insofar as it failed to consider the exercise of the powers available to it in relation to waiver of the Applicant's parenting payment debt under ss 1236 and 1237AAD of the SS Act.
The Applicant asks that the matter not be remitted, and that this Court instead make the decision in place of the Tribunal. The Respondent resists that course and seeks to have the matter remitted to the Tribunal.
In correspondence between the parties prior to the commencement of proceedings, the Respondent refused to undertake not to re-agitate the question of the Applicant's legal costs on remitter. The Respondent maintained that position in this Court, saying that it sought the ability to re-agitate all issues, despite having alleged no error in the approach of the Tribunal. The correspondence appears to suggest that had the Respondent provided assurances that it would not re-agitate the question of the legal costs, the Applicant may have consented to the proceeding being remitted. This is relevant to the question of costs, to which I will return.
For the reasons I have explained below, I agree that there was an error in the approach of the Tribunal insofar as it failed to properly consider the exclusion of the medical expenses. I do not consider that it is appropriate to consider the matters afresh myself: the fact finding task in this case is a reasonably complex one, and the Applicant seeks to put forward new material, and asks for factual findings to be made that are inconsistent with findings made below (or in relation to which there have been no findings below). It is therefore appropriate that the matter be remitted.
Ms Li is a litigant in person and I have approached her notice of appeal and submissions as a whole and as fairly as possible (Onassys v Comcare [2022] FCA 90 at [21] (Abraham J), citing Haritos v Commissioner of Taxation [2015] FCAFC 92; 233 FCR 315 (Haritos) at [104] (Allsop CJ, Kenny, Besanko, Robertson and Mortimer JJ), quoting Avetmiss Easy Pty Ltd v Australian Skills Qualifications Authority [2014] FCA 314 at [75]- [77] (Mortimer J)). While the Respondent raised substantial concerns about the amended notice of appeal and its failure to properly articulate a question of law, I have approached the matter as a question of substance, and not of form (in accordance with the reasons given in Haritos at [105]-[107] and [200]). Some aspects of the appeal as explained in the Applicant's written submissions and oral submissions were difficult to understand or to reconcile with each other.
Because of the concession as to the existence of legal error and my decision as to the appropriateness of remitter, it is not necessary or appropriate for me to consider those aspects of Ms Li's submissions which concern an alleged breach of natural justice or a failure to exercise discretion appropriately. The remedy for such errors is in any event remitter, and the Court has confidence that the issues in dispute will be considered carefully on remitter in accordance with the appropriate principles. To the extent that Ms Li's submissions engage with whether the Reasons applied the correct legal tests, I have identified and responded to those matters in an effort to assist the Tribunal in its task in determining the matter in accordance with law.

[34]

In Secretary, Department of Family and Community Services v Chamberlain [2002] FCA 67; 116 FCR 348 (Chamberlain), Kiefel J considered the operation of the "50 per cent rule", being the deeming provision in s 17(3). Mrs Chamberlain was in receipt of an age pension, and had previously received a disability support pension. She earned no more than $50 per week teaching music. She was involved in a car accident and suffered personal injury. The matter was settled out of court for $35,000 plus $4,000 for costs. Of that amount, the parties attributed $31,500 for pain and suffering, and $3,500 was attributed to loss of earnings. The parties' calculation of the sum was not put before the Tribunal. The application of the statutory formula resulted in a repayment obligation on Mrs Chamberlain of $7,643.36. Her Honour noted that the Tribunal had observed that the result of applying the statutory formula in that case was that Mrs Chamberlain repaid Centrelink more than twice the amount she actually received for economic loss, and that the 50% rule applied in the circumstances of Mrs Chamberlain's case, but not where a Court set the amount for economic loss (at [15]). Her Honour concluded that the statute did not intend the parties to the settlement to be in a position to determine the amount that had to be repaid to Centrelink (at [25]). That logic is easily comprehensible, and sits behind what has been referred to as the "50% rule" in s 17(3) of the SS Act. The Secretary ought not be subject to the potential manipulation of settlement agreements to avoid recovery of social security payments. As Kiefel J observed, the factual assumptions underpinning the calculations (including that which treats 50% of the total compensation payment as representing the loss component) could not have been intended to be subject to rebuttal in the process of applying the formulae (at [25]).
This case, and others (such as Haidar v Department of Social Security [1998] FCA 994; (1998) 157 ALR 359 at 367 (Hill J)) underscore the importance of the provisions which are concerned with whether or not to waive or ameliorate the impact of the scheme as a whole. In the context of this proceeding, those provisions included: ss 1184K, 1236(1), 1237A and 1237AAD of the SS Act.
Section 1184K provides:

[50]

The award of compensation received by the Applicant is set out at [3]-[4] above.
Ms Li was initially assessed as having received a Lump Sum of $523,976.73. On this basis, she was subject to a lump sum preclusion period under the SS Act from July 2014 until January 2019, and required to pay a debt of $83,143 (R[16]).
The decision as to the amount of the Lump Sum was reviewed by an authorised review officer, who affirmed the decision (R[17]). Shortly after, on 17 January 2023, the Respondent (via its agency, Centrelink) also decided that Ms Li had an income support bonus payment debt of $552.40. That decision was also reviewed and upheld by an authorised review officer.
The Applicant applied for review of both decisions in AAT1. AAT1 decided the amount of the compensation payment over $260,000 that the Applicant had received should be treated as not having been made to her. That meant that $263,976.73 of her total lump sum compensation payment of $523,976.73 was disregarded, and her preclusion period was shortened. The preclusion period was made to be effective from July 2014 to October 2016, rather than July 2014 until January 2019. The Applicant's net debt was also reduced to $43,136 and so she was entitled to a refund of $36,454.78.
The matter then proceeded on review to the Tribunal. Before the Tribunal, the Respondent did not argue that the approach to the legal fees of Law Firm A should be different, but it did contest the treatment of the legal costs paid to Law Firm B. The Tribunal also concluded that the amount of $238,112.07 that was paid directly to Law Firm A was never received in the sense contemplated by s 1171(1) of the SS Act, and was therefore correctly excluded from the calculation of the lump sum compensation payment (R[53]). In relation to the amount of $121,128.34, a different decision was reached: that amount was found to have been received by the Applicant only in a transitory sense because it was immediately paid to Law Firm B. The Tribunal said it should not be properly regarded as constituting any part of the lump sum compensation payment made to the Applicant (R[52]), and exercised its discretion to disregard that payment under s 1184K(1) (R[54]). The Tribunal found (at R[54]) that:

[67]

It is clear that ss 176 and 177 were not intended to be substantively different to ss 44(3), (4), (5), (7) and (8) of the predecessor Administrative Appeals Tribunal Act 1975 (Cth), and that authorities construing those predecessor provisions continue to be relevant (see Charles Apartments Pty Ltd v Commissioner of Taxation [2025] FCA 461 at [136] (Wheatley J)).
In Haritos, the Full Court said that while s 44(7) (the predecessor to s 177) permitted findings of fact in limited circumstances, it did not change the jurisdiction to one which permitted an appeal on findings of fact (at [114] (Allsop CJ, Kenny, Besanko, Robertson and Mortimer JJ)). That is consistent with the distinction between judicial and executive functions explained in NAIS v Minister for Immigration and Multicultural and Indigenous Affair [2005] HCA 77; 228 CLR 470 at [123] (Gleeson CJ, Gummow, Kirby, Hayne, Callinan and Heydon JJ). The cognate power in s 44(7) was described as a "limited ability to make factual findings" (Rusanov v Commissioner of Taxation (No 2) [2025] FCAFC 116 at [15] (Logan, Feutrill and Wheatley JJ)).
It follows that while the Court has a discretionary authority to make factual findings where matters were already before the Tribunal, that discretion only arises where the proposed findings are not inconsistent with a finding of fact made by the Tribunal which is not infected by an error of law (Commissioner of Taxation v Bazzo [2024] FCA 452 at [9] (Colvin J)).
The Applicant's request that the matter not be remitted is opposed by the Respondent.
There are new factual matters which the Applicant seeks to introduce, and additional arguments in relation to facts which were already before the Tribunal that go well beyond what would be necessary to deal with any question of law properly arising. The Applicant seeks new and different findings of fact, and that goes well beyond what is contemplated or authorised by s 177 of the ART Act. The Applicant's request is ultimately a request for this Court to trespass into the merits of the application and that request must be denied.
Nonetheless, there is a real dispute about the scope of the remitter, and whether it is appropriate for the Court to make any further comment about the approach to the errors alleged. It is, of course, not proper for this Court to engage in hypothetical, advisory opinions. However, it is appropriate for the Court to identify any errors of law arising from the amended notice of appeal that should accompany the remitted matter to assist the Tribunal to determine the matter in accordance with law.

[80]

These submissions are directed to "question of law 2" rather than ground 2. I was not able to identify submissions of substance directed to ground 2 as it is set out.
The core of the Respondent's submissions appears to be that in the absence of a proper question of law, the ground of appeal to which it corresponds cannot proceed. While acknowledging that the manner in which the Applicant put her case made engagement with the issues difficult, the Court should have had submissions directed to the grounds of appeal, and not simply to the questions of law set out in the notice of appeal. This is particularly so having regard to the observations regarding the identification of questions of law being a substantive matter, not one of form (see [12] above)
Ground 2 appears to be directed at the Tribunal's conclusion that the medical expenses ought to have been excluded from the calculation of the lump sum compensation payment, in part because some of those amounts (being $14,736.32) were ordered by the SAET to be paid to the Applicant as reimbursement of medical expenses fixed and agreed. By those same orders, the amounts payable to each of the law firms were made payable. The second amount was payable to the Applicant on account of fees incurred by Law Firm B. Thus, the funds were received in "a transitory way" by Ms Li before being transferred to Law Firm B. Ms Li appears to argue that the treatment of one amount in that way should lead to the same treatment in relation to the other amount.
One can readily understand why Ms Li would raise such an argument. However, properly understood it is an issue with the exercise of a discretionary power, which will no doubt be addressed upon remitter. It does not turn upon an alleged misunderstanding of the statutory framework, as noted above, I am content that the Tribunal was aware that it could reduce the Lump Sum amount by reference to the criteria in s 1184K. Because the matter is to be remitted and considered afresh it is not appropriate to consider whether additional reasons given for the discretion miscarrying should be resolved, given that in each instance it will involve an analysis of the facts, and the Applicant seeks to make new and different submissions about those facts upon remitter.
I am unable to identify any part of instruction 4.13.4.10 of the Social Security Guide which mandates a particular approach to the exclusion of medical expenses, although I note that the Respondent relies upon that instruction for the proposition that double recovery is to be avoided. One might accept that the statutory scheme involves an intention to avoid double recovery, but it is the application of the statute, and not a guide, which is relevant to the task of the Tribunal. The primacy of the statutory scheme over any guide issued by the Department of Social Services is clear.
The complaint concerning the recovery of $20,000 in medical expenses via "Medicare Compensation Recovery" involves characterisation of factual matters which will be properly before the Tribunal, and are not appropriate for comment by this Court.

[96]

In the course of the hearing the Applicant accepted that this was a new ground. Accordingly, I gave the Applicant and Respondent leave to file supplementary written submissions on this ground alone. The Applicant's supplementary written submissions stated that she had always advanced an argument of this kind. It appears that an argument of this kind was advanced before the Tribunal in at least one of the hearings below, although it was not squarely raised in this Court in the present appeal. In any event, the Respondent accepted that it faced no real prejudice from the ground but argued that it should not be permitted to be advanced because it lacked prospects.
I have considered the Applicant's arguments in relation to this issue. It involves the proper characterisation of "compensation" and "compensation-affected payments". The relevant parts of the SS Act are set out above.
The Applicant argues (in effect) that the definition of "compensation" requires both the payment of a settlement and that the payment is made wholly or partly in respect of lost earnings or lost capacity to earn resulting from personal injury. She argues that the latter part of the definition is not satisfied because the amounts attributable to medical expenses are not "in respect of lost earnings or lost capacity to earn" and so fall outside the definition.
Section 7 defines compensation to mean a payment in settlement of a claim where that claim is "made wholly or partly in respect of lost earnings". Thus, the definition looks to the nature of the settlement which triggered the payment. In this case, the Lump Sum was paid in settlement of an action in respect of personal injury.
Chamberlain makes clear that the first step in identifying "compensation" is to identify the lump sum payment in question. Once identified, it is necessary to ask whether the payment was made in part or in whole for lost earnings or lost capacity to earn resulting from personal injury. If it is the case that part (even a small part) of the lump sum payment was for lost earnings or lost capacity to earn resulting from personal injury, the statute operates to assume a 50% rate was for lost earnings or lost capacity to earn from personal injury. That assumption is not amenable to rebuttal by evidence (Chamberlain at [25]). The lump sum payment can be identified in a range of ways, including as the result of a deed of settlement (s 17(2)(c)) or a payment of damages (s 17(2)(a)) or a payment under a scheme of insurance or compensation under a Commonwealth, State or Territory law, including a payment under a contract entered into under such a scheme (s 17(2)(b)).
One of the purposes of s 17(3) is to avoid a situation where the parties to a dispute can manipulate a settlement to alter the operation of the legislative scheme.
In the context of this case, it is necessary to identify the total amount paid to Ms Li (or for her benefit: s 17(5)) as a total to resolve her claim for damages in respect of lost earnings or lost capacity to earn resulting from personal injury. Of that total amount that was agreed, the division into different categories (i.e. for medical expenses) does not alter the operation of the assumption in s 17(3) that 50% is to be taken as being in respect of lost earnings.
In Borcherdt v Department of Families, Housing, Community Service and Indigenous Affairs [2009] FCA 62, the Court was concerned with an argument raised by the Applicant that certain amounts of a settlement were directed to specific purposes like the payment of legal fees, and that in consequence, the settlement sum could not be characterised as falling within the definition of compensation. Justice Logan there concluded (at [34]) that:

[104]

I am persuaded that remitter of the matter to the Tribunal for reconsideration of all issues has the potential to work considerable injustice. The issue of the exclusion of legal costs has been disputed and determined on a number of occasions and the Respondent has not raised any alleged error in the decision making as it relates to those issues. That issue is severable from the question of the treatment of the medical expenses and the resultant debt position. There is no reason to subject the Applicant (or the Tribunal) to further agitation of issues connected with the legal expenses. It is only the inclusion or exclusion of the medical expenses and consideration of the waiver and write-off powers that remain in dispute. It is consistent with the efficient and cost-effective determination of the issues that remain in dispute that the matter be remitted only in that respect.
In the case of Roncevich v Repatriation Commission [2005] HCA 40; 222 CLR 115 (Roncevich), the High Court ordered that "the matter be remitted to the Tribunal according to law" (McHugh, Gummow, Callinan and Heydon JJ with Kirby J agreeing). Prior to the hearing of Roncevich, the respondent sought to raise a factual issue that had been previously conceded. The applicant sought to have the issue excluded. The Court declined to do so. Thus, in the absence of an order limiting the remitter, the respondent would be free to re-agitate issues concerning the inclusion or otherwise of the legal expenses. For the reasons that I have outlined above, I have decided to set aside the decision in part, and limit the remitter (see Commissioner of Taxation v Bazzo (No 2) [2024] FCA 560 at [4] (Colvin J)) so that the only issues for determination by the Tribunal will exclude reconsideration of the Tribunal's previous decision that the amount of $359,240.41 be disregarded under s 1184K of the SS Act as not having been made.
But for this specific exclusion, the remitter is intended to ensure that the Tribunal is free to carry out its task in the manner it considers necessary and appropriate.

At a glance

Court

Decision date

Before

Source

Judgment (107 paragraphs)

Parties

Legislation Cited (5)

Cases Cited (20)