Secretary, Department of Family & Community Services v Mourilyan

Federal Court of Australia|2001-11-12|Before: Dowsett J

The appeal 1 This is an appeal from a decision of a senior member of the Administrative Appeals Tribunal (the "Tribunal") which decision reviewed an earlier decision of the Social Security Appeals Tribunal ("SSAT") pursuant to the Social Security Act 1991 (the "Act").

History 2 The respondent suffered a work-related injury on 2 December 1993 and thereafter received financial and other support pursuant to the Workers' Compensation Act (1990). That Act was replaced by the WorkCover Queensland Act (1996), which act was assented to on 12 December 1996. The respondent has also received payments pursuant to the Act. It seems that the Workers' Compensation payments continued until 14 June 1996 and that payments under the Act commenced from 27 June 1996. The respondent alleged negligence in the circumstances surrounding his injury and commenced proceedings in the District Court. On 26 August 1998 he recovered judgment.

Weekly benefit $44,677.28 Medical Expenses 1,362.76 Other Expenses 466.00 Rehabilitation Expenses 2,532.00 Disability Settlements 29,372.72

Total $78,410.76

8 In the proceedings in SSAT and the Tribunal it appears to have been accepted that the "Weekly benefit" item represented payment in lieu of wages. The "Medical Expenses" item is self-explanatory. Neither the "Other Expenses" item nor the "Rehabilitation Expenses" item is explained. The "Disability Settlements" item presumably represents the amount of a lump sum settlement of the respondent's Workers' Compensation claim. Whether such settlement took into account lost income or lost capacity to earn is not disclosed. According to the Tribunal's reasons, the present applicant, acting through Centrelink also imposed a "charge" upon the judgment in the amount of $15,838.24, representing pension payments made from 24 June 1996 (when the Workers' Compensation payments stopped) to 20 August 1998 (just prior to the judgment).

The Act 9 Although the matter was not addressed in detail before me, the SSAT decision demonstrates that the scheme of the Act is to disqualify a person who has received the benefit of such a judgment from receiving benefits during what is called the "preclusion" period. This period is calculated by dividing an amount described as the "compensation part of lump sum" by the "income cut-out amount" (ss 1165). For present purposes there is no argument as to the latter sum. The problem is the determination of the former. Argument has proceeded on the basis that the expression "compensation part of lump sum" means the same as "compensation part of a lump sum compensation payment", a term which is defined in s 17 of the Act. Pursuant to subs 17(2) "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, including a payment under a contract entered into under such a scheme; 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; (whether the payment is in the form of a lump sum or in the form of a series of periodic payments) that is: (e) made wholly or partly in respect of lost earnings or lost capacity to earn; and (f) made either within or outside Australia. 10 Subsection 17(3) relevantly defines "compensation part of a lump sum compensation payment" as: (a) … (ab) … (b) … so much of the payment as is, in the Secretary's opinion, in respect of lost earnings or lost capacity to earn. 11 Both subss 17(2) and (3) focus upon a payment to the person in question. I make this point because it seems that both SSAT and the Tribunal rather focused upon amounts used by the Judge in calculating damages. I consider that the word "payment" in par 17(3)(b) means an actual transfer of money to the relevant person (including payments to a person receiving on his or her behalf). The amount of a judgment is not itself a payment; nor is any amount allowed for lost earnings or lost capacity to earn which may be included in that judgment. The exercise contemplated by par 17(3)(b) must commence with the identification of an amount actually paid to the relevant person. Where the judgment has been reduced for some statutory reason, only the reduced amount will be paid to the plaintiff. That reduced amount will be the starting point for the purposes of par 17(3)(b). The Secretary must then determine the part of that payment which is in respect of lost earnings or lost capacity to earn. The reference to "lost earnings" is presumably to past earnings, whilst the reference to "lost capacity to earn" is to future earnings. I should add that the "charge" referred to above may also, arguably, have reduced the amount paid to the plaintiff, but that question has not been argued. A successful counter-claim or plea of contributory negligence might raise similar problems. 12 When the amount of the payment received by a plaintiff is less than the amount of the judgment, the Secretary must consider the nature of the deduction in order to determine whether any part of the remainder (the payment) is in respect of lost earnings or lost capacity. In some cases it may be possible to demonstrate that the remainder contains specific amounts which are so referable. However it is possible that the deduction may result in the payment being less than the total of the components of the judgment, even apart from those components represented by the deduction. In those cases, it may be that the Secretary should calculate a rateable apportionment of the payment amongst the remaining items.

The issue 13 The question raised by this appeal is whether or not the award of $16,107 as interest on past economic loss, to the extent that it was part of any payment to the respondent, was in respect of lost earnings or lost capacity to earn. In SSAT it appears to have been accepted by the parties that it was. However the Tribunal determined that it was not. It is not immediately clear to me that this is a question of law, capable of ventilation in these proceedings. Paragraph 17(3)(b) is concerned only with the opinion of the Secretary. Whether or not the Secretary formed a particular opinion is clearly a question of fact. However both parties have implicitly submitted that for reasons of law, only one opinion was open in the present case. The applicant submitted that the Secretary should have formed the view that the interest payment was in respect of lost earnings or lost capacity to earn; the respondent submitted to the contrary.

NatuRe of an award of interest 14 In Hungerfords the High Court considered the award of interest as damages independent of any statutory provision but also considered the nature of an award pursuant to statute. Mason CJ and Wilson J said at 147-8 (concerning interest pursuant to the South Australian legislation): We see no reason for construing (the section) in such a way that it forecloses the authority of the courts to award damages in accordance with the principle established by Hadley v Baxendale and the measure of damages governing claims in tort. The section is not intended to erect a comprehensive and exclusive code governing the award of interest. It is a provision intended to provide a plaintiff with some protection against the late payment of damages. The section does not attempt to regulate the measure of compensation to be awarded for a specific head of loss. … 15 At 149, their Honours considered the possibility of recovering interest by way of damages rather than pursuant to such a legislative provision, observing: But we see no reason for allowing the reluctance of the common law to extend to cases where the defendant's breach of contract or negligence has caused the plaintiff to pay away or the defendant to withhold money and, as a result, the plaintiff has been deprived of the use of the money so paid away or withheld. The recovery of compensation for the loss may be ascribed to the operation of the second limb in Hadley v Baxendale. However, we would prefer to put it on the footing that it is a foreseeable loss, necessarily within the contemplation of the parties, which is directly related to the defendant's breach of contract or tort. 16 Similarly, Brennan and Deane JJ said at 152: There is, in our view, a critical distinction between an order that interest be paid upon an award of damages and an actual award of damages which represents compensation for a wrongfully caused loss of the use of money and which is assessed wholly or partly by reference to the interest which would have been earned by safe investment of the money or which was in fact paid upon borrowings which would otherwise have been unnecessary or retired. On the one hand, there is no common law power to make an order for the payment of interest to compensate for the delay in obtaining payment of what the court assesses to be the appropriate measure of damages for a wrongful act. If such interest is to be awarded at common law, it must be pursuant to statutory authority. On the other hand, there is no acceptable reason why the ordinary principles governing the recovery of common law damages should not, in an appropriate case, apply to entitle a plaintiff to an actual award of damages as compensation for a wrongfully and foreseeably caused loss of the use of money. 17 An award of interest pursuant to s 47 of the Supreme Court Act ("statutory interest") is in the discretion of the Court. It must choose an appropriate rate, identify whether interest should accrue on the whole or any part of the judgment and determine the period for which interest is to be awarded. The earliest possible date is that on which the cause of action arose; the latest possible date is the date of the judgment. In practice, awards pursuant to s 47 are made as a matter of course, adopting a rate of interest which is generally recognized as "current", identifying the time at which each aspect of the loss arose and the time for which it continued. However the exercise may be more complex in some cases. For example, in seeking statutory interest, a plaintiff might allege that he or she lost a particular investment opportunity or was forced to borrow at an unusually high rate because of his or her particular financial position. Those considerations would be relevant in the exercise of the discretion conferred by s 47, as they also would be in a claim of the kind contemplated in Hungerfords. Whilst the award of damages for lost earnings or capacity to earn focuses on the loss of income, the award of interest (pursuant to the statute or as damages) focuses on the plaintiff's likely use of his or her income. In most cases, a plaintiff who seeks an award of statutory interest will rely on the "broad brush" approach outlined above. Nonetheless, he or she is still seeking either the cost of borrowing or the value of a lost opportunity to invest.

The section 18 The connective phrase "in respect of" is no doubt very broad. It describes the relationship which must exist between "lost earnings or lost capacity to earn" and "so much of the payment" in order that there be a relevant amount for the purpose of calculating the preclusion period. The paragraph assumes that a relevant payment will represent different aspects of the loss suffered and that it will be possible to identify parts of it as attributable to particular aspects. On one view, even a remote connection between lost earnings or capacity and any part of a payment would be sufficient nexus to justify the Secretary in forming the relevant opinion. Alternatively, it may be that the Secretary must identify an amount as having been "paid" in respect of such loss. The practical difference between the two approaches is that the former would include an amount merely because it was calculated by reference to lost earnings or the value of lost capacity, while the latter approach would require that the amount be, in effect, compensation for such loss. The latter view does not require any narrowing of the natural width of the expression "in respect of", other than by reference to the use of the word "payment" in conjunction with it. 19 The broader construction might catch many other components of a personal injuries award. An award for pain, suffering and loss of amenity may include an element for lost job satisfaction caused by a change of employment as a result of injury or for additional pain and inconvenience caused by continued employment despite incapacity. The Griffiths v Kerkemeyer item might include an allowance for voluntary domestic service which assists the plaintiff to overcome his lost capacity to earn. The Fox v Wood component is obviously related to lost earnings or capacity to earn. Some items of special damage may be caught such as an allowance for purchasing analgesics to assist the plaintiff to work or special equipment to so assist. 20 There are other potential anomalies inherent in the broader approach. Firstly, it should be realized that in awarding interest, a court may take into account moneys received by way of Workers' Compensation payments and possibly, payments under the Act, as going in reduction of any amount upon which interest should be awarded. If so, then interest included in the judgment will be limited to interest on that part of lost earnings or capacity to earn for which the plaintiff has not been compensated by such payments. This situation would arise if there were some hiatus between injury and commencement of such payments or between cessation of Workers' Compensation payments and commencement of payments under the Act. It might also arise where the amount of such payments was less than the income which would have been earned by the plaintiff, had he or she not been injured. Thus there is not necessarily any connection between an award of interest and the actual amount paid to a plaintiff pursuant to the Act or as Workers' Compensation. Secondly, a plaintiff may recover interest at a rate which reflects lost opportunity or the rate at which money was borrowed. The broad approach would deprive the plaintiff of the benefit of such compensation. It seems unlikely that the legislature intended that result. 21 In my view par 17(3)(b) must be read as providing for the identification of any amount paid in respect of lost earnings or lost capacity to earn. That construction reflects the use of the word "payment" and avoids the anomalies to which I have referred.

The facts 22 I return to the present case. I know only that the award of interest amounted to $16,107 and that it was in some way related to past economic loss calculated in the amount of $115,200. Neither SSAT nor the Tribunal appears to have considered the circumstances which led the trial judge to make the award, nor even the basis for calculation. I am invited to consider the case upon the assumption that the award of interest was based upon no other considerations. Such an approach tends to characterize the payment as a further award for lost income. As I have explained, that is not the case. I have outlined my view of the meaning of par 17(3)(b). Whether any part of a relevant payment is in respect of lost earnings or lost capacity is a question of fact. The matter is dealt with in par 25 of the Tribunal's reasons as follows: I am satisfied that damages awarded because a claimant has been kept out of the damages payable on the date of accident by an intervening period of time between the accident and the award of damages, may be distinguished from damages in respect of lost earnings or lost capacity to earn. It is compensation for being kept out of the payment of damages and is made wholly in respect of time lost rather than lost earnings or lost capacity to earn. I have considered whether the interest should be characterised as damages made wholly or partly in respect of lost earnings. I am satisfied the interest does not have this character. Rather it is a payment to reflect the fact that the damages awarded were not paid on the date of the accident so that there is a deemed loss of interest on the damages awarded but the payment is not correctly characterised as in respect of lost earnings or lost capacity to earn. The loss is a financial loss caused by and arising out of the delayed payment of damages. It is not related to lost earnings or lost capacity to earn because although they are factors in the determination of damages to be paid they are not factors in the determination of the loss suffered by the claimant because he has been kept out of his money. 23 I see no error of fact or law in this view. However it seems likely that the Tribunal did not adopt the general approach to the task prescribed by par 17(3)(b) which I have outlined above. In the circumstances of this case, that may not matter.

Orders 24 I will hear submissions as to forms of order and as to costs after the parties have had an opportunity to consider my reasons. I certify that the preceding twenty-four (24) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Dowsett.

Associate: Dated: 12 November 2001 Counsel for the Applicant: Mr G. O'Sulliven

Solicitor for the Applicant: Australian Government Solicitor

Solicitor for the Respondent: Welfare Rights Centre

Date of Hearing: 21 September 2001, 29 October 2001

Supreme Court Act 1995(Qld)

At a glance

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Before

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Judgment (14 paragraphs)

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Legislation Cited (2)

Cases Cited (2)

Cited By (1)