The correct application of the Social Security Act
33 Cunneen was concerned with the fixing of a lump sum preclusion period pursuant to s 1165(4) of the Social Security Act. At 254, Foster J described the reasoning of the Tribunal as follows:
'The Tribunal first considered the payment of $2,500 for partial incapacity from 18 August 1988 to 24 March 1994 made pursuant to s 40 of the Workers' Compensation Act 1987 (NSW). It held that the payment was, in effect, a payment in arrears of $8.60 per week periodical compensation. Accordingly, s 17(4A) of the Act precluded a finding that it was a lump sum compensation payment. Therefore, although it was paid in respect of "lost earnings or lost capacity to earn" (s 17(2)(e)) it was proper to exclude it from the total amount received by Ms Cunneen under the Compensation Court award for the purpose of considering whether she had received "compensation" within the meaning of s 17(2) or whether the payment to her contained a "compensation part" in accordance with s 17(3).
Having made this exclusion, the Tribunal held that the remaining components of the total amount awarded could not qualify as payments wholly or partly in respect of lost earnings or lost earning capacity. The payments made pursuant to ss 66 and 67 of the Workers Compensation Act 1987 (NSW) respectively for permanent injuries in accordance with a table of maims and for pain and suffering could not so qualify, nor could the amounts awarded for medical expenses (pursuant to s 60 of that Act) nor the awards for interest and costs.
Accordingly, s 1165 was not brought into operation and no lump sum preclusion period should have been set, as Ms Cunneen's lump sum payment did not include amounts for lost earnings or lost earning capacity.'
34 His Honour set aside the Tribunal's decision. His Honour's reasoning is set out in the following passage at 255 - 256, in which his Honour dealt with a submission made on behalf of the Secretary to the Department of Social Security:
'Counsel's basic submission was that the Tribunal had erred in law in determining what was a "lump sum compensation payment" for the purpose of the application of s 17(3). As a matter of construction, it should not have approached the question by first excluding the amount of $2,500 paid for arrears of weekly compensation and then considered whether the other items of the award could each properly be characterised as compensation within the meaning of s 17(2). The term "lump sum compensation payment" connoted the total sum paid under the Compensation Court award pursuant to the settlement. I was not, at first, attracted to this submission as it seemed not inappropriate to characterise each of the items making up the award as being in themselves lump sum compensation payments. If this were so then it was arguable that the Tribunal, insofar as it had available to it the T documents, had, at least implicitly, found as a fact that the amounts payable under each item other than the first were not paid "wholly or partly in respect of lost earnings or lost capacity to earn". In these circumstances, it would not be open to this Court to re-open these factual findings even if, as put in an alternative submission for the applicant, the T documents demonstrated that this was not in truth the correct position. However, I have come to the conclusion that this is not, as a matter of construction, the correct view of the effect of the legislation and in particular of the term "lump sum compensation payment". I am satisfied, as a result of a submission put to me by counsel for the Secretary, to which I shall now make reference, that this term must be taken as referring to the total amount paid to the respondent under the terms of settlement expressed in the award.
I should state, at the outset, that I am satisfied that s 17(4A) should not be given the extended meaning accepted by the Tribunal. Reference to the Explanatory Memorandum in relation to the Social Security Legislation Amendment Bill 1992 (Cth) which introduced the section into the legislation makes it sufficiently clear in my opinion that the legislative intention was to address a situation of confusion which had resulted from conflicting approaches taken in the Tribunal. The purpose of the provision was to ensure that where a payment was simply a total of previously unpaid periodic payments it would not, thereby, acquire the characterisation of a "lump sum compensation". The section, in my view, was not intended to apply where a payment of arrears of periodic compensation did not stand alone but was included as a component in a larger "lump sum" payable as "compensation" within the meaning of s 17(2).
I have accepted the primary submission made by counsel for the Secretary, namely that it was an error of law on the part of the Tribunal to have, in effect, regarded each component of the total sum payable as being "lump sum compensation payments" in themselves. The proper construction of the legislation required that it characterise the total sum payable not the individual parts. If, having done so, the total sum qualified for the legislative description of a "lump sum compensation payment" then the provisions of s 17(3) would be applicable.
I have accepted this submission after considering the reasoning of von Doussa J in Secretary, Department of Social Security v Banks (1990) 23 FCR 416, a case relied upon by the Secretary. I am in respectful agreement with his Honour's reasoning and consider it to be determinative of the present case. His Honour was considering an earlier version of the sections under consideration in the present case but, in my opinion, there is no relevantly significant difference between the provisions.'
35 In effect, the appellant's submission in the present case requires that effect be given to s 17(2B) of the Social Security Act before s 17(4A) comes into play. The result of this reasoning would be that the amounts of $129 382.92 and $80 000 should be added together and treated as one lump sum. That lump sum would then be regarded as a single sum for the purposes of the calculation of a new lump sum preclusion period because the resulting lump sum would be partly in respect of lost earnings or lost capacity to earn, on the reasoning in Cunneen, the question would be whether the total sum qualified as a lump sum compensation payment, so that s 17(3) would apply. If that reasoning were followed, s 17(4A) would not apply, because the aggregated payment would not be a payment of arrears of periodic compensation payments.
36 The 'extended meaning' of s 17(4A), to which Foster J referred in Cunneen, appears to have been a meaning that would have required the treatment of a sum consisting partly of arrears of periodical compensation and partly of some other element or elements as not being a lump sum. His Honour was correct to reject such an approach. Section 17(4A) is
obviously intended to apply to a sum consisting only of arrears of periodic compensation payments.
37 The reasoning applied in the Tribunal and by the federal magistrate, and adopted by the respondent in argument on this appeal, requires that resort be had first to s 17(4A). Because the sum of $129 382.92 was a sum consisting of nothing other than arrears of periodic compensation payments, s 17(4A) provides that it cannot be treated as a lump sum compensation payment. The contention is that s 17(2B) does not apply, because s 17(4A) requires that that sum be disregarded if there is any aggregation to be done. The argument is that s 17(4A) compels the decision-maker to disregard the sum of $129 382.92 in the calculation of the compensation part of a lump sum compensation payment by the method required by s 17(3).
38 It is not easy to reconcile the complex provisions of the Social Security Act bearing on this case. The Tribunal and the federal magistrate accepted the respondent's argument that s 17(4A) operated to exclude from any aggregation of lump sums, pursuant to s 17(2B) the amount required to be paid pursuant to the judgment of the County Court in respect of arrears of weekly compensation. Certainly, because that amount was a payment of arrears of periodic compensation payments, s 17(4A) would operate to ensure that, standing alone, the amount could not be regarded as a lump sum compensation payment. Section 17(2B) is not concerned with aggregating lump sum compensation payments, as that four-word term is used throughout s 17. Rather, s 17(2B) provides a method of calculating a single lump sum compensation payment, where more than one lump sum is received. I do not regard s 17(4A) as operating to deprive the amount of the arrears of periodic compensation of its character as a lump sum, which it certainly was, as distinct from its character as a lump sum compensation payment, a technical term.
39 In taking this view, I rely on Cunneen. In the passage from the judgment of Foster J, which I have quoted at [33], his Honour described the course taken by the Tribunal in that case. It was an approach of considering separately the payments made by the insurer, applying s 17(4A) to the payment that was solely in respect of arrears of weekly payments, and excluding that payment from consideration. Foster J held that this approach was wrong. His Honour took the view that the total amount received should be regarded as a single lump sum compensation payment, and that the elements of the total sum should not be viewed in isolation. The provisions of the Social Security Act should be applied to the total sum received, and the character of that total sum should be determined accordingly. If only part of the total sum consisted of compensation for weekly payments, then s 17(4A) would not apply.
40 In my view, the conclusion reached by Foster J in Cunneen is consistent with the effect of s 17(2B) of the Social Security Act. Section 17(2B) required that all of the sums received by the appellant should be aggregated to determine the full extent of his lump sum compensation payment. Section 17(4A) should not have been applied first to the payment of $129 382.92, so as to exclude it from calculation on the basis that it was not, by itself, a lump sum compensation payment. It was always a lump sum payment, and was required to be aggregated with the other lump sum payment, or payments, before the character of the total sum could be determined. Once this was done, the total sum did not fall within s 17(4A), because it included more than just arrears of weekly payments.
41 To this extent, the appellant's argument succeeds and the Tribunal and the federal magistrate made an error in construing the provisions of s 17.
42 This does not necessarily mean that the rest of the appellant's reasoning must be accepted. I do not accept that s 17(3)(a) or (ab) operated to require that only 50 per cent of the total sum should be treated as the compensation part of the lump sum compensation payment. Both of those paragraphs apply to cases that have been settled on the basis of the payment of a lump sum. They apply an arbitrary rule that, where a lump sum settlement means that there is no disclosure of the amount of the lump sum that is in respect of lost earnings or lost earning capacity, then half of the lump sum is to be treated as being paid in respect of lost earnings or lost capacity to earn. Where the payments have been made in consequence of a judgment of a court, and the specific calculations have been made or can be made, those provisions are inapplicable. They apply only to payments made in settlement of claims, and to elections to receive entitlements to periodic payments in lump sum form, respectively. Payments mandated by judgments do not answer these descriptions. Nor am I able to accept the appellant's contention that he had 'chosen to receive' his entitlement to periodic compensation payments in the form of a lump sum, within the meaning of s 17(3)(ab)(i). The County Court had ordered the payment to him of arrears of periodic compensation payments, and the order could not be satisfied other than by payment of a lump sum.
43 The exclusion of s 17(3)(a) and (ab) from the process of reasoning brings into play s 17(3)(b) and s 17(4). Section 17(4) provides a formula for calculating the amount of the lump sum compensation payment for the purposes of s 17(3). It is applicable to the present case, because the appellant received periodic compensation payments and, after receiving those payments, received a lump sum compensation payment, as a result of which he became liable to repay an amount equal to the periodic compensation payments received. Because s 17(3)(a) and (ab) did not apply, it fell to the respondent, pursuant to s 17(3)(b), to determine how much of the lump sum compensation payment was in respect of lost earnings or lost capacity to earn. In fact, the County Court had already made this determination, so it would be unlikely that the respondent would take a different view.
44 The appellant's liability to repay an amount equal to the periodic compensation payments received arose pursuant to s 1170(1) and (4A) of the Social Security Act. The sum of the periodic compensation payments exceeded the sum of the payments of disability support pension, social security benefit (which includes sickness benefit) and disability support wife pension (all of which are included in the definition of 'compensation affected payment' in s 17(1)). The recoverable amount fixed by s 1170(4A)(d) therefore amounted to the whole of the payments made under the Social Security Act to the appellant and Ms Kaur during the periodic payments period. It was therefore open to the Secretary to give a notice to the Victorian Workcover Authority, pursuant to s 1174 of the Social Security Act, seeking to recover the amount from the Victorian Workcover Authority as a compensation payer. In that case, s 1174(6) operated to require the recoverable amount to be calculated in accordance with its provisions. It should be noted that s 1174(6) contains no reference to a new lump sum preclusion period. This is in contrast to s 1174(4) and (5), neither of which is applicable to the present case. Section 1174(4) is inapplicable because the appellant was at all times a member of a couple. Section 1174(5) is inapplicable because Ms Kaur received a compensation affected payment for the periodic payments period.
45 Had it been necessary to calculate a new lump sum preclusion period, pursuant to s 1165, the relevant subsections would be subss (2AA) and (8). This is because the aggregated lump sum was received after 20 March 1997. The purpose of a new lump sum preclusion period would only be to fix a period after the payment of an aggregated lump sum during which payments of social security could not be made, or would be required to be reduced to the extent of the element of the lump sum designed to compensate for loss of future earning capacity. Those provisions are inapplicable here, because the appellant continued to receive periodical compensation payments in accordance with the judgment of the County Court after the date of that judgment. It was this ongoing payment that rendered him and Ms Kaur ineligible to receive further payments of social security after the date of the judgment. The appellant cannot therefore draw any comfort from the provisions relating to the calculation of lump sum preclusion periods in the present case.