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Accident Compensation Cases

Re SSA36/11 (SSAA, 07/08/12)

Judgment Text

DECISION ON THE PAPERS 
Ms M Wallace - Chairperson, Mrs N Te Hira - Member, Mr K Williams - Member
[1]
The Authority issued an interim decision in relation to this matter on 17 October 2011. 
[2]
The Authority sought further information as to the Deed of Settlement completed on behalf of xxxx. 
[3]
The signed Deed of Settlement now available confirms that xxxx received an undissected payment of A$950,000 in respect of his claims under the Northern Territory Workers Rehabilitation and Compensation Act (WR & C Act), including claims for entitlement under ss 64 and 65 of that Act which relate to loss of earning capacity. 
Section 81 Review 
[4]
Once the Chief Executive became aware that the appellants had received compensation for loss of earning capacity it was appropriate for him to review their entitlement to benefit. In a review under s 81(1)(b) of the Social Security Act 1964 the Chief Executive has the power to review retrospectively whether the recipient of a benefit may not have been entitled to receive a benefit or the rate of benefit that was paid to the beneficiary at some earlier time. This may include in the light of the facts that are now to hand, a review of whether he would have been granted a benefit at the time the grant of benefit was made. 
[5]
A review will usually include consideration of whether or not the beneficiary has now received income in respect of the period in which he received a benefit which should now be taken into account in assessing entitlement to benefit. It is apparent that the appellant has now received compensatory income in respect of the period he was paid benefit. We have considered whether the money received was income. 
[6]
The definition of ‘income’ is contained in s 3(1) of the Act and provides:- 
[income, in relation to any person,— 
(a)
Means any money received or the value in money's worth of any interest acquired, before income tax, by the person which is not capital (except as hereinafter set out); and 
(b)
Includes, whether capital or not and as calculated before the deduction (where applicable) of income tax, any periodical payments made, and the value of any credits or services provided periodically, from any source for income-related purposes and used by the person for income-related purposes; …  ”
[7]
In Todd v the Social Security Commission1
| X |Footnote: 1
[1992] NZAR 415 at 417 
the Court of Appeal said:- 
“Income in its widest sense simply means that which comes in, and earnings related compensation received by social welfare beneficiaries is clearly within the wide definition of income in s 3(1). ”
[8]
Referring to this finding in M v the Chief Executive of Work and Income2
| X |Footnote: 2
HC Wellington AP335/01, 27 August 2002 
the High Court found:- 
“This proposition does not alter simply because earnings related compensation is paid retrospectively in a back payment. ”
[9]
As we noted in decision number 83/2011 issued on 17 October 2011 s 71 and s 71A make it clear that the intention of the Social Security Act 1964 is that a beneficiary should receive only one source of assistance or compensation in respect of the same period. This position was emphasised in M v the Chief Executive of Work and Income
[10]
We are satisfied that the money received by the appellant in respect of loss of earning capacity should be treated as income. It is money received calculated with reference to a period in respect of which income would have been paid but for the appellant's “accident”
[11]
If we are wrong in our conclusion that that part of the payment received relating to compensation for loss of earnings is income, we note that we have reviewed our earlier decision on the role of s 71(1)(a) in a review under s 81(2). 
[12]
We have concluded that s 81(2) entitles the Chief Executive to consider whether on the basis of the information now to hand he should have declined to grant a benefit as provided for under s 71(1)(a) on the basis that compensation has been paid and therefore a grant of benefit should be cancelled from the date of grant and a debt established. 
[13]
In either approach the Authority needs to consider what part of the payment should be treated as income in respect of the period 9 June 2008 to 31 August 2010 when the appellants received income tested benefits in New Zealand. That is necessary because the level of compensation may not necessarily result in cancellation of the full benefit entitlement. 
Calculation of Income 
[14]
Compensation under the WR & C Act is available for loss of earning capacity, permanent impairment and the cost of medical, surgical and rehabilitation treatment. 
[15]
On behalf of the Chief Executive it is submitted that in the absence of any evidence about what portion of the payment was not compensation for loss of earnings, then the whole of the settlement payment should be treated as income. 
[16]
The $950,000 was in fact a compromise payment. Arguably the payment may have included some element of all three categories of compensation. However some difficulty arises in assessing how much might have been allocated to each amount. 
[17]
Compensation for permanent impairment is provided for in s 71 and s 72 of the WR & C Act. Compensation for permanent impairment is paid by establishing the percentage of impairment and where that impairment is not less than 15%, compensation equal to that assessed percentage of 208 times the average weekly earnings at the time the payment is made, is payable. 
[18]
“Average weekly earnings” is defined in s 3 of the WR & C Act and means “the Average Weekly Earnings for Full time Adult Persons, Weekly Ordinary Time Earnings for the Northern Territory last published by the Australian Statistician before 1 January before the date in respect of which they are required under the Act to be assessed.” This figure according to the Australian Department of Statistics' website as at November 2009 was AS$1,175.50 per week3
| X |Footnote: 3
www.abs.gov.au — Average weekly earnings, Northern Territory - Trend 
. Multiplied by 206 this figure comes to A$242,153. We do not know the percentage of the appellant's permanent impairment. As the compensation paid was a compromised amount we infer that it did not include a full amount for permanent impairment. However even if we were to accept that the full amount of Permanent Impairment Allowance was paid that would have left a balance of A$708,000 (rounded). 
[19]
There is no evidence that any of this amount related to medical/rehabilitation costs. We infer those costs would have been met from the insurance cover the appellant had in the first year following the accident. 
[20]
At the time of his accident the appellant was nearly 50 years of age. Compensation under the WR & S Act for loss of earnings is payable until a worker attains the age of 65 years or normal retiring age for workers in the industry in which the appellant was employed. While this particular compensation payment was settlement of a disputed claim we think it reasonable to infer that compensation would have been assessed on the basis that, but for his injury, he would work until attaining the age of 65 years. In short we infer the payment notionally provided for 15 years of loss of earning capacity. While s 64 provides a formula as to how loss of earnings compensation is to be paid, as this was a compromise settlement a reasonable way of ascertaining the loss of earnings compensation payment is to divide the balance remaining, after a deduction for permanent impairment by 15. 
[21]
If the A$708,000 is divided by 15 years, it produces a notional annual amount of A$47,200. Converted into New Zealand dollars at the average historical rate traded in October 2010 of $1.306406,4
| X |Footnote: 4
www.nzforex.co.nz — historical exchange rates 
that amounted to NZ$61,218. In effect the appellant received loss of earnings compensation of at least NZ$61,218 per annum. 
Eligibility for Benefits 
[22]
The income cut-out points for Invalid's Benefit, accommodation supplement, disability allowance (in New Zealand dollars) at the relevant times were: 
Invalid's Benefit — income cut-out points for married couple 
As at 1 April 2008 
$35,632.00 gross 
($686 pw) 
As at 1 April 2009 
$36,595.00 
($704 pw) 
As at 1 April 2010 
$37,173.00 
($715 pw) 
Accommodation Supplement — income cut-out points in area 3 (including xxxx) for married couple without children 
As at 1 April 2008 
$42,588.00 gross 
($819 pw) 
As at 1 April 2009 
$43,368.00 
($834 pw) 
As at 1 April 2010 
$43,636.00 
($843 pw) 
Disability Allowance — gross weekly income limit 
As at 1 April 2008 
$765.65 
 
As at 1 April 2009 
$791.53 
 
As at 1 April 2010 
$807.04 
 
[23]
The notional average annual and weekly income received by the appellant in his compensation payment was well in excess of these cut out points. 
[24]
In relation to Temporary Additional Support there are no standard income cut-off points but it would not be payable if the income received results in a deficiency of less than $1.00 or there being a surplus of income once the disposable income/standard costs assessment was carried out. It is highly unlikely that the appellant would have had any ongoing eligibility for Temporary Additional Support based on income of $61,218 per annum. 
[25]
It was reasonable for the Chief Executive to conclude that the appellant received income related compensation in respect of the period 9 June 2008 to 31 August 2010 which compensated him at a level which exceeded the cut-out point for the benefits he had received in that period. It was appropriate therefore that on a backdated review of entitlement, the grant of those benefits should be cancelled and debts established. 
[26]
The issue then is whether or not the debts should be recovered. 
Section 86(9A) 
[27]
Generally speaking, overpayments of benefit are debts due to the Crown and must be recovered. There is a limited exception to this rule contained in s 86(9A) of the Social Security Act 1964. This provision gives the Chief Executive the discretion not to recover a debt in circumstances where: 
(a)
The debt arose as a result of an error by an officer of the Minister; 
(b)
the beneficiary did not intentionally contribute to the error; 
(c)
the beneficiary received the payments of benefit in good faith; 
(d)
the beneficiary changed his position believing he was entitled to receive the money; and 
(e)
it would be inequitable in all the circumstances including the debtor's financial circumstances to permit recovery. 
[28]
Pursuant to s 86(9B) of the Social Security Act 1964 the term “error” includes: 
(a)
the provision of incorrect information by an officer of the Ministry; 
(b)
an erroneous act or omission occurring during an investigation of benefit entitlement under s 12; and 
(c)
any erroneous act by an officer of the Ministry. 
[29]
Before we can direct that overpayment not be recovered we must first be satisfied that each of the criteria of s 86(9A) has been made out. If one of the criteria cannot be satisfied, it is not necessary for us to proceed to consider subsequent criteria. 
[30]
The first issue we must consider is whether or not the overpayments in this case were caused by an error by an officer of the Ministry. The benefits in this case were granted to the appellants in their time of need. We do not think that it was an error on the part of an officer of the Ministry to grant benefits to them at a time when they had no other means of financial support prior to the settlement under the Northern Territory Workers Compensation legislation being achieved. It is unfortunate that the grant of benefit was not specifically made subject to repayment but this did not in itself cause the overpayment. To meet the criteria of s 86(9A) the error by an officer of the Ministry must have resulted in the debt. In this case the debt has only arisen because of the settlement of a compensation claim relating to the period in respect of which the appellants were in receipt of benefit, not as a result of any error on the part of the Ministry. As a result, the criteria of s 86(9A) cannot be made out and we cannot direct the Chief Executive to take no steps to recover this debt under that provision. 
Section 86(1) and 86A 
[31]
We have also considered whether we should direct that the Chief Executive take no steps to recover the debt pursuant to s 86(1) or s 86A of the Act. Section 86(1) applies to debtors who are still in receipt of benefit. Section 86A applies to debtors who have sources of income other than benefit. In our view the principles will be the same whether the recovery action is under s 86(1) or s 86A. 
[32]
The considerations to be taken into account in exercising the discretion include the Chief Executive's obligations under the Public Finance Act 1989 to make only payments authorised by law and under the State Sector Act 1988 for the economic and efficient running of the Ministry. The purposes of the Social Security Act 1964 are also relevant. 
[33]
The circumstances in which the discretion should be exercised have been considered by the High Court on a number of occasions in the context of s 86(1). In McConkey v The Director General of Work and Income New Zealand5
| X |Footnote: 5
HC WN AP 277/00 20 August 2002 
Goddard J described the circumstances as “extraordinary”. In Cowley v The Ministry of Social Development6
| X |Footnote: 6
HC WN CIV-2008485-381 1 September 2008 
they were described by Clifford J as “unusual” and in Osborne v the Ministry of Social Development7
| X |Footnote: 7
HC AK CIV-2007-485-002579 31 August 2009 
they were described by Duffy J as “rare and unusual”
[34]
The appellants were granted benefits to assist them while they sought Workers Compensation. Ultimately the compensation package paid included compensation for lost earnings in the period they were in receipt of benefit. Persons in New Zealand receiving Accident Compensation payments would not have been entitled to receive both income tested benefit and ACC payments unless the Accident Compensation payments were less than the income tested benefit. We see no reason why the appellant should be advantaged over New Zealand recipients of Accident Compensation. 
[35]
Moreover we note that the Australian lawyers involved in the settlement assumed that the benefits would be recovered in New Zealand and for that reason repaid the debt directly to the Ministry in the first instance. We infer from this that had xxxx remained in Australia and received a Social Security Benefit there while waiting for his compensation package to be settled, the amount of any benefit payments would have been recovered from his compensation payment. 
[36]
We acknowledge that the consequences of the appellant's injury are serious and that he requires significant supervision. However we do not consider that the circumstances are such that we should direct that the debt should not have been recovered. xxxx has received a substantial compensation package which, with prudent administration should provide for himself and his wife at least until he reaches retirement age. 
[37]
The appeal is dismissed. 


[1992] NZAR 415 at 417 
HC Wellington AP335/01, 27 August 2002 
www.abs.gov.au — Average weekly earnings, Northern Territory - Trend 
www.nzforex.co.nz — historical exchange rates 
HC WN AP 277/00 20 August 2002 
HC WN CIV-2008485-381 1 September 2008 
HC AK CIV-2007-485-002579 31 August 2009 

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