Personal Injury Damages do Not Fall for Diminution by Disability Support Pension Payments to be Made Outside the Preclusion Period

In Comensoli v WQA [2024] VSCA 105 (23 May 2024), the Court of Appeal of the Supreme Court of Victoria addressed the issue of deduction from damages of a disability support pension likely to be made in future, outside the preclusion period, under the Social Security Act 1991 (Cth). Dismissing an appeal from the trial judge, and approving the decision of the Full Court of the Supreme Court of Tasmania, in Partridge v Hobart City Council [2012] TASFC 3; (2012) 22 Tas R 29, the court – Beach, Kennedy and Walker JJA – wrote:

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[38] The judge observed that there was no dispute that any compensation affected payments made during the preclusion period were to be ignored in the assessment of damages for loss of earning capacity. His Honour noted that there was no basis for reducing loss of earning capacity damages by amounts that the plaintiff was not permitted by the Act to retain. There was, thus, no double-dipping in respect of those payments.

[39] The judge identified the issue in dispute between the parties in the following terms:

The problem that arises concerns the situation where compensation payments have been or may in the future be made after the preclusion period has finished. In this case, it is agreed that the plaintiff has received $245,529.00 in Newstart Allowances or as a Disability Support Pension since the preclusion period expired many years ago. It is also agreed (and there would also be no doubt) that those payments are ‘compensation affected payments’.

Social Security Act 1991 (Cth) does not expressly deal with what is to happen with respect to payments made or that might be made after the preclusion period. This question may be particularly significant in claims for damages for historic child sex abuse because the preclusion period will often have finished many years prior to a settlement or verdict. But the issue might arise in any damages action.

[40] The judge then said that the problem was to be answered ‘by divining the intention of the Commonwealth when it made the payments it did’. His Honour noted that all the payments were made after 1991, saying that the Commonwealth’s intention ‘must be gleaned from the terms of [the 1991 Act] read in its context, including a consideration of the types of payments with which it deals’.

[41] After summarising the parties’ submissions, the judge concluded that the terms of the Act, read in context, revealed an intention on the part of the legislature to replace the ‘previous complex and uncertain common law position’ with a ‘single overall scheme for the treatment of social security payments’. His Honour said that that scheme precluded the receipt of ‘compensation affected payments’ from being considered in a damages assessment and provided for their repayment, or partial repayment, to the Commonwealth in accordance with a ‘relatively straightforward formula’. His Honour said that this conclusion followed from the following:

(a) The new arrangement specifically eschews any differentiation between different types of benefits received. The definition of a ‘compensation affected payment’ is wide and includes both benefits that under the common law might have been ignored in the assessment of damages and benefits that would have led to a reduction in the assessment of damages. It is inherently unlikely that the legislature would have intended to remove the complexity of the common law position altogether for the duration of the preclusion period but have intended its return for the period after the preclusion period.

(b) The calculation of the preclusion period necessarily takes place after damages have been assessed. This indicates an intention that damages should be capable of being assessed without having first to consider what the preclusion period would be. This cannot be done if payments received outside the preclusion period must be taken into account in assessing those damages. The logical sequence by which the damages are assessed first, and then the preclusion period calculated, and then the repayment obligations determined, strongly suggests that the legislature intended that the damages assessment should be independent of the benefits received including benefits paid after the expiration of the preclusion period.

(c) Associated with the above, there would be considerable complexity in the application of the process urged by the defendants. If the preclusion period had likely not finished at the time of the assessment, a jury would probably have to be told that if it were to award a particular sum of damages then the preclusion period would be until such and such a date, and that the jury would then have to consider the prospect that the claimant might receive unemployment benefits after that date. But if the jury were to award a different sum of damages then the preclusion period would be until some other date, and the jury would then have to consider the prospects that the claimant might receive unemployment benefits after that different date. A similar problem would exist if the preclusion period had expired. The jury would probably have to be told that if it were to award a particular sum of damages then the preclusion period would finish on one date, and so the jury should take into account a particular amount of benefits received, or if the jury were to award a different sum of damages then the preclusion period would finish on another date and so it should take into account a different amount of benefits received. These would be circular and tortuous processes in any damages assessment, particularly by a jury, and are unlikely to have been intended.

(d) There is a clear intention, at least for the duration of the preclusion period, to remove the benefit that a wrongdoer would otherwise obtain from the provision by the Commonwealth of certain social security payments, such as unemployment benefits, to an injured party. The requirement on the injured party to repay those benefits out of the damages award ensures that the damages paid by the wrongdoer are not to be reduced. Further, the legislation enables the Commonwealth to recover those payments directly from the wrongdoer even if the injured party does not wish to bring an action. These were significant changes to the common law position in favour of the Commonwealth (as the payer of the benefits) and against the interests of the wrongdoer. On the other hand, there is nothing in the legislation that reveals an intention to benefit wrongdoers by providing that social security benefits are to be taken into account in order to reduce a damages assessment.

(e) The new arrangement can require an injured party to repay to the Commonwealth, and allow the Commonwealth to recover directly from a wrongdoer, social security payments that are disconnected from the injury caused by the wrongdoer. This is because there is no requirement that a ‘compensation affected payment’ be made for an injury caused by the wrongdoer and for which damages are to be assessed. The new arrangement simply sets a time-frame, and provides for the recovery of all benefits paid during that time-frame. For example, if a claimant suffers the onset of an unrelated but separately-disabling condition during the preclusion period that entitles that person to benefits that are not attributable to the injury caused by the wrongdoer, those benefits, too, have to be repaid and can be recovered directly from the wrongdoer (subject to the maximums provided). In this way, too, the new arrangement promotes simplicity, to the benefit of the Commonwealth, over the complexities associated with the common law, and indicates that the Commonwealth was intending to introduce a comprehensive scheme rather than merely to work within the common law principles.

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[43] Finally, the judge dealt with submissions made by the defendants that Manser (the decision referred to in the defendants’ second proposed ground of appeal) compelled the conclusion that the disputed amount was required to be taken into account in the assessment of the plaintiff’s damages for past economic loss; and that Partridge was of no assistance to the plaintiff, because it was decided without any reference to Manser. The judge rejected these submissions, saying:

I do not consider that Manser v Spry is against the conclusion that I have reached. The High Court confirmed that the exercise is one of ascertaining the legislative intent. Its reference to the three criteria was not intended, as I read it, to be exhaustive in all circumstances or to exclude the normal process of ascertaining that intent having regard to the legislation considered as a whole and in its context. I note that the Court in Manser v Spry quoted with approval the following passage from Adams v Ascot Iron Foundry Pty Ltd :

The difficulty lies in attempting to extract from the Act an actual meaning or intention with reference to the question which has to be resolved. The question may be one to which the Parliament or the draftsman of the Act did not in fact advert at all. Nevertheless, if it is possible to do so, it is necessary to extract from the Act indications of what was intended. If one cannot find any real indications pointing one way or the other, or if one finds indications both ways which are evenly balanced, it may be that the question must then be resolved by taking the view that the dominant rule … should operate.

In this case, I consider that the statutory intention may, for the reasons I have given, be extracted from the Social Security Act 1991 (Cth). Further, to the extent that Manser v Spry focuses on the ‘nature of the benefit received’, it must be recalled that the Social Security Act 1991 (Cth) eschewed any distinctions of significance along those lines by its wide definition of a ‘compensation affected payment’. It would only be possible to consider the implications from a particular form of payment in the way done in Manser v Spry if it were already concluded that the question of payments outside the preclusion period were to be governed by the common law.

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[61] In our view, notwithstanding the submissions of the defendants, there is considerable force in the judge’s observations about the complexity of attempting to take into account compensation affected payments made outside the preclusion period. We will first consider the matter by reference to cases which settle, and then consider cases which are fought to judgment.

[62] Contrary to the defendants’ submissions, it seems to us that the majority of cases where this issue (what to do with compensation affected payments made outside the preclusion period) arises are likely to be cases where compensation affected payments have been made throughout the preclusion period and then continued beyond the end of that period. It is really only the abolition of the limitation defence in cases of the present kind that has given rise to a smaller cohort of cases where the preclusion period ends before the first compensation affected payment is made. That said, the resolution of this issue, involving (as it does) issues of statutory construction, cannot be determined by whether there are more of one type of case than another.

[63] We consider first the consequences of the defendants’ approach in relation to a proceeding, in which compensation affected payments have been made throughout the preclusion period and beyond, that settles. In such a proceeding, the compensation part of the lump sum compensation payment is 50 per cent of the settlement amount. At that point in the analysis, the parties can readily calculate the preclusion period and determine the precise amount of compensation affected payments that fall outside the preclusion period and should, on the defendants’ approach, be taken into account in the settlement. Those compensation affected payments would presumably be taken into account by reducing the settlement by the amount of them that had been paid after the end of the preclusion period.

[64] However, performing that calculation would then necessarily result in the settlement amount being reduced. That would then result in a corresponding reduction in the compensation part of the lump sum compensation payment (that amount being 50 per cent of the new settlement amount calculated after taking into account the original compensation affected payments made outside the preclusion period).

[65] The result of performing that exercise would be that the preclusion period would be shortened, resulting in another part of the compensation affected payments being paid after the end of the new shortened preclusion period. This would then require those additional payments to be taken into account in further reduction of the settlement sum.

[66] Performing that exercise would then result in a reduction in the settlement sum, a corresponding reduction in the preclusion period, and the requirement to take into account additional compensation affected payments. Indeed, were it not for certain rounding provisions in the Act, this iterative process might theoretically never end. One might ask, rhetorically: could this ever have been the intention of the legislature?

[67] In argument, senior counsel for the defendants sought to respond to this issue by submitting that no iterative calculations of the kind we have referred to would be required to be performed; and that, in taking into account benefits paid outside the preclusion period, it would be sufficient for a deduction from common law damages to be performed only once. No explanation was proffered, however, as to why this was so; or why an injured claimant would then be permitted to retain the benefit of compensation affected payments made outside the preclusion period that would actually apply to the newly recalculated settlement sum. The defendants could not point to any statutory provision that might prevent the application of the statutory regime in the manner discussed above. In the circumstances, the defendants’ submissions on this issue must be rejected.

[68] The complexity identified above, in respect of proceedings which settle, is even greater in a case where the injured person prosecutes their proceeding against the wrongdoer to judgment. In those circumstances, s 17(3) of the Act provides that the compensation part of the lump sum compensation payment is ‘so much of the payment as is, in the Secretary’s opinion, in respect of lost earnings or lost capacity to earn, or both’. So, in such a proceeding, after judgment, the Secretary would determine the compensation part of the lump sum compensation payment; the preclusion period would then be calculated; and the payments made beyond the end of the preclusion period would then be taken into account in reduction of the amount assessed by the Court. None of these matters would be known or calculable until after the Secretary had advised the parties of the amount which, in his or her opinion, was awarded in respect of loss of earnings and lost earning capacity.

[69] If the defendants’ submissions were adopted, then once the Secretary had expressed the opinion required by the terms of s 17(3), an issue could then potentially arise as to whether the Secretary would need to express another opinion about the amount of the compensation part of the lump sum compensation payment after the amount assessed by the Court has been reduced. This might give rise to a new (shorter) preclusion period, with the potential for further iterative calculations of the kind that might need to be performed when a proceeding terminates by settlement.

[70] In any event, quite how a judge, or a jury, assessing damages might calculate a preclusion period for the purpose of working out what benefits paid under the Act are not recoverable (and thus to be taken into account in the assessment of an injured person’s damages), without knowing what the Secretary’s opinion will be as to how much of the assessment is in respect of loss of earnings or loss of earning capacity or both, is almost impossible to say.

[71] In oral argument, senior counsel for the defendants sought to address this issue by submitting that evidence could be called (presumably from the Secretary or an appropriate Commonwealth officer) as to the opinion the Secretary would be likely to form pursuant to s 17(3)(b) of the Act if judgment were to be entered for particular amounts. Again, we reject these submissions. Quite how such evidence might be given, and/or what the consequences for the parties might be if the Secretary subsequently formed an opinion different from one about which evidence was given, was not explained by the defendants.

[72] While it may be accepted that courts are required to do their best in assessing damages, even in circumstances of considerable complexity, it cannot have been the intention of the legislature, when it enacted Part 3.14 of the Act, that the parties or a court might be required to undertake exercises of the kind referred to above in determining how to take into account compensation affected payments made outside the preclusion period.

[73] Before endeavouring for ourselves to discover the intention of the legislature, we will deal with the defendants’ submission that the judge erred at Reasons [20(e)] when he concluded that the provisions of the Act were disconnected from the injury caused by the wrongdoer.

[74] The judge was correct to conclude that there is no requirement that a ‘compensation affected payment’ be made in respect of an injury caused by the wrongdoer. Any doubt about whether the Commonwealth might recover payments that are disconnected from the injury the subject of the plaintiff’s cause of action is resolved by the operation of s 1160(2), which provides:

This Part [Part 3.14] applies whether or not there is any connection between the circumstances that give rise to the person’s qualification for the compensation affected payment and the circumstances that give rise to the receipt of compensation by the person or the person’s partner.

[75] Thus, there is no substance in the defendants’ criticism of the judge’s conclusion in Reasons [20(e)].

[76] We now turn to consider for ourselves what legislative intention (if any) is revealed by the relevant provisions of the Act. Legislative intention, like the purpose of a statute, resides in the text of the statute. In our opinion the legislative intention can be divined from the relevant statutory provisions in the present case.

[77] It is appropriate to start with some remarks about the history of the legislative treatment of benefits where a person received a compensation payment. Prior to the commencement of the 1986 Act, the only benefits paid under the Act which were recoverable from a person who received an award of damages were sickness benefits. The extrinsic material relied upon by the defendants, and to which we have already referred, discloses two possible purposes of the amendments sought to be made by the provisions of the 1986 Act: first, that the repayment provisions of the Act applying to sickness benefits should be extended to other forms of benefit, including invalid pensions and unemployment benefits; and secondly, that ‘double-dipping’ into both benefits under the Act and compensation should be ‘limit[ed]’. Nothing in the text of the 1986 Act or the extrinsic materials supports a conclusion that there was a legislative intention to eliminate double-dipping.

[78] Turning to the statutory provisions themselves, it is noteworthy that s 1160(1) provides that Part 3.14 of the Act operates to reduce a person’s compensation affected payment; to render a person’s compensation affected payment not payable; and to require the repayment of some or all of a person’s compensation affected payment. Neither that section, nor any other section in the Act, makes any express reference to limiting, much less prohibiting or eliminating, double-dipping. Nonetheless, given that these consequences follow the receipt of compensation, it appears to us that it was the intention of the legislature to limit double-dipping to the extent the legislature considered appropriate. That is reflected in the Parliament’s selection of a limited period — the preclusion period — as the period during which the person’s compensation affected payments are affected in the three ways specified.

[79] The presence of statutory provisions requiring the repayment of benefits paid pursuant to the Act is a strong indicium that it is the intention of the legislature that those benefits be enjoyed independently of, and cumulatively upon, any right to damages. In our view, the fact that the statutory mechanism for calculating the repayment might not result in the entirety of the benefits paid under the Act being repaid does not detract from this conclusion. Moreover, we are unable to divine any legislative intention that compensation affected payments should be treated differently, depending on whether they were paid during or outside the preclusion period, when determining whether they should be taken into account in the assessment of damages.

[80] Returning to the legislative history, prior to 1 May 1987, the Commonwealth’s ability to recover payments made under the Act was limited to sickness benefits. The amendments which came into force on and after 1 May 1987 considerably broadened the Commonwealth’s ability to recover payments made under the Act to people who received, or were entitled to receive, compensation outside the provisions of the Act. However, as part of these amendments, the legislature chose to enact a scheme of some complexity which had the capacity to capture benefits that might have been paid for reasons unconnected with the reasons for which damages might be payable, but not capture all of the benefits paid as a result of the injury the subject of that claim for damages.

[81] The legislative history of the Act, and the level of detail in the provisions governing the repayment of benefits paid under the Act, suggests to us that, in enacting the relevant provisions, the legislature intended, in effect, to cover the field, so that any and all benefits paid under the Act (whether paid inside or outside any calculated preclusion period) were only to be dealt with in accordance with the provisions of the Act, without any of them having to be taken into account in the assessment of a claimant’s common law damages.

[82] Moreover, the inability to say with certainty, prior to the finalisation of a claim for damages, the precise amount that will be repayable under the provisions of the Act, whether the claim is settled or prosecuted to a judgment, is another strong indicium that compensation affected payments made outside the preclusion period are intended to be enjoyed independently of, and cumulatively upon, any right to damages. Relatedly, as we observed above, it cannot have been the intention of the legislature that the parties or a court might be required to undertake iterative exercises of the kind discussed above when determining how to take into account compensation affected payments made outside the preclusion period; yet there is no statutory provision that would operate to preclude that process from occurring.

[83] Our conclusion is also supported by the fact that amounts paid during the preclusion period (and which have to be repaid) can include benefits paid under the Act for injuries which are unrelated to the injuries for which the relevant claim for damages is being made. Thus, in some cases, the fact that benefits paid to a plaintiff outside the preclusion period will not be taken into account in an assessment of damages, will be offset by a deduction from the assessment of unconnected benefits paid during the preclusion period — resulting in no breach of the cardinal principle and/or no overcompensation of that plaintiff.

[84] We accept that it is a cardinal principle governing the assessment of compensatory damages that an injured party cannot recover more than he or she has lost, as the authorities in this area disclose. Nonetheless, the authorities also demonstrate that, if it can be established that, in the case of statutory benefits, there was a legislative intention that such benefits be enjoyed independently of, and cumulatively upon, the right to damages, then a plaintiff, by the receipt of such benefits, may permissibly be compensated for more than he or she has lost. As the High Court recently observed in Obian v R, in a different context, common law rules are not always absolute. The cardinal principle relied upon by the defendants in the present case gives way to the legislative intention which we have discerned from the Act, which permits the plaintiff to enjoy the benefits paid under the Act outside the preclusion period, cumulatively upon his right to damages.

[85] Finally, we observe that the defendants accepted in oral argument that an available way to approach the question of the Parliament’s intention is to observe that, at a high level of generality, the payments in question are subject to recoupment, and that is a sufficient indication that a payment of that kind need not be taken into account, even though not all of the payments in fact made are subject to recoupment. Having accepted that such an approach was open, the defendants sought to persuade us that such an approach ought not be adopted. We did not find those submissions persuasive. Once it is accepted that such an approach is available, the conclusion that it is the correct approach is, in our view, inescapable in light of the authorities and the features of the statutory scheme to which we have referred.

[86] For the reasons given above, the judge did not err when he concluded that the payments, which made up the disputed amount, had the distinguishing characteristic that they were to be enjoyed independently of, and cumulatively upon, the plaintiff’s right to damages. Having correctly so concluded, there was no occasion to go onto the second step referred to in Manser of applying the ‘settled principle governing the assessment of compensatory damages’. It follows that both proposed grounds of appeal must be rejected.

[87] In reaching the above conclusion, it has not been necessary for us to address specifically the submissions made by the parties as to the correctness or otherwise of the reasoning in Partridge. It is sufficient for us to say that, having regard to our analysis above, we are of the view that the result in Partridge— that Mrs Partridge’s disability support pension, paid both during and outside the preclusion period, was not to be taken into account in the assessment of her damages — was correct.

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(footnotes deleted, emphasis added)