Courtenay Poulden

One of the regular concerns we have as personal injury lawyers is trying to give advice to plaintiffs (and indeed defendants) at settlement conferences as to what the net position will be taking into account such matters as Medicare and Centrelink refunds.

It is often necessary to make some educated guess as to what Centrelink may require by way of a payback or what the preclusion period for receiving benefits may apply in the future.

In matters involving catastrophic injury, an assessment of the compensation reduction amount pursuant to the NDIS (CRA) will also be fundamental. Clearly in cases where there is a verdict or a readily identifiable component for care, the tables will make it fairly easy to work out. What will be more difficult is the cases at the margins and more importantly, those cases where there is a need to compromise on account of liability risks.

I am told that a support coordinator will be available for discussion. The real difficulty becomes that a practitioner will have to satisfy her/himself that the figure is sufficiently certain to advise on as it is unlikely a binding decision will be made by a support coordinator at that stage.

In cases where contributory negligence is determined the provisions of Section 107(3) will apply to the CRA. What happens however when a Mediation is taking place and there is no reliable agreement as to what amount of contributory negligence is being applied. I understand that NDIS will, as Centrelink always has, be wary of arrangements between parties to settlements identifying apportionments that may ultimately have the impact of reducing a payback. I have, on a number of occasions, on a quite proper basis, abandoned a claim for economic loss knowing that if that claim was unlikely to be successful and remained part of the particulars a Centrelink payment payback would be obligatory. In my experience Centrelink has treated such arrangements with some suspicion.

In these days where alternate dispute resolution is encouraged more than ever, parties to personal injury litigation find themselves in settlement conferences or Mediations on a regular basis. It is all the more important in cases of catastrophic injury where the costs associated with the trial are considerable.

Another common experience that arises in cases where a Plaintiff brings compensation proceedings against a non employer in circumstances where workers’ compensation benefits have already been received and must be paid back. It is common when there are liability risks in the common law proceedings for there to be discussion between the Plaintiff’s lawyer and the workers’ compensation insurer in relation to a potential discount of the amount to be refunded particularly where it also operates to remove the workers’ compensation insurer’s obligation to provide further benefits.

The introduction of the Operational Guideline brings forward a whole new world of pain. For those who share my dislike of figures and formulas it could become overwhelming.

The position will be relatively clear when the NDIS component can be readily identified such as in cases where there is a verdict or where the NDIS component is readily identifiable in which case table 2 of the annexed Guidelines can be followed.

Where that is not the case then table 4 of the Guidelines applies.

It might be worth noting at this point that Section 107(3) of the National Disability Insurance Scheme Act provides that in circumstances where a Consent Judgment apportions liability, the CRA is reduced to the extent of that apportionment.

Let’s assume for the purposes of this discussion that Jane Smith is alleging an entitlement to damages on account of a failed neurological procedure. There are significant conflicting expert opinions and it is essentially an “all or nothing” case. Let’s further assume that the sum of $6,000,000.00 is the entitlement of Jane at full value.

Jane is represented by a leading Senior Counsel who has advised her that her prospects of success are no better than two thirds and that Jane should accept any offer of $4,000,000.00 inclusive or better.

If we follow Jane’s table we see that one-half of her settlement ($2,000,000.00) would be used to form the basis of a preclusion from receiving Centrelink benefits (about 35 years).

Picture then Senior Counsel advising at the Mediation that whilst the matter is worth $6,000,000.00, a proper compromise for the risk of liability is one-third and a settlement is achieved for $4,000,000.00. There is no apportionment in the sense that Section 107(3) envisages. It seems to me that following Jane’s story the following figures would apply:

Amount of compensation

$4,000,000.00

Step 1.2 – reduction for Centrelink and Medicare

$11,380.00

$3,988,620.00

In accordance with Step 1.3, one-half of the settlement ($2,000,000.00) would be deducted on account of the Centrelink preclusion period of 35 years. The amount calculated in accordance with Step 1.3 in this instance is therefore $1,988.620.00.

Continuing on to Step 2, the amount of anticipated benefits under the Scheme is valued at $1,960,000.00. Following the subtraction in Step 3.1 for amounts previously paid by Jane the remaining figure or CRA is $760,000.00.

Let’s now return to the compromised settlement of $4,000,000.00.  Let’s assume further that legal costs of $500,000.00 were deducted leaving a net settlement of $3,500,000.00 less Centrelink and Medicare or $3,488,620.00. We know that the care needs total $1,960.00.00 but the entitlement to that care under the Scheme will be reduced to the extent of $760,000.00 (about 40% of care will be underfunded). We also know that there will be no Social Security entitlement for 35 years.

It will be seen how care and attention will have to be paid to the commencement and resolution of proceedings in these circumstances. Take out the underfunded care and the loss of Social Security and even a substantial settlement calls for close inspection

The Legislation provides a mechanism whereby the Scheme itself can compel a participant to pursue compensation (see NDIS Act, Ch 5). Presumably the subrogation of rights will be used sparingly and regard will be had to advice that a participant has otherwise received.

Another interesting question will be how the Scheme applies the hardship provisions and in particular what level of satisfaction the Scheme operator will require of a genuine compromise and apply a reduction to the CRA accordingly. It has been my overwhelming experience that Government bodies (such as for example Centrelink) have been suspicious of Plaintiff’s lawyers claiming that Social Security repayments should be reduced on the basis of a compromise of liability.

Courtenay Poulden

6 December 2016