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4.5.4 Where a person or a dependant recovers damages from a third party

This situation is similar to subsection 388(5) of MRCA, however the person is suing a third-party and not the Commonwealth. If a person institutes proceedings against a third party, subsection 401(2) defines what compensation is recovered and subsection 402(2) provides that compensation is no longer payable after a person successfully sues a third party and recovers damages.

The amount to be repaid is the lesser of the amount of compensation already paid to the person (in relation to that cause of action) and the amount of damages awarded. 

Section 5 of the MRCA defines “compensation” to include medical treatment provided under Chapter 6.  Accordingly subsections 401(2) and 402(2) preclude the plaintiff from receiving any compensation, including compensation for treatment provided under Chapter 6, and any treatment at the expense of the Department previously received is recoverable.

Compensation for MRCA Supplement under section 221 or 245, bereavement payments under section 242 and 255 (where the deceased member of former member was in receipt of periodic payments for permanent impairment compensation), and section 253 (for weekly compensation to eligible young persons) continues after the date on which the damages are recovered by the person. Additionally, these payments are not included in the amount of compensation to be repaid under subsection 401(2).


Permanent Impairment Compensation

A client requests to be assessed for permanent impairment (PI) compensation under MRCA, the client has a number of accepted service-related conditions, where two conditions were caused by a motor vehicle accident. The client has also received a third-party settlement with respect of the motor vehicle accident. Therefore the impairment with respect of the same cause of action (injuries and associated impairment as a result of the accident) should not be included for the purposes of calculating the PI compensation.

Incapacity Payments

The same client submits a claim for incapacity payments under MRCA as they are currently unfit for work due to their accepted conditions. The client's ongoing incapacity for work is due to two of their accepted service-related codntiions, and on of the conditions is related to the motor vehicle accident, and the other is a psychological injury relating to their service. As this client has received a third party settlement with respect of the motor vehicle accident, the client willl either be:

  • Eligible for incapacity payments - where the psychological injury was the condition which first caused the incapacity for work, and medical certification is provided that confirms the client is still unfit for work as a result of this condition. Although the condition caused by the motor vehicle accident causes an incapacity; the client was first incapacitated for a separate cause of action and therefore the third party settlement will not preclude the client from receiving incapacity benefits.
  • Ineligible for incapacity payments - if the injury caused by the motor vehicle accident continues to, and is the condition which first led to the client's incapacity for work. Only if the motor vehicle injury resolves and ceases to be the reasons the client is unfit for work, will the client be eligible to receive incapacity payments if the psychological injury still causes an incapacity for work.

The person would be precluded from receiving treatment using their DVA Health Care Card for the two motor vehicle injuries. The client however would continue to be entitled to receive the MRCA supplement.

Settlement reached without admission of liability

Where a settlement payment has resolved a claim and liability has not been admitted as part of the settlement, offsetting and compensation recovery provisions across the three Acts will still apply.

Provided that an employee recovered an amount for an incapacity/injury/cause of action under a settlement arrangement, we do not consider the terms on which the settlement is prepared, including whether or not there is an admission of liability will impact on the application of the relevant sections of the VEA, MRCA or DRCA. Further, neither the VEA, MRCA or DRCA require an admission of liability in order to take an amount paid into account in relation to the application of the relevant offsetting/compensation reduction provisions. In relation to VEA specifically, the VEA regards a compromise or settlement of a claim for damages to be compensation (see s30B(c) of the VEA).

It can be difficult to ascertain the specific incapacitates that are referrable to a vaguely-worded settlement deed, but where claims for damages have been made at common law, we would expect:

  • The relevant incapacities to be described in a Statement of Claim prepared to commence court proceedings; or
  • If a matter was to settle before a Statement of Claim was issued, the relevant details to be described in correspondence provided by the claimant in order to justify the payment of a settlement sum.