Perry and Military Rehabilitation and Compensation Commission [2007] AATA 1108; (2007) 97 ALD 196 (8 March 2007)

Last Updated: 14 December 2009

Administrative Appeals Tribunal

DECISION AND REASONS FOR DECISION [2007] AATA 1108

ADMINISTRATIVE APPEALS TRIBUNAL )

) No N2006/797

VETERANS’ APPEALS DIVISION		)
	Re		DAVID PERRY

Applicant

And

MILITARY REHABILITATION AND COMPENSATION COMMISSION

Respondent

DECISION

Tribunal

Professor I. A. Shearer, Senior Member

Date 8 March 2007

Place Sydney

Decision

The decision under review is set aside and in substitution the Tribunal directs that the compensation payments be re-instated as and from 18 August 2005 to include the relevant allowances as calculated prior to the entry into force of the Safety Rehabilitation and Compensation and Other Legislation Amendment Act 2001. The Tribunal further sets aside the decision under review in so far as it directs the Applicant to repay the amounts said to be overpayments relating to the period 11 November 2003 to 14 December 2005 in the total amount of $5,941.30. The Tribunal orders that the Respondent pay to the Applicant the reasonable costs of these proceedings pursuant to section 67 of the Act.

..............................................
Professor I. A. Shearer
Senior Member

CATCHWORDS

COMPENSATION – Flying Allowance (Qualification and Skill) – amendment to section 8(9) of Safety Rehabilitation and Compensation Act 1988 – applicant ceased to be employed by the Commonwealth – type of increment increase to allowance – retrospective operation of legislation – question of substance or procedure – legislative intent – decision under review set aside.

Safety Rehabilitation and Compensation and Other Legislation Amendment Act 2001

Safety Rehabilitation and Compensation Act 1988, sections 5(2)(b), 8 and 19

Military Rehabilitation and Compensation Act 2004

Maxwell v. Murphy [1957] HCA 7; (1957) 96 CLR 261

Fisher v. Hebburn Ltd [1960] HCA 80; (1960) 105 CLR 188

Kraljevich v. Lake View and Star Ltd [1945] HCA 29; (1945) 70 CLR 647

John Holland Constructions Pty Ltd v. Hall [1987] NTSC 3; (1987) 45 NTR 11

D & W Livestock Transport v. Smith (No.2) [1994] NTSC 31; (1994) 117 FLR 264

Esber v. Commonwealth [1992] HCA 20; (1992) 174 CLR 430

Sinclair and the Defence Force Retirement and Death Benefits Authority [2005] AATA 334

Griffiths and the Military Compensation and Rehabilitation Commission [2005] AATA 1021

Coleman v. Shell Co. of Australia Ltd (1943) 45 SR (NSW) 27

Doro v. Victorian Railways Commissioners [1960] VicRp 12; [1960] VR 84

REASONS FOR DECISION

8 March 2007

Professor I. A. Shearer, Senior Member

BACKGROUND FACTS

1. The following facts are agreed between the parties.
2. The applicant, Mr. David Perry is presently 34 years old. He enlisted in the Royal Australian Navy on 4 March 1991.
3. Mr Perry served as an aircrew observer. At the time of his medical discharge in 2002 he held the rank of Lieutenant. In December 2000 he developed an undiagnosed viral illness whilst on duty in the Solomon Islands. That illness precipitated a post viral fatigue syndrome.
4. On 29 October 2001 Mr Perry lodged a claim for compensation with the Military Rehabilitation and Compensation Commission (hereinafter “MRCC”) seeking compensation for “chronic post viral fatigue syndrome/fibromyalgia” (hereinafter “the condition”).
5. On 4 February 2002 MRCC accepted liability for the condition, citing the date of injury as 21 December 2000, as that was the date on which Mr Perry first sought medical treatment for the condition.
6. On 1 October 2001 the Safety Rehabilitation and Compensation and Other Legislation Amendment Act 2001 (No 114 of 2001) (hereinafter “the amending Act”) came into force, relevantly to the present case repealing the former subsection 8(9) and substituting new provisions including the new subsection 8(9B).
7. Mr Perry was discharged from the Navy on 7 July 2002 and thereupon became a person who “has ceased to be employed by the Commonwealth” as contemplated by section 8(9B) of the Safety Rehabilitation and Compensation Act 1988 (hereinafter “the Act”).
8. On 18 August 2005 a delegate (effectively) determined to grant Mr Perry increases in his incapacity payments, including increments in Flying Allowance (Qualification and Skill) that would not have accrued (had Mr Perry continued such work) until after what was, in his case, the date of discharge.
9. On 31 January 2006 a delegate determined that the decision of 18 August 2005 was incorrect. The decision denied liability for any further incremental increases (after the date of discharge) of Mr Perry’s Flying Allowance, holding that his Flying Allowance should only increase by the Wage Cost Index increase, which occurs annually on 1 July.
10. On 24 February 2006 Mr Perry requested a reconsideration of the decision of 31 January 2006.
11. On 10 May 2006 an authorised reconsideration officer (hereinafter “ARO”) affirmed the decision of 31 January 2006. The ARO noted the application of section 8(9B) of the Act and found that Mr Perry’s Flying Allowance should be quantified only having regard to Wage Cost Index increases, and not by reference to comparable salary, wages, or pay increases as contended by Mr Perry. The ARO concluded that Mr Perry had received a gross overpayment in the sum of $5,941.30, this being a debt recoverable by the Commonwealth.
12. On or about 20 June 2006 Mr Perry lodged an application for review with the Tribunal, asserting that the Act had not been properly applied to his case.

THE APPLICABLE LAW

13. The law governing the case begins with section 19 of the Act, which establishes the liability of Comcare to pay compensation to an employee who is incapacitated for work as a result of an injury. Members of the Defence Force are declared to be employees of the Commonwealth for the purposes of the Act: section 5(2)(b). (However, it is to be noted that members of the Defence Force, with service after the commencement of the Military Rehabilitation and Compensation Act 2004 might only be entitled to compensation under that later Act. That is not the case with Mr Perry).
14. Calculation of compensation under the Act requires, inter alia, the calculation of the normal weekly earnings of an employee before an injury. Section 8 of the Act deals with normal weekly earnings. Section 8(6) of the Act provides:

Subject to this section, if the minimum amount per week payable to an employee in respect of his or her employment by the Commonwealth or a licensed corporation at the date of the injury is increased, or would have been increased if the employee had continued in that employment, because of:

1. the attainment by the employee of a particular age;
2. the completion by the employee of a particular period of service; or

100. the receipt by the employee of an increase in salary, wages or pay by way of an increment in a range of salary, wages or pay applicable to the employee or to his or her office, position or appointment;

the normal weekly earnings of the employee before the injury, as calculated under the preceding subsections, shall be increased by the same percentage by which that minimum amount per week is increased, or would have been increased, as the case may be..

15. A further relevant provision governing the calculation of Mr Perry’s compensation entitlements at the time of his injury (21 December 2000) was set out in section 8(9) of the Act as follows:

If the minimum amount per week payable in respect of employees included in a class of employees of which the employee was a member at the date of the injury is increased or reduced on or after that date as a result of:

1. the operation of a law of the Commonwealth or of a State or Territory; or
2. the making, alteration, or operation of an award, order, determination or industrial agreement, or of the doing of any other act or thing, under such a law;

the normal weekly earnings of the employee before the injury, as calculated under the preceding subsections, shall be increased or reduced by the same percentage as the percentage by which that minimum amount was so increased or reduced, as the case may be.

16. However, section 8(9) was amended in 2001. Section 8(9) as now amended provides:

The normal weekly earnings of an employee before the date of the employee’s injury, as calculated under the preceding subsections, must, while the employee continues to be employed by the Commonwealth or a licensed corporation, be increased or reduced by the relevant percentage.

17. “Relevant percentage”, as applicable to the present case, is defined by the new section, 8(9B), as follows:

The normal weekly earnings of an employee before injury, as calculated under subsections (1) to (8) and as increased or reduced under subsection (9) must, if the employee has ceased, or ceases, to be employed by the Commonwealth or a licensed corporation, be further increased, with effect from each indexation date in relation to that cessation, by reference to the percentage of increase (if any) of an index that is prescribed for the purposes of this subsection over the year ending on the 31 December preceding each such indexation date.

18. Section 8(9C) provides:

For the purpose of subsection (9B), the indexation date, in relation to a cessation of employment, is:

1. the 1 July next following:

(i) the date on which this Act receives the Royal Assent; or
(ii) the date of that cessation of employment;
whichever last occurs; and

2. each subsequent 1 July.
   

19. The particular award increment disputed in this case is the Flying Allowance (Qualification and Skill). This award is described in the Members Guide for ADF Pay and Conditions of Service 2005-2006 as follows:

Flying Allowance (qualification and skill).
To get this part you must be in an aircrew category, and be qualified. You must also work in a flying or flying-related position, or be posted for flying training
...
Some members who are qualified but no longer work in flying positions may still be able to get this part. For officer ranks of Colonel or below, it may be paid for up to six years after leaving flying duties. You must still be qualified and able to fly if needed.

20. Mr Perry was at first paid, and then denied, incremental increases of this allowance. Instead, by reason of the decision dated 31 January 2006, increases in this allowance were calculated according to the Wage Cost Index increase, and not by automatic increment, as from 11 November 2003. The justification given by the delegate of MRCC for this change in the basis of calculation was based on the amendment to the Act which came into effect on 1 October 2001. Unlike the previously applicable provision, the Act as amended, distinguishes between employees of the Commonwealth and those no longer employed by the Commonwealth.

THE ISSUES ARISING

21. The Applicant argues that the compensation rate with respect to his incapacity should be calculated in accordance with the provisions of the Act as they applied at the date of his injury, i.e. 21 December 2000. That is to say, no regard in this respect is to be had to his having ceased to be an employee of the Commonwealth after 7 July 2002, which would have attracted the operation of the Act, as amended, to his disadvantage only if the injury had occurred after 1 October 2001. The amending Act, which came into force on 1 October 2001, could only operate prospectively, that is to say, in relation to injuries occurring on or after 1 October 2001.
22. The Respondent states the issues as:
    1. Whether section 8(9B) of the Act applies to the Applicant, such as to preclude him from entitlement to incremental increases in Flying Allowance (Qualification and Skill) in the calculation of his normal weekly earnings; and
    2. Consequently, whether the Applicant has been overpaid benefits under section 19 of the Act, resulting in a recoverable debt pursuant to section 114 of the Act.

THE LEGAL ARGUMENTS

23. The essential issue in the case concerns whether section 8(9) of the Act should be regarded as prospective in operation and inapplicable to employees whose injuries arose prior to 1 October 2001.
24. Detailed submissions on the applicability to this case of the general presumption against retrospective operation of laws were made at the hearing on behalf of both parties, and, with the leave of the Tribunal, by way of additional written submissions on behalf of the applicant on 10 January 2007.
25. The essential difference in the position of the parties as to the applicability of the presumption against retrospective operation of the amending Act was that, for the applicant, Mr Perry’s rights to automatic increments went to substance and not merely to procedure. The respondent, by contrast, contended that the method of calculation of Mr Perry’s benefits went to procedure and was to be distinguished from his right to compensation (substance). The presumption against retrospectivity could arise only in respect of the latter, not the former.
26. The general principles regarding the retrospective operation of legislation are conveniently set out in DC Pearce and RS Geddes, Statutory Interpretation in Australia, Chapter 10. Counsel for both parties referred to the 5th edition (2001) of this authoritative work, although the 6th edition (2006) is now available and will be the one referred to in these Reasons.
27. The leading authority in Australia is Maxwell v. Murphy [1957] HCA 7; (1957) 96 CLR 261. That decision of the High Court of Australia reaffirmed that the general common law rule that statutes are not to be given retrospective operation does not apply to statutes that are concerned with procedure only.
28. Pearce and Geddes observe, however, that the distinction is not always easy to identify and apply:

The courts have ... recognised that a change that might be described as procedural in character may nevertheless affect a vested right adversely. In cases of this kind there is authority to suggest that the general principle against retrospectivity will be followed. The difficulties that arise are primarily in two areas: first, what is a procedural statute, and, secondly, when can it be said that an alteration of a matter of procedure affects a vested right adversely?” (at 10.20).

29. The applicant relied on several general authorities in support of his case, and on one recent authority decided in relation to the provision under consideration in the present case.
30. In Fisher v. Hebburn Ltd [1960] HCA 80; (1960) 105 CLR 188, at 194, Fullagar J. stated that:

There can be no doubt that the general rule is that an amending enactment – or, for that matter, any enactment – is prima facie to be construed as having a prospective operation only. That is to say, it is prima facie to be construed as not attaching new legal consequences to facts or events which occurred before its commencement.

31. In the applicant’s argument, to change the manner in which Mr Perry’s entitlements are to be calculated would be to attach “new legal consequences” to the events on which Mr Perry’s accepted claim is based.
32. Specifically in relation to the calculation of damages, the applicant cited in support of his contentions Kraljevich v. Lake View and Star Ltd [1945] HCA 29; (1945) 70 CLR 647, which related to an alteration made to the method of calculating the sum for which future payments of workers’ compensation might be redeemed. It was held that the amendment was substantive, not procedural. Dixon J stated (at 652):

In the present case we have an example of a provision which at first sight looks to be expressed in terms more appropriate to procedure, but one, in substance, measuring liability. For to prescribe the basis of calculating redemption is in reality to express the measure of liability. But, when the statute is examined in detail, the form also of the amended clause is seen less as a statement about proceedings for the realization of rights than as a delimitation of their measure....Both the structure and the substance [of the provision] appear to me to bring the case within the rule of construction, and, in my opinion, there are no indications at all of a contrary intention.

33. Latham CJ stated (at 650):

[I]n the present case, the right is a right to obtain an order for a sum of money calculated in a particular way, not merely a right of redemption in abstracto. The right of the worker who suffers from an accident for which compensation is payable under a Workers’ Compensation Act accrues immediately on the happening of the injury... The new Act applies only to accidents happening after the Act came into operation and the former provisions continue to apply to rights and liabilities in respect of accidents happening before that time...

34. As noted by Pearce and Geddes (at 10.29), Kraljevich’s case was followed in John Holland Constructions Pty Ltd v. Hall [1987] NTSC 3; (1987) 45 NTR 11. See also D & W Livestock Transport v. Smith (No.2) [1994] NTSC 31; (1994) 117 FLR 264.
35. Counsel for the applicant also cited Esber v. Commonwealth [1992] HCA 20; (1992) 174 CLR 430, at 440 ff. and Sinclair and the Defence Force Retirement and Death Benefits Authority [2005] AATA 334.
36. Consideration of retrospectivity in relation to the same provision of the Act as in the present case was given by Senior Member Penglis of this Tribunal in Griffiths and the Military Compensation and Rehabilitation Commission [2005] AATA 1021. Applying Kraljevich’s case, the Tribunal decided that the amended section 8(9) of the Act did not apply to the applicant in that case, and that his entitlements were to be those pursuant to section 8(9) as it stood unamended.
37. Counsel for the Respondent contested the applicability of the above authorities to the present case. In relation to the previous decision of this Tribunal in Griffiths (para. 36 above) counsel argued that it was incorrectly decided and should not be followed.
38. Counsel for the Respondent stressed that section 14 of the Act, establishing liability to pay compensation for injury, said nothing about the calculation of compensation. This is dealt with in section 19 of the Act which relates to the amount of compensation payable on a week by week basis. As he put it, “nothing is set in concrete as at the date of injury”. The disputed section 8(9) relates to the method of calculation of compensation under section 19. The legislative scheme does not give an accrued right to a particular amount of compensation but only a right to compensation subject to continuing revision and calculation of payments.
39. Thus understood, the authorities cited by counsel for the applicant (with the exception of Griffiths) were inapplicable since those cases dealt with accrued rights.
40. Counsel for the Respondent drew a distinction between legislation having a prior effect on past events and legislation basing future action on past events, citing Coleman v. Shell Co. of Australia Ltd (1943) 45 SR (NSW) 27, per Jordan CJ at 31. He also cited the following passage from Pearce and Geddes (at 10.4):

The Victorian Full Supreme Court put the matter succinctly in Robertson v. City of Nunawading [1973] VicRp 81; [1973] VR 819 at 824: ‘[the] principle [against retrospectivity] is not concerned with the case where the enactment under consideration merely takes account of antecedent facts and circumstances as a basis for what it prescribes for the future, and it does no more than that.

41. Counsel for the Respondent presented an alternative argument in the event that the Tribunal should hold that there was an accrued right to compensation in the manner and amount applicable as at the date of the injury. This argument was based on the undoubted rule that the presumption against retrospectivity is subject to an express intention of the legislature to set it aside, or the necessary intendment of the legislation is to do so. He adduced the Explanatory Memorandum in relation to the Safety, Rehabilitation and Compensation and Other Legislation Amendment Bill, 2000, tabled in the House of Representatives, and the responsible Minister’s second reading speech in the Senate on 27 August 2001 (Hansard, 26677 - 26682), as evidence of a legislative intention that the new provisions relevant to this case should operate with retrospective effect.
42. A further argument, in this respect, was based on a reading of section 8(9B) of the Act, as amended. This, he argued, was a clear indication of the legislative intent to alter the basis upon which any right to compensation was to be calculated in the case of persons who (like the applicant in this case) had ceased to be employed by the Commonwealth. If the applicant were entitled to be compensated in accordance with the superseded provisions, then section 8(9B) would have no work to do.

CONCLUSIONS

43. This matter has not been easy to decide. It has been ably argued by counsel on both sides. The fact that the presumption against retrospective operation of statutes is easy to state as a principle but harder to apply in practice was recognised by Adam J. in Doro v. Victorian Railways Commissioners [1960] VicRp 12; [1960] VR 84, who found that “the ease or difficulty with which [the principle] may be overcome, must, I would think, depend on the nature and degree of the injustice which would result from giving a statute retrospective operation.” (at 86).
44. The considerations advanced in favour of the Applicant are, I think, more persuasive than those for the Respondent, both in law and with regard to the justice of the case.
45. The material submitted by the Respondent in support of a suggested legislative intent are, in my view, equivocal and do not point clearly in the suggested direction. Moreover, the argument that section 8(9B) would have no work to do if the Applicant’s arguments were accepted is not, in my view, correct.

DECISION

46. The Tribunal sets aside the decision under review. The Tribunal directs that compensation payments be re-instated as and from 18 August 2005 to include the relevant allowances as calculated prior to the entry into force of the amending act.
47. The Tribunal further sets aside the decision under review in so far as it directs the Applicant to repay the amounts said to be overpayments relating to the period 11 November 2003 to 14 December 2005 in the total amount of $5,941.30.
48. The Tribunal orders that the Respondent pay to the Applicant the reasonable costs of these proceedings pursuant to section 67 of the Act.

I certify that the 48 preceding paragraphs are a true copy of the reasons for the decision herein of Professor I. A. Shearer, Senior Member.

Signed: .............[Emily Gadsby].........

Associate

Date/s of Hearing 29 November 2006

Date of Decision 8 March 2007

Counsel for the Applicant Mr N Dawson

Solicitor for the Applicant Mr G Isolani

Counsel for the Respondent Mr G Johnson

Solicitor for the Respondent Ms H Dejean