FEDERAL COURT OF AUSTRALIA

The Commonwealth of Australia v Smith [2009] FCAFC 175

ADMINISTRATIVE LAW – Veterans’ Entitlements – “double dipping” – entitlement to pension for war-caused injury – payment in settlement of common law action in negligence – whether both payments in respect of incapacity from the same injury – whether Veterans Entitlements’ Act 1986 (Cth) s 30C applicable to the facts – approach to be taken to the application of s 30C

Veterans’ Entitlements Act 1986 (Cth) ss 9, 13, 14, 30C

Commonwealth v Keogh (1983) 76 FLR 21 distinguished

K & S Lake City Freighters Pty Ltd v Gordon and Gotch Ltd (1985) 157 CLR 309 cited

Mills v Meeking (1990) 169 CLR 214 cited

Project Blue Sky Inc v Australian Broadcasting Authority (1998) 194 CLR 355 cited

Repatriation Commission v Budworth (2001) 116 FCR 200 cited

Shi v Migration Agents Registration Authority (2008) 235 CLR 286 cited

THE COMMONWEALTH OF AUSTRALIA v DAVID RONALD SMITH

VID 516 of 2009

BLACK CJ, MOORE AND MIDDLETON JJ

16 DECEMBER 2009

MELBOURNE

THE COURT ORDERS THAT:

1.                  The appeal be dismissed.

2.                  The appellant pay the respondent’s costs of the appeal.

Note:    Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.
The text of entered orders can be located using Federal Law Search on the Court’s website.

REASONS FOR JUDGMENT

THE COURT

iNTRODUCTION

1                     In this appeal, as the trial judge observed about the question raised before him, the issue for consideration involves a narrow point of statutory construction arising from certain specific and uncommon facts.  The issue raised is the proper construction of s 30C of the Veterans’ Entitlements Act 1986 (Cth) (‘the Act’) and the reference in s 30C(1)(c) to ‘incapacity from that injury’, and the application of that provision to the facts. 

2                     The factual background is not in dispute, and was set out by the trial judge. 

3                     Mr Smith served as a member of the Royal Australian Navy between 29 July 1963 and 28 July 1972.  Two facts relevant to his service need to be mentioned. 

4                     First, Mr Smith was serving in HMAS ‘Melbourne’ on 10 February 1964 when she collided in Australian waters with HMAS ‘Voyager’, as a result of which 80 members of the crew of ‘Voyager’ perished.

5                     Second, Mr Smith served in the Royal Australian Navy in Vietnam between October 1969 and October 1970, attached to the 135^th Assault Helicopter Company of the United States Army.  It was not disputed that this service was operational service within the meaning of the Act.

6                     On 26 November 1991, Mr Smith made a claim under the Act for a disability pension on the ground that he was suffering from a duodenal ulcer and from post-traumatic stress disorder (‘PTSD’), as well as from tinea pedis.  The tinea claim was rejected.  The rest of his claim was accepted by the Repatriation Commission (‘Commission’) on or about 8 January 1993, with effect from 26 August 1991.

7                     The decision of a delegate of the Commission dated 23 December 1992 contained this passage:

I now turn to the remaining part of the claim.  Medical evidence is that the ongoing traumas of Navy service may cause or be a risk factor in the development of post traumatic stress disorder and alcohol abuse and this would have contributed significantly to the development of his ulcers as well.

I have examined the relevant service documents, medical history and statements made in support of the claim and I find that the Veteran’s post traumatic stress disorder duodenal ulcers may have been causally linked to or aggravated by his service.

It follows therefore that a reasonable hypothesis connecting duodenal ulcers; post traumatic stress disorder with the Veteran’s war service has been established, and accordingly this part of the claim is granted…

8                     Mr Smith commenced an action for damages against the Commonwealth in the Supreme Court of New South Wales alleging that the collision between ‘Melbourne’ and ‘Voyager’ had been caused by the negligence of officers of the Commonwealth and that, as a result, he had suffered injury, loss and damage.  The proceedings were initially defended, but were later mediated.  They were settled on 11 December 2007 on a confidential basis.

9                     The terms of the settlement, which provided for the entry of judgment for a monetary sum in favour of Mr Smith, provided also that particulars which had been filed in the Supreme Court proceedings be amended by deleting from the ‘Particulars of Disabilities’ subparas (ii) to (xlii).  The deleted subparagraphs included subpara (viii), which specifically alleged PTSD, and subpara (xl), which alleged ‘Duodenal ulcer’.  Importantly, the ‘Particulars of Injuries’ only included ‘Severe Shock’.  As a matter of construction, it is plain that the common law action was settled on the footing that the plaintiff’s injury was ‘Severe Shock’ and that this did not include PTSD or duodenal ulcer.  Presumably, the settlement figure agreed upon by the parties reflected that circumstance.

10                  After that settlement had been arrived at the Department of Veterans Affairs evidently took the view, as a delegate of the Commission put it in a letter to Mr Smith’s solicitors dated 20 December 2007, that:

Mr Smith has been paid a total of $58,099.94 disability pension in respect of the common condition he has claimed compensation through the Supreme Court from 26 August 1991 [sic]. This amount is recoverable from the lump sum compensation paid to Mr Smith in relation to his disability pension under section 30C of the Veterans’ Entitlements Act 1986 (VEA)…

… I therefore request as a Delegate of the Repatriation Commission the amount of $58,099.94 be paid to the Receiver of Public Monies in relation to the overpayment of disability pension…

11                  By letter dated 31 July 2008, a delegate of the Commission re-calculated the amount to $55,262.75 but the Commission continued to insist that the amount of pension paid to the applicant under the Act was repayable from the moneys received in settlement of the common law action.  As appears from correspondence between the Commission and the applicant’s solicitors, the Commission has at all times maintained that its stance is supported by s 30C of the Act.

The Act

12                  Section 30C(1) of the Act provides;

30C     Lump sum compensation payment

(1)        If:

(a)       a lump sum payment of compensation is made to a person who is a veteran or a dependant of the veteran; and

(b)       the compensation payment is paid in respect of the incapacity of the veteran from injury or disease or the death of the veteran; and

(c)       the person is receiving, or is subsequently granted, a pension under this Part in respect of the incapacity from that injury or disease or the death;

the following provisions have effect:

(d)       the person is taken to have been, or to be, receiving payments of compensation at a rate per fortnight determined by, or under the instructions of, the Commonwealth Actuary;

(e)       the person is taken to have been, or to be, receiving those payments for the period of the person’s life determined by, or under the instructions of, the Commonwealth Actuary;

(f)        the period referred to in paragraph (e) begins:

(i)        on the day that lump sum payment is made to the person; or

(ii)       on the day the pension becomes payable to the person;

whichever is the earlier day.

13                  Section 9(1)(e) of the Act provides;

9  War‑caused injuries or diseases

(1)       Subject to this section and section 9A, for the purposes of this Act, an injury suffered by a veteran shall be taken to be a war‑caused injury, or a disease contracted by a veteran shall be taken to be a war‑caused disease, if:

…

(e)        the injury suffered, or disease contracted, by the veteran:

…

(ii)       was suffered or contracted before the commencement of the period, or last period, of eligible war service rendered by the veteran, but not while the veteran was rendering eligible war service;

and, in the opinion of the Commission, the injury or disease was contributed to in a material degree by, or was aggravated by, any eligible war service rendered by the veteran, being service rendered after the veteran suffered that injury or contracted that disease;

but not otherwise.

Consideration

14                  The Commonwealth is liable to pay pension by way of compensation to a veteran who ‘is incapacitated from a war-caused injury or a war-caused disease’: see ss 13(1)(b) and (d) of the Act.  The finding of liability, and the corresponding entitlement to pension, is based on incapacity from war-caused injury or disease, and not on the war-caused injury or disease itself. 

15                  Where a claim is made for a pension under s 14 of the Act, the decision-maker has to identify the relevant symptoms which he or she is satisfied constitute an injury or a disease that the veteran suffered or contracted, and then determine whether those symptoms were war-caused in accordance with the standard of proof prescribed by s 120 of the Act: see Repatriation Commission v Budworth (2001) 116 FCR 200 at [19]. 

16                  If an injury or disease is war-caused, the rate of pension payable in respect of incapacity from that war-caused injury or war-caused disease is governed by Div 4 Pt II of the Act.  In essence the rate of pension is dependent upon the degree of incapacity.  The degree of incapacity must be determined according to the relevant ‘Guide to the Assessment of Rates of Veterans’ Pensions’ (‘the Guide’) prepared by the Commission and approved by the Minister: see ss 21A(1) and 29(1) and (3) of the Act. 

17                  It is sufficient to observe for the purposes of this appeal that the Guide deals with ‘emotional and behavioural consequences’ of accepted psychiatric conditions.  Chapter 4 of the fourth and fifth editions of the Guide contain eight fundamental loss tables, which cover subjective distress, manifest distress, functional effects, occupation, domestic situation, social interaction, leisure activities and current therapy.

18                  When enacted in 1986 the Act did not provide for offsetting pensions paid under Pt II against payments of damages or compensation, but ss 74 and 77 required offsetting of pension paid under Pt IV.  This position was altered by the introduction of s 30C of the Act. 

19                  In the course of the Commonwealth’s submissions, reference was made to Mr Smith’s claim for pension and subsequent claims for increases in the pension rate.  Various reports were prepared by various doctors who assessed those claims.  It is unnecessary to rehearse these other than to say that the Commonwealth referred to claims being made by Mr Smith in relation to anxiety, depression, sleep disturbance and to reports by doctors to the exacerbation of the symptoms of Mr Smith’s pre-existing PTSD that dated from the time of the Voyager disaster. 

20                  In light of these matters the Commonwealth submitted that Mr Smith was granted a pension in 1992 because:

·                    his PTSD and duodenal ulcers ‘may have been causally linked to or aggravated by his service’ so that they were war-caused within the meaning of s 9 of the Act;

·                    that is, the decision that the PTSD and duodenal ulcers were ‘war-caused’ took into account the 1964 collision, as well as the Vietnam service;

·                    Mr Smith’s degree of incapacity from those war-caused injuries was assessed, under the Guide, at 40%, with the assessment of the ‘emotional and behavioural consequences’ of Mr Smith’s PTSD and alcohol abuse not reflecting any apportionment of consequences between traumas during his eligible service in Vietnam and other traumas (in particular the 1964 collision before that service); and

·                    the incapacity of 40% resulted in the pension being payable under Pt II of the Act at 40% at the general rate, as required by ss 21A(1) and 22(2) of the Act.

21                  The Commonwealth submits that s 30C(1) of the Act asks whether the incapacity in respect of which pension under Pt II of the Act is payable to a person is the incapacity from injury in respect of which a lump sum payment of compensation is paid.  The emphasis is placed upon incapacity and not on the injury.

22                  In our view, the submissions of the Commonwealth fail to give sufficient weight to the complete operation of s 30C, in particular the reference to ‘incapacity from that injury’ as found in s 30C(1)(c) (emphasis added). 

23                  To the peculiar facts of this case, s 30C(1) of the Act  can be seen to apply in the following way.  As to the pension, the Commission found that there was a reasonable hypothesis connecting the duodenal ulcers and the PTSD with Mr Smith’s war service on the basis they were either causally linked to or aggravated by his service. 

24                  The pension was paid in respect of the incapacity arising from the injuries of ulcers and PTSD.  So much is clear from the Commission’s decision of 23 December 1992, where the particular injuries (namely PTSD and duodenal ulcers) are referred to as the injuries that were causally linked to or aggravated by Mr Smith’s service.  Having identified the injuries, the issue of incapacity is then dealt with later in the Commission’s decision, when it assesses the level of pension payable. 

25                  Further, the basis of these injuries (namely PTSD and duodenal ulcer) remained constant even though the level of pension payable increased over the years pursuant to the Act.  As far as the compensation was concerned, it is apparent from the documentation before the Court that the compensation payment was in respect of ‘Severe Shock’, the particular injury set out in the ‘Particulars of Injuries’ which was the basis of the common law settlement.  The effect of the terms of settlement is obvious.  As we have noted, they identified only one injury for which Mr Smith was being compensated by the payment of the settlement sum.  It was the ‘Severe Shock’.  The terms of settlement excluded the possibility that the settlement sum was to be paid for the injuries of PTSD and duodenal ulcers.  There is thus no need for us to consider what was encompassed by the injury of ‘Severe Shock’, because it was made clear by deletion of certain of the ‘Particulars of Disability’ in the context of the settlement that both PTSD and duodenal ulcers were not included as injuries.  So, as a matter of fact, it is clear that the compensation payment was paid in respect of the injury ‘Severe Shock’ and not in respect of the injuries of duodenal ulcers and PTSD. 

26                  On this basis, whether or not the compensation payment (referred to in s 30C(1)(b)) and the pension received and granted (referred to in s 30C(1)(c)) were in respect of the same incapacity, as to which the parties were in dispute, they were not for the same injury.

27                  As a matter of ordinary language, the injury identified in subs (b) and (c) must be the same.  Therefore, common to both the compensation payment and the pension is the underlying injury for which both payments for incapacity are made.  The clear dichotomy between ‘incapacity’ and ‘injury’ or ‘disease’ reinforces the deliberate emphasis placed upon the need for there to be a common injury.

28                  By interpreting s 30C in this way, we give the words used their ordinary and grammatical meaning in the context in which they appear, and apply the words in a purposive way: see eg K & S Lake City Freighters Pty Ltd v Gordon and Gotch Ltd (1985) 157 CLR 309 at 315 (Mason CJ); Mills v Meeking (1990) 169 CLR 214 at 235 and 242-243 and Project Blue Sky Inc v Australian Broadcasting Authority (1998) 194 CLR 355 at 381-382. 

29                  The above reasoning is sufficient to dispose of the appeal in favour of the respondent.

30                  The Commonwealth also relied upon various dicta in the decision of Commonwealth v Keogh (1983) 76 FLR 21, which counsel submitted supported its arguments in this appeal. 

31                  The issue raised in Keogh concerned the operation of s 98(1) of the Compensation (Commonwealth Government Employees) Act 1971 (Cth) which provided:

Compensation is not payable under this Act to an employee in respect of an injury if the employee has received, or is entitled to receive, in respect of an incapacity resulting from that injury, a pension … in pursuance of a determination or assessment made under the [1920] Act … .

32                  Reference was made to comments by Smithers J at 27 where he concluded that s 98(1) would apply if a pension had been paid for:

… an incapacity to which a war service injury as well as a civilian injury have both contributed, especially where it appears that, but for the contribution of each, that incapacity would have not occurred’. 

33                  Reference was also made to comments of Davies J at 37 where his Honour said the onus was on the Commonwealth to demonstrate:

that the incapacity to which civilian employment had contributed was incapacity in respect of which a pension had been granted under the Repatriation Act.

and at 47 that:

Section 98(1) applies only when the compensable injury has resulted in incapacity and the employee is entitled, pursuant to a determination or assessment made under the Repatriation Act 1920, to a pension in respect of that incapacity. 

34                  We do not consider any assistance can be derived from the decision in Keogh 76 FLR 21.  In this appeal, it is the application of s 30C to a set of ‘specific and uncommon’ facts that needs to be considered.

35                  In Shi v Migration Agents Registration Authority (2008) 235 CLR 286 Hayne and Heydon JJ recently repeated the caution that at [92]:

… questions presented by the application of legislation can be answered only by first giving close attention to the relevant provisions. Reference to decided cases or other secondary material must not be permitted to distract attention from the language of the applicable statute or statutes. Expressions used in decided cases to explain the operation of commonly encountered statutory provisions and their application to the facts and circumstances of a particular case may serve only to mask the nature of the task that is presented when those provisions must be applied in another case. That masking effect occurs because attention is focused upon the expression used in the decided cases, not upon the relevant statutory provisions.

36                  Looking at the decision of Keogh 76 FLR 21, it is clear that their Honours were not directing their attention to the issue to be determined in this appeal.  We accept that in many instances the key task will be to identify the ‘incapacity’ in respect of which pension and compensation has been paid.  However, another requirement is made by the operation of s 30C(1), namely that the incapacity arise out of the same injury.

37                  For these reasons the appeal should be dismissed with costs.

Associate:

Dated:         16 December 2009