FEDERAL COURT OF AUSTRALIA

Comcare v Simmons [2014] FCAFC 4

THE COURT ORDERS THAT:

1.    The appeal and cross-appeal are dismissed.

2.    On or before 27 February 2014, the parties are to submit Short Minutes of Order which give effect to the reasons of the Court.

3.    If the parties cannot reach an agreement as to the costs of the appeal and the cross-appeal or the calculations as to the entitlements of the Respondent on or before 27 February 2014, then each party is to file and serve written submission of no more than two pages in length addressing any issue not the subject of agreement.

Note:    Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

REASONS FOR JUDGMENT

Flick and GRIFFITHS JJ

1    In May 2009 Mr Michael Simmons suffered an injury to his right shoulder in the course of his employment. He was then employed by the Commonwealth in the Operational Response Group (“ORG”) of the Australian Federal Police. As such, he was in receipt of both a base salary and an ORG allowance. The ORG allowance was payable to an employee who (inter alia) had assumed duties as an “operational” employee and was available for immediate deployment overseas. It was in an amount of approximately $20,000 per year.

2    In February 2010 Mr Simmons left the Operational Response Group based in Canberra and transferred to the Counter Terrorism Unit in Sydney. In August 2011 he left his employment with the Australian Federal Police and assumed a position with the New South Wales Police Service.

3    In issue is the manner in which the “normal weekly earnings” of Mr Simmons should be calculated for the purposes of s 8(10)(a) and (b) and s 19 of the Safety, Rehabilitation and Compensation Act 1988 (Cth). Section 8(10)(a) relevantly refers to those circumstances in which an employee “continues to be employed by the Commonwealth…”; s 8(10)(b) refers to those circumstances where an employee “has ceased to be employed by the Commonwealth…”. Both s 8(10)(a) and (b) require attention to be directed to the amount the employee “would receive” if the employee continues to be employed by the Commonwealth or the amount the employee “would receive” if he or she had continued to be employed. Section 19 sets forth the formula to be applied when calculating compensation for injuries resulting in incapacity and, in very summary form, provides for compensation to be calculated by deducting from an employee’s “normal weekly earnings” the greater of the amount per week that an employee “is able to earn in suitable employment” or the amount per week “that the employee earns from any employment…”.

4    The initial determination as to Mr Simmons’ entitlements was that the calculation of his “normal weekly earnings” should be reduced by the amount of the ORG allowance payable to him as of February 2010 when he declined to return to Canberra and decided to remain in Sydney. That decision was affirmed by the Administrative Appeals Tribunal: Re Simmons and Comcare [2012] AATA 687. The Tribunal concluded that the ORG allowance was not payable to Mr Simmons as from February 2010 because he chose to leave the Operational Response Group for personal reasons and not because of his compensable injury.

5    An appeal from that decision was allowed: Simmons v Comcare [2013] FCA 484, 134 ALD 522. The primary Judge concluded that for the purposes of s 8(10)(a) the calculation of Mr Simmons’ “normal weekly earnings” for the period from 8 February 2010 to 2 August 2011 was not to include the ORG allowance. His Honour further concluded that for the purposes of s 8(10)(b)(i) as at 3 August 2011 the calculation was to include the ORG allowance, but that for the purposes of s 8(10)(b)(ii) the calculation was not to include the ORG allowance. An order was made remitting the matter to Comcare to calculate Mr Simmons’ “normal weekly earnings”.

6    Comcare now appeals from that decision. It contends that the primary Judge erred in his construction of s 8(10)(b)(i). Mr Simmons was also dissatisfied with part of his Honour’s reasons. He filed a Notice of Cross-Appeal contending that the primary Judge erred in his construction of s 8(10)(a).

7    The relevant facts have been set forth in greater detail in the reasons of Perry J, as have the relevant statutory provisions and the authorities. Those matters need not be repeated. Gratitude is extended to her Honour for her careful and detailed exposition of the facts and the principles to be applied.

8    With respect to s 8(10)(b), and for the reasons given by her Honour, the personal choices made by Mr Simmons “were irrelevant to undertaking the calculation required by s 8(10)(b), where the employee had ceased to be employed by the Commonwealth” (at [73]). The assessment as to the amount that an employee “would receive” for the purposes of s 8(10)(b) proceeds upon the basis of the statutory assumptions set forth in s 8(10)(b). And the calculation of an employee’s “normal weekly earnings”, for the reasons given by her Honour, is but one of the integers of the statutory formula set forth in s 19. It is erroneous to attempt to construe and apply the phrase “normal weekly earnings” in s 8 divorced from those factors set forth in s 19(4). As explained by her Honour, s 8(10) “imposes a cap upon the amount of pre-injury NWE of an employee…” (at [71]) and “a last stop ‘reality check’, or audit, on the calculation under ss. 8(6)-(9G)…” (at [81]). The construction given by her Honour to ss 8(10)(b) and 19 give effect to the object and purpose of those provisions.

9    Unlike s 8(10)(b), however, which applies where an employee “has ceased to be employed by the Commonwealth …”, s 8(10)(a) applies where the employee “continues to be employed …”. Counsel for Mr Simmons submitted that the conclusions of the primary Judge result in there being “an inconsistency of treatment between the two paragraphs in relation to the Allowance”. The “inconsistency”, it was said, emerged from the fact that “the Allowance is not included in the calculation of NWE for the period during which the Cross-Appellant remains employed by the Commonwealth, and is included in the calculation of NWE for the period after the Cross-Appellant left the employment of the Commonwealth”. The result was said to be “an anomaly in the calculation of NWE…”.

10    There is, with respect, no “anomaly”. Section 8(10) serves as a “cap” on the manner of calculation of “normal weekly earnings”. The section directs attention to the two different situations which may confront an employee who has suffered a compensable injury – the employee may either remain in the employment of the Commonwealth (s 8(10)(a)) or he or she may have ceased to be so employed (s 8(10)(b)). Had Mr Simmons continued to be employed by the Commonwealth, rather than leaving such employment in August 2011, s 8(10)(a) would have been applied. And that provision would have to be applied in accordance with the facts as found by the Tribunal. Relevantly, the primary Judge concluded:

[37]    …[I]t is quite clear from [the Tribunal’s] reasoning that it formed the view that Mr Simmons did not leave the Operational Response Group because of his injury. The Tribunal found that the personal reasons were Mr Simmons’ Newport home and the greater proximity to his daughter. It rejected his claim that his injury was a cause of his decision to transfer to Sydney.

[38]    The Tribunal had to address the hypothetical question in s 8(10)(a) by a consideration of the facts, including what Mr Simmons would have done had he not been incapacitated for work. He remained employed by the Commonwealth up until about August 2011. I see no error in the tribunal having taken into account his decision, for personal reasons, to leave the Operational Response Group in arriving at the assessment of the earnings that he would receive if he were not incapacitated for work. This was a question of fact for the Tribunal and it would require the court to engage in merits review to come to some other conclusion. The latter course is not open.

Section 8(10)(a) requires attention to be directed to the “amount per week of the earnings that the employee would receive if he or she were not incapacitated for work…”. That amount may be greater or less than the amount the employee was earning prior to the injury. An employee may change employment within the Commonwealth for a variety of reasons, some perhaps being occasioned by the injury and others having no connection with the injury. Section 8(10)(b)(i) requires a calculation to be performed – not as to the “amount per week of the earnings that the employee would receive if he or she were not incapacitated for work…” – but rather a calculation as to the amount the employee “would receive if he or she had continued to be employed by the Commonwealth … in the employment in which he or she was engaged at the date of the injury…”. The primary Judge was, with respect, correct in placing reliance upon “the distinctions in wording within s 8(10)” and the “contradistinction to the phraseology in each limb of s 8(10)(b)”: [2013] FCA 484 at [21].

11    The fact that ss 8(10)(a) and 8(10)(b) are directed to two different situations and require separate calculations to be undertaken does not necessarily give rise to any “anomaly”. The two provisions are directed at placing a “cap” on the calculation of “normal weekly earnings” and are an attempt to accommodate the many different situations which may confront an injured employee. The different inquiries which must be undertaken is but a consequence of the statutory language employed by the legislature.

12    On the facts as found by the Tribunal, no issue arises as to the “reasonableness” of Mr Simmons’ decision to remain in Sydney for personal reasons and to continue working for the Commonwealth but in a different position. What is important is the finding of fact made by the Tribunal that Mr Simmons made that decision for reasons which were found to be unrelated to his injury. As the primary Judge observed ([2013] FCA 484 at [38]), that was a question of fact for the Tribunal to make and the Court would be engaging in an impermissible merits review to come to some other conclusion. Moreover, having regard to the language of s 8(10)(a) it is considered that that finding of fact – together with the consequential finding that thereafter Mr Simmons lost his entitlement to the ORG allowance – were relevant matters to be taken into account in applying that provision.

13    It follows that the appeal should be dismissed. The primary Judge’s conclusion as to the construction of s 8(10)(b)(i) and its application to the facts was, with respect, correct. It also follows that the cross-appeal should be dismissed.

14    Orders should be made dismissing the appeal and the cross-appeal. It is anticipated that the calculation as to the entitlements of Mr Simmons can be calculated by the parties in accordance with the reasons of the Court. In the absence of agreement, the matter should be remitted to Comcare for that calculation to be undertaken. The parties should bring in Short Minutes of Orders to give effect to the conclusions of the Court. There is no reason why Comcare should not pay the costs of the appeal and the cross-appeal.

Associate:

Dated:    13 February 2014

REASONS FOR JUDGMENT

PERRY J

1.    Introduction

15    This is an appeal by Comcare against a decision to allow an appeal in part from a decision of a single judge on a question of law under s 44 of the Administrative Appeals Tribunal Act 1975 (Cth) (“the AAT Act”). A cross-appeal is also instituted by Mr Michael Simmons against part of the decision below. Mr Simmons sustained an injury in the course of his former employment as a member of the Operational Response Group (“ORG”) of the Australian Federal Police (“AFP”) for which Comcare has accepted liability under s 14(1) of the Safety, Rehabilitation and Compensation Act 1988 (Cth) (“the Act”).

16    Both the appeal and cross-appeal concern the proper construction of the statutory equation prescribed by s 19 of the Act for calculating the amount of compensation payable week by week to an employee for an injury sustained by him or her that results in an incapacity for work. Section 19 provides for compensation to be assessed as the difference between:

(a)    normal weekly earnings (“NWE”) in the period immediately before the injury which is calculated under s 8, on the one hand; and

(b)    the earnings that the incapacitated employee in fact earns or would earn if engaged in suitable employment (“AE”) which is calculated under s 19, on the other hand.

17    Importantly for present purposes, NWE are capped by the amount calculated under s 8(10) of the Act. That amount is calculated differently depending upon whether or not the employee is in the employment of the Commonwealth or a licensed corporation (hereafter collectively referred to for convenience as ‘the Commonwealth’).

18    In the present case, in its decision given on 5 October 2012, the Administrative Appeals Tribunal (“the Tribunal”) affirmed Comcare’s decision to reduce the NWE of Mr Simmons with effect from 8 February 2010 by the pro rata value of a special allowance which comprised part of Mr Simmons’ terms of employment in the ORG (“the ORG allowance”). Specifically, the Tribunal found that the NWE was reduced to this extent:

(a)    under s 8(10)(a) of the Act, for the period from 8 February 2010 to 1 August 2011 when Mr Simmons left the ORG for personal reasons but was still in Commonwealth employment; and

(b)    under s 8(10)(b)(i) of the Act, from 1 August 2011 onwards when he was no longer in Commonwealth employment.

19    The issues before this Court are whether the primary judge correctly held that:

(a)    there was no error of law in the Tribunal’s reasons for the first finding (the issue raised by the cross-appeal); and

(b)    the Tribunal had erred in law in making the second finding (the issue raised on the appeal).

20    In this regard, both parties at trial and on appeal relied on the reasons of Dowsett J (with whom Spender J agreed) in John Holland Group Pty Ltd v Robertson (2010) 185 FCR 566 (‘John Holland’) esp at 586-587 [73]-[77] as having correctly resolved the question of statutory construction.

21    For the reasons set out below, I consider that the appeal should be dismissed. In my view, the decision by Mr Simmons to transfer out of the ORG and not to accept an offer to remain in the ORG was not relevant to the calculation of his NWE under s 8(10)(b)(i) of the Act. However, I agree with Justice Flick and Justice Griffiths that the position is different with respect to s 8(10)(a) of the Act and that the cross-appeal should also be dismissed for the reasons given by their Honours.

2.    The Decision of the Tribunal

2.1    The Tribunal’s findings of fact

22    The background facts are not in dispute.

23    On 15 May 2009, Mr Simmons injured his right shoulder in the course of his employment in the ORG based in Canberra. At the time, his base salary of $1,148.09 per week was supplemented by $648.05 in certain allowances, including relevantly the ORG allowance. The value of that allowance amounted to $383.39 per week payable fortnightly in arrears and was therefore equivalent to approximately $20,000 per annum.

24    The ORG allowance had been payable to Mr Simmons as an employee who had been assigned duties as an “operational” employee in the ORG under cl 7.2 of the Australian Federal Police (International Deployment Group) – Operational Response Group – Domestic – Determination No 7 of 2007 (“the Determination”) made under s 27 of the Australian Federal Police Act 1979 (Cth). Relevantly, the Determination provided in clauses 7.4 and 9.5 that:

“7.4    ORG operational employees receiving this allowance will be required:

a.    To be contactable and available for immediate deployment overseas.

b.    To manage leave arrangements and personal commitments subject to deployment requirements. This will include cancellation of leave where operational requirements demand.

c.    To maintain health and fitness for deployment overseas at a level necessary for operational response. The minimal standard is the AFP National Fitness Standard. However, this may be varied by the NMIDG [National Manager International Deployment Group] at any time.

d.    To maintain appropriate skill levels as notified by the NMIDG at any time.

e.    To maintain other eligibility for employment requirements as specified in sub-clause 9.5.

…

9.5    Payment of this allowance will not be made when ORG employees cease to be eligible and/or available for deployment. This includes but is not limited to:

a.    Cessation of assignment of ORG duties within Australia.

b.    Deployment of ORG employee overseas.

c.    Failure to meet medical, psychological, training and integrity assessments necessary for deployment.

d.    Failure to maintain the requirements specified at sub-clause 7.4 or 8.4.”

25    Thus, under the Determination, Mr Simmons as a member of the ORG was required to be fit and available for immediate deployment overseas on operational duties.

26    The Tribunal found that Mr Simmons’ shoulder injury rendered him unfit for work for a time. He obtained medical and physiotherapy treatment for the injury over the following months, and underwent surgery on 30 July 2009. Thereafter he commenced rehabilitation treatment. He was given suitable duties working three days a week for four hours per day from 31 August 2009 in the Sydney premises of the AFP. However, he was, then and subsequently, subject to medical restrictions including that he could not lift objects with his right arm.

27    On 4 November 2009, Mr Simmons attended a return to work meeting with a number of persons including a Superintendent with the International Deployment Group of the AFP. At that time Mr Simmons was still working in the Sydney office, performing desk-based administrative duties and his medical restrictions remained unchanged. He was told that he should return to Canberra from Sydney to undertake suitable duties in the ORG, Tactical Intelligence Work Team, from 16 November 2009, but he expressed reservations about doing so. Return to work plans were prepared for him subsequently, but he continued to be permitted to undertake rehabilitation while performing suitable duties based in the Sydney premises. The Tribunal found that, at that time, it was quite clear that Mr Simmons did not want to return to duties in Canberra, and the Superintendent authorised him to continue with his duties in Sydney, pending an independent assessment of his condition.

28    On 1 December 2009, Dr English, a consultant orthopaedic surgeon, diagnosed Mr Simmons “…as fit for the current alternative duties and also general policing duties” but “…as unfit in the long term for return to the ORG”. Dr English opined that completion of Mr Simmons’ physiotherapy and ongoing review by his existing orthopaedic surgeon was likely to be required for approximately nine months post-operatively.

29    On 17 December 2009, Mr Simmons received an offer of a position in the ORG as ORG Project Officer, which was described as “a suitable position… in line with your current skills and medical restrictions”. That position was based in Canberra to commence on 11 January 2010. In this regard, it appeared that the ORG had taken the position that it was unable to continue to provide duties for Mr Simmons in the Sydney office and wished for him to return to the Canberra office. During January 2010, Mr Simmons continued to receive offers for him to work in Canberra, but did not accept any of the offers and took leave for about a week during that period.

30    On 12 January 2010, Dr Greg Burrow, treating surgeon, reported that Mr Simmons “will be permanently unfit for work with ORG, but is fit to return to general duties policing, and is fit to trial the Use of Force Course.”

31    On 27 January 2010, the Tribunal assessed Mr Simmons’ NWE for the period 26 November 2009 to 13 January 2010 in the sum of $1,909.19.

32    It appears that Mr Simmons passed a use of force training course on 28 January 2010 and approval was sought for him to be released from the ORG to take up a position in the Sydney-based Counter Terrorism Unit as an operational member. On 8 February 2010, Mr Simmons was granted a transfer to take up permanently modified duties in the Counter Terrorism Unit based in Sydney. He was informed that from that day the ORG allowance would cease to be payable as “[y]our decision to transfer to the Sydney Office was based on your career goals and personal circumstances, not you [sic] injury and your ability to undertake the role you were offered.” As a result, Mr Simmons’ NWE for the purposes of calculating the compensation to which he was entitled under the Act were reduced to $1,589.41.

33    Subsequently, on 18 April 2010, Mr Simmons re-injured his right shoulder and was rendered unfit for work. He required further surgery.

34    In August 2011, he transferred to employment with the New South Wales Police Service.

2.2    The Tribunal’s conclusions as to Mr Simmons’ reasons for transferring his employment and impact of the transfer on his normal weekly earnings for the purposes of the Act

35    The Tribunal found at [16] that it was:

“…reasonably satisfied that Mr Simmons chose to transfer his employment from Canberra to Sydney for personal reasons relating to changes in his personal circumstances, his (then) new residence in Newport [a suburb of Sydney] and closer proximity to his daughter. The contemporaneous evidence does not support Mr Simmons’ present assertions concerning the injury-related reasons for seeking transfer to Sydney, although these cannot be ruled out entirely. The contemporaneous documents provide some support for Mr Simmons’ assertion that he repeatedly raised issues relating to his rehabilitation and treatment in Sydney at the time.”

36    As to the latter, the Tribunal accepted that Mr Simmons derived benefit from maintaining the therapeutic relationship with his treating surgeons and physiotherapist in Sydney, but found that did not prevent him from resuming suitable duties in Canberra. It found that he completed his post-operative rehabilitation program in January 2010 and that, while he required assistance and support from his partner, family members and others in respect of the self-care and domestic duties at various times, the evidence did not establish that he had any significant requirement for such assistance and support in January or February 2010. The Tribunal commented that his assertion that he needed that assistance and support did not sit easily or well with his ability to pass the use of force training at the end of January 2010, albeit that the requirements of that course had been somewhat modified. The Tribunal stated:

“I struggle to accept the proposition that a person who could satisfactorily meet the physical performance requirements of that testing would require assistance with self-care or domestic duties to any significant or substantial degree.”

37    Against this background, the Tribunal concluded that Mr Simmons’ NWE amount was correctly reduced to exclude the ORG allowance from 8 February 2010 for the following reasons.

1.    The NWE had been correctly calculated to include the ORG allowance prior to 8 February 2010 (at [25]).

2.    The Project Officer position with the ORG that Mr Simmons had been offered was “suitable employment” (at [19]). The fact that he was rendered permanently unfit to return to his pre-injury operational duties stands beside the point concerning his NWE and his notional earnings for the purposes of calculating compensation under the Act (at [21]).

3.    Mr Simmons would have been paid the allowance if he had taken the Project Officer position subject to his availability for deployment, the evidence establishing that the ORG allowance was paid to ORG members who had been injured (at [22]).

4.    Starting with Mr Simmons’ present employment in the NSW Police force:

(i)     Section 8(10)(b) of the Act applies for the purpose of calculating his NWE as he had ceased his employment with the Commonwealth in about August 2011. As a consequence, it was necessary to consider the notional amount that Mr Simmons would have earned each week as a member of the ORG if his pre-injury or if his Commonwealth employment had continued (at [24]).

(ii)    Under the terms of Mr Simmons’ pre-injury employment contained in the Determination, the ORG allowance was not payable if the terms of clause 9.5 (cessation of assignment of ORG duties within Australia) were satisfied, as was the case when Mr Simmons removed himself from the ORG (at [24] and [26]).

(iii)    It followed that the notional amount that Mr Simmons would earn each week after his transfer to the Counter Terrorism Unit in Sydney on 8 February 2010 would not include the ORG allowance by the application of clause 9.5 of the Determination. For that reason his NWE amount was correctly reduced under the statutory formula to exclude the ORG allowance on and from that date (at [27]).

38    The Tribunal concluded at [28]-[30] that the position was the same with respect to the period in which Mr Simmons had remained with the Commonwealth after 8 February 2010:

“28    Subsequent events, week by week, in the period from 8 February 2010 to the present, including Mr Simmons’ subsequent experiences of re-injury and his transfer into employment in the NSW Police Service, do not compel a different conclusion. Once Mr Simmons transferred out of his previous ORG employment for personal reasons, he was no longer entitled to payment of the ORG deployment allowance.

29    Thus, the amount that Mr Simmons would have earned if his pre-injury employment had continued, or if his Commonwealth employment had continued is the same – the notional amount of Mr Simmons’ earnings under s 8(10)(b)(i) or (ii), would be the weekly amount he would have earned at the level of his employment as a sworn Federal Agent in the Australian Federal Police. Under s 8(10)(b)(i), if Mr Simmons’ pre-injury employment as a Federal Agent in the ORG had continued, his weekly earnings would have reduced by the amount of the ORG deployment allowance when he left ORG on 8 February 2010 to take up Australian Federal Police duties in Sydney at the same substantive level, subject to incremental and other salary changes from time to time. It is the continuation of that employment, as a Federal Agent in Sydney, that must be considered under s 8(10)(b)(ii), and no different result would be obtained.

30    If one was to apply s 8(10)(a) to the weeks when Mr Simmons was in Commonwealth employment following his injury, no different result is obtained. Absent incapacity, Mr Simmons would not have earned the ORG deployment allowance on or after 8 February 2010, when he transferred to the Counter Terrorism Unit in Sydney. Thereafter, in each of those weeks, he would not have earned that allowance.”

39    The Tribunal then affirmed the decision under review that Mr Simmons’ NWE had been properly reduced by the amount of the ORG allowance from 8 February 2010.

2.3    The decision below

40    The matter came before the primary judge on questions of law raised in the notice of appeal under s 44 of the AAT Act. The primary judge identified the two questions of law at [2] of his reasons, namely:

“…whether, having accepted that Mr Simmons, as a result of a compensable injury, was permanently unfit as at 8 February 2010 to return to his pre-injury operational duties in the Operational Response Group, it was open to the Tribunal:

(1)     to find that, on the proper construction of the Act and the determination, his normal weekly earnings under s 8(10) of the Act on and after 8 February 2010, did not include the allowance;

(2)     to take into account, as a relevant consideration, Mr Simmons’ decision on 8 February 2010 to accept a transfer from the Operational Response Group in Canberra to the Counter Terrorism Unit in Sydney in determining whether the allowance should have been included in the calculation of his normal weekly earnings under s 8(10) of the Act.”

41    As noted above, it was common ground before his Honour that the way in which s 8(10) operates has been authoritatively determined by the reasons of Dowsett J in John Holland, particularly at 586-587 [73]-[77].

42    The primary judge held that the Tribunal had erred in not including the ORG allowance in the calculation of Mr Simmons’ NWE under s 8(10)(b) which applied once he had left the employment of the Commonwealth. The steps in the primary judge’s reasoning may be summarised as follows:

(a)    for the purposes of both s 8(10)(b)(i) and (ii), the phrase “the employment in which he or she was engaged” is the actual employment or job that the employee was engaged in at that date;

(b)    Mr Simmons’ two employments on the respective dates of his injury and subsequent transfer to the NSW police service in August 2011 were different in that they had different terms and conditions (including different duties, responsibilities, wages and entitlements), even though the Commonwealth was his employer until his transfer to the State police service;

(c)    the reference in s 8(10)(b)(i) to an employee continuing to be employed by the same employer in the employment in which he or she was engaged at the date of the injury is a reference to that person being employed to perform the same job with the same relevant incidents of employment in that job;

(d)    the criteria in both limbs of s 8(10)(b) are deliberately different from the criterion in s 8(10)(a);

(e)    s 8(10)(b)(ii) assumes the continuation of either the pre-injury employment or other actual employment undertaken after the injury with the same employer, and the decision-maker is not directed to assume that the employee was incapacitated;

(f)    the enquiry under that provision concerns the actual employment at the date that the employee ceases employment, and the earnings that would have been earned had he or she continued in that employment, which involves a comparison between actual earnings adjusted to reflect changes in circumstances between the cessation of employment and the date of calculation;

(g)    similarly, the enquiry under s 8(10)(b)(i) contemplates the notional continuation of the previous employment because, as Dowsett J observed in John Holland at 586 [76], the “purpose of the notional extension is to identify likely earnings in the event that such employment had been so extended”;

(h)    under that provision, the decision-maker should take the actual terms of the employment applicable to the employee at the time of the injury into account and enquire as to likely earnings pursuant to those terms as at the date of calculation;

(i)    that provision does not look at what actually happens to the employee after the injury, or consider how he or she would have reacted. However, if his or her employment or position came to be abolished, some enquiry would have to be made as to how that fact would have impacted on the terms and conditions of employment from that time until the relevant time for calculating the NWE; and

(j)    that is to be contrasted with s 8(10)(b)(ii), which projects forward from the actual employment of the employee at the time he or she ceased to be employed to the time at which the relevant calculation must be made.

43    By contrast, his Honour found that the Tribunal had not erred in excluding the ORG allowance from the calculation of Mr Simmons’ NWE under s 8(10)(a) which governed the calculation of NWE for the period commencing on 8 February 2010 until he left the employment of the Commonwealth in August 2011. His Honour found that s 8(10)(a) differs from s 8(10)(b) in that the calculation under the former is not tied to a fixed point in time. Rather, citing Dowsett J in John Holland at 586 [74]-[76], his Honour held at [27] that “… s 8(10)(a) is concerned with a notional inquiry that commences with the employee’s actual current employment and compares that to what his or her earnings would have been in that employment had he or she not been injured… ‘including consideration of whether he or she would have continued to perform the same duties as were being performed at the time of the accident.’” On this basis, his Honour held that:

“37    The question as to what was a relevant consideration for a decision-maker under s 8(10)(a) is a question of law. While it is true that the Tribunal did not precisely phrase the question it addressed in the way in which Mr Simmons contended it should have, it is quite clear from its reasoning that it formed the view that Mr Simmons did not leave the Operational Response Group because of his injury. The Tribunal found that the personal reasons were Mr Simmons’ Newport home and the closer proximity to his daughter. It rejected his claim that his injury was a cause of his decision to transfer to Sydney.

38.    The Tribunal had to address the hypothetical question in s 8(10)(a) by a consideration of the facts, including what Mr Simmons would have done had he not been incapacitated for work. He remained employed by the Commonwealth up until about August 2011. I see no error in the Tribunal having taken into account his decision, for personal reasons, to leave the Operational Response Group in arriving at the assessment of the earnings that he would receive if he were not incapacitated for work. This was a question of fact for the Tribunal and it would require the Court to engage in merits review to come to some other conclusion. The latter course is not open.”

3.    CONSIDERATION

3.1    The statutory scheme

44    As is apparent, the central issue on the appeal and cross-appeal concerns the construction of s 8(10) of the Act, the terms of which are set out below at [71], and more particularly s 8(10)(a) and (b)(i). No issue directly arose in relation to s 8(10)(b)(ii).

45    Section 8(10) constitutes one aspect of a complex scheme by which compensation is calculated for an employee who is incapacitated for work as a result of an injury to which the Act applies. As such, it is necessary to start with an analysis of that statutory scheme before the question of the proper construction of s 8(10) can be addressed.

3.1.1    Liability to pay compensation

46    Section 14(1) of Part II of the Act imposes liability on Comcare to pay compensation to injured employees (as defined) in the following terms:

“Subject to this Part, Comcare is liable to pay compensation in accordance with this Act in respect of an injury suffered by an employee if the injury results in death, incapacity for work, or impairment.”

47     An “employee” is defined in s 5 relevantly to mean a person employed by the Commonwealth or a Commonwealth authority. The term “injury” is defined in s 5A(1)(b) relevantly to mean “an injury (other than a disease) suffered by an employee, that is a physical or mental injury arising out of, or in the course of, the employee’s employment”. By s 4(9), the phrase “incapacity for work” is in turn a reference to:

“…an incapacity suffered by an employee as a result of an injury, being:

(a)    an incapacity to engage in any work; or

(b)    an incapacity to engage in work at the same level at which he or she was engaged by the Commonwealth or a licensed corporation in that work or any other work immediately before the injury happened.”

48    Once liability is established under s 14 of the Act, s 16 makes provision for compensation in respect of medical expenses while separate provision is made for calculating compensation in relation to injuries resulting in death under Division 2 of Part II, incapacity for work under Division 3, and impairment under Division 4. This case raises issues only in relation to the calculation of compensation for an injury resulting in incapacity for work.

3.1.2    The formula for calculating the amount of compensation due

49    Section 19 of the Act contains the formula for determining the amount of compensation due to an employee under s 14 for each week during which the employee is incapacitated for work as a result of an injury (subject to exceptions not presently relevant) for an initial period. The formula is defined in subs (2) as follows:

“(2)    Subject to this Part, Comcare is liable to pay to the employee in respect of the injury, for each week that is a maximum rate compensation week during which the employee is incapacitated, an amount of compensation worked out using the formula:

NWE – AE

where:

AE is the greater of the following amounts:

(a)    the amount per week (if any) that the employee is able to earn in suitable employment;

(b)    the amount per week (if any) that the employee earns from any employment (including self-employment) that is undertaken by the employee during that week.

NWE is the amount of the employee’s normal weekly earnings.” (emphasis added)

50    The application of the formula to each week constitutes a fundamental principle of the legislative scheme: Telstra Corporation v Hannaford (2006) 151 FCR 253 at 273 [57] (Conti J, with whose reasons Heerey and Dowsett JJ agreed); John Holland at 571 [19] (Dowsett J); and Bortolazzo v Comcare (1997) 75 FCR 385 at 388 (Heerey J).

51    By reason of the definition of “maximum rate compensation week” in s 19(2A) of the Act, coupled with s 19(2)(c) and (d), the number of working hours attracting compensation for the whole or partial incapacity to work which can be calculated at the maximum rate under s 19(2) is effectively limited or capped. That cap is set at 45 times the employee’s normal weekly hours.

52    Once that limit has been reached, s 19(3) applies to provide for a reduced level of compensation thereafter using the following formula:

“(3)    Subject to this Part, Comcare is liable to pay compensation to the employee, in respect of the injury, for each week during which the employee is incapacitated, other than a week referred to in subsection (2), of an amount calculated using the formula:

(Adjustment percentage x NWE) – AE

…

AE applies in relation to the whole of that particular week and has the same meaning as in subsection (2).”

53    Unlike s 19(2), subs (3) is not capped to a specific period of time and so provides for long-term earnings related benefits until 65 years of age. The replacement of long-term fixed benefits with benefits of this nature in Part II constituted the most significant difference between the Safety, Rehabilitation and Compensation Act 1988 (Cth) and its precedessor, the Compensation (Commonwealth Government Employees) Act 1971 (Cth): Explanatory Memorandum, Commonwealth Employees’ Rehabilitation and Compensation Bill 1988 (Cth) at 8; see also, Mr Howe, Second Reading speech: Commonwealth Employees’ Rehabilitation and Compensation Bill 1988 (Cth) 27 April 1988, Hansard (HR) at 2192.

54    The “adjustment percentage” is defined in s 19(3) as set percentages ranging from 75% in the case of an employee not employed during that week, to 100% if the employee is employed for 100% of his or her normal weekly hours during that week. This means, for example, that if the employee is not employed during the week in question, the amount of compensation payable will be an amount equal to 75% of his or her NWE less the amount (if any) that he or she earns or is deemed to be able to earn in suitable employment (being the component ‘AE’ in the statutory formula). At the other end of the spectrum, if the employee is working full-time but at a reduced rate of pay, the amount of compensation payable will be his or her NWE less the amount payable in respect of that employment.

55    For the reasons which I explain below, the effect of the formula in subs (2) (which is picked up in subs (3)) is that the higher of the amount of the employee’s actual earnings or deemed earnings (being those that the incapacitated employee is able to earn in “suitable employment”) is deducted from NWE being the amount that the employee would have earned for each week if he or she had not been incapacitated for work in whole or in part by the injury. The difference (if any) represents the amount of compensation payable per week, subject to:

    the maximum amount of compensation that may be awarded which is set by s 19(5);

    any increase in the amount under s 19(6) where there is a difference between the amount of compensation so calculated and minimum earnings as defined in s 19(7) to (14) inclusive; and

    the adjustment to the formula where subs (3) applies by the additional component, being the “adjustment percentage”.

3.1.3    Calculation of the component ‘AE’ in the statutory formula

56    The component ‘AE’ in the statutory formula is defined as the greater of the amounts determined under s 19(2)(a) and (b). Paragraph (a) focuses upon the amount per week that the employee in fact earns during the particular week, while para (b) focuses upon the amount per week that the employee would be able to earn “in suitable employment”. The former therefore involves a question of fact, while the latter requires Comcare to make a hypothetical or notional assessment.

57    The term “suitable employment” is defined in s 4 in relation to an employee who has suffered an injury in respect of which compensation is payable under the Act, to mean:

“(a)    in the case of an employee who was a permanent employee of the Commonwealth or a licensee on the day on which he or she was injured and who continues to be so employed—employment by the Commonwealth or the licensed corporation, as the case may be in work for which the employee is suited having regard to:

(i)    the employee’s age, experience, training, language and other skills;

(ii)    the employee’s suitability for rehabilitation or vocational retraining;

(iii)    where employment is available in a place that would require the employee to change his or her place of residence—whether it is reasonable to expect the employee to change his or her place of residence; and

(iv)    any other relevant matter; and

(b)    in any other case—any employment (including self-employment), having regard to the matters specified in subparagraphs (a)(i), (ii), (iii) and (iv).”

58    It is apparent from the definition that a determination of what is “suitable employment” involves a judgment on the part of the decision-maker, in the consideration of which the decision-maker must have regard to the matters in subs (i)-(iv) inclusive. Each of the considerations in subs (i)-(iii) focuses expressly upon characteristics individual to the employee, while subs (iv) permits any other relevant matter, including other matters pertaining to the individual employee, to be taken into account.

59    Similarly, a determination of the amount per week that the employee is able to earn in suitable employment involves a judgment by Comcare having regard to the considerations set out in s 19(4) of the Act.

(a)    First, where the employee is in employment, Comcare must have regard to the amount per week that the employee is earning in that employment (s 19(4)(a)).

(b)    Secondly, and relevantly for present purposes, where the employee after becoming incapacitated, received an offer of suitable employment and failed to accept that offer, Comcare must have regard under s 19(4)(b) to “the amount per week that the employee would be earning in that employment if he or she were engaged in that employment”. Section 19(4)(c), (d) and (e) deal in a similar manner with various alternative scenarios where the employee fails to continue in suitable employment, to comply with conditions of suitable employment relating to rehabilitation or vocational training, or to seek suitable employment in the first place.

(c)    Thirdly, and importantly, s 19(4)(f) imposes a requirement to have regard to the reasonableness of the employee’s conduct in any of the scenarios with which s 19(4)(b), (c), (d) or (e) are concerned. It provides as follows:

“(f)    where paragraph (b), (c), (d) or (e) applies to the employee—whether the employee’s failure to accept an offer of employment, to engage, or to continue to engage, in employment, to undertake, or to complete, a rehabilitation or vocational retraining program or to seek employment, as the case may be, was, in Comcare’s opinion, reasonable in all the circumstances”.

(d)    On a natural reading, the circumstances to which s 19(4)(f) directs attention to (“in all the circumstances”) in determining the reasonableness of the employee’s conduct include the personal circumstances of the employee concerned.

(e)    Finally, s 19(4)(g) provides that Comcare shall have regard to “any other matter that Comcare considers relevant.” In this regard, Hill J in Woodbridge v Comcare (1994) 20 AAR 196 held that “[t]he requirement that Comcare take into account other relevant matters contained in para. (g) makes it clear that the finding of the amount that an employee is able to earn in suitable employment is a finding that is to be made, having regard to all relevant factual matters. It is not a finding to be made exclusively by reference to the matters set out in subs 4(a) to (f).”

60    As is the case, therefore, with determining whether suitable employment is available, s 19(4) directs attention to the circumstances of the individual employee in calculating what the employee is able to earn in such suitable employment.

3.1.4    Calculation of Normal Weekly Earnings (NWE)

61    In my view, the position is different with respect to the employee’s NWE which is the other element of the formula in s 19(2) of the Act and, if the incapacity should persist, s 19(3).

62    For the reasons explained below, NWE is calculated in accordance with a formula in s 8(1) of the Act which is calibrated or updated by various factors in the succeeding provisions. These have the apparent purpose of ensuring (to the extent possible) that NWE represents the real value over time of the employee’s likely earnings on the hypothesis that he or she had not suffered the injury but continued in his or her pre-injury employment. As Finn J explained in Comcare v Thompson (2000) 100 FCR 375 at 376-377 [3] with respect to an incapacitated employee no longer employed by the Commonwealth:

“…a purpose of the Act is to make some provision (reflected in the compensation payable) for the employee’s participation in what I will loosely describe as changes in remuneration that the employee would have enjoyed had he or she remained in the Commonwealth’s employment. Section 8 of the Act evidences that purpose in the manner in which it allows for adjustments to be made to normal weekly earnings to take account of types of predictable salary increases and payments.”

63    The formula for NWE is contained in s 8(1) which provides:

“(1)    For the purposes of this Act, the normal weekly earnings of an employee (other than an employee referred to in subsection (2)) before an injury shall be calculated in relation to the relevant period under the formula:

(NH x RP) + A

where:

NH is the average number of hours worked in each week by the employee in his or her employment during the relevant period;

RP is the employee’s average hourly ordinary time rate of pay during that period; and

A is the average amount of any allowance payable to the employee in each week in respect of his or her employment during the relevant period, other than an allowance payable in respect of special expenses incurred, or likely to be incurred, by the employee in respect of that employment.”

64    It is not in dispute that the ORG allowance is an allowance within the meaning of s 8(1), that is, the element ‘A’ in the formula for NWE, as the Tribunal found: see [23(a)] above.

65    Leaving aside scenarios not applicable to the present case, the “relevant period” for the purpose of s 8 of the Act is defined in s 9(1) as “… a reference to the latest period of 2 weeks before the date of the injury during which the employee was continuously employed by the Commonwealth…”. As such, the starting point for calculating NWE is the amount per week that Mr Simmons received in the two weeks immediately prior to his injury. It is not in dispute that that amount included the ORG allowance.

66    The succeeding subsections in s 9 of the Act provide for various adjustments to be made to NWE.

67    First, s 8(6) provides that the amount of NWE is increased by the same percentage as the minimum amount that the employee would have received if he or she had continued in the pre-injury employment as a result of attaining a particular age, completing a particular period of service, or by way of increments applicable to the employee’s position (s 8(6)). The reference is to “… an increment in a range applicable to the employee specifically or to the position held”: McDonald v Department of Defence [1999] FCA 882 at [12] (Sundberg J). However, “the increase must be achieved within that position. A pay increase resulting from a change in position would not be ‘by way of an increment in a range’.”: Ibid at [12].

68    Secondly, the amount of NWE will be increased by the same percentage as any increase in the minimum earnings of the employee due to his or her promotion where the employee continues to be employed by the Commonwealth (s 8(7) of the Act).

69    Thirdly, s 8(9) of the Act provides that, where the employee continues to be employed by the Commonwealth, NWE as calculated under the preceding subsections must be increased or reduced by the “relevant percentage”, being relevant increases in the minimum amount payable to employees included in a class of which the employee is a member by awards, industrial agreements and the like. Unlike s 8(6), therefore, which is concerned with adjusting NWE to take account of pay increases applicable to the specific employee or specific position, subs (9) is concerned with an increase or reduction applicable to the employee as a member of a class of employees: Military Rehabilitation and Compensation Commission v Perry (2007) 164 FCR 307 at 315 [38] (Bennett J).

70    Fourthly, s 8(9B) of the Act provides for NWE before injury to be increased in line with a prescribed index where the employee has ceased to be employed by the Commonwealth, while subs (9F) provides for a percentage increase where there has been no increase already made under subs (6), (7) or (9) and no reduction under subs (9).

71    Finally, s 8(10) of the Act imposes a cap upon the amount of pre-injury NWE of an employee which has been calculated under the preceding subsections in the following terms:

“(10)    If the amount of the normal weekly earnings of an employee before an injury, as calculated under the preceding subsections, would exceed:

(a)    where the employee continues to be employed by the Commonwealth or a licensed corporation—the amount per week of the earnings that the employee would receive if he or she were not incapacitated for work; or

(b)    where the employee has ceased to be employed by the Commonwealth or a licensed corporation—whichever is the greater of the following amounts:

(i)    the amount per week of the earnings that the employee would receive if he or she had continued to be employed by the Commonwealth or the licensed corporation in the employment in which he or she was engaged at the date of the injury;

(ii)    the amount per week of the earnings that the employee would receive if he or she had continued to be employed by the Commonwealth or the licensed corporation in the employment in which he or she was engaged at the date on which the employment by the Commonwealth or the licensed corporation ceased;

the amount so calculated shall be reduced by the amount of the excess.”

3.2    Comcare’s submissions on the construction of s 8(10) of the Act

72    Comcare argued that:

(a)    in order to assess the relevant amounts of NWE under s 8(10), it was necessary for the decision-maker to inquire as to the amount, from week to week, what Mr Simmons would be likely to have earned if he had remained employed on the terms of his pre-injury employment;

(b)    this construction accords with the Full Court’s decision in John Holland and in particular that:

i.    the Act requires consideration of the circumstances which pertain in each week in respect of compensation is otherwise payable;

ii.    s 8(10)(b) requires an assessment of actual earnings, adjusted to reflect changes in circumstances between the cessation of employment and the date of calculation, having regard inter alia to the actual terms of employment (at 586 [74]-[77]);

(c)    this construction is supported by the language of s 8(10)(a) and (b)(i)-(ii) which limit the amount of NWE to the amount per week of the earnings that the employee “would receive” (emphasis added) if he or she had continued to be employed in his or her employment at the time of the injury or the date on which the employment ceased, it being said that those words “would receive” require the decision-maker to project forward in time in order to determine what that employee would fairly and realistically have received post injury under the pre-injury terms of engagement;

(d)    it is also supported by the fact that s 8(6),(7), (9) and (9A)–(9G) require Comcare to adjust NWE to have regard to circumstances post-dating the injury and so evince an intention to have regard to certain changed circumstances post-injury in order to calculate the amount of compensation;

(e)    applying this construction:

i.    upon deciding for personal reasons to leave the ORG on 8 February 2010 (as found by the Tribunal), Mr Simmons ceased to be entitled to the ORG allowance under the terms and conditions of his employment, namely clause 9.5 of the Determination;

ii.    in other words, the terms of Mr Simmons’ engagement did not permit him to be paid the allowance once he removed himself from that position;

iii.    his NWE should therefore no longer include the ORG allowance; and

iv.    the position with respect to the period after Mr Simmons left his employment with the Commonwealth under s 8(10)(b) is no different on the ground that Mr Simmons pre-injury “employment” is properly characterised as being a Federal Agent in the AFP and not as an officer in the ORG unit;

(f)    to hold otherwise, it was submitted, would place Mr Simmons in a better position than he would have been in if he had not been incapacitated for work and would lead to the position where Mr Simmons might continue to have a NWE figure that includes the ORG allowance for approximately 35 years until age 65 at $20,000.00 per annum.

3.3    Construction of s 8(10)(b) of the Act

73    I consider that the primary judge correctly held that personal choices by the employee were irrelevant to undertaking the calculation required by s 8(10)(b), where the employee had ceased to be employed by the Commonwealth.

74    First, the words “would receive” in s 8(10)(b) on which Comcare placed much weight, must be read in context. Those words occur as a part of the phrase “would receive if he or she had continued to be employed by the Commonwealth or the licensed corporation in the employment in which he or she was engaged at the date of the injury” in the case of s 8(10)(b)(i), or “at the date on which the employment by the Commonwealth or the licensed corporation ceased” in the case of s 8(10)(b)(ii). As such, in each case the assessment required to be made by the words “would receive” must be made on the basis of an explicit statutory assumption. Those assumptions, in turn, will be contrary to the facts in every case to which s 8(10)(b) applies because s 8(10)(b) is attracted only where the employee has in fact ceased to be employed by the Commonwealth or a licensed corporation.

75    The notional character of the assessment to be made under s 8(10)(b) is also evident in the umbrella paragraph to s 8(10)(a) and (b) which provides that “[i]f the amount of the normal weekly earnings of an employee before an injury, as calculated under the preceding subsections, would exceed…” (emphasis added). From this it is clear that the amount calculated under s 8(2)-(9G) is the notional NWE of the employee “before injury”, notwithstanding that the calculation itself may be undertaken many years after the injury was sustained, from week to week.

76    Secondly, as earlier explained, the calculation of NWE constitutes only one element in the formula contained in s 19(2) and (3). The other element which must be deducted from NWE is the employee’s actual or deemed earnings, or ‘AE’ as it is described in the formula. Importantly, as already explained, where the employee has been found to have failed to accept an offer of “suitable employment” under s 19(4)(b) (which the Tribunal appears to have found here), s 19(4)(f) requires the decision-maker to take into account the reasonableness of the employee’s conduct in all of the circumstances in determining the amount that represents actual or deemed earnings. Comcare’s submission that a failure to accept such an offer should be taken into account in calculating NWE therefore immediately suffers from the difficulty that the Parliament has made express provision to deal with that circumstance in calculating the amount AE which is to be subtracted from NWE. Moreover, the Parliament has made such provision in a way that protects employees against a failure to accept such an offer operating to their detriment in the calculation of compensation where the failure to do so was reasonable in all of the circumstances. That protection would be circumvented by the construction for which Comcare contends, and the statutory purpose to afford such protection thereby thwarted.

77    For example, if the Tribunal had instead considered the reasonableness of Mr Simmons’ conduct in failing to accept the offers of employment with the ORG in Canberra under s 19(4) of the Act, it would have had to take into account such matters as the benefits that the Tribunal accepted Mr Simmons would derive from maintaining the therapeutic relationship with his treating surgeons and physiotherapist (Tribunal’s reasons at [17]), and Mr Simmons’ concern that if he were to return to such a ‘niche’ unit as the ORG with a permanent impairment, his opportunities for advancement, diversifying and education would be greatly limited, as opposed to transferring to Sydney for a more suitable and career beneficial role (Tribunal’s reasons at [15(p)]). However, these matters were peremptorily excluded from consideration by the Tribunal once it found that Mr Simmons’ NWE must be reduced under s 8(10) by subtracting the ORG allowance upon him transferring out of his previous ORG employment for personal reasons. Equally, to take the example given by senior counsel for Comcare at the hearing, if the injured employee were to make a lifestyle choice to cease any employment and live on a commune performing voluntary work only, the question would arise as to whether there had been a failure to seek ‘suitable employment’ having regard to the employee’s personal circumstances and, if so, as to the reasonableness of the employee’s conduct under s 19(4) of the Act.

78    Thirdly, it does not make sense for the failure to accept suitable employment to be taken into account twice in applying the formula. Yet on Comcare’s construction, the Act would provide no mechanism for determining when such a failure should be taken into account in calculating NWE under s 8(10), on the one hand, and when it should be taken into account in determining deemed earnings for the purposes of calculating the component AE in the statutory formula to which s 19(4) applies, on the other hand.

79    Fourthly, my construction of the relationship between the factors NWE and AE in the formula is confirmed by the purpose of the adjustments which s 8 of the Act requires be made to the initial calculation of NWE under s 8(1) and with respect to which s 8(10) ultimately acts a cap. It is true, as Comcare submits, that those adjustments concern circumstances post-dating the injury. Nonetheless, they are of a different nature from those made under s 19(4) of the Act. The adjustments to NWE under s 8 cover such matters as increments to which the employee would have become entitled under the terms of employment at the time of the injury (subs (6)) or increases referable to the employee as a member of a class of employees: Comcare v Thompson (2000) 100 FCR 375 at 376-377 [3] (quoted at [47] above). The apparent purpose of such adjustments, as the respondent submitted, is to provide for a hypothetical updating of the original NWE figure so as to ensure that that figure “keep[s] pace”:

“…in an approximate fashion with the real ups and downs of earnings of other employees in the same positions. For example, the earnings of other employees will be affected by general increases accruing by virtue of length of service or increments in a range of salary, or by increases in the cost of living index, or by the effect of industrial awards or agreements. Sub-sections 8(6)-(9G) are plainly intended to factor in those kinds of general increases, in order to ensure that the ultimate incapacity payments made to the injured employee are not unfairly eroded as a result of the NWE figure being fixed at an earlier point in time, especially when the AE figure on the other side of the equation would not be so fixed, but would represent the up-to-date capacity to earn on earnings data current at the date of the calculation.”

80    However, notwithstanding the intended purpose of the adjustments, the hypothetical figure reached by applying the complex accumulations of increases required by s 8(6)-(9G) at best affords an approximate result which may be significantly higher or lower than the actual amounts that workers in those positions or successor positions in fact earn. That risk is heightened in cases where the employee is no longer employed by the Commonwealth or a licensed corporation and the calculations are made from week to week many years after the injury was sustained.

81    Read in this context, it is apparent that s 8(10) is intended to provide, as counsel for Mr Simmons submitted, “a last stop ‘reality check’, or ‘audit’, on the calculation done under ss.8(6)-(9G)” by providing a means of testing the outcome achieved by the earlier calculations. Thus, while it does not provide for further increases, where the NWE calculated under the preceding subsections produces a higher figure than that under s 8(10), the final amount of the NWE must be reduced to the lower figure calculated under s 8(10). As such, s 8(10) sets a ‘ceiling’ which the figure produced by the hypothetical calculations made under the preceding provisions cannot exceed. So read, the construction for which Comcare argues runs counter to the object of s 8 to project what would hypothetically have happened to the employee’s pre-injury earnings if he or she had not been injured and thereby incapacitated for work.

82    Fifthly, the logical result of Comcare’s approach (as Comcare accepted) is that Mr Simmons would have failed to be entitled to the ORG allowance under the Determination if an assessment had been made post-injury that he no longer met the fitness requirements of a member of the ORG unit, and his NWE reduced accordingly. However, that construction would mean that, if physical fitness is a term of employment, then the incapacity itself may disentitle the employee from compensation – a result which is inconsistent with the objects of the Act.

83    As to Comcare’s submission that the end result of the construction I have adopted is that Mr Simmons may be entitled to compensation which makes provision for the loss of the ORG allowance until 65 years of age, the inference seems to be that that would entitle him to some form of ‘windfall’ which the Act should be construed so as to avoid. However, the argument fails for precisely the reason that Dowsett J rejected a like contention in John Holland at 580 [51]. As his Honour said:

“An employee who has demonstrated the capacity and inclination to maximise the use of his or her earning capacity by accepting unusual requirements or conditions may reasonably expect, and be expected, to continue to do so. The Act does not purport to identify the likely future earnings of an injured employee had he or she not been injured. It rather makes assumptions about subsequent employment and directs that calculations be carried out accordingly. The concept of ‘windfall’ contemplates there being a ‘correct’ level of compensation against which the outcomes produced by different constructions of the Act may be measured. Such an approach is logically flawed. It is the construction of the Act which fixes the intended level of compensation. There is no other standard against which a particular outcome can be compared.”

3.4    Comcare’s reliance on John Holland in support of its construction of s 8(10)(b)

84    Against this, Comcare seeks to rely in particular on the construction of “employment” in the context of s 8(10)(b) adopted by Dowsett J in John Holland, namely, that “employment” for these purposes constitutes the actual duties as described in the contract of employment at the relevant time. On this basis Comcare submits that, in determining for the purposes of s 8(10)(b) the amount that the employee would receive per week of earnings if he or she had (hypothetically) continued to be employed in the employment in which he or she was engaged at the date of the injury, or on which Commonwealth employment ceased, it is relevant to determine whether the employee would have continued to be employed under the pre-injury terms and conditions from week to week.

85    In this regard, it is true that Dowsett J in John Holland held (correctly in my view) that the reference to “the employment in which he or she was engaged” in s 8(10)(b)(i) or (ii) directs attention to the employee’s actual duties at the times specified in those subsections. In his careful analysis of relevant aspects of the scheme of the Act, Dowsett J at 584-588 [66]-[69] identified a number of indicators which supported this meaning of the term “employment”. In particular, his Honour explained at [66] that:

“If the Act contemplates a connection between an injury or disease and the employee’s employment, then it must be possible to determine the ambit of such employment, and whether the circumstances in which the injury arose were within that ambit. This suggests a focus on what was done rather than upon trade, calling or any system of classification.”

86    It was in this context that his Honour expressed the view at 585 [71] that “[t]he notion that performing work under a contract is necessary to the concept of employment suggests that the terms of the contract should be seen as describing the employment.” (emphasis added). As his Honour then explained at 586 [73], that the statutory scheme “…seems to be more consistent with the purpose of the Act to treat the word ‘employment’, when used in the Act, as describing rather more than a trade, calling or classification of employees. The Act is very much concerned with conditions in which employees work and their terms of engagement, rather than how they may be classified.” It follows that I agree with the primary judge at [21] that the phrase “the employment in which he or she was engaged” refers to “the actual employment or job that the employee was engaged in at that date.”

87    In the present case, at the time of injury and relevantly for s 8(10)(b)(i), Mr Simmons was an operational employee in the ORG engaged under the Australian Federal Police Act 1979 (Cth) to perform ORG duties in accordance with the Determination. This description of his employment takes account of the terms of Mr Simmons’ engagement in line with the decision in John Holland. Subsequently, in August 2011, Mr Simmons was employed in the Counter Terrorism Unit and that was the employment in which he was engaged on the date when his employment with the Commonwealth ceased. As the Court below held, these two “employments” were different, having different terms and conditions, duties, responsibilities, wages and entitlements, notwithstanding that the Commonwealth was continuously his employer through the agency of the AFP.

88    By contrast, in seeking to characterise Mr Simmons’ employment simply as an agent in the AFP, Comcare falls into the very error of which it seeks to complain. That submission ignores the terms under which Mr Simmons was engaged at the time of the injury as an element of the description of his employment and instead describes his employment at a level of generality that is inconsistent with the construction adopted in John Holland.

89    Moreover, once it is accepted in line with the decision in John Holland that the employment in which an employee is engaged for the purposes of s 8(10)(b) is that described in the terms of employment at the date of injury or cessation of Commonwealth employment, the logic of Comcare’s approach is that the voluntary choice by Mr Simmons not to accept the offer to continue with the ORG:

(a)     effectively displaced the statutory assumption of continued employment in the position in which he was engaged at the relevant times; and

(b)    replaced that assumption with a new premise based on a finding that there has been a change in the individual’s circumstances after the relevant dates, namely that he was no longer in that position.

90    That approach cannot stand against the plain words of s 8(10)(b) of the Act requiring the contrary assumption to be made.

91    Nonetheless, it must be accepted, as submitted by Comcare, that the fact that the calculation under s 8(10)(b) is hypothetical does not mean that the amount should not take account of actual changes in circumstances in order to assess what the employee would receive on the stated hypotheses. To the contrary, an interpretation of the statutory test in s 8(10)(b) that permits the calculation to take into account changing circumstances bearing on NWE from week to week promotes a central object of the Act which is apparent from the requirement in s 19(2) to apply the formula for each week in which compensation is payable. As, for example, Conti J (with whose reasons Heerey and Dowsett JJ agreed) explained in Telstra Corporation v Hannaford (2006) 151 FCR 253 at 273 [57]:

“The stautory scheme allows for progressive and evolving decision-making giving effect to the provisions of ongoing review of relief or entitlements in the nature of course of workers compensation, being review which allows for adjustment or change in the light of events and circumstances which may subsequently happen. The statutory scheme hence reflects a flexible scope for adjustment by way of decisions in the nature of awards to be made subsequently to the determination of s 14 liability, whether that determination be made in isolation, or in the context of decision-making concerning consequential relief that may be required in the light of evolving circumstances. It is therefore a scheme which allows progressively for ongoing relief, and is thus not comparable of course with the process of curial resolution of the traditional common law entitlement of an injured employee for damages as a consequece of the negligent conduct of an employer. The opening words of s 14(1) ‘[s]ubject to this Part’ are consistent with the flexibility inherent in the ensuing codification of the various facets of compenstion envisaged.”

See also John Holland at 571 [19] (Dowsett J); and Bortolazzo v Comcare (1997) 75 FCR 385 at 388 (Heerey J).

92    Consistently with this, Dowsett J in John Holland held at 586 [75] with respect to s 8(10)(b)(ii) that:

“It seems unlikely that the basis for comparison was meant to be anything other than actual earnings, adjusted to reflect changes in circumstances between the cessation of employment and the date of calculation. In particular, it seems unlikely that it was intended that the actual terms of employment were to be ignored, and the calculation based on the notional employment at rates payable to persons in a particular trade, calling or classification.”

93    His Honour’s reasons at 586 [76] with respect to s 8(10)(b)(i) indicate no different approach, the only difference being that the relevant employment is that in which the employee was engaged at the date of injury.

94    However, that approach lends no support to the proposition put by Comcare that the enquiry should stray beyond the employee’s hypothetical earnings to a consideration of the impact of his personal choices and circumstances after the injury on the terms of his pre-injury employment in calculating NWE, as opposed to calculating AE. Contrary to the submissions of Comcare, no analogy can be drawn in this regard between the circumstances in John Holland and the submission that any enquiry as to Mr Simmons’ NWE must reflect the fact that he had placed himself in a position where he was unable to comply with the Determination and therefore no longer entitled to the allowance.

95    The starting point in John Holland was the terms of the contract which described the injured employee’s employment at the time of the injury and at the time his employment ceased. Under those terms, there was no entitlement to work overtime, but only an entitlement to be paid for such overtime as he performed. In those circumstances, Dowsett J held at 586-587 [77] that “[a]ny enquiry as to his earnings after completion of the project would presumably reflect the total unavailability of overtime.” The amount of NWE calculated for the purposes of applying the statutory formula for determining compensation was therefore reduced under s 8(10)(b) by circumstances that affected the position generally. In other words, there being no overtime available for anyone in the appellant’s position during the disputed period, and no entitlement to be paid for overtime unless overtime was in fact performed, an award of compensation that included overtime would have exceeded the amount per week of earnings that the injured employee would in reality have received if he had continued to be employed in the actual employment in which he was engaged at the relevant date. That is different from the circumstances of this case where conduct by Mr Simmons personally is said to have the consequence that his NWE can no longer include any component for the ORG allowance to which he was entitled at the time of the injury. For the reasons earlier explained, the scheme of the Act is to deal with relevant changes in personal circumstances in the calculation of AE as opposed to NWE.

4.    Conclusion

96    For the reasons set out above, I agree with the conclusion of the primary Judge that the Tribunal erred in reducing the amount of Mr Simmons’ NWE by the pro rata value of the ORG allowance. In my opinion, the Tribunal’s finding that Mr Simmons did not accept an offer to remain in the ORG for personal reasons is irrelevant to the assessment of his NWE under s 8(10)(b)(i) of the Act. However, I consider that the position is different with respect to s 8(10)(a) for the reasons given by Justices Flick and Griffiths. It follows that I agree that the appeal and cross-appeal must be dismissed and otherwise with the orders that their Honours propose.

Associate:

Dated:    13 February 2014