FEDERAL COURT OF AUSTRALIA

Lonergan v Comcare [2005] FCA 377

WORKERS’ COMPENSATION – entitlement to compensation under Safety, Rehabilitation and Compensation Act 1988 (Cth) – incapacity for work arising after retirement – whether compensation should be calculated under s 19 or s 21 of the Act – whether lump sum benefit under superannuation scheme should be taken into account

WORDS AND PHRASES – “being incapacitated for work as a result of an injury”

Safety, Rehabilitation and Compensation Act 1988 (Cth) ss 4, 19, 21

Huckel v Comcare (1994) 35 ALD 251 cited

Re Hammerton and Comcare (1995) 21 AAR 204 cited

Archer v Comcare [2000] FCA 1296 cited

Australian Broadcasting Tribunal v Bond (1990) 170 CLR 321 cited

Cooper Brookes (Wollongong) Pty Ltd v Federal Commissioner of Taxation (1981) 147 CLR 297 cited

BARRY MAXWELL LONERGAN V COMCARE

TAD 23 of 2004

HEEREY J

8 APRIL 2005

HOBART

On Appeal from the Administrative Appeals Tribunal

THE COURT ORDERS THAT:

1. The appeal be allowed.

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

3. The determination of the Administrative Appeals Tribunal dated 25 June 2004 be set aside and in lieu thereof it be ordered that the applicant’s compensation under the Safety, Rehabilitation and Compensation Act 1988 (Cth) be calculated in accordance with s 19 of that Act.

Note:    Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.

REASONS FOR JUDGMENT

1                     This appeal from the Administrative Appeals Tribunal raises the question of law whether the applicant’s compensation under the Safety, Rehabilitation and Compensation Act 1988 (Cth) (the Act) should be calculated under s 19 or s 21 of the Act.  The Tribunal’s reasons at times refer to s 21A, but it seems the potentially relevant alternative to s 19 must be s 21, which deals with persons like the applicant who receive a lump sum benefit under a superannuation scheme, rather than s 21A (persons receiving both a pension and a lump sum benefit).

The applicant’s claim

2                     The applicant was born in 1943.  Since 1985 he had been employed by Comcare as a driver.  On 27 July 1993 he sustained injuries to his bowel in a motor car accident during the course of his employment. 

3                     Following the accident and surgery the applicant returned to work.  But as a result of his injuries he was unable to work for various periods totalling 53.8 weeks.

4                     On 12 September 1997 the applicant accepted voluntary redundancy.  At that time he was, in the words of the respondent’s statement of facts and contention before the Tribunal, “undertaking his normal duties”.  His most recent period off work had ended with a return to work on 2 May 1997.

5                     Following his retirement the applicant purchased a taxi business.  On 20 April 1998 he developed a hernia.  It is not disputed that this was a consequence of his compensable injury in 1993. 

6                     On 26 May 1998 the respondent accepted liability for the applicant’s aggravation of a pre-existing condition leading to a perforated diverticular abscess, bowel resection and colostomy.

7                     The applicant’s incapacity payments were calculated under s 21 of the Act taking into account a lump sum superannuation payment received by the applicant following his retirement.  Subsequently the applicant consulted his present solicitors who in the course of correspondence with the respondent disputed the applicability of s 21.  In a letter dated 27 March 2003 the respondent stated:

‘Comcare accepts that Mr Lonergan was not incapacitated until some time after his compulsory [sic] retirement (involuntary [sic] redundancy) but Comcare’s understanding of Section 21 is that this does not preclude his superannuation from being taken into account.”

8                     On 29 May 2003 a review officer reconsidered the matter and affirmed the earlier determination.  In the course of her reasons the review officer said:

“On 12 September 1997 the Claimant was made redundant.  At that time the Claimant was undertaking his normal duties.”

9                     On 25 June 2004 the Tribunal affirmed the respondent’s decision: Lonergan and Comcare [2004] AATA 659 (incorrectly indexed in Austlii as Lonergan and Repatriation Commission).

The Act

10                  The respondent is liable to pay compensation in accordance with the Act in respect of an injury suffered by an employee if the injury results in incapacity for work:  s 14(1).  Injury is defined in s 4 to mean, amongst other things, an injury “suffered by an employee, being a physical or mental injury arising out of, or in the course of, the employee’s employment”.

11                  Part II of the Act deals with the calculation of compensation.  Division 3 of Pt II is concerned with injuries resulting in incapacity for work.  That expression is defined in s 4(9) as follows:

“(9)     A reference in this Act to an incapacity for work is 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.”

12                  Section 19 is the generally applicable section of Pt II Div 3.  It applies to an employee who is incapacitated for work as a result of an injury, other than employee to whom s 20, 21, 21A or 22 apply: s 19(1).

13                  Section 19(2) provides for liability to pay for each week during which the employee is incapacitated an amount worked out under 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.”

14                  Suitable employment is defined in s 4 to mean:

“(a)     in the case of an employee who, on the day on which he or she was injured was a permanent employee of the Commonwealth or a licensed corporation and who did not subsequently terminate that employment – 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).”

15                  Section 21 provides:

“(1)     This section applies to an employee who, being incapacitated for work as a result of an injury retires voluntarily, or is compulsorily retired, from his or her employment at any time after the commencement of this section and, as a result of the retirement, receives a lump sum benefit under a superannuation scheme.

(2)       Comcare is liable to pay compensation to the employee, in respect of the injury, in accordance with this section for each week after the date of the retirement during which the employee is incapacitated.

(3)       The amount of compensation is an amount calculated under the formula:

                        SA

            AC -   520 + SC

            where:

            AC is the amount of compensation that would have been payable to the employee for a week if:

(a)     section 19, other subsection 19(6), had applied to the employee; and

(b)     in the case of an employee who was not a member of the Defence Force immediately before retirement–the week were a week referred to in subsection 19(3).

SA is the superannuation amount; and

SC is the amount of superannuation contributions that would have been required to be paid  by the employee in that week if he or she were still contributing to the superannuation scheme.”

16                  Superannuation amount in effect means an amount corresponding to the Commonwealth’s contribution.  It is defined in s 4 to mean:

“(a)     if the scheme identifies a part of the pension or lump sum as attributable to the contributions made under the scheme by the Commonwealth, Commonwealth authority or licensed corporation–the amount of that part; or

(b)       in any other case–the amount assessed by the relevant authority to be the part of the pension or lump sum that is so attributable or, if such an assessment cannot be made, the amount of the pension received by the employee in respect of that week or the amount of the lump sum, as the case requires.”

The Tribunal’s decision

17                  The Tribunal, after reciting the applicant’s history, noted the argument put on his behalf that he was not incapacitated for work at the time of his retrenchment and therefore was entitled to payments calculated pursuant to s 19.  According to the Tribunal, the aplicant’s counsel had submitted that there must be a causative link between incapacity and retirement before s 21A (sic) applied or alternatively he must have been incapacitated for work at the date of his retirement.  I should mention at this stage that the first of these arguments was not pressed on the appeal.

18                  The Tribunal noted the applicant’s evidence in relation to his periods of incapacity for work due to the accident and his statement that at the time of his retirement he was carrying out his normal duties.

19                  The Tribunal recorded the respondent’s submissions as follows:

“11. The respondent argued that the concept of incapacity as used in Sections 20, 21 and 21A must be understood within the context of the Act. He contended that the Act focuses on "incapacity" in terms of assessment of a person’s ability to work in suitable employment and the availability of suitable employment. An incapacity whenever occurring, which entitles a person to compensation after retirement is to be paid according to the relevant formula.

12. It was submitted on behalf of the respondent that Section 19 deals with an entitlement to compensation for an employee who is incapacitated for work at any time prior to retirement. The later sections 20, 21 and 21A do not come into play until such time as the retirement has occurred. They apply to people who retire and are entitled from time to time to compensation for each week after their retirement for which they are incapacitated. Sections 20, 21 and 21A apply only to a former employee for the purposes of a continuing entitlement but by virtue of his or her retirement has gained an entitlement to one or other forms of superannuation set out in those sections. The term "being incapacitated" is used in the sense of following retirement.”

20                  After rejecting the argument (not now advanced) that there must be a causative link between incapacity and retirement, the Tribunal continued:

“15. The second submission put by the applicant was that he was not incapacitated at the date of his retirement, therefore, section 21 could not apply to his case. The Tribunal rejects the applicant’s second submission and accepts the concept of incapacity in the Act as put forward by the respondent. Incapacity for the purposes of Commonwealth legislation involves all sorts of additional doctrines and is more concerned with a person’s ability to work in suitable employment. If a person does not have an ability to work in suitable employment or suitable employment is not available, then their lack of ability to obtain suitable employment entitles them to ongoing compensation.

16. The Tribunal finds as a question of fact that had the applicant not gone into his own business at the time of his compulsory retirement it is unlikely that he would have been able to find suitable work and would have been deemed to be incapacitated for the purposes of the Act. The word incapacity in this legislation should be construed in its broad sense and not limited to the circumstance of the actual date of retirement. It is on this basis, we find that the present applicant was incapacitated within the meaning of s4 (a)[sic-presumably s 4(9)(a)] of the Act. The applicant’s entitlement to compensation remains because of his inability to obtain suitable employment.

17. The Tribunal believes that the purpose of section 21A as enacted by the Commonwealth Parliament in 1992 was to ensure that people would be treated in the same manner despite the circumstances of the timing of their incapacity provided it existed at some time after their retirement.

18. This purpose can be gleaned from the report in Hansard at P2749, attached to the second reading speech as part of the debate in Parliament, in which the Member for Barker observed:

‘The Bill contains provisions which, apart from eliminating simultaneous payments for both compensation and superannuation also limits the amount of compensation payable under the scheme’.”

Finding of fact

21                  Counsel for the respondent on the appeal first submitted that the finding of fact in [16] of the Tribunal’s reasons is conclusive against the applicant since an appeal to this Court lies only on a question of law: Administrative Appeals Tribunal Act 1975 (Cth) s 44(1).

22                  However this finding of fact is devoid of consequence because the Tribunal, apparently acting on the submissions of the respondent, asked itself the wrong question.  “Incapacity for work” is defined in s 4(9) in the terms set out in [11] above.  The different concept of “suitable employment” does not arise for consideration until the calculation of compensation is made under s 19(2) or s 21(3).  The distinction between the two criteria was adverted to by Neaves J in Huckel v Comcare (1994) 35 ALD 251 at 254.

23                  Incapacity for work, as defined in the Act, is a simple criterion.  On the respondent’s own case before the Tribunal it seems beyond argument that the applicant was not incapacitated for work at the time of his retirement: he was carrying out his normal duties and had been doing so for over 4 months.  There was no evidence on which the Tribunal, properly instructed, could find that the applicant was incapacitated for work at the time of his retirement and thus any finding to that effect would be an error of law: Australian Broadcasting Tribunal v Bond (1990) 170 CLR 321 at 355-356.

Incapacitated after retirement

24                  Does s 21 apply where the employee’s incapacity for work arises after his or her retirement?  The ordinary meaning of the language of s 21(1) is that the employee in question must be incapacitated for work at the time of his or her retirement (whether that retirement is voluntary or compulsory). “(B)eing incapacitated for work as a result of an injury” is an adjectival phrase which qualifies the employee who retires.  In other words, for the section to apply the employee who retires must possess a particular attribute or characteristic, namely, being incapacitated for work as a result of an injury.

25                  The respondent’s construction, adopted by the Tribunal, necessitates reading s 21(1) as though it said “being or subsequently becoming”. 

26                  Authority supports the applicant’s construction.  In Huckel Neaves J (at 259) spoke of:

“…the criterion prescribed in s 21(1) that the applicant be a person who was, at the time of his retirement, incapacitated for work as a result of his injury…”

27                  In Re Hammerton and Comcare (1995) 21 AAR 204 Forgie DP said (at 222):

“…neither [of ss 20(1) nor 21(1)] is providing that there must be a causative link between the incapacity for work as a result of injury and retirement.  Rather, they are providing only a temporal link between the incapacity and the retirement.  The retirement comes after the incapacity and may be either compulsory or voluntary retirement.  The only causative link in the two provisions is between the retirement and the receipt of a pension under a superannuation scheme.  The receipt of the pension must be received because of the retirement.”

Usually, as a matter of fact, the incapacity will have commenced before the retirement and thus one might say that the retirement comes after the incapacity, in the sense that the incapacity, existing at the time of retirement, commenced at some earlier time.  I read the passage from Hammerton in that way.  However, it would not be correct in my view to take s 21(1) as applying where there was, as in the present case, an incapacity for work which had ceased before retirement.  As already mentioned, the use of the present tense “being” requires the incapacity for work to exist at the same point in time as the retirement.  An incapacity for work commencing and terminating before retirement becomes compensable under s 19.  That section, by subs (3A), makes its own provision for the reduction of pension where the employee is in receipt of a pension under a superannuation scheme.  The operation of Pt II Div 3 is discussed by the Full Court in Archer v Comcare [2000] FCA 1296 at [8].

28                  The applicant’s construction is in my view clearly correct as a matter of ordinary language and grammatical sense.  I do not perceive any basis on which its operation could be perceived to be unintended: Cooper Brookes (Wollongong) Pty Ltd v Federal Commissioner of Taxation (1981) 147 CLR 297 at 321.

29                  If the respondent’s construction is correct, an incapacity which only arose 20 or 30 years after retirement, as for example an asbestos related disease, would require the application of s 21 and the recovery of pension sums paid decades earlier.  It makes sense therefore to calculate the effect of superannuation payments on compensation rights as at the date of retirement. 

Orders

30                  The appeal will be allowed with costs.  The applicant sought an order that his compensation under the Act be calculated in accordance with s 19.  This form of order was not opposed.  There seems no point in remitting the matter to the Tribunal.

Associate:

Dated:              8 April 2005