FEDERAL COURT OF AUSTRALIA

Smalley v Secretary, Department of Health and Ageing [2011] FCA 302

THE COURT ORDERS THAT:

1.    The notice of appeal filed on 11 March 2011 be struck out.

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

REASONS FOR JUDGMENT

introduction

1    By a notice of motion dated 28 February 2011, the Secretary, Department of Health and Ageing (“Secretary”) seeks to strike out or dismiss as incompetent an amended notice of appeal dated 11 March 2011 to which she is respondent.

2    By the amended notice of appeal the applicant, Queenie Smalley, appeals pursuant to s 44(1) of the Administrative Appeals Tribunal Act 1975 (“Cth”) (“the Act”) from the decision or determination of the Administrative Appeals Tribunal (“AAT”) given on 16 November 2010, by which the Tribunal:

(a)    set aside the decision of the Secretary made on 23 December 2008 to treat $466,280.02 of the compensation received by Ms Smalley for her claim of medical negligence under a settlement dated 4 March 2008 as a compensation payment reduction relating to the future costs of providing her residential care; and

(b)    substituted its own decision pursuant to s 4420(5) of the Aged Care Act 1997 (Cth) (to which Part 11 of the Residential Care Subsidy Principles 1997 (“Principles”) applied) that a reduced sum of $236,030.59 of Ms Smalley’s compensation was to be treated as the compensation payment reduction relating to the cost of her future care, which commenced on 4 March 2008.

3    Since 2000, as a result of an accident following which she received the surgical and medical treatment leading to the subject of her negligence claim, Ms Smalley has been permanently bed bound and in receipt of high level nursing and residential care. Ms Smalley contended, both before the Tribunal and on the hearing of this application, that the compensation payment reduction (which is, in effect, the amount by which the subsidy for the cost of her residential care will be reduced) should, according to the methodology used by the Secretary pursuant to Part 11 of the Principles, be only $151,390.39. In essence, Ms Smalley contended that the relevant methodology required a calculation from 4 March 2008 using a figure of 5, based on the Tribunal’s acceptance of medical evidence that Ms Smalley had a life expectancy of five years from 10 September 2010. The Tribunal, however, used a figure of 7.5, reached by taking account of the period between the date of settlement on 4 March 2008 and the commencement in September 2010 of the estimated five year life expectancy.

4    The amended notice of appeal, filed 11 March 2011, relevantly states:

3. THE QUESTIONS OF LAW raised on appeal are ---

The Tribunal was to review the determination by The Secretary Department of Health and Ageing ["The Secretary"] that the compensation payment reduction relating to Ms Smalley's settlement [4th March, 2008] pursuant to Section 44-20[5] Aged Care Act 1997 made on the 23rd December, 2008 of $466,280.02.

The Tribunal has failed to review the determination of The Secretary made [23rd December, 2008] under sub sections 4420[51 and [61 Aged Care Act 1997 in accordance with the Residential Care Subsidy Principles 1997.

The Tribunal member has failed to apply her finding of fact [Ms Smalley has a life expectancy of five [5] years] to the methodology pursuant to Part 11 Residential Care Subsidy Principles 1997 used by The Secretary for determining the compensation payment reduction ["the methodology"].

Factoring the finding of fact [five [5] year life expectancy] into the methodology, the compensation payment reduction is $151,390.39. Viz: The annual [$78.07 per day x 365.25] $28,515.07 difference between the high and low cost care subsidy, indexed by 3% pa x Ms Smalley's life expectancy of five [5] years.

3. ORDERS SOUGHT:

That the compensation payment reduction pursuant to Section 44-20[5] Aged Care Act 1997 relating to Ms Smalley's settlement is $151,390.39.

4. GROUNDS:

The methodology pursuant to Part 11 Residential Care Subsidy Principles used by The Secretary factoring in a life expectancy of five [5] years.

Viz: The annual [$78.07 per day x 365.25] $28,515.07 difference between the high and low cost care subsidy, indexed by 3% pa x Ms Smalley's life expectancy of five [5] years.

5. FINDINGS OF FACT (if any) that the Court is asked to make are:

That Ms Smalley's life expectancy is five [5] years.

5    The Secretary primarily submitted that the amended notice of appeal was incompetent, as it did not disclose a question of law and, accordingly, this court lacked jurisdiction to entertain the appeal.

6    Alternatively, the Secretary argued that if the amended notice of appeal sufficiently articulated a question of law, the appeal had no reasonable prospects of success and judgment for the Secretary should be given under s 31A of the Federal Court of Australia Act 1976 (Cth), or the appeal should be dismissed as frivolous, vexatious or an abuse of process pursuant to O 20 r 5 of the Federal Court Rules (Cth).

Legislation and authorities relevant to appeal from tribunal

7    Section 44(1) of the Act provides:

A party to a proceeding before the Tribunal may appeal to the Federal Court of Australia, on a question of law, from any decision of the Tribunal in that proceeding.

8    Section 44(7) of the Act provides:

If a party to a proceeding before the Tribunal appeals to the Federal Court of Australia under subsection (1), the Court may make findings of fact if:

(a)    the findings of fact are not inconsistent with findings of fact made by the Tribunal (other than findings made by the Tribunal as the result of an error of law); and

(b)    it appears to the Court that it is convenient for the Court to make the findings of fact, having regard to:

(i)     the extent (if any) to which it is necessary for facts to be found; and

(ii)    the means by which those facts might be established; and

(iii)    the expeditious and efficient resolution of the whole of the matter to which the proceeding before the Tribunal relates; and

(iv)    the relative expense to the parties of the Court, rather than the Tribunal, making the findings of fact; and

(v)    the relative delay to the parties of the Court, rather than the Tribunal, making the findings of fact; and

(vi)    whether any of the parties considers that it is appropriate for the Court, rather than the Tribunal, to make the findings of fact; and

(vii)    such other matters (if any) as the Court considers relevant.

9    Order 53 of the Federal Court Rules regulates the practice and procedure to be followed in respect to appeals from the Tribunal. Order 53 r 3(2), (3) and (4) provides:

(2)    The notice of appeal shall be signed by the applicant or his solicitor and shall state:

(a)    the decision of the Tribunal from which the appeal is brought, the members constituting the Tribunal and the date when the decision was made;

(b)     the question or questions of law to be raised on the appeal;

(c)     the order sought; and

(d)     briefly, but specifically, the grounds relied upon in support of the order sought.

(3)    The Court may on such terms and conditions as the Court thinks fit, allow a notice of appeal to be amended.

(4)    On the hearing of an appeal, the applicant shall not, without the leave of the Court, raise any question of law or rely on any ground in support of the order sought other than those stated in the notice of appeal.

10    In TNT Skypak International (Aust) Pty Ltd v Federal Commissioner of Taxation (1988) 82 ALR 175 at 178 (“Skypak”), Gummow J observed:

Section 44 of the AAT Act is expressed in narrower terms than the old s 196 of the Tax Act. This provided for appeals from the Board of Review which "involved” a question of law. The result was that if some question of law was involved, the whole of the decision of the Board was open to review, not merely the question of law ...

This no longer will be the case with appeals brought to this court under s 44 of the AAT Act. The existence of a question of law is now not merely a qualifying condition to ground the appeal, but also the subject matter of the appeal itself ...

11    Gummow J stated (at 181) that the case before him was one where:

… the factual controversy between the parties has been quelled before the tribunal, so that all that remains outstanding between the parties are questions of law. There is no difficulty in such a case with the application of s 44 because s 44 will be coterminous with the matter submitted by the Parliament for resolution by the exercise of the judicial power of the Commonwealth.

12    In Australian Telecommunications Corporation v Lambroglou (1990) 12 AAR 515 (“Lambroglou”) Ryan J said (at 524):

I do not regard it as legitimate to call in aid the grounds supplied in purported compliance with O 53, r 3(2)(d) to read down the questions stated as required by paragraph (b) to what are truly questions of law. Because the appeal under s 44 of the AAT Act is confined to a question of law it would be inappropriate for the Rules to specify as part of the contents of a notice of appeal "grounds” which would be appropriate if the appeal could be brought against findings of fact as well as against what are said to be errors of law; cp O 52, r 13(2)(b) which requires a notice of appeal of that wider kind to state "briefly, but specifically, the grounds relied upon in support of the appeal”. The distinction is recognized by O 53, r 3(2)(d) which requires the notice of appeal under the AAT Act to state only "the grounds relied upon in support of the order sought”. In the present case the order sought is that "the Decision of the Tribunal be set aside”. Grounds in support of that order would properly assume the resolution of the question of law in favour of the applicant and indicate in a summary way the reasons why that resolution requires the decision of the AAT to be set aside. Of necessity, properly drawn grounds of that kind could not elucidate the question of law.

13    Ryan J (at 524) stated that merely to assert that the Tribunal had erred in law in making a particular finding was not to state a question of law. His Honour further stated (at 527) that:

... it simply begs the question of law to commence it with the words "Whether the Tribunal erred in law.” If the question, properly analysed, is not a question of law no amount of formulary like "erred in law” or "was open as a matter of law” can make it into a question of law.

14    In Birdseye v Australian Securities and Investments Commission (2003) 76 ALD 321 (“Birdseye”), the Full Federal Court dismissed an appeal from a decision of the AAT brought under s 44 of the Act.

15    Branson and Stone JJ, in their joint judgment, adopted the observation of Bowen CJ and Deane J in their joint judgment in Drake v Minister for Immigration and Ethnic Affairs (1979) 2 ALD 60 at 61–2 that:

The proceedings are not an appeal in the strict sense in that they lie within the original jurisdiction of the court. It is, however, convenient to adopt the nomenclature of the Act and to refer to them as an appeal.

16    Branson and Stone JJ noted that the initial formulation of the question of law in the notice of appeal originally filed in Birdseye – namely “[w]hether the Tribunal has committed an error of law in determining not to extend the time within which the appellant might apply for review (on the merits by the Tribunal) of the respondent’s decision” – did not state a question of law, but rather “invited inquiry into whether the tribunal had committed any error of law in reaching its decision” (at [6]).

17    Further, although the amended notice of appeal stated a number of purported questions of law which referred to specified grounds, and were unchallenged, their Honours concluded that it did not comply with the requirement of O 53 r 3 of the Federal Court Rules understood in the context provided by s 44(1) of the Act.

18    Branson and Stone JJ noted, in that context, the observations of Gummow J in Skypak and Ryan J in Lambroglou. Their Honours stated (at [16]-[18]):

We express our respectful agreement with the above observations of Gummow and Ryan JJ respectively.

A number of well-known authorities has considered the distinction between a question of law and a question of fact: see, for example, Collector of Customs v Pozzolanic Enterprises Pty Ltd (1993) 43 FCR 280 ; 115 ALR 1; Collector of Customs v Agfa-Gevaert Pty Ltd (1996) 186 CLR 389 ; 43 ALD 193 ; 141 ALR 59. However, very limited consideration has been given to how a question of law ought properly to be stated in a notice of appeal from a decision of the tribunal having regard to the requirements imposed by O 53 r 3(2). Those requirements include that the questions of law raised by the appeal are to be stated separately from the grounds relied upon in support of the order sought on the appeal.

In our view, O 53 r 3(2) discloses an intention that a question of law to be raised on an appeal from the tribunal should be stated with precision as a pure question of law. It is in the specification of the grounds relied upon in support of the orders sought that, in our view, one should expect to find the links between the question of law, the circumstances of the particular case and the orders sought on the appeal. It is not necessary in this case to give consideration to questions such as whether an allegation of denial of natural justice can give rise to a question of law so as to found an appeal under s 44(1) of the AAT Act (see Clements v Independent Indigenous Advisory Committee (2003) 37 AAR 309 esp per Gray ACJ and North J at [3]–[8] and Gyles J at [58]–[67]) and if it can, how the question of law should be stated.

19    Branson and Stone JJ observed that as the questions of law stated in a notice of appeal were the subject matter of the appeal, in Birdseye it would be necessary to reframe one of the questions in the notice of appeal in order to provide the basis for an appeal. Their Honours also observed that the precise question of law intended to be stated by another purported question in the notice of appeal was unclear and, at best, it would be a mixed question of law which had only a tenuous connection with the Tribunal’s decision.

20    Branson and Stone JJ concluded at [32]:

In our view, for the reasons given above, the notice of appeal does not state any question of law on which an appeal from the decision of the tribunal could succeed. Indeed, as the reasons for judgment of Marshall J reveal, even if this court had jurisdiction to entertain an appeal from the tribunal which involved a question of law, this appeal would fail.

21    Marshall J, in a separate judgment, concluded at [61]:

I have read in draft form, since preparing these reasons for judgment, the reasons for judgment of Branson and Stone JJ. I agree with what their Honours have said concerning the deficiencies in the applicant’s notice of appeal and I also agree that the notice of appeal in the instant matter does not, with precision, identify a question or questions of law.

22    In Colby Corp Pty Ltd v Commissioner of Taxation (2008) 165 FCR 133, the Full Federal Court (Branson, Stone and Jessup JJ) dismissed an appeal brought pursuant to s 44(1) of the Act.

23    Branson and Stone JJ, in their joint judgment, reiterated the views they had expressed in Birdseye. Their Honours stated at [13]:

An applicant’s right to invoke the Court’s jurisdiction to review the decision of the Tribunal arises under s 44(1) of the Administrative Appeals Tribunal Act 1975 (Cth) and is a right to appeal “on a question of law”: Birdseye … per Branson and Stone JJ at [17]–[18]; Price Street Professional Centre Pty Ltd v Commissioner of Taxation (2007) 67 ATR 544 at [35] per Edmonds J.. The right to appeal from a decision of the Tribunal is to be distinguished from a right to appeal “in relation to” a question of law or where the appeal “involves” a question of law. As Gummow J remarked in TNT Skypak … at 178, “The existence of a question of law is … not merely a qualifying condition to ground the appeal, but also the subject matter of the appeal itself”.

24    Their Honours further stated at [16]:

Nothing in Birdseye is intended to suggest that a question of law within the meaning of s 44(1) cannot contain any reference to factual matters. Whether primary facts constitute evidence of an ultimate fact is uncontroversially a question of law within the meaning of s 44(1). An example would be whether the primary facts constitute evidence of compliance with a statutory test. It is also uncontroversial that, except in the limited circumstances identified by s 44(7), the legislature intended the Tribunal to be the final arbiter of fact and the Federal Court not to be permitted to make factual findings on an appeal under s 44(1). For this reason, an appeal under s 44(1) is not a vehicle whereby a party may have the Federal Court review the Tribunal’s findings of fact. Unless the answer to the question of law, which is the subject-matter of the s 44(1) appeal, reveals that a factual finding of the Tribunal is affected by error (in which case the matter will ordinarily be remitted to the Tribunal), an appeal under s 44(1) must proceed on the basis of the findings of fact made by the Tribunal.

25    In Bittmann v Australian Securities and Investments Commission (ASIC) (No 2) [2006] FCA 1786 at [12], Kenny J analysed the source of the court’s power to dismiss an appeal brought under s 44 of the Act on the basis of failure to state a question of law as follows:

In McGregor v Chief Executive Officer of Centrelink [2000] FCA 701 at [17], Spender J expressed the view that there was power under O 20 r 2 of the Rules to dismiss an appeal purportedly under s 44 of the AAT Act on the basis that it stated no question of law and thus disclosed no reasonable cause of action: see also Zoia v Administrative Appeals Tribunal [2003] FCA 303 at [6] per Carr J and Barghouthi v ING Custodians Pty Ltd [2003] FCA 1272 at [15] per Allsop J. In Lambroglou, Ryan J expressed the view (at 519) that O 53 r 15(1) of the Rules conferred a power sufficiently broad to allow the Court to strike out the whole or part of an appeal under s 44 of the AAT Act. Whatever the correct analysis of the Rules, s 23 of the Federal Court Act confers broad power on the Court to make orders of such kinds as it thinks appropriate. I accept that, pursuant to s 23, the Court has power to strike out a notice of appeal in reliance on s 44 where the notice does not state a question of law: compare also Lambroglou at 519–520.

26    In Hoe v Manningham City Council [2011] VSC 37 (“Hoe”), a case on which Ms Smalley particularly relied, Pagone J granted leave to appeal from a decision of the Victorian Civil and Administrative Tribunal (“VCAT”) pursuant to s 148 of the Victorian Civil and Administrative Tribunal Act 1998 (Vic) (“VCAT Act”) on a question of law.

27    His Honour referred to the objectives underpinning the need to identify an error of law to enliven and to form the basis of the Court’s jurisdiction to hear an appeal under the VCAT Act. His Honour stated at [4]-[5]:

The need to identify precisely an error of law is important also to identify and define the subject matter and ambit of any appeal to this court and thus to ensure that the statutory appellate jurisdiction of this court is lawfully engaged, defined and circumscribed. In Osland v Secretary to the Dept of Justice [(2010) 126 ALD 1] French CJ, Gummow and Bell JJ emphasised the need for precision in definition of the question of law upon which an appeal under s 148 of the VCAT Act was brought saying [at [21]]:

There is a need for better definition of the questions of law upon an appeal to the Court of Appeal under s 148 of the VCAT Act than appeared in these proceedings. The questions of law are not to be distilled from the grounds of appeal. What Gummow J said of s 44 of the Commonwealth AAT Act in TNT Skypak International (Aust) Pty Ltd v FCT is true also of s 148:

… The existence of a question of law is … not merely a qualifying condition to ground the appeal, but also the subject matter of the appeal itself.

These observations emphasise the need for precision in articulating the question of law in an appeal and emphasise a fundamental reason for the need for that precision. The court’s jurisdiction to hear an appeal depends upon there being a question of law in issue but it is only the question of law which the court is permitted by the statutory appeals jurisdiction to consider. The fact that a question of law may have been involved in a decision does not permit the whole of the decision to be agitated upon an appeal. The question of law is the trigger for an appeal but is also the entire subject matter of the appeal and for both purposes it is essential that the question of law said to have been erroneously decided is identified exactly.

The fact that Mr Hoe is an unrepresented litigant potentially creates difficulties for the court as well as for opposing parties and their legal representatives. The adversarial system of justice works best when parties are equally represented by competent legal practitioners who are knowledgeable of the law and skilled in forensic craft.

28    His Honour then noted that, as the applicant was a litigant in person and not a qualified lawyer able to identify a question of law in conventional terms with the relevant precision (at [7]), “different considerations may be called for in different contexts and at different stages of the court’s functions” (at [6]).

29    His Honour also observed that although the applicant’s appeal from the Tribunal’s decision appeared to take issue with findings of facts, it involved a construction of a planning scheme and the “Tribunal was primarily being asked whether the words in the Planning Scheme covered the facts and circumstances of [the applicant’s] case” (at [14]).

30    In that context, his Honour stated at [12]:

[T]he actual decision [of the Tribunal] has many of the hallmarks of a legal conclusion that the facts as found were such as to bring the case within the provisions of a statutory enactment.

…

[A] question of law arises when the issue to be decided is whether the facts come within the statutory description. That is not because an appeal is allowed about the facts found but because whether the facts as found come within the statutory description involves an understanding of what the words in the statute (or in another legislative instrument or principle or rule of law) mean independently of the facts. Such legal challenges are not about the evidence tendered, or about the facts as found upon the evidence, but about the interpretation given to the words in the statute. Such legal challenges do not re-open the hearing for debate about the evidence and generally (unless there was no evidence to justify a finding) do not permit complaints that the factual findings were not supported by the evidence. Rather, such legal challenges focus upon the interpretation or construction of a statute, or some other principle or rule of law, to determine whether an interpretation or construction of the law supports its application on the facts as found.

31    Pagone J recognised that in Hoe, the Tribunal’s decision depended on its interpretation of a term which it had then applied to the facts. On a fair analysis of the applicant’s claim, there was “a clear complaint that the evidence did not support the conclusions reached by the Tribunal upon the proper construction of the Planning Scheme” (at [22]). Pagone J concluded that the applicant was “complaining primarily that the facts found…do not fit the legal description required by the Planning Scheme” (at [21]). His Honour held that the application had identified an error of law but stated that directions may be necessary to ensure precise focus (at [23]).

32    Pagone J’s acknowledgment that a question of law arises when the issue to be decided is whether the facts come within a statutory description was an orthodox iteration of established principles. Hoe (albeit decided on different legislation from that in issue in this case) does not in any way diminish or modify the requirement for a precisely stated question of law necessary to found jurisdiction and provide the subject matter of an appeal under s 44(1) of the Act.

33    Section 23 of the Federal Court of Australia Act states:

Making of orders and issue of writs

The Court has power, in relation to matters in which it has jurisdiction, to make orders of such kinds, including interlocutory orders, and to issue, or direct the issue of, writs of such kinds, as the Court thinks appropriate.

Section 31A of the Federal Court of Australia Act 1976 (Cth)

34    Section 31A of the Federal Court of Australia Act 1976 (Cth) states:

Summary judgment

(1)    The Court may give judgment for one party against another in relation to the whole or any part of a proceeding if:

(a)    the first party is prosecuting the proceeding or that part of the proceeding; and

(b)    the Court is satisfied that the other party has no reasonable prospect of successfully defending the proceeding or that part of the proceeding.

(2)    The Court may give judgment for one party against another in relation to the whole or any part of a proceeding if:

(a)    the first party is defending the proceeding or that part of the proceeding; and

(b)    the Court is satisfied that the other party has no reasonable prospect of successfully prosecuting the proceeding or that part of the proceeding.

(3)    For the purposes of this section, a defence or a proceeding or part of a proceeding need not be:

(a)    hopeless; or

(b)    bound to fail;

for it to have no reasonable prospect of success.

(4)    This section does not limit any powers that the Court has apart from this section.

(5)    This section does not apply to criminal proceedings.

35    O 20, r 5 of the Federal Court Rules states:

5    Stay or dismissal (proceedings commenced on or after 1 December 2005)

(1)    This rule applies to a proceeding commenced on or after 1 December 2005 if the Court is satisfied that, for the proceeding generally or for a claim for relief in the proceeding:

(a)    the proceeding or claim is frivolous or vexatious; or

(b)    the proceeding or claim is an abuse of the process of the Court.

(2)    The Court may order that the proceeding be stayed or dismissed generally or in relation to the claim for relief.

(3)    The Court may receive evidence on the hearing of an application for an order under subrule (2).

Legislation RELEVANT To tribunal’s decision

36    The Aged Care Act provides, inter alia, for the Commonwealth to give financial support through the payment of subsidies for the provision of aged care.

37    Section 4420 of the Aged Care Act provides for a compensation payment reduction. It states:

The compensation payment reduction

(1)    The compensation payment reduction for the care recipient in respect of the *payment period is the sum of all compensation payment reductions for days during the period:

(a)    on which the care recipient is provided with residential care through the residential care service in question; and

(b)    that are covered by a compensation entitlement.

(2)    For the purposes of this section, a day is covered by a compensation entitlement if:

(a)    the care recipient is entitled to compensation under a judgment, settlement or reimbursement arrangement; and

(b)    the compensation takes into account the cost of providing residential care to the care recipient on that day; and

(c)    the application of compensation payment reductions to the care recipient for preceding days has not resulted in reductions in subsidy that, in total, exceed or equal the part of the compensation that relates, or is to be treated under subsection (5) or (6) as relating, to future costs of providing residential care.

(3)    The compensation payment reduction for a particular day is an amount equal to the amount of *residential care subsidy that would be payable for the care recipient in respect of the *payment period if:

(a)    the care recipient was provided with residential care on that day only; and

(b)    this section and Subdivision 44 F did not apply.

(4)    However, if:

(a)    the compensation payment reduction arises from a judgment or settlement that fixes the amount of compensation on the basis that liability should be apportioned between the care recipient and the compensation payer; and

(b)    as a result, the amount of compensation is less than it would have been if liability had not been so apportioned; and

(c)    the compensation is not paid in a lump sum;

the amount of the compensation payment reduction under subsection (3) is reduced by the proportion corresponding to the proportion of liability that is apportioned to the care recipient by the judgment or settlement.

(5)    If a care recipient is entitled to compensation under a judgment or settlement that does not take into account the future costs of providing residential care to the care recipient, the Secretary may, in accordance with the Residential Care Subsidy Principles, determine:

(a)    that, for the purposes of this section, the judgment or settlement is to be treated as having taken into account the cost of providing that residential care; and

(b)    the part of the compensation that, for the purposes of this section, is to be treated as relating to the future costs of providing residential care.

Note:    Determinations are reviewable under Part 6.1.

(6)    If:

(a)    a care recipient is entitled to compensation under a settlement; and

(b)    the settlement takes into account the future costs of providing residential care to the recipient; and

(c)    the Secretary is satisfied that the settlement does not adequately take into account the future costs of providing residential care to the care recipient;

the Secretary may, in accordance with the Residential Care Subsidy Principles, determine the part of the compensation that, for the purposes of this section, is to be treated as relating to the future costs of providing residential care.

Note:    Determinations are reviewable under Part 6.1.

(7)    A determination under subsection (5) or (6) must be in writing and notice of it must be given to the care recipient.

(7A)    A determination under subsection (5) or (6) is not a legislative instrument.

(8)    A reference in this section to the costs of providing residential care does not include a reference to an amount that is or may be payable as an *accommodation bond, except to the extent provided in the Residential Care Subsidy Principles.

(9)    In this section, the following terms have the same meanings as in the Health and Other Services (Compensation) Act 1995:

compensation

compensation payer

judgment

reimbursement arrangement

settlement.

(emphasis in original)

38    The Principles referred to in s 4420(5) of the Aged Care Act relevantly state:

21.27 Purpose of Part (Act, s 44-20)

This Part specifies matters to be considered by the Secretary in exercising the powers under subsections 44-20 (5) and (6) of the Act to make a determination affecting the compensation payment reduction for a care recipient who is entitled to compensation under a judgment or settlement.

21.28    The matters

(1) The Secretary must take into account the following matters:

(a) the amount of the judgment or settlement;

(b) for a judgment - the components stated in the judgment and the amount stated for each component;

(c) the proportion of liability apportioned to the care recipient;

(d) the amounts spent on residential care at the time of judgment or settlement.

Examples of components of judgment for paragraph (b):

1.    Loss of income.

2.    Costs of future care.

(2) The Secretary may take into account any other matters the Secretary considers relevant, including:

(a) the amounts that are likely to be paid to or withheld by other Government agencies because of the judgment or settlement;

(b) the amounts spent on care other than residential care at the time of the judgment or settlement;

(c) the likely cost of residential care for the care recipient;

(d) other costs of care for which the care recipient is likely to be liable;

(e) the amount of the accommodation bond paid or payable by the care recipient.

(emphasis in original)

Other documents relied on by the applicant

39    Counsel for the applicant in written submissions referred to, and at the hearing handed up, a document entitled “Determination Guidelines - Section 4420 of the Aged Care Act 1997 - Compensation Payment Reduction” (“Guidelines”) and a document described as a commentary on s 4420 of the Aged Care Act approved by Iain Scott, Assistant Secretary, Prudential and Approved Provider Regulation Branch, Department of Health and Ageing, dated 17 September 2010 (“commentary”).

40    The commentary referred to s 44-20(1) of the Aged Care Act and the Principles, including the matters which the Secretary’s delegate may consider when making a determination, such as the likely cost of providing residential care. The commentary stated “In order to consider the likely cost of providing residential care, the delegate considers the residential care subsidy amount payable at the time of settlement and the likely time the care recipient will remain in residential care, being the remainder of their life, ie: their life expectancy. The commentary stated:

The delegate considers medical reports supplied providing opinions regarding life expectancy. If there is not a medical report supporting a reduction in life expectancy the Australian Bureau of Statistics Life Expectancy Reports is used.

In order to calculate the cost of providing residential care to the care recipient for the future, the subsidy amount paid at day of settlement is used. This is then multiplied by 365.25 to obtain a yearly amount. The figure of 365.25 is used to take into account leap years. A 3% indexation is applied yearly thereafter to take into account the subsidy indexation. These yearly amounts are calculated to cover the life expectancy of the care recipient.

41    The commentary set out a number of hypothetical examples of the application of the formula.

42    The Guidelines explained the meaning of the compensation payment reduction by reference to the legislation and the Principles. Under “[w]here future care costs have not been provided or ‘how to make a determination’”, the Guidelines stated:

The principles listed under Section 1 must be taken into consideration. The principles as listed under Section 2 may be taken into consideration, by law the Secretary is not obliged to include these factors. However, where they apply, these factors are considered as the intention of this process is to ensure that the resident contributes a reasonable amount towards their own costs. We do not seek to take their entire settlement amount or give them nothing to live on. Also, Section 2 provides for other relevant factors to be considered.

43    Before me, the Guidelines and commentary were not tendered and their status was disputed. The applicant submitted that the documents had been promulgated by the Secretary, while the Secretary submitted that the documents were simply internal working documents produced to the Tribunal to assist the calculation. The Secretary submitted that the Court should have no regard to either document in determining whether there was a question of law founding jurisdiction for an appeal and, if so, whether an appeal so articulated had sufficient prospects of success.

44    The Guidelines set out a hypothetical example of application of the Principles to a case in which the annual rate of the residential care subsidy was first estimated and “as [the person] is expected to live another 3 years, this amount must be multiplied by 3, with an additional 1.03% included for each subsequent year”.

45    Under “Reaching a Reasonable Compromise” the Guidelines stated:

This is the most difficult function of the position, because there aren’t any hard and fast rules on how this is to be done. Basically, you need to balance the needs of the resident against the Department’s responsibility to taxpayer, i.e. the resident pays what they can towards their own residential care costs, but still gets the benefits intended by the compensation payment. …

Remember that all determinations are appealable decisions, and that you need solid reasons for all decisions. Obviously where you can, rely on the legislation, but remember that whatever you decide has very real consequences for the resident who will have to live with the determination that you are making over what may be their only source of income.

46    In relation to “Reduction in Life Expectancy”, the Guidelines stated:

We can, and should, take this into consideration where it is substantiated by a medical report. A solicitor’s affirmation of this is not enough.

Tribunal’s decision

47    The factual background to the appeal, which was undisputed, was set out in the Tribunal’s reasons for decision as follows:

1. Miss Smalley sustained a subtrochanteric fracture of the left femur on 8 April 2000. This fracture necessitated internal fixation with a plate and screw. The surgery was performed on 12 May 2000 at the Maroondah Hospital. Postoperatively, Miss Smalley developed a deep vein thrombosis and a Methicillin Resistant Staphylococcus Aureus (MRSA) wound infection with wound dehiscence (the wound fell apart). These conditions required prolonged hospitalisation and the eventual removal of the fixators. Miss Smalley's fracture did not unite and she has been confined to bed since the original accident of 8 April 2000. She requires specialised nursing care on a residential basis at the Shepparton Aged Care Home.

2. The management of her fracture and her ongoing needs for highlevel nursing home care has been complicated by morbid obesity, a longstanding anxiety disorder, Paget's disease of the bone, osteoarthrosis of the right hip with avascular necrosis of the femoral head, recurrent chest infections and a cerebrovascular accident (stroke) which occurred in October 2007.

3. Miss Smalley made a claim for negligence against the surgeon and the hospital treating her left femur fracture. On 4 March 2008 this claim was settled for $1,100,000. The settlement did not provide apportionment for future care. Following the payment of legal costs and medical expenses already incurred, the net amount available to Miss Smalley was initially estimated to be $757,950.91. After a review of other costs, this amount was reduced to $535,738.94.

4. Miss Smalley is required to contribute to the provision of her care in the Shepparton Aged Care Home. The amount of her contribution has been calculated on Australian Bureau of Statistics (ABS) figures, based on her age and life expectancy. Her life expectancy has been reduced due to her co-existing chronic illnesses.

5. On 9 September 2008 the delegate of the Secretary of the Department of Health and Ageing (the Secretary) determined that, pursuant to s 44-20 of the Aged Care Act 1997 (the Act), $487,217.69 of the damages awarded to Miss Smalley related to expenses to be incurred in respect of her residential care.

6. The Secretary reconsidered that decision. She set it aside and made a new decision on 23 December 2008, which reduced Miss Smalley's contribution to the cost of her residential care to $466,280.02.

7. On 13 January 2009 Miss Smalley applied to the Administrative Appeals Tribunal for a review of the decision of 23 December 2008.

48    The Tribunal observed that two geriatricians, Dr Scholes and Dr Campbell, had assessed Ms Smalley at different times.

49    In summary, on 20 September 2007, prior to the settlement, Dr Scholes estimated that Ms Smalley’s life expectancy was 14.2 years.

50    In October 2007, Ms Smalley suffered a cerebrovascular accident and, subsequently, from respiratory infections and other conditions. In his report dated 9 July 2010, Dr Scholes revised her life expectancy to less than five years due to the additional health problems which had arisen since his earlier report. In his report dated 6 September 2010, Dr Campbell stated “overall I estimate that Ms Smalley has a life expectancy of five years from the date of this report”. Dr Scholes, by a letter dated 13 September 2010, stated that he fully agreed with Dr Campbell’s report.

51    In the light of the reports of Dr Scholes and Dr Campbell, the Secretary recalculated the cost of providing future residential care for Ms Smalley, from the settlement on 4 March 2008 based on a life expectancy of seven years and six months. The Secretary accepted the costs prior to settlement including legal costs and additional services, leaving an amount of $535,738.94 to Ms Smalley’s credit. The Secretary accepted that Ms Smalley’s contribution to her care should be calculated on a daily amount of $78.07 (being the difference between the high and low care subsidies) and required a contribution to care over a period of seven and a half years, calculated at $236,030.69.

52    Ms Smalley appealed to the AAT.

53    The Tribunal stated at [17]:

Before the hearing, the parties agreed that the facts were not in dispute. The parties did not call any evidence. The parties and the Tribunal relied on the contents of the TDocuments and the tendered exhibits in relation to the facts. The issues identified were the start date of the most recent life expectancy estimate, and therefore when Miss Smalley's requirement to pay the difference between standard (or low) and special (or high) care arises. The Applicant argued that the fiveyear life expectancy should operate from 4 March 2008. The Secretary argued that it commenced on 6 September 2010.

54    The Tribunal observed that Ms Smalley submitted that the “life expectancy calculation of 6 September 2010 applied prior to the date of settlement and that the Tribunal should not consider the trial of living between October 2007 and September 2010”. Further, the Tribunal “should find this revised life expectancy [of five years] began from the date of settlement and calculate Miss Smalley’s compensation payment reduction accordingly”.

55    The Tribunal observed that the Secretary submitted that it should base its decision on the circumstances prevailing at the date of its decision, in accordance with Shi v Migration Agents Registration Authority (2008) 235 CLR 286. In that context, the Secretary submitted that the “the most recent evidence of Miss Smalley’s life expectancy of five years from 6 September 2010 is the agreed opinion of Dr Scholes and Dr Campbell. This translates to a life expectancy of seven and a half years from the date of settlement of her claim for damages”.

56    The Tribunal considered the applicable legislation and set out the history of the successive decisions in relation to Ms Smalley’s compensation reduction payment.

57    The Tribunal stated at [31] to [34]:

Prior to the hearing the parties agreed that the only issue was whether the most recent life expectancy estimate of five years was to begin from 6 September 2010, as clearly stated by Doctors Campbell and Scholes, or from 4 March 2008.

The Act does not refer to date of settlement. Section 44-20(1) clearly states that the payment period is the sum of all compensation payment reductions for days during the period ... on which the care recipient is provided with residential care...

Miss Smalley has repaid the Department of Health and Aging the cost of her care between 23 July 2001 and 4 March 2008. The amounts the Secretary determined in the initial determination, the reconsideration, and the revised estimate following 6 September 2010 relating to future care are based on predicted life expectancy.

It is not the role of the Tribunal to determine Miss Smalley's life expectancy. The estimates have varied from 14.2 years in September 2007 to 13.6 years in 2008 to five or less years in 2010. The limiting factors with respect to life expectancy, the morbid obesity, pulmonary infections and stroke, were present at the date the compensation payment reductions came into effect. The Tribunal accepts the estimate of five or less years of 6 September 2010.

58    The Tribunal dismissed a number of Ms Smalley’s allegations which are not relevant to this application.

59    The Tribunal concluded at [39]:

The Tribunal bases its decision on the current expert evidence that, as of 6 September 2010, Miss Smalley has a predicted life expectancy of five years. Having verified the Secretary's calculations of the cost of future care, the Tribunal determines that Miss Smalley's total contribution (the compensation payment reduction) is $236,030.59 and that future care commenced on 4 March 2008.

Discussion

Whether question of law stated

60    Before me, counsel for Ms Smalley did not seek to amend or reframe the questions of law. He submitted, however, that they could be articulated in a number of different ways. In explanation of the legal question said to be raised in the amended notice of appeal, counsel submitted that there was no temporal basis under the legislation for the determination of the formula in the Guidelines, and the Tribunal erred because, having found as a fact that the most recent life expectancy of Ms Smalley was five years, it did not insert that figure into the formula, instead using a figure of 7.5. As I understood his submission, counsel did not challenge the legitimacy of the formula but rather, the validity of the figure of 7.5 used by the Tribunal.

61    Counsel submitted that the error of law made by the Tribunal was the failure to apply its finding of fact of the applicant’s most recent estimated life expectancy, which was in evidence, to the formula set out in the “Guidelines”, as explained by the commentary. That, counsel said, constituted a failure properly to apply the methodology pursuant to Part 11 of the Principles, and thus constituted a question of law according to Pagone J’s reasoning in Hoe.

62    Counsel submitted that the question of law was whether there is a temporal requirement under the legislation that life expectancy to be determined on the basis of the finding of fact of five years (when there was no finding of fact that Ms Smalley had a life expectancy of seven and a half years) which would then become the figure used in the formula on which the parties were ad idem in determining the subsidy.

63    While a question of law in the requisite sense may arise in relation to whether facts come within the statutory description, in the present case, the amended notice of appeal merely stated the decision the Tribunal was to review, and asserted that the Tribunal member failed to review the Secretary’s determination in accordance with the Principles and to apply the finding of fact that Ms Smalley had a life expectancy of five years to the methodology pursuant to Part 11 of the Principles. The amended notice of appeal then set out the allegedly correct alternative calculation using a figure of 5, which resulted in a total sum of $151,390.39. The amended notice of appeal requested the court to make the finding of fact “that Ms Smalley’s life expectancy is five (5) years”.

64    In my opinion, the amended notice of appeal does not state a question of law, whether in form or substance, in relation to the statutory construction on which the alleged error depends. As in Birdseye, the purported question invites a question as to whether the Tribunal erred in reaching its decision and asserts what the correct decision would be, but does not coherently articulate any question of law. If the alleged error were that the Tribunal erred in concluding that Ms Smalley had a life expectancy of seven and a half years instead of five years from the date of settlement, such an error would be one of fact only and outside the court’s jurisdiction under s 44 of the Act. The questions of law stated in the amended notice of appeal beg any potential question of construction of the legislative framework or broader discretionary context which would support a conclusion of error. Moreover, if and to the extent that the questions of law stated in the amended notice of appeal indicate that a proper construction of the legislation, principles and associated guidelines required the use of a different figure, the logical pathway is not exposed.

65    In my opinion, no question of law was precisely articulated in the notice of appeal. Further, the applicant’s submissions did not assist me to identify a precisely stated question of law necessary to found jurisdiction and the subject matter of the appeal.

Whether reasonable prospects of success

66    Irrespective of the absence of jurisdiction consequent on failure to state a question of law, Ms Smalley’s principal contention on appeal was, in my opinion, untenable for a number of reasons.

67    Both the content of the amended notice of appeal and the related submissions on the nature of the Tribunal’s alleged error, in my opinion, lacked logical coherence. First, the amended notice of appeal misstated the crucial fact asserted to be found by the Tribunal. The Tribunal did not find that Ms Smalley had a life expectancy of five years in vacuuo. Rather, it found that Ms Smalley had a life expectancy of five years from September 2010.

68    Counsel for Ms Smalley conceded that the calculation of the cost of future care was to be from the date of settlement, but asserted that a life expectancy expressed as a term of years divorced from any commencement date should be inserted into the formula said to be used by the Tribunal pursuant to the Guideline and commentary. An estimation of a life expectancy expressed as a term of years does not, however, meaningfully delimit a future period of time unless it runs from a commencement date.

69    Section 4420(1) of the Aged Care Act states that the compensation payment reduction is in relation to all days on which the care recipient is provided with residential care that are covered by a compensation payment. Although s 4420 does not refer to “the date of the settlement”, a compensation payment reduction would apply only to a day covered by a compensation entitlement under a judgment, settlement or reimbursement arrangement. The date of a judgment or settlement that takes account of the cost of providing residential care may not govern whether a given day is covered, as the judgment or settlement could provide for the cost of residential care commencing before or after the date of the judgment or settlement. Where, however, a judgment or settlement provides compensation but does not take into account the future costs of providing residential care, and s 4420(5) therefore applies, in my opinion the date of the judgment or settlement is necessarily the date on which “the future” commences.

70    It was common ground that Section 4420(5) applied to Ms Smalley’s settlement (as it did not take into account the future costs of providing residential care) and permitted the Secretary to determine in accordance with the Principles, both that pursuant to s 4420(5)(a), the settlement was to be treated as having taken into account the costs of providing residential care and, pursuant to s 4420(5)(b), the part of the compensation that was to be treated as relating to “the future costs of providing residential care”.

71    Part 11 of the Principles thus applied. The Secretary, in exercising his or her powers under s 4420(5) to determine, inter alia, the part of the compensation that is to be treated as relating to “the future costs of providing residential care”, must take into account the matters in s21.28(1) of the Principles and may take into account any other matters considered relevant, including, as in this case, “the likely cost of residential care for the care recipient” under s21.28(1)(c).

72    Only the matters specified in s 21.28(1) must be taken into account. Neither the legislation nor the Principles prescribe any particular formula or method of calculation for determining the amount relating to “the future costs of providing residential care” or “the likely cost of residential care” in the event that the Secretary takes that factor into account. There is no express requirement to estimate the life expectancy of the care recipient, or to do so on any particular basis or from any particular date. The legislation, and indeed the Guidelines, make clear that where the Secretary considers the likely cost of residential care, any conclusion reached on that question is but one of a number of factors to which the Secretary must or may have regard in determining the part of the compensation to be treated as relating to the future costs of providing residential care.

73    The Guidelines and commentary on which the amended notice of appeal and related submissions partly depended were not of statutory character. If, as the applicant submitted, they were “promulgated” by the Secretary, they nevertheless constitute no more than guidance or commentary on the practical application of the legislation and Principles to which they are subject. They could not modify, contradict or introduce additional requirements to the legislation or Principles. Moreover, the Guidelines, commentary and the relevant examples do not, as a matter of substance, support Ms Smalley’s argument that where the Secretary determines the amount of compensation to be treated as relating to the future costs of providing residential care, the future costs must be calculated by inserting a figure based on a term of years without any commencement date derived from the only, or most recent, estimate of life expectancy in evidence. The “future” contemplated in relation to “the future costs of providing residential care” is a period of time which commences to run from the date of the judgment or settlement. The legislation and the Principles would, in my opinion, permit the Secretary to take into account the life expectancy of the resident as at any particular date to assist in estimating the length of that period of residential care commencing at the date of settlement.

74    The Tribunal, on a fair reading, determined the future costs of residential care (measured from the date of the settlement on 4 March 2008) on the basis that Ms Smalley, who had a five year life expectancy as at September 2010, would require an estimated seven and a half years of residential care from 4 March 2008. It accepted that past estimates of Ms Smalley’s life expectancy were not relevant, and based its decision on the facts and circumstances as the date of the decision.

75    In determining the amount of her compensation to be treated as relating to the future costs of Ms Smalley’s residential care, the Tribunal applied the finding of her life expectancy at a later date to estimate the period of future residential care from an earlier date and applied the later term (7.5) as a component of a formula which is not prescribed by the legislation, although its validity was not challenged by either party in this case.

76    Although it is unnecessary to determine the issue, in my opinion, any appeal based on the matters stated in the amended notice of appeal and related submissions would have no reasonable prospects of success.

cONCLUSION

77    In my opinion, the amended notice of appeal does not state a question of law and the appeal accordingly should be dismissed for want of jurisdiction.

Associate:

Dated:    31 March 2011