FEDERAL COURT OF AUSTRALIA

Chun v Comcare [2013] FCA 11

THE COURT ORDERS THAT:

1.    The appeal be dismissed.

2.    Costs be reserved.

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

REASONS FOR JUDGMENT

1    This is an appeal on a question of law under s 44 of the Administrative Appeals Tribunal Act 1975 (Cth) from a decision of the Administrative Appeals Tribunal (the Tribunal) given on 25 July 2012.

2    By that decision the Tribunal remitted the decision under review to the respondent, Comcare, in respect of an issue which the respondent had conceded, the issue being as to a date under s 19(2A) of the Safety, Rehabilitation and Compensation Act 1988 (Cth) (the Act). No issue arises on this appeal in respect of that matter. Two other issues were decided against the applicant by the Tribunal and it is these issues which are the subject of the amended notice of appeal. It was not suggested that by reason of those circumstances the form of the appeal was incompetent.

3    There was no dispute that Comcare was liable under ss 14 and 19 of the Act. However, the applicant disputed the calculation of his incapacity payments under s 19.

Facts

4    The facts as found by the Tribunal were that the applicant was employed by the Department of Defence until his employment was terminated, on misconduct grounds I was told, on 15 October 2009. I was also told that the applicant had suffered injuries in or around May 2007 and July 2009.

5    The Tribunal also found that the relevant industrial agreement as at 15 October 2009 was the Defence Collective Agreement 2006-2009.

6    Paragraph G9.3 of that Agreement provided:

Defence will provide an employer superannuation contribution for each employee who is a member of the PSSap or who elects a fund different from their default. The contribution will be based on fortnightly contribution salary and be paid at a rate as specified by the PSSap, though not less than 15.4 per cent.

“PSSap” is the Public Sector Superannuation Accumulation Plan (PSSAP): see for example the definition in s 4 of the Superannuation Act 2005 (Cth) (Superannuation Act).

7    The Defence Enterprise Collective Agreement 2009 provided, from 3 November 2009, for the following increases in salary for employees covered by that Agreement:

G2.1 In recognition of the contribution made by employees to improving productivity and efficiency throughout Defence, salary will be increased by:

a.    3.8% from no later than the second pay day after the Agreement becomes operational (expected to be 12 or 26 November 2009, with payment made on the following pay day); and

b.        2.4% from 8 July 2010, which is expected to be paid on 22 July 2010.

8    As I have said, these provisions of the Defence Enterprise Collective Agreement 2009 were implemented on 3 November 2009. The parties agreed there was an (immaterial) error in [16] of the Tribunal’s reasons where this date was stated as 3 November 2011. As I have also said, Mr Chun’s employment was terminated on 15 October 2009, prior to the implementation of the Defence Enterprise Collective Agreement 2009.

9    The Tribunal also found, for the purposes of s 8(6)(c) of the Act, that at the date his employment was terminated the applicant had already reached the highest level in the range of salary for the position he held.

Notice of appeal

10    By his amended notice of appeal dated 26 October 2012 the applicant stated the following two questions of law:

1.    Whether Employers Superannuation Contributions form part of the NWE calculation in whole or in part.

2.    Whether the Applicant is entitled to the benefit of both s 8(6) and s 8(9B) increases.

Consideration

First question

11    The answer to the first question turns on the meaning of the words “any allowance payable to the employee in each week in respect of his or her employment during the relevant period” within the description of “A” in s 8(1) of the Act. More particularly, the question is whether, as the applicant contends, the employer contributions to his superannuation are such an “allowance”.

12    Section 19 of the Act, referred to above, provided relevantly:

19  Compensation for injuries resulting in incapacity

(1)    This section applies to an employee who is incapacitated for work as a result of an injury, other than an employee to whom section 20, 21, 21A or 22 applies.

(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.

…

(3A)    If, as a result of the incapacity:

(a)    the amount per week payable to the employee in respect of his or her continued employment is reduced; and

(b)      a pension under a superannuation scheme is payable to the employee;

subsection (3) applies in relation to the employee in relation to a week during which the employee is incapacitated as if the references in the subsection to the amount he or she was able to earn during the week in suitable employment were instead references to the sum of that amount and any amount of the pension referred to in paragraph (b) that is payable to the employee in respect of that week.

…

13    Normal weekly earnings (NWE) is defined in s 4(1) and s 8(1) of the Act as follows:

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.

14    The “relevant period” is dealt with at length in s 9 of the Act as, generally, the latest period of 2 weeks before the date of the injury during which the employee was continuously employed by the Commonwealth or a licensed corporation.

15    The applicant submitted before the Tribunal that the amount of employer superannuation contribution provided for by the Defence Collective Agreement 2006-2009 (15.4% of fortnightly contribution salary) was an allowance of the kind provided for in s 8(1). He sought support for this argument in paragraph G10.1, referring to salary sacrifice arrangements. The applicant also submitted that if he failed in respect of 15.4% then he should succeed in relation to the difference between 9% and 15.4%, being 6.4%, as the 6.4% was not a percentage fixed by law, whereas 9% was so fixed. The applicant also submitted that the employer contribution was a form of salary sacrifice because he had “elected” this scheme instead of others which have lower employer contributions, but this last point was abandoned in oral submissions before me.

16    The Tribunal followed earlier decisions of the Tribunal in Hammerton and Comcare [1995] AATA 63, (1995) 21 AAR 204 and McKernan and Comcare (2004) 85 ALD 508. The Tribunal disagreed with the applicant’s submission that employer superannuation contributions, at any percentage rate, were an allowance within the meaning of s 8(1).

17    The applicant in his written submissions to the Court put that the construction of “allowance” for which he contended was supported by the propositions that had Parliament wished to exclude superannuation it could have done so clearly; that the exclusion of superannuation would extinguish a property right; the Court should presume that general words were intended to be subject to the basic rights of the individual; there was a general presumption in favour of the protection of common law rights and freedoms; and for these reasons the word “allowance” should be given a broad interpretation. It was not clear whether these contentions were maintained in oral submissions. Further the applicant submitted that the additional 6.4% superannuation contribution should be classified as an “allowance”, being negotiated and as part of the salary package in excess of the required 9% superannuation guarantee.

18    In oral submissions on this ground the applicant contended that payment of superannuation is a compulsory obligation and the applicant’s employer must make a payment to a third party, here the PSSAP fund, but when the amount was paid to those funds, it was held on trust under the trust deed for payment to the beneficiary at the preservation age. The submission was that the Tribunal conflated the words “paid” and “payable” to an employee: here the contributions were payable to the employee, although ability to be paid was not temporally connected until one reached the preservation age. It was put that in s 19, if superannuation was not meant to be accounted for, it would have said so and it did not.

19    By ss 20, 21 and 21A of the Act, the applicant submitted, the legislation was attempting to say that if you get a superannuation benefit which is paid in a pension and that continues you cannot double dip. The schemes that are set up in ss 20, 21 and 21A are absent from s 19, for the reason that this superannuation must be an allowance which is calculated in s 19 and therefore it is not the same situation as where one double dips in ss 20, 21 and 21A. The applicant did not fall within ss 20, 21, or 21A, he fell within s 19. But ss 20, 21 and 21A were sections designed to stop double dipping. In effect, if one receives a superannuation pension, the compensation is calculated to make sure that that pension is not double counted firstly in the compensation mechanisms under s 8(1) and then counted again. So it says you take those amounts off. While s 19 does not talk about superannuation it does not indicate that the legislative intention was to not include it, because, indeed, it is not included in ss 20, 21 and 21A. If s 19 was not meant to deal with superannuation, express words would be in s 19 as they are in ss 20, 21, 21A.

20    The applicant submitted the Act should be given an interpretation beneficial to persons seeking compensation: Nash v Sunshine Porcelain Potteries Limited (1959) 101 CLR 353 (Nash) at 361 per Dixon CJ who said that it was well settled that a right to compensation conferred by the workers compensation legislation of Victoria there under consideration was not to be restricted or denied because of difficulties in fitting the clauses relating to the computation of compensation to the circumstances of the worker’s case.

21    Superannuation must, it was submitted, form part of allowances because the money is: (a) held on trust in a superannuation fund and is payable to the employee on the reaching of preservation age and (b) because if one suggests otherwise, this legislation, in effect, takes away the benefit of the superannuation that the applicant would otherwise have had, had he continued on in his employment because superannuation is not accounted for anyway. On the respondent’s construction, superannuation was simply not calculated and, therefore, the applicant ends off in a worse position under the computation of the compensation because the calculation of his normal weekly earnings does not take into account superannuation because it was not an allowance and it was not part of his wages or salary. The injustice is that he is no longer working there because he was terminated but the compensation mechanism under the Act is designed to compensate him for his injury: on the respondent’s argument the calculation of that compensation does not account for superannuation that he would be entitled to; on the applicant’s argument, he is entitled to that superannuation, albeit at some point in the future, so the Act must allow for that calculation to be factored into the compensation amount that is given to him.

22    As to the 6.4%, the applicant submitted it was something other than what the legislation says you must get to look after yourself when you reach preservation age. So in terms of the words “allowance”, it was something that was allowed above the minimum.

23    The respondent submitted that the relevant words in the definition of “A” in s 8(1) of the Act were not capable of including a superannuation contribution made by an employer to a superannuation fund. Consideration of the meaning of the word “allowance” in its context and the true nature of superannuation contributions supported this conclusion, as did the requirement in the provision that any allowance be payable to the employee in each week. Superannuation contributions, the respondent submitted, are not payable to the employee: they are only ever payable to a superannuation fund. There was no room for the inclusion of superannuation contributions in s 8, taking its correct place with the other provisions of the Act. The difference was that the amount of superannuation contribution was not ever payable to the employee. It went to the superannuation fund. It is there held on trust and invested and managed under the applicable superannuation trust deed until the employee meets the preservation age, being defined in reg 6.01(2) of the Superannuation Industry (Supervision) Regulations 1994 (Cth), which in his circumstances is 60, based on his date of birth. If superannuation was included as an allowance under s 8, through the application of s 19, the employee would receive in his hands and presently a superannuation amount that would otherwise be quarantined and held in trust through the superannuation scheme to the preservation age (or until the triggering of any of the relevant events that would permit him to succeed in a benefit application).

24    As to a beneficial construction, the respondent submitted that Bortalazzo v Comcare (1997) 75 FCR 385 at 388 was authority that that approach applied only in the case of ambiguity and a liberal interpretation was one thing, rewriting the statute another.

25    The respondent relied on s 17 of the Superannuation Act as providing that the designated employer of the member must pay to the Board in accordance with the Rules any contributions that under the rules are payable by the employer in respect of the member: the Rules being defined in s 4 of the Superannuation Act to mean the Rules for the administration of the PSSAP set out in the Schedule to the deed to establish the PSSAP. The deed is a legislative instrument: see s 10(2) of the Superannuation Act.

26    Clause 3.1 of the Deed provided, relevantly:

3.1    The functions of the Board in relation to PSSAP and the PSSAP Fund are to administer PSSAP and to manage and invest the PSSAP Fund in accordance with the provisions of the Act and this Deed including, without limiting the generality of the foregoing, the following functions:

(a)    to receive payments from designated employers as provided for in the Act and other superannuation entities in accordance with this Deed;

(b)    to pay benefits to the persons entitled to receive benefits from PSSAP in accordance with the Act and this Deed;

…

27    Clause 5 of the Deed provided, relevantly:

5.1    All contributions and other moneys paid to the Board for the purposes of PSSAP, or as directed by the Board, shall be held in trust by the Board in the PSSAP Fund. The PSSAP Fund shall be managed and invested by the Board in accordance with the Act and the Deed.

5.2    The PSSAP Fund shall comprise:

(a)    …;

(b)    contributions made by employers pursuant to the Act and the Deed;

…

28    Turning to the rules in the Schedule to the Deed, they provided:

Basic contributions by designated employers

2.2.1    Each pay day the designated employer of an ordinary employer-sponsored member must pay as contributions to the Board an amount equal to 15.4% of the superannuation salary of the member on that day. However, the Board must reject any contributions paid under this Rule if the SIS Act would prevent the PSSAP Fund from accepting the contributions or if acceptance of the contributions by the Board may jeopardise the status of the PSSAP Fund as a complying superannuation fund.

Superannuation salary

2.2.2    The superannuation salary of an ordinary employer-sponsored member is:

(a)    where the circumstances referred to in Rule 2.2.3 apply — the ordinary time earnings of the person; and

(b)    in all other cases the amount that would have been the person’s “fortnightly contribution salary” if they were a PSS member.

2.2.3    The superannuation salary of an ordinary employer-sponsored member will be the person’s ordinary time earnings if this is specified in:

(a)    a workplace agreement that applies to the ordinary employer-sponsored member;

(b)     a pre-reform certified agreement that applies to the ordinary employer sponsored member;

(c)    a pre-reform AWA that applies to the ordinary employer-sponsored member;

(d)     an AWA that applies to the ordinary employer-sponsored member;

(e)    a remuneration determination that applies to the ordinary employer-sponsored member; or

(f)    an enterprise agreement that applies to the ordinary employer-sponsored member; or

(g)    a workplace determination that applies to the ordinary employer-sponsored member; or

(h)    an agreement in writing between the ordinary employer-sponsored member and their designated employer in the case of an ordinary employer-sponsored member not covered by a workplace agreement, a pre-reform certified agreement, a pre-reform AWA, an AWA, a remuneration determination, an enterprise agreement, or a workplace determination.

(original emphasis)

29    Thus, the respondent submitted, the applicable legislation mandated 15.4% and there was no basis for distinguishing between the 9% contribution under other general legislation, such as the Superannuation Guarantee (Administration) Act 1992 (Cth), and the 15.4% contribution under the present statutory regime.

30    The respondent submitted that both the ordinary time earnings of the person and the amount that would have been the person’s “fortnightly contribution salary” included the amount the employer pays to the employee, including any allowance.

31    As to the distinction between the ordinary time earnings of the person and the amount that would have been the person’s “fortnightly contribution salary” if they were a PSS member in rule 2.2.2, the respondent submitted that the applicable collective agreement or other industrial agreement would delineate which of those two applied.

32    The respondent referred to the Defence Collective Agreement 2006-2009 which provided for the contribution to be based on fortnightly contribution salary. I have set out the relevant clause at [6] above.

33    The respondent contrasted the Defence Enterprise Collective Agreement 2009 which provided for the contribution to be based on ordinary time earnings:

G10.4 Employer superannuation contributions for PSSap members and employees who have exercised choice will be 15.4% of ordinary time earnings, within the meaning of the Superannuation Guarantee (Administration) Act 1992, or such a rate as specified by the Rules of the PSSap, though not less than 15.4 per cent. Maternity leave (excluding Government paid parental leave) will be considered to be ordinary times earnings consistent with the PSSap Deed.

34    The respondent referred to Mutual Acceptance Company Limited v Federal Commissioner of Taxation (1944) 69 CLR 389. There, certain of the appellant’s travellers, who collected hire purchase instalments, provided and used for that purpose motor cars not owned or provided by the appellant and each of those travellers were paid by the appellant, in addition to his weekly wage and commission, a fixed weekly payment in respect of his use of the motor car in connection with the appellant’s business. These additional payments were fixed sums of 25s., 32s. 6d., 35s. or 37s. 6d. a week, according to the size of the territory which the traveller had to cover and the size of the motor car used by him. The payments roughly represented about two-thirds of the expenditure estimated as likely to be incurred by travellers in using the car. In its books the appellant describes these payments as car allowances. The question was whether the additional payments were “wages” within the meaning of the Pay-roll Tax Assessment Act 1941 (Cth). The relevant definition was:

‘wages’ means any wages, salary, commission, bonuses or allowances paid or payable (whether at piece work rates or otherwise and whether paid or payable in cash or in kind) to any employee as such and, without limiting the generality of the foregoing, includes—

(a)     any payment made under any prescribed classes of contracts to the extent to which that payment is attributable to labour;

…

35    The majority held the payments were allowances paid to employees as such and were therefore “wages” as defined. At 396-398, Latham CJ said:

It is contended, however, that … the only allowances which are included within the definition are allowances which are in the nature of remuneration for services. “Allowance” in the relevant sense is defined in the Standard Dictionary as meaning:—“That which is allowed; a portion or amount granted for some purpose, as by military regulation, operation of law, or judicial decree; also, a limited amount or portion, as of income or food; as, an allowance of rations; an allowance for costs; an allowance for tare or breakage; an extra allowance for services; to put one on an allowance of bread.” When the word is used in connection with the relation of employer and employee it means in my opinion a grant of something additional to ordinary wages for the purpose of meeting some particular requirement connected with the service rendered by the employee or as compensation for unusual conditions of that service. Expense allowances, travelling allowances, and entertainment allowances are payments additional to ordinary wages made for the purpose of meeting certain requirements of a service. Tropical allowances, overtime allowances, and extra pay by way of “dirt money” are allowances as compensation for unusual conditions of service.

The latter class of allowances represents higher wages paid on account of special conditions, and may fairly be described as part of wages in the ordinary sense. A victualling allowance has been held to be part of the wages of a seaman (The Tergeste [(1903) P 26]). Allowances which are wages in the ordinary sense are, however, included in the word “wages” itself where it appears in the definition. If the word “allowances” were limited by construction to allowances which fell within the ordinary concept of “wages,” the result would be that the word “allowances” in the definition would have no application, and would not operate to extend the ordinary meaning of the word “wages.” It would have no significance or effect. Accordingly, in my opinion it is proper to reject the contention that only such allowances as are remuneration for services are included within the word “allowances” in the definition.

…

The payments made to the travellers employed by the appellant company are allowances in the sense that they are payments made to employees of the company as such, that is, in respect of an incident of their service, and the moneys when paid are at the complete disposition of the employees. In my opinion they are allowances within the meaning of the definition and the question in the case should therefore be answered in the affirmative.

Although dissenting in the result, Dixon J said at 402-403:

“Allowance” is one of the many words which take their meaning from a context rather than affecting or controlling the meaning of other words of the context in which they occur. For, considered alone and at rest rather than at work with other words, it means the allowing of a thing or a thing allowed. It is only by its application that you discover the kind of thing in mind.

36    The respondent referred to the definition of allowance in the CCH Macquarie Dictionary of Employment and Industrial Relations: “a payment to an employee in addition to the ordinary rate of pay, usually as compensation for some particular disability (e.g. heat, dust, cold … ) or other aspect of work (its isolation, seasonality, etc.) which is beyond the normal working conditions in industry.”

37    The respondent also relied on Mahony v Federal Commissioner of Taxation (1967) 41 ALJR 232 where Kitto J explained in general terms the word “superannuation” when appearing in the phrase “a provident, benefit or superannuation fund”. At 232, Kitto J said that superannuation referred to the provision of a particular kind of benefit being a provision to arise on an employee’s retirement or death or other cessation of employment of a subvention for him or his estate or persons towards whom he may have stood in some kind of relation commonly giving rise to a legal or moral responsibility.

38    In reply the applicant submitted that the criteria for payment needed to be satisfied but they were criteria that would always occur since one is always going to die or reach the preservation age. It will be your money at some point.

39    In my opinion, it is first necessary to consider the basis for the contributions which the applicant claims to answer the statutory expression “any allowance payable to the employee in each week in respect of his … employment during the relevant period”. Under s 17(2) of the Superannuation Act the Department as the designated employer “must pay to the Board, in accordance with the Rules, any contributions that, under the Rules, are payable by the employer in respect of the member.” The Rules in turn required, by Rule 2.2.1, the Department to pay each pay day as contributions to the Board (as defined in s 4 of the Superannuation Act) 15.4% of the superannuation salary of the member on that day. Rule 2.2.7 required the Board to pay the amount into the PSSAP Fund. On receipt of a benefit application as defined by Rule 3.1.1, the Board was required by Rule 3.1.4 to pay to or in respect of the member a lump sum subject to the Superannuation Industry (Supervision) Act 1993 (Cth).

40    In my opinion, the employer superannuation contributions do not fall within the definition in “A” in s 8(1) as an allowance payable to the employee, the applicant, in each week during the relevant period.

41    The contributions do not fall within the ordinary meaning of “allowance”. The Macquarie Dictionary defines the word relevantly as meaning:

3. an addition, as to a wage, etc., on account of some extenuating or qualifying circumstance: a travel allowance.

See also Mutual Acceptance Company Limited v Federal Commissioner of Taxation (above).

42    In my view it is also relevant that the formula in s 8(1) of the Act is for the purpose of calculating normal weekly earnings. That provides the context in which “A” is to be found in the formula which refers to the average number of hours worked in each week by the employee in his or her employment during the relevant period; the employee’s average hourly ordinary time rate of pay during that period; and 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. As I have set out at [14] above, by s 9 the relevant period is, generally, 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.

43    Further, the amounts under s 19 are calculated by reference to amounts payable to the employee and not to a third party, here the Board, and amounts which were at the employee’s disposition. Contrary to the applicant’s submission founded on injustice, it does not seem to me to be unjust that contributions which are not so payable to him apart from any effect of s 19 should continue not to be paid to him when calculating normal weekly earnings before an injury under s 19. It follows from what I have said that, in my view, employer contributions to the Board for payment by the Board into the PSSAP Fund in respect of a continuing employee would not be part of any allowance payable to that employee in each week within the definition of “A” in s 8(1) of the Act.

44    Similarly, and contrary to the further submission of the applicant, I see no inconsistency between s 19 not picking up employer superannuation contributions in the calculation of normal weekly earnings and the terms or operation of ss 20, 21 and 21A. First, the same calculation of normal weekly earnings forms part of the formula in ss 20, 21 and 21A. Second, the additional references to superannuation in those sections relate to: compensation payable under s 20 where the employee receives a pension under a superannuation scheme as a result of the employee’s retirement; compensation payable under s 21 where the employee receives a lump sum benefit under a superannuation scheme as a result of the employee’s retirement; and compensation payable under s 21A where the employee receives a pension and a lump sum benefit under a superannuation scheme as a result of the employee’s retirement. In each case the purpose is to bring in payments received by a former employee out of a superannuation scheme rather than being referable to an amount of contribution in the calculation of normal weekly earnings before an injury.

45    In my opinion, the employer contributions could not be said to be payable to the employee in each week merely because at a point in the future the trustee of the fund will make a payment or payments out of the fund and, in the meantime, is a trustee.

46    The general principles to which the applicant referred in his written submissions do not have a direct role to play given the lack of relevant ambiguity in s 8(1). For example, there is no acquisition or taking of any property rights or pre-existing entitlements, either statutory or non-statutory: compare Buck v Comcare (1966) 66 FCR 359 per Finn J, considered by a Full Court in PPHF v Director-General of Security (2011) 193 FCR 436 at [38]. As I have said, it was not clear whether those submissions were maintained at the hearing.

47    I also reject the further submission that there is any relevant distinction in relation to the 6.4%. As the respondent submitted, the applicable legislation mandates 15.4% and there is therefore no basis for distinguishing between that percentage and the 9% contribution under other, general, legislation.

48    I reject the first ground of appeal.

Second question

49    The answer to the second question appeared to turn on the interrelationship between s 8(6) and s 8(9B) of the Act. More particularly the apparent question was whether, on the facts of this case, the normal weekly earnings of the applicant as an employee before the injury should “be further increased” by reference to the percentage increase in the wage price index prescribed for the purposes of s 8(9B) of the Act.

50    The applicant by his written submissions contended that whilst at the date of termination of employment he was then at the highest level of his range of salary for the position this did not exclude his entitlement to any award increases he would have become entitled to but for injury as well as his entitlement to any indexed increases under s 8(9B) of the Act: increases in s 8(6) must be included as well as indexed increases in the calculation of normal weekly earnings. By the words in s 8(9B) “as calculated under subsections (1) to (8)”, s 8(6) was imported.

51    However in the course of argument it became clear that the issue was whether, in the events which had occurred after the applicant had left the employ of the Commonwealth, s 8(6) was engaged so as to pick up, by s 8(6)(c), the increases provided by cl G2.1 of the Defence Enterprise Collective Agreement 2009, from November 2009: see [7] above. Thus the issue related to that considered in McDonald v Department of Defence [1999] FCA 882 (McDonald) per Sundberg J and in Comcare v Thompson (2000) 100 FCR 375 (Thompson) per Finn J. It was not suggested in submissions that either of those cases had been wrongly decided.

52    In his oral submissions, the applicant submitted that in [15] of the Tribunal’s reasons it set out the increases of 3.8% and 2.4%. Although the applicant’s employment was terminated prior to the implementation he submitted that had he continued on in his employment, he would have been entitled to that increase despite the fact that he was at the top of the salary. He would have been entitled to those increases as well as the wage price index increase. The Tribunal misapplied s 8(6)(c) because it did not take into account the increases under the Defence Enterprise Collective Agreement 2009.

53    The respondent submitted that there were no more increments in any “range” applicable to the applicant which he could “work up through” over time for the purposes of s 8(6)(c) of the Act. This language was a reference to the decision in McDonald at [12]. The increase referred to that arose on 3 November 2009 was an increase under an industrial agreement. It was not an increase by way of an increment. The increase provided by cl G2.1 was an increase applicable to all employees under the terms of the Defence Enterprise Collective Agreement 2009. This increase fell within s 8(9A) because it was an increase that would have applied to the applicant had he remained in employment, which is contemplated by the combined operation of ss 8(9) and 8(9A). The combined operation of those two provisions is an alternative to s 8(9B), which deals with the circumstance of an employee who has ceased employment.

54    The respondent relied on two aspects of the judgment of Bennett J in Military Rehabilitation and Compensation Commission v Perry (2007) 164 FCR 307 (Perry). The first aspect related to materials extrinsic to the legislation. The second was the relationship between ss 8(9) and 8(9A) on the one hand and s 8(9B) on the other.

55    As to the first aspect, the Minister said in the Explanatory Memorandum:

The amendments to the SRC Act (Schedule 2) will:

…

§ Address a deficiency in the Act relating to compensation for employees no longer employed by the Commonwealth by enabling their normal weekly earnings to be increased by reference to a prescribed index (Schedule 2, Part 2);

…

PART 2 - AMENDMENTS RELATING TO INDEXATION OF

NORMAL WEEKLY EARNINGS

Item 13 - Subsection 8(9)

2.26 This amendment will repeal the existing subsection 8(9) and substitute new subsections 8(9) to 8(9D). The amendment is proposed to provide that the normal weekly earnings of people who are no longer employed by the Commonwealth be updated by reference to a prescribed index.

2.27 The current provisions allow for the adjustment of the minimum amount payable to recipients of compensation, either employees or former employees of the Commonwealth or a licensed authority, if their normal weekly earnings are either increased or reduced by way of changes in awards, agreements or other instruments affecting ordinary hours and hourly rates of pay. The updating of normal weekly earnings for former employees under the existing subsection 8(9) has, however, become problematic due to the increasingly decentralised nature of wage fixing. This has resulted in uncertainty and delay for recipients in receiving their correct entitlements.

2.28 The proposed amendment will identify an indexation date and allow for an index to be prescribed by regulation to be applied from that date to provide certainty and timeliness in the adjustment of normal weekly earnings for the recipients of compensation. The provision will allow for the annual indexation of the ‘normal weekly earnings’ by increasing the minimum amount per week payable to the employee at the date of the injury by reference to a prescribed index. The indexation date has been identified as 1 July following the date on which the Act received Royal Assent or the date of cessation of employment (which last occurs) and each subsequent 1 July. The index is applicable over the one year ending on 31 December preceding each indexation date. Regulations may specify the manner in which the increase is calculated by reference to the prescribed index.

The then existing s 8(9), referred to by the Minister, provided:

8(9)    If the minimum amount per week payable in respect of employees included in a class of employees of which the employee was a member at the date of the injury is increased or reduced on or after that date as a result of:

(a)    the operation of a law of the Commonwealth or of a State or Territory; or

(b)    the making, alteration or operation of an award, order, determination or industrial agreement, or of the doing of any other act or thing, under such a law;

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

56    As to the second aspect, Bennett J said at [44]:

It is not logical that the intention was to make the normal weekly earnings of an employee who ceased employment higher than those of an employee who remains in employment. There is no point in making the earnings higher and then reducing the excess by application of subs (10).

57    The respondent submitted that if the applicant got the 3.8% and the 2.4% he would be, in effect, getting the same as his former cohort, because he was terminated, plus the wage cost index. He would therefore be better off than his former cohort as a result because had he remained employed he would receive simply the increases under the industrial instrument, the 3.8% and the 2.4%. But what he sought to achieve through s 8(6) was the 3.8% and then the 2.4% plus the wage price index. That would be an unintended consequence and clearly not a correct interpretation.

58    Further, assuming that the applicant was somewhere lower in the range, on clause D6.5 eligibility criteria he would not be entitled to any increase, in any event, because he was not participating in the workplace in the performance cycle. He has been removed from employment as of 15 October 2009, two weeks before this agreement came into force.

59    He was not participating in the employment relationship or the performance scheme after his termination on 15 October 2009 and indeed, in any event, he was at the top of the range so the only increase can be regarded as an increase under ss 8(9) and 8(9A) because, properly considered, these increases were in the nature of increases under an industrial agreement. The automatic 3.8% that came into force on 3 November 2009 and the automatic 2.4% that was also provided were not increments.

60    The respondent submitted that the Defence Enterprise Collective Agreement 2009 showed that the increases were not within s 8(6)(c). Counsel drew attention in particular to:

Part D – Performance

…

D1     Performance Feedback Assessment and Development Scheme

D1.1    Overview. The performance management scheme in Defence is known as the Performance Feedback Assessment and Development Scheme (PFADS).

Application and relevance

D1.2    All employees are required to participate in PFADS. Participation in this scheme constitutes:

a.    taking part in performance exchanges, and actively developing and putting in place a performance agreement in accordance with paragraph D2.1; and

b.     for employees who are also supervisors, conducting performance exchanges with each of their employees, and developing and putting in place a performance agreement in accordance with paragraph D2.1.

D1.3    Employees who refuse to participate in PFADS are not eligible to receive performance progression or the pay rises listed at paragraph G2.1. Refusal to participate in PFADS may also constitute a breach of the APS Values and Code of Conduct.

…

D6 Performance Progression

D6.1     Performance progression is a payment that relates to an employee's substantive salary in recognition of sustained good performance and behaviour over the performance cycle. All employees are to be considered for performance progression, except where the employee is an excluded employee (see paragraph D6.16) or where the employee has refused to participate in PFADS (see paragraph D6.17).

…

D6.5     Eligibility criteria. Employees are to satisfy all criteria during the current performance cycle to be eligible for performance progression. Where all the following criteria are met, performance progression must be paid:

a.     The employee has adhered to the Defence values, the APS Values, Defence's Mutual Responsibilities and upheld the APS Code of Conduct.

b.     The employee has an end-cycle performance rating of Fully Effective, Superior or Outstanding.

c.     Subject to paragraph D6.6, the employee has undertaken duties at their substantive classification level for a minimum period of six months during the performance cycle. Undertaking Defence Reserve service on Defence Reserve leave is considered to be 'undertaking duties' for the purposes of satisfying this requirement.

d.     The employee has completed the mandatory awareness programs set out in Part A of this Agreement unless the second-level supervisor is satisfied that it was clearly unreasonable to expect the employee to have done so.

…

G2 Adjustments to rates of pay

G2.1     In recognition of the contribution made by employees to improving productivity and efficiency throughout Defence, salary will be increased by:

a.     3.8% from no later than the second pay day after the Agreement becomes operational (expected to be 12 or 26 November 2009, with payment made on the following pay day); and

b.     2.4% from 8 July 2010, which is expected to be paid on 22 July 2010.

G2.2     Extraneous payments, including for overtime and shift penalties, will be adjusted with effect from the same dates listed in paragraph G2.1.

G2.3     A bonus of $750 is to be paid to all employees who are on duty, compensation leave or on paid leave on the date this agreement takes effect. The Secretary may approve payment of this bonus to employees who may otherwise not be eligible under this paragraph.

G2.4     An employee is excluded from receiving pay rises and the bonus in paragraphs G2.1 and G2.3 where they have refused to participate in PFADS. This exclusion also applies to supervisors who do not complete a performance agreement with their employees; in this circumstance employees will not be disadvantaged.

(original emphasis)

61    In my opinion the condition for the operation of s 8(6)(c) has not arisen. The provision only operates if the minimum amount per week payable is increased or would have been increased because of the receipt of an increase in salary, wages or pay by way of an increment in a range of salary, wages or pay applicable to the employee or to his or her office, position or appointment. Absent that condition “normal weekly earnings” is not increased under that provision. In light of the unchallenged finding of fact by the Tribunal that the applicant had already reached the highest level in the range of salary for the position he held for the purposes of s 8(6)(c), it follows, as the Tribunal held, that the applicant’s weekly compensation should be increased only by reference to the index prescribed for the purposes of s 8(9B). It is therefore unnecessary to consider other aspects of Perry.

62    In McDonald, Sundberg J considered a claim under s 8(6) based on a later “promotion”. The applicant contended that the Tribunal had failed to apply s 8(6). His Honour said:

[12]     …

Section 8(6)(c) requires the respondent to take into account pay increases resulting from “the receipt by the employee of an increase in salary, wages or pay by way of an increment in a range of salary, wages or pay applicable to the employee or to his or her office, position or appointment”. The increase must be an increment in a range applicable to the employee specifically or to the position held. The section contemplates the existence of a pay range which the employee may “work up through” over time. 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”. The opening words of s 8(6), which require increases in “the minimum amount per week payable to an employee in respect of his or her employment by the Commonwealth at the date of the injury” to be taken into account, support this view. Thus, what is to be considered is the employee’s position at the date of the injury, not any position to which the employee may be promoted after that date. That s 8(6) is not concerned with increases in pay attributable to an employee’s promotion is confirmed by sub-s(7), which deals expressly with that subject (in a manner which does not avail the applicant).

63    In Thompson, the Administrative Appeals Tribunal decided that the respondent’s “normal weekly earnings” should be based on the earnings of the person then occupying his former position, in that case, as fixed by the AWA between that person and the National Library of Australia. Finn J allowed Comcare’s appeal, holding that individually negotiated salary increases in a scheme devoid of a fixed ceiling by way of maximum could not be characterised as “increments in a range of salary” within s 8(6)(c). His Honour said at [34]-[36] that the methodology employed by the Tribunal, and the construction given s 8(6)(c) of the Act, were impermissible. Whatever else might be said of individually negotiated salary increases in a scheme devoid of a fixed ceiling by way of maximum, Finn J said, those increases cannot be characterised as “increments in a range of salary”. As Sundberg J indicated in McDonald at [12], “[t]he section contemplates the existence of a pay range which the employee may ‘work up through’ over time”. Such a range, and an increment within it, cannot be manufactured in the manner proposed by the Tribunal, Finn J said. Formally, the Tribunal’s reasoning process was that the range was determined by the increase negotiated, which increase provided the increment in the range which is the increase received for a s 8(6)(c) purpose. In substance, what the Tribunal had done so as to give effect to “the spirit of the Act”, was to add a new par (d) to the subsection to read, in effect:

(d) the receipt by the employee of a negotiated increase in salary.

If the phrase “an increment in a range of salary” ought not to have been manipulated as Finn J described neither should the word “increment” itself in its setting. Section 8(6)(c) of the Act was not drafted with the AWA system in mind.

64    In my view the applicant’s submissions on this second question are inconsistent with these decisions: there was in the applicant’s case no increment in a range of salary, wages or pay. Further, the percentage increases were not increases in a range but adjustments applicable to employees who had met certain criteria.

65    I do not find it necessary to consider whether, in the alternative, the increases fell within ss 8(9) and 8(9A) which apply only if the employee had remained employed, which the applicant did not. The Tribunal did not do so and there was no notice of contention on the part of the respondent.

66    I also do not find it necessary to consider, in the further alternative, any operation of s 8(10) or s 19(4) of the Act. Again, those provisions were not considered by the Tribunal and there was no notice of contention on the part of the respondent.

67    I reject the second ground of appeal.

Orders

68    For these reasons, the appeal is dismissed. In accordance with the respondent’s request made in submissions, I will hear the parties in relation to costs.

Associate:

Dated:    18 January 2013