the authorities
14 As with a number of the transitional provisions contained in the 1988 Act, s 124(3) is badly drafted. The section has caused difficulty ever since it was enacted. The issue whether an employee suffered a "permanent impairment" prior to, or after, "the commencing date" is pivotal in determining whether a lump sum is payable. Yet that seemingly straightforward question can sometimes pose real problems.
15 The difficulty has been compounded by the fact that there are decisions of this Court involving the construction of the section that simply cannot be reconciled with each other.
16 The first reported case dealing with the new provisions was Blackman v Australian Telecommunications Commission (1990) 12 AAR 11. There, a Full Court comprising Pincus, Foster and Hill JJ dealt with an appellant who had been diagnosed as suffering mesothelioma in November 1988. That diagnosis, some weeks before the commencing date, undoubtedly amounted to a "permanent impairment" within the meaning of the 1988 Act. It was clear that the appellant had no entitlement to lump sum compensation in respect of his impairment under the 1971 Act. It followed, so it seemed, he had no entitlement to compensation under s 24 or s 25 of the 1988 Act.
17 The Full Court noted that the only substantial argument advanced on behalf of the appellant was that relevant "permanent impairment" occurred after, as well as before, the commencing date, and that this brought s 24 into play. The Court said at 14:
"There was some evidence before the Tribunal that the disease, and therefore the degree of impairment, had generally worsened since the condition was first diagnosed, in accordance with its natural progress. It appears that treatment alleviated the effects of the disease at one stage, but the applicant's overall condition had tended to deteriorate. Mr Joseph's contention amounted to this: although there is only one disease and, having regard to the definition of injury in s 4(1), therefore only one "injury", if the impairment consequent upon it has worsened substantially after the commencing date, then that worsening in itself constituted an "impairment" within the meaning of s 124(3) occurring after the commencing date.
If the contention on behalf of the applicant is correct, then each time an impairment worsens significantly, there is a new impairment within the meaning of the 1988 Act. We cannot read the relevant provisions in this way. The scheme of the Act, in particular of ss 24 and 25, is not that as a disease progresses, the aggravation of its consequences constitutes a series of new impairments, each giving rise to a separate liability to pay compensation. It that were so, then small increments of aggravation of the impairment would not be compensable at all; for under s 24(7) there is no right to compensation if the degree of permanent impairment is determined to be less than 10 per cent. As an impairment worsens, further rights to compensation may accrue under s 25, but not because there is another distinct impairment.
To achieve the result that a variation (substantial or otherwise) of the degree of impairment should be treated as a new impairment for the purposes of s 124(3), different language would have been necessary. The natural reading of "impairment … that occurred before the commencement date" is such as to cover the case in which there is but a single impairment, which came into existence before the commencing date and thereafter fluctuated in intensity but generally worsened.
The consequence is that the applicant is not entitled to compensation under ss 24 and 245 of the 1988 Act in resect of his permanent impairment, because it occurred, that is, came into existence, before the commencing date."
18 Several years later, in Brennan v Comcare (1994) 50 FCR 555 a Full Court comprising Burchett, Ryan and Gummow JJ considered precisely the same issue. The appellant in that case suffered injuries to his back shortly before the commencement of the 1988 Act. His claim for a lump sum payment for permanent impairment under s 24 of that Act was upheld by the Tribunal on the basis that his permanent impairment had commenced after the commencing date, when his condition had stabilised following surgery. This Court at first instance set aside that decision, and the appellant appealed against that judgment.
19 The Full Court dismissed the appeal, holding that the primary judge had correctly determined that the Tribunal had failed to answer the central question, namely whether it could properly be said that, prior to the commencing date, the appellant's impairment, being damage to his back, was likely to continue indefinitely. The Full Court also held that the Tribunal had misdirected itself in having regard to the provisions of a document prepared by Comcare under s 28, and titled "Guide to the Assessment of the Degree of Permanent Impairment" ("the Guide") when performing its task under s 124(3).
20 Of particular significance for present purposes are the reservations expressed by Burchett J at 560, and Gummow J at 571 regarding the correctness of the judgment in Blackman. Burchett J regarded the views expressed in that judgment as obiter dicta. Gummow J agreed, observing that the passage in Blackman dealing with the meaning of "permanent impairment" should be "treated with caution". His Honour noted that the terms of the legislation were consistent with the imposition of distinct liabilities where an injury results in more than one permanent impairment. He said:
"… in a particular case those results may be manifested sequentially rather than concurrently."
21 The next occasion on which s 124(3) was considered was in Comcare v Levett (1995) 60 FCR 14. In that case, a Full Court comprising Lockhart, Beazley and Moore JJ, heard an appeal from the Tribunal which had held that the respondent, who suffered an injury to his back in June 1982, was entitled to a lump sum under the 1988 Act. The Full Court held that the respondent's injury was sustained before the commencing date, and the injury resulted in an impairment that also occurred before that date. However, permanent impairment did not arise until after the commencing date, and accordingly, the respondent was entitled to lump sum benefits under the 1988 Act.
22 The Full Court considered both Blackman and Brennan, but distinguished those cases on their particular facts. In Levett, the respondent had clearly suffered an injury prior to the commencing date, but that injury did not give rise to permanent impairment. It was obvious, in those circumstances, that the respondent was entitled to receive a lump sum payment.
23 In Department of Defence v West (1998) 85 FCR 491, the respondent suffered a serious back injury in 1968 in the course of his employment, and sought compensation for permanent impairment under s 24 of the 1988 Act. Before the Tribunal, the parties agreed that as at 1 December 1988 he suffered a 10 per cent permanent impairment under Table 9.6 of the Guide, and that as at 18 December 1996 he suffered a 20 per cent impairment under the same Table. The Tribunal held that the respondent was not prevented by s 124(3) from claiming compensation for the additional 10 per cent back impairment that had occurred since 1 December 1988. Merkel J, with whom O'Connor J agreed, said at 505-506:
"Plainly, the policy underlying s 124 is that where the entitlement to compensation under the Act has a relevant nexus with a period before the commencement of the Act, an employee is not to be deprived of any compensation that would have been payable under the earlier applicable, but now repealed, statutory scheme but is not to be entitled to any greater compensation than would have been payable under the repealed statutory scheme: see Hoyle v Telstra Corporation Ltd (1997) 75 FCR 390 at 392, 294 and 398. In Hoyle, the Full Court concluded that employees who were totally incapacitated before the commencement date of the Act as a result of an injury which was compensable under the Compensation (Commonwealth Government Employees) Act 1971 (Cth) (the 1971 Act) could not receive a lump sum payment under s 24 of the Act which they were not entitled to receive under the 1971 Act."
24 His Honour continued at 506:
"Unfortunately, the agreement of the parties as to the respondent's permanent impairment did not descend to any greater detail than that set out above as to the nature or extent of the impairment or the patho-physiological condition that caused the initial permanent impairment and its subsequent deterioration or worsening. Although there was evidence before the AAT that the deterioration of the respondent's lumbar spine since 1 December 1988 was a significant worsening it would be inappropriate for this Court to make a decision on that basis having regard to the agreement of the parties to contest the matter before the AAT on the basis of the agreed facts in relation to the level of impairment. I say "unfortunately" as in my view a change of the underlying patho-physiological condition or a significant worsening of an impairment which is likely to have come about as a result of that change might be relevant factors in determining whether the permanent impairment that the respondent suffered at the date of the hearing was the same permanent impairment as that which he had suffered as at or prior to 1 December 1988.
In these circumstances, the question arising in the present case must be whether a deterioration in the level of permanent impairment, as defined in s 4, can result in the deteriorated condition being a new permanent impairment. The appellant answers that question in the negative in reliance upon Blackman v Australian Telecommunications Corporation (1990) 12 AAR 11 in which a Full Court (Pincus, Foster and Hill JJ) observed, obiter dicta, that a permanent impairment which generally worsens as time passes, even to a stage where it has worsened significantly, is not a new impairment or a series of separate impairments as it worsens but is the same permanent impairment."
25 After referring to a number of passages from the judgments in Blackman, and Brennan, and also referring to a passage in Levett, his Honour posed the question, whether a deterioration in a permanent impairment could constitute a different impairment. He said at 512:
"The appellant's contentions, and the dicta in Blackman, require the conclusion that under the Act a slight impairment such as a minor loss of use of a limb, which is permanent in that it is of indefinite duration, is the same impairment as the total loss of use of the limb where each impairment has resulted from the same injury. Although it is true that each impairment involves a loss of use of the limb, in my view it is not a natural use of the relevant words to say that each is the same permanent impairment. It is both more accurate and consistent with the ordinary meaning of the relevant words to say that there was initially a slight loss of use of the limb but the subsequent total loss of use of the limb was, both qualitatively and quantitatively, a different impairment. I agree with Burchett J in Brennan at 558 where his Honour said that a worker who has suffered a slight loss of use of the right leg before the commencing day but afterwards lost its use entirely is entitled to treat the further loss of the use of the leg "as a further impairment occurring after the commencing date".
A loss of the entitlement conferred under ss 24 and 25 by reason of s 124(3) only occurs when the permanent impairment the subject of the claim is the permanent impairment that the employee suffered as at 1 December 1988. On my reasoning, and that of Burchett J in Brennan, where a change in a permanent impairment occurring after the commencement date is such that, quantitatively and qualitatively, it is properly to be characterised as a further or new impairment occurring after the commencing date it is compensable by a lump sum payment under ss 24 and 25. That conclusion is consistent with the language used and with the statutory policy to be discerned from ss 24, 25 and 124 of providing benefits to workers in respect of a further permanent impairment that occurs after the commencing day irrespective of whether the injury that resulted in the impairment occurred before or after the commencing day. It also avoids capricious and arbitrary outcomes under workers´ compensation legislation, which is of a remedial nature and should be construed liberally: see Brennan at 559 and the cases there referred to."
26 It should be noted that the third member of the Court, Heerey J, dissented. His Honour indicated that he preferred the reasoning in Blackman to the reservations expressed in Brennan.
27 The last case on this subject that was drawn to my attention was Comcare Australia (Department of Defence) v Maida (2002) 36 AAR 69, a decision of Mansfield J at first instance. In that case, the respondent had been discharged from the Australian Army in September 1988, suffering from paranoid schizophrenia. Lump sum compensation was not available for that condition under the 1971 Act but he claimed a payment for permanent impairment under s 24 of the 1988 Act. Notwithstanding s 124(3), the Tribunal upheld the respondent's claim. It found that there was "a substantial increase in the level of impairment, and a distinct qualitative difference, in terms of the effect of the impairment upon the applicant".
28 Mansfield J ordered that the appeal be allowed, and remitted the matter to the Tribunal for hearing and determination according to law. He held that the Tribunal had erred by taking the view that an increase in the level of symptoms might, of itself, constitute a further or different impairment so as to fall under s 24(1).
29 It is instructive to consider, in some detail, the Tribunal's reasoning in Maida. It found that the respondent's condition in that case had progressed from a 10 per cent impairment under Table 5.1 of the Guide in 1988, to a 30 per cent current impairment. It observed that such a change "of itself must be marked as significant alteration".
30 Mansfield J rejected this reasoning. After analysing in detail the various cases dealing with s 124(3), his Honour turned specifically to West. He said at 79:
"However, the nature and extent of the loss of use or malfunction is critical to determining whether an impairment has changed to such an extent that it is a further or new impairment. Merkel J accepted that gradual worsening does not result in a series of separate or further impairments. Questions of fact and degree will be involved in making a qualitative assessment as to whether, in a particular case, the permanent impairment existing as at 1 December 1988 has deteriorated to an extent that it is properly to be characterised as a further or different impairment from that which existed at the commencement date."
31 His Honour went on to observe that the difference between the majority and minority views in West might simply be a matter of degree. He concluded, however, that it was unnecessary to resolve that question in the instant case. He said at 79-80:
"In the light of that consideration, in my view it was appropriate for the Tribunal to follow the approach outlined by Merkel J in West. The issue is whether it did so.
In effect, in this matter, the applicant puts the following propositions which, in my view, correctly summarise the state of the law:
"20.1 The progression of a disease or gradual worsening of the degree of an impairment does not constitute a new or distinct impairment.
20.2 If there is no change in the underlying patho-physiological condition causing an impairment, any worsening of that impairment will not constitute a new or distinct impairment.
20.3 A significant worsening of an impairment may constitute a new or distinct impairment, but only if there has been a change in the underlying patho-physiological condition, so that there has been a qualitative change to the impairment - that is, the development of a new impairment."
32 His Honour continued at 82-83:
"The conclusion of the Tribunal that there was a "distinct qualitative difference" in the respondent's impairment after 1 December 1988 is said to be "in terms of the effect of the impairment upon the applicant". That indicates a focus upon the effect or degree of the permanent impairment rather than the nature of the permanent impairment. The degree of a permanent impairment, as noted earlier, is a different concept under the SRC Act from that of a permanent impairment. Moreover, as Gummow J pointed out in Brennan, the use of the Guide to the Assessment of the Degree of Permanent Impairment prepared pursuant to s 28 of the SRC Act as a step in determining the existence of a permanent impairment is erroneous. It is directed to the measure of the degree of permanent impairment, rather than to the existence of a permanent impairment. The Tribunal's use of Table 5.1 of the Guide to assist in determining that the respondent has a qualitatively different permanent impairment at the time of its determination from that which existed at 1 December 1988 is therefore inappropriate. It also indicates a focus upon the worsening of the degree of impairment as evidenced by its consequences, rather than upon the emergence of a new permanent impairment itself.
For those reasons, I have reached the conclusion that the Tribunal erred in law in its consideration of the respondent's claim. The appeal should be allowed, and the decision of the Tribunal should be set aside.
The applicant further seeks that the decision of the applicant's delegate that the respondent is not entitled to compensation under ss 24 and 27 of the SRC Act be affirmed. I am not disposed to adopt that course. It would have the effect of foreclosing any entitlement the respondent might have to lump sum compensation for a permanent impairment under the SRC Act. It therefore assumes that the Tribunal, properly applying the law, would have reached the conclusion that the respondent has suffered no further permanent impairment as a result of his schizophrenia after 1 December 1988. I am not confident that the Tribunal, properly applying the law, would reach such a conclusion.
A significant deterioration in the degree of permanent impairment from any injury may indicate that a discernible or measurable underlying pathological change has occurred. Examples readily suggest themselves. An employee may have a back injury producing lower back pain, and subsequently pain extending into the legs indicating the possibility of further pathological change in the lower back so as to impinge upon nerve roots which previously were unaffected. In the case of a condition such as schizophrenia, there may or may not be some further patho-physiological changes which account for a significant deterioration in symptoms. The Tribunal at one point described the significant worsening of the respondent's symptoms, and so of the degree of his permanent impairment, as being "marked by significant alteration". I have concluded that it then erred in failing to determine whether there had in fact been a qualitative change in the patho-physiological condition underlying his schizophrenia, and in regarding a change in the degree of his permanent impairment as itself constituting a new permanent impairment under the SRC Act.
However, the Tribunal might upon the whole of the evidence conclude that there had been some further patho-physiological change in his underlying condition. It may be satisfied that the deterioration in symptomatology is not indicative merely of the progression or gradual worsening of the degree of the respondent's impairment. It might of course also reach the view that there has been no change in the underlying patho-physiological condition so that the worsening of the degree of impairment will not constitute a new or distinct impairment. But I do not think it is for the Court to foreclose those options to the Tribunal when the Court has concluded that the Tribunal, through legal error, has not addressed the respondent's claim correctly.
I accordingly further order that the respondent's claim be remitted to the Tribunal for further hearing and determination in accordance with those reasons for judgment."
33 I have set out his Honour's reasons in some detail because they assumed considerable importance during the course of the hearing before me. I shall return to those reasons later in this judgment.