Comcare Australia v Mathieson

the legislative context 5 In order to understand the issues raised in this appeal, it is necessary to set out in some detail the provisions of the 1988 Act that govern compensation for injuries resulting in permanent impairment. 6 The claim sought to be established before the Tribunal was brought under s 24(1). That section provides: "(1) Where an injury to an employee results in a permanent impairment, Comcare is liable to pay compensation to the employee in respect of the injury." 7 It is also necessary to note the following subsections of s 24: "(5) Comcare shall determine the degree of permanent impairment of the employee resulting from an injury under the provisions of the approved Guide. (6) The degree of permanent impairment shall be expressed as a percentage." 8 The expression "permanent impairment" in s 24(1) involves the use of words that are separately defined in s 4(1) as follows: "impairment means the loss, the loss of the use, or the damage or malfunction, of any part of the body or of any bodily system or function or part of such system or function. … permanentmeans likely to continue indefinitely." 9 Sections 24 and 25 provide for a body established under the Act, namely the Commission for the Safety Rehabilitation and Compensation of Commonwealth Employees ("the Commission"), to determine compensation for permanent impairment. The amount of compensation to be paid is proportionate to the degree of permanent impairment, which is determined as a percentage. However, s 24(7) provides: "(7) Subject to section 25, if: (a) the employee has a permanent impairment other than a hearing loss; and (b) Comcare determines that the degree of permanent impairment is less than 10%; an amount of compensation is not payable to the employee under this section." 10 Section 25 permits the Commission to make more than one determination of the degree of impairment. Under s 25(4): "(4) Where Comcare has made a final assessment of the degree of permanent impairment of an employee (other than a hearing loss), no further amounts of compensation shall be payable to the employee in respect of a subsequent increase in the degree of impairment, unless the increase is 10% or more." 11 Under both the 1930 Act, and the 1971 Act, there was no general provision for payment of a lump sum as compensation for a permanent impairment. A lump sum could be awarded for certain specified work-caused impairments. These included "loss of leg at or above knee". However, they did not extend to an impairment of the type suffered by the respondent. 12 The 1988 Act allowed, for the first time, for lump sum compensation for all forms of permanent impairment, but included in Div 2 what were described as "transitional provisions". The critical provision is section s 124(3). It provides: "(3) A person is not entitled to compensation under section 24 or 25 in respect of a permanent impairment, or under section 17 in respect of the death of an employee, being an impairment or death that occurred before the commencing date, if: (a) the person received compensation of a lump sum in respect of that impairment or death under the 1912 Act, the 1930 Act or the 1971 Act; or (b) the person was not entitled to receive compensation of a lump sum in respect of that impairment or death: (i) where the impairment or death occurred before the commencement of the 1930 Act - under the 1912 Act; (ii) where the impairment or death occurred after the commencement of the 1930 Act but before the commencement of the 1971 Act - under the 1930 Act as in force when the impairment or death occurred; or (iii) in any other case - under the 1971 Act as in force when the impairment or death occurred." 13 It is common ground between the parties that the aim of the transitional provisions in the 1988 Act was to ensure that employees were no better off, and no worse off, by reason of the introduction of the new provisions, at least in relation to injuries and impairment that had been sustained prior to the commencing date.

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.

the tribunal's findings and reasoning 34 The Tribunal accepted that the respondent joined the Royal Australian Navy in 1963, and that he resigned on 10 March 1975. It found that he suffered injuries to both his knees in about 1963, and that he had surgery on his right knee in 1967, and on his left knee in 1972. It concluded that he suffered a permanent impairment, as at 1 December 1988, of 10 per cent under Table 9.5 of the Guide. 35 It was common ground before the Tribunal that by the time it came to consider the respondent's case, he was totally and permanently incapacitated by reason of the injuries to his knees. 36 The Tribunal expressed its findings regarding the respondent's condition at [82] in the following terms: "Having regard to the criteria against an impairment of 10% under Table 9.5, I am satisfied that the extent of the [respondent's] impairment at 1 December 1988 was 10%. I do so because I find as a fact that at that time, based on the evidence heard and the documents read containing the applicant's history, he would have then been able to rise to a standing position and walk, but have difficulty with grades and steps. I also find that at 1 December 1988, the [respondent's] impairment was permanent." 37 The Tribunal continued at [83]: "Subsequent to 1 December 1988, I am satisfied and find as a fact that the [respondent's] condition has deteriorated. I am satisfied and find as a fact that quantitatively and qualitatively the extent of the worsening has amounted to a new impairment which is compensable under s 24 of the Act. The extent of the compensation is the difference between the extent of impairment at 1 December 1988 and the finding of impairment at the time of this review which, for reasons which will follow, I am satisfied is 30% pursuant to Table 9.5." 38 The Tribunal said that it had reached this conclusion based upon the evidence and report of Mr Roger Coates, an orthopaedic surgeon, who found, at the time of his assessment in March 1999, that the respondent had an impairment of thirty per cent under Table 9.5. It also relied upon the evidence of Mr David Conroy, a surgeon, who examined the respondent in 1999, and who was of the opinion that the level of his permanent impairment was between twenty and thirty per cent. The Tribunal rejected the views of Mr Michael Shannon, a surgeon, who examined the respondent in 2001, and who concluded that there had been no worsening of his condition since 1988. It also rejected the views of Mr Clive Jones, a surgeon who also examined the respondent in 2001, and who concluded that his incapacity had not become so different in its pathology or in its effects that it could be said to be a new impairment after December 1988. Indeed, Mr Jones said that the respondent's condition had been present prior to 1988, and that "nothing changed" thereafter apart from the slow progression of osteoarthritis of the knees.

the applicant's contentions 39 Mr Hanks QC, who appeared on behalf of the applicant, submitted that once the Tribunal found that the respondent's impairment from bilateral knee injuries occurred before 1 December 1988, s 124(3) of the 1988 Act operated to preclude him from any entitlement to compensation under s 24 in respect of that permanent impairment. He submitted that this was because, under the 1971 Act, the respondent would not have been entitled to receive any lump sum payment in respect of permanent impairment arising from injury to his knees. Mr Hanks added that if, hypothetically, the respondent's permanent impairment occurred prior to the commencement of the 1971 Act, the respondent would similarly have been unable to receive a lump sum payment. He referred to s 12(1) of the 1930 Act which, he submitted, taken in combination with s 124(3)(b)(ii) of the 1988 Act, would have produced the same result. 40 Mr Hanks submitted that, on the Tribunal's own findings, there was no change in the underlying pathophysiological condition. That condition remained the same from 1967, when the respondent first had surgery, until September 2002, when the Tribunal made its decision. The condition was degenerative disease in the knees. There had simply been a deterioration in the degree of impairment caused by that disease, as measured by the Guide from 10 per cent in November 1988 to 30 per cent in September 2002. In the absence of any change in the underlying pathophysiological condition, it could not be said that the respondent developed a new or different impairment. A substantial worsening of the same impairment after the commencing date did not constitute a new impairment. 41 Mr Hanks noted that the Tribunal had acknowledged that it was dealing with a condition that had gradually deteriorated. He referred to various statements by the Tribunal to that effect. He submitted that the Tribunal erred in law by treating an increase measured by the Guide in the degree of permanent impairment (being an impairment that had occurred before the commencing date) as having established a new impairment (being an impairment that had occurred after the commencing date). 42 Mr Hanks submitted that although the Tribunal had received evidence from a number of doctors, there was no evidence that there had been a change in the pathophysiological condition causing the impairment. According to s 28(4) of the 1988 Act, the Guide is used to assess "the degree of permanent impairment". It may support a decision of the kind contemplated by s 25(4) that there has been "a subsequent increase in the degree of impairment". It cannot, however, be used to identify a new impairment. 43 Mr Hanks argued that the Tribunal had confused a "gradual worsening" with the emergence of a new and different impairment. He submitted that the authorities upon which the Tribunal based its decision, namely Blackman, Brennan and West did not support the Tribunal's approach. He further submitted that the Tribunal had failed to observe the distinction between a "gradual worsening of a condition" resulting in separate and distinct impairments, and a "gradual worsening in the degree of the same impairment". 44 Mr Hanks contended that the Tribunal had failed to make a number of critical findings of fact. The Tribunal found that the respondent's condition had deteriorated, and that "quantitatively and qualitatively" the extent of the worsening amounted to a new impairment. However, it did not refer to any facts, or any evidence, on which that finding had been based. Moreover, it did not refer to any facts, or any evidence, to support the conclusion that there had been a change in the underlying pathophysiological condition. Indeed, it made no finding as to the nature of that condition as at 1 December 1988, still less thereafter. He referred to ss 43(2) and 43(2B) of the AAT Act, which require the Tribunal to give reasons, and to include in this reasons its findings on material questions of fact and a reference to the evidence or other material on which those findings were based. He submitted that the Tribunal's failure to state the reasons for its decision - by omitting a critical finding or findings of fact - amounted to a breach of the requirements of those requirements, and thereby constituted an error of law.

The respondent's contentions 45 Mr Gorton QC, who appeared on behalf of the respondent, submitted that the appeal should be dismissed because it did not raise any question or questions of law. He submitted that the notice of appeal raised nothing more than a series of challenges to findings of fact. Alternatively, to the extent that it raised questions of law, these were not relevant to the resolution of the respondent's claim. 46 Mr Gorton argued that the Tribunal had found that the respondent's condition, resulting from the injuries to his knees, had deteriorated after 1 December 1988. The Tribunal had also found that, viewed "quantitatively and qualitatively", the deterioration amounted to a new impairment. The formulation adopted by the Tribunal showed that it had correctly understood the legal test to be applied in construing s 124(3), and that it had properly performed its task. 47 More specifically, Mr Gorton submitted that there is no requirement that there be an identifiable change in an underlying pathophysiological condition in order to satisfy the requirements of s 124(3). He contended that an arthritic condition could cause markedly deteriorating symptoms, and disability, as it progressed. The condition could fall within the same broad definition, but still amount to a new impairment, in substance, over time. 48 Alternatively, Mr Gorton submitted that if it were necessary to establish that the respondent's pathophysiological condition had changed before it could be said that he suffered from a new permanent impairment, there was abundant evidence before the Tribunal to satisfy that requirement. He referred, in particular, to the evidence of Mr Coates that there had been damage beyond cartilage, to the bone, in about 1993. He also referred to the evidence of Mr Conroy regarding the change that he had detected in the physical condition of the respondent's knees. 49 Mr Gorton disputed Mr Hanks' contention that the Tribunal had approached the case on the basis that a mere change in the measured assessment would constitute a new impairment. He submitted that the Tribunal's reasons were plainly adequate to show the facts found, and the reasoning process that it had adopted.

conSIDERATION 50 It is hardly satisfactory that there should be so much uncertainty regarding the construction of s 124(3) of the 1988 Act so long after its commencement. The applicant would undoubtedly succeed in this appeal if the approach taken by the Full Court in Blackman, and endorsed by Heerey J in West, were to be followed. However, in a number of cases, to which I have previously referred, serious reservations have been expressed as to the correctness of that approach. 51 The most recent discussion by an appellate court of this issue appears in the judgment of Merkel J, with which O'Connor J agreed, in West. It was that approach that commended itself to Mansfield J in Maida. It is that approach that I propose to follow. 52 Mr Hanks formally submitted that Blackman had been correctly decided, and that I should follow the reasoning in that case, rather than the view of the majority in West. I reject that submission. His alternative submission was that the Tribunal had erred in law by failing to apply correctly the "quantitative and qualitative" test enunciated in West. He further submitted that an essential element of that test was the requirement that there be an identifiable change in the underlying pathophysiological condition before there can be a new physical impairment. 53 In my opinion, Mr Hanks' alternative submission should be accepted. I should say that I have some reservations about the use of the expression "pathophysiological condition". That expression is nowhere to be found in the 1988 Act, or in any relevant extrinsic material. Nonetheless, Merkel J, who used it repeatedly in his judgment in West, must have chosen to use it after careful consideration. 54 The term "pathophysiological" is defined in the Oxford English Dictionary as "pertaining to pathophysiology". That term, in turn, is defined as "the physiological processes associated with disease or injury; the study of such processes". It appears to be a word that is understood in scientific circles, and seems to capture the essence of what Merkel J had in mind when he referred to a "qualitative" change in the nature of a permanent impairment. 55 I appreciate that the test adopted in West can give rise to difficulties in borderline cases. Reasonable minds, including the reasonable minds of experts, can differ as to whether the level of deterioration in a person's condition amounts to a new condition. Sometimes, there will be a clear, and readily ascertainable change in the pathophysiology of the condition. For example, a person who is HIV positive, and then develops AIDS, will almost certainly be regarded as having a new condition. Arthritic degeneration poses greater difficulties. At what stage does a change in the level of physical impairment, based upon a steady degeneration of that condition, amount to a new and different "permanent impairment"? 56 The Tribunal plainly intended to apply the test approved by the majority in West. It used the formula developed by the majority in that case, save for the reference to a pathophysiological condition. In my view, the Tribunal's failure to use that expression is of little consequence provided that its reasons demonstrate that it appreciated that it was required to have regard not just to the extent of the impairment, but also to the quality of that impairment. Under the 1988 Act, the concept of "degree of permanent impairment" differs from that of "permanent impairment". I agree with what Mansfield J said about this in Maida. 57 I also note, as Mansfield J did, that in Brennan, Gummow J pointed out that the use of the Guide, as a step in determining the existence of a permanent impairment, is erroneous. The Guide is directed to the measure of the degree of permanent impairment, rather than to its existence. As Mansfield J also observed, the use of the Guide 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. 58 Mr Hanks acknowledged, in oral submissions, that there was evidence before the Tribunal that might, conceivably, have formed the basis for a finding that there had been a qualitative change in the nature of the respondent's permanent impairment after the commencing date. Mr Gorton referred, for example, to a note prepared by Mr Michael Anderson, an orthopaedic surgeon, in 1994, which spoke of "things having changed in the last two months". There was also evidence before the Tribunal regarding the nature of osteoarthritis, and the capacity of that condition to progress rapidly. There was medical evidence which spoke of "exponential" deterioration, as well as evidence regarding the move from cartilage to bone. In addition, there was evidence that the respondent had been capable of full-time employment in 1988, but was totally incapacitated, by reason of the impairment, by 1998. Finally, there was evidence regarding the respondent's need to have supports for his knees in order to move around, and his need for ever-increasing quantities of pain killing medication, after he ceased working in about 1999. 59 All of these factors, taken together, might have led the Tribunal to conclude, as a matter of fact, that the respondent suffered from a new and different permanent impairment after the commencing date. The problem is that the Tribunal did not make any finding in these or any similar terms. It simply used the formula propounded by Merkel J in West without explaining the basis upon which it arrived at the conclusion that there had been a "qualitative" as well as "quantitative" change in his condition. 60 In my opinion, the Tribunal failed to comply with the requirements of ss 43(2) and 43(2B) of the AAT Act. It did not include in its reasons "findings on material questions of fact". Nor did it include "a reference to the evidence or other material on which those findings were based". 61 A substantial failure by the Tribunal to state reasons for its decision may constitute an error of law. Where it is impossible to discern from the reasons given the actual reasoning process adopted, the decision may be set aside on appeal under s 44 of the AAT Act. See Dornan v Riordan (1990) 24 FCR 564; Brackenberg v Comcare Australia (1995) 56 FCR 335; and Australian Postal Corporation v Wallace (1996) 41 ALD 455. 62 In Ansett Transport Industries (Operations) Pty Ltd v Wraith (1983) 48 ALR 500, Woodward J said at 507 that in order to comply with a request for reasons under s 13 of the Administrative Decisions (Judicial Review) Act 1977 (Cth), a decision-maker: "…should set out his understanding of the relevant law, any findings of fact on which his conclusions depend (especially if those facts have been in dispute), and the reasoning processes which led him to those conclusions. He should do so in clear and unambiguous language, not in vague generalities or the formal language of legislation." (emphasis added) 63 Where the Tribunal fails to make findings on specific questions of fact that it regards as material to the issues before it, the conclusion may follow that it has failed to direct its attention to relevant considerations, and that the proceeding has thereby miscarried. Of course, a requirement to set out findings and reasons focuses upon the "subjective" thought processes of the decision-maker: Minister for Immigration and Multicultural Affairs v Yusuf (2001) 206 CLR 323 at 346. Sections 43(2) and 43(2B) oblige the Tribunal to set out its findings on those questions of fact which it considered to be material to its decision, and to the reasons it had for reaching that decision. The Tribunal did not comply with this requirement, in the present case. 64 In my opinion, the Tribunal's failure to spell out adequately how, and why, it came to the conclusion that there had been a "qualitative" change to the respondent's permanent impairment amounted to a failure to comply with its statutory obligation. As the High Court noted in Yusuf, that failure enables a court, which has been asked to review a Tribunal's decision, to infer that the Tribunal did not mention a particular matter in its reasons because it did not consider that matter to be material. In an appropriate case, that could form the basis for judicial review. Alternatively, as in Brackenreg, it might reveal that the Tribunal erred in law, for the purposes of s 44 of the AAT Act, by incorrectly applying the law to the facts as found by it. In short, the Tribunal's failure in this case to point to any evidence, or other material, that might explain how it came to the conclusion that there had been a qualitative change to the respondent's impairment, in my view, vitiates its decision. 65 Mr Hanks acknowledged that if the applicant succeeded on the ground that the Tribunal had failed adequately to indicate how it was that it made its finding that there had been a qualitative change, the matter would have to be remitted to the Tribunal for further hearing and determination. In his written submissions, he contended that the matter should be remitted to a differently constituted Tribunal. I can see no reason why an order to that effect should be made. The only error of substance that has been identified in the manner in which the Tribunal went about its task is an error of a legal nature. In my opinion, the Tribunal, as previously constituted, is perfectly able to address that error. It can reconsider the evidence previously led, receive any additional evidence that it considers relevant, hear further submissions, and arrive at a conclusion that is supported by reasons that satisfy the requirements of ss 43(2) and 43(2B). 66 Mr Hanks indicated that if the applicant were successful in this appeal, it would not seek costs. Accordingly, the appeal will be allowed, the decision of the Tribunal given on 26 September 2002 set aside, and the matter remitted to the Tribunal for further hearing and determination. There will be no order as to costs. I certify that the preceding sixty-six (66) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Weinberg.

Associate: Dated: 12 March 2004 Counsel for the Applicant: Mr P Hanks QC with Ms AB McMahon

Counsel for the Respondent: Mr RP Gorton QC with Mr PR Trigar