Comcare v Burgess

REASONS FOR JUDGMENT 1 The question of law raised by this application by Comcare by way of an appeal under s 44 of the Administrative Appeals Tribunal Act 1975 (Cth) ('AAT Act') from a decision of the Administrative Appeal Tribunal ('the Tribunal') given on 7 August 2007 is a relatively confined question of construction of the proper operation of s 8(10) of the Safety Rehabilitation and Compensation Act 1988 (Cth) ('the SRC Act') in the circumstances of a claim for compensation in respect of an injury (s 4(1)) SRC Act) suffered by Ms Katie Burgess resulting in incapacity for work. 2 The facts are these. 3 On 21 December 2004, Ms Burgess made a claim for compensation in respect of severe depression which she said she had first noticed on 29 September 2004 which she said arose out of her employment with the Department of Defence. On 19 February 2005, Comcare accepted liability in respect of Ms Burgess's depressive disorder and made payments of compensation to her from 29 October 2004 until 18 October 2006. On 28 February 2007, Comcare determined that for the period 19 October 2006 to 18 January 2007, Ms Burgess was entitled to compensation payments of $842.05 per week being 75% of her normal weekly earnings. The phrase 'normal weekly earnings' has a particular meaning under s 8 of the SRC Act. Ms Burgess's compensation payments had been reduced, consistent with the provisions of the SRC Act, from 100% to 75% of her normal weekly earnings as she had been in receipt of compensation payments for more than 45 weeks. 4 By letter dated 27 March 2007, Comcare was informed by Mr Bruce Sheffield, a Rehabilitation, Compensation and Medical Case Manager employed by the Department of Defence of the following matter: The above named employee of this Department has an accepted compensation claim. At present she is not receiving payments from this Department. This is because the Departmental Australian Public Service Act, Code of Conduct, Delegate suspended her without pay with effect from 18 October 2006. This suspension is still in effect. It is my understanding that the Delegate is obliged to regularly review the matter and that one of these reviews would be undertaken in the relatively near future. 5 On 3 April 2007, Comcare notified Ms Burgess of a reconsideration on its own motion pursuant to s 62(1) of the SRC Act of its earlier determination of an entitlement on the part of Ms Burgess to incapacity payments for a period including the period 18 October 2006 to 18 January 2007. Comcare advised Ms Burgess that having regard to the advice from Comcare by the letter of 27 March 2007 '… it appears that had you not been incapacitated for work, you would be receiving the weekly amount of zero from 18 October 2006 to present due to your current suspension from employment without pay'. As a result of the reconsideration pursuant to s 62(1), Comcare made the following decision: Having regard to the evidence on file, I have varied the determinations of 22 November 2006 and 28 February 2007. I find that you are entitled to incapacity at the rate of $842.05 (75% of your NWE - Normal Weekly Earnings) from 28 August 2006 to 17 October 2006 and at the rate of $0.00 from 18 October 2006 to 18 January 2007. 6 The normal weekly earnings of Ms Burgess between 18 October 2006 and 18 January 2007 were $1,122.73. 7 These facts recited at [3] to [6] are drawn from a statement of agreed facts between the parties. Paragraph 7 of the agreed facts is in these terms: 7. If Ms Burgess had not been incapacitated for work, having returned to work fulltime prior to 18 October 2006, from 18 October 2006 she would not have been paid since she was suspended from her employment from 18 October 2006. 8 The respondent, Ms Burgess, places particular emphasis upon this paragraph as, in the context of the contended proper approach to s 8(10)(a) of the SRC Act, this paragraph recognises, it is said, that had incapacity not occurred, Ms Burgess would not have been in receipt of 'earnings' which is said to be a critical pre‑condition to the operation of s 8(10)(a) before a reduction of the amount of normal weekly earnings to which an employee would be entitled, can occur, under the subsection. 9 The statutory provisions are these. 10 Part II of the SRC Act provides for 'Compensation'. Division 1 addresses compensation in respect of injuries (see particularly s 14(1) as to an injury resulting in incapacity for work), property loss or damage and medical expenses. Division 2 addresses compensation for injuries resulting in death and Division 3 addresses compensation for injuries resulting in incapacity for work by reference to particular formulas for the calculation of the amount of compensation. Section 19(1) provides that the section applies to an employee who is incapacitated for work as a result of an injury. Subject to Part II, 'Comcare is liable to pay compensation to the employee, in respect of the injury, for each week during which the employee is incapacitated … of an amount calculated using the formula: (Adjustment percentage x NWE) - AE)' (s 19(3)). The Adjustment percentage in the case of Ms Burgess is 75%. The term 'AE' is the greater of an amount per week that an employee is able to earn in suitable employment or the amount per week that an employee earns from any employment undertaken by the employee during the relevant week. The amount thus determined is subtracted from the adjusted normal weekly earnings. That term takes its meaning from s 8 of the SRC Act and by operation of s 8(1) the normal weekly earnings of an employee struck during the 'relevant period' prior to an injury is calculated according to the formula (NH x RP) + A where 'NH' is the average number of hours worked in each week by the employee in employment during the relevant period; 'RP' is the employee's average hourly ordinary time rate of pay during the relevant period and 'A' is the average amount of any allowance payable to the employee in each week. For the purpose of calculating the normal weekly earnings of an employee before an injury, the reference to the 'relevant period' is a reference to the latest period of two weeks before the date of the injury during which the employee was continuously employed by the Commonwealth (s 9(1)). 11 The parties agree that having regard to s 8(1) and s 9(1) of the SRC Act, the normal weekly earnings of Ms Burgess in the period 18 October 2006 to 18 January 2007 were $1,122.73. However, the normal weekly earnings are subject to a potential reduction by operation of s 8(10) of the SRC Act. That subsection is in these terms: 8(10) If the amount of the normal weekly earnings of an employee before an injury, as calculated under the preceding subsections, would exceed: (a) where the employee continues to be employed by the Commonwealth … - the amount per week of the earnings that the employee would receive if he or she were not incapacitated for work; or (b) where the employee has ceased to be employed by the Commonwealth … - whichever is the greater of the following amounts: (i) the amount per week of the earnings that the employee would receive if he or she had continued to be employed by the Commonwealth … in the employment in which he or she was engaged at the date of the injury; (ii) the amount per week of the earnings that the employee would receive if he or she had continued to be employed by the Commonwealth … in the employment in which he or she was engaged at the date on which the employment by the Commonwealth … ceased; the amount so calculated shall be reduced by the amount of the excess. 12 The applicant says that s 8(10)(a) postulates a straightforward hypothetical question. The hypothetical question arises in the present circumstances, that is, in circumstances where Ms Burgess has continued to be employed by the Commonwealth (although suspended). The subsection asks, what is the amount per week of the earnings that Ms Burgess would receive were she not incapacitated for work? Because Ms Burgess was suspended from employment without pay with effect from 18 October 2006, the amount per week of the earnings that Ms Burgess would receive were she not incapacitated for work is demonstrated to be zero. The subsection then asks, does the amount of Ms Burgess's normal weekly earnings before injury exceed that amount? If so, the normal weekly earnings of Ms Burgess are to be reduced by the amount of the excess. In this case, the excess is the entirety of the normal weekly earnings since Ms Burgess would have received nothing due to her suspension without pay. The application of s 8(10)(a) in conjunction with s 8(1) and s 19(3) of the SRC Act thus brings about the expected result, it is said, that an employee incapacitated for work cannot receive compensation each week for earnings he or she would not have received in any event. The statutory mechanism for bringing about that result is the reduction of 'normal weekly earnings' struck in the two week period prior to injury (derived by the preceding subsections of s 8) by the amount of the excess beyond that which would have been the earnings of the employee. In a case where the earnings would have been nothing, the normal weekly earnings, for the purposes of the formula, are, in consequence, reduced to nothing. 13 The respondent says that s 8(10)(a) is simply not engaged in the present circumstances for the reason that the subsection can only operate in circumstances where the normal weekly earnings of Ms Burgess are capable of being compared with (so as to determine whether any relevant reduction should occur) 'the amount per week of the earnings that the employee would receive if he or she were not incapacitated for work'. Since Ms Burgess, by reason of the suspension, did not receive in any relevant week any amount of earnings, there can be no relevant comparison. In other words, the subsection assumes, at its centre, that the employee is in receipt of earnings and invites a comparison between the quantum of those earnings and the amount of normal weekly earnings determined by operation of the earlier subsections of the section. Normal weekly earnings are then to be reduced by the amount of the excess (if any); the quantum of the term 'NWE' is thus determined and inserted into the formula in s 19(3) and the amount of compensation is thus determined. 14 The Tribunal concluded that this contention on behalf of Ms Burgess is correct; set aside Comcare's decision of 3 April 2007 ([5] of these reasons); and substituted a decision that Ms Burgess was entitled to compensation under s 19 of the SRC Act at the rate of $842.05 from 18 October 2006 to 18 January 2007 (being 75% of normal weekly earnings). 15 The Tribunal's reasons are expressed in these terms: 10. The starting point is the recognition that a statutory provision has to be construed in its context so that it is consistent with the language and purpose of all of the provisions of the statute … Section 19 of the SRC Act (together with s 14) creates the entitlement to be paid compensation for incapacity for work. The incapacity that Ms Burgess has had accepted by Comcare remains; it has not been removed by her suspension from work. The construction contended for by Comcare treats her as being no longer entitled to receive compensation for that incapacity by reference to events that are unconnected to the injury. 11. The merit of the argument advanced by Comcare may be tested in this way. Let it be assumed that on 18 October 2006 Ms Burgess's employment had been terminated rather than merely suspended. Ms Ford accepted that in that event, Ms Burgess's entitlements would fall to be considered under s 8(10)(b) of the SRC Act and that there would not, in such a case, be a reduction to nil of her entitlements. It seems odd, to say the least, that Ms Burgess should be in a worse position when she has been suspended pending investigation than she would have been had her employment been terminated as the result of an investigation. And the same is true if she had herself terminated the employment. 12. I do not regard s 8(10) of the SRC Act as having any operation in the present situation. Its function is to cater for the cases where, through unusual variations, the employees normal weekly earnings were artificially high or to prevent the employee receiving a windfall. Bortolazzo v Comcare provides an illustration. There, pre‑injury, the employees had been receiving shift penalties. As a consequence of a restructure by their employer, there were no longer any duties that required shift work. The approach of the Tribunal in determining entitlements by reference to the salary without shift penalty was approved by Heerey J on the employees' appeal to the court. His Honour said [in relation to s 8(10)(a)] this: '….The underlying policy is that an injured employee should not be worse off during the period of incapacity as a result of work related injury. However, it follows conversely that the injured employee should not be better off'. 13. I do not regard the construction for which Comcare contends to be consistent with the structure and purpose of the SRC Act. And I do not accept that Ms Burgess is 'better off' as a result of her work related injury if she were to continue receiving compensation after being suspended without pay. Rather I consider that she is being compensated for an accepted lack of capacity for employment which remains regardless of the steps taken by her employer unrelated to her incapacity. 14. I accept, as well, Mr Murdoch's second argument as demonstrating that the subsection can have no application in a case such as the present. On the literal interpretation for which Comcare contends, s 8(10) of the SRC Act is not engaged here. As Mr Murdoch put it, there is no comparator. The paragraph requires that there be earnings of an amount that have been received. Where there are no earnings there is no amount and nothing has been received. 16. … It seems to me to strain the language of the paragraph to say that an amount of earning was received when no amount of earning was received. To paraphrase, whatever may be the elasticity of the expression 'the amount per week of the earnings that the employee would receive' it does not, and cannot, accommodate the case where no amount would be received. 17. In my view effect is given to the purpose of the SRC Act (Acts Interpretation Act 1901 (Cth), s 15AA) by construing it as not having operation in a case such as the present. 16 Accordingly, the Tribunal considered that ss 14 and 19 of the SRC Act create an entitlement to compensation for 'incapacity for work'; the incapacity remains; it is the subject matter of the compensation; construing s 8(10)(a) in a way that deprives Ms Burgess of compensation for incapacity by reference to the event of suspension without pay is inconsistent with the purpose and objective of the SRC Act; and, therefore, s 8(10) has no operation in circumstances where earnings are reduced to nil by events 'unconnected' with the injury. 17 As a result, Ms Burgess is not, in the view of the Tribunal, 'better off' in the sense contemplated by Heerey J in Bortolazzo v Comcare (1997) 75 FCR 385 by receiving compensation payments for something she has actually lost (ie. capacity for work) even though she would not have received any weekly earnings from the relevant date had she not been incapacitated. The Tribunal in reaching its view of the proper construction of s 8(10)(a) also relied upon a perceived anomaly arising out of differential treatment had Ms Burgess's employment 'ceased'; found assistance in the judgment of their Honours in Federal Commissioner of Taxation v Ryan (2000) 201 CLR 109; and concluded that the subsection is not enlivened where no 'comparator' earnings were received by Ms Burgess. 18 The applicant says the Tribunal erred in adopting each of these approaches to the construction of s 8(10). 19 The SRC Act provides for a statutory compensation regime in respect of an injury suffered by an employee if the injury results (among other things) in incapacity for work. The regime is compensatory. The expression of that compensation for incapacity for work is found in a formula that adjusts (according to a range of considerations) normal weekly earnings determined immediately prior to the injury so that an incapacitated employee receives compensation for lost earnings or at least a statutory proportion of those lost normal weekly earnings during each week the incapacity endures. Because the regime is compensatory, the determination of normal weekly earnings (as the foundation for the ultimate calculation of the compensatory payment) is to be reached having regard to whether the statutory calculation (according to s 8(1) to s 8(9) of the SRC Act) of normal weekly earnings is greater than the amount an employee would have received had he or she not been incapacitated for work by reason of the injury. If the normal weekly earnings so determined exceed those earnings, normal weekly earnings are reduced by the amount of the excess. An employee (subject to the adjustments incorporated within the formula) ought not, as a matter of statutory purpose, to be better off by way of compensation than he or she would have been had incapacity not resulted from the injury . 20 In principle therefore, if the employee has been suspended from employment without pay, there are no weekly earnings lost by reason of incapacity to be compensated according to the formula. Had the incapacity not arisen, the employee would not have received any earnings and put simply, there would be nothing that might be the subject of compensation. Because the expression of the compensation for incapacity is determined according to a formula that takes account of earnings (founded upon adjusted normal weekly earnings), it seems difficult to accept that compensation under the Act for incapacity for work as a result of an injury is anything other than truly compensatory. That being so, there seems no reason according to principle, why s 8(10)(a) ought not to be construed in a way that recognises that normal weekly earnings must be reduced to nil if the employee would, absent incapacity, have received no earnings. 21 The amount of compensation is to be determined however according to the content of the express terms of the SRC Act. 22 The appellant says this in‑principle approach to answering the hypothetical question posed by the subsection reflects an orthodox application of the language of the subsection and is consistent with the purpose of the SRC Act. 23 The respondent however, identifies another meaning as to the true purpose of the subsection. The respondent says the subsection contemplates a contract of service - an employment contract between the Commonwealth and Ms Burgess, and assumes that Ms Burgess is receiving an amount per week by way of earnings as an incident of that employment. Since Ms Burgess is suspended from employment without pay she cannot receive any amount per week of the earnings referable to the contract. Since there are no earnings referable to the contract, the assumption fails and the subsection has no role to play because its foundation fails. It therefore cannot operate to effect a reduction of the normal weekly earnings for the purposes of the formula contemplated by s 19(3) of the SRC Act. 24 In other words, the subsection does not comprehend within its terms a circumstance where the employee 'continues to be employed by the Commonwealth' but is suspended from that employment without pay. The subsection assumes continuity of employment and the receipt of earnings and therefore a continuity of performance of the contract. 25 It seems to me that s 8(10)(a) contemplates a circumstance in which an employee (that is, relevantly here, 'a person who is employed by the Commonwealth', s 5(1) SRC Act) 'continues to be employed by the Commonwealth' in the sense that such a person continues to provide service to the Commonwealth and correspondingly continues to receive earnings from the Commonwealth. In those circumstances, s 8(10)(a) seeks to compare the normal weekly earnings (as determined) with the quantum of those corresponding earnings and reduce the normal weekly earnings for the purposes of the s 19(3) formula by the amount of the excess. 26 Had the legislature intended that suspension of employment would bring about a reduction of normal weekly earnings to nil for the purposes of a formula quantifying the amount of weekly compensation under s 19(3) during a period of incapacity for work, the legislature would have expressly provided for that result. It did not do so. Although Ms Burgess continues to be employed by the Commonwealth in the sense that the contract of employment is 'on foot' and employment has not been terminated nor 'ceased' (see s 8(10)(b)), the continuity of employment contemplated by s 8(10)(a) is continuity of provision of service and receipt of earnings not simply a subsisting employer/employee relationship. A suspension of employment is not an event contemplated by the section as an element of its operation or purpose. Its purpose is to strike a comparison of pre‑injury normal weekly earnings (otherwise determined by the earlier subsections of s 8) with continuity of earnings that would have been received based upon Ms Burgess's provision of service and receipt of earnings. 27 Accordingly, having regard to the express terms of the SRC Act, s 8(10)(a) does not operate so as to effect a reduction in normal weekly earnings otherwise determined in accordance with the earlier subsections of s 8 of the SRC Act, for the purposes of the formula contemplated by s 19(3). 28 The following further observations ought to be made. In the result, it is not necessary to give consideration to the utility, in the question to be determined in this proceeding, of the observations of their Honours in Commissioner of Taxation v Ryan (supra). Nor is it necessary to give consideration to the remaining grounds identified by the Tribunal in its reasoning to support the orders made by the Tribunal. The questions of law identified by the applicant appellant, to be determined on the appeal are these: (a) whether the reference in s 8(10)(a) of the SRC Act to 'the amount per week of the earnings that the employee would receive' includes an amount of zero; and (b) whether the effect of s 8(10)(a) is that, in a case where an employee suffering an incapacity for work as a result of an injury has been suspended from her employment without pay, that employee/employee's 'normal weekly earnings' calculated under the preceding subsections of s 8 must be reduced to zero. 29 For the reasons indicated above, s 8(10)(a) does not operate so as to reduce an employee's normal weekly earnings calculated under the preceding subsections of s 8 to zero. As to the first question, had I formed the view that s 8(10)(a) is enlivened and operates in circumstances where an employee has been suspended from employment, I would conclude that the phrase 'the amount per week of the earnings that the employee would receive' includes an amount of zero. Had the subsection operated, the hypothetical question posed by the subsection would necessarily involve answering the question of whether the employee would receive earnings had the employee not been incapacitated for work. The answer to that question might be earnings or no earnings. The subsection is not prevented from operating simply because the employee has failed to earn an amount (Ryan v Federal Commissioner of Taxation (1997) 148 ALR 88 at 98 per Spender J; Commissioner of Taxation v Ryan (2000) 201 CLR 109 at [87] per Callinan J). 30 As a result, the appeal must be dismissed with costs. I certify that the preceding thirty (30) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Greenwood.