The question posed for preliminary determination, namely whether it is open to the Tribunal to determine the applicant's entitlement to compensation in these proceedings, is answered "no".

COMPENSATION - operation of the Military Rehabilitation and Compensation Act 2004 - jurisdiction of the Tribunal - question of whether it is open to the Tribunal to determine entitlement to compensation in addition to liability - statutory construction - question posed for preliminary determination answered "no"

Military Rehabilitation and Compensation Act 2004 (Cth)

Re Fuad and Telstra Corporation Ltd [2004] AATA 1182; (2004) 39 AAR 496

Lees v Comcare [1999] FCA 753; (1999) 56 ALD 84

1. The issue for decision in this case is whether, on a review by this Tribunal of a decision by the Military Rehabilitation and Compensation Commission that denies liability to pay compensation pursuant to the Military Rehabilitation and Compensation Act 2004 (Cth) (the MRC Act) to a Defence Force member, it is open to the Tribunal to determine the entitlement to compensation if the issue of liability is determined by the Tribunal favourably to the Defence Force member. Mr Campbell Irwin, the applicant in the proceedings, says that it is. The Commission, the respondent to the proceedings, says that it is not and that a determination on liability favourable to the member would require the Tribunal to remit the matter to the Commission to determine questions of entitlement, i.e. the amount of compensation payable.
2. In my view the Commission's argument must be accepted. What follows are my reasons for taking that view.

1. The background is not in dispute and may be shortly stated. Mr Irwin was a member of the Australian Regular Army until his discharge in January 2007. On 1 February 2007 he lodged a claim with the Commission for "permanent impairment compensation" for a back injury. Material lodged in support of the claim suggested that the injury was suffered on 10 February 2006 whilst Mr Irwin was unloading trucks in the course of his duty. The letter from Mr Irwin's solicitors which enclosed the claim included the following,

(a) Admit liability for our client's Defence-related Back injury which was occasioned during the course of our client's Military Service; and

(b) Assess our client's entitlement to permanent impairment compensation pursuant to Section 68 of the [MRC Act]."

The letter went on to make it plain that the Commission was being asked "to admit liability ... and assess compensation for the injury on the basis that it is permanent" (emphasis in original).

1. By letter dated 16 May 2007 the Commission rejected "the claim for liability in respect of [Mr Irwin's] back injury". The basis of the rejection was that the claim did not meet the requirements under s 23(1) of the MRC Act. On 14 December 2007 that decision was confirmed by the Commission on re-consideration pursuant to s 350(2) of the MRC Act.
2. On 21 January 2008 Mr Irwin lodged an application in the Tribunal seeking a review of the reviewable determination constituted by the decision of 14 December 2007.
3. In the course of the Tribunal's ordinary case conference procedures the difference of opinion about the Tribunal's jurisdiction set out in paragraph [1] above emerged and the parties agreed to have the issue determined as a preliminary issue.

1. The "simplified outline" of the MRC Act is set out in s 3 in these terms:

"This Act provides for compensation and other benefits to be provided for current and former members of the Defence Force who suffer a service injury or disease. The Act also provides for compensation and other benefits to be provided for the dependants of some deceased members.

Before most benefits can be paid or provided, the Commission must accept liability for an injury, disease or death of a current or former member under Chapter 2. Chapters 3 to 6 set out what the benefits are.

The procedure for dealing with claims under this Act is dealt with under Chapters 7 and 8. The Military Rehabilitation and Compensation Commission and the administration of the Act are dealt with in Chapters 9 to 11.

Provisions in this Act might be affected by the Military Rehabilitation and Compensation (Consequential and Transitional Provisions) Act 2004.

A person who is entitled to a benefit under this Act might also be entitled to a pension, allowance or other benefit under the Veterans' Entitlements Act 1986. This might include the following:

(a) a service pension under Part III of that Act;

(b) treatment under Part V of that Act;

(c) an allowance such as a telephone allowance, a pharmaceutical allowance, a Victoria Cross allowance or Income Support Supplement;

1. As is apparent from s 3 there must be an acceptance by the Commission of liability before most benefits are payable. Chapter 2 of the MRC Act deals with "Accepting liability for service injuries, diseases and deaths". That chapter has a simplified outline, expressed in s 21 in these terms:

"A condition for most benefits under this Act is that the Commission has accepted liability for an injury, disease or death. The Commission accepts liability if there is some connection between the injury, disease or death and defence service.

The process for deciding whether to accept liability is as follows:

(a) first, a person makes a claim under section 319 for acceptance of liability for an injury, disease or death (the rules for making claims are found in Chapter 7);

(b) then, the Commission decides whether the injury, disease or death is a service injury, disease or death under Part 3;

(c) then, the Commission decides whether it is prevented from accepting liability for the injury, disease or death because of an exclusion under Part 4 (for example, because the injury, disease or death resulted from a serious default or a wilful act).

The Commission must accept liability if the injury, disease or death is a service injury, disease or death, and none of the exclusions in Part 4 apply.

The effect of this Chapter in respect of cadets and declared members might be modified by the regulations (see section 439)."

It is a sufficient explanation of the provisions within Chapter 2 to note that they deal with the connection necessary between the injury or death and service and the circumstances where liability is not to be accepted, for example where the injury arose from serious default or wilful acts. None of these matters are germane to the present issue.

1. Chapter 7 of the MRC Act deals with claims. Given the arguments of the parties it is necessary to examine some of the provisions of Chapter 7. First, s 319 of the MRC Act provides:

"(1) A claim may be made under this section for one or more of the following:

(a) acceptance of liability by the Commission for a service injury sustained by a person or a service disease contracted by a person;

(b) acceptance of liability by the Commission for the service death of a person;

(c) acceptance of liability by the Commission for the loss of, or damage to, a member's medical aid;

1. Section 320 deals with who may make a claim. It is in these terms:

"(1) A claim under subsection 319(1) may be made by:

(a) if paragraph 319(1)(a) applies - the person who sustained the injury or contracted the disease; or

(b) if paragraph 319(1)(b) applies - a person who is a dependant of the person who died; or

(c) if paragraph 319(1)(c) applies - the member whose medical aid is lost or damaged; or

(d) if paragraph 319(1)(d) applies - the person who is entitled to the compensation."

1. Section 323 of the MRC Act details the requirements of giving a claim to the Commission. Once a claim is given to the Commission in accordance with s 323 "the Commission must investigate the matters to which the claim relates"[1].
2. Once a claim has been made and investigated the Commission must consider all matters that are, in its opinion, relevant to the claim and determine the claim in writing[2]. The Commission, in undertaking that task, is not bound to act formally, is not bound by the rules of evidence and must act according to substantial justice and the substantial merits of the case without regard to legal form and technicalities[3]. By virtue of s 346(1) of the MRC Act, the Commission must give a claimant a written notice setting out the terms of its determination and the reasons for the determination as soon as practicable after making the original determination. Once an original determination has been made a claimant may ask for reconsideration by the Commission of the original determination[4], or may apply to the Veterans' Review Board for reconsideration[5].
3. By virtue of s 350(2) of the MRC Act the Commission, on reconsideration, may make a determination revoking, confirming or varying the original determination. The determination on reconsideration is a reviewable determination[6] which, by virtue of s 354(1) of the MRC Act, may be the subject of an application for review to this Tribunal.
4. It is next important to examine the provisions of the MRC Act that establish a liability on the part of the Commonwealth to pay compensation. The provision relating to permanent impairment is set out in s 68 of the MRC Act in these terms:

"(1) The Commonwealth is liable to pay compensation to a person if:

(a) the Commission has accepted liability for one or more service injuries or diseases (the compensable condition) of the person; and

(i) as a result of the compensable condition, the person has suffered an impairment; and

(ii) the impairment is likely to continue indefinitely; and

(iii) the person's compensable condition has stabilised; and

(c) a claim for compensation in respect of the person has been made under section 319."

It is unnecessary for present purposes to look more closely at the provisions regarding compensation for permanent impairment and how the amount of compensation is determined. Those issues do not arise at this juncture. What is of significance, according to the argument of Mr Derrington SC for the Commission, is that acceptance of liability in the terms set out in s 68(1)(a) of the MRC Act is a pre-condition to a liability to pay compensation. That pre-condition is common throughout the MRC Act[7].

1. The scheme of the MRC Act, as exemplified by s 68, informs the proper construction of ss 319 and 320 of the MRC Act with the result, says the Commission's argument, that Mr Irwin was not able to make a valid claim for compensation and the Commission, rightly, did not consider such a claim. Thus, it is said, as the determination of any claim for compensation was not open to the officer who undertook the reconsideration it is equally not open to the Tribunal.

1. The issue for decision does not fall to be decided by reference to the ultimate decision of the Full Court of the Federal Court in Lees v Comcare[8] despite that case being concerned with an identical "three tiered decision-making process"[9] found in the Safety, Rehabilitation and Compensation Act 1988 (Cth) (the SRC Act). In that case the Court was not concerned with the situation of a claim for both an acceptance of liability and the determination of the entitlement to compensation. Nonetheless, the Court's conclusions regarding the decision-making process seem to me to have application in the present case, given the identical decision-making structure.
2. The key to the Commission's argument is the proposition that it is not open to a claimant to make a valid claim for compensation, that is, a claim under s 319(1)(d) of the MRC Act, until the Commission has accepted liability for a claim made under one or other of ss 319(1)(a), (b) or (c) of that Act. That must be so, it seems to me, because this Tribunal's powers for the purposes of reviewing a decision are no greater than the powers of the original decision-maker. As the Court said in Lees v Comcare[10]:

"The AAT will not be authorised on review of a reviewable decision to exercise any powers and discretions which would not have been available to the determining authority at the second tier decision-making stage, albeit that such powers and discretions might have been available to the determining authority at the first tier decision-making stage."

Thus, in the present case the Tribunal may consider the issue of entitlement only if the power to consider that question had been available to the decision-maker at the reconsideration stage. That power would have been available at that stage only if the original decision-maker had considered, or had been

obliged to consider, the issue of entitlement as well as that of liability.

1. Plainly enough the original decision-maker did not consider the entitlement question despite the request being made for that issue to be considered as well as the issue of liability. The argument for Mr Irwin is that the original decision-maker was bound to consider the entitlement question as requested.
2. Whatever may be the position under the SRC Act, the structure of the MRC Act is significantly different. The various sections of the MRC Act that create the entitlement to compensation, including s 68 which is relevant here, require, as a condition of liability to pay compensation, that there be an acceptance of liability by the Commission. Without an acceptance of liability by the Commission for a service injury Mr Irwin has no entitlement to compensation. He thus does not answer the description in s 320(1)(d) of the MRC Act of a person who may make a claim to compensation under s 319(1)(d) of that Act. The SRC Act has no equivalent to ss 319 and 320 of the MRC Act.
3. If Mr Irwin was not entitled to make a claim for compensation for permanent impairment until there had been an acceptance of liability, the Commission was not obliged to consider his purported claim for compensation. Once liability had been accepted it could do so, but until acceptance of liability the claim was not a valid claim.
4. Construing the MRC Act in this way is also supported by the wording of s 21 of the MRC Act and the reference therein to first making a claim under s 319 for acceptance of liability, and by the requirement in s 68(1)(c) of the MRC Act (and the other "liability" provisions) that before the Commonwealth is liable to pay compensation "a claim for compensation in respect of the person has been made under section 319". The requirement of s 68(1)(a) that liability has been accepted assumes that an earlier claim for an acceptance of liability has been made (and accepted). Thus the requirement of s 68(1)(c) of the MRC Act for a claim having been made supports the notion of separate and distinct claims. In practice, the Commission deals with the requirement for separate claims by requiring the completion of a claim form which initially deals with the question of liability but which seeks details of the claims being made "[i]f it is determined that there is liability to pay you compensation".
5. Ms Scott-McKenzie, counsel for Mr Irwin, relied upon the decision of Downes J, as President of the Tribunal, in Re Fuad and Telstra Corporation Ltd[11] but that decision is readily distinguishable given the different structure of the SRC Act so far as the making of claims is concerned. There is, of course, nothing to prevent someone in Mr Irwin's position from making what purports to be a claim, but, in my view, unless and until the Commission has made a determination accepting liability the claim is not a valid claim and the Commission is not obliged to investigate it or make a determination on it.
6. The argument was put that it was unnecessarily burdensome to require a claimant to potentially undertake two separate proceedings in the Tribunal. That may, in some circumstances, be the consequence of what I regard as being the proper construction of the MRC Act. But that consequence is abated by the entitlement of a successful applicant to an award of costs. Moreover, the consequence of the construction put forward by Mr Irwin is that the Commission would be required to undertake medical investigations even when it rejects liability, unless it were prepared to be limited to medical evidence put forward by an applicant. That seems to be an unlikely and impracticable consequence that tells against Mr Irwin's construction.
7. It follows that I am of the view that the Tribunal does not have power to consider Mr Irwin's entitlement to compensation were it to be satisfied at a hearing that the Commonwealth was liable to pay compensation. The question posed, in essence, is whether it is open to the Tribunal to determine the applicant's entitlement to compensation in these proceedings. I would answer that question "no".
8. In relation to the question of costs, I have considered the submissions made by the parties and have come to the view that I have no power to make any order for costs. However, consistently with the approach taken by the President in Re Fuad and Telstra Corporation Ltd[12] and acknowledging that I cannot bind the Tribunal as subsequently constituted to decide this application, it seems to me that it would be reasonable that, if an order for costs is ultimately made in favour of Mr Irwin, those costs ought include the costs of, and incidental to, the determination of this preliminary question. The issue was in the nature of a "test case" on new legislation. It was particularly in the interests of the Commission (evidenced in part by the engagement of leading counsel) to have the question determined in this case in advance of the hearing, and, more generally, to have the issue decided.
9. Finally, I note that the parties were invited to provide supplementary submissions in relation to the question of costs. The submissions provided to the Tribunal by the applicant went beyond that issue. In this Tribunal, as in the courts, leave should be sought before any additional submissions are lodged. Although I have had regard to these submissions, I would like to make clear to parties that leave to deliver further submissions is limited to the subject matter of the leave and is not an invitation to burden the Tribunal and the other party with additional submissions going beyond the grant of leave. Where, after the hearing, it is desired to lodge supplementary submissions leave should be sought to do so following consultation with the other party.

I certify that the 26 preceding paragraphs are a true copy of the reasons for the decision herein of Deputy President P E Hack SC

Signed: ...................Signed...............................................

Solicitors for the Applicant Slater and Gordon Lawyers

Solicitors for the Respondent Australian Government Solicitor

[7] See, for example, s 43 in relation to the provision of rehabilitation benefits; s 55 in relation to the supply and alteration of aids and appliances; ss 61 and 62 in relation to the provision of assistance in finding work; ss 85, 86 and 87 in relation to compensation for incapacity.

[8] [1999] FCA 753; (1999) 56 ALD 84.

[9] [1999] FCA 753; (1999) 56 ALD 84 at 91, [32].

[10] [1999] FCA 753; (1999) 56 ALD 84 at 93, [39].

[11] [2004] AATA 1182; (2004) 39 AAR 496.

[12] [2004] AATA 1182; (2004) 39 AAR 496 at [13].