McDermid v Repatriation Commission

1. The parties are to provide short minutes of orders to give effect to the judgment. Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

LOGAN J: 1 Mr William McDermid, the applicant in this proceeding, was a member of the Royal Australian Navy for two decades, from 26 November 1965 to 25 November 1985. 2 For the purposes of the Veterans' Entitlements Act 1986 (Cth) (the VEA), Mr McDermid's naval service fell into the following categories established under that Act: (a) operational service - on HMAS Supply from 24 March 1966 to 11 May 1966 and from 26 May 1966 to 26 June 1966; (b) further operational service - in Vietnam from 19 September 1968 to 12 April 1969, and (c) eligible defence service from 7 December 1972 to 25 November 1985. 3 At common law, members of the Defence Force are not employees of the Commonwealth: Commonwealth of Australia v Quince (1944) 68 CLR 227. Nonetheless, by virtue of statutory deeming or definitional provisions, the Safety, Rehabilitation and Compensation Act 1988 (Cth) (the SRC Act) or, as the case may be, predecessor Federal workers' compensation legislation also applied to Mr McDermid, in respect of his naval service, save for the periods of his operational service. 4 Mr McDermid had the misfortune to suffer a number of injuries over the course of his naval service, which have had sequels to his health, detailed below. Latterly, he has also had what he doubtless sees as the added misfortune of becoming enmeshed in the complexity of the provision made from time to time by Parliament in the VEA in an endeavour to prevent any duplication of benefits in respect of like injuries or incapacity as between those payable under the SRC Act or its predecessors and those otherwise payable under the VEA. In turn, that complexity is but one pathway in the labyrinth that is the VEA, an Act which has been amended no less than 127 times over the 30 years since its enactment in 1986. 5 Mr McDermid is a member of a class of Australian ex-servicemen and women subject to this complexity. Both for the members of that class and for the respondent Repatriation Commission (the Commission) and those of its delegates within the Department of Veterans' Affairs (DVA) who must administer it, that complexity, to say nothing of the wider labyrinth, presents considerable challenges of comprehension as to its application. Even with the able assistance of counsel for Mr McDermid and for the Commission, for whose helpful and candid submissions I am truly grateful, I have found that those same challenges remain. 6 With the commencement of the Military Rehabilitation and Compensation Act 2004 (Cth), the affected class is now closed but the number of persons within it is large. Because of this, though the resolution of the issues in this case is of particular personal interest to Mr McDermid, the outcome will serve a wider, public interest. 7 The provision of interest in the VEA is s 74. The form of that provision and others with which it interacts did not remain static over the period with which the events of this case are concerned. 8 Mr McDermid initially sought the resolution of his differences with the Commission as to the construction and application of s 74 by way of a review proceeding in the Administrative Appeals Tribunal (the Tribunal). Prompted by a view which the Commission held at the time as to the nature of the operation of that provision, the Tribunal concluded that it was, in effect, self-executing and entailed no reviewable decision such that it had no jurisdiction: McDermid v Repatriation Commission [2011] AATA 834. 9 In this proceeding and upon reflection about what s 74 in its particular forms entailed in administration, the Commission expressly reserved its position as to whether, indeed, the view which had previously been taken of the nature of the operation of the provision was correct. With the fairness which the Australian community and its serving and former Defence Force members are entitled to expect from it, the Commission conceded that Mr McDermid had invoked this Court's jurisdiction under s 39B of the Judiciary Act 1903 (Cth) and deliberately raised no issue that relief ought to be refused as a matter of discretion, because an adequate alternative remedy namely, review by the Tribunal, existed. In keeping with this stance by the Commission, I expressly refrain from considering whether or not s 74 entails the making of a decision reviewable by the Tribunal. 10 For the purposes of this proceeding, a number of facts have been agreed. What follows is taken from the statement of those agreed facts. 11 Mr McDermid has the following accepted defence caused injuries, as defined in the VEA: (a) Lumbar disc degeneration (accepted with effect from 12 May 1982, by decision of the Commission dated 5 June 1984); (b) Left rotator cuff syndrome (accepted with effect from 3 July 1983, by decision of the Commission dated 5 June 1984); (c) Osteoarthritis of the left knee (accepted with effect from 26 March 1998, by decision of the Commission dated 10 March 1999); (d) Osteoarthritis of the right knee (accepted with effect from 20 February 1997, by decision of the Veterans' Review Board (VRB) dated 3 June 1998); (e) Inguinal hernia on the right side (accepted with effect from 20 February 1997, by decision of the VRB dated 3 June 1998); and (f) Cervical spondylosis and thoracic spondylosis (accepted with effect from 21 January 1999, by decision of the Commission dated 29 June 1999). 12 The following injuries have been accepted as founding liability to pay compensation to Mr McDermid under s 14 of the SRC Act: (a) Aggravation of pre-existing injury resulting in degeneration of the 2nd/3rd lumbar intervertebral disc (accepted on 25 June 1984) - the lumbar spine condition; and (b) Sprain left supraspinatus ligament (left shoulder) (accepted on 28 February 1986) - the left shoulder condition. 13 The incapacity from the injury, "lumbar disc degeneration", as originally accepted under the predecessor to the VEA and taken to have been accepted under the VEA, is the same incapacity as the incapacity from the lumbar spine condition, an injury accepted under the Compensation (Commonwealth Government Employees) Act 1971 (Cth) (the 1971 Act), a predecessor to the SRC Act, which remained compensable under the SRC Act. 14 On 2 March 1986, a delegate of the Commissioner for Employee's Compensation decided to admit liability to pay compensation to Mr McDermid under the 1971 Act in respect of the left shoulder condition. 15 On 9 June 1987, a delegate of the Commissioner for Employee's Compensation decided to pay Mr McDermid lump sum compensation of $4,369.60 under s 39 of the 1971 Act by reason of a "10% loss of efficient use of the left arm at or above the elbow". 16 ln late 1993 or early 1994, Mr McDermid ceased remunerative work. With effect from 1 January 1994, he was paid compensation under s 19 of the SRC Act as a result of his incapacity for work caused by his lumbar spine condition. He continued to receive those payments of compensation until 27 May 2013 when he turned 65 years of age. 17 On 3 November 1994, the Commission took steps to limit Mr McDermid's disability pension paid under the VEA for his lumbar disc degeneration, in accordance with its view as to the operation of s 74 of the VEA. Those steps were taken by identifying a notional assessment of the disability pension paid for the same incapacity as the incapacity caused by the lumbar spine condition, namely, the incapacity caused by the lumbar disc degeneration, and reducing Mr McDermid's disability pension to the extent of that notional assessment. 18 On 24 May 1995, Mr McDermid's disability pension under the VEA was increased to 90% of the general rate with effect from 7 March 1995. 19 On 23 April 1997, Mr McDermid's rehabilitation programme conducted in accordance with the requirements of the SRC Act was closed on the basis that he was unable to work more than six hours per week as a result of his lumbar spine condition. 20 On 2 July 1997, the Commission decided to reduce Mr McDermid's disability pension under the VEA from 90% of the general rate to 50% of the general rate. 21 On 3 June 1998, the VRB decided that Mr McDermid's claims for "osteoarthritis of the right knee" and "inguinal hernia on the right side" should be accepted under the VEA with effect from 20 February 1997. The assessment of his pension under that Act was remitted to the Commission. 22 On 13 August 1998, the Commission decided to increase Mr McDermid's disability pension under the VEA to 70% of the general rate with effect from 20 February 1997 as a result of the VRB's decision dated 3 June 1998. 23 On 10 March 1999, the Commission accepted Mr McDermid's claim under s 14 of the VEA for "osteoarthritis of the left knee" with effect from 26 March 1998, and increased his disability pension to 100% of the general rate with effect from 26 March 1998. 24 On 24 May 1999, the VRB decided that Mr McDermid was entitled to a disability pension at 90% of the general rate from 20 February 1997, and at 100% of the general rate from 26 March 1998. 25 On 29 June 1999, the Commission accepted Mr McDermid's claim under s 14 of the VEA for "cervical spondylosis and thoracic spondylosis" with effect from 21 January 1999, and determined that Mr McDermid was entitled to a disability pension at the special rate from 21 January 1999. 26 Also on 29 June 1999, the Respondent decided, for the purposes of s 74 of the VEA, that: (a) Mr McDermid would not qualify for disability pension at the special rate if the lumbar spine condition was not accepted because the requirements of the "alone" test in s 24(1)(c) of the VEA would not be satisfied; (b) the notional assessment of the rate of pension payable for the lumbar spine condition was therefore the difference between disability pension at the special (referred to as "T&PI") rate and disability pension at 100% of the general rate; and (c) Mr McDermid was entitled to disability pension at 100% of the general rate for his other accepted conditions. 27 The Commission also concluded at that time that the notional assessment of the pension for the left rotator cuff syndrome was nil, consequent on Mr McDermid's receipt on 9 June 1987 of lump sum compensation of $4,369.60 under s 39 of the 1971 Act. 28 On 19 July 1999, the Commission reconsidered the determination dated 29 June 1999, identified in para 25 above, and decided that Mr McDermid was entitled to a disability pension at the special rate from 20 February 1997. 29 On 3 August 1999, the Commission advised Mr McDermid that the limitation on his disability pension (being the limitation for which the Commission considered that s 74 of the VEA provided by reason of Mr McDermid's continuing receipt of compensation under s 19 of the SRC Act) had been incorrectly processed, and outlined what it saw as the correct calculation of the limitation. Mr McDermid's disability pension was reduced by the difference between the special rate and 100% of the general rate. 30 In his communications with the Commission via the DVA, Mr McDermid has contended over time that he meets the requirements of the VEA for payment of the special rate of pension by reason of the incapacity resulting from his other defence caused conditions if his lumbar spine condition is not taken into account. Whether that contention is correct depends on the meaning and application of s 74 in the circumstances of his case. 31 On 27 May 2013, Mr McDermid's payments of compensation by reason of incapacity for work under s 19 of the SRC Act ceased automatically when he turned 65, pursuant to s 23(1) of the SRC Act. 32 The limitation that applied to Mr McDermid's disability pension pursuant to s 74 of the VEA to the extent of the pension paid for the lumbar spine condition also ceased at this time, because he had ceased to receive payments of compensation in respect of incapacity from the lumbar spine condition, being the same incapacity in respect of which pension was payable to him under the VEA for his lumbar disc degeneration. However, consequent upon his receipt of a lump sum payment of compensation of $4,369.60 under s 24 of the SRC Act for permanent impairment resulting from the left shoulder condition, the Commission reduced Mr McDermid's pension under the VEA by $10.36 a fortnight from 27 May 2013. 33 The statement of agreed facts also contains a number of attachments detailing an agreed position as to payments made to Mr McDermid under the VEA and the SRC Act, related offset calculations made from time to time by the Commission on the basis of its understanding as to the operation of s 74 as that section has been amended over the relevant period and a graphic representation of the actuarial calculation which the Commission understood was required by s 74(3) of the VEA as a consequence of the payment of lump sum compensation to Mr McDermid under s 39 of the 1971 Act on 9 June 1987. It is not necessary to reproduce these in order to resolve the statutory construction issues in relation to s 74 of the VEA. 34 It is now necessary to turn to the meaning and effect of s 74 of the VEA over time.