Transport Accident Commission v McRitchie [2001] VSC 151

2. There are two appeals by way of an originating motion in this matter, both arising from a decision of Deputy President McNamara of the Victorian Civil and Administrative Tribunal ("the decision" and "VCAT" or "the Tribunal" respectively) delivered on 16th May 2000. The Transport Accident Commission ("TAC") was granted leave to appeal by Master Wheeler on 18th August 2000. At that time, the Master refused to grant to Leanne McRitchie (the person in respect of whose situation the matter came before VCAT) leave to appeal. Subsequently, leave to appeal the decision was granted by Smith, J. of this Court.

5. Leanne McRitchie was born on 15th July 1976 and is thus now 24 years of age. On 1st June 1996, she suffered catastrophic injuries as a result of a transport accident whilst she was travelling as a passenger in a motor vehicle. Her rights with respect to medical and like benefits thus fell to be determined pursuant to the provisions of the Transport Accident Act 1986 ("the Act"). The TAC assessed her level of whole person impairment as exceeding 49 per cent and accepts that she has suffered a total loss of earning capacity. This means that she is entitled to payments for lost earning capacity until aged 65 years. Those payments are presently being made at the rate of $364 per week and it is a rate that increases annually. Ms McRitchie's initial medical treatment was at the Maroondah Hospital, then the Alfred Hospital and later at the Ivanhoe Manor Private Rehabilitation Hospital. She is a single person with a devoted and caring father.

8. Mr McRitchie is a sole parent with two other children to rear and with heavy business commitments. In late 1997 Mr McRitchie was presented with three options for his daughter's ongoing care:

(a) caring for Leanne at home;

(b) having her placed in a nursing home; or

(c) placing her in what is described as "a community house".

Mr McRitchie, who gave evidence to the Tribunal, explained why he chose option (c). First, because of his heavy business commitments and his other parental obligations, it was impossible for him to care for his daughter Leanne at home. Second, the nursing home was not a satisfactory option in his judgment because most of the residents of such places were elderly and such a home would not provide a satisfactory environment to a person of Leanne's age. Moreover, it was unlikely that a nursing home could provide the necessary attendant care which Leanne required. The evidence indicated that Ms McRitchie suffered from the effects of a very profound head injury., She is partially paralyzed, she has very limited short-term memory and requires constant attention and care. She requires substantial assistance with all aspects of her daily living, including assistance in dressing and undressing and personal hygiene. She is confined to bed or a wheelchair and it is necessary that her food be liquified or cut up into small pieces to enable her to eat it.

14. The initial community house into which she was admitted was 131 Ford Street, Ivanhoe, a place administered by the company which administered the Ivanhoe Manor Private Rehabilitation Hospital in which she had been. Originally, Leanne stayed at the Ford Street community house during the week, with Mr McRitchie taking her home to the Wantirna home at weekends. However, in about February2000 Leanne moved to another community house situated in Leddy Street, Nunawading, which accommodation was much closer geographically to the family home in Wantirna.

17. In accordance with its obligations under s.60(1) of the Transport Accident Act, the TAC provided a payment to the community house of $179 per day, which had risen to $183 per day at the time of the hearing before me. This payment is made on every day of a seven-day week, regardless of whether Leanne goes home on weekends or not. The weekly payment was therefore $1,253 at the time of the hearing VCAT claimed that at the time of the hearing before me it was $1,281, a fee designed to meet the cost of shared attendant care for residents of the community house. In addition, TAC meets the further of additional carers to meet Ms McRitchie's particular needs, which include the provision of attendant care on weekends and the provision of attendant care if she left the community house for any reason, e.g. an outing, or to get medical treatment. Ms McRitchie is required to provide a payment of $25 a day on each day of the seven-day week, a total of $175 per week. This sum, colloquially described as a "bed fee", is levied by the Ivanhoe Manor Private Rehabilitation Organization. It is said to be a contribution "towards the cost of accommodation, meals and utilities". When she was an in-patient at the Ivanhoe Manor Private Rehabilitation Hospital, no bed fee was levied because, one presumes, hospital fees are an expense specifically provided by s.60 (s.3).

20. It may be now convenient to reproduce the relevant sections and definitions.

"60. Medical and like benefits (1) In addition to any other compensation paid under this Act, the Commission is liable to pay as compensation in respect of a person who is injured or dies as a result of a transport accident - (a) the reasonable costs of road accident rescue services, medical services, hospital services, nursing services, rehabilitation services and ambulance services received in Australia because of the accident; ..."

S.3: "rehabilitation services" -

(a) means the provision to or for a person for the purpose of rehabilitation of any aid, treatment, assistance, appliance, apparatus or any other services; (b) without derogating from the generality of paragraph (a), includes the provision to or for a person for the purpose of rehabilitation of attendant care, household help, modification to a home or a motor vehicle, counselling or transportation costs - if the provision under paragraph (a) or (b) is of an authorized service in accordance with section 23;"

26. There was evidence given to VCAT from Mr Allan Blackwood, senior health and policy adviser to the TAC, who described the de-institutionalized program which had commenced in approximately 1992. He said that the philosophy behind that was that, where possible, the care of persons with disabilities is best done in the community. He stated that TAC considered that it was not liable to pay the bed fee because TAC "does not pay accommodation, food or utility costs" and because the Community House is "fundamentally long-term accommodation, it is the permanent home of a resident".

29. I should say that the evidence before VCAT, as I have already indicated, established that Ms McRitchie required specially prepared food because she could only consume solids with difficulty and then only cut very small, or possibly vitamized. She requires special care to prevent her from choking and special steps (and this is of considerable importance) have to be taken to maintain her stable temperature because her condition rendered her particularly vulnerable to temperature fluctuation. There had been some minor improvement in her condition but the evidence favoured that she would have to remain in the community house, or similar institution for the rest of her life.

32. As far as the charge made by Ivanhoe Manor was concerned, it appeared that there may have some input from TAC as to what would be a fair and reasonable amount to charge for that, TAC not regarding it as a rehabilitation expense.

35. It ought also be stated that at the time Leanne McRitchie was injured she had recently completed an Associate Diploma of Health Science ("Using Therapy") at the Melbourne College of Hair and Beauty. She had not actually commenced her career grounded upon that qualification although, as I have indicated, it was common ground that she had suffered a complete loss of earning capacity and was therefore entitled to loss of earning capacity benefits pursuant to s.49 of the Act. On 21st December 1998 the TAC fixed her loss of earning capacity benefits, based upon an assumed pre-accident capacity of $410 per week. The Guardian and Administration Board had appointed Mr McRitchie as her administrator pursuant to provisions of that Act on 18th October 1996.

38. There were a number of issues before VCAT and the first was concerned with the $25-per-day bed fee which TAC asserts it was not liable to meet because it did not fall within its obligation pursuant to s.61 of the Act to meet the reasonable costs of the services therein provided because the bed fee did not answer the description of "medical services", "hospital services", "nursing services", "rehabilitation services" .... Thus it put the case that these were personal responsibility of Ms McRitchie. The second issue before the Tribunal, and before me, was connected with the same issue as to whether or not the bed fee fell within the definition of "rehabilitation services". The Tribunal took the view that, in the case of persons placed in the community in a shared house where they enjoyed substantial autonomy and freedom of movement, that the cost of rent, utilities and food would properly be regarded as "house expenses" rather than the cost of rehabilitation services. However it also took the view that where items such as accommodation, utilities and food were so completely integrated into the institutional program, it would be unreasonable to seek "to disaggregate" them. The Tribunal expressed the view that until the relevantly recent past, TAC did not attempt to divide these sorts of charges when they were levied by the hospital for in-patient care. The Tribunal took the view that any purported separation of so-called "living expenses" from the overall program provision of "rehabilitation services" was unrealistic. It relied upon the necessities of special attendant care to enable her to eat, to look after her, to move her around and to go home. It concluded that the TAC's refusal to pick up the levies was legally incorrect because they fell within the range of the obligations imposed on it.

41. The second issue was how the Tribunal dealt with the loss of earning capacity benefits. Section 49 of the Act makes provision for the payment of benefits after the first 18 months by means of a formula said to be "A x B/C".

"pre-accident earning capacity" in relation to an earner who suffers loss of earning capacity as a result of an injury in a transport accident, means the amount calculated in accordance with the formula - A x B/C where - A is the amount the Commission determines as the weekly amount the earner had the capacity to earn before the accident in employment reasonably available to the earner in view of the earner's training, skills and experience less such amount as the Commission reasonably considers to be the amount of income tax that would have been payable on that weekly amount under the Income Tax Assessment Act 1936 of the Commonwealth as amended and in force for the time being. B is the latest average weekly earnings as at 15 June in the preceding financial year of all employees for Victoria published by the Australian Statistician in respect of the December quarter of that financial year. C is the average weekly earnings of all employees for Victoria last published by the Australian Statistician before 15 June last preceding the accident in respect of the December quarter last preceding that date - or, if an amount cannot be determined in accordance with that formula, means 60 per centum of average weekly earnings of all employees for Victoria last published by the Australian Statistician in respect of a quarter."

45. TAC fixed Ms McRitchie's loss of earning capacity benefits at $358 per week on the assumption that $410 per week was factor A, that is, the quantified capacity to earn which was regarded as within the meaning of s.49, notwithstanding that she had not commenced full-time work. It appears that there was conceded error as to the appropriate amount as a weekly figure. But the real debate was whether or not there should be taken into account, for the relevant purpose, assumptions about Ms McRitchie moving on to a higher level of compensation (or because subsequent Federal awards provided for higher hourly rates for overtime and weekend work), none of those events having occurred prior to the disabling event. The argument thus was that the basis of calculation was anchored in the period immediately prior to the accident. Essentially, the Tribunal accepted this view of the matter, namely that the statutory formula in s.49 evinced an intention to provide for a lesser level of compensation that would be provided at common law by way of damages for the lost earning capacity. Within this context, there was some debate before the Tribunal as to the hourly rate, it being argued that her loss of earning capacity had to be assessed on the basis that she may have derived fees as a company director in her father's companies, which were involved in heat treatment applications. Before the Tribunal, the evidence appeared to indicate that she may have derived director's fees in the order of $4,000 per annum. There was evidence that, given her personal qualities and intelligence, she was capable of acting as a director and deriving income from this. The Tribunal dismissed this evidence as irrelevant because it lay in no different situation than matters in relation to pre-accident earnings, the Tribunal taking the view that it was not allowed under the Act to address future losses other than the extrapolation of pre-accident level losses. There was also a minor aspect in relation to earnings by Ms McRitchie as a netball umpire.

48. The upshot of these findings was, unhappily for the Tribunal, that its decision pleased no one. The TAC appealed on the basis that the Tribunal was wrong in regarding the provision of services as "rehabilitation services" as indivisible so that the specific rehabilitation component could not be seen as separate and divisible. Essentially the submission was that VCAT was wrong to see the single sum process within s.60 (that is the cost of accommodation, meals, etc.) as being analogous or a guide.

51. So far as the cross-appellant McRitchie is concerned, the challenge was to the Tribunal's view of the correct method of calculating pre-accident incapacity under s.49(5) of the Act, and specifically whether item "A" of the formula was confined to pre-accident earning capacity, ignoring possible future earning capacity developments. Essentially, since the injuries were received on 1 June 1996, and the award was on the 28th December 1996, the cross-appellant complained the consequence was that the TAC had fixed the lost earning capacity in the period 1st December 1997 to 30th June 1998 at $296 based on her pre-accident earnings of $410 gross (net $308) without regard to the conclusions that ought to have been reached about her likely earning capacity in the relevant period. Ms McRitchie's arguments were that the Tribunal had looked simply at losses, rather than lost earning capacity, and had ignored the application of principles which the common law applied.

54. Mr D. Habersberger, Q.C., who appeared with Mr W.D.J. Martin for the TAC, submitted with respect to the TAC appeal that the Tribunal had fallen into error in that the charge made by the Leddy Street Home to the respondent McRitchie for accommodation was not a cost of "rehabilitation service" within the meaning of s.60(1)(a) of the Act. It contended that a rehabilitation service was one designed for or aimed at restoring a person to former health, or restoring that person partially or completely to a better condition. Mr Habersberger relied upon statements made in Wood v. Cullen[1] to this effect:

"Rehabilitative medicine in our community is not confined to persons who can or will be restored to former health, but is available to assist persons whose health would otherwise deteriorate."

58. He also referred to the Dictionary definitions from "Macquarie" and "Goulds", the focus of which is that rehabilitation invoked restoration of former health over a variety of measures to train or retrain someone with a disability or seeking to restore maximum dependence commensurate with the limitations of that person by developing residual capacities. Essentially he submitted that rehabilitation invoked maintaining a level to enable some improvement to be achieved or possibly be achieved. Thus the argument was put that a charge for accommodation, food and a share of utilities (the so-called bed fee) was not in respect of any aid, treatment, assistance, appliance or apparatus provided to Ms McRitchie for the purpose of rehabilitation, that being the language in s.3. It was argued that the only way it could come within part (a) of the definition of rehabilitation services in s.3 was if it fell within the remnant of the description, "of any other service". He contended that the general idea of "any other service" could be derived from the preceding words in part (a), namely "aid, treatment, assistance, appliance or apparatus" or from the specific examples in part (b) attendant care, household help, modifications to a home or car, counselling or transportation costs. It was put that provision of a "service or thing" for the purpose of rehabilitation was designed to restore the person to a better condition and was something additional and beyond, over and above, normal living needs.

61. Thus he argued that the charge for accommodation, food and share of utilities was merely a basic or daily living expense provided for the purpose of keeping Ms McRitchie alive with a roof over her head and not to rehabilitate her, nor to restore her partially or completely to a better condition, nor to prevent her health from otherwise deteriorating. He claimed that it was irrelevant that when she had been in hospital that her daily living expenses were met by the Commission because the definition of hospital service in s.3 of the Act required the TAC to meet them, falling as they did within the comprehension of the phrase "maintenance" in part (a) of the definition and arguably within "usual services provided by a hospital with respect to the treatment of the injury of the person" (see (b) (iv)).

64. It was also argued that the fact that the phrase "maintenance", or anything like it, had not been included in the definition of "rehabilitation service" was significant. It was therefore argued in conjunction with that proposition that it was irrelevant that until recently people in her position would have been in a rehabilitation hospital, with the TAC picking up all charges. As I understood the argument, the appellant TAC accepted that the Deputy President was correct in determining that the cost of rent, utilities and food for a significantly impaired person in a shared house who "enjoyed substantial autonomous (probably an error for autonomy) and freedom of movement ... would probably be regarded as house expenses rather than the cost of rehabilitation services".

67. Mr Habersberger argued that the 24-hour attendant care in the context to which her food was specially prepared was provided for and funded by the Commission. The argument appeared to be that whatever the condition of the person in terms of mobility in both cases, the charge comprehended by the bed fee was made for the provision of accommodation, utilities and food and was not a rehabilitation service. The key argument however was that services provided for the purposes of daily living are not rehabilitation services but merely equivalent of what the injured person would have had to have provided in any event, even if not injured. This appeared to be an argument that, since Ms McRitchie's need for accommodation, food and utilities existed in any event, their provisional cost was not a rehabilitation service, merely because they followed upon and were a consequence of the transport accident.

70. Mr J.N. Forrest, Q.C., with whom Dr I. Freckleton appeared, agreed that the question of law arising from the decision of VCAT was "whether the charge ('the bed fee') made by the Leddy Street home for the respondent for accommodation, food and share of utilities is in the circumstances a cost of rehabilitation service within the meaning of s.60(1)(a) of the Act. He drew attention to s.1 of the Act which set out the purpose of it as being (a) to establish a scheme of compensation in respect of persons who are injured as a result of transport accidents and (b) to provide suitable and just compensation in respect of persons injured as a result of transport accidents and (e) to provide suitable assistance for the effect of rehabilitation of persons injured as a result of transport accidents (s.8). He pointed out s.11 of the Act, which required the Commission, as part of its objectives (s.11(b)) "to ensure that appropriate compensation is delivered in the most socially and economically appropriate manner and as expeditiously as possible" and (c) to ensure the Transport Accident Scheme emphasizes accident prevention and effective rehabilitation. He argued that the Act, being intended to be beneficial legislation under Part 3, should be given a broad or liberal interpretation in favour of those for whom it was enacted. See Wilson v. Wilson's Tyre Works Pty Ltd[2] and Dodd v. Executive Air Services Pty Ltd[3].

73. Mr Forrest noted the findings of Deputy President McNamara to the following effect: (1) that she suffered from the effects of a profound head injury and extensive paralysis; (2) she required substantial assistance with all aspects of her daily living including all aspects of personal care along with careful supervision of all she does that is 24-hour care; (3) that it was reasonable for her to be accommodated in a community house with full-time care and supervision and that the entire environment in which she lived, both day and night, was relevant to her rehabilitation. He referred to the reasons for decision of the learned Deputy President[4] as to why he had formed the view that it would be unrealistic to separate out her strict rehabilitative expenses and the provision of special care and accommodation to her, that is, the reasons why items such as accommodation, utilities and food were so completely integrated into her institutional program that it would be unreasonable to seek to "disaggregate" them. He argued that VCAT's findings were made in the light of evidence including the evidence of Mr Blackwood. Other than the definition, there was no specific qualification upon the liability of the Commission to meet rehabilitative expenses arising out of injuries nor any part of the Act exempting them from liability in relation to food, accommodation and utility costs. He noted that no attempt had been made to quantify the component parts of the bed fee for Ms McRitchie, that is, that the split between rehabilitation and bed costs was totally at the behest of the Commission[5].

76. No investigation had been made as to the specific circumstances of Ms McRitchie but the Commission had simply induced a policy to endeavour to split the costs of what would have been a standard fee charged by the rehabilitation institution in an effort to relieve itself of significant financial obligation, that policy requiring or advising the rehabilitation institution to be a party to the division of the fee. He claimed that it was the injury that was productive of the necessity for the expenses involved in the provision of full-time rehabilitation services within the Home. He said it was not to the point that such living expenses may or may not have been incurred in any event. It was because she had been confined to a rehabilitation institution and required "rehabilitation services" as a result of her injury that all expenses associated with that injury became compensable. He referred to the analogous situation in respect of the provision and need for services arising from torts outside the Act.[6]

79. He also addressed the draconian consequences, in his submission, of the construction contended for by the appellant. The first aspect dismisses from account individual considerations; second, imposes liability on grievously injured persons who may or may not have had to incur the kind of expenses here encompassed in a circumstance where the cause of the confinement in such a place is the injury produced by the accident; third, that the construction imposes a financial penalty on a person, frequently without any income either by way of pension or benefits, stripping them of any independent income.

82. He argued that the issue is essentially a question of construction of the relevant parts of the Act and their application to the situation that prevails. The description of the matters encompassed within the bed fee do not arise from the Act. It may be, in many cases, that the provision of a matter or service for the purpose of rehabilitation is beyond doubt directed to restoring a person wholly or partially to an improved state. The claim, however, that a charge for accommodation, food and share of utilities are merely a basic living expense and unconnected with the rehabilitation purpose is an over-rigid construction that sits uneasily with the legislative purpose as set out in the Act.

85. Mr Habersberger, when asked by me who cut up or vitamized the respondent's McRitchie's food, claimed that it would be done in the kitchen, although the evidence did not address that matter. It led him to say that that service is already paid for by paying the staff. In the same way he claimed that if the bed had to be raised, for example, that was done by the attendant carer and, as I understood the argument, that that would not amount to a rehabilitation service anyway. But whether it does or does not must depend upon the circumstances.

88. It is not apparent to me that the cost of accommodation is easy to detach from the cost of keeping Ms McRitchie's temperature at a particular level for her, as not being part of her rehabilitation but merely part of so-called ordinary living. Nor am I convinced that the definitions of "rehabilitation service" sought to be relied on, derived from Dictionaries, would necessarily exclude maintaining a patient at a level to enable some improvement to be achieved, or possibly achieved in the future. That is, it is a service to aid that person whose health would otherwise deteriorate. As such that would fall within the OED definition when one considers, as the Tribunal did, some of those particular features e.g. special preparation of the food to enable her to swallow it, or special attention to maintaining the correct level of temperature suitable for her needs as being part of her treatment or rehabilitation or as within "any other service" within the definition. Where the particular case throws up matters of that kind, then force is lent to the view held by the Tribunal that the matters are said to compose the bed fee are inextricably linked with all of the other services that have to be provided to keep the patient going, just as much as a bed, heating and food.

91. Mr Forrest strongly criticized the Commission for failing to make any meaningful and detailed attempt to identify and isolate the elements, and their cost, that comprise the $175 per week bed fee, instead of leaving it in such a broad way that it made the Tribunal's task of determining the extent to which the services provided might answer the description of "any other service" in the general service provision in the definition of rehabilitation services in the Act, impossible. Indeed it became a fundamental part of his submission that the Tribunal's decision could not be impugned because the Commission had simply left the matter in such a state that the Tribunal had no option but to reach the conclusion that the matters with respect to which the bed fee was allegedly imposed (rent (accommodation), food and a share of gas, light and water) was so ill-defined and so lacked point in respect of the cost attributable to each element that the Tribunal was bound to regard them as incapable of being separated out ("disaggregated"). Accordingly, it was right to approach the matter on the basis that the claimed elements were indivisible from the rehabilitation services provided. The argument thus was that when the activities broadly described could not in practice, in an "on the ground" situation, be made separable and separated by the evidence, then they should all be treated as forming part of rehabilitation.

94. I note Mr Habersberger appeared to accept that many of the elements, e.g. preparing food in a particular way, or providing heating to cope with Ms McRitchie's condition or other services to cope with her spasms, might form part of rehabilitation. He nevertheless argued that no restriction should be drawn, categorizing the relevant activity or service, based upon a person's disabilities. One can but say that there is an air of unreality about the submission if particular persons all dwelling in the one place have different problems requiring different treatment, that is to be moved in a particular way or kept heated or cooled in a particular way or being fed in a particular way (all arising as a consequence of disabilities caused in the transport accident).

97. Mr Habersberger also was critical of the Tribunal's approach to the construction of the meaning of "rehabilitation services" as defined in the Act, he claiming that the reference by the Deputy President to the situation prevailing under s.60(1) as an indication that he had gone astray. However, I am of the view that the Deputy President was well aware that the provision in relation to hospital services clearly did not apply to Ms McRitchie's situation at Ivanhoe Manor or Leddy House but was merely using the hospital obligation as of some broad assistance by way of analogy but not as a statutory warrant for his conclusion. He was also criticized for not specifically enunciating his legal construction of the definition of rehabilitation services. It was not necessary, however, that he should do so so long as he acted upon a correct basis which can be derived from the totality of his reasons. What he did conclude was that the services purported to be encompassed by the so-called bed-fee were in these circumstances rehabilitation services because they were so intimately bound up with her whole care and rehabilitation. I do not have to ask the rhetorical question why the provision of food in a particular form so as not to produce major difficulties in a patient would not be rehabilitative, or as forming part of the rehabilitation process. In Ms McRitchie's case, it appears to have been conceded that it was. No criticism could be made of that, as keeping her warm or avoiding fluctuations in temperature that might produce spasms in her, or keeping her in her room with ample space so that she might move around in her wheelchair, or vitamizing her food, were just as important as aids to rehabilitation as the wheelchair in which she sat. The Deputy President closely analysed the facts in relation to the definition without attempting any broad construction of it. But it is not difficult to understand from the way he analysed the facts in relation to the sub-section why he regarded the matters falling under the bed-fee as being incapable of being distinguished from other rehabilitation services. Not surprisingly, the distinction between allowing the cost of raising the bed so that the patient might drink vitamized food through a straw and allowing the cost for the food itself is an unappealing distinction, verging on the intolerable in the approach to legislation which is meant to be benevolent and remedial.

100. The evidence referred to before the Tribunal and me made it clear that it is the TAC that really determines the bed fee and how its component parts were to be broadly described. Mr Forrest in effect denoted the system as one of artifice in that the TAC had no statutory warrant for imposing a bed fee itself and therefore managed the matter so that the bed fee was imposed by the relevant institution which, if it did not impose it, would be unlikely to continue to receive the support of the TAC. Ms McRitchie appealed to the Tribunal from the Commission's refusal to pay the so-called bed fee, although it is perfectly apparent from the documents exhibited to affidavits that it was the Commission that contrived it. Mr Forrest contended that the bed fee was a charge fixed by TAC and orchestrated by it as part of a policy to transfer cost to the patient, he claiming the evidence of the TAC expert Blackwood clearly established that. I do not doubt that the objective of this was a revenue-raising one, to seek to transfer some costs arguably related and connected with rehabilitation to the patient by describing them in a particular way. However, there is nothing unlawful about that as the TAC is entitled to manage its revenues in a way that it deems to be most appropriate, so long as it acts lawfully and in accordance with its obligations under the Act. Thus the fact that for years these elements were treated as payable as part of the rehabilitation service could not be decisive in this case or any case, the matter having to be decided on the basis of the facts relevant to the particular case, keeping in mind the provisions of the sections. It does appear that when the TAC commenced funding treatment in community houses such as Ivanhoe Manor and Leddy House that the cost reduction program was devised and imposed. More significant, however, is that no real attempt was made in the evidence to tease out the component parts of the cost of $25 per day, that is how much related to heating, how much to lighting, how much to rent, how much to food, how much to cutting up food, etc. In one sense no criticism can be made of that. The issue is the classification of the service rather than its cost. Nevertheless, the Tribunal was bound to act on the basis of the evidence put before it and, as I have indicated, it was not given much assistance on this aspect. The presentation on behalf of the Commission did not assist the Tribunal to do much other than regard the elements as being indistinguishable one from the other in relation to the rehabilitation service.

103. The key argument advanced in support of the decision of the Tribunal here was that a narrow view of rehabilitation ought not be adopted; that if the service provided to an individual were connected with proper care in the rehabilitation of that person from the disabilities occasioned by the transport accident, then it should be treated as a rehabilitation service. I do not accept that the Tribunal fell into error in this respect in this case. Not every case will be the same and the application of the Act and the definition to the different circumstances may lead to different results. In the case of Ms McRitchie, the decision was open to the Tribunal which was not mistaken in my view in approaching the general elements arising under the bed fee as being, in the case of Ms McRitchie, connected with her rehabilitation. The Tribunal was entitled to look at the rehabilitation services in the light of where she was, rather than as an intellectual exercise in isolation from the matters subsumed under the so-called bed fee. It was entitled to look where she was situated, what her necessities were, such as the heating, the special food preparation and delivery, a larger room for her to move around in her wheelchair, what Mr Forrest called a 'holistic' approach. In effect, he contended that not to regard the heating, the place, the rooms, the food, the lighting as all being germane to her rehabilitation and thereby her improvement, was a "pettifogging" argument of a kind so described by Hutley, J. in Thomas v. Ferguson Transformers Pty Ltd.[7]. The argument as advanced to me is persuasive that what was here being provided under the rubric of the bed fee was not normal heating but special heating, not normal food but special food, not a normal size room but a large room sufficient to enable her to move her wheelchair around, all because she needed those matters in order to rehabilitate her to the level to which she might achieve improvement. Some reliance was placed upon the fact that there had been some improvement in Ms McRitchie both at Ivanhoe Manor and Leddy Street with the relevant rehabilitation services of that kind. Reliance was also placed upon the evidence of her father which detailed her specific disabilities, how these special treatments were applied to her and how she had improved under that regime.

106. I note that Mr Habersberger accepted that the application of the definition might vary according to the situation of the relevant person. Accordingly, I am of the view that the Tribunal was not incorrect in viewing her grave disabilities, both motor and intellectual, all deriving from cerebral injury, as requiring special rehabilitative measures which were described and might be regarded as being connected with her rehabilitation, to achieve improvement to overcome those injuries and live as reasonable a life as might be attained. In my opinion a "rehabilitation service" under the Act necessarily must include keeping that person in a state appropriate to facilitate rehabilitation at the relevant place (subject to occasional home attendances). Accordingly in my view the appeal in this case must be dismissed. It is apparent, I daresay, both from the reasons of the Tribunal and these reasons that the decisions in these cases will depend on the circumstances. This case has produced the legal consequences which I have described.

109. I now turn to the second appeal which is the appeal on behalf of Ms McRitchie against the decision of the Tribunal, the Deputy President holding that the definition in the formula for the calculation of pre-accident earning capacity under s.49(5) of the Act was confined to the weekly amount the earner had the capacity to earn in employment reasonably available to the earner immediately before the accident, disregarding such amounts as the earner might have earned in the future in employment reasonably available to her in view of her training skills and experience, existing had the accident not intervened.

112. The definition in s.49(5) of "pre-accident earning capacity" has been set out earlier in these reasons, that definition incorporating the formula by which that amount is to be derived. It must be immediately noticed that the definition of "pre-accident earning capacity" is to the effect that it "means the amount calculated in accordance with the formula". That is, its conceptual characteristic is subordinated to the specific provisions as to calculation set out in the sub-section.

115. Mr Forrest's argument was directed as to what that expression "pre-accident earning capacity" meant in this Act and at what time that assessment of earning capacity was to be made. He accepted that the legislation sought to distinguish between two types of payments in respect of lost earning capacity, firstly loss of earnings in the first 18 months and then loss of earning capacity payments thereafter. He said the short point was whether in determining loss of earning capacity does the assessor of that fact under s.49 have regard only to matters of established fact or does the assessment task involve having regard to matters relevant to the capacity of the person who exercised a particular skill and qualifications that have been destroyed or diminished by the accident. In this case he claimed, the issue really was whether his client was limited in her claim to what she would have earned as a beautician shortly after the accident occurred and limited to that point of time (it being accepted by the Commission that, although she was unemployed as a beautician at the time of the transport accident, she would have obtained a job as a beautician), or was the Commission required, in assessing the amount, to take into account promotion and future prospects including wage rises occurring by way of Awards. In this case there was also an issue as to whether or not Ms McRitchie would have been able to generate income in the role of a company director in the family companies. I have already referred to some of the facts concerning that aspect. The fundamental question is the meaning of "A" in the formula. The Commission contends that item "A" requires that the weekly amount the earner had the capacity to earn in employment reasonably available to her before the accident is the amount that has to be taken into account in the calculation. "A" does not require, or enable, to be taken into account the weekly amount the earner had the then capacity to earn in the future in employment reasonable available to her, in view of her training skills and experience existing immediately prior to the accident. The Deputy President had held that the definition in the s.49 formula showed a clear intention to provide for a lesser level of compensation than common law damages for loss of earning capacity would provide.

118. Mr Forrest for Ms McRitchie contended that the use of the words "earning capacity" within s.49 must be distinguished from loss of earnings, in the same way that the common law distinguishes between lost earnings and lost earning capacity. Mr Forrest contended that there could be no doubt about the source and purpose of the phrase "earning capacity" it being intended to provide the decision-maker a far greater discretion as to the assessment of compensation, not simply being confined to mere loss of earnings. Thus he argued that task of the assessor under s.49 is to determine loss of earning capacity not simply lost earnings. Nevertheless it must be said that the formula is dealing with weekly earnings which the earner had the capacity to earn. It is also, as I have indicated, notable that pre-accident earning capacity means an amount calculated in accordance with the formula. Reliance was placed upon the explanatory memorandum to the Transport Accident Bill and some parts of the Second Reading Speech in the Assembly on 8th May 1986. In particular he referred to the statement made by Mr Jolly[8] to this effect:

"The Bill now before the House shows the system of benefits to apply under the new scheme. As I said at the outset, these benefits are on a no-fault basis. They reflect the need to compensate injured persons for two things - immediate loss of income and the actual impairment received, together with the loss of earning capacity arising from that impairment. ... It is important that Honourable Members recognize that this relates to earning capacity and not to actual income. Earning capacities will be assessed every five years after injury stabilization. Between these reviews, injured persons are free to earn as much as they can."

I note, however, that the Minister referred to the loss of earning capacity arising from that impairment and did not refer to future earnings. The argument was that the essence of the system of benefits under the Act was for victims to receive "loss of earnings" benefits for the first 18 months and thereafter "loss of earning capacity" benefits. He claimed the calculation of loss of earning capacity benefits is provided to be by reference to the amount the victim had the "capacity" to earn pre-accident, rather than being calculated in relation to actual earnings. He claimed that both the decision of the Tribunal and the earlier case of Re Rowe v. Transport Accident Commission failed to take into account the difference between the concepts of loss of earnings and loss of earning capacity. He argued that the common law meaning of lost earning capacity was well-known and that it should be concluded that its adoption in the statutory wording meant that the legislative intention was that it would carry the same meaning as at common law, subject to any clear indication to the contrary or specific qualification. Thus he put it that loss of earning capacity was a flexible concept allowing as a matter of fairness for the estimation of likely career progression arising out of pre-accident that would, but for the event, in due course have found expression in a post-accident career and income progression. With respect Ms McRitchie, she would have continued in her career path after completing her training, risen to a different pay scale at the expiration of 12 months and then onto a Federal award. She also had, in his submission, a well-founded expectation of receiving director's fees in the immediate future and that both expectations were in existence at the time of her accident. He argued there was no restriction implicit in the words of the legislation save for the statutory ceiling placed by s.49 upon the amount of lost earning capacity benefits and the fact that the legislation provided a statutory formula by which those benefits are to be calculated. These matters are not merely incidental variations, he claimed. They are fundamental to the way in which the statute is intended to work in this respect. Provision of a compulsory statutory formula is not an abnegation of the application of the common law principles of assessment of damages in respect of lost earning capacity. It was submitted that calculation of lost earning capacity at common law involves the tasks described in any number of cases; see Cullen v. Trapell[9]; Burden v. Rath[10] and more recently the statements [11]of the High Court in Husher v. Husher. Reliance was also placed upon the High Court's statements in Medlin v. State Government Insurance Commission[12] to the effect that compensation by way of damages for lost earning capacity can be recovered in relation of a future time if there has been an accident-caused loss of capacity which will in the future produce financial loss. It was submitted that both Deputy President McNamara and Presiding Member Coghlan in Re Rowe v. Transport Accident Commission[13] had confused the concepts of loss of earnings and loss of earning capacity. Presiding Member Coghlan had in Rowe decided the reference in factor "A" in the formula was a reference to an assessment of the amount the earner had the capacity to earn before the transport accident occurred and did not refer to the common law concept of loss of earning capacity or the earning capacity the earner would have had after the accident. In my view, a reading of Rowe does not support the claim of confusion between loss of earnings and loss of earning capacity. It proceeded upon the basis that there was a specific provision in the statute that had to be interpreted. The approach in Rowe was to the effect that ss.49 and 50 of the Act directed the Commission on how to assess the amount of the weekly payment in respect of the loss of earning capacity with s.49(2)(a) providing that the amount was 80 per cent of the earner's pre-accident earning capacity, that capacity being specifically defined in s.49(5). It was also said that pre-accident earning capacity therefore had a precise meaning for this Act which did not embrace the loss of earning capacity as it would be in a common law claim. Thus the Tribunal looked at the person's capacity to earn before the accident in employment reasonably available. There were no words used to indicate that the calculations were made by reference to common law loss of earning capacity or what one's earning capacity might have been "but for the accident" or had it not been for the accident.

123. Mr Forrest argued that the reference in s.49 to "the capacity to earn before the accident" simply identified a point of time at which the assessment was to be made and did not exclude the Commission or any Tribunal from making an allowance for matters relevant to capacity as opposed to actual earnings. The submission put was that earning capacity had two aspects: (1) the unexercised part of the earning capacity available at the time which was the way the Commission assessed this applicant; (2) that the capacity to earn in the future although that capacity is to be assessed at the time of the accident. He argued that the earning capacity was not fixed as at the time of the accident but that, when one looked at the stream of the Act, capacity meant more than a simple unexercised capacity. It meant the capacity to earn in future. The appeared to mean that the exercise was to evaluate the capacity at the time of the accident but to also take into account what the capacity was in the future. It was not satisfactorily explained to my mind how these two propositions were reconcilable. Reference was made to claims in Wrongs Act proceedings, where the assessment of the loss were made at the time of death but the valuation of the earning capacity was not fixed to that time but looked at the future in common law terms. However, in my judgment, this argument does not pay sufficient regard to the stark reality that there is here a mathematical exercise, driven by statutory formula. His argument means that the capacity to earn had to be commenced at the time immediately prior to the intervention of the injury but might include an assessment capacity as yet undemonstrated. This appears to my mind to denude the statutory formula of its real point.

126. Mr Habersberger argued there was nothing in the section that required there to be taken into account the weekly amount the earner had capacity to earn in the future in employment. He said the whole point of this was that the definition of item "A" referred to an actual amount which could have been earned before the accident and that the sub-section did not require or enable the Commission to hypothesize about an amount which might have been earned in the future if the accident had not occurred. He argued that the Act provided a self-contained statutory compensation scheme for persons injured in transport accidents and that it was not concerned with reproducing in it the common law position. On the contrary the Act notably restricted common law rights which persons injured as a result of negligence in transport accidents previously had. He said the definition of pre-accident earning capacity of s.49(5) clearly cut back what otherwise might have been understood at common law to be available by the phrase "loss of earning capacity" and that the legislation was prohibiting looking at the loss in futuro and confining it to the lost earning capacity after the time of the accident. The words, he said, were specific, namely that the loss was the amount the Commission determined was the weekly amount the earner had the capacity to earn before the accident. If the Parliament had intended the construction contended for, to make available the whole of common law damages to lost earning capacity, it would have used some such phrase as the capacity to earn "but for the accident". He rejected the claim that the phrase "before the accident" was merely fixing the time of the exercise because, if that is all it was doing there was no need to include a reference to time at all. But there was such a reference, in the phrase "before the accident". It would simply have been left as the weekly amount the earner had the capacity to earn.

129. Mr Habersberger pointed out that in s.6(2) of the Act when earnings were defined for the purpose of loss of earnings, the description was:

"'earnings' means such amount as, in the opinion of the Commission, the person concerned would have received by a way of income from personal exertion but for the transport accident."

as an example of the simple methodology of the Act in making provision for a future event. He urged that the phrase "before the accident" in s.49(5) should be given full weight as it was the key component in restricting the level of damages in contrast to common law on the basis that this was a no fault scheme, with generous provisions in many respects. He contended this case was a perfect example of the distinction between loss of earnings and the loss of earning capacity in that Ms McRitchie was not in employment at the time of the accident, that is immediately before the accident, but she had qualified in her beautician's course and had just acquired the capacity to engage in employment as first year beautician. Therefore she was treated as having that capacity. The Act does not go on to permit speculation, rational or irrational, about what she would have been her working capacity over her working life. He drew attention to s.49(6), its restriction on the determination of the post-earning capacity and other provisions concerning apprentices and people under awards, all of which he contended would be unnecessary if one merely applied the common law concept of earning capacity. Thus he argued all of this was there for a purpose. The qualification in s.49(5) as to employment reasonably available, accommodation in the sort of situation here prevailing where she had not actually commenced work. The heart of the submission was that this part of the Act and certainly the whole of s.49 was a code that excluded the common law and, specifically for this case, confined the lost earning capacity issue to the terms of the Act.

134. I note that "A" refers to weekly amounts earned, rather than lump sums, a matter that really runs against the appellant McRitchie's argument in respect of compensation for lost future earning capacity. Thus the assessment of the payments that might be made beyond the first 18 month period seems to run counter to the scheme of the Act if one would at that point of time start to address weekly amounts that might be earned some years in the future. It appears that parts "B" and "C" of the formula in s.49(5) have the effect of affording protection against an out-of-date rate. Reviews take place annually after the first 18 months. One assumes that that loss of earning capacity calculation is done by considering the pre-accident earning capacity as defined in s.49 and then the post-accident earning capacity in s.50. Eighty per cent of the difference is the weekly payment. The commencing point is the same in either case. None of this applied to the plaintiff who is incapable of work forever.

137. I do not propose to be elaborate about my conclusions and reasoning. I do not accept the appellant McRitchie's submission in respect of lost earning capacity. I am of the view that the legislation has built into it a number of compromises concerning the compensation that might be obtained under the Act. Doubtless this is partly due to the fact that it is a no-fault scheme in its major themes and is reaching to a very large number of injured persons falling within its purview. One of the compromises is to limit the recoverable amount for damage to earning capacity.

140. In my opinion the language of s.49(5) is clear and in its form does not easily admit of the importation of common law concepts as to compensation for lost earning capacity. I reject the argument that the use of the phrase "before the accident" merely to denote the time at which the exercise is to commence and be carried out. The Tribunal was not in error in its construction of the section in the relevant respects. It appeared to be suggested, however, that the matter ought be remitted to the Tribunal to have the question of the post-accident earnings re-addressed having regard to the impact of a relevant Federal award.

143. I will hear counsel further on this aspect. Finally, consistent with the view which I have formed and expressed, the Tribunal was entitled to disallow the claim founded on the expectation of director's fees in the future.

[1] [1991] VicRp 62; [1991] 2 V.R. 214 at 225 (O'Bryan, J.).

[3] [1975] VicRp 66; [1975] V.R. 668.

[6] See Van Gurven v. Fenton [1992] HCA 54; (1992) 175 C.L.R. 327.

[7] (1979) 1 N.S.W.L.R. 216.

[9] [1931] HCA 44; (1981) 46 C.L.R. 1.

[10] (1986) Australian Torts Reports 80-050 at 67,949 (Kirby, P. there describing the task as one of "rational speculation about the future).

[11] [1999] HCA 47 at paras [8]-[9].

[12] [1995] HCA 5; (1995) 182 C.L.R. 1 at 12.

[13] (1996-1998) Vol. 12 Victorian Administrative Reports 219.