Statement of Principles concerning localised sclerosis (Reasonable Hypothesis) (No. 61 of 2018)

Localised sclerosis (also called localised scleroderma or morphea) is defined in subsection 7(2) as an autoimmune, fibrosing connective tissue disorder characterised by localised skin thickening with increased collagen. The definition expressly excludes systemic sclerosis, graft versus host disease with dermal fibrosis, and a series of scleroderma-like conditions such as lipodermatosclerosis, scleromyxoedema, eosinophilic fasciitis and chronic radiation dermatitis. Notes to the definition clarify that localised sclerosis is limited to skin, subcutaneous tissue and underlying bone; that it typically presents with no sclerodactyly, Raynaud phenomenon or nailfold capillary changes; and that it is not associated with major vascular symptoms or visceral disease. Diagnosis is based on clinical findings, though histopathologic confirmation may be needed to rule out other diseases. Serological markers include elevated levels of antinuclear antibody, anti-ssDNA antibody, anti-topoisomerase II alpha antibody and rheumatoid factor. The ICD‑10‑AM codes assigned are L94.0 or L94.1, but the meaning of localised sclerosis for this instrument is the substantive definition, not the code.

Relevant service is defined in the dictionary (Schedule 1) and includes: operational service, peacekeeping service, hazardous service, and British nuclear test defence service under the VEA; and warlike service and non-warlike service under the MRCA. This is the universe of service types to which the instrument applies.

Factors - section 9 lists seven factors, at least one of which must exist for a reasonable hypothesis to be raised. They are: (1) inhaling respirable crystalline silica dust for a cumulative period of at least 2,500 hours before clinical onset, where the dust was produced, excavated, drilled, cut, ground, or used in construction, manufacturing, cleaning or blasting; (2) being treated with a drug or a drug from a class of drugs from the specified list of drugs at the time of clinical onset (the list includes balicatib, bleomycin, enfuvirtide, pemetrexed, taxanes, and tumour necrosis factor-α inhibitors); (3) undergoing a course of therapeutic radiation for cancer where the affected site was in the field of radiation before clinical onset; (4) having an injury to the skin at the affected site within six months before clinical onset (injury to the skin is defined broadly as any injury capable of causing inflammation, including cuts, abrasions, burns, pressure, surgery, injections and infectious lesions); (5) same as (2) but for clinical worsening (drug treatment at time of worsening); (6) same as (3) but for clinical worsening (therapeutic radiation before worsening); (7) inability to obtain appropriate clinical management for localised sclerosis. Factors (5) to (7) apply only to material contribution to or aggravation of localised sclerosis where the condition was suffered or contracted before or during (but did not arise out of) relevant service (subsection 10(2)).

Reasonable hypothesis - the instrument does not define this term itself; it derives from sections 120 and 120A of the VEA. The instrument’s role is to provide the factual content that, if present, makes a hypothesis reasonable.

Death from localised sclerosis - subsection 7(5) includes death from a terminal event that was contributed to by the localised sclerosis. “Terminal event” is defined in the dictionary as the proximate or ultimate cause of death, including pneumonia, respiratory failure, cardiac arrest, circulatory failure, or cessation of brain function.

The instrument directly affects veterans, members of Peacekeeping Forces, and members of the Forces under the VEA, and members under the MRCA, who have or claim to have localised sclerosis. It also affects their dependents in cases of death from localised sclerosis. The practical impact falls on anyone making a claim for compensation, medical treatment, or other benefits under the VEA or MRCA where the condition is localised sclerosis. For claimants, the instrument sets a minimum evidentiary hurdle. If they cannot point to one of the seven factors related to their service, their claim will fail regardless of other medical evidence that might suggest a causal link. The instrument therefore has a gatekeeping effect, potentially limiting access to benefits for those whose condition does not match the prescribed risk factors.

For decision-makers within the Department of Veterans’ Affairs and the Military Rehabilitation and Compensation Commission, the instrument constrains their discretion. When applying the reasonable hypothesis standard under section 120A of the VEA or section 338 of the MRCA, they must treat any hypothesis that does not align with the factors in section 9 as not reasonable. This reduces uncertainty in adjudication but also reduces flexibility to consider novel or rare causal pathways.

For medical practitioners and expert witnesses, the instrument provides a list of recognised risk factors that will be accepted as sufficient to raise a hypothesis. It also creates a demand for evidence on the specified factors - for example, cumulative silica dust exposure hours, drug treatment records, radiation therapy records, or skin injury history. The instrument may influence what medical histories are taken and what investigations are undertaken.

For the RMA, the instrument represents an exercise of delegated legislative power under the VEA. The RMA is required to review and update Statements of Principles based on sound medical-scientific evidence. This instrument replaced the 2009 version, so it reflects updated medical knowledge as of 2018.

For taxpayers and the compensation system, the instrument influences the flow of claims. By specifying factors, it may either increase or decrease the number of successful claims compared to a more open-ended standard. The silica dust factor, with a high 2,500-hour cumulative threshold, may exclude claimants with lower exposures. Conversely, the drug factors capture a narrow list, potentially excluding other drug exposures that might be hypothesised to cause the condition.

The instrument does not itself impose duties or confer rights on claimants. It operates within the framework of the VEA and MRCA, which set out the rights to compensation and the duties of the Repatriation Commission and the Military Rehabilitation and Compensation Commission to determine claims. The key duty the instrument creates for decision-makers is to accept any claim that meets at least one of the factors in section 9 as having raised a reasonable hypothesis, provided the factor is related to relevant service per section 10. Conversely, if no factor exists, the decision-maker must reject the claim at the hypothesis stage.

Claimants have a right to rely on the factors to support their claim. They also have a right to be assessed under the correct standard of proof. The instrument clarifies what evidence the decision-maker must consider as sufficient to meet the reasonable hypothesis threshold. Claimants do not have a duty to prove the factor to the civil standard - the hypothesis need only be reasonable, not proved on the balance of probabilities. However, the factor itself must exist; it is not enough to speculate that it might have existed.

For the RMA, there is a duty to base the instrument on sound medical-scientific evidence, as stated in section 8. The instrument itself does not create a duty to update or review, but the VEA requires the RMA to keep Statements of Principles under review and to revoke or amend them if new evidence warrants.

The instrument also interacts with section 11, which provides that if a factor in section 9 refers to an injury or disease covered by another Statement of Principles, then the factors in that other Statement of Principles apply. This creates a cross-referencing duty: decision-makers must look to the other SoP to determine whether the factor is satisfied. For example, if a drug factor involves a condition like “cancer” in the context of therapeutic radiation, the SoP for that cancer may be relevant.

Importantly, the instrument does not create any private rights of action or duties towards third parties. It is entirely confined to the veteran/member compensation system.

This instrument is not a penal instrument. It does not create offences or prescribe penalties. Its enforcement is indirect: it governs the fact-finding process in administrative claims. If a decision-maker fails to correctly apply the instrument, that decision may be reviewable by the Veterans’ Review Board, the Administrative Appeals Tribunal, or the Federal Court. The consequence of non-compliance with the instrument is not a penalty but the possibility of the decision being set aside and remitted.

Fraudulent claims - for example, a claimant fabricating evidence of a skin injury to satisfy factor (4) - would be subject to the general fraud provisions in the VEA and the Criminal Code. Those provisions are not in this instrument. Similarly, a decision-maker who deliberately disregards the instrument could face administrative sanctions, but these flow from public service employment law, not from this SoP.

The instrument does contain one factor that could be seen as a form of enforcement on the system: factor (7) - “inability to obtain appropriate clinical management for localised sclerosis.” This factor creates an incentive for the compensation system to provide timely and effective treatment. If a veteran cannot access appropriate clinical management, that itself becomes a factor that can raise a hypothesis for worsening. This could be used strategically by claimants to argue that inadequate care by the department has aggravated their condition.

In terms of procedural enforcement, the instrument must be applied by decision-makers when determining claims under section 120A of the VEA or section 338 of the MRCA. If a decision-maker fails to refer to the instrument or makes a finding inconsistent with its terms, that is an error of law. However, the instrument itself does not contain any compliance mechanism or penalty unit.

The instrument is made under subsection 196B(2) of the VEA and must be read in conjunction with that Act, particularly sections 120 and 120A which establish the standard of proof for claims. The instrument also interacts with the MRCA, specifically section 338, which applies the same reasonable hypothesis standard to claims under that Act. Section 5 of the instrument expressly states it applies to claims under section 120A of the VEA and section 338 of the MRCA.

The instrument repeals and replaces the 2009 SoP (No. 66 of 2009) - section 4. Any claim made after the commencement date (23 July 2018) must be determined under the 2018 instrument. Claims already finally determined under the earlier SoP are not reopened. However, if a claim was lodged before the commencement but not yet decided, the decision-maker must apply the new SoP.

Section 11 incorporates other Statements of Principles by reference. For example, if a factor refers to an injury or disease covered by another SoP, then the factors in that other SoP apply as in force from time to time. This means a decision-maker may need to consult multiple SoPs to determine whether a single factor is satisfied. For instance, if factor (2) involves treatment with a “specified list of drugs” and one of those drugs is used to treat cancer, the SoP for the cancer might be relevant if the drug factor itself refers to an injury or disease covered by another SoP. The instrument does not elaborate further; the cross-referencing is automatic.

The instrument also interacts with the general administrative law framework. Decisions made under it are subject to judicial review under the Administrative Decisions (Judicial Review) Act 1977, and to merits review by the Veterans’ Review Board and the Administrative Appeals Tribunal. The instrument is itself a legislative instrument registered under the Legislation Act 2003, meaning it is subject to parliamentary scrutiny and disallowance, though it is made by the RMA, not a minister.

The dictionary defines “relevant service” by reference to the VEA and MRCA. This links the instrument to the definitions of operational service, peacekeeping service, hazardous service, British nuclear test defence service, warlike service, and non-warlike service in those Acts. Any amendment to those definitions in the parent Acts would automatically affect the scope of this instrument without need for amendment.

The ICD-10-AM code reference in subsection 7(3) is to the Tenth Edition effective 1 July 2017. Should future editions revise the coding for localised sclerosis, the instrument would still apply based on its own definition, not the code. The code is only for administrative purposes.

The compiled instrument shows amendments up to Amendment Statement of Principles concerning localised sclerosis (Reasonable Hypothesis) (No. 15 of 2019), registered on 2 January 2019, with commencement on 23 July 2018 (the same date as the original instrument). This is an unusual backdated commencement - the amendment commenced on the same day as the original instrument, meaning it was effectively part of the original from its start. The amendment altered subsections 9(2) and 9(5), which deal with drug treatment factors. The amendment history in endnote 4 shows that both subsection 9(2) and subsection 9(5) were “am. No. 15 of 2019”. The original instrument (No. 61 of 2018) was registered on 26 June 2018 and commenced 23 July 2018. The amendment was registered on 2 January 2019 but backdated to commence on 23 July 2018. This suggests the RMA corrected or refined the drug list shortly after the original was made, and the amendment was given retrospective effect to avoid a gap in coverage.

Before the 2018 instrument, the previous SoP was No. 66 of 2009, which is repealed by section 4. The 2018 instrument therefore represents a complete re-evaluation of the medical evidence for localised sclerosis. The changes from 2009 to 2018 are not detailed in this compilation, but the 2018 instrument introduced the specific silica dust threshold of 2,500 hours and the finite list of drugs in the schedule. The 2019 amendment likely updated the drug list based on new evidence. The specified list of drugs in the current version includes: balicatib, bleomycin, enfuvirtide, pemetrexed, taxanes, and tumour necrosis factor-α inhibitors. The amendment may have added or removed particular drugs.

There are no other amendment histories within this compilation. The endnotes indicate that there are no uncommenced amendments affecting the law as at the compilation date (23 July 2018, but the compilation includes the 2019 amendment - note the date inconsistency: the compilation date is given as 23 July 2018 on the cover, but the amendment with registration 2 January 2019 is included. This is because the amendment was backdated; the compilation shows the law as in force on 23 July 2018 after incorporating the backdated amendment.

The instrument itself does not reference any court cases, and the compilation does not include any litigation notes. However, as a legislative instrument made under the VEA, it is likely to have been considered in administrative and judicial review proceedings concerning claims for localised sclerosis. Because this deep dive must be based solely on the source, we cannot name any specific cases. But we can note the legal context: the instrument is binding on decision-makers and tribunals, and its validity can be challenged on grounds such as unreasonableness or failure to consider sound medical-scientific evidence. The RMA’s determinations have been the subject of litigation in the Federal Court and the High Court in relation to other conditions, but the source provided does not contain any such references for this specific instrument.

Practitioners should be aware that the instrument is presumed valid unless set aside. Any argument that the factors are insufficient or too restrictive would need to be made in the context of a judicial review application, not in the merits review. The Veterans’ Review Board and the AAT are bound to apply the instrument, not to question its underlying medical basis.

The instrument’s predecessor (No. 66 of 2009) may have been litigated, but the current instrument replaced it, and any claim determined under the old instrument would have been decided under different factors. The repeal of the old instrument in section 4 means that no new claims can be determined under it.

Several provisions create traps for unwary claimants and practitioners. First, the silica dust factor (subsection 9(1)) requires a cumulative total of at least 2,500 hours of inhalation “at the time material containing crystalline silica was being produced, excavated, drilled, cut or ground; or used in construction, manufacturing, cleaning or blasting.” This is a high threshold. For a full-time worker in a dusty trade, 2,500 hours represents about 1.25 years of 40-hour weeks, but “cumulative” means the total across all exposure episodes. Claimants who had lower exposure will not satisfy this factor, even if medical evidence suggests silica is a trigger. Second, the drug factors (subsections 9(2) and 9(5)) refer only to drugs “from the specified list of drugs.” That list is narrow: balicatib, bleomycin, enfuvirtide, pemetrexed, taxanes, and tumour necrosis factor-α inhibitors. Other drugs that might cause or worsen localised sclerosis are not captured. The factor requires that the drug treatment be “at the time of the clinical onset” or “at the time of the clinical worsening.” This means the drug must be being taken concurrently with the onset or worsening; past use may not suffice if the drug was discontinued.

Third, the injury factor (subsection 9(4)) requires the injury to be to the skin “at the affected site” and within the six months before onset. The definition of “injury to the skin” is broad, but the requirement of “affecting the site” where sclerosis later develops means a remote injury to another body part is irrelevant. Also, the injury must be capable of causing inflammation; trivial injuries that do not cause inflammation may not qualify.

Fourth, the “inability to obtain appropriate clinical management” factor (subsection 9(7)) applies only to clinical worsening, not to initial onset. It also requires that the inability relate to the person’s relevant service. This could arise if the Department’s own processes delayed treatment. But proving inability - as opposed to mere delay or inconvenience - is a high bar.

Fifth, the factor sections 9(5) to 9(7) are expressly limited by subsection 10(2) to cases of material contribution to or aggravation where the condition was “suffered or contracted before or during (but did not arise out of) the person’s relevant service.” This means those factors cannot be used to connect the initial contraction of localised sclerosis to service; they only apply to worsening of a pre-existing condition. For a claim based on new-onset disease during service, only factors 9(1) to 9(4) are available.

Sixth, the dictionary definition of “localised sclerosis” excludes systemic sclerosis. Claimants misdiagnosed with systemic sclerosis will not be covered. The diagnostic notes in subsection 7(2) require absence of sclerodactyly, Raynaud phenomenon, and nailfold capillary changes - but these are clinical findings that may not be documented in every patient’s file. A lack of documented exclusion could lead to debates over the correct diagnosis.

Seventh, the instrument applies only to claims under section 120A of the VEA and section 338 of the MRCA. Claims under other sections (e.g., non-operational service claims under the balance of probabilities standard) are not governed by this instrument. Practitioners must ensure the correct standard is applied.

Compliance with this instrument is not a matter of filing forms or paying fees. It is about satisfying the evidentiary requirements in a claim for localised sclerosis. For a claimant, the steps are: (1) obtain a firm diagnosis of localised sclerosis as defined in subsection 7(2) - excluding systemic sclerosis and other conditions; (2) identify which of the seven factors in section 9 might apply; (3) gather evidence to support the existence of at least one factor; (4) show that the factor is related to relevant service as defined in the dictionary; (5) if the claim is for death, show that death was from a terminal event contributed to by localised sclerosis.

For the silica dust factor, evidence must show cumulative exposure of at least 2,500 hours to respirable crystalline silica dust during specific activities (production, excavation, drilling, cutting, grinding, or use in construction, manufacturing, cleaning, or blasting). This often requires occupational history statements, workplace records, and possibly expert opinion on dust levels. For drug factors, the claimant must prove treatment with a drug from the specified list at the time of onset or worsening. Medical records and prescription histories are essential.

For therapeutic radiation factor, evidence of a course of radiation for cancer with the affected site in the field of radiation must be produced. This requires oncology records and mapping of radiation fields.

For skin injury factor, the claimant must show an injury to the skin at the exact site of the sclerosis within six months before onset. Medical records documenting cuts, burns, surgery, infections, or injections are needed.

For the inability to obtain appropriate clinical management factor, the claimant must demonstrate that they could not access treatment that would have prevented worsening, and that this inability was connected to service (e.g., delays in referral by the Department). This is the most subjective factor.

All evidence must be related to service. The factor must have occurred during or as a result of service. For example, silica dust exposure must have happened while serving, not later in civilian life. If the factor occurred outside service, the claim fails.

For decision-makers, compliance means applying the instrument strictly. When a claim is lodged, the decision-maker must check whether any factor in section 9 exists, based on the material provided. If no factor is raised, the claim must be rejected at the hypothesis stage. If a factor is raised, the decision-maker must then assess whether the factor is related to service. If it is, the reasonable hypothesis is established, and the claim proceeds to the staged consideration of whether the condition is, on the balance of probabilities, connected to service (for operational service claims) or to the next step under the applicable standard.

Practitioners should also be aware of section 11: if a factor refers to an injury or disease covered by another SoP (e.g., cancer in factor (3)), the decision-maker must consult that other SoP to determine whether the factor exists. This adds complexity.

Record-keeping is crucial. The RMA expects that claims will be supported by contemporaneous documentation. The instrument does not require any specific form of evidence, but the more objective the evidence, the stronger the claim. Self-reported exposure histories may be accepted but can be challenged.

Finally, note that the instrument is a binding legislative instrument. Non-compliance by a decision-maker can lead to a successful appeal. Claimants and their representatives should ensure the decision-maker’s reasons explicitly address each relevant factor. If the reasons are silent on a factor that could apply, that may be grounds for review.