Bayford and Repatriation Commission
[2011] AATA 913
•20 December 2011
Administrative Appeals Tribunal
DECISION AND REASONS FOR DECISION [2011] AATA 913
ADMINISTRATIVE APPEALS TRIBUNAL )
) No 2010/4560
VETERANS' APPEALS DIVISION ) Re JOHN ALWIN BAYFORD Applicant
And
REPATRIATION COMMISSION
Respondent
DECISION
Tribunal G. D. Friedman, Senior Member Date20 December 2011
PlaceMelbourne
Decision The Tribunal sets aside the decision under review and substitutes a decision that Mr Bayford is eligible to receive disability pension at the special rate from 1 May 2010.
..................[sgd]........................
Senior Member
VETERANS' AFFAIRS ‑ veterans’ entitlements - special rate of pension - whether incapacity from war-caused injuries alone prevented the veteran from undertaking remunerative work - whether loss of salary or wages or earnings of own account - date of effect
Veterans’ Entitlements Act 1986 s 21(3), 24(1)(a), (b) and (c)
Cavell v Repatriation Commission (1988) 9 AAR 534
Counsel v Repatriation Commission [2002] FCAFC 201
Flentjar v Repatriation Commission (1997) 48 ALD 1
Forbes v Repatriation Commission (2000) 101 FCR 50
Re Fahey and Repatriation Commission [1986] AATA 244
Re Jones and Repatriation Commission [2011] AATA 631
Repatriation Commission v Connell [2011] FCAFC 116
REASONS FOR DECISION
20 December 2011 G.D. Friedman, Senior Member
1. John Bayford is receiving disability pension at 80 per cent of the general rate and he now seeks the higher loss-of-earnings related payment known as special rate. He worked as a book keeper for many years until September 2009.
2. The special rate of pension requires, among other things, that a person is prevented from continuing to undertake remunerative work, and cannot work more than eight hours per week, by reason of war-caused disability. The respondent says that Mr Bayford is not entitled to special rate because there were reasons other than his war-caused disabilities of chronic adjustment disorder (unspecified), bilateral sensorineural deafness and solar skin damage that account for him not working during the assessment period, and that he has not suffered a loss of wages, salary or earnings by no longer working.
LEGISLATIVE BACKGROUND
3. Section 24 of the Veterans’ Entitlements Act 1986 (the Act) makes provision for payment at rates higher than 100 per cent of the general rate of pension:
24(1) This section applies to a veteran if:
…
(a) either:
(i)the degree of incapacity of the veteran from war-caused injury or war‑caused disease, or both, is determined under section 21A to be at least 70% or has been so determined by a determination that is in force…
(b)the veteran is totally and permanently incapacitated, that is to say, the veteran’s incapacity from war-caused injury or war-caused disease, or both, is of such a nature as, of itself alone, to render the veteran incapable of undertaking remunerative work for periods aggregating more than 8 hours per week; and
(c)the veteran is, by reason of incapacity from that war-caused injury or war‑caused disease, or both, alone, prevented from continuing to undertake remunerative work that the veteran was undertaking and is, by reason thereof, suffering a loss of salary or wages, or of earnings on his or her own account, that the veteran would not be suffering if the veteran were free of that incapacity…
…
ISSUE
4. There was no dispute that Mr Bayford satisfies s 24(1)(a) and s 24(1)(b) of the Act. The issue before the Tribunal is whether he satisfies s 24(1)(c) of the Act: whether he is prevented from continuing to undertake remunerative work that he was undertaking; and whether he has suffered a loss of salary or wages or earnings on his own account that he would not be suffering if he were free of his accepted conditions.
DOES MR BAYFORD SATISFY S24(1)(C) OF THE ACT?
5. In Flentjar v Repatriation Commission (1997) 48 ALD 1 the Full Federal Court described the test in s 24(1)(c) as:
(1) What was the relevant “remunerative work that the veteran was undertaking” within the meaning of s 24(1)(c) of the Act?
(2) Is the veteran, by reason of war caused injury or war caused disease, or both, prevented from continuing to undertake that work?
(3) If the answer to question 2 is yes, is the war caused injury or war caused disease, or both, the only factor or factors preventing the veteran from continuing to undertake that work?
(4) If the answer to questions 2 and 3 are, in each case, yes, is the veteran by reason of being prevented from continuing to undertake that work, suffering a loss of salary, wages or earnings on his own account that he would not be suffering if he were free of that incapacity?
(1) What was the relevant “remunerative work that the veteran was undertaking” within the meaning of s 24(1)(c) of the Act?
6. Mr Bayford told the Tribunal that he left school after the equivalent of Year 11 and was employed by the ANZ Bank as a teller. On 19 April 1967 he commenced National Service and served in Vietnam from 27 November 1967 until 19 November 1968. After his discharge from the Australian Army on 18 April 1969 he returned to the bank, where he remained until 1980, having reached the position of Branch Accountant. He worked as a book keeper for North Broken Hill until 1984, then for a Victorian Government department until he was retrenched in 1988. He drove taxis for about 16 months and then undertook a book keeping role on a contract basis with a number of businesses until 1994, when he obtained a full-time contract with a film production company. In 1998 he and his wife established a company (Movietone Productions Pty Ltd) and in 2002 his company again employed him as a contractor providing book keeping services to various businesses. In 2005 he commenced full-time work for McCall Security Pty Ltd which employed him under a contract between Movietone and McCall, through an arrangement in which Movietone invoiced McCall for hours worked by Mr Bayford. He ceased work on 17 September 2009.
7. The answer to question (1) is book keeper.
(2) Is the veteran, by reason of war caused injury or war caused disease, or both, prevented from continuing to undertake that work?
8. Mr Bayford explained that within one year of his commencement with McCall he found difficulty in completing his duties because of the consequences of interrupted sleep which he had suffered from the time of his service in Vietnam, where he worked as a signaller two hours on and four hours off over a 24-hour period. He said that this was the basis of the diagnosis of the accepted condition of chronic adjustment disorder (unspecified). He was falling asleep at work because he was able to sleep for only about four hours at night, and this led to concentration and memory problems. Mr Bayford stated that in 2006 he came to an agreement with McCall to reduce his working hours to about 18 per week, comprising six hours per day for three days. This arrangement continued until 17 September 2009, when he resigned because he said that he could not cope with even the reduced hours, and felt that he had no option but to cease work.
9. In reports dated 6 July 2009 and 13 July 2010 Dr N Pomorin, consultant psychiatrist, stated that Mr Bayford was referred for assessment and treatment in 2009. Dr Pomorin told the Tribunal that he took a history of insomnia since service in Vietnam with about four hours of sleep each night, leading to excessive tiredness during the day. Dr Pomorin dismissed diagnoses of post-traumatic stress disorder, depressive disorder or other anxiety conditions. He said that he had rejected a diagnosis of primary insomnia because he believed that the condition occurred as a result of specific stressors in Vietnam, and preferred a diagnosis of chronic adjustment disorder (unspecified) which caused the insomnia. Dr Pomorin said that Mr Bayford’s capacity to perform any remunerative work has been affected permanently by the condition.
10. Dr B Kenny, consultant psychiatrist, stated in a report dated 26 September 2008 that Mr Bayford has sleep problems arising from service in Vietnam but these were not symptomatic of a psychiatric condition. Dr Kenny did not have any documentation and relied on a history given by Mr Bayford. In a report dated 18 May 2011Dr N Strauss, consultant psychiatrist, noted a pattern of sleep disorder which he attributed to Mr Bayford’s service in Vietnam, and stated that Mr Bayford is totally and permanently incapacitated for work because of sleep problems. Dr Strauss preferred a diagnosis of primary insomnia or primary sleep disorder.
11. The Tribunal accepts that the diagnosis of chronic adjustment disorder (unspecified) by Dr Pomorin arising from sleep disturbance is appropriate and that this was accepted as war-caused by the Veterans’ Review Board on 12 November 2009 in response to Mr Bayford’s claim for sleep interruption/deprivation, so there is no need to consider the question of whether the Tribunal ought to substitute a diagnosis of primary insomnia or primary sleep disorder as suggested by Dr Strauss, or a diagnosis of no psychiatric condition as suggested by Dr Kenny.
12. The answer to question (2) is yes.
(3) If the answer to question 2 is yes, is the war caused injury or war caused disease, or both, the only factor or factors preventing the veteran from continuing to undertake that work?
13. Mr Bayford told the Tribunal that in respect of his physical condition he has suffered intermittent back pain since an accident while in Vietnam and he experienced spasms while driving taxis, but the condition has largely resolved in recent years. He said that back pain has not had any impact on his ability to work. He described a left knee replacement in November 2010 arising from osteoarthritis of the knee joint, but said that this had no impact on his ability to work, particularly in view of the sedentary nature of his employment. Clinical notes from his visits to his general practitioner indicate that back spasms are noted only rarely.
14. Dr R Horsley, occupational physician, stated in a report dated 16 March 2011 that Mr Bayford’s back and left knee conditions do not affect his ability to work, and concluded that sleep disturbance was the major issue. Dr C Thomas, consultant in rehabilitation and pain medicine, acknowledged in a report dated 24 January 2011 that Mr Bayford has had knee replacement surgery which has improved the condition of the knee. Dr Thomas did not receive any information about back pain but concluded that there appears to be nothing outside the war-caused condition of chronic adjustment disorder that would impact on Mr Bayford’s ability to work.
15. In a report dated 11 May 2011Dr J Burdon, consultant respiratory physician, concluded that Mr Bayford suffers from insomnia which is a physiological response to the pattern of sleep disturbance that originated during service in Vietnam. He did not believe that any other sleep disorders were present or that medication would assist Mr Bayford. Dr Pomorin was not aware of any factor other than the adjustment disorder that would prevent Mr Bayford from continuing to undertake work as a book keeper.
16. The Tribunal takes into account the evidence from Mr Bayford and the medical evidence about the accepted psychiatric condition on Mr Bayford’s ability to work as a book keeper and finds that his evidence is consistent with the medical evidence. The Tribunal finds that the war-caused conditions were the only factors preventing him from continuing to perform the type of work that he was undertaking, so the answer to question (3) is yes.
(4) If the answer to questions 2 and 3 are, in each case, yes, is the veteran by reason of being prevented from continuing to undertake that work, suffering a loss of salary, wages or earnings on his own account that he would not be suffering if he were free of that incapacity?
17. Mr Bayford told the Tribunal that since ceasing work on 17 September 2009 he has been suffering a loss that he would not have suffered if he were free of the war-caused adjustment disorder. He said that he and his wife continue to be directors of Movietone, although his wife has recently retired and the company will be wound up soon. He explained that he has continued to receive income from the company through dividends but not from his personal exertion. Mr Bayford produced personal tax records from 2006 to 2010 and tax records for Movietone for the same period. He also provided figures for 2011 that are to be submitted to the Australian Taxation Office.
18. Mr Bayford said that in 2011 Movietone reported wages and salaries of $2000 which were paid to his wife for her work as an information technology consultant. He received no wage or salary. Under cross-examination he agreed that since ceasing work for McCall in 2009 he has performed minor tasks for Movietone such as preparing Business Activity Statements and helping to prepare financial statements for the accountant, but has not received remuneration for these activities.
19. In Cavell v Repatriation Commission (1988) 9 AAR 534 Burchett J said that decisions regarding s 24(1)(c) should be made with an eye to reality and that common sense is the proper guide. This principle was supported in Forbes v Repatriation Commission (2000) 101 FCR 50.
20. In Re Fahey and Repatriation Commission [1986] AATA 244 the Tribunal held at [11]:
...It seems to us that the question is not one of loss of income, that is to say of reduced support, but rather of loss of (i) salary, (ii) wages, or (iii) earnings on the veteran's own account, that the veteran would not be suffering if he or she had been free of the incapacity. And it is all in the context of being "prevented from continuing to undertake remunerative work". The phrase here relevant, namely "earnings on his or her own account", was in our opinion clearly inserted to cover the case of a person who derived not salary or wages, but rather the earnings of a business profession or trade as a result of remunerative work. There is a loss of salary or wages, or of earnings on one's own account, when one does suffer a loss of remuneration properly so described. …It would have been very easy for the legislature to have said "loss of income" if that was what was meant. Instead the legislature has used a more lengthy formula which, on a fair reading, is more restrictive in its scope. It would not be correct to subvert the legislative intent by giving "earnings on his own account" an interpretation so expansive that it, together with "wages and salary", adds up to mean "income"…It is reasonable to conclude that, not having used that term in s.24, it was not intended to cover all that is covered by the term "income".
21. In Counsel v Repatriation Commission [2002] FCAFC 201 the appellant was involved in a partnership to which he had contributed significantly before his incapacity. The Full Federal Court held that he had suffered a loss of earnings because he no longer had access to the cash flow or earnings of the business. Goldberg J said at [79]:
...When the appellant was ultimately prevented by incapacity from continuing to undertake the work which he carried out in the course of the partnership, he thereby suffered a loss of earnings on his own account in the sense that he was no longer able to have access to, or take advantage of, the cashflow or earnings of the partnership business…
At [81] Goldberg J referred to:
…the requirement that the entitlement to a special rate pension depends on establishing not only that war-caused injury or disease has prevented the veteran from undertaking the remunerative work he or she has been undertaking, but that it has also brought about a cessation of the generation of an income stream which hitherto existed. Put another way, the appellant's efforts of personal exertion no longer produce money.
22. In Repatriation Commission v Connell [2011] FCAFC 116 the Full Federal Court stated at [28]:
…Being able to perform work without restriction because of illness or injury is a situation far removed from being able to perform the same work, but with restrictions due to illness or injury. Each is remunerative work of the same type, in this case, painting. But it is not the same remunerative work considering the nature and quality of the work. If one is performing full-time work without any health related restrictions that reduce one’s hours on account of such restrictions it cannot be sensibly said that the later work is a continuation of the work previously undertaken. It is of an entirely different nature and quality, although identical in terms of describing the relevant occupation.
23. In Re Jones and Repatriation Commission [2011] AATA 631 the Tribunal stated at [83]:
…for the purposes of s 24(1)(c) of the VE Act, I am only concerned of earnings derived by MrJones through his personal exertion. MrJones made it clear in his evidence, which is supported by all of the financial records in question, that the company’s earnings which were due in substantial part to his personal exertion declined substantially in 2007, eventually reaching zero in 2009. He admitted that he continued to receive dividends as a result of monies invested by the company, some rental income until the factories were sold and the distribution of monies following the sale of the factories by the partnership. None of these earnings were the result of his personal exertion…
24. The Tribunal accepts Mr Bayford’s evidence that he ceased full-time work in September 2009, and that the income of Movietone since then was derived by his wife’s exertion. Applying Counsel, the Tribunal finds that since that time Mr Bayford has lost access to an income stream that he previously derived from his personal exertion. In this context the small contribution to Movietone made by him by way of preparing Business Activity Statements and some of the financial statements for the accountant since ceasing work with McCall does not represent earnings from his personal exertion.
25. An examination of Mr Bayford’s financial statements for 2010 and 2011 shows that following his cessation of work he received salary from Movietone of $10,000 in 2010 and zero in 2011. He continued to receive dividends from Movietone in the amount of $30,000 in each of these years. Applying the principle in Re Fahey, the Tribunal finds that although his income remained unchanged from 2009 to 2011, the main reason was that this figure comprised dividends, which Mr Bayford admitted was at the suggestion of the company’s accountant for tax purposes and was within taxation law. As was the case in Re Jones, the Tribunal does not believe that the remuneration received from dividends paid by Movietone represents earnings resulting from Mr Bayford’s personal exertion.
26. For these reasons the Tribunal finds that the answer to question (4) is yes.
CONCLUSION27. As Mr Bayford satisfies the test in Flentjar the Tribunal finds that he satisfies s 24(1)(c) of the Act and he meets the criteria for disability pension at the special rate.
DATE OF EFFECT
28. Section 21(3) of the Act provides that the date of effect cannot be a date before a person becomes eligible for the increased pension, and all the criteria in s 24(1) of the Act must be met at the same point in time during the assessment period. Mr Bayford stated that he made the decision to cease remunerative work with McCall on 17 September 2009 because he believed he could no longer cope with the demands of the position due to his war-caused disabilities alone, and said that the date of effect should be the next day. He emphasised that his decision was supported by Dr Pomorin, who had stated in his report dated 6 July 2009:
As a result of his poor sleep he is excessively tired during the day and unable to continue work. Therefore he currently only works an eighteen hour week.
29. The Tribunal does not accept this interpretation. In his report Dr Pomorin allocated an occupation impairment rating of 6 and stated: Can only cope with working eighteen hours per week. This suggests that the comment …unable to continue work. referred to Mr Bayford’s inability to continue working on a given day when he became excessively tired. The assessment by a medical practitioner of Mr Bayford’s incapacity for work was not made until Dr Pomorin examined him on 1 May 2010 and included his opinion in the report dated 13 July 2010. Therefore, taking into account the Tribunal’s findings that Mr Bayford did not derive income from Movietone from his own exertion after he ceased working with McCall, the Tribunal finds that Mr Bayford met all the criteria in s 24(1) of the Act on 1 May 2010 and that this is the date of effect of special rate.
DECISION
30. The Tribunal sets aside the decision under review and substitutes a decision that Mr Bayford is eligible to receive disability pension at the special rate from 1 May 2010.
I certify that the thirty [30] preceding paragraphs are a true copy of the reasons for the decision of:
G.D. Friedman, Senior Member
[sgd]Michael Heffernan
Associate
Dates of hearing: 24 and 25 October 2011
Final date for further submissions: 9 December 2011
Date of decision: 20 December 2011
Counsel for the applicant: Ms F Ryan
Solicitor for the applicant: Williams Winter
Advocate for the respondent: Ms R Casamento, Department of Veterans’
Affairs
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