Horner; Military Rehabilitation and Compensation Commission and (Compensation)

[2015] AATA 618

Horner; Military Rehabilitation and Compensation Commission and (Compensation) [2015] AATA 618 (21 August 2015)

Division	VETERANS' APPEALS DIVISION
File Number	2014/5215
Re	Military Rehabilitation and Compensation Commission
APPLICANT
And	Christopher Horner
RESPONDENT

Decision

Tribunal	Deputy President K Bean
Date	21 August 2015
Place	Adelaide

The decision under review is set aside and in substitution for that decision it is decided that Mr Horner’s normal earnings for the purposes of section 141 of the Military Rehabilitation and Compensation Act 2004 are to be calculated by reference to the salary of a Flight Lieutenant, and without regard to what he would have earned if he had been promoted to the rank of Squadron Leader.

............ [Sgd] ......................................

Deputy President K Bean

Catchwords

COMPENSATION - Military compensation - Determination of normal earnings - Meaning of reasonable expectation of promotion - Where promotion would almost certainly have occurred but for compensable injury - Provision intended to exclude from normal earnings any promotion that had not yet actually occurred - Decision under review set aside.

Legislation

Military Rehabilitation and Compensation Act 2004, ss 141, 180, 186

Safety, Rehabilitation and Compensation Act 1988, s 8

Cases

Peabody v Commissioner of Taxation (1993) 40 FCR 531

Secondary Materials

Military Rehabilitation and Compensation Bill 2003 (Cth) Explanatory Memorandum

REASONS FOR DECISION

Deputy President K Bean

21 August 2015

1. The respondent, Mr Horner, had a long and highly successful career in the Royal Australian Air Force (RAAF). Unfortunately, this was cut short due to a depressive illness which he developed as a result of his service and he was medically discharged on 25 January 2013.

2. At the time of his discharge, Mr Horner held the actual rank of Flight Lieutenant. However he had been identified for promotion to the rank of Squadron Leader, subject to securing a suitable posting and certain other conditions.[1]

   [1]     Exhibit 1, T10/80.

3. It is that situation, and the question of how it affects the compensation to which Mr Horner is entitled, which has given rise to the current application.

4. In brief terms, the procedural history of the matter is that the applicant, the Military Rehabilitation and Compensation Commission (the MRCC), originally calculated Mr Horner’s entitlements on the basis that his normal earnings were those of a Flight Lieutenant, being the rank Mr Horner held at the time he was injured and when he was discharged. However, following an application by Mr Horner to the Veterans’ Review Board (VRB), on 11 July 2014, the VRB set aside the MRCC’s determination and substituted its determination that “assessment of compensation for incapacity to work be based on the normal weekly earnings of a recently promoted Squadron Leader”.[2]

   [2]     Exhibit 1, T15/103.

5. Subsequent to that decision, the MRCC lodged an application with this Tribunal seeking review of the decision of the VRB. The MRCC says that the approach adopted by the VRB was in error and that Mr Horner’s compensation entitlements should be calculated on the basis that his normal earnings were those of a Flight Lieutenant. Mr Horner disputes that position and says that the decision of the VRB should be upheld.

   ISSUE

6. It follows that the issue for my determination is how Mr Horner’s normal earnings should be determined and, in particular, whether these should be determined on the basis that his normal earnings were those of a Flight Lieutenant or a Squadron Leader.

   STATUTORY FRAMEWORK

7. There is no dispute that the applicable legislation is the Military Rehabilitation and Compensation Act 2004 (the MRCA) and, in particular, Chapter 4 of that Act. The parties also agree that the provision which applies to working out Mr Horner’s normal earnings is s 141, which relevantly provides as follows:

   Working out normal earnings

   (1)The normal earnings for a week for a person who was a Permanent Forces member immediately before last ceasing to be a member of the Defence Force means the amount worked out using the following formula:

   Note:     The amount of $100 is indexed under section 183.

   (2)The person’s ADF pay for a week means the amount of pay that the person would have earned for the week as a Permanent Forces member if:

   (a)     the person were still a Permanent Forces member; and

   (b)    the person were not incapacitated for service.

   Note:   The person’s ADF pay for a week might be adjusted under Part 5.

8. Part 5 of Chapter 4 of the MRCA provides for the adjustment of the amount of compensation paid for incapacity, and s 180 relevantly sets out the ‘amounts that are excluded when working out normal and actual earnings’ as follows:

   Amounts that are excluded when working out normal and actual earnings

   (1)       In working out normal earnings, do not include:

   (a)any amount of a bonus that is earned by the person (whether paid as a lump sum or periodically); or

   (b)    the amount of any expected increase due to:

   (i)     the reasonable expectation of a bonus; or

   (ii)    the reasonable expectation of a promotion; or

   (iii)     the reasonable expectation of a posting.

   …

9. Also of some potential relevance here is s 186 of the MRCA, which allows for the compensation paid to serving members to take account of any increase in their pay due to an actual promotion:

   Increases in pay and allowances due to actual promotions

   (1)This section applies for the purposes of sections 91, 96, 114 and 149 if a person is promoted.

   (2)The amount of pay that the person would have earned for a period as a member of the Defence Force, and the amount of a pay-related allowance that the person would have been paid for a period, include:

   (a)the amount of any actual increase in the person’s pay or a pay-related allowance; or

   (b)the amount of an additional pay-related allowance the person would be paid;

   for the period because the person is promoted.

   Note:A person must actually be promoted in order to receive an increase under this subsection.

   THE VRB DECISION AND PARTIES’ CONTENTIONS

10. Although it noted the terms of subs 180(1)(b)(ii), the VRB’s decision was based upon the Board’s conclusion that Mr Horner had more than a ‘reasonable expectation’ of promotion. The Board said:

    The wording of that subsection excludes any increase in amount of compensation that might have happened due to the “reasonable expectation of promotion”.

    Both the Officer appraisal report and the promotion list provide the Board with compelling evidence that the claimant’s expectation for promotion far exceeds any meaning implied by the adjective “reasonable”. It seems to verge on inevitability, and would have happened on 1 January 2010, but for the intervention of a debilitating recurrence of Depression.[3]

    [3]     Exhibit 1, T15/105.

11. Mr Horner adopts this analysis, emphasising the point that not only had he been earmarked for promotion, but the only reason his promotion did not actually proceed was due to his compensable condition and incapacity. In other words, his compensable condition alone prevented him from being promoted and he should be compensated accordingly.

12. In support of the contention that he would have been promoted, Mr Horner points to RAAF communications, including a cable dated 2 April 2009 with the heading “2010 Promotions – Officers”.[4] This communication listed Mr Horner amongst other Flight Lieutenants identified for promotion to Squadron Leader, contingent upon their obtaining a suitable posting at “a position of higher appointment”[5], and fulfilment of certain other conditions. He points out that the only reason he was not able to secure such a posting, and fulfil the other conditions, was because of his compensable medical condition, which imposed certain geographic and other restrictions upon him. As noted in a letter from the Personnel Branch to Mr Horner:

    Around the time of your identification for promotion you had a posting (geographic) restriction to remain within the Adelaide area due to a medical condition. In 2010, there were no SQNLDR positions available within the Adelaide area that you may have been suitable for, and selected to occupy, on promotion.[6]

    [4]     Exhibit 1, T10/79.

    [5]     Exhibit 1, T10/80.

    [6]     Exhibit 16.

13. Whilst acknowledging that he had not actually been promoted, as he was medically discharged before this could occur, Mr Horner nevertheless contends that his promotion would certainly have occurred if it had not been for the intervention of his compensable condition. He urges me to adopt the reasoning of the VRB, which found that he had far more than a ‘reasonable expectation’ of promotion, and accordingly the terms of s 180 of the Act did not preclude his normal earnings being calculated on the basis of having obtained the rank of Squadron Leader.

14. However, Mr Dubé, who appeared as counsel for the MRCC at the hearing, argued that the relevant provisions of the MRCA are modelled on s 8 of the Safety, Rehabilitation and Compensation Act 1988 (the SRC Act). He contended that not only were the higher earnings as a Squadron Leader excluded by s 180, they did not fall within the terms of s 141, properly construed. He acknowledged that in circumstances where Mr Horner’s failure to obtain promotion was attributable to his compensable injury, the construction contended for by the MRCC produced an “unfortunate” result, but argued the construction was nevertheless correct, and the Tribunal was bound to adopt and apply it.

    ANALYSIS

15. The starting point in calculating Mr Horner’s normal earnings is s 141, which effectively requires his normal earnings to be calculated by reference to his ‘ADF pay,’ being the amount of pay he would have earned if he were still an RAAF member, and he was not incapacitated for service.[7]

    [7]     Subsection 141(2).

16. As Mr Horner points out, without more this would potentially leave open an approach whereby his ADF pay was calculated on the basis of the pay of a Squadron Leader, being the rank to which he would have been promoted if not for his compensable injury, and would have attained either before his date of discharge or subsequently. However, one of the difficulties for that approach is that s 180 specifically provides that in working out an injured member’s normal earnings, it is not permissible to include ‘the reasonable expectation of a promotion’.

17. Mr Horner contends that he is not caught by this provision as it is not accurate to describe his situation as one in which he had a ‘reasonable expectation of promotion’. Therefore, as s 180 does not apply, his normal earnings can be calculated by reference to his ‘ADF pay’ being the amount he would have earned if he had not been injured, as a Squadron Leader.

18. In essence, the question for me distils to whether, in excluding increases due to ‘the reasonable expectation of a promotion’, the legislature also intended to exclude an increase due to a promotion which, but for the compensable injury, would almost certainly have occurred. In other words, does s 180 also exclude increases which were almost certain rather than just ‘reasonably expected’?

19. In addressing that issue, I have had regard to authorities which have discussed, in different contexts, the meaning of the phrase “reasonable expectation”. A helpful decision in this regard is that of the Full Court of the Federal Court in Peabody v Commissioner of Taxation (1993) 40 FCR 531, in which Justice Hill summarised the effect of a number of other authorities as follows:

    These cases indicate, what would presumably be in any event obvious, that the meaning of words such as “reasonable expectation” depends upon the context in which they appear. Nevertheless, in the present context, as in Cockcroft, the words were intended to receive, and should receive, their ordinary meaning. So too, as in Cockcroft, the word “reasonable” is used in contradistinction to that which is “irrational, absurd or ridiculous”. The word “expectation” requires that the hypothesis be one which proceeds beyond the level of a mere possibility to become that which is the expected outcome. If it were necessary to substitute one ordinary English phrase for another, it might be said that it requires consideration of the question whether the hypothesised outcome is a reasonable probability: cf Davies v Taylor (supra).

20. I have also had regard to the Explanatory Memorandum which accompanied the Military Rehabilitation and Compensation Bill 2003. With respect to what became s 141, the Explanatory Memorandum said:

    To determine normal earnings for person (sic) who was a Permanent Forces member immediately prior to his or her discharge, the Commission will include the pay and any allowances that were payable to the person immediately before discharge.

    With respect to what became s 180, it said:

    The following are not included in any calculation of normal or actual earnings:

    …

    Possible increases due to the expectation of a bonus, promotion or posting – This reflects section 8 of the SRCA, in that calculations for normal earnings can not include speculation that there is or was a reasonable expectation of a promotion, bonus or posting and that it would actually occur.

21. Unfortunately, there is little other guidance available to me on this specific question. Having given it careful consideration however, I have ultimately concluded that I am not persuaded that something more certain than a ‘reasonable expectation’ of a promotion is not caught and also excluded by the terms of s 180.

22. As I have alluded to above, the phrase “reasonable expectation”, has been construed variously in different contexts to import different degrees of probability. The construction adopted by the VRB and urged upon me by Mr Horner is certainly arguable. However, there is nothing elsewhere in the text of the statute which suggests that s 180 was not intended to exclude the expectation of a promotion which had not yet occurred regardless of how probable the promotion was. Further, the part of the Explanatory Memorandum relating to what became s 180 strongly suggests that it was intended to exclude consideration of any promotion which had not occurred, as s 8 of the SRC Act clearly does. The part of the Explanatory Memorandum relating to what became s 141 of the MRCA also tends to support the MRCC’s construction, as it suggests that normal earnings are to be calculated by reference to what was actually ‘payable’ to a person at the date of their discharge.

23. In these circumstances, whilst it does not expressly say so, I have concluded that the intention of subs 180(1)(b)(ii) was to exclude from normal earnings any expectation of a promotion which had not yet actually occurred, and it should be construed accordingly.

24. As Mr Dubé properly conceded during the hearing, it is conceivable that a circumstance could arise where there was a degree of ambiguity as to whether a promotion had actually occurred. For example, the situation may have been different if Mr Horner had been identified for promotion and procured a posting, but not yet arrived at the new posting or received his first salary payment at the promoted level. However, I accept Mr Dubé’s submission that that degree of ambiguity does not exist here, since whilst Mr Horner had been clearly earmarked for promotion, there is no doubt the promotion had not taken effect at the time of his discharge.

25. As I have indicated, I have been influenced in reaching my conclusion by the fact that the relevant provisions of the MRCA are clearly modelled on s 8 of the SRC Act, which does not allow for the possibility of including an expected promotion in the normal weekly earnings of an injured employee, no matter how certain the promotion may have been. I acknowledge that the MRCA requires normal earnings to be calculated at the date of discharge rather than the date of injury. However, in my view that difference does not significantly detract from the proposition that, broadly speaking, similar principles were intended to apply.

26. Like the SRC Act and earlier incarnations of that Act, the MRCA also reflects what might be described as a ‘trade off’ for employees and members between the disadvantage of receiving less than the damages which would be payable at common law, and the advantage of not needing to prove negligence.

27. As the MRCC has acknowledged, the construction I have accepted as correct produces a particularly unfortunate result in Mr Horner’s case. The result is especially unpalatable given that, in his case, there is very little doubt that he would have been promoted if not for the geographic constraints imposed by his compensable injury. I have given careful consideration to whether that fact should change the outcome in this matter, which seems unlikely to have been intended, and may not have been foreseen.

28. Ultimately however, I have concluded that the construction argued for by the MRCC is correct and Mr Horner is caught by that construction in the manner contended for by the MRCC, notwithstanding the unfortunate effect of this in his circumstances. Arguably, the legislation would have operated in a fairer manner if allowance had been made for promotions which in all likelihood would have occurred, but for the compensable injury. However, I am of course bound by the legislation, which contains no provision to that effect. I accept Mr Dubé’s submission that even if the Act, properly construed, produces an anomalous result or one which is to some extent at odds with the objects of the legislation, it is not open to the Tribunal to “redraft” the legislation, or “supply the deficiency”.[8]

    [8]     R v L (1994) 49 FCR 534 at 538 and Tokyo Mart Pty Ltd v Campbell (1988) 15 NSWLR 275 at 283, cited in Comcare v Thompson (2000) 100 FCR 375 at [40] – [42].

    CONCLUSION

29. For these reasons, I have ultimately concluded that subs 180(1)(b)(ii) is effective in requiring that Mr Horner’s normal earnings not be calculated by reference to what he would have earned if he had been promoted to the rank of Squadron Leader. In these circumstances, it is unnecessary for me to finally determine the question of whether, if s 180 did not have that effect, s 141 would have allowed regard to be had to Mr Horner’s probable promotion.

30. In light of that conclusion, I am obliged to set aside the decision of the Veterans’ Review Board dated 11 July 2014 and substitute a decision that Mr Horner’s ‘normal earnings’ for the purposes of the MRCA are to be calculated on the basis of the salary of a Flight Lieutenant.

    DECISION

31. The decision under review is set aside and in substitution for that decision it is decided that Mr Horner’s normal earnings for the purposes of s 141 of the MRCA are to be calculated by reference to the salary of a Flight Lieutenant, and without regard to what he would have earned if he had been promoted to the rank of Squadron Leader.

I certify that the preceding 31 (thirty-one) paragraphs are a true copy of the reasons for the decision herein of Deputy President K Bean

.......... [Sgd] ......................................

Associate

Dated 21 August 2015

Date of Hearing	21 May 2015
Counsel for the Applicant	Mr Dubé
Solicitors for the Applicant	Sparke Helmore Lawyers
Respondent	In Person