Keen and Telstra Corporation Limited

[2004] AATA 849

Administrative

Appeals

Tribunal

 

DECISION AND REASONS FOR DECISION [2004] AATA 849

ADMINISTRATIVE APPEALS TRIBUNAL      )

)          No N2004/270

GENERAL ADMINISTRATIVE DIVISION		)
Re		LA-RAINE KEEN

Applicant

And TELSTRA CORPORATION LIMITED

Respondent

DECISION

Tribunal Senior Member Josephine Kelly

Date16 August 2004

PlaceSydney

Decision:

The Tribunal sets aside the decision under review and remits the matter to the respondent with the following directions:

(1) As at 30 December 1997 the Applicant’s normal weekly earnings pursuant to s 8 of the Safety, Rehabilitation and Compensation Act 1988 (“the Act”) were $1,311.03;

(2)(a) The Applicant’s entitlement to weekly payments of compensation is to be calculated pursuant to s 21 of the Act.

(b) For the purpose of s 21 of the Act:

(i)    The superannuation amount  is $183,397.73;

(ii)     The superannuation contribution is $65.55.

(3)(a) Section 33 of the Act applies to the calculation of the Applicant’s entitlement to weekly payments of compensation.

(b)  The gross redundancy payment made to the Applicant in the sum of $104,828.55 is referable to the first 80 weeks after her involuntary redundancy on 29 December 1997.

..............................................

Mrs Josephine Kelly  

CATCHWORDS

COMPENSATION – injury to neck and shoulder – calculation of benefits – involuntary redundancy – whether section 21 SRC Act applies – classification by superannuation fund of different classes of benefits irrelevant to construction of s21 – causal link between incapacity and retirement not required under s21 – temporal link required – whether section 33 SRC Act applies – redundancy payment of 80 weeks pay is “salary wages or pay” under s33 – payment referable to period 80 weeks after date of redundancy – decision remitted to respondent for reconsideration

LEGISLATION

Safety, Rehabilitation and Compensation Act 1988 sections 8, 21, 33

CASELAW

Hammerton and Comcare (1995) 21 AAR 204

Re Milliken (1991) 14 AAR 564 at 572

Sullivan and Comcare AAT No. 13475 [1998] AATA 907 24 November 1998

Re O’Shea and Comcare (1993) 18 AAR 430

Construction, Forestry, Mining and Energy Union v Amcor Limited [2002] FCA 610

Archer v Comcare [2000] FCA 1296 (14 September 2000)

Westfield Holdings v Adams [2001] NSWIRComm 293

Fryar v System Services Pty Limited (1996) 137 ALR 321

Re Clerks (State) Award [1976] I.A.S. Current Review 166

La-raine Lesley Keen and Telstra Corporation Limited [2003] AATA 585

REASONS FOR DECISION

16 August 2004	Senior Member Josephine Kelly
Background

1.The reviewable decision was made on 20 July 2004 (Exhibit R3).  That decision was made following the remittal of a decision dated 1 March 2004 (Exhibit T1, pages 204 to 209) pursuant to the Administrative Appeals Tribunal Act 1975, s 42D. The reviewable decision varied the earlier decision.

2.The reviewable decision concerned the calculation of the benefits to be paid to the Applicant, Ms Keen, by the Respondent, Telstra Corporation Limited (“Telstra”), pursuant to a decision of this Tribunal in La-raine Lesley Keen and Telstra Corporation Limited [2003] AATA 585 on 23 June 2003. The Tribunal determined that Ms Keen was entitled to payment of compensation for incapacity pursuant to s 19 of the Safety, Rehabilitation and Compensation Act (“the SRC Act”) from 30 December 1997, and that the amount she was able to earn in suitable employment was nil.

3.The parties agree that the effect of the Tribunal’s finding was that Ms Keen was made redundant involuntarily on 29 December 1997. 

4.They also agree that Ms Keen:

(a)   was incapacitated before that date, and

(b)  received a superannuation benefit and a redundancy payment when she was made redundant.

The Issues

5.The issues in these proceedings were:

(a) the correct calculation of normal weekly earnings pursuant to s 8 of the SRC Act,

(b) whether Ms Keen’s entitlement to weekly payments of compensation are to be calculated according to s 19 or s 21 of the SRC Act;

(c) whether and if so how, s 33 of the SRC Act applies to the payments of weekly compensation made to Ms Keen.

6.        During the course of the hearing agreement was reached as to the amounts of the following variables necessary for calculation of the benefits due to Ms Keen, depending on the findings in this case:

As at 30 December 1997

(a) Normal Weekly Earnings pursuant to s 8 are $1,311.03;

(b) The superannuation amount pursuant to ss 4 and s 21 is $183,397.75

(c) The superannuation contributions pursuant to s 21 are $65.55.

The Legislation

7. Section 21(1) provides:

“This section applies to an employee who, being incapacitated for work as a result of an injury retires voluntarily, or is compulsorily retired, from his or her employment at any time after the commencement of this section and, as a result of the retirement, receives a lump sum benefit under a superannuation scheme.”

8. Section 33(1) provides:

“Where, in relation to a day in respect of which compensation is payable to an employee under section 19, 20, 21, 21A, 22 or 31, an amount or amounts are paid or payable to the employee by the Commonwealth or a licensed corporation by way of salary, wages or pay, the amount of compensation payable under that section in respect of that day shall be reduced by the amount, or the sum of the amounts, so paid or payable to the employee.”

Section 21

9. There was no dispute that:

(a) Telstra Superannuation Scheme (“the Scheme”) of which Ms Keen was a beneficiary was a “superannuation scheme” as defined in s 4(1) and referred to in s 21;

(b) she “received” her non-preserved superannuation entitlement within the meaning of s 21;

(c)  she did not “receive” the “preserved amount”,  which was a small amount.

The Submissions

10. Mr Vincent, appearing for Ms Keen, put the following submissions. He acknowledged that the purpose of s 21 was to prevent double compensation. That was clear by reference to the Second Reading Speech, part of which is set out in Re Hammerton and Comcare (1995) 21 AAR 204 at 221, and from the language of the section.

11. He said the proper interpretation and application of s 21 required the consideration of the following matters.

12. First, the Tribunal has to consider the appropriateness of applying the section to the fact of the payment.  The corporate landscape has changed since the legislation was enacted.  There has been greater reliance on redundancies in the last decade as a staff management tool.  The legislation has to cover a more diverse range of circumstances than those that existed when it was passed.  There has been a move away from a centralised public sector to increased independence of agencies such as Telstra.   

13. When the legislation was passed the explosive growth of superannuation law would not have been foreseen.  As an example, he cited the obligation to hold on to superannuation benefits, by which I understand him to mean the preservation requirement.

14. In that context, Mr Vincent said, the nature of the benefit received under the superannuation scheme was relevant.   It is necessary to look at the quantum of the benefit and how it is made up.  If Ms Keen had resigned rather than being made redundant, she would not have got a cent more.  There was no difference in the quantum of the benefit between retirement and redundancy, although there was a difference in the preserved amount, being less in the case of redundancy.

15. However, and most significantly, if Ms Keen had resigned because of incapacity, by which I understand him to mean that she would have been entitled to the total and permanent invalidity benefit under the Scheme, she would have received a higher amount.

16. This submission was elaborated as follows.  Division 2 of the Superannuation Trust Deed (Exhibit A3) applied to Ms Keen.  Part 2.3 set out the various benefit categories: 2.3.1 Retirement benefits, 2.3.2 Death benefits, 2.3.3 Total and permanent invalidity benefits, 2.3.4 Redundancy benefits, and 2.3.5 Withdrawal benefits. 

17. Mr Vincent referred to the Telstra Superannuation Scheme Statement of Benefits for Ms Keen for the year 1 July 1996 to 30 June 1997 (Exhibit A2).  In that document the Total and Permanent Invalidity or Death Benefit was $381,786.82, compared to the Redundancy benefit of $246,960.05, a difference of approximately $135,000.

18. He pointed to the computer printout showing Ms Keen’s retrenchment benefit at 29 December 1997 (Exhibit A4) and says that it indicates that difference was then in the order of $130,000.  The printout states:  “The benefit payable had you died on your date of cessation of employment” was $381,824.  (I assume that was the same as the Total and Permanent Invalidity Benefit referred to by Mr Vincent in his submission).  The redundancy benefit was $251,481.67.

19. That Ms Keen’s resignation and retirement benefit would have been the same was a matter of calculation under the Scheme (Exhibit A3, p 50, cl. 2.3.5).

20. In summary, I understand the submission to be that for the purpose of s 21, the superannuation benefit Ms Keen received is to be classified in accordance with the Scheme. That is, she received a “retirement” or “redundancy” benefit rather than a total and permanent invalidity benefit

21. Having determined the proper classification of the benefit, the next part of the argument was that there has to be a causal relationship between the injury and resultant incapacity and retirement in order for s 21 to apply. I understand that the parties agree that in Ms Keen’s case there was no such causal relationship.

22. Properly, Mr Vincent referred the Tribunal to Re Hammerton at 222 where Deputy President Forgie made a determination contrary to the submission made:

“Looking at the words of ss 20(1) and 21(1), it seems to me that neither is providing that there must be a causative link between the incapacity for work as a result of an injury and retirement.  Rather, they are providing only a temporal link between the incapacity and the retirement”.

23. Mr Vincent sought to distinguish that case from the present factual situation.  As I understand the submission, it was that in Re Hammerton whether there was a causative link did not really matter because other benefits were available.  In the case of Telstra there is no other benefit.   In my opinion that factual distinction is not available. In any event the extract set out above is a clear finding on the proper interpretation of the provisions and does not rely on the particular factual circumstances in that case. 

24. He also sought to rely on Re Milliken (1991) 14 AAR 564 at 572 in support of the same proposition, however, that was not pressed. Re Milliken was relevantly concerned with s 131 of the Act. That is a transitional provision which also has the purpose of avoiding the situation of a former employee receiving both compensation and superannuation from their former employer (p 571).

25. There was not a consideration in that case of whether a causal link was necessary between incapacity and the retirement.  

26. The next proposition put by Mr Vincent is that there must be a temporal link between incapacity and retirement, that is, the incapacity must occur before retirement.  He referred to Sullivan and Comcare AAT No. 13475 [1998] AATA 907 24 November 1998.

27. In that case Senior Member Handley held that no causal link is required between the injury and the retirement (contrary to Mr Vincent’s earlier submission) in relation to s 20 but only a temporal link.  That is, the retirement comes after the incapacity.  The Tribunal quoted an extract from Re Hammerton which included the passage quoted above (see paragraph 65).  

28. In Sullivan the incapacity for work came after the retirement (paragraph 73).   As it was agreed that Ms Keen was incapacitated at the relevant date, the temporal link is not in dispute in this case.

29. Mr Vincent cited Re O’Shea and Comcare (1993) 18 AAR 430 as supporting the proposition that a redundancy was deemed to be “involuntary” retirement (p 451). That case dealt with s 20. Sections 20 and 21 are complementary and have the same purpose, that is, to prevent double compensation in the case of superannuation pensions and lump sum payments respectively.

30. Mr Vincent also referred to the discussion in Re Hammerton of the meaning of “retirement” at p 214 at .5.  In summary, it was held to mean withdrawing from work because of age or because of incapacity for work. 

31. The meaning of “redundancy” was addressed in Construction, Forestry, Mining and Energy Union v Amcor Limited [2002] FCA 610, in the context of the construction of in industrial agreement and the sale of a business. At paragraph 9 Finkelstein J said:

“In the context of employment law it is generally accepted that becoming redundant means that the employee is no longer required by his (or her) employer because the employer no longer has a need for the work that the employee was performing.”

32. I understand these authorities to be cited to support the argument that Ms Keen did not retire because of “incapacity” but was ”involuntarily retired”.  

In summary Mr Vincent’s argument is that:

(a)   having determined that the superannuation benefit paid to Ms Keen is properly  characterised as being for an involuntary retirement rather than for incapacity;

(b) there is no causal link between the “incapacity” and the “involuntary retirement”, only a temporal link,

(c) the superannuation benefit received was not a “lump sum” received as a result of the retirement and therefore s 21 does not apply.

33. Mr Polin, counsel for Telstra, submitted that the approximately $180,000 (the agreed “superannuation amount”) received by Ms Keen under superannuation scheme was a “lump sum” within the meaning of s 21.

34. He said that she had also received under her redundancy payment approximately $104,000 calculated on 80 weeks wages.  (Her total redundancy payment of approximately $143,102 included accrued leave entitlements (Exhibit R1, p. 535)).

35. Mr Polin’s substantive submissions were:

(a)      there is no requirement for a causative link between incapacity and retirement (paragraph 58 Hammerton p 223) and Sullivan at paragraph 65.  The case of Milliken was not on point and was not contrary to that proposition.

(b)      a lump sum was received under the superannuation scheme, that is everything that was not preserved including the employer contributions and it does not matter how the superannuation scheme allocated the payments.

36. Mr Polin submitted that O’Shea’s case was the same factual situation.  There the employee had two options, to return to “Transport & Communications” or be declared involuntarily redundant.  Ms Keen was given the option of going to Pacific Access or to take what Telstra argued before the Tribunal unsuccessfully was a voluntary redundancy (Exhibit R1 paragraph 78, page 672). 

37. He referred to Archer v Comcare (2000) 101 FCR 30 where the Full Federal Court held that a “lump sum benefit” is received when a benefit that is payable to the employee has been paid to him or has been paid at his direction or when the trustee has dealt with the benefit at the request or with the consent of the employee.

Findings on section 21

38. Having considered the evidence and the submissions, the Tribunal finds in accordance with Re Hammerton and Sullivan that s 21 does not require a causative link between the incapacity and the involuntary retirement.

39. As the parties agreed, there does need to be a temporal link, that is, the incapacity must arise before the retirement, and that link existed in this case.

40. Further, the superannuation received by Ms Keen was relevantly a “lump sum benefit under a superannuation scheme” received as a result of the retirement. Neither alleged changes in the corporate landscape nor the growth in superannuation law relevantly affects the proper construction of s 21.

41. Mr Vincent’s argument that how the superannuation scheme defines and quantifies benefits has to be considered when determining whether s 21 applies is not supported by the wording of the section or by authority At highest, I understand that argument to have supported the “causal link” argument, that is, that Ms Keen did not retire because of incapacity.

42. Underlying Mr Vincent’s submissions, but not relied on directly was a sense of unfairness that Ms Keen has received a lower superannuation benefit than she would have if she had taken a total and permanent incapacity payment under the Scheme. That is a matter concerning the operation of that scheme and not the proper construction of s 21.

43. Accordingly, the Tribunal finds that Ms Keen’s entitlement to weekly payments of compensation is to be calculated pursuant to s 21 of the Act.

Section 33

44. It is agreed that Ms Keen’s gross redundancy payment excluding accrued leave is $104,828.55 (Exhibit R1, p 535).     

45. The primary question is whether that payment constituted “salary, wages or pay” within the meaning of s 33.

46. Ms Keen’s redundancy payment was calculated by reference to her period of service (Exhibit R1 p 535).  The calculation was:

Final salary ETP/52 X 80 weeks = $104,828.55

Note:  The accrued leave payable to Ms Keen is not included in this calculation. 

The Submissions on the principal question under s 33

47. Mr Vincent said the payment was not “salary, wages or pay” but is properly classified  as “compensation”. 

48. He relied on Westfield Holdings v Adams [2001] NSWIRComm 293 paragraphs 140, 141. In that case, the New South Wales Industrial Relations Commission was considering the nature of on the one hand a notice period or payment in lieu, and on the other hand a redundancy or severance payment.

49. Mr Vincent relies particularly on the quotation set out at paragraph 141 of that decision from von Doussa J in Fryar v System Services Pty Limited (1996) 137 ALR 321 where his Honour discusses the two concepts, and says:

“A severance payment, however, is intended to provide a payment as compensation for the loss of non-transferable credits and entitlements that have been built up through length of service such as sick leave and long service leave, and for inconvenience and hardship imposed by the termination of employment through no fault of the employee”

.

50. In Re Hammerton the Tribunal considered whether a productivity payment should be included as a component of “normal weekly earnings” for the purpose of s 8. At p 226-228 the Tribunal discussed the meaning of wages, salary or pay and referred to a number of decisions. The Tribunal’s conclusion was (at p 228):

“The result of these cases is that to be salary or wages, an amount must at least be an amount of money actually paid or payable by an employer to an employee for labour or personal services.  The payment is made pursuant to an agreement between the employer and the employee”.

The Tribunal found the productivity bonus did not fall within the meaning of those words.

51. Mr Vincent also relied on Amcor.  The question in that case was whether the positions of various employees were made redundant and therefore whether they were entitled to severance payments.  Justice Finkelstein quoted from a decision of the New South Wales Industrial Relations Commission, Re Clerks (State) Award [1976] I.A.S. current review 166 at 175:

“It can fairly be said that in industrial circles the term redundancy payment has come to mean compensation for losses of various kinds suffered by employees who have given substantial service to an employer and whose services are terminated because, for one reason or another, the employer no longer needs them”. [Amcor, paragraph 9].

52. Mr Polin submitted that the purpose of s 33 is similar to that of s 21, to ensure that the Commonwealth does not pay twice. It is not a beneficial provision.

53. He sought to distinguish the cases relied upon by Mr Vincent as they related to different legislation and different jurisdictions.

54. He said one looks at the nature of the payment not as categorised in the hands of the employee but as categorised by the employer. Therefore one looks at Exhibit R2, the “AOTC Redundancy Agreement 1993” which sets out entitlements in terms of weeks of service (section 7). He points to s 33(2) which excludes from a reference “to an amount paid or payable”, “pay in respect of a period of leave of absence, or in lieu of the grant of a period of leave of absence”, in various contexts. He says that the only application of s 33 is in the case of redundancy.

55. Mr Vincent submitted in reply that s 33 could apply where there was a retrospective salary increase.

Findings on the principal question under s 33

56. There are no authorities on the point in issue. The purpose of the provision is to prevent double compensation being paid by the Commonwealth to the employee, as in the case of ss 20, 21 and 131. Accepting Mr Vincent’s submission that a redundancy payment is “compensation” does not prevent the payment also being “salary, wages or pay” for the purpose of s 33. Rather, it supports that conclusion. As “compensation” for being made redundant, the employer pays “salary, wages or pay” for a certain period, calculated on the length of service.

57. In my opinion the redundancy payment was “an amount paid or payable by an employer to an employee for labour or personal services” and was “made pursuant to an agreement between the employer and the employee” (Re Hammerton at 228) and hence was “salary, wages or pay” within the meaning of s 33. The agreement was the AOTC Redundancy Agreement (Exhibit R2) which set out the framework of entitlements (Section 7),

Submissions on the secondary question under s 33

58. The secondary submission made by Mr Vincent was that if the payment was relevantly “wages, salary or pay”, the appropriate approach would be to look at the days compensation was paid and the days salary was paid.  This was not done. 

59. Ms Keen’s compensation built up from date of separation on 29 December 1997 until the reviewable decision on 20 July 2004. Only a small amount of compensation has been paid to Ms Keen.  From 18 February 2004 the first compensation paid was $19,491.61.  Mr Vincent submitted that if redundancy is referable to 80 weeks, then it is referable to only the first 80 weeks of compensation payments after the date of redundancy.  

60. Mr Vincent tendered a document that he said showed the proper calculation resulted in a difference from the Respondent’s calculation of $46,000 (see Exhibit A5).

61. Mr Polin’s approach was to deduct the total redundancy payment from the gross amount of compensation payable. He points out that the provision refers to the “sum” or “sums” paid or payable.  That is, the redundancy payment is applied to the periods when Ms Keen was paid compensation.  The section does not require a pro rata application over a period limited to the weeks to which the redundancy payment is referable.

62. An alternative submission made by Mr Vincent was that the redundancy payment was referable to weeks worked prior to redundancy. Therefore the redundancy payment was not referable to a day in respect of which compensation was payable. 

63. In response, Mr Polin said that the payment was for services in any event.

Findings on the secondary question under s 33

64. Addressing this alternative submission first, in my opinion, the redundancy payment is referable to a period of weeks after the date of redundancy, although calculated on the basis of the period of previous service (Exhibit R2, Section 7 and Exhibit R1 at page 535).    

65. How is the redundancy payment applied pursuant to s 33? Section 33 operates when on a particular day both compensation must be payable, and also an amount or amounts by way of salary, wages or pay, must be paid or payable. The question follows, for which days was the redundancy payment “paid or payable”? In my opinion it is for the period calculated in accordance with the redundancy agreement (Ex R2) and specified in the print-out on page 535 of Exhibit R1, that is 80 weeks from the date of redundancy.

66. To take the total redundancy payment and deduct that amount from the compensation payable does not accord with the language of the provision as it does not give effect to the requirement that the salary, wages or pay be paid or payable “in relation to a day in respect of which compensation is payable”.   Further, the nature of salary, wages or pay” is that they are referable to a time period, for example a year, a month or a week.  

67. The use of the phrases “an amount or amounts” and “the amount, or the sum of the amounts” in s 33 does not support Mr Polin’s submission. Those phrases refer to the “salary, wages or pay” paid or payable “in relation to a day in respect of which compensation is paid”. The provision takes into account that various sums meeting the description “salary, wages or pay” may be payable in relation to a particular day.

68. Accordingly, for the purpose of s 33 of the Act, I find that the redundancy payment in this case is referable to the first 80 weeks after redundancy.

Decision

69.   The Tribunal sets aside the decision under review and remits the matter to the respondent with the following directions:

(1) As at 30 December 1997 the Applicant’s normal weekly earnings pursuant to s 8 of the Safety, Rehabilitation and Compensation Act 1988 (“the Act”) were $1,311.03;

(2)(a) The Applicant’s entitlement to weekly payments of compensation is to be calculated pursuant to s 21 of the Act.

(b) For the purpose of s 21 of the Act:

(i)        The superannuation amount is $183,397.73;

(ii)       The superannuation contribution is $65.55.

(3) (a) Section 33 of the Act applies to the calculation of the Applicant’s entitlement to weekly payments of compensation.

(b)  The gross redundancy payment made to the Applicant in the sum of $104,828.55 is referable to the first 80 weeks after her involuntary redundancy on 29 December 1997.

I certify that the 69 preceding paragraphs are a true copy of the reasons for the decision herein of Senior Member Kelly

Signed: Guy Moloney           .....................................................................................

Associate

Date/s of Hearing  28 July 2004
Date of Decision  16 August 2004
Counsel for the Applicant         M Vincent
Solicitor for the Applicant          Stacks, Forster
Counsel for the Respondent     N Polin
Solicitor for the Respondent     Henry Davis York