Kirk Westwood and Military Rehabilitation And Compensation Commission
[2012] AATA 816
•20 November 2012
[2012] AATA 816
Division VETERANS' APPEALS DIVISION File Number(s)
2012/2136
Re
Kirk Westwood
APPLICANT
And
Military Rehabilitation And Compensation Commission
RESPONDENT
Decision
Tribunal Hon. Brian Tamberlin, QC, Deputy President
Date 20 November 2012 Place Sydney The decision under review is set aside and remitted to the Respondent to calculate the civilian component of normal earnings based on the net taxable income of $4,646.00 for the financial year ended 30 June 2008, as shown in the Applicant’s tax return and using the orange coloured days shown in Exhibit B, as being the number of days on which he engaged in gaining civilian income.
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Hon. Brian Tamberlin, QC, Deputy President
Catchwords
COMPENSATION – whether there is a civilian component to the calculation of Applicant’s normal earnings – if civilian component found, on what basis should calculations be made – reconstructed invoices not reliable records – tax returns reflect declining income from sporadic civilian business activities for relevant period – asserted intention of Applicant to pursue full-time combat role. Decision under review set aside and remitted for recalculation.
Legislation
Military Rehabilitation and Compensation Act 2004 (Cth), subsections 98(1), 99(1) and 99(2)
REASONS FOR DECISION
Hon. Brian Tamberlin, QC, Deputy President
20 November 2012
The Applicant seeks review of a decision of the reviewing officer of the Respondent dated 14 May 2012, which affirmed a determination of 21 December 2011 by the primary delegate that there is no civilian component to the calculation of the normal earnings of the Applicant under sections 98 and 99 of the Military Rehabilitation and Compensation Act 2004 (Cth) (MRC Act):
The relevant provisions are as follows:
98 Working out the civilian component for an incapacitated Reservist who is incapacitated for work
Working out the civilian component of normal earnings
(1) The civilian component for a week for an incapacitated Reservist who is incapacitated for work is the amount worked out using the following formula:
The term “example period” is defined in s 99 of the MRC Act as follows:
99 Definition of example period for the civilian component of normal earnings
(1) For the purposes of section 98, the example period for an incapacitated Reservist who is incapacitated for work is the latest period of 2 weeks:
(a) during which the Reservist was continuously engaged in civilian work; and
(b) ending before the onset date for the incapacity.
(2) However, the Commission may determine as the example period:
(a) a different 2 week period that it considers reasonable; or
(b) a period of a different length that it considers reasonable;
if the civilian daily earnings for the example period under subsection (1) would not fairly represent the daily rate at which the Reservist was being paid for his or her civilian work before the onset date for the incapacity.
Decision
The decision maker noted that by Consent Order in July 2011 an earlier Tribunal had remitted the application to the Respondent with a view to issuing a new determination, including the obtaining of details as to the civilian earnings of the Applicant for the period of at least 18 months prior to the accepted date of injury, which was 28 September 2008, and then determining the “civilian component” of normal earnings having regard to ss 98 and 99 of the MRC Act.
On the question of civilian earnings, the decision maker referred to the tax returns of the Applicant for the financial years ended 2007, 2008 and 2009, and noted that the civilian income was predominantly derived from sporadic invoices in respect of a consultancy business. She considered that this was unhelpful in terms of ascertaining any civilian component of normal earnings, and stated that an examination of other historical financial periods to determine civilian earnings would not be representative of the Applicant’s earnings.
The delegate considered whether a different period could be used as an “example period”, but rejected this alternative because there was no period which she considered would fairly represent the daily rate at which the Applicant was being paid for his or her civilian work before the onset date of the incapacity. In relation to the taxation returns, she considered that they were not helpful by reason of the sporadic invoices issued in respect of the business activities of the Applicant.
She agreed with the approach taken in the initial determination in deciding to adopt the immediate two weeks prior to the injury as the example period, but found that there was no “civilian component” which formed part of the calculation of the Applicant’s normal earnings.
Issue
The issue before me is whether the finding that there was “no civilian component” to the Applicant’s normal earnings is correct. If there is a civilian component, a question arises as to the basis on which such component should be calculated.
Background
The Applicant is a part-time Reservist and, under s 86 of the MRC Act, the Commonwealth is liable to pay compensation if a service injury results in incapacity for service or work. The amount of compensation is to be worked out taking into account the difference between a member’s normal weekly earnings and actual earnings.
Because the Applicant was a part-time Reservist at the time of his injury, his normal earnings are worked out by combining an “ADF component” and a “civilian component”. The civilian component is worked out under ss 98 and 99 of the MRC Act as set out above.
Under s 98(4) of the MRC Act, the civilian daily earnings for an incapacitated Reservist who was not engaged in civilian work before the onset date of the incapacity is “nil”.
The Applicant is currently 40 years of age and enlisted in the Royal Australian Army on 15 September 2006 and obtained the rank of private.
The Applicant was not a full-time member of the army but undertook service that has been categorised as continuous full-time service under the MRC Act.
His service records confirm that the Applicant was undergoing training for selection in the Special Forces when he suffered a severe injury to his left eye on 28 September 2008.
The Applicant had, for some time before the injury, owned and operated his own business, which involved outdoor activities with respect to training people in skills such as, but not limited to, search and rescue, navigation, river guidance, adventure guidance and rock-climbing. The income generated by the Applicant, with respect to these activities, is contained in the income tax returns for financial years ended 30 June 2007 through to 2009.
The injury suffered by the Applicant resulted in left traumatic corneal ulcer and left recurrent corneal erosions. It was sustained in the course of his duties when he was accidently stabbed in the eye by a stick which contained cordite which flicked up as he crawled around.
In support of his claim, the Applicant made a statement and referred to documentation. He was cross-examined in some detail.
The Applicant’s business was described as a consultancy that he commenced in about July 2005 and was called “Kirk Westwood – Intuitive Consultancy”. Prior to that, he had been involved in the adventure industry as a guide with other adventure businesses. From about 2006 he says that since July 2006 he started to charge up to $550 a day, depending on trips and the work involved was often part of a program. The work was sporadic, but could cover periods of up to 10 days or more from time to time. On some occasions he did work which took about four days.
The Applicant found that his ability to do adventure-based training was severely limited as a consequence of the injury to his eye. With respect to services, he provided his income tax returns to the Commission in September 2009. In relation to his invoices, he says that he had them on his computer covering the period 1 July 2005 up to November 2009, but his computer crashed as a result of a virus and all the details were destroyed.
In support of his claim for the civilian component he has referred to his tax returns, together with the copies of invoices and provided a calendar of his activities, setting out in colour-code form, the periods during 2007-2009 on which he was engaged in various activities, including days spent on personal professional development, adventure-based training, reservist days, personal holidays and other personal key dates.
In addition, he has provided reconstructed or recreated invoices for a number of periods of civilian employment prior to his injury, and in order to do so he says he has made enquiries of some organisation who engaged him.
The Applicant has produced three documents which purport to be tax invoices for work performed in relation to “East Coast Kayaking”, “Roaming Adventures” and “Yarra Valley Grammar”. These cover periods of three to five day periods with a charge rate of $550 a day. Two are dated 1 September 2008 and the other 1 August 2008.
In my view these invoices are not reliable as evidence of the Applicant’s actual earnings. It is clear from the evidence that they are reconstructions or recreations. They were produced at a very late stage and the Applicant had been on notice for many months of the need to produce supporting evidence to verify his claims as to earnings. These invoices are inconsistent with different copies of what appear to be charges for the same work at the same rate which were attached to the Applicant’s Statement of Facts, Issues and Contentions. Moreover, when considered in the context of his evidence to which I will refer to below, as to their origin, I did not accept that the invoices are reliable records. It is significant that there is no reference to the existence of these documents or the work referred to in the proceedings before the Veterans’ Review Board on 25 October 2010 when it may have been of assistance and relevant to the Applicant in making out his case to have them before the Board.
A significant further consideration is that the documentary evidence before me records that on a number of occasions the Applicant had made statements indicating that it was his intention dating back to early 2008 to take leave from his business and give away his clients in order to pursue an active combat role. On several occasions there are references to him having decided to give up civilian employment as from a period of nine or 10 months before the injury was sustained in September 2008. In my view these statements clearly indicated that as from early 2008 he did not intend to engage in civilian activities and that he intended to dedicate himself to his Reservist service.
The Applicant’s three tax returns in evidence disclose taxable income as follows:
(i)2005-2006 $63,000
(ii)2006-2007 $59,745
(iii)2007-2008 $4,646
These tax returns are accepted as genuine but they reflect a declining income in the period from 2005 leading up to September 2008 from his civilian activities. This is also indicated by change in pattern of activities from November 2007 shown at Exhibit B, which is the Applicant’s coloured table of activities. Exhibit B is consistent with his repeated assertions that he was giving up civilian work and evidences a strong tapering off of civilian activities in the 2007 to 2008 financial year.
The Applicant submits as one alternative, that it would be appropriate to take as the example period the financial year ended 2007 as being representative of earnings.
In my view this period is too remote and does not take into account the marked change in pattern in the Applicant’s civilian business activities which occurred in the period financial year 30 June 2008. Nor does it take into account his reported assertions that he had given up his clients to pursue a combat role for example.
CONCLUSION
Having regard to the sporadic nature of the Applicant’s civilian work and to his repeated statements as to pursuit of a combat role full-time; the giving up of his clients; the change in the pattern of his civilian activity in 2008 as evidenced by Exhibit B, I do not think that it is reasonable to select any particular two week period during which he was continuously engaged in civilian work, as required under section 99(1) of the MRC Act, which could fairly represent the daily rate paid for his civilian work before the onset of his incapacity.
With respect to section 99(2), however, I consider that the calculation of the daily rate based on the number of days worked and the taxable income of the Applicant of $4,646.00, as shown in his tax return for the financial year ended 30 June 2008, taking into account the number of days worked as shown in Exhibit B, would fairly represent his civilian earnings and in particular enable the calculation of a daily rate. This approach would take into account the sporadic nature of his business activities and reflect the substantial pattern of work over a twelve month period and take into account the surrender of his clients and the reduced scale of his business activities in 2008. The Applicant asserted that this would not fairly represent his civilian earnings because of substantial up-front expenses. However, he has produced no reliable evidence, documentary or otherwise, to persuade me that the net taxable income as returned did not represent the true civilian component of his earnings.
For the above reasons I set aside the decision under review and remit the matter to the Respondent to calculate a daily rate of civilian pay based on the net taxable income of $4,646.00 for the financial year ended 30 June 2008, using the orange coloured days shown in Exhibit B, as being the number of days on which he was engaged in gaining a civilian income.
31. I certify that the preceding 30 (thirty) paragraphs are a true copy of the reasons for the decision herein of Hon. B Tamberlin, QC, Deputy President.
32.
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Associate
Dated 20 November 2012
Date of hearing 24 October 2012 Counsel for the Applicant Mr C Colborne
Representative for the Applicant KCI Lawyers Counsel for the Respondent Mr C Clark Representative for the Respondent Dibbs Barker
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