McIntyre v South Australian Superannuation Board T/A Supersa
[2014] SADC 63
•30 April 2014
DISTRICT COURT OF SOUTH AUSTRALIA
(Civil)
MCINTYRE v SOUTH AUSTRALIAN SUPERANNUATION BOARD T/A SUPERSA
[2014] SADC 63
Judgment of His Honour Judge Soulio
30 April 2014
SUPERANNUATION - BENEFITS - MATTERS AFFECTING ENTITLEMENT TO AND PAYMENT OF
Appellant ceased employment - dispute as to reasons for termination - whether due to invalidity - SuperSA refused applications for payment of invalidity insurance benefit and early release of preserved benefits - appeal lodged - appeal allowed.
Southern State Superannuation Act 1994 ss 3, 32, 33A, 34, 40, 48; Southern State Superannuation Act 2009 ss 25, 29; Southern State Regulations 2009 regs 55, 58, 59; District Court Act 1991 s 42; Limitation of Actions Act 1936 s 48; District Court Civil Rules 2006 r 281, referred to.
Ferdinands v Commissioner of Police (2001) 216 LSJS 193; Chammas v Harwood Nominees Pty Ltd (1993) 7 ANZ Ins Cas 61-175; Edwards v The Hunter Valley Co-op Dairy (1992) 7 ANZ Ins Cas 61-113; Wyllie v National Mutual Life Association of Australasia Ltd & Ors (1997) 217 ALR 324, considered.
MCINTYRE v SOUTH AUSTRALIAN SUPERANNUATION BOARD T/A SUPERSA
[2014] SADC 63Background
The appellant, who was born on 9 November 1965, commenced employment with the then Department for Education and Children Services (DECS) on 2 May 2005. As a consequence he became entitled to membership of the TripleS Superannuation Scheme, administered by the South Australian Superannuation Board (trading as SuperSA) under the Southern State Superannuation Act 1994 (SA) (‘the 1994 Act’).
On becoming a member the appellant received one standard unit of basic insurance cover, and from the date of commencement of his employment, SuperSA deducted insurance premiums from his superannuation account. The appellant’s compulsory superannuation entitlements were credited to his TripleS account.
The appellant’s employment with DECS was terminated on 13 July 2008, when he was 42 years old. As at that date the 1994 Act was in force. That Act was superseded by the Southern State Superannuation Act 2009 (SA) (‘the 2009 Act’) as from 1 August 2009.
Following the cessation of employment the appellant did not advise SuperSA of his intentions regarding his superannuation benefits, and, accordingly, the benefits were taken to be preserved, pursuant to s 32(4) of the 1994 Act.
The appellant subsequently asserted that he was permanently incapacitated for work, and made applications for payment of an invalidity insurance benefit, and for early release of preserved benefits.
The Claims
The Application for Invalidity Insurance Benefit
As the appellant’s employment was terminated on 13 July 2008, any right he may have to an invalidity insurance benefit accrued at that date. The applicable legislation is that in force at the termination date, namely the 1994 Act.[1]
[1] Although the 1994 Act was subsequently repealed, s 16(1)(c) Acts Interpretation Act 1915 provides that the repeal does not affect any right which had accrued prior to the repeal, see Esber v Commonwealth (1992) 174 CLR 430.
Such claims were regulated by s 34 of the 1994 Act which relevantly provided:
(1) If a member's employment terminates on account of invalidity before the member reaches the age of 65 years the member is entitled to benefits made up of the following components:
(a) the employee component; and
(b) the employer component; and
(c) the rollover component (if any); and
(ca) the co-contribution component (if any); and
(d)subject to this section, the basic invalidity insurance benefit and the voluntary invalidity insurance benefit (if any).
(2) The basic and voluntary invalidity insurance benefits are not payable unless the Board is satisfied that the member's incapacity for all kinds of work is 60 per cent or more of total incapacity and is likely to be permanent.
…
(7)Subject to subsection (8) a member’s employment will be taken to have terminated on account of invalidity if and only if-
(a) the employer (acting with the written approval of the Board) terminates the employment on the ground of the member’s invalidity; or
(b) -
(i)the employer or the member satisfies the Board (before termination of employment) that the member is incapacitated for work in the member’s present position and that there is no other position, carrying a salary of at least 80 per cent of the salary applicable to the member’s present position, which the member could reasonably be expected to take, available to the member; and
(ii)after notice has been given to the Board as required by the regulations, the employer terminates the employment or the member resigns from employment.
(8)A member's employment will be taken to have terminated on account of invalidity if—
(a) at a time when the member is totally or partially incapacitated for work in the member's present position the member's employment is terminated by the employer—
(i)in circumstances that would, but for this subsection, constitute retrenchment of the member; or
(ii)on account of the unsatisfactory performance by the member of his or her duties (including the member's failure to meet performance standards) caused by the member's incapacity; or
(iii)for any other reason that is caused by or is the direct result of the member's incapacity; and
(b) the Board is satisfied that the member has been totally or partially incapacitated for work in the member's former position since the termination of his or her employment (being a period of at least six months) and that the incapacity is likely to be permanent.
(9)A member referred to in subsection (8) who claims to be entitled to benefits under this section, or a person acting on his or her behalf, must within six months after the termination of the member's employment, give written notice to the Board claiming that the member is entitled to benefits under this section.
Under cover of a letter of 10 August 2010 from his solicitors, the appellant lodged a claim for payment of the invalidity insurance benefit which, if accepted, would have resulted in a payment of some $50,000 as a lump sum.
The application for the invalidity insurance benefit (and the subsequent application for early release of preserved benefits) asserted that the medical condition which gave rise to the appellant’s incapacity, and was thereby said to justify the payment of the benefit, was “adrenal insufficiency first suffered on 3 March 2009.”
In response to the question “what duties does your condition(s) prevent you from doing?” the appellant alleged in the application that he had problems with: “concentrating, reliability, physical strength, mental capacity, energy loss, vagueness and fatigue.”
The application was supported by a medical statement, as required by the application form, recording the appellant’s diagnosis as “adrenal insufficiency,” and confirming the nature of the symptoms. The application asserted that the appellant was “currently unable to work – undergoing assessment as to why”.
The making of the application triggered a request by SuperSA to DECS to provide a “Claims Management Termination Certificate TripleS Scheme”. Despite the fact that in a letter of 3 March 2008 from DECS to the appellant, DECS had outlined the employment arrangements of the appellant with the Department, and despite the fact that the appellant commenced working with DECS in 2005, and the contract was renewed annually from time to time; in response to the request by SuperSA for a Termination Certificate an authorised officer of DECS certified, in a pro forma certificate, that the reason the appellant had ceased employment was simply “End of Contract”.
Section 3 of the 1994 Act relevantly provides:
(4a) where a member is employed-
(a)Pursuant to a contract for a fixed term;
…
and the employment is not renewed at the end of the term or period, the member’s employment will be taken to have terminated by retirement or resignation (depending on the member’s age).
Perhaps not surprisingly, SuperSA regarded that not as a situation where the appellant had, by reason of incapacity, been unable to continue in the contract, but rather that the contract had come to an end by the effluxion of time, and the appellant was therefore regarded as having resigned his employment.[2]
[2] The appellant’s age was such that he could not have been regarded as retiring from his employment.
Indeed upon the appeal counsel for the respondent submitted that the contract was “early end dated”, apparently a term of art, and went on to submit that the reasons had not been ascertained by the respondent and are not relevant.
The reason for termination provided by DECS, in the pro forma certificate, namely “end of contract”, might be regarded as an insufficient description of the circumstances of termination of employment, given that it was provided in the context of a claim for invalidity insurance benefits, and therefore, in my view, called for the provision of further information. However, the respondent proceeded on the basis that the contract had come to an end for reasons other than invalidity. As I have said, it was not perhaps surprising that that was so, but the first decision proceeded on that basis, and that coloured the process thereafter.
The Application for Early Release of Entitlements
While the disability benefit claim application was under consideration, under cover of a letter from the appellant’s solicitors dated 20 September 2010, the appellant lodged a claim, seeking release of his preserved benefits.[3]
[3] The solicitor’s letter referred to a limited release of the sum of $30,000, perhaps based on that being the basic threshold under regulation 53(1) of the 2009 Regulations.
The application for early release, subject to a qualification to which I refer below, was made on the same basis, namely “adrenal insufficiency” said to have been first suffered on 7 March 2009, and such application contained the same supporting material as the first claim.
It was initially argued that the application for early release was regulated by the legislation in force at the time of the application, namely the 2009 Act and Regulations. Regulation 58 of the Southern State Superannuation Regulations 2009, relevantly provides that:
(1) If—
(a) a member's employment terminates on account of invalidity before the member reaches the age of 65 years; or
(b) the Board is satisfied that a member whose employment has not terminated is suffering from a terminal illness, the member is entitled to benefits made up of the following components:
(c) the employee component;
(d) the employer component;
(e) the rollover component (if any);
(f) the co‑contribution component (if any);
…
(11)Subject to subregulations (12) and (12a), a member's employment will be taken to have terminated on account of invalidity if—
(a) the employer terminates the employment on the ground of the member's invalidity; or
(b) the employer or the member satisfies the Board (before termination of employment) that the member is incapacitated for work in the member's present position and that there is no other position, carrying a salary of at least 80% of the salary applicable to the member's present position, which the member could reasonably be expected to take, available to the member.
(12)A member's employment will be taken to have terminated on account of invalidity if—
(a) —
(i)at the time when the member is totally or partially incapacitated for work in the member's present position the member's employment is terminated by the employer—
(A)in circumstances that would, but for this subregulation, constitute retrenchment of the member; or
(B)on account of the unsatisfactory performance by the member of his or her duties (including the member's failure to meet performance standards) caused by the member's incapacity; or
(ii)the member's employment is terminated by the member for any reason that is caused by or is the direct result of the member's incapacity; and
(b) the Board is satisfied that the member has been incapacitated for all kinds of work for a period of at least 6 months since terminating his or her employment and that the incapacity is likely to be permanent.
(12a)A member's employment will be taken to have terminated on account of invalidity if—
(a) the member's employment pursuant to a fixed term contract has terminated due to the expiry of the contract; and
(b) the Board is satisfied that the member has been incapacitated for all kinds of work for a period of at least 6 months since the termination of the employment on account of invalidity attributable to a medical condition existing before the expiry of the contract.
According to regulation 58 therefore, where a member’s employment terminates on account of invalidity before the member reaches 65 years of age, the member is entitled to benefits including the employee and employer components of his contributions. The question again is whether the termination was “on account of invalidity”.
The Decisions
Decision 1 – The Invalidity Insurance Benefits Decision
By letter of 16 February 2011, Mr Prior, a delegate of the Minister for the purposes of the 1994 Act, wrote to the appellant’s solicitors, on behalf of SuperSA, advising that the claim for invalidity insurance benefit was rejected.
As can be seen, the section requires that the member’s employment be terminated “on account of invalidity” as defined in s 7 of the 1994 Act, or be taken to have been terminated in terms of the provisions of s 34(8). Mr Prior determined that as the appellant’s disability did not emerge until March 2009, he had no entitlement pursuant to s 34 of the 1994 Act.
Mr Prior referred to s 3(4a) of the 1994 Act as providing that:
Where a member is employed pursuant to a contract for a fixed term and employment is not renewed at the end of the term or period, the member’s employment will be taken to have been terminated by retirement or resignation (depending on the member’s age).
The letter went on to say:
As Mr McIntyre’s employment is taken to have terminated by resignation his only entitlement is to be determined under Section 32 of the repealed Act. Section 32(6)(b) provides for the payment of the account balance where the Board is satisfied that the member’s incapacity for all kinds of work is 60 per cent or more of total incapacity and is likely to be permanent.
Mr Prior advised that SuperSA would refund insurance premiums deducted from the appellant’s account after 13 July 2008.
Decision 2 – The Early Release Decision
By letter dated 17 November 2011 SuperSA declined the appellant’s request, on the grounds of total and permanent disablement for early release of the preserved benefit.
The reasons given were that:
Based on the medical information provided, payment of Mr McIntyre’s entitlement has been denied, as there is not enough information to support that his condition meets the criteria of the governing legislation.
Regulation 58, Clause 7, c of the Southern State Superannuation Regulations 2009 states:
‘the basic and voluntary invalidity insurance benefits are not payable to a member entitled to benefits under sub-regulation (1)(a) unless the Board is satisfied that the member’s incapacity for all kinds of work is 60% or more of total incapacity and is likely to be permanent.’
The decision was based, it appears, on a recommendation to the Claims Assessment Panel (CAP) by the claims manager, Mr Isles, which purported to set out the factual background and referred to some of the medical evidence.
The CAP recommendation, in relation to the application for early release, referred to the relevant medical condition as “Adrenal insufficiency” and went on to say:[4]
Member terminated employment (end of contract) on 13 July 2008. Total and Permanent Disablement insurance ceased 13 July 2008. Member claimed account under TPD on 12 August 2010. The member’s lawyer was advised on 9 March 2011 that he was not entitled to TPD insurance as employment was not “terminated on the grounds of invalidity” as required under the Southern State Superannuation 1994 Act. On 20 June 2011 the member’s application for Early Release of Preserved Benefits was declined. On 25 August 2011 the member’s lawyer provided additional medical information and requested that the decision in relation to early release and TPD be reconsidered.
[4] Exhibit R2.
In the CAP recommendation Mr Isles also said, in summarising the test for early release, that:
For Early Release of Preserved Benefits, Southern State Superannuation Regulations 2009 (SA) s 55(7)(b)(1) states:
has become incapacitated and satisfies the Board that his or her incapacity for all kinds of work is 60% or more of total incapacity and is likely to be permanent.
Regulation 55 relates to members who have resigned from their employment before reaching retirement age for reasons other than invalidity. The reference to regulation 55 rather than regulation 58 no doubt followed from the contents of the termination certificate provided by DECS, and I will return to that topic.
Regulation 58 applies to claims for, amongst other things, early release of preserved benefits, where the member’s employment is terminated by reason of invalidity.[5]
[5] Invalidity is defined in the 2009 Act as meaning “physical or mental incapacity to carry out the duties of employment”.
Mr Isles had listed the medical reports on file and in a short pro forma summarised the medical evidence in part and stated that:
Medical Practitioner Independent Total Incap >60% Permanent 1. Medical Assessor
25.10.2011Yes No No 2. Dr Peter Stevenson
14.10.2011Yes Not stated No 3. Dr H Hustig
18.8.2011No Yes yes
I make the observation that the medical assessor referred to, is in fact a physiotherapist engaged by SuperSA to advise generally on claims. His opinion that “it is reasonable to deny granting permanent invalidity benefit status based on Dr Stephenson’s expert opinion” was not strictly a medical opinion, but was rather an opinion on the merits of the claim.
Extension of Time
Extension of Time to Claim Insurance Benefit
As I have said, pursuant to s 34(9) of the 1994 Act a member who claims to be entitled to benefits under the section must give written notice of the claim within six months of termination of employment.
Section 48 of the 1994 Act relevantly provides:
(2) If, in the opinion of the Board-[6]
[6] Section 48(5) provides that if a time limit is extended the Board’s report to the Minister must include details of the extension. There was no evidence here as to whether that occurred, but I do not consider that to be in any way determinative of the way the Board’s actions are to be characterised.
(a)a time limit under this Act should be extended in particular circumstances; or
(b)a procedural step under this Act should be waived in particular circumstances,
the Board may extend the time limit (even if it has already expired) or waive compliance with the procedural step.
(3) In determining whether to take action under subsection (2), the Board should have regard to-
(a)in a case under subsection (2)(a)-
(i)the length of delay that has occurred; and
(ii)the explanation for the delay; and
(iii)any hardship that will occur of the time limit is not extended; and
(iv)the extent to which it will cause any unfairness if the time limit is not extended; and
(v)any other relevant factor;
Upon the appeal the submission made by the respondent was that no claim had been made by the appellant to extend any time periods prescribed by either the 1994 Act or the 2009 Act, and that “as a result it was not a relevant consideration for the Board”.
However, as I read s 48(2) of the 1994 Act, no specific application to extend time is required to activate a consideration of the Board’s opinion as to whether a time limit should be extended. The Board’s decision to refuse the claim was not based on the fact that more than six months had passed from the time of termination of employment until the making of the claim. I can only infer that the Board extended the time, either expressly or impliedly, and waived the requirement to claim within six months, and proceeded to make its decision on the merits.
Extension of Time to Claim Early Release
As I have said, the appellant’s employment was terminated on 13 July 2008. His claim for early release was lodged on 17 September 2010, more than two years later. The respondent made the same submission on appeal in relation to s 29 of the 2009 Act, the cognate provision of s 48 of the 1994 Act.
The Board’s decision again was not based on any point in relation to the timing of the claim. However, another issue arises. Regulation 58 of the 2009 Regulations relevantly provides:
(13)A member referred to in subregulation (12) or (12a) who claims to be entitled to benefits under this regulation, or a person acting on his or her behalf, must within 2 years after the termination of the member's employment, give written notice to the Board claiming that the member is entitled to benefits under this regulation.
There is a general power of the Board to extend time, pursuant to s 29 of the 2009 Act which provides:
(2) If, in the opinion of the Board—
(a) a time limit under this Act or the regulations should be extended in particular circumstances; or
(b) a procedural step under this Act or the regulations should be waived in particular circumstances, the Board may extend the time limit (even if it has already expired) or waive compliance with the procedural step.
(3)In determining whether to take action under subsection (2), the Board should have regard to—
(a) in a case under subsection (2)(a)—
(i) the length of delay that has occurred; and
(ii) the explanation for the delay; and
(iii) any hardship that will occur if the time limit is not extended; and
(iv)the extent to which it will cause any unfairness if the time limit is not extended; and
(v) any other relevant factor;
(b) in a case under subsection (2)(b)—
(i) the conduct of the person who would benefit from the action; and
(ii) any hardship that will occur if the procedural step is not waived; and
(iii)the extent to which it will cause any unfairness if the procedural step is not waived; and
(iv) any other relevant factor.
However section 29 provides:
(4) Subsections (2) and (3) do not derogate from any other provision of this Act or the regulations that makes specific provision for the extension of time.
And regulation 59 provides:
(14)The time limit of 2 years referred to in subregulation (13) may not be extended under any circumstances.
The claim for early release was, as I have said, lodged on 20 September 2010, more than two years after the termination of employment. Regulation 58 would therefore appear to preclude consideration of a claim under that regulation.[7]
[7] It was common ground that there was no time limit applicable to a claim made pursuant to regulation 55 of the 2009 Regulations.
However, on the appeal counsel for the respondent made the concession, quite properly, that in the event that there was a finding that the appellant did in fact terminate his employment on account of invalidity, he would be entitled, pursuant to s 34(1) of the 1994 Act, to payment of the entirety of the balance including all benefits from his employee account and employer account, and rollover and co-contribution if any, standing to his account at the date of termination.[8]
[8] T 11, 22.4.14.
Ms Stanley submitted that in such circumstances the appellant would be entitled to receive the amount of the employee and employer benefit in his account “in essence, what [he] would receive if an alternative claim was made under regulation 55(7)[9] for the early release of preserved benefits”.
Time Within Which to Appeal
[9] Regulation 55(7) of the 2009 Regulations.
Neither the 1994 Act nor the 2009 Act fix a time within which the present appeal must be instituted.
Rule 281 District Court Civil Rules 2006 provides that:
Subject to any other relevant law, an appeal must be commenced within 21 days after the date of the judgment, order or decision subject to the appeal.
The present appeal was lodged out of time, and the appellant seeks an extension of time within which to appeal.
Section 48 of the Limitation of Actions Act 1936 provides that a court may extend the time so prescribed or limited to such an extent, and upon such terms (if any) as the justice of the case may require.
The respondent did not oppose the application for extension of time to appeal. The appellant had issued related proceedings in the District Court claiming damages for breach of contract. The parties mutually agreed to a stay of those proceedings until the conclusion of the present appeal. The defendant undertook that no point would be taken in respect of any statutory time limit.
In considering the application for an extension of time I have taken into account the merits of the appeal, the length and reason for the delay, and the absence of any prejudice to the respondent.[10] I am satisfied that the justice of the case is such as to justify the grant of an extension of time to institute the within appeal.
[10] Ferdinands v Commissioner of Police (2001) 216 LSJS 193.
The Appeal
Nature of the Appeal
A person dissatisfied with a decision of the Board made pursuant to the 1994 Act, or the 2009 Act and Regulations may appeal to the Administrative and Disciplinary Division of the District Court.[11]
[11] Section 40(1) 1994 Act, s 25(1) 2009 Act.
Section 42E District Court Act provides:
(1)The Court must, on an appeal, examine the decision of the original decision-maker on the evidence or material before the original decision-maker but the Court may, as it thinks fit, allow further evidence or material to be presented to it.
(2) The Court, on an appeal—
(a) is not bound by the rules of evidence but may inform itself as it thinks fit; and
(b) must act according to equity, good conscience and the substantial merits of the case without regard to technicalities and legal forms.
(3)The Court must, on an appeal, give due weight to the decision being appealed against and the reasons for it and not depart from the decision except for cogent reasons.
Grounds of Appeal
The grounds of appeal were expressed in general terms, namely that the two decisions were wrong in fact and in law, were unreasonable, involved a failure by the decision maker to properly exercise its discretion, a failure to take into account relevant considerations, took into account irrelevant or erroneous considerations, and involved a denial of natural justice.
The Approach to Decision Making
There is some analogy between the approach required of the respondent, and the duty imposed upon an insurer in considering a claim under a policy.
In Chammas v Harwood Nominees Pty Ltd,[12] where the subject insurance policy pre-dated the Insurance Contracts Act, Hodgson J referred to the observations of McLelland J in Edwards v Hunter Valley Co-op Dairy,[13] and held that the onus falling on the insurer was to fulfil “its duty of good faith and fair dealing and act reasonably in considering and determining the matter”. He was there critical of the insurer’s failure to “invite the plaintiff to put any additional evidence to support his claim”. He said:
I do not understand the authorities to require that natural justice in the full sense be given by an insurer considering this sort of case, but it does seem to me that some attention to the requirements of natural justice is part of fairness and reasonableness in dealing with such a case.
[12] Chammas v Harwood Nominees Pty Ltd (1993) 7 ANZ Ins Cas 61-175.
[13] Edwards v Hunter Valley Co-op Dairy (1992) 7 ANZ Ins Cas 61-113.
In Wyllie v National Mutual Life Association of Australasia Ltd & Ors, Hunter J observed:[14]
[14] Wyllie v National Mutual Life Association of Australasia Ltd & Ors (1997) 217 ALR 324.
As to the obligation of the insurer to the plaintiff I have reached the conclusion that:
(1)It was under a duty to the plaintiff to act with utmost good faith in the assessment of his claim,
(2)It was under an implied obligation to the plaintiff, in forming an opinion as to the plaintiff’s disability, to act
(a) fairly,
(b) in good faith, and
(c) reasonably
in considering and determining that matter, having due regard for the interests of the plaintiff.
The duty to act in good faith, in my opinion, is owed to the plaintiff whether his status is that of a party entitled to sue the insurer directly or derivatively as the beneficiary of the benefit of the promise under the conversion option offered by the policy.
Hunter J, in deciding that matter, said:
The conclusion I have reached in this case is that the insurer failed to act reasonably, fairly or in good faith in the assessment of the plaintiff s claim, largely as a result of its misconception of what was required of it in assessing the plaintiffs claim under the policy.
I bear in mind the observations in Edwards v Hunter Valley Co-op Dairy, where McLelland J said:[15]
However in the field of insurance, it is well established that where under a contract of insurance an element of the insurer's liability is expressed in terms of the satisfaction or opinion of the insurer, the insurer is obliged to act reasonably in considering and determining that matter. … To say that an insurer must act reasonably in forming or declining to form an opinion is not to say that a Court can substitute its own view for that of the insurer. … Unless the view taken by the insurer can be shown to have been unreasonable on the material then before the insurer, the decision of the insurer cannot be successfully attacked on this ground. (citations omitted)
Issues on Appeal
[15] Edwards v The Hunter Valley Co-op Dairy (1992) 7 ANZ Ins Cas 61-113 p 77,536; and see s 13 Insurance Contracts Act 1984 (Cth).
The appellant’s criticism of the approach taken by the respondent was that the respondent had only been prepared to make a decision based upon medical evidence, in effect a medical certification of permanent incapacity of greater than 60 per cent.
The appellant sought to distinguish the situation where the respondent was required by statute to have regard to a medical opinion in arriving at a decision as to whether the appellant was entitled to benefits, from the corresponding legislative provisions in relation to the appellant’s application, which required only that the respondent be satisfied, and that, the appellant submitted, meant satisfied on all of the evidence, that the appellant suffered from such an incapacity, and that the incapacity was “likely to be permanent”.
In order to establish an entitlement to invalidity insurance benefits,[16] the appellant must show that he suffers an incapacity for all kinds of work of 60 per cent or greater and that such condition is likely to be permanent.
[16] Section 34(2) 1994 Act; reg 58(12) 2009 Regulations.
Counsel for the respondent conceded, quite properly, that the appellant suffered an incapacity for work, and indeed an incapacity of 60 per cent or greater. However the respondent’s position was that it could not be satisfied that the condition was likely to be permanent, as is required in order for benefits to be paid.
A Further Issue
The appellant argued that in considering the issues on appeal I should consider whether the appellant was entitled to a pension pursuant to s 33A of the 1994 Act, which relevantly provides:
(1) Subject to this section, a member who-
(a)is temporarily or permanently incapacitated for work; and
(b)is no longer engaged in work in respect of employment to which this Act applies on account of the incapacity; and
(c)has not reach the age of 60 years,
is entitled to a disability pension.
(1a)An application for a disability pension must be made within 6 months of the day on which the member ceases to be engaged in work in respect of employment to which this Act applies.
The appellant has never made an application for a pension. I decline to consider that issue.
Additional Material Upon Appeal
I received, without objection, affidavits in support of the appeal, and answering affidavits from the respondent. Additional material and affidavits were also received by consent upon the hearing of the appeal.
The Appellant
The unchallenged affidavit evidence of the appellant was that he had obtained an advanced certificate in urban horticulture, and a position with the Port Lincoln Council, ultimately being promoted to head gardener. He worked there for eight years. He then returned to his family farm and worked for four years before commencing a landscaping business in 2002. In addition to running that business, on 2 May 2005 he commenced employment with DECS as a groundskeeper at the Port Vincent Primary School.
In June 2006 the appellant underwent minor orthopaedic surgery, and it was noted that he had a heart murmur. He was referred for investigations by a cardiologist, Dr Mahar, and was advised by Dr Mahar that he was suffering from aortic stenosis and regurgitation. He was advised that his condition should be monitored and that he would require open heart surgery at some stage.
During 2007 the appellant’s marital relationship broke down. He began to feel stressed and fatigued. He deposed to the fact that he had difficulty performing work as a landscaper, and as a groundskeeper for DECS.
In January 2008 he consulted Dr Mahar for a review of his heart condition. Dr Mahar advised that the heart condition had deteriorated more quickly than expected, and recommended aortic valve replacement surgery. On 30 January 2008, as is common ground, he commenced a further contract of employment with DECS, due to run until January 2009.
During the early part of that renewed contract he had discussions with the Principal of the Port Vincent Primary School, a Ms Hawthorn, and advised her that he was not coping with his work, and that the stress of attempting to continue to work, together with the stress of the divorce, was having an adverse impact on his heart condition. He told Ms Hawthorn that he felt that he was unable to keep working. He deposed to the fact that she appeared to be understanding and was reluctant to terminate his contract. She advised him that he would be able to stop working without actually terminating his employment, and that he could then return to work once he had sufficiently recovered.
The appellant ceased working, as is common ground, on 13 July 2008. He was informed by letter on 18 June 2010, by the subsequent Principal of the Port Vincent Primary School, Ms Pointon, that his application was still active with DECS, and that his name appeared on lists sent to schools that might require his services.
Dr Mahar advised the appellant that he should undergo valve replacement surgery in 2008, but that surgery was ultimately delayed until March 2009. The appellant was told that it might take some days to recover from that procedure. Unfortunately he suffered complications as a result of the surgery, causing both adrenal glands to haemorrhage, and in turn causing him to suffer from adrenal insufficiency, ultimately diagnosed by an endocrinologist at the Royal Adelaide Hospital, Associate Professor Guha.
The appellant was diagnosed as suffering the symptoms of Addison’s disease, a condition in which the adrenal glands do not function properly, and require adrenal replacement medication. He continued to suffer from fatigue and lethargy. The medication administered to deal with the adrenal condition in turn caused weight gain and fluid retention.
The appellant has been diagnosed as suffering depression, in addition to the heart condition, and the condition of adrenal insufficiency. The administration of replacement hydrocortisone for the adrenal insufficiency problem has had some impact on his immune system and he has been further disabled by what might otherwise be minor ailments. He also deposed to suffering some back symptoms and associated sciatic pain.
It seems to me that given the error, or at least the confusion, which developed as to the reason for the appellant to cease working, and given the reference to the medical condition upon which the claims were based being limited to “adrenal insufficiency”, a situation created, at least initially, by the appellant himself, that the overall evidence needs to be considered, and fresh consideration given to whether the appellant meets the criteria to make him eligible for the two categories of disability payments.
Dr Mahar
On 8 January 2008 Dr Mahar reported that he had first seen the appellant on 29 May 2006 following the observation of the heart murmur. At that stage Dr Mahar thought the appellant had moderate aortic stenosis and regurgitation, later confirmed by echo-cardiography. At the time of Dr Mahar’s report the valvular disease had progressed more quickly than anticipated, and Dr Mahar said that the appellant was scheduled to have an aortic valve replacement.
By letter of 4 November 2008 Dr Mahar had advised the appellant that following test findings at the cardiac surgical conference, it was agreed that the appellant had a severely diseased valve which needed to be replaced at some time in the near future. The insertion of a mechanical valve meant that the appellant would be required to take Warfarin for the rest of his life. The appellant was told that the surgery involved “opening up your chest” and that Dr Mahar recommended he would require two or three months off work.
On 7 February 2011 Dr Mahar reported that the appellant had not been well, and had felt quite vague. An MRI scan revealed small white-matter lesions consistent with being chronic small vessel ischemic changes prominent for the appellant’s age.
Dr Ponte
In a report of 31 July 2009, to the Child Support Agency, Dr Ponte said that the appellant had consulted him regularly since undergoing open heart surgery in March 2009 to replace the aortic valve. He said that the appellant had suffered major life threatening complications which had prolonged the recovery. Dr Ponte concluded that at that stage he was unable to say when the appellant would be physically and mentally capable to continue with the requirements, which I infer to mean resume working and make payments.
Associate Professor Guha
In a report of 5 November 2009, Associate Professor Guha said that further testing was required after listing the appellant’s conditions as:
1. Aortic valve replacement for congenital bicuspid valve March 2009
2. Bilateral adrenal haemorrhage post aortic valve replacement – primary adrenal insufficiency consequent of this
3. Mild obstructive sleep apnoea
4. Dyslipidaemia
In a subsequent report of 9 August 2010,[17] Associate Professor Guha noted, in addition to the conditions previously listed, an increasing problem of marked energy loss, lethargy and decreased concentration, and inability to perform tasks. The appellant reported being unreliable and unable to turn up at planned times for work, and associated short-term memory problems. It is not clear to what work that reference is made. Associate Professor Guha noted a secondary problem of excessive sweating following even mild activity. Neurological examination revealed mild cognitive impairment. Associate Professor Guha raised the issue of whether there might be neuro-cognitive deficits post surgery.
[17] Completed by Dr Thynne, Endocrine Registrar.
In a subsequent report of 1 April 2011, Associate Professor Guha said that patients who have adrenal gland insufficiency suffer from a number of symptoms including fatigue, tiredness and cognitive impairment prior to the initiation of replacement therapy, but noted that the appellant had been on replacement therapy for many months and one would have expected most of the symptoms to resolve if attributable solely to adrenal gland insufficiency. He said it was therefore likely that the symptoms have other causes and that it is possible that adrenal gland insufficiency may serve to aggravate symptoms caused by other underlying conditions.
Dr Molloy
The report of Dr Molloy, neurosurgeon, dated 21 January 2011, records that examination on that date revealed no neurological abnormality. She noted a history of tiredness, sweating, and numbness and tiredness of the legs when walking. A CT scan of the lumbar spine showed lumbar canal stenosis and possible disc bulging, and Dr Molloy recommended an MRI scan. She supported an application for disability pension.
An MRI scan of the lumbar spine, reported on by Dr Jenkins on 14 April 2011, showed a degenerative disc disease predominately from L2 to L5 and at L3/L4 a broad based disc bulge with superimposed left foraminal disc protrusion, moderate central canal and moderate left foraminal narrowing which may have been irritating the existing L3 nerve root.
Dr Hustig
In a report of 18 August 2011, Dr Hustig, psychiatrist, noted that the appellant required Fludrocortisone and hydrocortisone to minimise the impact of adrenal insufficiency. He noted the list of side effects of Fludrocortisone Acetate as muscle weakness, loss of muscle mass, osteoporosis, increased proneness to fractures, impaired wound healing with fragile bruising, mild problems of anergia, and electrolyte disturbances with fluid retention and weight gain. Similar side effects associated with hydrocortisone. Dr Hustig considered that when he interviewed the appellant on 22 July 2011 the appellant presented with many of the physical hallmarks of steroid replacement therapy.
Dr Hustig noted a description of memory loss with difficulties of nominal aphasia. Dr Hustig described the appellant as going from a robust self-employed landscape worker, to someone struggling to cope with minor domestic work. He considered however that the appellant’s depression, rather than being reactive depression, more probably related to either underlying brain damage as part of a vascular event surrounding surgery, or as a subsequent complication to the increased proneness to clotting, or maybe the consequence of steroid therapy which nevertheless must be continued given the nature of atrophy of the appellant’s adrenal glands.
Dr Hustig expressed the opinion that whilst the appellant’s medical condition was quite complex, there was a clear time line between the developing cardiac compromise which led to the valve replacement, and the subsequent problems of adrenal and renal failure and complications of the therapy for that disorder.
He expressed the opinion that, given the steady decline in the appellant’s work ability since September 2008, despite the efforts of the treating physicians and endocrinologists, the appellant would not be able to return to his pre-incapacitated state. He assessed the appellant as being incapacitated, and at a greater percentage than 60 per cent incapacity. He said that, given the fact that the condition had persisted for several years, and that the contributing factors could not be ameliorated, for central purposes the balancing capacity should be considered permanent. He did not consider that the appellant could return to any meaningful paid employment.
Dr Stevenson
Dr Stevenson is a consultant physician who examined the appellant on 1 June 2011. He described the appellant as appearing mildly obtunded and either sleep deprived or melancholic. He described the appellant as being non-specifically unwell, but found little on examination. He noted the history of what he described as an elective valve replacement in 2009, complicated by adrenal haemorrhage. He said that the appellant had had “replaced chronic renal failure” and had reported persisting illness with malaise, insomnia, and intellectual incoordination which had not been clearly diagnosed.
Dr Stevenson said that the aortic valve replacement was uncontentious, the renal failure had been adequately replaced and should be asymptomatic or minimally symptomatic. The presentation, including a report of neurocognitive difficulties, might attract a differential diagnosis including severe depression, sleep disturbance or cerebral ischemia as a complication of the bypass surgery. He said that the presentation seemed generally realistic, but that it was difficult to establish a precise medical basis for incapacity, let alone permanence.
He accepted that the appellant was currently substantially incapacitated but, in the absence of a specific diagnosis to explain the symptoms at his age, he could not conclude that the incapacity was permanent at that stage.
He accepted that there was prima facie evidence of a significant depressive illness, and said that the appellant might have organic neurocognitive complications from surgery.
He said that the issues of permanence should be deferred for 12 months, to enable the appellant to undergo sleep studies, and psychiatric review plus assessment of possible neurocognitive damage.
He accepted that the appellant was incapacitated to a level of 60 per cent, but said that he did not have a secure basis to conclude that that level of incapacity was permanent.
Conclusion
In the present case I do not intend to suggest that the respondent acted in bad faith, nor indeed that the respondent intended to act unreasonably.
Rather, in my view, an erroneous outcome has occurred because of the way in which the initial information as to the reason for termination of employment was requested, and supplied, combined with the very restricted description of the basis of the appellant’s incapacity identified in the initial applications.
As I have said, s 34(2) of the 1994 Act provides that the invalidity insurance benefit is not payable unless the Board is satisfied that the member’s incapacity is 60 per cent or more of total incapacity and is likely to be permanent.
The respondent was required to act reasonably in considering and determining that question. It is not sufficient that the respondent may have honestly held that opinion.[18]
[18] Edwards v The Hunter Valley Co-op Dairy (1992) 7 ANZ Ins Cas 61-113, p 77, 536, and see cases cited therein.
In my view, where, as here, the respondent has considered the application on the basis of inaccurate information provided by the employer, the Court is entitled to reconsider the decisions of the respondent in light of the material available at the time the decisions were made, but also having regard to the additional material received by consent upon the hearing of this appeal. I do so particularly given the mistaken information supplied by the appellant’s employer as to the reason he ceased working, and the limited information provided in the initial applications.
I find that the appellant’s employment came to an end by virtue of his incapacity to continue in that employment, contrary to the information provided by DECS, upon which the respondent proceeded to determine the application, that is, that the appellant’s employment was terminated on account of invalidity.
It is common ground, for the reasons I have expressed, that the appellant is presently incapacitated to the extent of 60 per cent or greater.
What then of the issue of the permanence of the invalidity? Whilst there are differing medical opinions as to the permanence of the appellant’s incapacity, in my view, on the basis of the appellant’s affidavit evidence, and the medical evidence as a whole as to the multiple causes of the appellant’s incapacity and the duration of that incapacity, now approaching five years, the incapacity is “likely to be permanent” within the meaning of the legislation.
Section 42F of the District Court Act provides:
The Court may, on an appeal—
(a) affirm the decision appealed against;
(b) rescind the decision and substitute a decision that the Court considers appropriate;
(c) remit matters to the original decision-maker for consideration or further consideration in accordance with any directions or recommendations of the Court.
Neither party submitted that I should return the applications to the respondent for consideration.
In relation to Decision 1, after giving due weight to the original decision, I find that there are cogent reasons to depart from the decision. I allow the appeal and rescind the decision. I order that the respondent pay to the appellant the invalidity insurance benefit pursuant to s 34(1)(d) of the 1994 Act.
In relation to Decision 2, having made a finding that the appellant’s employment was terminated on account of invalidity, I accept Ms Stanley’s submission, and allow the appeal. I rescind the decision and order that the respondent pay to the appellant the balance standing to his superannuation account, comprising the employee and employer contributions.
Consequential Orders
Upon determination of an appeal in this Division the Court may make any ancillary or consequential order that the Court considers appropriate.[19] However no order for costs is to be made unless the Court considers such an order to be necessary in the interests of justice.[20]
[19] Section 42G(1) District Court Act 1991.
[20] Section 42G(2) District Court Act 1991.
I will hear the parties as to consequential orders.
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