Ragg and Military Rehabilitation and Compensation Commission

[2012] AATA 18

Administrative Appeals Tribunal

DECISION AND REASONS FOR DECISION [2012] AATA 18

ADMINISTRATIVE APPEALS TRIBUNAL      )

)          No 2010/2266

GENERAL ADMINISTRATIVE DIVISION		)
Re		APRIL RAGG

Applicant

And MILITARY REHABILITATION AND COMPENSATION COMMISSION

Respondent

DECISION

Tribunal Mr R G Kenny, Senior Member

Date16 January 2012

PlaceBrisbane

Decision The Tribunal affirms the decision under review.  

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

Senior Member

CATCHWORDS

WORKERS’ COMPENSATION – Service with the Australian Defence Force - Applicant received district allowance on the basis of serving in Darwin – District allowance was paid in respect of special expenses incurred, or likely to be incurred, by her in respect of her employment – District allowance not a component of normal weekly earnings for the purposes of calculating compensation payments – Decision under review affirmed

Military Rehabilitation and Compensation Act 2004 (Cth) ss 5, 8, 19
Administrative Appeals Tribunal Act 1975 (Cth) s 34J

O’Mullane and Comcare [2002] AATA 1251
Re Kennedy v MRCC (2007) 93 ALD 700

Re Maley and Comcare (1998) 27 AAR 100
Re Perry and Department of Defence [1997] (AAT No 11718, 21 March 1997)

Re Ragg and Military Rehabilitation and Compensation Commission (2009) 109 ALD 465
Re Sutton and Comcare [1996] AATA 168

Re Whitton and Department of Defence [1998] (AAT No 12902, 21 April 1998)

Re Zarb and Comcare [1997] 48 ALD 718

REASONS FOR DECISION

16 January 2012 Mr R G Kenny, Senior Member

BACKGROUND

1.      Ms Ragg served in the Australian Army from 4 April 1995.  In October 1997, she sustained a back injury.  On 19 January 1998, she was posted to Darwin for a period of three years. At the time of her medical discharge on 5 March 2000, Ms Ragg was in receipt of the district allowance based on her Darwin posting.

2.      The Military Rehabilitation and Compensation Commission (the MRCC) accepted “chronic musculoskeletal strain of the cervical spine, with subsequent sequalae of chronic fibrositis” as being related to Ms Ragg’s service. The MRCC had previously accepted Ms Ragg’s claims for “major depressive disorder” and “chronic pain disorder”. Because of her service-related conditions, Ms Ragg was entitled to compensation under the Safety, Rehabilitation and Compensation Act 1988 (the Act)[1]. This comprised payments of normal weekly earnings (NWE) calculated in accordance with ss 8 and 19 of the Act. On 3 September 2009, the MRCC advised Ms Ragg that she was entitled, as part of her NWE, to be paid the district allowance for the period after she was discharged, but only until her posting to Darwin was to have been completed; i.e. from 6 March 2000 until 19 January 2001.

[1] It is common ground that Ms Ragg is an employee as required under s 8(1) and s 5(2) and (9) of the Act.

3.      By letter dated 13 September 2009, Ms Ragg’s husband, Colin Ragg, sought review of that decision on behalf of Mr Ragg, stating:

I request that this matter be reconsidered, as I disagree with the response that April is only entitled to 3 years of District Allowance, due to her “possible tenure” of three years in Darwin.

4. In a reviewable decision, dated 14 May 2010, the MRCC determined that Ms Ragg’s NWE included the district allowance only for the three year period of her posting to that area, which was to end on 19 January 2001. In so determining, the respondent relied on the effect of s 8(10) of the Act. As I understand the application for review of that decision, Ms Ragg requests that the district allowance be paid to her without the limitation that it cease after her posting was to be completed in Darwin on 19 January 2001.

5. The matter came before the Tribunal and was determined in the absence of the parties without a formal hearing in accordance with s 34J of the Administrative Appeals Tribunal Act 1975 (Cth).

ISSUES AND LEGISLATION

6. Under s 8(1) of the Act, NWE is calculated under the formula (NH x RP) + A, where:

NH is the average number of hours worked in each week by the employee in his or her employment during the relevant period;

RP is the employee’s average hourly ordinary time rate of pay during that period; and

A is the average amount of any allowance payable to the employee in each week in respect of his or her employment during the relevant period, other than an allowance payable in respect of special expenses incurred, or likely to be incurred, by the employee in respect of that employment.

7. In the event that the district allowance was a “special expense”, it will not be included in A and, accordingly, will not be payable to Ms Ragg as part of her NWE calculation. In the event that it is not a “special expense”, it will be included in Ms Ragg’s calculation unless and until it is excluded by a provision of the Act, such as s 8(10) thereof which reads:

(10)  If the amount of the normal weekly earnings of an employee before an injury, as calculated under the preceding subsections, would exceed:

(a)  where the employee continues to be employed by the Commonwealth or a licensed corporation—the amount per week of the earnings that the employee would receive if he or she were not incapacitated for work; or

(b)  where the employee has ceased to be employed by the Commonwealth or a licensed corporation—whichever is the greater of the following amounts:

(i)  the amount per week of the earnings that the employee would receive if he or she had continued to be employed by the Commonwealth or the licensed corporation in the employment in which he or she was engaged at the date of the injury;

(ii)  the amount per week of the earnings that the employee would receive if he or she had continued to be employed by the Commonwealth or the licensed corporation in the employment in which he or she was engaged at the date on which the employment by the Commonwealth or the licensed corporation ceased;

the amount so calculated shall be reduced by the amount of the excess.

SUBMISSIONS

8.      In a written submission on behalf of his wife, Mr Ragg submitted that the district allowance is not a special expense and should be included in Ms Ragg’s NWE. He submitted that it was an allowance for such things as conditions encountered during service. Mr Ragg included an attachment from an Australian Defence Force (ADF) document[2] where the purpose of the district allowance was described:

ADF district allowance compensates for service in a location in Australia that involves hardship. The hardship must be caused by remoteness, harsh climate and cost of living.[3]

[2] See the Pay and Conditions Manual – Administration and Technical Explanation (PACMATE). It is to be used as a separate companion to the ADF Pay and Conditions Manual.

[3] See 4.4.3 of the PACMATE referred to in note 2 above.

9. Further, Mr Ragg submitted that the district allowance was not subject to termination under s 8(10) of the Act, as determined by the respondent. He annexed an ADF document which was related to posting tenure. It read:

…Service posting plans aim to achieve two consecutive postings in the one geographic locality and three years duration of each posting. Where this not possible, a minimum of four years in the one locality is to be achieved.[4]…

[4] See Defence Instructions (Army) prepared by Brigadier C.W. Orme, Director-General Personnel-Army on 20 December 2005.

10.     Mr Ragg submitted that Ms Ragg’s intention was to serve in Darwin well beyond her initial three year posting and that this was supported by his own employment in the Northern Territory Police Force as well as their purchase of land in Darwin prior to Ms Ragg’s medical discharge. He also referred to the circumstances of other army personnel who served more than thirteen years in Darwin. 

11. In its written submission, the respondent contended that the district allowance was a “special expense”, as that term is used in the definition of “A” in the formula in s 8(1) of the Act. As I see it, that contention is not consistent with the respondent’s payment of the district allowance to Ms Ragg as part of her NWE. Nevertheless, the respondent now contends that the district allowance was not payable to her after the end of the 36 month period for which she was posted to Darwin. In that regard, the respondent referred to a minute from the Department of Defence prepared on 17 June 2009 in response to the question:

Please confirm specifically how long the member’s posting to Darwin would have been if not for medical discharge?

The response to that request was given as: “36 months”.

12. The issues for the Tribunal are whether the district allowance is a special expense or, if it is payable as part of Ms Ragg’s NWE, whether payment is terminated by the terms of s 8(10) of the Act.

CONSIDERATION

Characterisation of the district allowance

13.     The Act provides no guidance on the ambit of the term “special expense”. In Re Sutton and Comcare[5] (Sutton), an accommodation allowance was paid to the employee in the absence of available "suitable unfurnished accommodation".[6] Reference was made, at [12], to Comcare material[7] which set out the following criteria for including items under s 8(1) of the Act:

Allowances to be included would generally be those payable for such things as conditions encountered during service, special qualifications, special duties and so on. Any allowance for monies expended (or likely to be spent) by the employee will not be earnings as such i.e. these are not monies 'obtained as a reward for work or merit' (OED definition of earnings). The following are examples of the types of allowances which can be included in calculating NWE. The lists are not exhaustive but as a guideline, allowances that are taxable or continue to be paid during leave would be included:

INCLUDED Higher Duties Allowance, First Aid Allowance, Leading Hand Allowance, Proficiency Allowance, Shift Allowances…

EXCLUDED Annual Leave Bonus, Travelling Allowance, Meal Allowance, Tropical Clothing Allowance…

[5] [1996] AATA 168.

[6] [1996] AATA 168 at [14], per Breen D.P.

[7] This was described in Sutton as “Legislation Information Papers Volume 3”; in the respondent’s written submission as “Comcare Internal Guideline (Legislation Information papers Volume 3)”; and, in Ragg (see note 8 below), as the “Safety, Rehabilitation and Compensation Act Manual (“the Manual”) Volume 3”.

14. In that case, the Tribunal determined that the Comcare extract reflected the meaning and intent of the formula in s 8(1) of the Act. I am also of that opinion and, indeed, note that both Mr Ragg and the respondent included reference to it in their respective written submissions. In Sutton, the Tribunal held that the accommodation allowance paid to Mr Sutton was payable to him to recompense the outlay of special expenses and was excluded from NWE. 

15.     The decision in Sutton was followed by the Tribunal in a matter relating to the present applicant, Ms Ragg.[8] There, the Tribunal was concerned with a Remote Locality Leave Travel (“RLLT”) allowance which was paid to her to enable her, her spouse and dependants to travel from Darwin to the nearest capital city twice a year as part of a scheme to allow service members to escape the isolated conditions of postings in remote locations. The Tribunal referred, at [21] – [22], to the Manual and noted:

The Manual sheds some light on the issue, however, by identifying types of allowances which should and should not be included in the calculation of incapacity payments. According to the Manual, allowances generally taken into account include those that are taxable, continue to be paid during leave, or are paid in respect of skills or qualifications. The Manual identifies first aid, higher duties, proficiency, and shift allowances as examples of such allowable allowances. But the Manual excludes annual leave bonus, travelling, meal, tropical clothing and uniform maintenance allowances.

…The Manual also says allowances for monies expended or likely to be expended by the service member, such as travel allowances, do not constitute earnings and should not be included in NWE calculations. The Tribunal made the same point in Re Sutton and Comcare [1996] AATA 168. I agree with that view.

[8] Re Ragg and Military Rehabilitation and Compensation Commission (2009) 109 ALD 465 (Ragg).

16. Despite the liability of Ms Ragg to taxation on the RLLT, the Tribunal determined that the RLLT was a special expense and not part of her NWE. Similarly, allowances to be paid prospectively on an employee’s completion of a qualifying criterion have been held to fall outside of the scope of s 8(1) of the Act.[9]  

[9] See Re Perry and Department of Defence [1997] (AAT No 11718, 21 March 1997)  and O’Mullane and Comcare [2002] AATA 1251.

17. Allowances which have been held to fall within the “A” component of s 8(1) of the Act include a field allowance paid on a daily basis to an infantry soldier as compensation for working under adverse conditions while in the field[10] and a diving allowance paid to a Navy diver irrespective of the amount of work he undertook[11].  In Re Kennedy v MRCC[12] (Kennedy), the employee served in the Special Air Service Regiment and received an allowance known as Special Action Force Allowance (SAFA) in addition to his standard Army pay. Although the matter turned on the operation of s 8(10) of the Act, the Tribunal accepted that the SAFA was an allowance payable as NWE under s 8(1) of the Act.

[10] Re Maley and Comcare (1998) 27 AAR 100 (Maley).

[11] Re Whitton and Department of Defence [1998] (AAT No 12902, 21 April 1998) (Whitton)..

[12] (2007) 93 ALD 700.

18.     In Re Zarb and Comcare[13] (Zarb), the Tribunal determined that penalty rates in the form of shift allowances “arise directly from and are recompense for the particular labour and/or service provided by the employee”. It continued:

The relevant penalty rates before this Tribunal were not paid in respect of special expenses incurred or likely to be incurred by the applicant in respect of his employment. They clearly were allowances payable in respect of his employment in the sense that they were recompense for his labour and are to be included when calculating the applicant's normal weekly earnings pursuant to the provisions of s 8(1) and the Tribunal so finds.

[13] [1997] 48 ALD 718 at [52]-[54].

There the Tribunal noted that allowances in “A” in s 8(1) are those which are "payable to the employee in respect of his or her employment" and that “A” forms an integral part of calculating normal weekly earnings.

19.     As noted above, the Comcare material includes, as NWE, allowances for such things as “conditions encountered during service, special qualifications, special duties and so on”. The SAFA in Kennedy and the diving allowance in Whitton may be characterised as falling within special qualifications and/or special duties; the shift allowances in Zarb as within special duties; and the field allowance in Maley as within conditions encountered during service or special duties. I have noted the exclusion in the Comcare material of any allowance for “monies expended (or likely to be spent) by the employee”. The payments in Kennedy, Whitton, Zarb and Maley are not of that character and comprised monies “'obtained as a reward for work or merit'”. 

20.     On the other hand, the accommodation allowance in Sutton and the RLLT in Ragg may be characterised as allowances for monies expended (or likely to be spent) by the employee on, respectively, accommodation and travel. The ADF description of the district allowance is that it compensates for service in areas which involve hardship caused by remoteness, harsh climate and cost of living. I am satisfied that the district allowance paid to Ms Ragg may also be characterised as an allowance for monies expended by her to meet those aspects of hardship while living in Darwin. This means that the district allowance is in respect of special expenses incurred, or likely to be incurred, by her in respect of her employment in Darwin. Accordingly, the district allowance is not part of “A” in s 8(1) of the Act and does not form part of her NWE.

Reduction of NWE under s 8(10) of the Act

21. Because the district allowance does not form part of Ms Ragg’s NWE, s 8(10) of the Act is not applicable. In the decision under review, the respondent determined that the district allowance was not payable to Ms Ragg after 19 January 2001. I am satisfied that the district allowance was not payable as part of Ms Ragg’s NWE at any time and this includes the period identified in the decision under review.

DECISION

22.     The decision under review is affirmed.

I certify that the 22 preceding paragraphs are a true copy of the reasons for the decision herein of Mr R G Kenny, Senior Member

Signed: ..........[Sgd]................................................................
              Mark O’Brien, Research Associate

Hearing on the Papers

Date of Decision  16 January 2012