Raison and Military Rehabilitation and Compensation Commission

[2007] AATA 2107

Administrative Appeals Tribunal

DECISION AND REASONS FOR DECISION [2007] AATA 2107

ADMINISTRATIVE APPEALS TRIBUNAL      )

)          No   2007/2706

VETERANS’ APPEALS DIVISION  )           

Re PAUL RAISON

Applicant

And MILITARY REHABILITATION and COMPENSATION COMMISSION 

Respondent

DECISION

Tribunal Mr RG Kenny, Member

Date24 December 2007

PlaceBrisbane (Heard in Townsville)

Decision The Tribunal affirms the decision under review.

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

RG Kenny
  Member

CATCHWORDS

WORKERS’ COMPENSATION – receipt of compensation payments and superannuation payments – superannuation payments constitute a pension rather than a lump sum benefit – need for compensation payments to be reduced – overpayment raised – decision affirmed

Safety, Rehabilitation and Compensation Act 1988 (Cth) ss 4, 20, 114
Military Superannuation and Benefits Act 1991 (Cth)

Defence Force Retirement and Death Benefits Act 1973 (Cth)

Hammerton v Comcare (1995) 21 AAR 204

REASONS FOR DECISION

24 December 2007    Mr RG Kenny, Member

Background

1.      Paul Raison served in the Australian Regular Army from 1995 until 1999.  As a result of an incident in 1995, he suffers from post traumatic stress disorder.  The Military Compensation and Rehabilitation Service (MCRS – now the Military Rehabilitation and Compensation Commission), under the Safety, Rehabilitation and Compensation Act 1988 (the SRC Act), accepted liability for his incapacity from that condition. The MCRS paid him fortnightly compensation payments for that incapacity and an interim lump-sum payment for permanent impairment. The fortnightly compensation payments commenced in October 2003 and were backdated to 3 February 2003, the date from which Mr Raison was certified as being medically unfit for work. The interim lump-sum payment was made in August 2003. Mr Raison was also classified as Class B under the Military Superannuation and Benefits Act 1991 (the MSB Act) and received, from Military Super, a pension under the MSB Act. Those MSB pension payments commenced in January 2007 and were backdated to August 1999 when Mr Raison was discharged from the army. They included an arrears payment of $105,861.69.

2.      On 19 February 2007, the MCRS determined that Mr Raison had been overpaid the amount of $70,177.91 in compensation payments.  This was because of his MSB pension payments which had not been taken into account in calculating his compensation entitlements.  That decision was affirmed on 27 April 2007 and Mr Raison now seeks further review by the Administrative Appeals Tribunal (the Tribunal).

3.      The factual aspects of this matter, including the amounts of compensation payments and MSB pension payments made to Mr Raison, are not in dispute.  From the time that MCRS began to make compensation payments to Mr Raison, it made requests by letter to Military Super to ascertain whether or not MSB pension payments were also being made to him.  However, it was not for some years that Mr Raison began to receive an MSB pension and, on 16 February 2007, Military Super advised MCRS that this was the case.  The advice to Mr Raison concerning his MSB pension was dated 16 January 2007.  It set out the details of his payments.  He was to be paid at the rate of $16,118.96 per year which equated to a fortnightly payment of $619.96 (gross) to commence on 1 February 2007.  His first payment was in the sum of $106,481.85.  This included an arrears payment of $105,861.69 which was described in the advice as a “lump-sum”.  The advice also included a table which detailed the annual components that made up the arrears payment.  These varied over the years as the fortnightly MSB pension rate increased to reflect CPI changes.

Issues and Legislation

4. In issue is the operation of s 20 of the SRC Act which was applied in the decision under review. Subsection 20(1) of the SRC Act identifies the class of person to whom the provision relates and s 20(3) thereof gives a formula which operates to reduce the level of compensation payments where the recipient is in receipt of a pension under a superannuation scheme. They read:

20  Compensation for injuries resulting in incapacity where employee is in receipt of a superannuation pension

(1)       Compensation payable to an employee who is incapacitated for work as a result of an injury is determined in accordance with this section if:

(a)       the employee is retired from his or her employment (whether the employee retired voluntarily or was compulsorily retired); and

(b)       the employee receives a pension under a superannuation scheme as a result of the employee’s retirement.

….

(3)       The amount of compensation is the amount worked out using this formula:

where:

amount of compensation means the amount of compensation that would have been payable to the employee for a week if:

(a)       section 19, other than subsection 19(6), had applied to the employee; and

(b)       in the case of an employee who was not a member of the Defence Force immediately before retirement—the week were a week referred to in subsection 19(3).

5. It is common ground that s 20(1)(a) of the SRC Act is met in this case and that the MSB pension payments made to Mr Raison by Military Super were paid under a "superannuation scheme", as that term is defined in s 4 of the SRC Act. The definition of “superannuation amount” is also given in that provision. It reads:

superannuation amount, in relation to a pension received by an employee in respect of a week, or a lump sum benefit received by an employee, being a pension or benefit under a superannuation scheme, means an amount equal to:

(a)       if the scheme identifies a part of the pension or lump sum as attributable to the contributions made under the scheme by the Commonwealth, Commonwealth authority or licensed corporation—the amount of that part; or

(b)       in any other case—the amount assessed by the relevant authority to be the part of the pension or lump sum that is so attributable or, if such an assessment cannot be made, the amount of the pension received by the employee in respect of that week or the amount of the lump sum, as the case requires.

6. The issues for determination are whether or not Mr Raison is a person who “receives a pension” for the purposes of s 20(1)(b) of the SRC Act and whether all of the MSB pension payments he received should be taken into account when applying the formula in s 20(3) of the SRC Act. It is not disputed that, in the event that Mr Raison is such a person and that all of his superannuation payments are to be included, his incapacity payments under the MSB Act will be reduced in the manner and amount determined by the respondent and that any overpayment is recoverable in accordance with s 114 of the SRC Act.

Submissions

7. Mr Honchin submitted that the MSB pension payments, in order to constitute a pension for the purposes of s 20 of the SRC Act, had to be periodic (weekly or fortnightly) payments and not a lump-sum payment. He submitted that, as such, the lump-sum of $105,861.69 should not be taken into account to reduce Mr Raison’s incapacity payments. For this, he relied upon the decision of the Tribunal in Hammerton v Comcare (1995) 21 AAR 204.

8. Mr Clark accepted that part of a superannuation payment in the form of an MSB pension was made to Mr Raison in a lump-sum format. However, he submitted that its true character was that of periodic fortnightly amounts which were paid in the lump-sum format as the accumulation of the periodic payments between 1999 and 2007. He submitted that MSB pension payments, including the arrears, constituted a pension under s 20 of the SRC Act.

Consideration

9. The terms “pension” and “lump-sum” payment or benefit are not defined in the SRC Act. In Hammerton v Comcare, the Tribunal was concerned with the predecessor of the MSB Act. This was the Defence Force Retirement and Death Benefits Act 1973 (the DFRDB Act). There, Mr Hammerton, on retirement from the army, exercised an election to commute the maximum amount of superannuation available to him by way of a lump-sum benefit. He was also able to receive a fortnightly pension into the future. Subsequently, he received compensation payments from the Commonwealth and one of the issues before the Tribunal was whether the lump-sum that he received was embraced by the terms of s 20 of the SRC Act. The Tribunal distinguished between a pension payment and a lump-sum benefit. It concluded that, to be a pension, payment must be weekly and periodic and must not be a series of lump-sum payments even if they are made on a periodic basis. On the other hand, a lump-sum payment was one paid as a once and for all payment whether or not it was made in one or more than one payment. In the result, the Tribunal determined that, while the fortnightly payment constituted a pension, the commuted portion of Mr Hammerton’s superannuation payments was a lump-sum benefit and not a pension.

10. Since 1 February 2007, Mr Raison has received fortnightly payments from Military Super and I am satisfied that these comprise payments of pension and that he is a person who receives a pension for the purposes of the SRC Act.

11.     I have noted the distinction between lump-sum and pension in Hammerton v Comcare.  However, that case is to be distinguished from that of Mr Raison.  The cases relate to different legislative superannuation schemes and the nature of the amount paid to Mr Raison is different from that paid to Mr Hammerton. 

12. As noted above, the lump sum received by Mr Hammerton was the commuted portion of the superannuation entitlement. The Tribunal in that case noted that the sum was calculated in accordance with a formula under the DFRDB Act. It was not calculated according to the amount of weekly pension multiplied by a particular number of weeks. In Mr Raison’s case, Military Super determined, on 16 January 2007, that he was entitled to be paid at the rate of $16,118.96 per year which equated to $619.96 (gross) per fortnight. Mr Raison was advised that he would receive that fortnightly amount from 1 February 2007 and that he would receive an arrears payment of $105,861.69. In determining whether a payment should be considered to be a lump-sum or a pension, for the purposes of s 20 of the SRC Act, regard must be had to the character of the payment and the means by which it is calculated. These matters are more significant than merely considering the manner adopted for making the payment.

13. The character of the sum of $105,861.69 is that it represents the fortnightly payments that Mr Raison was entitled to, continuously, from August 1999 to January 2007. As it was an arrears payment, it could be paid only in one lump-sum or, perhaps, in a series of lump-sums; but I am satisfied that it retains its character as an aggregation of fortnightly or periodic payments which constitute a pension for the purpose of s 20(1)(b) of the SRC Act and which is to be taken into account in applying the formula in s 20(3) of the SRC Act.

Decision

14.     The Tribunal affirms the decision under review.

I certify that the 14 preceding paragraphs are a true copy of the reasons for the decision herein of Mr RG Kenny, Member

Signed:         .....................................................................................
  Legal Research Officer

Date of Hearing  15 November 2007
Date of Decision  24 December 2007
Counsel for the Applicant         Mr D Honchin
Solicitor for the Applicant          Purcell Taylor Lawyers
Counsel for the Respondent     Mr C Clark
Solicitor for the Respondent     Sparke Helmore