Smith and Military Rehabilitation and Compensation Commission (Compensation)
[2023] AATA 3021
•22 September 2023
Smith and Military Rehabilitation and Compensation Commission (Compensation) [2023] AATA 3021 (22 September 2023)
Division:GENERAL DIVISION
File Number: 2022/9641
Re:Graham Smith
APPLICANT
AndMilitary Rehabilitation and Compensation Commission
RESPONDENT
DECISION
Tribunal:Dr L Bygrave, Member
Date:22 September 2023
Place:Melbourne
The decision under review is affirmed.
......................[SGD]..................................................
Dr L Bygrave, Member
Catchwords
COMPENSATION – entitlement to incapacity payments – calculation of normal weekly earnings – where Applicant discharged from the Army in 1983 – increases of normal weekly earnings made by annual adjustments in accordance with the Wage Price Index – decision under review affirmed
Legislation
Administrative Appeals Tribunal Act 1975 (Cth)
Safety, Rehabilitation and Compensation Act 1988 (Cth)
Safety, Rehabilitation and Compensation (Defence-related Claims) Act 1988 (Cth)Safety, Rehabilitation and Compensation (Defence-related Claims) Regulations 2019 (Cth)
Cases
Military Rehabilitation and Compensation Commission v Perry [2007] FCA 1586
REASONS FOR DECISION
Dr L Bygrave, Member
22 September 2023
INTRODUCTION
The Applicant, Mr Graham Smith, receives incapacity payments pursuant to the Safety, Rehabilitation and Compensation (Defence-related Claims) Act 1988 (Cth) (DRC Act) for his accepted condition of aggravation of reflux oesophagitis with the date of injury of 1 February 1982.
On 7 July 2022, the Respondent wrote to Mr Smith to advise that his incapacity payments had been reassessed due to rate changes and he was entitled to increased fortnightly incapacity payments under Division 3, Part II of the DRC Act. This letter relevantly included information about a ‘Wage Price Index [WPI] increase of 2.30% effective from 1 July 2022’ and set out the fortnightly payment amounts to be paid to Mr Smith, both the ‘first payment after increases’ effective from 7 July 2022 and ‘ongoing payment[s]’ from 21 July 2022.[1]
[1] Exhibit T-T5, 129-130.
Mr Smith requested the Respondent review the incapacity payments made to him and, on 31 October 2022, an email from a delegate of the Respondent to Mr Smith included the following statements:
·a review had been conducted into the payments made to Mr Smith and ‘the manner of their calculation’;
·the ‘foundation for the adjustment for increases of incapacity payments’ to Mr Smith is ‘via annual adjustments to the [WPI]’;
·Mr Smith’s ‘entitlement to incapacity payments arises from the [DRC Act]’;
·‘increases or adjustments’ to incapacity payments are ‘made annually, effective from 1 July, in accordance with changes to the WPI increases’; and
·Mr Smith was discharged from the military in 1983, which is prior to the 1995 Defence pay restructure, and his normal weekly earnings (NWE) are based on ‘Private Proficient 2/0’.[2]
This email also set out a table of the WPI increases each year from 1 July 2002 and the corresponding fortnightly military salary used for calculation purposes from 1 March 2001.
[2] Exhibit T-T1.1, 4.
On 9 November 2022, Mr Smith made an application for review of this decision to the General Division of the Administrative Appeals Tribunal (the Tribunal).
By way of procedural background, I note that the Tribunal (differently constituted) decided on 21 December 2022 that ‘it has jurisdiction to proceed further with the hearing of this application’ and provided written reasons for this decision on 17 May 2023.[3] In particular, the Tribunal concluded (at [24]):
that the determination contained in the letter from the Department [of Veterans’ Affairs] to the applicant of 7 July 2022 was an application of ss 19 and 8 [of the DRC Act] which calculated the incapacity entitlements to which the applicant became entitled. Therefore, the Tribunal concludes that the letter of 7 July 2022 sent by the Department to the applicant was a “determination” within the meaning of s 60(1) of the [DRC] Act.
[3] Exhibit ST-ST07.
The Tribunal further concluded (at [33]) that ‘the use of the word “review” in the email’ dated 31 October 2022 is ‘consistent with the concept of a “reconsideration” of the determination within the meaning of s 62’ of the DRC Act.
The matter was heard by the Tribunal in Melbourne on 13 September 2023. Counsel for the Respondent and Mr Smith appeared at the hearing and gave oral submissions in person.
For clarity, the Respondent made a request, that was agreed to by Mr Smith at the hearing, for this Tribunal to make an order pursuant to subsection 25(4) of the Administrative Appeals Tribunal Act 1975 (Cth) that the scope of this review is limited to the determination of Mr Smith’s NWE for the purposes of section 8 of the DRC Act. Consistent with this order, the sole issue to determine in this matter is the amount of Mr Smith’s NWE under section 8 of DRC Act for the purposes of the incapacity period.
RELEVANT LEGISLATION
The relevant statutory provisions are set out in the DRC Act and the Safety, Rehabilitation and Compensation (Defence-related Claims) Regulations 2019 (Cth) (DRC Regulations).
The payment of compensation for injuries resulting in incapacity for work is stipulated in Division 3, Part II of the DRC Act. Section 19 applies to an employee who is incapacitated for work as a result of an injury and states:
(2) Subject to this Part, the Commonwealth is liable to pay to the employee in respect of the injury, for each week that is a maximum rate compensation week during which the employee is incapacitated, an amount of compensation worked out using the formula:
NWE – AE
where:
AE is the greater of the following amounts:
(a) the amount per week (if any) that the employee is able to earn in suitable employment;
(b) the amount per week (if any) that the employee earns from any employment (including self-employment) that is undertaken by the employee during that week.
NWE is the amount of the employee’s normal weekly earnings.
[emphasis in original]
Subsection 19(3) of the DRC Act applies to Mr Smith’s circumstances as it is more than 45 weeks since he has been employed; this has the effect of adjusting NWE paid to Mr Smith by 75%.
Section 8 of the DRC Act sets out the calculation for NWE; relevantly, subsection 8(1) states:
(1) For the purposes of this Act, the normal weekly earnings of an employee (other than an employee referred to in subsection (2)) before an injury shall be calculated in relation to the relevant period 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.
[emphasis in original]
The ‘relevant period’ is defined in subsection 9(1) of the DRC Act:
(1) For the purposes of calculating the normal weekly earnings of an employee before an injury, a reference in section 8 to the relevant period is, subject to this section, a reference to the latest period of 2 weeks before the date of the injury during which the employee was continuously employed by the Commonwealth.
[emphasis added]
Subsections 8(9B) and (9D) of the DRC Act further provide:
(9B) The normal weekly earnings of an employee before injury, as calculated under subsections (1) to (8) and as increased or reduced under subsection (9) must, if the employee has ceased, or ceases, to be employed by the Commonwealth, be further increased, with effect from each indexation date in relation to that cessation, by reference to the percentage of increase (if any) of an index that is prescribed for the purposes of this subsection over the year ending on the 31 December preceding each such indexation date.
…
(9D) For the purpose of subsection (9B), the regulations may specify the manner of calculating the further increase referred to in that subsection by reference to the movement of the index that is prescribed for the purposes of that subsection.
Part 2 of the DRC Regulations sets out compensation provisions. Regulation 6 outlines the prescribed index for further annual increase in NWE after cessation of employment as follows:
For the purposes of subsection 8(9B) of the Act, the Wage Price Index (total hourly rates of pay excluding bonuses/all sectors/all Australia/original) published by the Australian Statistician is prescribed.
[emphasis added]
The DRC Regulations at regulation 7 stipulate the manner for calculating further annual increases after cessation of employment:
For the purposes of subsection 8(9D) of the Act, the further increase in normal weekly earnings referred to in subsection 8(9B) of the Act is to be calculated, to 3 decimal places and rounded up to 2 decimal places, in accordance with the following formula:
(F x WE) – WE
where:
F is the greater of the following:
(a) the number (worked out to 4 decimal places and rounded up to 3 decimal places) obtained by dividing the index number by the previous index number;
(b) 1.000.
index number is the index number of the Wage Price Index mentioned in section 6 for the quarter that ended on 31 December in the year immediately before the indexation date.
previous index number is the index number of the Wage Price Index mentioned in section 6 for the quarter that ended on 31 December in the previous year.
WE is the normal weekly earnings that applied immediately before the indexation date.
Note: Under this formula, there will be a further increase in normal weekly earnings only if F is greater than 1.000.
CONSIDERATION
Mr Smith enlisted in the Army on 5 August 1980 and was discharged on 14 February 1983 on the basis that his retention was not ‘in the interest of Australia or the Army’.[4] At the date of his discharge in 1983, Mr Smith’s rank and pay group in the Army was ‘PTE P pay level 3’: this correlates to ‘PTE P pay group 2’ (or PTE P2) following a pay restructure at the Australian Defence Force in November 1995.[5] Mr Smith does not dispute that the current equivalent of his rank and pay group in the Army is ‘PTE P2’.
[4] Exhibit ST-ST01, 1-2.
[5] Exhibits T-T3.1, 12 and ST-ST04, 100.
The applicable legislative history and context for Mr Smith’s entitlement to compensation for incapacity for work since his discharge from the Army in 1983 is outlined in the Statement of Facts, Issues and Contention of the Respondent dated 31 August 2023. This includes provisions enacted in the Safety, Rehabilitation and Compensation Act 1988 (Cth) (the SRC Act) on 1 December 1988, amendments to the SRC Act made on 1 October 2001, and the DRC Act that came into force on 12 October 2017.[6]
[6] See Statement of Facts, Issues and Contention of the Respondent dated 31 August 2023, paragraphs 19-31.
Relevant to the determination of Mr Smith’s NWE, amendments to the SRC Act that commenced on 1 October 2001 established a new method of calculating NWE for a discharged member. Notably, these amendments also carried into the DRC Act that came into force on 17 October 2017. From 1 October 2001, the introduction of subsection 8(9B) in the SRC Act (and later the DRC Act) provided that the NWE of a discharged member was to be increased annually on 1 July by reference to a statutory indexation rate, the WPI.
A table in the email from the Respondent to Mr Smith on 31 October 2022 sets out:
·relevant WPI percentage increases from 1 July 2002 to 1 July 2022;
·the applicable fortnightly military salary (@ 100%) from 1 July 2002 to 1 July 2022; and
·references to attached Statutory Rate Increase letters sent to Mr Smith from 1 July 2002 to 1 July 2022 (except 1 July 2016 as this letter was ‘unavailable’).[7]
[7] Exhibit T-T1.1, 4-5.
I am satisfied the relevant statutory provisions – the SRC Act from 1 October 2001 and the DRC Act from 12 October 2017 – provide a clear formula to calculate annual increases to NWE paid to Mr Smith from 1 October 2001.
The NWE of Mr Smith before the injury are determined pursuant to subsection 8(1) of the DRC Act and subsection 9(2) of the DRC Act, which defines the ‘relevant period’ as the two weeks prior to injury. It is not in dispute that Mr Smith, as a full-time serving member of the Army, was paid a salary in the relevant period and it is this salary (+ service allowance + other allowances payable if applicable) that must be used to determine Mr Smith’s NWE for the purposes of subsection 8(1) of the DRC Act.
As set out in paragraph 17 above, the applicable pay group for Mr Smith is PTE P2. As at 1 March 2001, which is the date of the last rate of pay prior to the SRC Act amendments on 1 October 2001, the Permanent Forces Salary Tables states the fortnightly rate of pay for PTE P2 was $1,396.12.[8]
[8] Exhibit T-T3.6, 23.
I note that, immediately prior to the incapacity period applicable to this matter, a Statutory Rate Increase letter from the Department of Veterans’ Affairs (the Department) to Mr Smith dated 20 July 2021 stated his incapacity payments, which incorporated his NWE for the period from 1 July 2021 to 30 June 2022, was $1,926.92 per fortnight.[9] The Department sent Mr Smith a further Statutory Rate Increase letter dated 7 July 2022 that set out his incapacity payments, incorporating his NWE from 1 July 2022 to 30 June 2023, were $1,971.24 per fortnight.[10] This amount of ‘$1,971.24 (gross)’ from 1 July 2022 – an increase of $44.32 a fortnight ($1,971.24 – $1,926.92 = $44.32) – is consistent with a WPI increase of 2.30%.
[9] Exhibit T-T3.26, 113.
[10] Exhibit T-T5, 129-130.
I have reviewed the table in the email from the Respondent dated 31 October 2022 that outlines the WPI increases each year from 1 July 2002 and the corresponding military salary (at 100%) that has been used for calculation purposes. I am satisfied that, on 1 July of each year since 1 October 2001, the WPI percentage increase has been correctly calculated and applied to Mr Smith’s NWE in accordance with subsection 8(9B) of the SRC Act (from 1 October 2001) and the DRC Act (from 12 October 2017).
Finally, I have considered whether the provisions of subsection 8(6) of the DRC Act, which sets out circumstances for an increase in the minimum amount payable, apply to Mr Smith. As I find no evidence that Mr Smith is eligible to receive an increment to his salary as a function of, for example, his age or period of service, I am satisfied that subsection 8(6) of the DRC Act is not relevant to this matter.
Submissions from the Applicant
Mr Smith has made extensive written and oral submissions setting out his concerns that he has been underpaid incapacity payments since 2001 and he has not been paid correct WPI rises. He wrote in an email dated 30 June 2023, ‘i state the dept is using previous years earnings as our pay rises also not paying correct wpi rises as earnings are not included from previous years earnings’.[11] [reproduced as in original]
[11] Exhibit A1.
At the hearing, Mr Smith referred to Statutory Rate Increase letters dated 20 July 2021 and 7 July 2022 that he received from the Department. He said the Statutory Rate Increase letter dated 20 July 2021 set out ‘ongoing’ fortnightly payments from 22 July 2021 in the amount of ‘$1,926.92 (gross)’ and, after the WPI increase of 2.30% effective from 1 July 2022, he calculated that he should receive ‘an additional $44.40’ each fortnight. Mr Smith said that the reference in the Statutory Rate Increase letter dated 7 July 2022 to a ‘first payment after increases – effective from 07 July 2022’ of ‘$1,944.65 (gross)’ means that he was underpaid in this fortnight period. He contended that, if he was underpaid for the first pay period in every financial year, then he has not been paid his correct annual entitlement since 2001. Mr Smith referred the Tribunal to PAYG payment summaries for financial years ending 30 June 2000 to 30 June 2006 and said that differences between the PAYG payment summaries and his NWE show he has been underpaid incapacity payments.[12]
[12] Exhibit A1.
Mr Smith also filed a document at the hearing, ‘ADF Military Salary – Permanent Rates’, that states the annual salary for ‘Army PTE, level 1’ is ‘$68,861’ as at ‘10 November 2022’.[13] Based on this salary, Mr Smith submitted to the Tribunal that he should be receiving fortnightly payments calculated on the following formula: ‘$68,861 (Army PTE level 1 annual salary) x 75% (adjustment percentage as he has not been employed in the last 45 weeks) / 26 (number of fortnights per year)’. (My calculations show this equals $1,986.38 a fortnight (gross).)
[13] Exhibit A2.
I have considered Mr Smith’s submissions and reject these for the following reasons.
First, the different (lower) payment that Mr Smith receives in the first payment after 1 July each year includes a period from the previous year ending on 30 June as well as a period from the new year commencing on 1 July. I accept that this is an administrative imperative where pay fortnights may straddle a period from late June to early July. I am satisfied the example used by Mr Smith of the Statutory Rate Increase letter on 7 July 2022 that referred to a ‘first payment after increases’ effective from 7 July 2022 encompasses his entitlement to NWE for the period from 23 June 2022 to 7 July 2022 and therefore, the amount of $1,944.65 (gross) includes payment at the fortnightly rate from 1 July 2021 for the period from 23 June 2022 to 30 June 2022, and payment at the fortnightly rate from 1 July 2022 for the period from 1 July 2022 to 7 July 2022.
Second, Mr Smith provided no legislative basis to explain why he should be paid according to the ‘ADF Military Salary – Permanent Rates’ published on 10 November 2022. Mr Smith was discharged from the Army in 1983 and following the introduction of subsection 8(9B) into the SRC Act on 1 October 2001, I find the increase of NWE on 1 July each year must be referenced to the statutory indexation rate of the WPI. Consequently, the ADF Military Salary – Permanent Rates’ dated 10 November 2022 are not relevant to what I must determine in accordance with the DRC Act. I note this finding is consistent with the decision of the Federal Court of Australia in Military Rehabilitation and Compensation Commission v Perry, which contemplated the construction and application of subsection 8(9B) when a person ceases to be employed by the Commonwealth.[14]
[14] [2007] FCA 1586.
Finally, and for completeness, Mr Smith referred the Tribunal to a media release dated 28 June 2023 on the Department’s webpage titled, ‘Increase to incapacity payments’[15], and made oral submissions about loans he received from the Department in about 2001–2002 and repaid. I have considered these matters and decide there is no information before the Tribunal that shows these are relevant to the issue I need to determine about Mr Smith’s NWE for the purposes of section 8 of the DRC Act.
[15] Exhibit A1.
CONCLUSION
For the reasons set out above, I am satisfied that the decision made by the Respondent on 31 October 2022 that determines Mr Smith’s NWE for the incapacity period for the purposes of section 8 of the DRC Act is affirmed.
DECISION
The decision under review is affirmed.
I certify that the preceding 35 (thirty - five) paragraphs are a true copy of the reasons for the decision herein of Dr L Bygrave, Member
..........................[sgd]..............................................
Associate
Dated: 22 September 2023
Date of hearing: 13 September 2023 Applicant: Self-Represented Counsel for the Respondent Ms Lindsay Cooper Solicitors for the Respondent: Australian Government Solicitor
1
1
0