SPAUL and COMCARE
[2011] AATA 435
•23 June 2011
Administrative Appeals Tribunal
DECISION AND REASONS FOR DECISION [2011] AATA 435
ADMINISTRATIVE APPEALS TRIBUNAL )
) No 2010/4952
GENERAL ADMINISTRATIVE DIVISION ) Re FRANK ROBERT SPAUL Applicant
And
COMCARE
Respondent
DECISION
Tribunal G. D. Friedman, Senior Member Date23 June 2011
PlaceMelbourne
Decision The Tribunal sets aside the reviewable decision of 3 November 2010 and substitutes the following decision:
(1) Mr Spaul sustained an injury described as adjustment disorder with mixed anxiety and depressed mood on 7 September 2004 which resulted in total incapacity for work commencing on 8 September 2004;
(2) Mr Spaul is entitled to compensation for incapacity under s 19 of the Safety, Compensation and Rehabilitation Act 1988 (the SRC Act) from 8 September 2004 as follows:
(a) 100 per cent of his normal weekly earnings ($1635.66) for a period of 45 weeks; and
(b) 75 per cent of the appropriate figure for normal weekly earnings from the expiry of that period of 45 weeks to 2 December 2007.
(3) Mr Spaul’s normal weekly earnings for the purposes of s 8 of the SRC Act are to be calculated on the basis of Mr Spaul’s annual salary as follows:
With effect from Annual salary
8 September 2004 $85,327.00
1 July 2005 $88,313.45
1 July 2006 $92,022.61
1 July 2007 $95,703.51
(4) The costs of the proceedings are to be as agreed between the parties. If there is no agreement either party may apply to the Tribunal within 14 days of the decision for costs to be determined.
.................[signed].............................
Senior Member
COMPENSATION – adjustment disorder - termination of employment - whether a continuing employee - annual salary - normal weekly earnings - method of calculation
Administrative Appeals Tribunal Act 1975
Safety, Rehabilitation and Compensation Act 1988 ss 8(6), 8(9A) 8(9B), 8(9), 8(10), 19(2)
Military Rehabilitation and Compensation Commission v Perry [2007] FCA 1586
Minister for Immigration and Multicultural Affairs v Bhardwaj (2002) 209 CLR 597
Re Secretary, Department of Social Security and Bradley 1992 [AATA] 271
Re Spaul and Comcare [2006] AATA 915
Trajkovski v Telstra Corp Ltd [1998] FCA 169REASONS FOR DECISION
23 June 2011 G. D. Friedman, Senior Member
1.
Frank Spaul was employed by Medicare Australia (formerly the Health Insurance Commission) from 1988 until Medicare terminated his employment on
7 September 2004 for serious misconduct and inability to perform the requirements of your position. In 2003 he had suffered from an adjustment disorder which resulted in total incapacity for work. He lodged a claim for compensation, which was heard by the Tribunal in 2006. In its decision the Tribunal held that the action to terminate
Mr Spaul’s employment did not constitute reasonable administrative action that would have disentitled him from receiving compensation.
2.
Following the decision the parties reached agreement that Mr Spaul would receive compensation for incapacity for the period 8 September 2004 to 3 December 2007 in respect of a new injury, being aggravation of the adjustment disorder on
7 September 2004. On 3 November 2010 the respondent made a reviewable decision affirming a determination dated 13 August 2010 (which specified Mr Spaul’s normal weekly earnings for the purposes of determining incapacity payments) and affirmed a determination dated 25 August 2010 (which referred to compensation leave and incapacity payments but did not include the injury sustained on
7 September 2004).
3.Mr Spaul maintains that he is still an employee of Medicare Australia for the purposes of his entitlement to compensation, and disputes the salary figures used by the respondent to calculate normal weekly earnings and his entitlements to compensation.
LEGISLATIVE BACKGROUND
4.Section 8 of the SRC Act in effect during the relevant period sets out the method by which normal weekly earnings are to be calculated for the purposes of determining the appropriate amount of compensation. The relevant subsections are:
(6) Subject to this section, if the minimum amount per week payable to
an employee in respect of his or her employment by the Commonwealth or a licensed corporation at the date of the injury is increased, or would have been increased if the employee had continued in that employment, because of:
(a) the attainment by the employee of a particular age;
(b) the completion by the employee of a particular period of service; or
(c) the receipt by the employee of an increase in salary, wages or pay by way of an increment in a range of salary, wages or pay applicable to the employee or to his or her office, position or appointment;
the normal weekly earnings of the employee before the injury, as calculated under the preceding subsections, shall be increased by the same percentage as the percentage by which that minimum amount per week is increased, or would have been increased, as the case may be.
…
(9) The normal weekly earnings of an employee before the date of the employee’s injury, as calculated under the preceding subsections, must, while the employee continues to be employed by the Commonwealth or a licensed corporation, be increased or reduced by the relevant percentage.
(9A) For the purposes of subsection (9), relevant percentage means the same percentage as the percentage of increase or reduction in the
minimum amount per week payable in respect of employees included in a class of employees of which the employee was a member at the date of the injury as a result of:(a) the operation of a law of the Commonwealth or of a State or Territory; or
(b) the making, alteration or operation of an award, order, determination or industrial agreement or the doing of any other act or thing, under such a law.
(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 or a licensed corporation, 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.
(9C) For the purpose of subsection (9B), the indexation date, in relation to a cessation of employment, is:
(a) the 1 July next following:
(i) the date on which this Act receives the Royal Assent; or
(ii) the date of that cessation of employment;
whichever last occurs; and
(b) each subsequent 1 July.
…
(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.
ISSUES
5. There was no dispute that Mr Spaul suffered a further injury on 7 September 2004, being aggravation of adjustment disorder with mixed anxiety and depressed mood which was materially contributed to by his employment and resulted in total incapacity for work, and that he is entitled to receive compensation under s 19(2) of the SRC Act from 8 September 2004. The issues before the Tribunal are:
·
Did Mr Spaul cease to be an employee of Medicare Australia on
7 September 2004 for the purposes of the SRC Act?; and
·What is the correct approach to determining Mr Spaul’s normal weekly earnings during the period 8 September 2004 to 2 December 2007?
DID MR SPAUL CEASE TO BE AN EMPLOYEE OF MEDICARE AUSTRALIA ON 7 SEPTEMBER 2004 FOR THE PURPOSES OF THE SRC ACT?
6. Mr Spaul submitted that the purported decision to terminate his employment was a nullity and that no subsequent action has been taken to alter his employment status, so for the purposes of calculating normal weekly earnings (NWE) under the SRC Act he remains a continuing employee. Mr Spaul referred to the decision of the Tribunal on 27 October 2006 (Re Spaul and Comcare [2006] AATA 915) (the 2006 decision) in which the Tribunal found that the respondent was liable to pay compensation to Mr Spaul under the SRC Act for adjustment disorder with mixed anxiety and depressed mood suffered on 20 November 2003, and for aggravation of the injury suffered during the period July 2004 to September 2004.
7. In the 2006 decision the Tribunal found that Mr Spaul’s adjustment disorder injury was not excluded from the definition of injury under the SRC Act because the decision to terminate his employment was did not constitute reasonable administrative action under the SRC Act. The Tribunal stated at [81] and [82]:
81. I am satisfied that Mr O'Brien's decision to terminate Mr Spaul’s employment on the grounds of serious misconduct was not disciplinary action within the meaning of the Act. I am satisfied that that the process was a sham and that its real purpose was to achieve a severance of the employment relationship between the Commission and Mr Spaul for reasons unrelated to a breach of discipline (assuming that there was one)…
82. Even if the process undertaken was not a sham, the fact that Mr Burgess did not hold the necessary delegation to make the decision to terminate Mr Spaul's employment on the ground of misconduct of itself makes the purported decision a nullity and therefore not "disciplinary action".
8. Mr Spaul submitted that the effect of a decision being a nullity (as described by the Tribunal) is that the relevant function is treated as having not been performed. This means that if the decision to terminate Mr Spaul’s employment was not performed properly, then it follows that he should be treated as an ongoing employee unless and until proper termination action is taken. He submitted that the respondent chose not to challenge any part of the 2006 decision in the Federal Court, nor did the respondent seek to re-visit in the Tribunal the question of whether the purported decision to terminate Mr Spaul’s employment was a sham or a nullity. Mr Spaul emphasised that in the 2006 decision the Tribunal’s finding that the purported termination of his employment was a nullity was made solely for the purposes of the SRC Act and has no bearing on any question of whether he could force Medicare Australia to reinstate him.
9. In determining whether Mr Spaul remains an employee the Tribunal notes that in Trajkovski v Telstra Corp Ltd [1998] FCA 169 Tamberlin J considered the question of the Tribunal’s exercise of its jurisdiction and stated:
…In order to perform its statutory duty to review the decision pursuant to the SRC Act, it was essential that the AAT come to a conclusion on the existence and limits of its jurisdiction. This necessarily involves a consideration of the applicability of s 37(7) and its effect. Thus it requires an examination of pertinent questions of fact and law which arise in making this determination. This is not a question of "reviewing" any decision as to jurisdiction but of properly considering the threshold question of whether it has jurisdiction …
10. In Minister for Immigration and Multicultural Affairs v Bhardwaj (2002) 209 CLR 597 Gleeson CJ stated at [11]:
To say that a tribunal has considered an application, reached a conclusion, and informed affected parties of its decision, is to make a statement of fact. But the legal consequences of that fact depend upon the Act; and the answer to a question about those consequences may depend upon the purpose for which the question is asked. The answer to the question whether a legally effective decision has been made may depend upon the kind of legal effect that is under consideration, and upon further facts as to what was done, or not done, following the communication of the decision.
11. The Tribunal does not accept Mr Spaul’s submissions. In the 2006 decision the Tribunal found that the decision to terminate Mr Spaul’s employment on the grounds of serious misconduct was not disciplinary action and that the process was a sham. This description referred only to the question of whether the action by Medicare Australia to terminate the employment constituted reasonable disciplinary action in connection with the exclusionary provision of the SRC Act, and did not refer to the termination of employment itself. Similarly the word nullity in the context of the decision that the decision-maker …did not hold the necessary delegation to terminate Mr Spaul’s employment on the ground of misconduct referred to the decision as being … not “disciplinary action” … so that the exclusionary provision of reasonable disciplinary action did not apply.
12. The use of the words sham and nullity in the 2006 decision did not, and could not, refer to the termination of Mr Spaul’s employment itself, and there is nothing in the 2006 decision to suggest that this was contemplated by the Tribunal. The decision under review involved the question of compensation for the injury suffered by Mr Spaul, not the decision to terminate his employment, which is clearly outside the Tribunal’s jurisdiction, as there is no power in the SRC Act or the Administrative Appeals Tribunal Act 1975 in which the Tribunal could go behind the termination decision to declare the termination of Mr Spaul’s employment to be void.
13. For these reasons the Tribunal finds that Mr Spaul ceased to be an employee of Medicare Australia on 7 September 2004 for the purposes of the SRC Act when Medicare Australia terminated his employment.
WHAT IS THE CORRECT APPROACH TO DETERMINING MR SPAUL’S NORMAL WEEKLY EARNINGS DURING THE PERIOD 8 SEPTEMBER 2004 TO
2 DECEMBER 2007?14. Section 8 of the SRC Act provides that entitlement to incapacity payments is calculated on the basis of normal weekly earnings. In its determination dated
13 August 2010 the respondent decided that Mr Spaul’s normal weekly earnings for the relevant period were based on the following amounts of annual salary:
With effect from Annual salary
8 September 2004 $85,327.00
1 July 2005 $88,313.45
1 July 2006 $92,022.61
1 July 2007 $95,703.51
15. Mr Spaul submitted that the correct amounts for annual salary should be:
With effect from Annual salary
8 September 2004 $85,327.00
1 October 2004 $88,953.00
5 December 2005 $92,066.36
1 July 2006 $92,511.00
14 December 2006 $95,841.08
1 July 2007 $96,212.00
16. There was no dispute that Mr Spaul’s annual salary was $85,327.00 on and from 8 September 2004 based on his salary as at 7 September 2004 as Principal Executive Officer Class B (PEO B) at the third pay point (later included in the broad banded HIC 8 classification) under the Health Insurance Commission (Managing Change) Certified Agreement 2003-5 (the 2003 Agreement) which came into effect on 4 December 2003. Mr Spaul stated that on 1 October 2004 his salary would have increased by 4.25 per cent to $88,953.00 (the third pay point of HIC 8) because the 2003 Agreement provided for increases in salary for any person at the PEO B (HIC 8) level as an accrued right at the time of the termination on the basis that the first increment contained in the 2003 Agreement was fixed before the injury occurred.
17. Mr Spaul submitted that there is nothing in the SRC Act to suggest that an accrued right to a future salary increase existing at the date of injury can be retrospectively ignored, and that the increase on 1 October 2004 is properly described as an increment in a range of salary, wages or pay applicable to the employee or to his or her office, position or appointment (s 8(6)(c) of the SRC Act). He said that if he had continued as an employee he would have occupied the position as at 1 October 2004, and even after termination he would remain entitled to any increment under s 8(6) of the SRC Act because of his history of achievement and nature of the work that he had been undertaking. Mr Spaul said that but for his injury he would have progressed to the highest level of the new HIC 8 classification until the end of the period covered by the 2003 Agreement (2 December 2005).
18. In Military Rehabilitation and Compensation Commission v Perry [2007] FCA 1586 Bennett J held that s 8(6) continues to operate in respect of employees and former employees when they are no longer employed. He stated at [27]:
27 The normal weekly earnings of the employee are as calculated under ss 8(1) to 8(8) of the Act. That includes the increment (s 8(6)). Section 8(6) is directed to increments in remuneration payable to an employee by reason of the attainment of a level of seniority or the passage of time, including actual increments and hypothetical increments. Section 8(6) applies to injured employees who continue to be employed by the Commonwealth and, as is apparent from ‘would have been increased if the employee had continued in that employment’, continues to operate in respect of employees after employment has ended. That is, the subsection provides that, whether in employment or whether employment has ceased, the normal weekly earnings shall be increased by the percentage by which they would have been increased before injury.
19. The Tribunal takes into account that when Mr Spaul was transferred to the position of Manager Physical Security on 3 July 2003 he was paid at the level of PEO B (third pay point), and when the 2003 Agreement came into operation this became HIC 8 at the third pay point. At the time his employment was terminated on 7 September 2004 he remained at the third pay point of HIC 8. Under paragraph 8.4 of the 2003 Agreement an employee had to satisfy certain criteria in order to progress to the fourth pay point of HIC 8 (which at the time was $88,953.00). Paragraph 8.4.2 provided:
8.4.2 – Access to the 4th pay point (former class A classification levels) within the classification may only occur where the job requirements satisfy critical work value factors relating to accountability, judgement and competencies as outlined in the relevant HIC Work Level Standard, and:
v A merit selection process has been conducted in accordance with HIC policy; or
v The Managing Director determines that an employee can be automatically advanced without a merit selection process in accordance with Condition Number 4 or Condition Number 10 of the HIC Terms and Conditions of Employment, as varied from time to time.
20. The Tribunal takes into account that no employee progressed to the fourth pay point of HIC 8 on 1 October 2004, and that performance assessment of
Mr Spaul was not possible because he had worked only two days in the fourteen months prior to the date of the termination of his employment. The Tribunal does not accept that, in the circumstances of this particular case, Mr Spaul’s salary would necessarily have increased to the fourth pay point of HIC 8 on 1 October 2004 if had he continued as an employee, as there was no guarantee that his salary would have increased because of the attainment of a particular age (s 8(6)(a) of the SRC Act); the completion by Mr Spaul of a particular period of service (s 8(6)(b) of the SRC Act) or by way of an increment to his salary (s 8(6)(c) of the SRC Act). Under the 2003 Agreement performance ratings were not relevant to advancement to the fourth pay point, so any predictions about Mr Spaul’s advancement to the fourth pay point after the date of termination remain speculative, and the actual increments and hypothetical increments referred to by Bennett J do not apply to Mr Spaul.
21. On the question of an accrued right the Tribunal notes that in Re Secretary, Department of Social Security and Bradley [1992] AATA 271 the Tribunal stated at [25]:
… Thus, a right conditional upon the exercise of a discretion is not an accrued right, but a right which is conditional upon a favourable non-discretionary decision being made is an accrued right, provided that the statutory machinery for obtaining that decision has been set in train before the repeal or amendment …
The Tribunal stated at [29]:
…A particular person lodges an application. The legislation is subsequently repealed. The applicant at the time of the repeal had an accrued right to the payment.
22. Mr Spaul’s claim is based on aspects of the 2003 Agreement and is not an application made under legislation that is later repealed before a decision is made, so in the circumstances of this application the question of an accrued right does not assist Mr Spaul.
23. For these reasons the Tribunal finds that on 1 October 2004 Mr Spaul’s annual salary for the purposes of calculating normal weekly earnings was $85,327.00.
24. Mr Spaul submitted that on expiry of the 2003 Agreement on 2 December 2005 a new Certified Agreement came into force, so that his annual salary as at
5 December 2005 and 14 December 2006 would be increased for the purposes of calculating normal weekly earnings if he had remained in the employment of Medicare Australia, but under s 8(10) of the SRC Act would need to be reduced to the amount he would have received if he was still employed.
25. Given the Tribunal’s finding that Mr Spaul ceased to be an employee of Medicare Australia on 7 September 2004, s 8(9B) and s 8(9C) of the SRC Act apply to persons who have ceased to be employed by the Commonwealth and provide for indexation increases to apply to the calculation of normal weekly earnings. In
Mr Spaul’s case this means that the indexation provisions apply each 1 July after the cessation of his employment on 7 September 2004. Under s 8(9D) of the SRC Act regulation 5 of the Safety, Rehabilitation and Compensation Regulations 2002 provides that the Wage Cost Index (WCI) is to be used for the purposes of s 8(9B) of the SRC Act. The relevant WCI percentages are:
1 July 2005: 3.5 per cent
1 July 2006: 4.2 per cent
1 July 2005: 4.0 per cent
26. Using these figures the calculation of Mr Spaul’s normal weekly earnings based on the relevant annual salary amounts are:
8 September 2004 $85,327.00
1 July 2005 $85,327.00 x 3.5 per cent + $85,327.00 = $88,313.45
1 July 2006 $88,313.45 x 4.2 per cent + $88,313.45 = $92,022.61
1 July 2007 $92,022.61 x 4.0 per cent + $92,022.61 = $95,703.51
27. Therefore the Tribunal finds that the amounts listed in the respondent’s determination dated 13 August 2010 in respect of normal weekly earnings are correct.
DECISION
28. The Tribunal sets aside the reviewable decision of 3 November 2010 and substitutes the following decision:
(1) Mr Spaul sustained an injury described as adjustment disorder with mixed anxiety and depressed mood on 7 September 2004 which resulted in total incapacity for work commencing on 8 September 2004;
(2) Mr Spaul is entitled to compensation for incapacity under s 19 of the Safety, Compensation and Rehabilitation Act 1988 (the SRC Act) from 8 September 2004 as follows:
(a) 100 per cent of his normal weekly earnings ($1635.66) for a period of 45 weeks; and
(b) 75 per cent of the appropriate figure for normal weekly earnings from the expiry of that period of 45 weeks to 2 December 2007.
(3) Mr Spaul’s normal weekly earnings for the purposes of s 8 of the SRC Act are to be calculated on the basis of Mr Spaul’s annual salary as follows:
With effect from Annual salary
8 September 2004 $85,327.00
1 July 2005 $88,313.45
1 July 2006 $92,022.61
1 July 2007 $95,703.51
(4) The costs of the proceedings are to be as agreed between the parties. If there is no agreement either party may apply to the Tribunal within 14 days of the decision for costs to be determined.
I certify that the twenty-eight [28] preceding paragraphs are a true copy of the reasons for the decision of:
G. D. Friedman, Senior Member
Signed: ………………[signed]…………………………….
Kate Conners Associate
Date of hearing: 16 June 2011
Date of decision: 23 June 2011
Counsel for the applicant: Mr L Grey
Solicitor for the applicant: C & M Lawyers
Counsel for the respondent: Mr B DubéSolicitor for the respondent: Sparke Helmore
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