FEDERAL COURT OF AUSTRALIA Repatriation Commission v Hendy [2002] FCAFC 424 DEFENCE AND WAR – veterans' entitlements – factors to be taken into consideration upon an application for an increase of a veteran's pension on the basis that previously accepted service-caused disabilities had worsened – whether war-caused injury or war-caused disease alone render the veteran incapable of undertaking remunerative work Administrative Appeals Tribunal Act 1975 (Cth), s 43(2B) and 44. Veterans' Entitlements Act 1986 (Cth), ss 15(1), 19, 24(1). Flentjar v Repatriation Commission (1997) 48 ALD 1, followed. REPATRIATION COMMISSION v LESLIE ARTHUR HENDY N 566 OF 2002 WHITLAM, EMMETT & STONE JJ 19 DECEMBER 2002 SYDNEY IN THE FEDERAL COURT OF AUSTRALIA NEW SOUTH WALES DISTRICT REGISTRY N566 OF 2002 ON APPEAL FROM A SINGLE JUDGE OF THE FEDERAL COURT OF AUSTRALIA BETWEEN: REPATRIATION COMMISSION APPELLANT AND: LESLIE ARTHUR HENDY RESPONDENT JUDGES: WHITLAM, EMMETT & STONE JJ DATE OF ORDER: 19 DECEMBER 2002 WHERE MADE: SYDNEY THE COURT ORDERS THAT: 1. the appeal be upheld; 2. the orders of Madgwick J made on 10 May 2002 be set aside and, in lieu thereof, the following orders be substituted: 1. the appeal be dismissed; and 2. the applicant pay the respondent's costs of the application. 3. the respondent pay the appellant's costs of the appeal. Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules. IN THE FEDERAL COURT OF AUSTRALIA NEW SOUTH WALES DISTRICT REGISTRY N566 OF 2002 ON APPEAL FROM A SINGLE JUDGE OF THE FEDERAL COURT OF AUSTRALIA BETWEEN: REPATRIATION COMMISSION APPELLANT AND: LESLIE ARTHUR HENDY RESPONDENT JUDGES: WHITLAM, EMMETT & STONE JJ DATE: 19 DECEMBER 2002 PLACE: SYDNEY REASONS FOR JUDGMENT THE COURT: 1 The respondent, Leslie Arthur Hendy ("the Veteran"), rendered eligible operational service, within the meaning of the Veterans' Entitlements Act 1986 (Cth) ("the Act"), in Vietnam prior to his discharge from the Royal Australian Navy ("the RAN") on 27 July 1970. On 16 October 1996, the Veteran was awarded a pension under Pt II of the Act with effect from 22 November 1995. The Repatriation Commission ("the Commission") accepted that the Veteran's condition of post-traumatic stress disorder, coupled with alcohol dependence and major depression, and bilateral sensorineural hearing loss, gave rise to an entitlement to a pension under the Act. On 7 July 1998, the Veteran applied for an increase in his pension on the basis that his accepted service-caused disabilities had worsened. On 20 August 1998, a delegate of the appellant increased the Veteran's pension with effect from 6 July 1998 but determined that the Veteran was not entitled to a pension at the "Special Rate" under s 24 of the Act. 2 On 3 September 1998, the Veteran applied to the Veterans' Review Board ("the Board") for review of the decision of 20 August 1998. The Board refused the Veteran's application and, on 11 February 1999, determined that the decision of the Commission should be set aside and that the Veteran should receive only ninety per cent of the general rate of pension under the Act. On 31 May 1999, the Veteran appealed to the Administrative Appeals Tribunal ("the Tribunal") from the decision of the Commission as varied by the Board. On 28 November 2000, the Tribunal affirmed the decision under review. 3 The Veteran then appealed to the Federal Court of Australia pursuant to s 44 of the Administrative Appeals Tribunal Act 1975 (Cth) ("the AAT Act"). On 10 May 2002, a judge of the Court ordered that the appeal be allowed, that the decision of the Tribunal be set aside and that the matter be remitted to the Tribunal, differently constituted, for determination according to law. His Honour also made orders as to the costs of the proceeding. By notice of appeal filed on 14 June 2002, the Commission now appeals to the Full Court from the orders made by the primary judge. statutory framework 4 Section 15(1) of the Act provides that a veteran who is in receipt of a pension under Part II of the Act may apply for an increase in the rate of pension on the ground that the incapacity of the veteran has increased since the rate of the pension was assessed or last assessed. Under ss 19(4A) of the Act, the Commission must deal with an application under s 15(1) by assessing the matters set out in s 19(5C). 5 Under s 19(5C) the matters that the Commission must assess are: "(a) the rate or rates at which the pension would have been payable from time to time during the assessment period; and (b) …the rate at which the pension is payable." [emphasis added] Under s 19(9), the term "assessment period" is defined as the period starting on the application day and ending when the claim or application is determined, and the term "application day" means the day on which the claim or application was received at an office of the Department of Veterans' Affairs in Australia. In the present case, the application day is 7 July 1998. 6 Section 19(5B), relevantly for the present case, provides that the Commission must assess the matters set out in s 19(5C) in accordance with s 24 of the Act. Section 24(4) fixes a special rate at which pension is payable to a veteran to whom s 24 applies. Under s 24(1), s 24 applies to a veteran, relevantly, if: "… (b) the veteran is totally and permanently incapacitated, that is to say, the veteran's incapacity from war-caused injury or war-caused disease, or both, is of such a nature as, of itself alone, to render the veteran incapable of undertaking remunerative work for periods aggregating more than 8 hours per week; and (c) the veteran is, by reason of incapacity from that war-caused injury or war-caused disease, or both, alone, prevented from continuing to undertake remunerative work that the veteran was undertaking and is, by reason thereof, suffering a loss of salary or wages, or of earnings on his or her own account, that the veteran would not be suffering if the veteran were free of that incapacity;…" THE DECISION OF THE TRIBUNAL 7 The Tribunal made findings concerning the employment of the Veteran after leaving the RAN. The Tribunal found that the Veteran drove a truck for several years. He also worked as a hotel employee for a number of years in different jobs. He worked in one hotel as an assistant manager and cellarman for a few years followed by employment for 9˝ years, as a cellarman at a Returned Services League club, from about 1986 or 1987. He left that employment in order to gain access to superannuation benefits, which he used to pay for a house. 8 Some time thereafter, the Veteran drove a concrete delivery truck for a period of two years. For eight years, finishing in 1995, he drove a self-owned four ton truck delivering alcohol. He subsequently sold the truck and had a period of unemployment. He then gained a job with "Materials in the Raw", driving a truck as an employee for six or so months, delivering garden soil, railway sleepers and similar garden goods. He worked often on Saturday, Sunday or both days. The Veteran ceased work in August 1996. 9 The Tribunal formulated the questions before it in the following terms: * Are the Veteran's accepted disabilities of such a nature as, of themselves alone, to render him incapable of undertaking remunerative work for at least 8 hours a week? * Do the Veteran's accepted disabilities alone prevent him from continuing to undertake remunerative work that he was undertaking causing a loss of income he would otherwise be receiving? There is no quarrel from either the Commission or the Veteran concerning the formulation of those questions, which arise under s 24(1)(b) and s 24(1)(c) of the Act respectively. 10 The Tribunal found that the Veteran's relevant vocational, trade and professional skills, qualifications and experience were in clerical work, administration, labouring and driving. The Tribunal accepted the opinions of two medical practitioners that the Veteran was capable of doing "light work" such as truck driving or courier duties and that he would also be suitable for cellarman duties and for light storeman duties. 11 The Tribunal found that, if the Veteran were to engage in work as a light duties storeman, it is likely that his irritability and other post-traumatic stress disorder related behaviours would make it virtually impossible for him to do the job successfully. The Tribunal was satisfied, on balance, that the Veteran's alcohol dependence is, and was, when he ceased work in August 1996, a clinical feature of his post-traumatic stress disorder. The Tribunal found, therefore, that that disability was properly taken into account in applying the test in s 24(1)(b) of the Act. 12 However, the Tribunal also considered the question of whether or not a condition that was not related to the Veteran's service with the RAN incapacitated him for remunerative employment. That condition was arthritis of the knee. The Tribunal referred to the evidence of a medical practitioner, Dr Lennon, to the effect that there was evidence "of only very minor medial compartmental osteoarthritis of the left knee". On the basis that cessation of work was due to the Veteran's post-traumatic stress disorder rather than the condition of his knee, the Tribunal found that orthopaedic conditions of the Veteran's knee were not a reason for his incapacity to undertake remunerative employment. The Tribunal concluded, therefore, that s 24(1)(b) of the Act was satisfied, in that the Veteran's accepted disabilities alone prevent him from undertaking any remunerative work for 8 or more hours per week. 13 Accordingly, it was then necessary for the Tribunal to consider the requirements of s 24(1)(c) of the Act. The Tribunal considered those requirements by reference to the following issues (articulated in Flentjar v Repatriation Commission (1997) 48 ALD 1). "1. What was the relevant "remunerative work that the veteran was undertaking" within the meaning of s 24(1)(c) of the Act? 2. Is the veteran, by reason of war-caused injury or war-caused disease, or both, prevented from continuing to undertake that work? 3. If the answer to question 2 is yes, is the war-caused injury or war-caused disease, or both, the only factor or factors preventing the veteran from continuing to undertake that work? 4. If the answers to questions 2 and 3 are, in each case, yes, is the veteran by reason of being prevented from continuing to undertake that work, suffering a loss of salary, wages or earnings on his own account that he would not be suffering if he were free of that incapacity?" 14 The Tribunal had regard to the remunerative work that the Veteran was undertaking at the time he ceased work in 1995, namely delivery of alcohol by truck. It also referred to the later part-time work with "Materials in the Raw" involving the delivery, by truck, of garden soil, railway sleepers and similar garden goods. The Tribunal, however, considered that it should consider the Veteran's position under s 24(1)(c) by reference to his former work in hotel administration and management and in truck driving or goods delivery. The Tribunal accepted that the Veteran's post-traumatic stress disorder, with associated major depression and alcohol dependence, prevent him from returning to such work. 15 Thus, the Tribunal answered the first issue posed by reference to his former work in hotel administration and management and in truck driving and goods delivery. The Tribunal concluded, in relation to the second issue, that the Veteran's post-traumatic stress disorder, and associated conditions, prevent him from continuing to undertake relevant remunerative work. 16 In addressing the third issue, the Tribunal had regard to the medical evidence before it. Dr Baz considered that the Veteran may have difficulty with heavier types of work, especially those involving loading and unloading alcohol supplies or heavy goods. She considered that those activities could aggravate the Veteran's knee symptoms, which are not disabilities related to his relevant service. The Tribunal considered that the diagnosis by Dr Lennon of a very minor medial compartmental osteoarthritis of the left knee provided some consistency in interpreting Dr Baz's opinion. That is to say, the Tribunal considered that the Veteran's minor osteoarthritic knee condition might be aggravated by heavy work. 17 The Tribunal referred to the evidence of Dr Hession, who considered that the Veteran could not perform cellarman duties because of the arthritis in his knees. However, Dr Hession also suggested that, while light storeman work would be within his capacity, the Veteran would find it difficult to move into that work, because of lack of experience, age and his absence of the work force from four to five years. The Tribunal accepted Dr Hession's opinion that labour market factors would operate to restrict the Veteran's potential for employment as a truck driver making deliveries or as an assistant manager or cellarman in the hotel industry. The Veteran had not done that work for about nine years at the time when he made the claim under consideration. 18 However, the Tribunal considered that the arthritic condition of the Veteran's knee would have an effect on his capacity to do that work. The Tribunal concluded, therefore, that the Veteran's accepted disabilities of post-traumatic stress disorder, and related conditions, were not the only factors preventing him from continuing to undertake the relevant remunerative work of hotel administration and management and truck driving and goods delivery. Having regard to that conclusion, the Tribunal found it unnecessary to consider the fourth issue, namely, whether the Veteran had sustained a loss of income because of his inability to undertake relevant remunerative work. THE ISSUES BEFORE THE COURT 19 In his amended notice of appeal to the Court under s 44 of the AAT Act, the Veteran relied on the following grounds: "The Tribunal erred in law in its application of section 24 of the Act in that it: (a) incorrectly applied sub-section 24(1)(c) of the Act, and … (c) found that it was not the Applicant's accepted as war-caused disabilities alone which prevented him from continuing to undertake relevant remunerative work; there being no evidence capable of supporting that finding and/or such a finding being unreasonable on the evidence before the Tribunal." 20 It is common ground that the Tribunal was required to assess the Veteran's entitlement as at the application date. However, the Veteran contended that the Commission should have had regard to his capacity to perform the work last performed, namely, in the part-time work that he was doing in 1996 with "Materials in the Raw". The Veteran's contention was that: (1) The Tribunal did not ask whether the Veteran would have been prevented, as at the application date, only by the war-caused disease, from continuing in his last work, namely that of a truck driver with light duties; (2) If the Tribunal did find that the Veteran's knee condition prevented him from continuing in such work, then the conclusion is irrational and perverse in the light of the finding that the Veteran's orthopaedic conditions were not a reason for his incapacity to undertake remunerative employment. 21 The Commission contended, on the other hand, that there was no basis for concluding that the work undertaken in 1996 with "Materials in the Raw" was any less heavy than the earlier work being performed by the Veteran, which the medical evidence indicated he was not capable of doing because of his knee condition. THE DECISION OF THE PRIMARY JUDGE 22 The primary judge held that the Tribunal fell into legal error. His Honour considered that the conclusion was inescapable that the Veteran had been employed in remunerative work, in no trivial degree, for several months with "Materials in the Raw". His Honour considered that there was ample material to suggest that it was the Veteran's war-caused incapacity alone that had prevented him from continuing to undertake that work. His Honour considered that whether other factors prevented him from re-engaging in more onerous kinds of work that he had previously undertaken was beside the point. 23 In addition, his Honour considered that it is not within the intendment of the Act that a decision-maker might resort, under the rubric of "labour market factors", to the mere consequences of a veteran's service-related disability for the purpose of defeating a claim. If a service-related condition incapacitates a veteran for particular work, as time goes by, the veteran's ability to re-enter the work force would tend to be impaired on account of lack of recent experience of that work, coupled with the absence from the workplace generally and increasing age. While his Honour accepted that it was correct to say that labour market factors may be a disentitling, concurrent source of prevention of a veteran from undertaking remunerative work, his Honour construed the Tribunal's reasons as a finding that labour market forces operated to prevent the Veteran from obtaining work simply because of his service-related disabilities. 24 His Honour also considered that, if Dr Hession's views as to the Veteran's physical capabilities were to be rejected, one would expect some explanation as to why that would be so. His Honour formed the impression that the Tribunal misunderstood or confused the medical evidence. His Honour was of the opinion that the Tribunal failed "properly, genuinely and realistically" to consider the factors that it relied upon to determine that the war-caused incapacities were not the only reason that the Veteran was prevented from continuing to undertake remunerative work that he was undertaking. His Honour considered that the Tribunal, thereby, erred in law. 25 His Honour also considered that a failure by the Tribunal to give reasons, or adequate reasons, explaining the process by which it reached its decision, amounted to an error of law. His Honour considered that a fair reading of the Tribunal's reasons did not provide any basis for ascertaining why the Tribunal reached "the surprising conclusions it did, at least in relation to the [Veteran's] former knee problems". GROUNDS OF APPEAL 26 The Commission relies on two grounds of appeal as follows: · denial of procedural fairness; · error in the interpretation of s 24(1)(c) of the Act. DENIAL OF PROCEDURAL FAIRNESS 27 The primary judge decided that the Tribunal had erred in law by failing to give proper and genuine and realistic consideration to the evidence before it and by failing to give reasons or adequate reasons for its decision. Neither of those errors was mentioned in the notice of appeal from the Tribunal to the Court and the Commission contends that it was not given an opportunity to make submissions in relation to those matters. 28 However, senior counsel for the Commission conceded that those grounds could have been raised in the notice of appeal and that no further evidence would have been required before the primary judge in order to deal with them. Further, senior counsel conceded that the merits of the alleged errors can be dealt with adequately before the Full Court. It was not suggested that, if this ground were to be established, there should be a further hearing before the primary judge. INTERPRETATION OF S 24(1)(c) 29 The Commission's notice of appeal particularises this ground by asserting that the primary judge erred by: · substituting an inquiry into the reasons why the Veteran left his last job for consideration of whether the requirements of s 24(1)(c) of the Act were satisfied during the assessment period, which commenced two years after the Veteran left his last job; · holding that the Veteran's non-war-caused disability was to be taken into account only if it actually prevented him from continuing his last job; · holding that the Veteran's non-war-caused disability was to be taken into account only if he knew of medical opinion about that disability and acted on it; · holding that only factors that prevented, rather than hindered, the Veteran from continuing to undertake remunerative work that he was undertaking are to be taken into account; · holding that labour market factors are not to be taken into account under s 24(1)(c) of the Act if they are "the mere consequences of a veteran's service-related disability". In essence, the Commission contends that the primary judge erred in finding that there was an error of law on the part of the Tribunal. DISPOSITION OF THE APPEAL 30 The primary judge referred to evidence of Dr Hession stating that the Veteran "has arthritis in both knees but the degree of arthritis is not such as to prevent employment, although excessive lifting or very strenuous physical activity or weight bearing should be restricted". Dr Hession then went on to say: "I do not consider he is fit for cellarman duties because of the arthritis in his knees but light storeman duties should be within his capacity, even though he is not experienced in such work." 31 His Honour then referred to the Veteran's evidence that his knees "had not caused him any problems in performing his last job and that since his knee was operated on in 1997, he had not suffered any further impairment". 32 After referring to the Tribunal's findings concerning the evidence of Dr Hession, the primary judge observed that "the great preponderance of the evidence, including Dr Hession's, was that all but the heaviest types of work are within the [Veteran's] physical capabilities". His Honour was of the view that the Tribunal's decision did not evince a proper, genuine and realistic consideration of the medical evidence. His Honour considered that if Dr Hession's views as to the Veteran's physical capabilities were to be rejected, one would expect some explanation as to why that would be so. His Honour was left with the "strong impression" that the Tribunal misunderstood or confused the medical evidence, or alternatively failed to give reasons, or adequate reasons, explaining the process by which it reached its decision. 33 While it may be an error of law for an administrative decision-maker to fail to give proper, genuine and realistic consideration to the question before it, reaching an erroneous conclusion after a genuine consideration of the evidence is not an error of law. 34 Since the Tribunal formulated the question in the terms set out above, there is no reason to conclude that the Tribunal was not mindful of that formulation when making its finding that the Veteran's arthritic knee condition was not a reason for his incapacity to undertake remunerative employment. That is to say, the Tribunal's finding should be read as a conclusion that, even without that condition, the Veteran would be incapable of undertaking remunerative work for periods aggregating more than eight hours per week. Such a finding is not exceptionable in terms of s 24(1)(b). In the light of that finding, the Tribunal correctly considered the second question, namely, the application to the Veteran of s 24(1)(c). 35 On a fair reading of the reasons of the Tribunal, the Tribunal did not treat labour market forces as preventing the Veteran from obtaining work simply by reason of his post-traumatic stress disorder or absence from the workforce by reason of that condition. While the evidence concerning the condition of the Veteran's knee could easily have supported a different conclusion, the Tribunal's conclusion was open to it. 36 The Tribunal's task was to assess what the Veteran probably would have done, if he had none of his service disabilities during the assessment period. The requirement to consider "remunerative work that the veteran was undertaking" does not mean a particular job with a particular employer but the substantive remunerative work that the Veteran had undertaken in the past. That is the exercise that the Tribunal undertook. The Tribunal was not bound to limit its consideration to the last employment that the Veteran actually undertook. 37 The consideration of what a veteran would probably have done, absent the service disabilities, is a hypothetical exercise. The language of s 24(1)(c) of the Act directs attention to the question of whether incapacity from the relevant condition alone prevents a veteran from continuing to undertake remunerative work. The provision does not contemplate that other factors are only to be taken into account if they, of themselves, prevent the Veteran from working. The decision-maker is required to take into account any factor that plays a part or contributes to a veteran's being prevented from continuing to engage in remunerative work. If a period of time elapses after a veteran ceases remunerative work and before the commencement of the assessment period, lack of recent work experience, time out of the workforce and increasing age will be relevant for consideration under s 24(1)(c) of the Act. The decision-maker is required to consider the effect, contribution to, and relative weight to be attached to any or all of those factors during the assessment period. So long as the Tribunal performs this exercise, the conclusions drawn from the assignment of the relative impact the various factors on the ability of the veteran to continue in remunerative work is not reviewable, except in exceptional circumstances. Moreover, having considered any or all of the factors which may have contributed to a veteran's incapacity, the Tribunal is then required to determine whether it is the veteran's war-caused injury or war-caused disease, or both, alone which prevent the veteran from continuing to undertake remunerative work. Error on the part of the Tribunal is determining whether the veteran's war-caused injury or war-caused disease is the sole determinant in the prevention of continued remunerative work is, similarly, not open to review. 38 The Tribunal formulated the issues that arise under s 24(1)(c) of the Act. The Tribunal was not bound to have regard only to the work that the Veteran was performing with "Materials in the Raw". However, it had regard to the Veteran's work with that employer. The Tribunal made a finding of fact concerning the question of whether the Veteran was prevented from continuing to undertake remunerative work that he had been undertaking by reason of incapacity from war-caused conditions alone. As stated earlier, this is no error of law; rather it was merely an outcome of the decision-making process which it was bound to undertake. 39 Finally, with regard to his Honour's alternative finding that the Tribunal failed to give adequate reasons for reaching the conclusions it did, s 43(2B) of the AAT Act requires that, where the Tribunal gives in writing the reasons for its decision, those reasons shall include its findings on material questions of fact and a reference to the evidence or other material on which those findings were based. However, this is not a requirement that the reasons provide an unarguable logical progression to a conclusion. It will, in almost every case, be that alternative conclusions are possible based on the evidence and other material to which reasons refer. The fact that the Tribunal may come to a conclusion contrary to that which the Court or a Tribunal differently constituted might come is not a reviewable error, so long as the reasons include the factors set out in s 43(2B) of the AAT Act. conclusion 40 Accordingly, the appeal should be upheld and the orders of the primary judge should be set aside. In lieu thereof, there should be orders that the appeal from the Tribunal be dismissed with costs. The Veteran should pay the Commission's costs of the appeal to the Full Court. I certify that the preceding forty (40) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Court. Associate: Dated: 19 December 2002 Solicitor for the Appellant: D.E.J. Ryan SC with R.M. Henderson Solicitor for the Appellant: Australian Government Solicitor Counsel for the Respondent: M.B. Smith Solicitors for the Respondent: Dibbs Barker Gosling Date of Hearing: 19 November 2002 Date of Judgment: 19 December 2002