FEDERAL COURT OF AUSTRALIA James v Military Rehabilitation and Compensation Commission [2010] FCAFC 95 Citation: James v Military Rehabilitation and Compensation Commission [2010] FCAFC 95 Appeal from: Justin James v Military Rehabilitation and Compensation Commission [2009] AATA 842 Parties: JUSTIN JAMES v MILITARY REHABILITATION AND COMPENSATION COMMISSION File number: VID 847 of 2009 Judges: KEANE CJ, MIDDLETON AND GORDON JJ Date of judgment: 28 July 2010 Catchwords: ADMINISTRATIVE LAW – judicial review – a guide authorised by the Military Rehabilitation and Compensation Act 2004 (Cth) to determine compensation payable to an injured person allowed payments awarded for previous injuries to be set off against payments for new injuries – whether this provision was within the scope of delegated legislative authority Legislation: Administrative Appeals Tribunal Act 1975 (Cth), s 44 Military Rehabilitation and Compensation Act 2004 (Cth), ss 67, 68, 69, 74(2), 319 Military Rehabilitation and Compensation (Consequential and Transitional Provisions) Act 2004 (Cth), ss 13, 14 Safety, Rehabilitation and Compensation Act 1988 (Cth), s 24 Veterans' Entitlements Act 1986 (Cth) Cases cited: Bruce v Cole (1998) 45 NSWLR 163 cited Fellowes v Military Rehabilitation and Compensation Commission (2009) 240 CLR 28 cited Lysons v Andrew Knowles & Sons Ltd [1901] AC 79 cited Minister for Resources v Dover Fisheries Pty Ltd (1993) 116 ALR 54 cited Nash v Sunshine Porcelain Potteries Ltd (1959) 101 CLR 353 cited South Australia v Tanner (1989) 166 CLR 161 cited Date of hearing: 19 July 2010 Place: Melbourne Division: GENERAL DIVISION Category: Catchwords Number of paragraphs: 55 Counsel for the Appellant: P Hanks QC, with M Carey Solicitor for the Appellant: Slater & Gordan Lawyers Counsel for the Respondent: T Howe QC, with C Dowsett Solicitor for the Respondent: DLA Phillips Fox IN THE FEDERAL COURT OF AUSTRALIA VICTORIA DISTRICT REGISTRY GENERAL DIVISION VID 847 of 2009 ON APPEAL FROM THE ADMINISTRATIVE APPEALS TRIBUNAL BETWEEN: JUSTIN JAMES Appellant AND: MILITARY REHABILITATION AND COMPENSATION COMMISSION Respondent JUDGES: KEANE CJ, MIDDLETON AND GORDON JJ DATE OF ORDER: 28 JULY 2010 WHERE MADE: MELBOURNE THE COURT ORDERS THAT: 1. The decision of the AAT in matter No 2007/5882 given on 30 October 2009 be set aside. 2. Matter No 2007/5882 be remitted to the Military Rehabilitation and Compensation Commission for determination in accordance with law. Note:Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules. The text of entered orders can be located using Federal Law Search on the Court's website. IN THE FEDERAL COURT OF AUSTRALIA VICTORIA DISTRICT REGISTRY GENERAL DIVISION VID 847 of 2009 ON APPEAL FROM THE ADMINISTRATIVE APPEALS TRIBUNAL BETWEEN: JUSTIN JAMES Appellant AND: MILITARY REHABILITATION AND COMPENSATION COMMISSION Respondent JUDGES: KEANE CJ, MIDDLETON AND GORDON JJ DATE: 28 JULY 2010 PLACE: MELBOURNE REASONS FOR JUDGMENT 1 The appellant (Lt James), an officer of the Royal Australian Navy, made a claim under s 319 of the Military Rehabilitation and Compensation Act 2004 (Cth) (the MRC Act) in respect of a right knee injury suffered in February 2005. Prior to the commencement of the MRC Act, Lt James had earlier suffered two other injuries: an injury to his right ankle (resulting in early osteo-arthritis), and an injury to his left knee (specifically, an aggravation of a pre-existing medial meniscus injury). Lt James' entitlement to compensation for these earlier injuries arose, and was satisfied, under the Safety, Rehabilitation and Compensation Act 1988 (Cth) (the SRC Act). 2 The Military Rehabilitation and Compensation Commission (the Commission) assessed the impairment suffered by Lt James as a result of his right knee injury under the MRC Act. In order to determine the compensation for this impairment, the Commission applied a method which offset the compensation already paid to Lt James under the SRC Act in respect of the left knee and right ankle injuries. This offsetting method is prescribed by Ch 25 of the Guide to Determining Impairment and Compensation (GARP M). 3 Lt James appealed to the Administrative Appeals Tribunal (the AAT) in respect of this decision and in respect of other decisions of the Commission relating to claims by Lt James under the SRC Act for his earlier injuries. In order to distinguish the matter of present concern from the matters relating to Lt James' claims under the SRC Act, this matter will be referred to as matter No 2007/5882. 4 On 30 October 2009, the Commission's decision in matter No 2007/5882 was affirmed by the AAT. Lt James now appeals to this court from the decision of the AAT. 5 Pursuant to s 44 of the Administrative Appeals Tribunal Act 1975 (Cth), this Court's jurisdiction to entertain an appeal from the AAT exists only in respect of errors of law on the part of the AAT. The principal issue in this Court relates to the proper mode of calculating the compensation payable to a claimant under the MRC Act, where the claimant has a previous entitlement to compensation under the SRC Act. The issue is whether the provisions of Ch 25 of GARP M are valid. The resolution of this issue involves a consideration of the MRC Act and of the Military Rehabilitation and Compensation (Consequential and Transitional Provisions) Act 2004 (Cth) (the Transitional Act). There is a consequential question as to the proper disposition of the costs of the proceedings before the AAT. 6 Originally, there was also a question raised on the appeal to this Court as to whether the AAT had erred in mistaking the facts agreed between the parties concerning the extent of the impairment suffered by Lt James as a result of the injury to his right knee. It is now common ground between the parties that the AAT did indeed err in this regard, and that, because of the error, matter No 2007/5882 must, in any event, be remitted to the Commission for further consideration. It is also common ground that a reconsideration by the Commission will be of practical benefit to Lt James only if Ch 25 of GARP M is held to be invalid. 7 We will now set out in some greater detail the circumstances of the case before the AAT. We will then set out the relevant provisions of the MRC Act and the Transitional Act. We will then discuss the reasons of the AAT and the arguments advanced by Lt James in support of the contention that Ch 25 of GARP M is invalid. the proceedings in the aat 8 Lt James suffered a right ankle injury on 13 June 1992; and, on 2 September 1997, he was awarded lump sum compensation of $18,864.75 under the SRC Act. In about June 1998, Lt James suffered a left knee injury and, on 23 May 2001, he was awarded compensation of $20,094.08 under the SRC Act. Lt James applied for an increase in the impairment resulting from those injuries, but these matters need not be further considered here. 9 In the AAT in matter No 2007/5882, the parties agreed that Lieutenant James suffered a level of impairment assessed in accordance with GARP M as follows: (a) 12 points for the loss of range of movement of the right knee joint; (b) nil points for resting joint pain; and (c) a rating of 4 for lifestyle effects. 10 The reference to 12 points was to impairment points out of 100 where 100 represents maximum impairment. Lt James argued that the amount calculated under Ch 25 of GARP M for the impairment resulting from the right knee injury, taking into consideration the proper award under the SRC Act for his earlier injuries, would be minus $4.23 per week if Ch 25 was valid. Lt James' principal argument was, of course, that Ch 25 was not valid. If this argument were correct, he would have been entitled to an award of compensation. The Commission contended that the award under the SRC Act for the left knee and right ankle had to be subtracted from the amount calculated for the right knee injury under the MRC Act, producing minus $6.55 per week. If the Commission's contentions were correct, no compensation would be payable under the MRC Act. The AAT seems to have apprehended that acceptance of the Commission's submission led to a result that the amount payable was $0.95 per week. 11 The parties to the appeal to this Court have agreed that the AAT's calculations cannot stand. They are also agreed that, once the principal point in the appeal is determined, i.e. whether Ch 25 of GARP M is valid, the Commission should undertake the necessary recalculation. It is unnecessary for this Court to be concerned with the detail of these calculations; it may be noted, however, that the parties are agreed that if Ch 25 of GARP M is valid then its application will lead to the conclusion that no compensation is payable under the MRC Act in respect of Lt James' right knee injury. 12 The material part of Ch 25 of GARP M is as follows: Bringing across impairment points from an unrelated SRCA injury or disease A claim made under section 319 of the MRCA may result in liability for an injury or disease being accepted and compensation payable. Where a person entitled to a payment under MRCA in respect of permanent impairment was or is paid a lump sum for permanent impairment under the SRCA or liability for a condition accepted under the SRCA the combined impairment must be determined under the MRCA using this Guide. An accepted liability under the SRCA is referred to as the old injury or disease. This may not result in a greater impairment rating, or result in a compensation periodic payment because it is too small to meet the threshold value. It may also be that it is only a temporary change. In the latter case liability is established for the purpose of paying incapacity payments. The impairment resulting from any old injury or disease must be determined using this Guide as at the date of the MRCA determination. The points so derived for the old injury or disease must then be combined using the combined impairment table to determine the overall impairment assessment for the purpose of the MRCA. IR ‑ Impairment Rating S ‑ Old SRCA injury or disease M ‑ MRCA injury or disease Total IR(S+M) = combined [IR(S) + IR(M)] Determine the lifestyle effect of both M and S taken together. The SRCA lump sum, converted to a periodic payment, is subtracted from the MRCA periodic payment to get the net MRCA periodic payment. In order to calculate the net MRCA periodic payment the SRCA lump sum must be converted to a periodic payment. The SRCA amount is converted to a current lump sum value (by multiplying by the ratio of the current value for maximum SRCA section 24 payment to the value when the lump sum payment was made) and the amount converted to a periodic payment by dividing by an age-based number provided by the Australian Government Actuary for this purpose. The age to be used in applying this age-based number is the age the person was at the time the SRCA lump sum was paid. The amount is indexed annually (on 1 July) using the indexation factor calculated under section 404 of the MRCA. The net MRCA periodic payments continue for life or can be converted to a lump sum in accordance with section 78 of the MRCA. 13 The AAT erroneously proceeded on the footing that the impairment resulting from Lt James' ruptured anterior cruciate ligament of the right knee injury consisted of 12 impairment points and a lifestyle rating of 2. It was common ground between the parties that this impairment consisted of 12 impairment points and a lifestyle rating of 4. The Commission concedes that the AAT fell into error proceeding on a factual basis that was contrary to a fact agreed between the parties. Specifically the agreed lifestyle rating for the purposes of Ch 22 of GARP M was a rating of 4, not 2 as the AAT seems to have supposed. the relevant legISLATION 14 Section 319 of the MRC Act provides for the making of a claim for compensation under the MRC Act. It permits a claim: … for one or more of … (a) acceptance of liability by the Commission for a service injury sustained by a person … [and] (d) compensation. 15 Section 67 of the MRC Act allows the Commission to determine a guide for assessing a person's level of impairment. 67 Guide to determining impairment and compensation (1) The Commission may determine, in writing, a guide setting out: (a) criteria to be used in deciding the degree of impairment of a person resulting from a service injury or disease; and (b) methods by which the degree of that impairment can be expressed in impairment points on a scale from 0 to 100; and (c) criteria to be used in assessing the effect of a service injury or disease on a person's lifestyle; and (d) methods by which the effect of a service injury or disease on a person's lifestyle can be expressed as a numerical rating; and (e) methods by which the impairment points of a person, and the effect on a person's lifestyle, from a service injury or disease can be used to determine the compensation payable to the person under this Part by reference to the maximum compensation that can be payable to a person under this Part. (2) The guide must: (a) specify different methods under paragraph (1)(e) for: (i) service injuries or diseases that relate to warlike service or non-warlike service; and (ii) other service injuries or diseases; and (b) specify a method for determining the compensation payable to a person who has both: (i) a service injury or disease that relates to warlike service or non-warlike service; and (ii) another service injury or disease. (3) The Commission may, from time to time, repeal or amend the guide in writing. (4) The guide, and any repeal or amendment of the guide, is a disallowable instrument for the purposes of section 46A of the Acts Interpretation Act 1901. 16 Section 68 of the MRC Act establishes a claimant's entitlement to compensation. It is in the following terms: 68 Entitlement to compensation for permanent impairment (1) The Commonwealth is liable to pay compensation to a person if: (a) the Commission has accepted liability for one or more service injuries or diseases (the compensable condition) of the person; and (b) the Commission is satisfied that: (i) as a result of the compensable condition, the person has suffered an impairment; and (ii) the impairment is likely to continue indefinitely; and (iii) the person's compensable condition has stabilised; and (c) a claim for compensation in respect of the person has been made under section 319. (2) The Commission must determine: (a) the degree of impairment suffered by the person as a result of the compensable condition; and (b) the date on which the person became entitled to compensation under this section by satisfying paragraph (1)(b) and sections 69 and 70 (if applicable). 17 We pause here to note that the entitlement of a claimant to compensation depends on the Commission being satisfied that the claimant has suffered an impairment as a result of a service injury or disease. It is common ground that for this purpose a service injury or disease is one suffered after the commencement of the MRC Act. 18 Section 69 of the MRC Act is in the following terms: 69 No compensation for less than the threshold impairment points The Commonwealth is liable to pay compensation to a person under section 68 only if: (a) for an impairment resulting from a single service injury or disease consisting of: (i) hearing loss; or (ii) the loss, or the loss of the use, of a finger or toe; or (iii) the loss of the sense of taste or smell; the impairment suffered by the person constitutes at least 5 impairment points; and (b) otherwise – the impairment suffered by the person from the compensable condition constitutes at least 10 impairment points. 19 We pause here to note that the liability of the Commonwealth to pay compensation at all in circumstances such as the present, depends upon the extent of the claimant's impairment being at least 10 impairment points. 20 Section 74(2) of the MRC Act provides: (2) The Commission must, as soon as practicable after the Commonwealth becomes liable to pay compensation under section 68 or 71 to a person for an impairment resulting from one or more service injuries or diseases: (a) assess the effect of the injuries or diseases on the person's lifestyle; and (b) determine the weekly amount of compensation to which the person is entitled under that section. 21 Lt James's earlier injuries were compensated under the SRC Act prior to the commencement of the MRC Act. During this time the Commonwealth could be liable to pay compensation to injured veterans under either the SRC Act, or the Veterans' Entitlements Act 1986 (Cth) (the VE Act). When the MRC Act was enacted, the Transitional Act was also enacted to allow veterans with a claim under the SRC or VE Acts to make further claims under the MRC Act. It is common ground that the MRC Act and the Transitional Act are to be read as one. 22 Section 13 of the Transitional Act provides: 13 Bringing across impairment points from a VEA or SRCA injury or disease (1) This section applies if: (a) a claim is made under section 319 of the MRCA in respect of a person who also has: (i) a separate war-caused or defence-caused injury or disease (within the meaning of the VEA) (the old injury or disease); or (ii) a separate injury or disease (within the meaning of the SRCA) (the old injury or disease); or (b) a claim is made under section 319 of the MRCA in respect of an aggravation of, or a material contribution to: (i) a war-caused or defence-caused injury or disease of a person (within the meaning of the VEA) (the old injury or disease); or (ii) an injury or disease of a person (within the meaning of the SRCA) (the old injury or disease); or a sign or symptom of such an injury or disease. (2) The Commission must determine the impairment points constituted by the impairment suffered by the person from the old injury or disease using the guide under section 67 of the MRCA. (3) For the purposes of determining under the MRCA the number of impairment points constituted by an impairment suffered by a person, the Commission must count the impairment points determined for the old injury or disease under subsection (2) towards the person's total impairment points. (4) The Commission may include in the guide under section 67 of the MRCA one or more methods of working out the amount of compensation a person is entitled to under Part 2 of Chapter 4 of the MRCA (permanent impairment) for the service injury or disease. A method may (but does not have to) include a method of offsetting payments made to the person under the VEA or the SRCA in respect of the old injury or disease. Note: The regulations may also include a method of converting lump sum amounts into weekly amounts for the purposes of offsetting (see paragraph 24(3)(b)). 23 Section 14 of the Transitional Act provides: 14 Offsetting VEA and SRCA payments against a Special Rate Disability Pension (1) For the purposes of section 204 of the MRCA, the maximum weekly amount of a Special Rate Disability Pension that could be payable to a person, at a time, must also be reduced by one half of the fortnightly rate at which any pension because of paragraph 13(1)(b) or 70(1)(b) of the VEA is payable to the person at that time. (2) For the purposes of section 204 of the MRCA, the maximum weekly amount of a Special Rate Disability Pension that could be payable to a person must also be reduced by the sum of any previous payments of a lump sum to the person under section 24, 25 or 27 of the SRCA, converted to a weekly amount in accordance with regulations made for the purposes of paragraph 24(3)(b) of this Act. THE REASONS OF THE AAT 24 The AAT identified statutory authority for Ch 25 of GARP M in both s 67(1) of the MRC Act and s 13(4) of the Transitional Act, in that Ch 25 of GARP M set out a method of working out the amount of compensation payable under the MRC Act to a person who has a service injury or disease under the MRC Act, and who also has a pre-existing injury or disease or condition under either the VE Act or the SRC Act. 25 The AAT observed that the Commonwealth's liability to pay compensation under the MRC Act for permanent impairment depended on the existence of "one or more service injuries or diseases", described in s 68(1)(a) of the MRC Act as the "compensable condition". That term, the AAT said, must include those service injuries or diseases in respect of which the Commission has accepted liability in response to a previous claim under s 319 and in respect of which a claim for compensation for permanent impairment has been made under s 319 of the MRC Act. 26 The AAT noted that s 68 of the MRC Act, unlike s 24 of the SRC Act, "does not provide that the Commonwealth is liable to pay 'compensation in respect of the injury' …". Rather, the Commonwealth was made liable where three criteria were established. The AAT concluded that the word "impairment" in s 5 of the MRC Act was written in terms of an "impairment in relation to a person" and focused on the loss, loss of use, damage or malfunction of "the person's body"; that the focus of the s 68(1) of the MRC Act entitlement was on "the person's having suffered an impairment and the loss that is represented by that impairment to the person"; and that this compelled a conclusion different to the conclusion reached by the High Court in Fellowes v Military Rehabilitation and Compensation Commission (2009) 240 CLR 28. 27 Further, the AAT noted (at [100]): The scheme of the MRC Act is that compensation for permanent impairment is given in respect of that permanent impairment provided it attracts the requisite number of impairment points. It does not provide for compensation in respect of a service injury or disease. 28 The quantification of any entitlement to compensation for permanent impairment, the AAT said, is not determined by s 68 of the MRC Act but by the guide determined in accordance with s 67 of the MRC Act, which was intended to set out criteria to determine impairment points, the method for determining the effect of a service injury or disease on lifestyle and the methods by which that effect and impairment points can be used to determine compensation. 29 The AAT said that s 13 of the Transitional Act directed the Commission to determine the impairment points constituted by the old injury or disease under the VE Act or the SRC Act "and count them towards that person's total impairment points". The AAT observed that: … Parliament did not intend that a person's rights and liabilities under the VE Act and the SRC Act on the one hand and the MRC Act on the other be cumulative. Parliament made that clear by providing for those injuries or diseases in respect of which the Commonwealth was clearly liable under either one or other of the compensation regimens but not under both and those in which the regimen under which it was liable was determined by the choice of the person but, again, not under both. 30 The AAT construed GARP M's reference to an "old injury or disease" as referring to injuries and diseases for which liability to pay compensation had been determined under either the VE Act or the SRC Act. This was said to be "consistent with the scheme of compensation provided in the MRC Act" and the power given to the Commission "to determine a method, if it wishes, to offset payments made to the person under the VE Act or the SRC Act". 31 The AAT viewed Ch 25 of GARP M as mirroring "general principles set out in s 13 of the Transitional Act". The AAT concluded: 1. The reference in s 67(1)(b) to "impairment points" is a reference to the impairment points resulting from "a service injury or disease", which has a particular meaning within the MRC Act and "is not one to which the VE Act or the SRC Act applies". 2. However, because s 13 of the Transitional Act required the Commission to determine the impairment points for a person resulting from an old injury or disease using the guide determined by s 67 of the MRC Act and count them toward the person's total impairment points, Parliament intended that old and new injuries or diseases are both to be assessed on the same basis absent specific authority in s 67 of the MRC Act or s 13 of the Transitional Act. The AAT concluded that such a result followed from: (a) The obligation on the MRCC to count impairment points from both service injuries and diseases as well as old injuries and diseases; and (b) "the scheme of compensation generally". Although this process "necessarily leads to a lower assessment of impairment than addition of impairment points … that is consistent with a scheme of compensation that has at its heart an assessment of whole person impairment". lt james' arguments in this court 32 Lt James argues that the AAT erred in law in misconstruing the provisions of the MRC Act. In particular, Lt James contends that the offsetting method provided by Ch 25 of GARP M was in excess of the power conferred on the Commission by the MRC Act and the Transitional Act. In particular, it is argued on behalf of Lt James that: · The text of s 13 of the Transitional Act does not support Ch 25 of GARP M in that it is concerned only with Special Rate Disability Pensions; · Chapter 25 of GARP M is not a reasonably proportionate effectuation of the delegated legislative power conferred by s 67 of the MRC Act and s 13 of the Transitional Act; · Section 13, and especially s 13(4), of the Transitional Act should be read down so as not to permit an unintended destruction of a claimant's right to seek damages at common law; · Section 13, and especially s 13(4), of the Transitional Actshould be read down because it is concerned with the quantification not the creation of a claimant's entitlement to compensation. We shall consider these arguments in turn. 33 Lt James also argues that if he is successful costs incurred by him should be paid by the Commonwealth under the power conferred by s 357 of the MRC Act. IS chapter 25 of garp m authorised by the mrc act and the transitional act? 34 The guide contemplated by s 67(1) of the MRC Act is required to be concerned with the determination for the purposes of s 68(2) of "the degree of impairment suffered by the person as a result of the compensable condition", being the "service injuries or diseases … of the person" referred to in s 68(1). That expression does not include an injury or injuries suffered prior to the operation of the MRC Act. That is hardly surprising: such injuries are compensable under the SRC Act or the VE Act. It is s 13(4) of the Transitional Act which expressly addresses the relationship between the service injury which constitutes the compensable condition for the purposes of s 68 of the MRC Act and earlier injuries which were compensable under the earlier regime. It is difficult to see that there is anything in Ch 25 of the GARP M regime which is not expressly authorised by s 13: the terms of Ch 25 mirror the provisions of s 13(4), and s 13(4) expressly authorises the inclusion in the guide produced under s 67 of the MRC Act of a method for offsetting compensation paid under the VE Act or SRC Act for previous injuries. 35 A claimant's entitlement to compensation under ss 67 to 69 of the MRC Act arises in respect of impairment resulting from a compensable condition. Section 13 of the Transitional Act facilitates ascertainment of the existence and extent of impairment which is compensable under the MRC Act in cases where compensation has been paid under the SRC Act in respect of an earlier injury which has resulted in ongoing impairment. In such cases, a claimant's entitlement to compensation is not determined solely by ss 67 to 69 in that the operation of these provisions in circumstances such as the present is affected by s 13 of the Transitional Act. 36 It was argued on Lt James' behalf that Ch 25 of GARP M may be applied to produce a negative figure, and that is said to be a result so absurd that it cannot be attributed to the legislature. It is fair to say, however, that it was acknowledged on Lt James' behalf that a negative figure does not oblige the claimant to make any payment to the Commonwealth: it simply means that no compensation is payable for the impairment the subject of a claim under the MRC Act. The difficulty we have with the argument advanced on behalf of Lt James, and which, in the end, we consider to be insuperable, is that Ch 25 of GARP M is expressly authorised by the text of s 13(4) of the Transitional Act. There is no way of reading that text down so as to rob Ch 25 of GARP M of the support afforded by that text. We will deal with Lt James' arguments in this regard after discussing his argument based on reasonable proportionality. Is Chapter 25 reasonably proportionate to the power given to the Commission? 37 The notion of reasonable proportionality as a test of the validity of delegated legislation has its origins in European jurisprudence. In England, the test was initially proposed by Lord Diplock in Council of Civil Service Unions v Minister for the Civil Service [1985] AC 374. In 2000, the European Court of Human Rights declared that reliance on Wednesbury unreasonable was inadequate, and that England must use the proportionality test in the protection of rights under the European Convention for the Protection of Human Rights (Lustig-Prean v United Kingdom (No 1) (2000) 29 EHHR 548). 38 Aronson, Dyer and Groves point out difficulties in accepting reasonable proportionality as a ground for review of administrative decisions, particularly in an Australian context removed from human rights considerations (Aronson M, Dyer B, Groves M, Judicial Review of Administrative Action (4th ed, Thomson Reuters, 2009), 380-1): … proportionality review needs an anchor, because it involves a balancing exercise at its final stage, and possibly also when determining the legitimacy of the government's objectives when limiting a protected right. No matter how the test is structured, at some stage it requires the court to assess the balance between means and ends, and that is an exercise which needs a criterion for favouring one end of the scales to the other. If the means do bear a rational relationship with permissible ends, any balancing for proportionality must logically assume a prior right, interest or freedom which can be placed in the scales. Reasonable proportionality takes as its starting point the notion that there should be minimum government interference with prior rights, interests and freedoms. If the doctrine is to retain its current shape, it can therefore be useful only if one can first identify interests which are important enough to warrant the imposition of a "minimum interference" principle. Hence the significance of the difference between the HRA's rights and the common law's rights. And hence our difficulty in understanding how proportionality review might work if, as some have argued, its coverage extends or should extend beyond HRA to the common law's fundamental or constitutional rights (whatever these might be), or even further. (Footnotes omitted). 39 In the Australian context, reasonable proportionality is a concept "at the boundaries of accepted administrative law" (Bruce v Cole (1998) 45 NSWLR 163, 185 (Spigelman CJ)). In South Australia v Tanner (1989) 166 CLR 161, the High Court said (at 167-8): … the test of validity is whether the regulation is capable of being considered to be reasonably proportionate to the end to be achieved … It is not enough that the court itself thinks the regulation inexpedient or misguided. It must be so lacking in reasonable proportionality as not to be a real exercise of the power. 40 In Minister for Resources v Dover Fisheries Pty Ltd (1993) 116 ALR 54, Cooper J stated: The substantive operation of [the] delegated legislation must be capable of being reasonably considered to be appropriate and adapted to achieve the prescribed purpose. This requires that there be a reasonable proportionality between the object or purpose and the means adopted to achieve or procure it… … The test of proportionality reflects an underlying assumption that the legislature did not intend that the power to enact delegated legislation would be exercised beyond what was reasonably proportionate to achieve the relevant statutory object or purpose; the test of reasonableness assumes that the legislature did not intend to confer a power to enact delegated legislation which enactment no reasonable mind could justify as appropriate and adapted to the purpose in issue and the subject matter of the grant. Whether one describes the test as one of "reasonable proportionality" or "unreasonableness", the object is to find the limit set by the legislature for the proper exercise of the regulation or rule making power and then to measure the substantive operation of the delegated legislation by reference to that limit. In my view there is no substantive difference between the tests as stated. (Emphasis added). 41 It is not necessary to examine any further the extent (if any) to which the tests of "reasonable proportionality" and "unreasonableness" may differ. In this case there is certainly no "limit" set by the legislation against which one can measure the operation of Ch 25 of GARP M. There is also no doubt that the introduction of the provisions of Ch 25 of GARP M was not beyond the real exercise of power conferred by the Transitional Act. Section 13(4) of the Transitional Act specifically contemplates that entitlements under the SRC Act may be offset by GARP M against MRC Act entitlements, without fixing a limit as to the effect of that setting off before reaching the point of zero entitlement. is sECTION 13 of the transitional act concerned only with SRDP'S? 42 On Lt James' behalf it was argued, with diminishing conviction as the argument proceeded, that the Explanatory Memorandum reveals s 13 of the Transitional Act is only concerned with special rate disability pensions (SRDPs). 43 Lt James submits that, because the explanatory memorandum refers to SRDPs as examples of payments that may be affected by s 13, the section is therefore limited in its application to the determination of entitlement to an SRDP. This submission is not compelling. Nothing in the text of s 13 of the Transitional Act suggests that its operation is confined to the determination of SRDP entitlements. Indeed, the contrast between the open-ended language of s 13, and especially s 13(4), and the specific reference in s 14 to SRDPs is distinctly against Lt James' argument in this respect. 44 It is also the case that, in truth, the Explanatory Memorandum, when read in full, does not seek to limit the application of the section exclusively to SRDP entitlements. The Explanatory Memorandum for ss 13 and 14 states: Clause 13 - Bringing across impairment points from a VEA or SRCA injury or disease Subclause (1) enables this clause to apply to a claim made under the MRCA for someone who also has a VEA or SRCA entitlement for an injury or disease (called the old injury or disease). It also applies to an aggravation of, or contribution to the old injury or disease or a sign or symptom of such an injury or disease. Subclause (2) requires the MRCC to use the guide authorised under section 67 of the MRCA to determine an impairment rating for the old injury or disease. The MRCC may use the impairment chapters (Chapters 1 to 22) from the GARP V established under section 29 of the VEA. Subclause (3) provides that the impairment rating for the old injury or disease, derived from the application of section 67 of the MRCA, will be taken to have been made under the MRCA for the purpose of determining any permanent impairment compensation under the MRCA. Subclause (4) allows the MRCC to include in the guide under section 67 of MRCA, the methods of calculating amounts of permanent impairment compensation. The method may, but is not required to include any provisions for offsetting of compensation paid under the VEA or SRCA for the old injury or disease. For example, this might be for the purpose of determining: • whether the person meets the criteria to be offered a choice between incapacity payments and the SRDP under section 199 of the MRCA; or • whether the person no longer meets the criteria for SRDP (section 209 of MRCA). Clause 14 – Offsetting VEA and SRCA payments against a Special Rate Disability Pension Currently, dual entitlement under the SRCA and the VEA makes it possible for a person to receive the VEA Special Rate and also claim compensation under the SRCA for injuries or diseases not related to any VEA service. This is an unintended consequence of the legislation that introduced the SRCA for coverage in Australia and overseas and yet retained access to the VEA for operational service. This clause will ensure that a similar situation does not arise in respect of persons entitled to SRDP under the MRCA by reducing the maximum weekly amount of SRDP by: • any disability pension payments for a war or defence-caused injury or disease made under the VEA; and • the weekly equivalent of a lump sum permanent impairment payment, interim compensation or additional compensation for permanent impairment made under the SRCA. 45 Finally, on this point, the reading down of the section for which Lt James contends is inconsistent with s 13(1) which applies if "a claim is made" under s 319. SRDPs are only payable once a claim under s 319 has already been made and determined (see s 199 read with s 118). It is also inconsistent with s 13(4) insofar as it applies to "compensation a person is entitled to under Pt 2 of Ch 4" of the MRC Act. SRDP payments are payable under Pt 6 of Ch 4, not Pt 2. Denial of common law damages 46 Lt James refers to s 388 of the MRC Act which bars claims against the Commonwealth for injuries and diseases suffered by service members, and to s 389(1) which allows a person to seek common law damages for non-economic loss, provided that "compensation is payable under section 68, 71 or 75 in respect of a service injury or disease of the person but the compensation has not yet been paid". 47 The argument advanced for Lt James is that if Ch 25 of GARP M is effective to allow compensation payments under the SRC Act to be offset against entitlements under the MRC Act, there will be some circumstances (such as the present), where the net compensation in respect of an injury will be zero. As a result, so the argument goes, no compensation will be payable under s 68 and the exception to extinguishment under s 389(1) will not apply. Lt James submits that this is a "significant reduction in the rights of injured persons". 48 If one thing is clear, however, it is that the purpose of s 388 of the MRC Act is to extinguish common law rights and to replace them with rights under the MRC Act. And as has been seen above, s 13(4) of the Transitional Act specifically contemplates offsetting SRC Act entitlements against MRC Act entitlements. This process is obviously apt to result in no compensation being payable in particular cases. In such a case, the applicant is in no worse position than some other injured persons to whom no compensation is payable, such as an applicant who does not meet the minimum number of "impairment points" required by s 69. Such a person will also not be entitled to bring an action within the scope of s 389(1). the right to compensation: creation or quantification? 49 On behalf of Lt James, reference was made to the decisions of the House of Lords in Lysons v Andrew Knowles & Sons Ltd [1901] AC 79 esp at 85-86, 92 and of the High Court in Nash v Sunshine Porcelain Potteries Ltd (1959) 101 CLR 353 esp at 361 as authority for the proposition that as a matter of statutory construction a provision of a statute which creates a right to compensation is not to be read down because of difficulty in accommodating provisions concerned with the quantification of compensation to the circumstances of the case. 50 Reference to this principle of construction does not avail Lt James. Insofar as s 13(4) of the Transitional Act may affect the operation of ss 67, 68 and 69 of the MRC Act, it is concerned not merely with the quantification of compensation but with the ascertainment of the impairment on which the liability of the Commonwealth to satisfy an entitlement to compensation depends. 51 In any event, there is no need for recourse to principles of statutory construction which are designed to assist in the resolution of a doubtful case. The effect of s 13(4) of the Transitional Act is not in doubt. Costs IN the aat 52 Section 357 of the MRC Act provides, by and large, an application of the usual "costs follow the event" rule if an applicant is successful: 357 Costs of proceedings before the Tribunal (1) Subject to this section and to subsection 358(1), the costs incurred by a party to proceedings instituted under this Part in respect of a determination are to be borne by that party. (2) If, in proceedings instituted by a claimant, the Tribunal makes a determination: (a) varying a determination in a manner favourable to the claimant; or (b) setting aside a determination and making a determination in substitution for the first-mentioned determination that is more favourable to the claimant than the first-mentioned determination; the Tribunal may order that the costs of those proceedings incurred by the claimant, or a part of those costs, are to be paid by the Commonwealth. … 53 Because it is clear that Lt James' cannot hope to enjoy any substantial success on the recalculation which must be carried out by the Commission, we consider that in this case there should be no orders as to the costs of the proceedings before the AAT. orders 54 We propose that the Court order that the decision of the AAT in matter No 2007/5882 given on 30 October 2009 be set aside. 55 Matter No 2007/5882 should be remitted to the Commission for determination in accordance with law. I certify that the preceding fifty-five (55) numbered paragraphs are a true copy of the Reasons for Judgment herein of Keane CJ, Middleton and Gordon JJ. Associate: Dated: 28 July 2010