FEDERAL COURT OF AUSTRALIA Military Superannuation and Benefits Board No 1 v Stanger [2002] FCA 671 ADMINISTRATIVE LAW – Military and Superannuation Benefits Board – nature of Complaints Tribunal's role – obligation to answer statutory questions – whether evidence to support tribunals findings – whether medical evidence permitted inference as to level of incapacity – capacity of Tribunal to "remake" decision Statutes Military Superannuation and Benefits Act 1991 (Cth) s 4 Military Superannuation and Benefits Rules r 19(1), 22(1), 22(2), 23(1), 23(3) Superannuation (Resolution of Complaints) Act 1993 (Cth) ss 46(1), 14(2), 14AA, 32-35, 36, 37(1), 37(3), 37(4), 37(5), 37(6) Cases Attorney-General (Cth) v Breckler (1999) 197 CLR 83 Applied Briffa v Hay (1997) 75 FCR 428 Followed Lykogiannis v Retail Employees Superannuation Pty Limited (2000) 97 FCR 361 Applied Seafarers' Retirement Fund Pty Ltd v Oppenhuis (1999) 94 FCR 594 Followed MILITARY AND SUPERANNUATION BENEFITS BOARD NO 1 v JEFFREY JOHN STANGER V633 of 2001 KIEFEL J BRISBANE 31 MAY 2002 IN THE FEDERAL COURT OF AUSTRALIA QUEENSLAND DISTRICT REGISTRY V633 OF 2001 BETWEEN: MILITARY AND SUPERANNUATION BENEFITS BOARD NO 1 APPLICANT AND: JEFFREY JOHN STANGER RESPONDENT JUDGE: KIEFEL J DATE OF ORDER: 31 MAY 2002 WHERE MADE: BRISBANE THE COURT ORDERS THAT: 1. The decision of the Superannuation Complaints Tribunal of 9 May 2001 is set aside and the matter is remitted to the Tribunal for determination according to law. Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules. IN THE FEDERAL COURT OF AUSTRALIA QUEENSLAND DISTRICT REGISTRY V633 OF 2001 BETWEEN: MILITARY AND SUPERANNUATION BENEFITS BOARD NO 1 APPLICANT AND: JEFFREY JOHN STANGER RESPONDENT JUDGE: KIEFEL J DATE: 31 MAY 2002 PLACE: BRISBANE REASONS FOR JUDGMENT 1 Mr Stanger was discharged from the Royal Australian Air Force on 9 March 1995 on the ground of invalidity. His incapacity was assessed by a delegate of the Military Superannuation and Benefits Board of Trustees on 13 March 1995. On 23 July 1999 the Incapacity Classification Committee ("the ICC") reclassified Mr Stanger at a lower level of incapacity and that decision was affirmed on review by the applicant Board. The Superannuation Complaints Tribunal did not consider that decision to be fair and reasonable in the circumstances and substituted its own decision, that Mr Stanger had had no change in the percentage of incapacity since the relevant date, 27 August 1999. The Board appeals from that decision. The appeal is limited to questions of law: s 46(1) Superannuation (Resolution of Complaints) Act 1993 (Cth) ("the Complaints Act"). STATUTORY PROVISIONS 2 The Military Superannuation and Benefits Act 1991 (Cth), s 4, required the establishment, by deed, of an occupational superannuation scheme. Clause 2(1) of the Trust Deed established the Military Superannuation and Benefits Scheme for the benefit of members of the Permanent Forces, and others, to be administered by the Board. The rules, which are set out in the Schedule to the Trust Deed, are to be read as part of the Trust Deed: cl 1(1). Rules 17 and 19 require the Board to establish the ICC and provid that it is to exercise its functions subject to the direction of the Board. 3 When a member of the Scheme is retired on the ground of invalidity, the Board or the ICC is required to determine the retiree's incapacity with respect to civilian employment and classify it. Rules 22(1) and (2) are in these terms: "(1) Where a member is retired on the ground of invalidity, the Board or the Committee must determine the percentage of incapacity in relation to civil employment of the invalidity retiree and must classify the retiree according to the percentage of incapacity as follows: Percentage of Incapacity Class 60 % or more A 30% or more but less than 60% B Less than 30% C (2) In determining, for the purposes of subrule (1), the percentage of incapacity in relation to civil employment of an invalidity retiree, the Board or the Committee must have regard to the following matters only: (a) the vocational, trade and professional skills, qualifications and experience of the retiree; (b) the kinds of civil employment which a person with the skills, qualifications and experience referred to in paragraph (a) might reasonably undertake; (c) the degree to which the physical or mental impairment of the retiree that is the cause of the invalidity by reason of which he or she has been retired has diminished his or her capacity to undertake the kinds of civil employment referred to in paragraph (b)." 4 Rule 23(1) permits a reclassification of a pensioner in respect of the incapacity. It is in these terms: "Where the Board or the Committee, at any time, is satisfied that there has been such a change in the percentage of incapacity in relation to civil employment of an invalidity pensioner that his or her classification should be altered, the Board or the Committee may reclassify him or her in the appropriate classification set out in rule 22 according to the percentage of his or her incapacity in relation to civil employment." 5 In similar terms to rule 22(2), rule 23(3) requires three matters to be taken into account: "(3) In determining, for the purposes of subrule (1), the percentage of incapacity in relation to civil employment of an invalidity pensioner, the Board or the Committee must have regard to the following matters only: (a) the vocational, trade and professional skills, qualifications and experience of the pensioner; (b) the kinds of civil employment which a person with skills, qualifications and experience referred to in paragraph (a) might reasonably undertake; (c) the degree to which any physical or mental impairment of the pensioner, being a prescribed physical or mental impairment, has diminished his or her capacity to undertake the kinds of civil employment referred to in paragraph (b). The phrase "a prescribed physical or mental impairment" is defined by subrule (10) of rule 23 to mean: "(a) a physical or mental impairment of the pensioner that was the cause, or one of the causes, of the invalidity by reason of which he or she was retired, whether or not that impairment has changed, for better or worse, since that retirement; or (b) any other physical or mental impairment of the pensioner causally connected with a physical or mental impairment referred to in paragraph (a)." 6 The Complaints Act establishes a system for the determination of complaints about, and reviews of, decisions made in the administration of superannuation and other funds. Section 14(2) provides that a person may make a complaint, other than an "excluded complaint", to the Tribunal established under the Act, on the basis that the decision is or was unfair or unreasonable. Section 14AA confirms that a complaint may be made about a decision which involved an exercise of discretion. Given the role of the Tribunal, as I later discuss, this may be taken to refer to the broad meaning of discretion, as encompassing the formation of opinions and value judgments. The Tribunal, in conducting a "review meeting" prior to making a decision (see ss 32-35) is able to inform itself of any relevant matter: s 36. Section 37 provides for the powers of the Tribunal with respect to the review. Sub-sections 37(1), (3), (4), (5) and (6) provide: "(1) For the purpose of reviewing a decision of the trustee of a fund that is the subject of a complaint under section 14: (a) the Tribunal has all the powers, obligations and discretions that are conferred on the trustee; and (b) subject to subsection (6), must make a determination in accordance with subsection (3). (3) On reviewing the decision of a trustee, insurer or other decision‑maker that is the subject of, or relevant to, a complaint under section 14, the Tribunal must make a determination in writing: (a) affirming the decision; or (b) remitting the matter to which the decision relates to the trustee, insurer or other decision-maker for reconsideration in accordance with the directions of the Tribunal; or (c) varying the decision; or (d) setting aside the decision and substituting a decision for the decision so set aside. (4) The Tribunal may only exercise its determination‑making power under subsection (3) for the purpose of placing the complainant as nearly as practicable in such a position that the unfairness, unreasonableness, or both, that the Tribunal has determined to exist in relation to the trustee's decision that is the subject of the complaint no longer exists. (5) The Tribunal must not do anything under subsection (3) that would be contrary to law, to the governing rules of the fund concerned and, if a contract of insurance between an insurer and trustee is involved, to the terms of the contract. (6) The Tribunal must affirm a decision referred to under subsection (3) if it is satisfied that the decision, in its operation in relation to: (a) the complainant; and (b) so far as concerns a complaint regarding the payment of a death benefit—any person (other than the complainant, a trustee, insurer or decision‑maker) who: (i) has become a party to the complaint; and (ii) has an interest in the death benefit or claims to be, or to be entitled to benefits through, a person having an interest in the death benefit; was fair and reasonable in the circumstances." THE BOARD'S DECISION 7 When the Board's delegate initially assessed Mr Stanger's incapacity at retirement the cause of the physical incapacity was described, by reference to medical opinion based upon an x-ray, as: "…fusion of L3/4 with associated pain in back and left leg and left acromo-clavicular joint arthritis with left shoulder pain." (The reference to the impairment arising from the shoulder does not assume importance on this appeal). 8 Dr L, the orthopaedic surgeon who had treated and reviewed Mr Stanger's condition had concluded that the fusion of the vertebrae was due to an old trauma. Elsewhere there is a reference to an incident which had occurred in 1993 and which was associated with the onset of pain. The delegate assessed Mr Stanger's incapacity at sixty per cent and classified him as a class A invalidity retiree. He directed a review of the classification in three years. The kinds of civil employment considered suitable to Mr Stanger, had he not been incapacitated, were security guard, truck driver and storeman. The impairment was said to have diminished his capacity to undertake those kinds of employment to a large degree overall. 9 Prior to that decision, on 17 August 1994, a CT scan of the lumbar spine was said to show fusion of the L3/4 disc level, but no disc protrusion, and at the L5/S1 level a "moderate generalised disc bulge …". An earlier x-ray report, of 29 July 1994, had referred to narrowing of the L4/5 disc space. Prior to the CT scan, a note from a medical officer to a physiotherapist appears to refer to L5/S1 as "extremely tender", although the hand-writing is not entirely clear. On the same day, 2 August 1994, a physiotherapist appears to have referred to "L5/S1" in notes, but it is not possible to read what is said about it. It is not apparent whether these documents were before the delegate. On 16 December 1994 a review by the Employment Standards Committee of the Department of Defence referred to x-rays as having shown long-standing fusion of L3/4 anteriorly and Dr L's opinion. This was the report referred to in the initial determination and assessment of 13 March 1995. 10 In 1999 the matter of the applicant's incapacity classification was reviewed. Dr W, a consultant orthopaedic surgeon, was provided with the description of Mr Stanger's impairment as set out in [7] above. It did not contain a reference to any condition at the L5/S1 level. Dr W however, made reference to it. He reviewed the x-rays and scan taken in 1994 and an x-ray taken on 3 June 1999. The scan was said by Dr W to have "revealed no significant abnormality apart from a moderate and generalised posterior disc bulge at the L5/S1 level" and the x-ray taken in June 1999 "revealed similar appearances at the L3/4 level but also revealed narrowing of the L5/S1 intervertebral disc space with some degenerative changes of the facet joints at this level". The doctor was requested to provide an assessment of the degree of incapacity in the three civil occupations which had been considered by the delegate. His assessment of the diminution of Mr Stanger's capacity to work in those occupations differed from the initial assessment. He considered it to be less than sixty per cent with respect to the occupations of truck driver and storeman and less than thirty per cent with respect to that of security officer. In undertaking that task the doctor answered questions which referred to "the impairment". Given his identification of the condition at L5/S1 it is not entirely clear whether he was assessing only the impairment as defined, or the whole of Mr Stanger's present incapacity arising from problems with his lower back. No mention was made of the relationship with the conditions at the two levels and whether, as at the time of retirement, that at L5/S1 would have been productive of incapacity. He was not asked, and did not offer an opinion, whether there had been any apparent change. 11 On 23 July 1999 the ICC reclassified the incapacity as forty per cent and at a lower level of pension entitlement, Class B. Mr Stanger sought a reconsideration of that decision. 12 The Schemes Reconsideration Section requested a report from Dr L. On 23 November 1999 he advised that: "Mr Stanger has a fusion at L3/4 which is either post-infective or congenital. He has severe low back pain which is most likely due to a degenerative disc at L5/S1 and as proven on MRI there is no deformity at this level or neurological loss". 13 This advice, which assumes some importance on the appeal, was in the same terms as that provided by the doctor to the Returned & Services League of Australia (Qld Branch) a copy of which is included in the documents which were before the Tribunal. In that letter Dr L expressed the opinion that the applicant was effectively unemployable and that in his view it was "somewhat harsh" to reduce his allowance from Class A to Class B. In the advices to the Schemes Reconsideration Section, Dr L added that the reference to the impairment which caused the applicant's retirement from the defence forces namely "fusion at L3/4 with associated pain in back and left leg" and "left AC joint arthritis with left shoulder pain" was appropriate. 14 Dr La was also asked to report. On 22 December 1999 he advised that the x-rays taken in June 1996 (it is not clear whether this date is correct) showed "a decreased disc space at L5-S1 with anterior fusion at L3-4, the latter probably dating from previous trauma or childhood infection". An MRI investigation revealed "desiccation and degenerative change at the L3/4 level and also at L5/S1. … There is some posterior facet arthritis at L5/S1" There was no sensory change in the L5 or S1 nerve root distribution on examination. He concluded: "I consider the degenerative change at L5/S1 is a constitutional change for this patient, unconnected with the incident when the dog struck him as he described and unconnected with his Air Force career. I consider he should be assessed as if he has a moderate impairment of function for the job of Security Officer, Driver or Storeman but I consider that he should be capable of working as a Courier Driver, the impairment for this position being small. I think the impairments are likely to stay the same. There are no causally connected impairments, other than the Retirement impairments." 15 The Reconsideration Advisory Committee made a recommendation to the Board to affirm the ICC's decision of 23 July 1999. It noted that the request for consideration of the R & SLA (Qld Branch) was based upon medical evidence which had not been made available to the ICC, namely the report of Dr L dated 18 August 1999, MRI scan of 25 June 1999 and the x-ray taken on 3 June 1999. 16 Under the heading "Prescribed Physical or Mental Impairment" the Committee advised: 11. The Committee notes that Mr Stanger initially suffered an injury to his lumbo-sacral spine in 1993, however he had not reported any pain in this region until May of the following year. The back pain worsened and he had been referred to orthopaedic surgeon, Dr L…, in August 1994, at which time an xray demonstrated moderate generalised disc bulge at the L5/S1 level. A bone scan at that time revealed 'partial fusion across a narrowed L3/4 disc space with some associated moulding of the anterior portions of adjacent vertebral bodies'. No destructive bony lesion had been identified and it had been felt that the appearance most likely represented partial fusion resulting from childhood trauma prior to fusion of the secondary ossification centres which as a result had been disrupted. The findings were reported as 'reflecting the increased sclerosis and bone in this region with ongoing activity', but not suggestive of an active discitis nor any other inflammatory condition. Dr L… had recommended back exercises and modification to his lifestyle in the work place and activities of daily living, believing Mr Stanger's back condition to be disabling and quite significant, particularly in relation to sitting." … 13. The Committee notes that orthopaedic surgeon Dr L… considers the description of the retirement impairment … to be appropriate, while orthopaedic surgeons Drs W…and La… have not recommended any alternative descriptions and in the absence of evidence identifying any separate conditions causing any additional incapacity since discharge, the committee concurs with the ICC that Fusion of the 3rd and 4th lumbar vertebrae with associated back pain, pain in Left leg; Left Acromioclavicular Joint Arthritis with Left Shoulder Pain aptly describes Mr Stanger's prescribed impairment.". 17 The Committee then considered the various civilian occupations otherwise open to Mr Stanger and his incapacity with respect to them. In doing so the Committee took into account the differing medical opinions. It had regard to aspects of the occupations in coming to its own view as to the extent of the incapacity with respect to each of the occupations. 18 The Committee noted, in its conclusion, Dr L's assessment of Mr Stanger's incapacity as "severe" but it was of the view that the doctor had based his assessments on his opinion that Mr Stanger "was unsuitable for the various occupations as listed, thereby considering him to be effectively unemployable". It did not consider that to be borne out by the evidence or to be the correct view. THE Tribunal DECISION 19 The Tribunal determined that the impairment to the discs at L5/S1 was either part of the prescribed physical impairment or causally connected with it. It reasoned as follows: "The question before the Tribunal is whether or not the operation of the Trustee decision to reclassify the Complainant from Class A to Class B was fair and reasonable in the circumstances. The Tribunal notes that the difference of opinion between the Complainant and the Trustee hinges on ascertaining the precise nature of the "prescribed physical or mental impairment" and whether or not the L3/4 and L5/S1 disc problems were "causally connected impairments." After reviewing the medical evidence, the Tribunal notes that there was clear evidence of a disorder in the spine other than at the L3/4 level at the time of the Complainant's retirement from the Employer. It is useful to quote in full the "prescribed physical or mental impairment" which was: fusion of 3rd and 4th lumbar vertebrae with associated back pain, pain in left leg, left acromioclavicular joint arthritis with left shoulder pain. In the view of the Tribunal, the medical evidence supports the Complainant's argument that the problems at L5/S1 were either part of the prescribed physical impairment or were causally connected with it. The Tribunal reaches this conclusion on the basis that the L5/S1 problem: · was in existence at the time of retirement; · is not excluded from being part of the prescribed impairment in any of the medical evidence; · could have contributed to or been part of the "associated back pain" referred to as part of the prescribed impairment and/or contributed to the 'pain in left leg"; and · was not excluded as being causally connected with the prescribed impairment by the two medical reports requested by the Trustee, and in respect of which, the Trustee had expressly asked the doctors to provide an opinion. The Tribunal is aware that both Dr W and Dr La were asked about "causally connected impairments" but neither distinguished the L5/S1 condition as being unassociated with the impairment which resulted in the Complainant's incapacity for employment. In addition, neither doctor stated that the L5/S1 was not causally connected. The Tribunal also notes that the Trustee has interpreted Dr La's report as providing an assessment that excludes the L5/S1 condition, and as a result of such exclusion, concludes that he has a moderate impairment for work as a security officer, driver or storeman but a small impairment for work as a courier driver. The Tribunal disagrees with this interpretation. On the face of it, Dr La's report stated that the L5/S1 change is unconnected with the incident when a dog struck the Complainant and nothing further. In any case, the Tribunal notes that the Trustee must take the Complainant as he finds him; and, that is the totality of the person that is to be assessed as a collective entity - Minehan v AGL Employees Superannuation P/L [1998] ACTSC 114. The Tribunal agrees with the Complainant that it would appear unlikely that he could obtain employment as a courier driver or as an animal trainer. In fact, on the evidence before the Tribunal it appears that a fair and reasonable assessment of the totality of the medical evidence is that the Complainant's incapacity precludes him from undertaking any such employment. In reaching this conclusion the Tribunal also took into account that the Complainant had in fact unsuccessfully attempted employment in a number of areas deemed suitable by Dr La." THE APPEAL 20 A supplementary Notice of Appeal was filed by the Board. I take it to replace that originally filed. The principal issue which in my view arises on the appeal is whether there was any evidence to support the Tribunal's findings about the involvement of the condition at L5/S1. There can be no doubt that in such a context a complete absence of evidence may amount to an error of law. The Board submits that, there being no medical evidence showing that it was either part of the physical impairment at retirement or causally connected with it, the Tribunal's findings were merely speculative. It further submits that it is not possible under r 23 to make alternative findings, for logically something cannot be a cause of the impairment and also causally connected with it. Further grounds relate to the way in which the Tribunal dealt with Dr La's report and to the Tribunal statements in the penultimate paragraph of the reasons set out above, in these respects it is contended that the Tribunal took into account irrelevant considerations or applied wrong principles. 21 The process which the Tribunal undertakes requires it to form an opinion on the evidence before it as to whether the Board's decision was unfair or unreasonable. If it comes to either view, it may substitute its own determination: Attorney-General (Cth) v Breckler (1999) 197 CLR 83, 129 [89], Kirby J. Decisions of this Court also confirm the nature of the decision-making process as one commenced afresh, as if the Tribunal were the decision-maker: see Seafarers' Retirement Fund Pty Ltd v Oppenhuis (1999) 94 FCR 594; 598-599; Briffa v Hay (1997) 75 FCR 428, 437 Merkel J; Lykogiannis v Retail Employees Superannuation Pty Limited (2000) 97 FCR 361, 372 [48], Mansfield J. The Tribunal's additional task is to consider whether the Board's decision is unfair or unreasonable in light of its determination. 22 The question whether the Board's decision was unfair or unreasonable can only be assessed after the Tribunal comes to its views on the same matters referred to in r 23, albeit that it may further inform itself. It would follow that it would consider the question whether there has been a change in the percentage of incapacity, in relation to civil employment, such as would warrant reclassification. This does not appear to have been a matter directly addressed by the ICC, the Board or the Tribunal, but it is not one of the issues on the appeal. 23 In my view the Board's submission that the Tribunal has not done what the statute required of it is correct. It did not determine what was the "prescribed physical impairment". Its approach left unanswered which part of the definition the L5/S1 condition fell into, although it might be thought to have considered the possibility that it was part of the cause of the invalidity at retirement as greater. The Tribunal's uncertainty is a reflection of the state of the medical evidence. What was necessary to be undertaken by it, and the Committees before it, was to obtain clarification of the medical evidence in light of the reference to another condition at L5/S1. There is presently no evidence that the L5/S1 condition was productive of incapacity at the time of retirement or that it is associated with the condition then noted. 24 The only reference to a condition productive of incapacity at the time of retirement was to that at L3/4. The Tribunal was no doubt conscious of this when it surmised the condition that at L5/S1 must have been encapsulated in the words "associated back pain" and "pain in left leg". These are references to symptoms resulting from a condition of the spine, but the only condition identified was that at L3/4. Without more these words do not stand as evidence of some extended description of the condition or as referrable to another. The commencing point of the Tribunal's reasoning was that "the L5/S1 problem was in existence at the time of retirement". It is correct that a moderate disc bulge was observed at the relevant time. What is missing is any evidence that the condition, as it then was, was the cause of any incapacity. The later medical evidence does not assist, for no doctor revisits the question of the incapacity at retirement with the L5/S1 condition in mind. Dr W simply noted narrowing of the disc space with some degenerative changes and Dr La refers to it as a constitutional change which might imply recovery. If the Tribunal was right to consider that Dr La did not actually discount the condition as a relevant impairment, because he focussed upon whether it was an employment-related condition, his report does not provide the necessary evidence. Even Dr L, whose view about the level of incapacity the Tribunal appears to have shared, left the matter unresolved. 25 It is true that Dr L attributed Mr Stanger's present severe low back pain to a degenerative disc at L5/S1. In his concluding remarks in that report the doctor confirms the initial description of the impairment as correct, namely "fusion at L3/4 with associated back pain in back and left leg". The Tribunal must have thought that Dr L must have intended a reference to the L5/S1 condition in the initial description, especially since there was no explanation otherwise as to how the two views could be squared. The Tribunal's reference in its reasons to possibilities and as matters not being excluded is, as I have said, a reflection of the state of the medical evidence. What Dr L did not address in his report was whether the L5/S1 condition was likely to have been present at retirement and productive of incapacity. That may have required an explanation as to why the description of the condition then referred only to L3/4. If it was seen as the or a source of impairment then, did it have a connexion with the other condition and does it now? There would seem to me no reason, in principle, why an expert could not revise an initial description of a condition if later information revealed more. It is just that here Dr L has not apparently done so. The Tribunal was left to conjecture and that cannot take the place of evidence on the point. conclusion 26 The Tribunal did not identify the impairment it was assessing as the statute required. In finding that what Dr L had described as the present cause of the severe pain, L5/S1, was either present and a cause of the incapacity at retirement, or it was associated with what was the cause, it speculated. There was no evidence to enable either conclusion. The evidence did not permit any inference to be drawn. What was necessary was medical opinion directly on the point. 27 The decision will be set aside and the matter remitted to the Tribunal for determination according to law. There is no issue as to costs in this case. I certify that the preceding twenty-seven (27) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Kiefel. Associate: Dated: 31 May 2002 Counsel for the Applicant: Mr P Hanks QC Solicitor for the Applicant: Australian Government Solicitor Counsel for the Respondent: Mr D Honchin Solicitor for the Respondent: Purcell Taylor Date of Hearing: 5 February 2002 Date of Judgment: 31 May 2001