FEDERAL COURT OF AUSTRALIA Comcare v Marinceski [2007] FCA 2088 COMCARE v JOHN MARINCESKI AND ADMINISTRATIVE APPEALS TRIBUNAL NSD 644 OF 2007 FLICK J 28 DECEMBER 2007 SYDNEY IN THE FEDERAL COURT OF AUSTRALIA NEW SOUTH WALES DISTRICT REGISTRY NSD 644 OF 2007 BETWEEN: COMCARE Applicant AND: JOHN MARINCESKI First Respondent ADMINISTRATIVE APPEALS TRIBUNAL Second Respondent ON APPEAL FROM THE ADMINISTRATIVE APPEALS TRIBUNAL CONSTITUTED BY SENIOR MEMBER ALLEN JUDGE: FLICK J DATE OF ORDER: 28 DECEMBER 2007 WHERE MADE: SYDNEY THE COURT ORDERS THAT: 1. The appeal be allowed. 2. The decision of the Administrative Appeals Tribunal dated 16 March 2007 be set aside and the matter be remitted to the Tribunal for further determination in accordance with these reasons. 3. The Amended Application for an order of review be dismissed. 4. The cross-appeal be dismissed. 5. Leave to amend the Notice of Cross-Appeal be refused. 6. The First Respondent to pay the costs of the Applicant. 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 NSD 644 OF 2007 ON APPEAL FROM THE ADMINISTRATIVE APPEALS TRIBUNAL CONSTITUTED BY SENIOR MEMBER ALLEN BETWEEN: COMCARE Applicant AND: JOHN MARINCESKI First Respondent ADMINISTRATIVE APPEALS TRIBUNAL Second Respondent JUDGE: FLICK J DATE: 28 DECEMBER 2007 PLACE: SYDNEY REASONS FOR JUDGMENT 1 On 16 March 2007 the Administrative Appeals Tribunal published its reasons for decision in respect to a claim for compensation made by Mr John Marinceski. 2 The facts raised by the Notice of Appeal are not disputed. The principal issue in dispute is the application of s 52(3) of the Compensation (Commonwealth Government Employees) Act 1971 (Cth) and also s 52(4)(g) of that Act. 3 The facts may be stated simply. On 2 April 1979 Mr Marinceski was retired from his position as a gardener with the Department of the Capital Territory — Parks and Gardens, on the ground of invalidity. From 24 May 1979 Mr Marinceski has been receiving an invalid pension payable under s 24 of the Social Security Act 1947 (Cth). 4 Prior to May 1979, namely on 9 March 1979, Mr Marinceski made a claim for compensation payable pursuant to the 1971 Act.That Act has been repealed by s 139 of the Safety, Rehabilitation and Compensation Act 1988 (Cth). The 1988 Act came into force on 1 December 1988. Section 124(1), however, provides that it is the 1988 Act that applies in relation to an injury loss or damage suffered by an employee, whether before or after the commencement of the 1988 Act. Section 124(2) further provides that an employee who suffered an injury before the commencement of the 1988 Act is not entitled to compensation unless he or she was previously entitled to compensation under the 1971 Act. 5 On 19 February 1985 Mr Marinceski's claim for compensation was ultimately accepted by the Commissioner for Employees Compensation. 6 A sum of $ 4,477.09, being the amount of tax payable on the lump sum payment, was deducted from the compensation paid to Mr Marinceski. The manner in which this sum was calculated was explained in a letter from the Department of Territories to the Commissioner of Taxation dated 11 July 1986. That letter was in evidence before the Tribunal and formed part of the statement provided pursuant to s 37 of the Administrative Appeals Tribunal Act 1975 (Cth). That letter detailed what was described as "the gross amount" payable to Mr Marinceski for the period 1979 through to 1986, and the tax payable for the years there identified. 7 In determining the amount of compensation on appeal, the Administrative Appeals Tribunal concluded that s 52(3) conferred an "unfettered discretion" and empowered it to give consideration to the tax payable by reason of compensation having been paid. In resolving the dispute, the Tribunal decided in part as follows: [26] I therefore set aside the decision under review and remit this matter to the Respondent with the direction that the calculation of underpayment to the Applicant is to be increased by the sum of $ 4,477.09, being the amount of tax extracted from his lump sum payment of compensation. 8 It is common ground between the Applicant and Mr Marinceski that the Tribunal erred in concluding that s 52(3) conferred an "unfettered discretion". The Applicant contends that the taxation consequences of payments made is not within the ambit of the power conferred by s 52(3) and that that section confines consideration to the quantification of compensation payable; Mr Marinceski contends that s 52(3) does permit consideration to be given to the taxation consequences of a payment being made to a recipient of compensation. 9 A further matter dividing the parties is that Mr Marinceski wishes to contend on appeal to this Court that s 52(3) does not extend to any deduction being authorised for payments payable under the Social Security Act 1947 (Cth)or, alternatively, the payments in fact made in the present case. Mr Marinceski also contends that s 52(4)(g) "required the decision-maker to exclude payments in respect of dependent children". 10 The Tribunal has filed a submitting appearance. Section 52(3) — a deduction for invalid pension? 11 Section 52 of the Compensation (Australian Government Employees) Act 1971 (Cth) is a lengthy and somewhat complex provision. It is a section which provides for a reduction in the compensation payable. 12 Section 52(3) provides as follows: Where, in relation to any period in respect of which compensation is payable to an employee in accordance with section 45, 46, 47 or 50, an amount is, or amounts are, paid or payable to the employee by the Commonwealth (not being an amount or amounts by way of salary, wages or pay) by reason of the injury in respect of which the compensation is payable or by reason of any incapacity resulting from that injury, the compensation payable to the employee under that section in respect of that period is, subject to subsection (4), such amount per week as is determined by the Commissioner, having regard to the circumstances giving rise to the payment of, or the liability of the Commonwealth to pay, that amount or those amounts, but the amount so determined shall not exceed the amount per week of the compensation that, but for this subsection, would be payable to the employee under that section in respect of that period. 13 The Applicant's Notice of Appeal raised for resolution the correct construction and application of this provision. The Notice of Cross-Appeal as filed on behalf of Mr Marinceski raised for resolution the following three questions, namely: (1) Did the Tribunal err in law in failing to take into account the effect of subsection 52(4)(g) of the Compensation (Australian Government Employees) Act 1971? (2) Did the Tribunal err in finding that the tax paid on the lump sum payment was $4,477.09? (3) Did the Tribunal err in applying the policy against "double dipping"? 14 By a document titled "Amended Notice of Cross-Appeal", Mr Marinceski seeks to contend that s 52(3) does not extend to or embrace any deduction for payments made by way of invalid pension. He sought leave to amend. If leave is granted, he further seeks to contend that, even if s 52(3) does permit a deduction for such a pension, there should be no deduction in the present case because there was no evidence before the Tribunal that the invalid pension paid to him was payable by reason of the same injury for which compensation was paid. His Outline of Submissions concluded by contending that: The tribunal had before it no evidence that the invalid pension paid to the respondent was paid in respect of "incapacity arising from an injury for which compensation was payable." It is submitted that that tribunal erred in failing to take any account of whether the pension paid to the respondent was in respect of incapacity arising from an injury for which compensation is payable. It seems simply to assume that the compensation and pension were paid in respect of the same incapacity. 15 These contentions, it is considered, had not been raised by the existing Notice of Cross-Appeal. Leave to now pursue such factual contentions should not be entertained. 16 Subsequent to the hearing of the appeal, further submissions were filed by both the Applicant and Mr Marinceski directed to the questions whether leave should be given to amend the Notice of Cross-Appeal. In the further submissions filed on behalf of Mr Marinceski, it was foreshadowed that "it would be a matter of small moment" for this additional factual matter to be pursued before the Tribunal should the proceedings be remitted to the Tribunal for further consideration. Reliance was placed upon the following observations of Mansfield J in Murran Investments Pty Ltd v Aromatic Beauty Products Pty Ltd [2000] FCA 1732, 191 ALR 579: [44] In Celestino v Celestino (unreported, Spender, Miles and von Doussa JJ, 16 August 1990) (Celestino), the court had to consider an application made during the course of an assessment of damages that a written admission of liability be withdrawn. The Full Court quoted with approval the principle stated by Bowen LJ in Cropper v Smith (1884) 26 Ch D 700 at 710–11: … the object of Courts is to decide the rights of the parties, and not to punish them for mistakes they make in the conduct of their cases … I know of no kind of error or mistake which, if not fraudulent or intended to overreach, the Court ought not to correct, if it can be done without injustice to the other party … as soon as it appears that the way in which a party has framed his case will not lead to a decision of the real matter in controversy, it is as much a matter of right on his part to have it correct, if it can be done without injustice, as anything else in the case is a matter of right. [45] That statement of principle was approved by the High Court in Clough and Rogers v Frog (1974) 4 ALR 615, 48 ALJR 481, and in JL Holdings at CLR 154; ALR 357. It is therefore necessary, as their Honours point out in Celestino at pp 8–10, to be satisfied: · that an error or mistake by or on behalf of the party seeking the amendment has been demonstrated; · that a sensible explanation for the making of the admission has been provided, based on evidence of a solid and substantial character; and · that no injustice will be occasioned to the other party by the withdrawal of the admission, other than hardship by delay or cost which can be accommodated by an appropriate order for costs. 17 It is also relevant to note the following comments of Justice Kenny in Matland Holdings Pty Ltd v NTZ Pty Ltd [2002] FCA 1590. Her Honour there referred to Celestino, supra, and continued: [47] In the context of the present application I am mindful too, of the observations of Gillard J in McKenzie v The Commonwealth, [2001] VSC 361 at [44] to [45] to the following effect: I respectfully disagree with the Full Court of the Federal Court [in Celestino] if it was seeking to lay down any principle, that it is necessary to show that there was an error or mistake and that there was a reasonable explanation for making an admission, before a party was entitled to withdraw the admission in a pleading. It cannot be denied that the Court would expect some explanation of the change, but the absence of an explanation of what the Court considered was an adequate or reasonable explanation, could hardly be determinant of the application. In the end, it is a question of doing justice between the parties. These observations of Kenny J have since been cited by Nicholson J in BP Australia Pty Ltd v Nyran Pty Ltd [2003] FCA 834 at [24] 18 Reliance is also placed upon the fact that Mr Marinceski was unrepresented before the Administrative Appeals Tribunal. 19 A number of obstacles, however, confront Mr Marinceski being given leave to amend. First, a factual matter not put in issue before the Tribunal was whether or not the invalid pension was paid by reason of the same injury. Indeed, it would appear that the contrary was the position previously adopted by Mr Marinceski. His "Statement of Facts and Contentions" as filed with the Tribunal thus stated: [8] Following the Applicant's retirement on 2 April 1979 and up until his receipt of compensation on 6 February 1986, the Applicant had been on an invalid pension by reason of the injury in respect of which the compensation was payable. 20 It is difficult to envisage a set of circumstances in which a party should be permitted to agitate on appeal a contention dependent upon a finding of fact not made by the Tribunal and not even put in issue before the Tribunal. Even in circumstances where there is no constraint upon an Applicant such as s 44(1) of the Administrative Appeals Tribunal Act 1975 (Cth), a party is normally bound by the manner in which he conducted the hearing the subject of appeal. In the present case, there is a very real prospect that Comcare may well have conducted the hearing before the Tribunal differently had the present factual matter been then put in dispute. 21 Even though Mr Marinceski was not represented before the Administrative Appeals Tribunal, the "Statement of Facts and Contentions" as filed with that Tribunal was prepared by and signed by a person described as the "Solicitor for the Applicant". The transcript of the proceedings before the Tribunal further indicates that Mr Marinceski "adopted" the "Statement of Facts and Contentions" prepared by his "former solicitor." 22 In considering whether or not to allow the amendment, it matters little that the initial Notice of Cross Appeal did not then raise any contention as to whether the injury was the same as that for which compensation had been paid. That Notice of Cross Appeal was prepared by the solicitor who appeared for Mr Marinceski on the hearing of this appeal. Any prejudice to the Applicant occasioned by that Notice not containing an appropriate ground of cross-appeal could be addressed by an order for costs. 23 That which presently matters is how the issues were identified for resolution by the Tribunal. No explanation has been provided as to how the "Statement of Facts and Contentions" then came to be drafted or the basis upon which the admission in paragraph 8 of that statement was made. Had it not been made, and had the issue been raised for resolution, the Tribunal would necessarily have had to consider further evidence. It is not considered that the prejudice to the present Applicant could satisfactorily be overcome by now permitting the amendment and making an order for costs of the appeal. 24 Second, the contention that s 52(3) does not permit any deduction for payment of an invalid pension is not dependent upon any resolution of any factual dispute. If that question were to be entertained and resolved in favour of Mr Marinceski, it would matter not that the injury for which an invalid pension was payable was in respect to the same injury for which compensation was paid or some other injury. But this question of statutory construction was not raised for resolution before the Tribunal and, accordingly, was not the subject of decision. The right of appeal conferred by s 44 of the Administrative Appeals Tribunal Act 1975 (Cth) is not an unconfined right of appeal. The right of appeal is confined to "an appeal … on a question of law, from any decision of the Tribunal": see TNT Skypack International (Aust) Pty Ltd v Federal Commissioner of Taxation (1988) 19 ATR 1067, 82 ALR 175. 25 Difficulties may be confronted in identifying a question of law in circumstances where an issue is first raised on appeal: Taxation, Federal Commissioner of v Raptis (1989) 19 ALD 726; 89 ATC 4994 at 4999 per Gummow J; Hill v Repatriation Commission [2005] FCAFC 23 at [118] per Wilcox, French and Weinberg JJ, 218 ALR 251. Those difficulties are encountered in the present proceedings. 26 Irrespective of whether any appeal would involve a departure from the manner in which the case was conducted before the Tribunal, and thereby expose the Applicant to prejudice, it is not considered that the granting of leave would clearly raise "a question of law, from any decision of the Tribunal" within the meaning of s 44(1) of the 1975 Act. 27 Without resolving the issue, a preliminary view has been formed that there is little reason to construe s 52(3) of the 1971 Act as excluding consideration being given to payments payable under the Social Security Act 1947 (Cth) or, more particularly, invalid pensions. The contention sought to be advanced on behalf of Mr Marinceski that s 52(3) is confined to payments in respect to "compensation" is one which holds little attraction. Not only is there little reason to narrowly construe the terms of s 52(3) itself, s 52(4) seeks to start from an assumption that there is a need to exclude payments which would otherwise fall for consideration under s 52(3), including payments under the social security regime. As submitted by the Applicant, there is little purpose in seeking to expressly exclude such payments under s 52(4) unless s 52(3) includes payments under the social security regime. The contention on behalf of Mr Maricenski that the sole source of legislative authority to make an adjustment for payments received from a variety of Commonwealth sources remained the Social Security Act 1947 (Cth) is not supported by the terms of s 52(3) itself. 28 Third, the existing draft Amended Notice of Cross Appeal does not presently identify the "question of law to be raised on the appeal" for the purposes of O 53 r 3(2)(b) of the Federal Court Rules 1979 (Cth). The Federal Court Rules require "strict compliance": Ibarcena v Secretary, Department of Family & Community Services [2001] FCA 453, 33 AAR 76. But for the other obstacles confronting Mr Marinceski, the Amended Notice of Cross-Appeal could have potentially been further amended. The other obstacles, however, are such that there is little point in seeking to redraft a document in respect to which leave would otherwise be refused. 29 Leave to amend the Notice of Cross-Appeal is refused. Section 52(3) – is tax to be considered? 30 This question, it is understood, involves at least two disparate matters, namely: 1. As a matter of construction, is s 52(3) confined to a determination of payments referable to compensation, or does it include consideration being given to the tax otherwise payable by a recipient of compensation? 2. If consideration may be given to the tax payable by a recipient, was the decision of the Tribunal as to the amount of $4,477.09 "arbitrary" such that it should be set aside? 31 As to the former matter, it was contended on behalf of Mr Maricenski that the Tribunal committed no error in taking into account the fact that tax had been deducted from the compensation otherwise payable. The authority to take that matter into account, it was argued, was conferred by the terms of s 52(3) and in particular the authority to have "regard to the circumstances giving rise to the payment". That phrase, it was contended in his written submissions, was sufficiently broad as to extend to the personal "circumstances" of Mr Marinceski including the fact that: The payment of pension monies was made in circumstances of, and because, the decision(s) of the respondent incorrectly deprived the respondent of his entitlement to compensation for a period of close to 7 years. 32 Contrary to the assertion of Mr Maricenski, it is considered that the tax consequences of compensation being payable is not a matter which falls for determination by the Commissioner. The statutory phrase itself directs attention to those circumstances "giving rise to the payment." That phrase, by its terms, confines consideration to whatever may be the relevant circumstances that give rise to the payment. The consequences of any payment being made, including any tax that may become payable should compensation be paid, post-date the making of any payment and fall outside of the authority conferred upon the Commissioner. 33 Reliance by Mr Maricenski upon Secretary, Department of Family and Community Services v Allan [2001] FCA 1160, 116 FCR 1 is misplaced. It was there concluded that the effect of the GST on the Respondent's cost of living could be considered when deciding whether there were "special circumstances" for the purposes of s 1184(1) of the Social Security Act 1991 (Cth). As there explained by Heerey J: [16] In exercising the discretion conferred by s 1184(1) the Tribunal had to have regard to all the circumstances of Mr Allan's case and decide whether they amounted to special circumstance. I agree with counsel for the Secretary that there remains a further discretion as to whether the power under s 1184(1) should be exercised and, if so, how. But I do not see that element of the process as having any significance in the present case. [17] It is not sensible to lay down precise limits or precise rules as to what may constitute special circumstances: Beadle v Director General of Social Security (1985) 60 ALR 225 at 228. Ill health, financial circumstances and the unfairness of a strict application of the Act are some matters which may in an individual case, constitute special circumstances: Kirkbright v Secretary, Department of Family and Community Services (2000) 32 AAR 120 at 123, 127; see also Kertland v Secretary, Department of Family and Community Services (1999) 95 FCR 64 at 71. [18] The impact of the GST on Mr Allan was but one of a number of circumstances which, in total, the Tribunal regarded as special. A factor which applies to all, or a substantial part of, the community need not necessarily be excluded in considering the range of circumstances which affect an individual and whether those circumstances in total can be said to be "special". Regard needs to be had to the purpose of s 1184(1) which is to ameliorate what would otherwise be harsh and unfair application of a rigid formula. With a very large compensation sum the preclusion period might be very long. The longer the period, the greater the potential for unforeseen circumstances to create hardship… 34 The very object or purpose of s 1184(1) was to confer a wide discretion capable of taking into account a wide variety of circumstances peculiar to a claimant. But that is not the object or purpose of s 52(3) of the 1971 Act. Section 52(3) is not susceptible of a construction which permits consideration to be given to matters other than "the circumstances giving rise to the payment". Section 52(3) does not expressly confer any authority upon the Commissioner, for example, to give consideration to such other matters "as he considers relevant". There is certainly not within the terms of s 52 any phrase such as "special circumstances" — or any like phrase — susceptible of a construction which would empower consideration to be given to the personal or financial circumstances of Mr Marinceski by reason of the payments made. 35 The second of the two matters identified is a little more complex. The Applicant's position was that the calculation of the amount of $ 4,477.09 was arbitrary and should be set aside — assuming that it was legitimate to take tax implications into account at all. By reason of the fact that it has been concluded that s 52(3) does not authorise consideration to be given to such implications, the manner in which the figure was determined assumes little continuing relevance. 36 However, reservation was expressed during the hearing as to the Applicant's participation in proceedings before the Tribunal and not then adducing such evidence as may have been of assistance or relevant to the Tribunal making "the correct or preferable decision" on the merits. Had the Applicant wished to contend (in the alternative to its primary submission) that the quantum of tax payable on compensation payments had been incorrectly calculated or that reliance could not be placed upon the calculation set forth in the Departmental letter dated 11 July 1986, it should have adduced before the Tribunal such evidence or then advanced such submissions as it considered did properly expose the correct calculation or approach. It did not then do so. Questions may well be raised as to the appropriateness of the Applicant now attempting to do so, not only by way of an appeal pursuant to s 44 of the 1975 Act but also by seeking to invoke the Administrative Decisions (Judicial Review) Act 1977 (Cth). 37 The Applicant is equally bound by the manner in which it conducted its case before the Tribunal, as is Mr Marinceski. Section 52(4)(g) 38 Section 52(4)(g) of the 1971 Act provides as follows: A reference in a preceding provision of this section to an amount paid or payable to an employee by the Commonwealth does not include a reference to – … (g) an amount of pension or allowance in respect of a child in relation to whom this Act applies who, at the date when the amount was paid or became payable, as the case may be, was dependent upon the employee; … 39 It was common ground between Mr Maricenski and the Applicant as to the application of s 54(2)(g). The Applicant's Submissions in Reply thus relevantly stated: There is no dispute that the amount of a pension paid in respect of children is not subject to a deduction under section 52(3), because of the exclusion in s52(4)(g). 40 During the course of the hearing on 25 October 2007, counsel for the Applicant maintained that there had in fact been no deduction from the amount of compensation otherwise payable in respect of any amount and that there had been no determination contrary to s 52(4)(g). The Applicant was to explain its position to those appearing for Mr Marinceski. 41 In the absence of further submissions made subsequent to the hearing, it is assumed that this issue has now been resolved. If not, this factual question could also be further considered by the Tribunal when the proceedings are remitted to it. ORDERS 42 The orders of the Court are: 1. The appeal be allowed. 2. The decision of the Administrative Appeals Tribunal dated 16 March 2007 be set aside and the matter be remitted to the Tribunal for further determination in accordance with these reasons. 3. The Amended Application for an Order of Review be dismissed. 4. The Cross-Appeal be dismissed. 5. Leave to amend the Notice of Cross Appeal be refused. 6. The First Respondent to pay the costs of the Applicant. I certify that the preceding forty-two (42) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Flick. Associate: Dated: 28 December 2007 Counsel for the Applicant: G M Elliott Solicitor for the Applicant: C Hutchins (AGS) Solicitor for the First Respondent: S Hodges Date of Hearing: 25 October 2007 Date of Judgment: 28 December 2007