FEDERAL COURT OF AUSTRALIA Smith v Military Rehabilitation and Compensation Commission [2016] FCA 1558 Appeal from: Smith v Military Rehabilitation and Compensation Commission [2015] AATA 343 File number: TAD 20 of 2015 Judge: TRACEY J Date of judgment: 22 December 2016 Catchwords: ADMINISTRATIVE LAW – appeal from decision of Administrative Appeals Tribunal concerning quantum of payments to which appellant entitled – Tribunal concerned with period between 29 May 2001 and 30 June 2009 – Tribunal held that no "increments" applied to appellant within the meaning of s 8(6)(c) of the Safety, Rehabilitation and Compensation Act 1988 (Cth) – whether Tribunal erred in law in so holding – no appealable error – appeal dismissed Legislation: Administrative Appeals Tribunal Act 1975 (Cth), s 44 Safety, Rehabilitation and Compensation Act 1988 (Cth), ss 8(6), 8(9), 8(9)–(9D) Cases cited: Chun v Comcare (2009) 209 FCR 399 Engida v Linfox Australia Pty Ltd [2016] FCA 793 Smith v Military Rehabilitation and Compensation Commission [2015] AATA 343 Date of hearing: 21 July 2016 Registry: Victoria Division: General Division National Practice Area: Administrative and Constitutional Law and Human Rights Category: Catchwords Number of paragraphs: 37 Counsel for the Appellant: The appellant appeared in person Counsel for the Respondent: Mr D Wilson Solicitor for the Respondent: Australian Government Solicitor ORDERS TAD 20 of 2015 BETWEEN: STUART M G SMITH Appellant AND: MILITARY REHABILITATION AND COMPENSATION COMMISSION Respondent JUDGE: TRACEY J DATE OF ORDER: 22 December 2016 THE COURT ORDERS THAT: 1. The appeal be dismissed with costs. Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011. REASONS FOR JUDGMENT TRACEY J: 1 The appellant, Mr Stuart Smith, appeals from a decision of the Administrative Appeals Tribunal ("the Tribunal"): see Smith v Military Rehabilitation and Compensation Commission [2015] AATA 343. The decision relates to Mr Smith's entitlement to incapacity payments arising from military service. More specifically, it is concerned with the quantum of the payments to which Mr Smith is entitled. 2 On 25 May 1989 Mr Smith enlisted in the Army Reserve. He sustained an injury to his back during an exercise on 10 November 1992 and was discharged from the Reserve on 12 July 1996 at his own request. At the time at which he sustained the injury, Mr Smith was employed as a joiner by Joinery Products Sales Pty Ltd ("Joinery Products"). He continued his employment with that company until 1998. 3 There was no dispute that, by reason of the injury which he suffered, Mr Smith had an entitlement to be paid compensation pursuant to the Safety, Rehabilitation and Compensation Act 1988 (Cth) ("the Act"). What was in issue was the amount of compensation to which he was entitled. The calculation of that amount was to be undertaken in part by reference to Mr Smith's "normal weekly earnings" ("NWE") in his civilian employment at the time he sustained the injury. In order to understand how the issues that confronted the Tribunal arose it is necessary first to set out the relevant legislative provisions. RELEVANT LEGISLATION 4 Prior to amendments to the Act which came into force on 1 October 2001, s 8(9) provided for NWE to be increased or reduced where there had been an increase or reduction in the minimum wage payable to "employees included in a class of employees of which the employee was a member at the date of the injury", as a result of: "(a) the operation of a law of the Commonwealth or of a State or Territory; or (b) the making, alteration or operation of an award, order, determination or industrial agreement, or of the doing of any other act or thing, under such a law" 5 Section 8(6) provided that: "(6) Subject to this section, if the minimum amount per week payable to an employee in respect of his or her employment by the Commonwealth or a licensed corporation at the date of the injury is increased, or would have been increased if the employee had continued in that employment, because of: (a) the attainment by the employee of a particular age; (b) the completion by the employee of a particular period of service; or (c) the receipt by the employee of an increase in salary, wages or pay by way of an increment in a range of salary, wages or pay applicable to the employee or to his or her office, position or appointment; the normal weekly earnings of the employee before the injury, as calculated under the preceding subsections, shall be increased by the same percentage as the percentage by which that minimum amount per week is increased, or would have been increased, as the case may be." 6 From 1 October 2001, s 8(9) was repealed and replaced by sub-ss 8(9)–8(9D). Those sub-sections provided that: "(9) The normal weekly earnings of an employee before the date of the employee's injury, as calculated under the preceding subsections, must, while the employee continues to be employed by the Commonwealth or a licensed corporation, be increased or reduced by the relevant percentage. (9A) For the purposes of subsection (9), relevant percentage means the same percentage as the percentage of increase or reduction in the minimum amount per week payable in respect of employees included in a class of employees of which the employee was a member at the date of the injury as a result of: (a) the operation of a law of the Commonwealth or of a State or Territory; or (b) the making, alteration or operation of an award, order, determination or industrial agreement or the doing of any other act or thing, under such a law. (9B) The normal weekly earnings of an employee before injury, as calculated under subsections (1) to (8) and as increased or reduced under subsection (9) must, if the employee has ceased, or ceases, to be employed by the Commonwealth or a licensed corporation, be further increased, with effect from each indexation date in relation to that cessation, by reference to the percentage of increase (if any) of an index that is prescribed for the purposes of this subsection over the year ending on the 31 December preceding each such indexation date. (9C) For the purpose of subsection (9B), the indexation date, in relation to a cessation of employment, is: (a) the 1 July next following: (i) the date on which this Act receives the Royal Assent; or (ii) the date of that cessation of employment; whichever last occurs; and (b) each subsequent 1 July. (9D) For the purpose of subsection (9B), the regulations may specify the manner of calculating the further increase referred to in that subsection by reference to the movement of the index that is prescribed for the purposes of that subsection." 7 The effect of the amendment was that employees' NWE would be adjusted on each "indexation date" by reference to an index prescribed under s 8(9B). The first indexation date was 1 July 2002. BACKGROUND FACTS 8 After he left Joinery Products in 1998, Mr Smith moved from one job to another with periods of unemployment occasionally interspersed between them. Much of this work was performed on a part-time basis. For most of this time he was rendered partially incapacitated for work by his 1992 injury and that incapacity was, for some periods, total. 9 At various times between 1998 and 2012, Mr Smith applied, under the Act, for a review of the quantum of compensation he was being paid. 10 The most recent review was undertaken by a delegate of the Military Rehabilitation and Compensation Commission ("the Commission") early in 2013. As a result of that review the delegate revoked the then-extant determination, made in 2011, and substituted a recalculated amount of benefits. 11 Mr Smith was dissatisfied with the basis upon which the recalculation had been undertaken and appealed to the Tribunal. He sought a recalculation of his incapacity benefit entitlements for the period between 29 May 2001 and 14 June 2012. THE TRIBUNAL DECISION 12 Mr Smith's appeal raised multiple issues. Following discussions between the parties it was agreed that the appeal be confined to two issues. They were: (1) What was the correct hourly rate to be used for the purposes of calculating the civilian component of Mr Smith's NWE as at 29 May 2001? (2) What adjustments to that amount should be made during the period 29 May 2001 to 30 June 2009? 13 The parties agreed that, for the purposes of calculating the civilian component of Mr Smith's NWE, the commencement amount was an hourly rate of $15.36, as from 29 May 2001. Mr Smith contended that this amount should be adjusted in accordance with s 8(6)(c) of the Act. He said that, but for his injury, he would have been appointed as foreman with Joinery Products and would, at the time of the Tribunal hearing, have been earning $33 per hour. 14 The Tribunal found that there was no evidence that Mr Smith was entitled, from May 2001, to receive any incremental adjustment to his salary, wages or pay under s 8(6)(c). It held that any wage increases which might have occurred following a promotion to foreman could not constitute an increase of the kind contemplated by s 8(6)(c). 15 Although it did not do so explicitly, the Tribunal must further be taken to have held, accepting the Commission's contention recorded at [35], that Mr Smith was classified (under the relevant industrial instrument) as a joiner level 10 at the time of ceasing work with Joinery Products and that he was, therefore, not entitled to any further increments within his wage range. This conclusion was to be inferred from the fact that, by 1998, Mr Smith had worked for the company for 10 years and was based on the assumption that he had had the benefit of annual incremental increases. The Tribunal referred to Chun v Comcare (2009) 209 FCR 399, in which Robertson J said, at [61], that: "In my opinion the condition for the operation of s 8(6)(c) has not arisen. The provision only operates if the minimum amount per week payable is increased or would have been increased because of the receipt of an increase in salary, wages or pay by way of an increment in a range of salary, wages or pay applicable to the employee or to his or her office, position or appointment. Absent that condition "normal weekly earnings" is not increased under that provision. In light of the unchallenged finding of fact by the Tribunal that the applicant had already reached the highest level in the range of salary for the position he held for the purposes of s 8(6)(c), it follows, as the Tribunal held, that the applicant's weekly compensation should be increased only by reference to the index prescribed for the purposes of s 8(9B)." 16 The other available reading of the Tribunal's reasons is that it did not consider it necessary to deal with the Commission's contention that Mr Smith was already at joiner level 10, because, more fundamentally, there was an insufficient evidential basis in the material before it for finding that Mr Smith would have had the benefit of any increment in applicable wages (cf the first sentence of [48] of the Tribunal's reasons). 17 The Tribunal found that, from 1 October 2001 until 30 June 2009, the only annual adjustments that could be made were those provided for in the indexation provisions of s 8(9B). 18 The Tribunal decided to vary the reviewable decision as follows: (1) The correct hourly rate to be used for the purpose of calculating the civilian component of Mr Smith's NWE as at 29 May 2001 was to be $15.36. (2) During the period 29 May 2001 to 30 June 2009 the civilian component of Mr Smith's NWE should be adjusted annually, commencing 1 July 2002, by the applicable indexation figure pursuant to s 8(9B) of the Act. (3) Mr Smith was not entitled to any other adjustments to the civilian component of his NWE. THE APPLICANT'S APPEAL 19 On 30 June 2015, Mr Smith filed a notice of appeal. Under the heading "Questions of law" he included five long and discursive grounds. No questions of law were identified . During a preliminary hearing, held on 23 October 2015, the Court indicated that there might be a question of law as to whether adjustments were required to be made to Mr Smith's NWE under s 8(9B) and s 8(6)(c) of the Act. 20 On 29 July 2015, the Commission filed a notice of objection to competency. It objected that the appeal was filed out of time and that the notice of appeal did not identify or raise a question of law. At the hearing, the Commission advised that it no longer pressed its objection that the appeal was filed out of time but persisted with its contention that Mr Smith had failed to identify a relevant question of law. 21 In a recent decision (Engida v Linfox Australia Pty Ltd [2016] FCA 793 at [36]), I outlined the manner in which the Court deals with appeals brought to it pursuant to s 44 of the Administrative Appeals Tribunal Act 1975 (Cth). I there said that: "[36] The requirement that appellants identify relevant questions of law when prosecuting appeals from the Tribunal arises from the terms of s 44 of the AAT Act. Any appeal must be "on a question of law". As a result "[t]he existence of a question of law is … not merely a qualifying condition to ground the appeal, but also the subject matter of the appeal itself": TNT Skypak International (Aust) Pty Ltd v Federal Commissioner of Taxation (1988) 19 ATR 1067 at 1070 (Gummow J). For some time this Court adopted a strict approach when respondents challenged the competency of appeals because appellants had failed to identify questions of law with precision. Such a failure led in many cases to the upholding of the objection to competency or the Court itself framing a question or questions of law to found its jurisdiction: see, for example, Birdseye v Australian Securities and Investments Commission (2003) 38 AAR 55 at 60. More recently, this approach has been reviewed. In Haritos v Commissioner of Taxation (2015) 233 FCR 315 a Full Court said, at 350: '92. We agree with Ryan J in Lambroglou that merely to assert that the Tribunal erred in law in making a particular finding is not to state a question of law. We also agree with the later statement by Ryan J, at 527, that: "[I]t simply begs the question of law to commence it with the words 'whether the Tribunal erred in law'. If the question, properly analysed, is not a question of law no amount of formulary like 'erred in law' or 'was open as a matter of law' can make it into a question of law" (emphasis added). But this is not to say that it is impermissible to commence a question of law for the purposes of s 44 with the expression 'whether the Tribunal erred in law' if that is given sufficiently precise content by what follows. 93. We also agree there would be a deficiency in a notice of appeal if the asserted questions of law did no more than invite the Court to embark on a broad and hypothetical enquiry as to the construction and operation of statutory provisions: Screen Australia v EME Productions No 1 Pty Ltd (2012) 200 FCR 282 at [24] per Keane CJ, Finn and Gilmour JJ. 94. In our opinion the issue must be approached as one of substance. In cases of doubt, the Court should consider the notice of appeal, the alleged question or questions of law, the grounds raised, the statutory context, and the Tribunal's reasons for its decision, and having considered all those matters, satisfy itself that there is in fact a question of law.'" 22 Mr Smith is not legally qualified and it is hardly surprising that he experienced difficulty in drafting questions of law which were the subject matter of his appeal. Form must not be allowed to prevail over substance. At the heart of his case is a question of law: it is whether the Tribunal was correct in holding that, from 29 May 2001, the only statutory basis for adjusting the quantum of his NWE was that provided by s 8(9B) of the Act. It is implicit in this formulation that a further question arises as to whether Mr Smith was entitled to any additional compensation by operation of s 8(6). 23 I, therefore, reject the Commission's objection to competency. THE PARTIES' SUBMISSIONS 24 Mr Smith submitted that the Tribunal had failed to consider evidence which he had provided of incremental wage increases of comparable employees at Joinery Products when calculating his NWE. He had, he said, provided the Tribunal with evidence of the incremental pay rate increases of the employee who had replaced him after he left Joinery Products. Mr Smith relied on this evidence to demonstrate that he would (he said) have received similar pay increases and would have attained the level of foreman. Mr Smith also relied on evidence from Joinery Products that indicated that he would have received regular increases from 2002 of $1.00 per hour per year. This $1.00 was described by Mr Smith, during argument, as an increment which would have been payable to an employee with his skills in the years following 1 October 2001. 25 The Commission submitted that the Tribunal was correct to recognise that s 8(9), in its pre-indexation form, applied prior to 1 October 2001 and that, thereafter, the new s 8(9)–(9D) applied. 26 It contended that the Tribunal's reasons demonstrated that it was aware that s 8(6) continued to apply after the commencement of the indexation provisions. It argued that the Tribunal correctly applied the provision by considering whether the material before it satisfied the criteria set out in s 8(6). It maintained that the Tribunal had correctly concluded that wage increases achieved because of promotions did not fall within s 8(6)(c). CONSIDERATION 27 There was a paucity of information before the Tribunal relating to Mr Smith's terms and conditions of employment at relevant times. 28 The uncontentious finding that the correct hourly rate for the purposes of calculating the civilian component of the NWE as at 29 May 2001 was $15.36 was founded on a letter, dated 25 July 2001, from the paymaster of Joinery Products in which the paymaster certified that, if Mr Smith had still been employed by the company on that day, his hourly pay rate would have been $15.36. No explanation was provided as to the basis on which this sum had been determined. In particular, no reference was made to any industrial award or instrument which prescribed such a figure or to the capacity in which it was assumed Mr Smith would have been employed on that day. Mr Smith nonetheless told the Tribunal that he accepted the accuracy of this amount. 29 Mr Smith's claim that, had he remained employed, he would have received an increment of $1.00 per hour per year was based on a letter written by a Manager of Joinery Products on 10 November 2010. In that letter the Manager advised that: "I also believe he [Mr Smith] should have received regular increases since 2002 as pay rates climbed upwards of $1.00 per hour per year in the market to reach what they are today." This was plainly an estimate, but the basis on which it was made was not further explained. 30 Although the Tribunal was not provided with any relevant industrial instrument, it did have before it a letter from the Manager of Joinery Products to Mr Smith dated 27 August 2008. In that letter the Manager referred to the National Building & Construction Industry Award and then set out "our current hourly rates of pay from joiner level 1 through to foreman." There were ten joiner levels. The Manager did not specifically say that the hourly rates which he placed next to each level were those prescribed by the Award. It is probable that they were not. The Manager said that none of the company's employees at that time were paid the minimum Award rate because nobody would work for that rate. A later letter, dated 7 July 2010, from the same Manager to the Department of Veterans' Affairs, said that Joinery Products paid employees under the National Building and Construction Award with an average premium of 10 per cent above the Award. In neither letter was there information concerning the basis upon which workers progressed from one level to the next. The Manager did not say whether the Award (or an earlier version of it), its classification of joiner, and the ten incremental pay levels within that classification would have applied to Mr Smith had he still been employed by the company in 2001—although this may be inferred from a full reading of the text of the letter. 31 The Tribunal accepted the invitation of the parties to resolve two discrete issues and, depending on the resolution of those issues, to make an adjustment to the rate of compensation payable to Mr Smith during a nominated period. It undertook this task having regard to the legislation which applied at relevant times. 32 Doing the best it could on the limited material before it, the Tribunal accepted that the starting point for calculating Mr Smith's entitlements was the agreed hourly rate of $15.36. That was the rate which, it was assumed, would have been payable to him on 29 May 2001 had he still been employed by Joinery Products. The indexation rate, prescribed under s 8(9B) of the Act, was to be applied to this hourly rate on and after 1 July 2002 because, by that time, Mr Smith had ceased to be an employee of the Commonwealth. 33 The Tribunal declined to bring into account any of the material on which Mr Smith had sought to rely with a view to establishing that, had he remained in the employment of Joinery Products during the relevant period, his hourly rate would have increased incrementally along the lines enjoyed by other comparable employees and/or in accordance with the variations to which the correspondence from Joinery Products referred. 34 The Tribunal did not bring these matters into account for a number of reasons. The first was that, at the time at which his employment with Joinery Products ceased, Mr Smith was already at the highest pay level in the joiner classification and could not, therefore, had he remained employed in that capacity, have received any further wage increments by advancing to a higher level within that classification. Alternatively, the Tribunal might be understood to have determined that there was insufficient evidence before it to find that Mr Smith would have had the benefit of any wage increment. In either case, in order to obtain further pay rises Mr Smith would have had to obtain another, more senior, position such as foreman. For the reasons given by Robertson J, in Chun the Tribunal held, correctly in my view, that s 8(6) was not engaged and that the only basis for adjusting the NWE component of the calculation after 1 July 2002 was that provided for by s 8(9B) of the Act. 35 The Tribunal also reasoned that the $1 per hour per year estimate of the Joinery Products Manager was the kind of wage increase that would have been covered by the former s 8(9). That may not have been right: the Manager did not appear to be referring to the "operation of a law of the Commonwealth", nor to anything having to do with an award, order, determination or industrial agreement. But, importantly, I discern no legal error in the Tribunal's associated conclusion that the $1 per hour per year estimate does not meet the description of an "increment in a range of … wages" within the meaning of s 8(6)(c). Rather the figure reflected the manager's estimates of movements in market rates over time. 36 I can discern no appealable error in the Tribunal's reasons. 37 The appeal must be dismissed with costs. I certify that the preceding thirty-seven (37) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Tracey. Associate: Dated: 22 December 2016