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James and Military Rehabilitation and Compensation Commission

[2010] FCAFC 95

COURT Federal Court, Melbourne
DECISION Tribunal decision set aside and remitted to the MRCC
ISSUES MRCA – GARP M – whether offsetting method is prescribed by chapter  25 – within scope of delegated legislation


The Military Rehabilitation and Compensation Commission (Commission) decided that Lieutenant James was entitled to compensation for permanent impairment in respect of a right knee injury.  Lieutenant James had two previous injuries accepted under the SRCA, and the Commission offset the compensation already paid under the SRCA. The offsetting method applied by the Commission is prescribed by Ch 25 of GARP M. Lt James appealed the decision of the Commission to the Administrative Appeals Tribunal who affirmed the decision that Lt James was entitled to compensation for permanent impairment as a result of his right knee injury amounting to $0.95 per week or, a lump sum of $1,209.45. Lt James appealed the Tribunal’s decision to the Federal Court.

Lt James’ position

Lt  James  argued that the Tribunal had made an error of law in misconstruing the provisions of the MRCA. Specifically, the offsetting method provided by Ch 25 of GARP M was in excess of the power conferred on the Commission by the MRCA and the Transitional Act.

In addition, there was a question raised on the appeal as to whether the Tribunal 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.

The parties agreed that the Tribunal had erred in that regard, and that, because of the error, the matter must, in any event, be remitted to the Commission for further consideration. It is also common ground that a reconsideration by the Commission would only be of practical benefit to Lt  James if Ch 25 of GARP M was held to be invalid.

The Court’s consideration

Is chapter 25 of GAPR M authorised by the MRCA and the Transitional Act?

The Full Court considered that while the MRCA does not reference an injury or injuries suffered prior to the operation of that Act (as such injuries are compensable under the SRCA or VEA), section 13(4) of the Transitional Act expressly addresses the relationship between the service injury which constitutes the ‘compensable condition’ for the purposes of section 68 of the MRCA and earlier injuries which were compensable under the VEA or SRCA. The Full Court said:

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 MRCA of a method for offsetting compensation paid under the VEA or SRCA for previous injuries…a claimant’s entitlement to compensation is not determined solely by ss 67 to 69 [of the MRCA] in that the operation of these provisions in circumstances such as the present is affected by s 13 of the Transitional Act.

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…

Is chapter 25 reasonably proportionate to the power given to the Commission?

The Court considered the “notion of reasonable proportionality” test of the validity of delegated legislation in the Australian context, noting the High Court’s decision in South Australia v Tanner [1989] HCA 3; (1989) 166 CLR 161 :

... 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.

In respect of chapter 25, the Full Court considered that there was certainly no "limit" set by the legislation, against which the operation of chapter 25 of GARP M could be measured. Further, the Full Court considered that there was 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, specifically section 13(4) which contemplates that entitlements under the SRCA may be offset against MRCA entitlements.

Is section 13 of the Transitional Act concerned only with SRDP’s?

On Lt James’ behalf it was argued, that the Explanatory Memorandum reveals section 13 of the Transitional Act is only concerned with special rate disability pensions (SRDPs). Justice Tracey considered that there was nothing in the text of section 13 of the Transitional Act that suggests its operation is confined to the determination of SRDP entitlements.

Denial of common law damages

Lt  James noted that section 388 of the MRCA bars claims against the Commonwealth for injuries and diseases suffered by service members, and that section 389(1) allows a person to seek common law damages 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". It was argued that in some circumstances, such as Lt James, where the net compensation in respect of an injury will be zero, 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".

Justice Tracey considered that the purpose of section 388 of the MRCA is to extinguish common law rights and to replace them with rights under the MRCA. Specifically, section 13(4) of the Transitional Act contemplates offsetting SRCA entitlements against MRCA entitlements. Where this process This results in no compensation being payable, 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?

Finally, it was argued on behalf of Lt James that the principle from 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] HCA 7; (1959) 101 CLR 353 esp at 361, 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.

Justice Tracey concluded that this principle of construction did not assist Lt  James. The effect of section 13(4) of the Transitional Act was not in doubt.

Formal decision

The Court set aside the Tribunal’s decision and remitted the matter to the Commission. Justice Tracey considered the issue of costs and held that 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, there should be no orders as to the costs of the proceedings before the Tribunal.

Editorial Note

In James, the Court held that the rules for assessing compensation for permanent impairment if a person has conditions accepted under the VEA or SRCA as well as under the MRCA in section 13 of the CTPA and Chapter 25 of GARP M were valid.  The decision emphasises that the method in Chapter 25 seeks to ensure that compensation is paid for impairment for which the Commonwealth is liable but has not previously compensated the person for. If the method in chapter 25 was not used to assess compensation for permanent impairment, it could result in dual entitlements. 

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