Thompson and Comcare [1999] AATA 11 (13 January 1999)

Last Updated: 29 January 1999

Administrative

Appeals

Tribunal

DECISION AND REASONS FOR DECISION [1999] AATA 11

ADMINISTRATIVE APPEALS TRIBUNAL )

) N o S98/24

GENERAL ADMINISTRATIVE DIVISION )

Re NEIL THOMPSON

Applicant

And COMCARE

Respondent

DECISION

Tribunal Deputy President B.H. Burns

Date 13 January 1999

Place Adelaide

Decision The decision under review is set aside and in substitution therefor, it is decided that the applicant has not received a lump sum benefit within the meaning of s21 of the Safety, Rehabilitation and Compensation Act 1988. Accordingly, the matter is remitted to the respondent for determination of the applicant's entitlement to compensation. The respondent is to pay the costs of the applicant reasonably incurred in connection with these proceedings. In the absence of agreement between the parties, costs are to be taxed by a Registrar or Deputy Registrar and liberty to apply is reserved to both parties.

...............(Signed)..................

Deputy President B.H. Burns

CATCHWORDS

COMPENSATION - entitlement to weekly incapacity payments - adjustment where a person "receives a lump sum benefit under a superannuation scheme" - election to preserve all benefits - whether the applicant received a lump sum benefit - decision set aside

Safety, Rehabilitation and Compensation Act 1988 - s21

Superannuation Act 1976

Re Hammerton and Comcare [1995] 21 AAR 204

Re Mirkovic and Telstra Corporation Ltd (1993) 18 AAR 492

REASONS FOR DECISION

13 January 1999 Deputy President B.H. Burns

1. This is an application by Neil Thompson ("the applicant") for review of a reviewable decision dated 24 November 1997, affirming a determination made by a delegate of Comcare ("the respondent") on 18 September 1997, which calculated the applicant's entitlement to incapacity payments of compensation pursuant to s21 of the Safety, Rehabilitation and Compensation Act 1988 ("the Act").

2. The Tribunal had before it the documents lodged pursuant to s37 of the Administrative Appeals Tribunal Act 1975 (the "T" documents) together with other documentary material placed before it at the hearing. Neither party called any oral evidence and the matter proceeded by way of submission alone.

3. The applicant was represented by Mr T. Bourne and the respondent was represented by Mr S. Apps, both of counsel.

4. By way of background, the Tribunal makes the following findings of fact which were agreed as between the parties.

(a) The applicant was born on 17 July 1958.

(b) At all material times, the applicant was employed by the Department of Administrative Services. At various times from 1984 until 1993 in the course of that employment, the applicant sustained injuries as a result of which he has been at all times at least partially incapacitated for work.

(c) On 6 August 1997, pursuant to s76W of the Public Service Act 1922, the applicant was furnished with a notice indicating that he was involuntarily retired from the Australian Public Service with effect from 17 September 1997.

(d) By letters dated 6 June 1997 and 4 August 1997, ComSuper gave to the applicant a summary of the relevant benefit options available to him from the Commonwealth Superannuation Scheme ("CSS") in the event that he was involuntarily retired. These options were:

(i) Maximum pension, plus refund of productivity component;

(ii) Standard pension, plus refund of member and productivity components;

(iii) Lump sum only, no pension;

(iv) Preserve all benefits.

(e) The applicant elected to preserve all benefits and in consequence, the applicant was paid no amount by ComSuper either by way of lump sum or pension. As a further consequence of the election to preserve all benefits, the total benefits payable to the applicant were preserved until minimum retiring age when an employer component may be paid to him as an indexed pension. Further, as a result of his election, the applicant ceased to become entitled to a lump sum payment of the employer component on retirement.

(f) To date, the applicant has received no payment of superannuation by way of lump sum or pension.

(g) On 18 September 1997, Comcare, confirming earlier advice given to the applicant dated 24 August 1997, determined that the applicant had received a lump sum benefit in the amount of $73,994.68 within the meaning of s21 of the Act and that, for the purposes of calculating the applicant's weekly compensation, he was receiving an amount equal to $170.95 per week by way of superannuation. Consequently, it was determined that the applicant was entitled to weekly incapacity payments at the rate of $278.70 gross.

(h) On 24 November 1997, the delegate's determination was affirmed upon reconsideration by an independent review officer.

(i) On 23 January 1998, the applicant applied to the Tribunal for review of the reconsideration decision.

5. The sole issue in dispute between the parties is as to whether or not the applicant had, in the course of electing to preserve all superannuation benefits, received a lump sum benefit within the meaning of s21 of the Act which reads as follows:

`Compensation for injuries resulting in incapacity where employee is in receipt of a lump sum benefit

21. (1) This section applies to an employee who, being incapacitated for work as a result of an injury retires voluntarily, or is compulsorily retired, from his or her employment at any time after the commencement of this section and, as a result of the retirement, receives a lump sum benefit under a superannuation scheme.

(2) Comcare is liable to pay compensation to the employee, in respect of the injury, in accordance with this section for each week after the date of the retirement during which the employee is incapacitated.

(3) The amount of compensation is an amount calculated under the formula:

AC - (SA + SC)

520

where:

AC is the amount of compensation that would have been payable to the employee for a week if:

(a) section 19, other than subsection 19(6), had applied to the employee; and

(b) in the case of an employee who was not a member of the Defence Force immediately before retirement - the week were a week referred to in a subsection 19(3);

SA is the superannuation amount; and

SC is the amount of superannuation contributions that would have been required to be paid by the employee in that week if he or she were still contributing to the superannuation scheme.

Relevantly, "superannuation amount" is defined in s4 of the Act as follows:

`Interpretation

4. (1) In this Act, unless the contrary intention appears:

...

"superannuation amount", in relation to a pension received by an employee in respect of a week, or a lump sum benefit received by an employee, being a pension or benefit under a superannuation scheme, means an amount equal to:

(a) if the scheme identifies a part of the pension or lump sum as attributable to the contributions made under the scheme by the Commonwealth, Commonwealth authority or licensed corporation - the amount of that part; or

(b) in any other case - the amount assessed by the relevant authority to be the part of the pension or lump sum that is so attributable or, if such an assessment cannot be made, the amount of the pension received by the employee in respect of that week or the amount of the lump sum, as the case requires;'

It was agreed between the parties that the above was relevant for s21 purposes with respect to the employer component of the applicant's superannuation entitlement (as opposed to any component comprising his own contributions).

6. Section 20 of the Act, which was referred to in the course of submissions, is as follows:

`Compensation for injuries resulting in incapacity where employee is in receipt of a superannuation pension

20. (1) This section applies to an employee who, being incapacitated for work as a result of an injury, retires voluntarily, or is compulsorily retired, from his or her employment at any time after the commencement of this section and, as a result of the retirement, receives a pension under a superannuation scheme.

(2) Comcare is liable to pay compensation to the employee, in respect of the injury, in accordance with this section for each week after the date of the retirement during which the employee is incapacitated.

(3) The amount of compensation is an amount calculated under the formula:

AC - (SA + SC)

where:

AC is the amount of compensation that would have been payable to the employee for a week if:

(a) section 19, other than subsection 19(6), had applied to the employee; and

(b) in the case of an employee who was not a member of the Defence force immediately before retirement - the week were a week referred to in subsection 91(3);

SA is the superannuation amount; and

SC is the amount of superannuation contributions that would have been required to be paid by the employee in that week if he or she were still contributing to the superannuation scheme.'

SUBMISSIONS BY THE PARTIES

7. On behalf of the applicant, it was submitted by Mr Bourne that in the course of electing to preserve all benefits, the applicant had not received a lump sum benefit within the meaning of s21 of the Act. Mr Bourne submitted that in the process of election, the applicant had preserved his rights under the superannuation scheme to receive, all things being equal, an indexed pension at some later point in time and in so doing had disentitled himself to any payment or benefit, either present or future, by way of a lump sum amount.

8. In this regard, Mr Bourne submitted that there was an important distinction between receipt of an entitlement to a lump sum benefit, which the applicant had at the time of election, as opposed to actual receipt of a lump sum benefit. He maintained that the applicant was given the choice to receive a lump sum benefit or not, as the case may be, and had elected not to receive such a benefit. In this regard, Mr Bourne referred to a decision of the Tribunal in Re Hammerton and Comcare [1995] 21 AAR 204 where Deputy President Forgie was of the view, when considering s20 of the Act, that the words "receives a pension" as appear in that section mean "to take into one's hands or possession a pension" and cannot be read "so that they mean `receives an entitlement' to a pension". This reasoning, he said, was equally pertinent in the course of interpreting the words "receives a lump sum benefit" in s21.

9. In the course of his submission, Mr Bourne referred the Tribunal to another decision of the Tribunal in Re Mirkovic and Telstra Corporation Ltd (1993) 18 AAR 492 where it was held that an employee who voluntarily retired with an entitlement to a lump sum which the employee elected to "roll over" by investment with an approved fund had in fact received a lump sum within the meaning of s21. The reasoning adopted by the Tribunal in that case was that in the course of rolling over the lump sum, the worker had exercised an "unequivocal power of disposition over it", and hence could be said to have "received" a benefit within the meaning of the words in s21. Mr Bourne submitted that Mirkovic's case could be distinguished from the facts at hand in so far as Mr Thompson, rather than exercising a power of disposition over the lump sum benefit, had chosen instead not to receive the lump sum benefit at all nor accept access to it or control over it or authority to deal with it in any way whatsoever. In other words, whereas the applicant in Mirkovic had, by rolling over the lump sum, in effect "received and deferred" his entitlement to a lump sum benefit in order to take advantage of certain taxation benefits, Mr Thompson, by preserving his benefit, had forever disentitled himself to a lump sum. It was in this sense that Mr Bourne contended that the applicant had not received a lump sum benefit - in short, he had elected not to, unlike the employee in Mirkovic.

10. Mr Apps on the other hand submitted on behalf of the respondent that the applicant had received a lump sum benefit in the course of electing to preserve his benefits under the superannuation scheme. He submitted that at the time of election, the applicant received, that is, took into his possession or control, albeit notionally, the amount comprising the lump sum. His submission was that whatever happened to it thereafter was of no moment as this was merely a question of how the benefit, having come into the applicant's possession, was then to be applied. He submitted that whatever the applicant chose to do with the sum ie. whether he elected to receive it in the form of a standard pension or in the form of a lump sum payment or to have it rolled over (as in Mirkovic) or utilised in some other fashion, it did not matter because the receipt of the benefit had already occurred at such point in time as the applicant had become aware that the lump sum was in his possession and that he had an unequivocal power of disposition over it.

11. In short, the respondent contended that receipt of the lump sum benefit occurred independently of and at a point in time just prior to the election process and that the election process was merely the process of determining what then was to be done with it. In Mr Apps' terminology, the benefit is an amount which is "crystallised" as at the date of election ie. is something that has already come into existence and has fallen under the power or control of the elector. On the other hand, the applicant was maintaining that receipt of a lump sum benefit, if at all, occurs consequent to an election to do so and does not arise independently of such election.

12. Mr Apps then submitted that the applicant's interpretation of s21 would contravene the scheme of the Act and, in particular, s20 which relates to persons who receive superannuation in the form of a pension. He submitted that were the applicant's interpretation of s21 correct, the person who elects to preserve their benefits is far better off than the person who chooses to take their superannuation in the form of a pension in so far as the latter person has their compensation payment reduced to the extent of their pension whereas the former goes on receiving their full entitlement to compensation in addition to accruing interest on their "preserved" sum which would then come to them, all things being equal, in the form of a higher pension upon retirement. Were s21 not to apply to the current scenario, in the respondent's submission, the person who elects to preserve would be doubling-dipping in so far as they would be permitted to derive a benefit from superannuation entitlements while at the same time receiving full compensation, a situation which is clearly contrary to the object of the legislation.

13. Mr Bourne replied to this submission by denying that the applicant would be advantaged by electing to preserve his benefits compared with the person who chose to take their superannuation in the form of a pension. In this regard, he submitted that the applicant would be "stung" later on, in so far as when he did eventually receive the employer-funded superannuation entitlements in his hand as it were, in the form of an indexed pension, his compensation would be reduced by a greater amount than were he to have spread it over a longer period of time. In effect, he submitted that one way or other, the applicant would not avoid the consequences of the legislative scheme.

CONSIDERATION OF THE MATTER AT LARGE

14. The Tribunal would indicate that in making its decision, it has had regard to the entirety of the material placed before it including the submissions of the parties and the authorities referred to by counsel.

15. It was agreed as between the parties that if s21 of the Act does not apply, then the applicant has an ongoing entitlement to receive weekly compensation payments for incapacity pursuant to s19 of the Act. If s21 does apply, then compensation will be reduced according to the formula set out in s21(3) of the Act. For this to occur, the Tribunal would need to be satisfied that the applicant has received a lump sum benefit under a superannuation scheme (s21(1)). The issue in dispute is whether or not as a result of his election to preserve all benefits which came about as a result of his compulsory retirement, the applicant could be said to have received a lump sum benefit under a superannuation scheme.

16. The Tribunal now turns to a consideration of the meaning to be given to the phrase "receives a lump sum benefit under a superannuation scheme" contained in s21 of the Act.

17. "Superannuation scheme" is defined in s4 and it is not in dispute that the applicant was at all material times a member of a superannuation scheme, ie. the CSS which is a superannuation scheme for the purposes of s21 of the Act and the Tribunal so finds. This scheme is governed by the provisions of the Superannuation Act 1976. It is that Act which provided the applicant with certain options at or about the time of his compulsory retirement. One of those options was, pursuant to s137, to elect that Division 3 of Part IX of the Superannuation Act 1976 apply in relation to him. That was the option described earlier in these reasons as "Preserve all benefits". In selecting this option, the applicant made an election pursuant to s137(1)(b) of the Superannuation Act 1976. Deferred benefits then became applicable in respect of the applicant pursuant to s139 and payable at a future date determined by that section. It is agreed between the parties that the applicant's election had the effect of preserving all benefits until minimum retirement age when an employer component may be paid to him by way of pension and that by his election the applicant had ceased to become entitled to any lump sum payment on retirement. It is clear that in the election process the applicant rejected any option he may have had of receiving a lump sum benefit. Can it then be said at any point in time, in reference to the applicant's election, that he received a lump sum benefit under the CSS. Clearly, the answer must be in the negative.

18. The election process brought about an entitlement to deferred benefits payable in the future and in the form of a pension on attaining what would otherwise have been his minimum retiring age. Bearing in mind that the relevant superannuation scheme on the facts in this case is the CSS, it is clear that the expression "lump sum benefit" in s21 of the Act is referring to a lump sum benefit under the Superannuation Act 1976. The election by the applicant to preserve all benefits did not create any form of lump sum benefit envisaged by the Superannuation Act 1976. In this regard, the Tribunal would indicate that one of the options rejected by the applicant in the election process was that which was described as "lump sum only, no pension". This was referring to an election which the applicant was entitled to make under s62 of the Superannuation Act 1976 and which if he had made would have entitled him to payment of a "lump sum benefit" equal to the sum of (a) 3½ times the amount of his accumulated basic contributions, and (b) the amount of his accumulated supplementary contributions (if any). Other references appear in the Superannuation Act 1976 to lump sum benefits taking the form of being equal to that prescribed by the legislation. There is however no reference in the Superannuation Act 1976 to a lump sum benefit which could in any way fit the factual situation before this Tribunal.

19. The Tribunal rejects the notion that the election made by the applicant in some way created a lump sum benefit under a superannuation scheme, namely the CSS. What it did do was to create a deferred benefit which would take the form of a pension and be payable at a future date. At best, the election process might be said to have notionally created a "lump sum" which in the fullness of time would be utilised towards the payment of a pension but this does not constitute a "lump sum benefit" under the relevant superannuation scheme, ie. the CSS established pursuant to the Superannuation Act 1976.

20. Further, the Tribunal would indicate that it does not agree with the submission of the respondent that the lump sum benefit received by the applicant was an amount that "crystallised" as at the date of election and that the process of election was merely the choosing of how it was to be applied. It must be remembered that up until the time of election, all that existed was an entitlement to a benefit yet to be characterised for the purposes of the Superannuation Act 1976. Accordingly, there was no lump sum benefit in existence prior to the applicant's election and after his election it is agreed there was not even an entitlement to one.

21. If, contrary to the Tribunal's view, the election process did in fact create a lump sum benefit under the CSS, the Tribunal now turns to consider whether the applicant received such a benefit. This requires interpretation of the word "receives" in s21 of the Act and in this regard, the Tribunal agrees with the views expressed by the Tribunal in Mirkovic (supra) namely that it means not only "to take in one's hand or into one's possession" but it also has the wider meaning of "over which he (or she) has an unequivocal power of disposition". In Mirkovic (supra) the applicant clearly had such a power which he exercised by directing the administrators of the CSS to roll over the majority of his eligible termination payment (some $57,000) by investing it with the AMP Society in its deferred annuity fund. The balance of the payment was paid to him by cheque. The balance clearly was a lump sum benefit for s21 purposes and so was the amount invested with the AMP. The applicant clearly had an unequivocal power of disposition over it. He was under no obligation to roll it over - he could do with it as he pleased. This is not the factual situation before this Tribunal. The applicant before this Tribunal has never been in the position of having an unequivocal power of disposition. His election to preserve all benefits precluded this from occurring. Until such time as the applicant exercised his choice, he could not be said to have had an unequivocal power of disposition and only if he had exercised it in favour of taking a lump sum benefit could it then be said that he had such a power. He of course never made such an election and accordingly cannot be said to have received a lump sum benefit for the purposes of s21 of the Act and the Tribunal so finds.

22. The Tribunal is of the view that the above views are supported when one has regard to the purpose of the legislation as evidenced by the speech introducing the Bill in the House of Representatives on 27 April 1988 when the Minister said:

`This Bill will also seek to reduce the unreasonable costs associated with work-related injuries by introducing measures to prevent double-dipping by employees using sick leave payments or superannuation entitlements while on compensation. For example, many employees who have been retired on invalidity grounds under the current legislation enjoy benefits under both compensation and superannuation schemes at a rate considerably in excess of their previous income.'

On any view, by electing to preserve his benefits in the system, the applicant could not be said to be "using" his superannuation entitlements while on compensation any more than it could be said that an uninjured worker, who accrues interest on his or her superannuation benefits in the normal course whilst continuing to earn an income is "using" their superannuation entitlements. The Tribunal is satisfied that the applicant could not be said to be double-dipping as he would not be using his superannuation entitlements when in receipt of compensation. Rather, the applicant would be in receipt of compensation payments at a time when he was not in receipt of any superannuation benefit. The legislation is aimed at avoiding double-dipping, ie. enjoying benefits under both compensation and superannuation schemes in excess of previous income.

23. The respondent submitted that were it the case that the person who elects to preserve their superannuation entitlements does not fall subject to the provisions in s21, then that person would be unreasonably advantaged over the person who elects to receive their entitlement in the form of a lump sum or pension who then falls subject to the provisions in ss20 and 21 respectively. The respondent submitted that this would lead to a situation where it would be in every person's best interests to elect to preserve their benefits which would clearly obstruct the intended effect of the legislative scheme which is to reduce the Commonwealth's costs. The respondent thus invited the Tribunal to prefer its interpretation of s21 as it would better implement the purpose of the legislation and would redress the potential unfairness outlined above.

24. The Tribunal would indicate that it does not accept the above submission for the reason that the meaning given to the phrase "receives a lump sum benefit" does not, in the Tribunal's view, lead to a result that is outside the intended effect of the legislative scheme nor one which is manifestly absurd or unreasonable. In short, the ss20, 21 and 21A provisions are intended to prevent double-dipping. The Tribunal is of the view, having satisfied itself that compensation paid to the applicant after an election to defer benefits does not amount to double-dipping, that the meaning to be given to the subject phrase is entirely consistent with the intended effect of the legislative scheme. The respondent contended that as a consequence, it would be in the best interests of every person who found themselves to be in a situation similar to that of the applicant to elect to preserve all benefits which would have the effect of avoiding the operation of ss20, 21 and 21A entirely. The Tribunal would indicate that if this be the case (a view which the Tribunal does not hold) then the legislation can be amended to address the situation. This Tribunal however cannot see that Parliament intended, in enacting s21 of the Act, to bring about a situation whereby an incapacitated employee, who happens to be compulsorily retired after x years service and as a consequence elects to defer his or her superannuation benefits should receive less by way of compensation payments than an incapacitated employee with x years service who happens not to be compulsorily retired and does not as yet have to elect to receive or defer any superannuation benefit. If Parliament had intended the deferment of benefits to have the same meaning as the receipt of a lump sum benefit, then it could have said so but it has not.

25. For the above reasons, the Tribunal's decision is that the decision under review is set aside and in substitution therefor, it is decided that the applicant has not received a lump sum benefit within the meaning of s21 of the Act. The Tribunal directs that the matter be remitted to the respondent for determination of the applicant's entitlement to compensation. The respondent is to pay the costs of the applicant reasonably incurred in connection with these proceedings. In the absence of agreement between the parties, costs are to be taxed by a Registrar or Deputy Registrar and liberty to apply is reserved to both parties.

I certify that this and the twelve (12) preceding pages are a true copy of the decision and reasons for decision herein of Deputy President B.H. Burns

Signed: ...............................................................................

Peter Psaltis (Associate)

Date/s of Hearing 19 November 1998

Date of Decision 13 January 1999

Counsel for the Applicant Mr T. Bourne

Solicitor for Applicant Stanley & Partners

Counsel for the Respondent Mr S. Apps

Solicitor for the Respondent Australian Government Solicitor