National Mutual Life Association of Australia Ltd v Peter Jevtovic [1997] FCA 359 (8 May 1997)

CATCHWORDS

SUPERANNUATION - Complaints Tribunal - Functions - Trustee decides that member not totally and permanently disabled - Complaint to Tribunal - Tribunal required to affirm trustee's decision if satisfied decision fair and reasonable in circumstances - Meaning of "fair and reasonable" - Tribunal determines whether in its opinion member totally and permanently disabled - Receives fresh evidence - Appeal to Federal Court on question of law.

Superannuation (Resolution of Complaints) Act 1993 ss36, 37

Pope v Lawler (unreported, 7 May 1996)

Minister for Immigration and Ethnic Affairs v Wu [1996] HCA 6; (1996) 185 CLR 259

Re Brindle; Ex parte F B & F A McMahon Pty Ltd [1992] FCA 203; (1992) 108 ALR 470

NATIONAL MUTUAL LIFE ASSOCIATION OF AUSTRALIA LTD v PETER JEVTOVIC VG 656 of 1996

COURT: Sundberg J

PLACE: Melbourne

DATE: 8 May 1997

IN THE FEDERAL COURT OF AUSTRALIA )

VICTORIA DISTRICT REGISTRY ) No VG 656 of 1996

GENERAL DIVISION )

BETWEEN: NATIONAL MUTUAL LIFE ASSOCIATION OF AUSTRALIA LTD

Applicant

AND: PETER JEVTOVIC

Respondent

COURT: Sundberg J

DATE: 8 May 1997

PLACE: Melbourne

MINUTES OF ORDER

The Court orders that:

1. The appeal be allowed.

2. The matter be remitted to the Superannuation Complaints Tribunal to be determined again in accordance with these reasons.

Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.

IN THE FEDERAL COURT OF AUSTRALIA )

VICTORIA DISTRICT REGISTRY ) No VG 656 of 1996

GENERAL DIVISION )

BETWEEN: NATIONAL MUTUAL LIFE ASSOCIATION OF AUSTRALIA LTD

Applicant

AND: PETER JEVTOVIC

Respondent

COURT: Sundberg J

DATE: 8 May 1997

PLACE: Melbourne

REASONS FOR JUDGMENT

SUNDBERG J:

Background

In May 1972 the respondent began working for Trico Pty Ltd ("Trico") as a toolmaker. In 1986 he injured his back while at work. He returned to work in September 1987 on light duties as a quality control inspector. He ceased employment on 3 March 1994 on medical advice and lodged a claim with Trico for a permanent disablement benefit under Trico's Superannuation Plan. Trico forwarded the claim to the applicant ("the insurer") for consideration. On 15 March 1995 the insurer informed Trico that it did not consider the respondent totally and permanently disabled, and rejected the claim. Trico referred the insurer's decision to the trustee of the Plan, Trico Custodian Pty Ltd ("the trustee"), which on 17 May 1995 denied the respondent's claim for total and permanent disablement benefit. The respondent lodged a complaint with the Superannuation Complaints Tribunal pursuant to s14 of the Superannuation (Resolution of Complaints) Act 1993 ("the Act"). The Tribunal joined the insurer as a party to the complaint. The Tribunal set aside the trustee's and insurer's decisions and ordered that the insurer pay the benefit to the respondent. The insurer has appealed to this court pursuant to s46 which permits an appeal "on a question of law".

Evidence before Tribunal

The Tribunal had before it four reports from the respondent's general practitioner, Dr Pragastis. The first, dated 15 December 1993, stated that the respondent had ischaemic heart disease, poor effort tolerance, shortness of breath, frequent chest pain and chronic back pain. The second, dated 25 February 1994, stated that the respondent's ischaemic heart disease was such that he should retire on health grounds. The third, dated 13 May 1994, stated that the respondent had "ischaemic heart disease (acute myocardial infarction 29 May 1993)", continual angina, poor effort tolerance, shortness of breath, chronic back pain and anxiety. The final report, dated 18 October 1994, repeated the earlier diagnosis, and said that the respondent was "not suitable for work", was "not capable of working", and that there was no work he would be able to do in the future.

There was also a report from Dr Nash, who had treated the respondent since 1982. He noted that the respondent had first injured his back in 1984. Following the injury in 1986 the respondent complained of constant back pain. Dr Nash was of the opinion that the respondent suffered from chronic degenerative disc disease causing chronic pain and disability, coronary artery disease reducing his exercise tolerance, and hypolipidaemia, and as a result required constant medical attention. He was in Dr Nash's opinion totally and permanently unfit for any work.

Dr Krafchek, a consultant cardiologist, had treated the respondent in 1990 for chest pain and in 1993 following his heart attack. He was of the view that the respondent's ability to perform "normal work etc will have been impaired [by his heart condition], and he may well find it difficult to continue his usual or further work". But he thought the respondent "can certainly work although he may find strenuous activities difficult".

Dr McLellan, a specialist, reported that the respondent suffered chest pains with variable exertion, showed some shortness of breath, but no palpitations or claudication. Dr McLellan concluded that even though the respondent had had a heart attack, he was not limited by angina or shortness of breath, but rather by non-specific pain. Dr McLellan noted that the respondent had not worked full time for nine years, "but I consider that he is physically capable of doing so. It is more his own insistence of not being able to work which is preoccupying him". Dr McLellan answered in the affirmative the question whether the respondent was "ever likely to be able to resume work in any job for which he is reasonably qualified by education training or experience".

The Tribunal also had before it a statement from Trico which recorded that the respondent had been employed from May 1972 until March 1994, that he had been a toolmaker prior to injuring his back, and that when he returned to work it was as a quality control inspector, visually inspecting and measuring parts. The respondent was occasionally required to lift and carry objects weighing 20 kilos or more, and to reach above his shoulders. "Occasionally" meant less than one third of his time. Twenty five per cent of the respondent's time was spent walking, and the same percentage standing. He was not required to climb ladders, crawl, kneel, or climb ramps or steps. Since his return to work as an inspector in September 1987, he had worked for four hours a day. Trico stated that the respondent would not be able to return to his regular occupation, and that no alternative jobs were available. In response to the inquiry whether the respondent's skills could be used by Trico in any other type of work, the answer was "No ... in accordance with Medical Certificate". It is not clear from the statement whether the description of the respondent's activities (lifting, walking and standing) related to his work as a toolmaker or as an inspector.

All the material so far described was before the insurer and the trustee as well as the Tribunal. However the Tribunal was in possession of two medical reports prepared after the making of the insurer's and the trustee's decisions. The first was a report from Dr Bogetic, who stated that ever since his heart attack the respondent had had both chest pain and shortness of breath on exertion, and as a result his physical activities had been significantly limited. Dr Bogetic expressed no opinion as to the respondent's continued employability.

The other report was from Dr Dodge, a consultant physician. This was provided to the Tribunal as part of a submission made by the respondent's solicitors. After referring to the respondent's various disabilities, Dr Dodge said that as a result of his back problems the respondent was "unable to perform strenuous physical activity in particular prolonged standing, prolonged walking or bending", and in view of his heart disease and back problems he was unfit to perform "even the light work that he was doing on a part time basis prior to his resignation". His work as a quality control inspector would cause him work related anxiety. Dr Dodge concluded that the respondent "is now no longer capable of any full time or part time permanent employment".

The legislation

The Tribunal was established by s6 of the Act. Its objectives include providing mechanisms for the review of the decisions or conduct to which complaints relate that are fair, economical, informal and quick: s11. Section 14(2) enables a person to make a complaint to the Tribunal that a decision relating to a member of a regulated superannuation fund was or is unfair or unreasonable. The parties to a complaint are the complainant and the trustee, and the Tribunal has power to join an insurer where the subject matter of the complaint relates to a death benefit or a disability benefit under a contract of insurance between the trustee and an insurer: s18.

Section 32(1) provides that if the Tribunal has not been able to settle a complaint by conciliation, it must fix a date, time and place for a "review meeting". The parties are entitled to make written submissions for the purposes of the review meeting: s33. Unless the Tribunal considers it necessary that there be oral submissions at the review meeting, it must conduct the meeting without them: s34. Section 36 provides:

The Tribunal, in reviewing a decision or conduct:

(a) is not bound by technicalities, legal forms or rules of evidence; and

(b) is to act as speedily as a proper consideration of the review allows, having regard to the objectives laid down by section 11 and the interests of all the members of the fund to which the complaint relates; and

(c) may inform itself of any matter relevant to a review of the decision in any way it thinks appropriate.

Section 37 is in part as follows:

(1) For the purposes 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).

(2) If an insurer ... has been joined as a party to a complaint under section 14:

(a) the Tribunal must, when reviewing the trustee's decision, also review any decision of the insurer ... that is relevant to the complaint; and

(b) for that purpose, has all the powers, obligations and discretions that are conferred on the insurer ....

(c) subject to subsection (6), must make a determination in accordance with subsection (3).

(3) On reviewing the decision of a trustee [or] insurer ... 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 [or] insurer ... 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 ...

...

was fair and reasonable in the circumstances.

A review is usually held in private, and the Tribunal may give directions as to the persons who may be present: s38. A decision of a trustee or insurer as varied by the Tribunal, or a decision made by the Tribunal in substitution for a decision of a trustee or insurer, is to be taken to be a decision of a trustee or insurer, and on the coming into operation of the Tribunal's determination has effect on and from the day on which the original decision had or has effect: s41(3).

The trust deed and insurance policy

Clause 11 of the deed governing the Plan provides that if a member leaves the service before the normal retirement date as a result of becoming totally and permanently disabled, the trustee shall pay a certain benefit to the member. The expression "totally and permanently disabled" has the meaning attributed to it by "a policy which provides Group Life Insurance": clause 11. In the relevant insurance policy the expression is defined as

having been absent from employment with the Company through injury or illness for six consecutive months and in the opinion of National Mutual after consideration of medical evidence that is satisfactory to National Mutual having become incapacitated to such an extent as to render the Member unlikely ever to engage in or work for reward in any occupation or work for which he is reasonably qualified by education, training or experience ....

Tribunal's reasoning

Under the heading "Issues" the Tribunal said:

the issues the Tribunal must address is whether or not the decision of the Trustee was fair and reasonable in its operation to [the respondent]. This will involve the Tribunal considering whether the evidence before it enables the Tribunal to conclude that [the respondent] satisfies the requirements to be classified as totally and permanently disabled according to the Trust Deed.

Under the heading "Conclusion", in dealing with s37, the Tribunal said:

[the Tribunal] must ... affirm the Trustee's decision if in its operation to the complainant it was fair and reasonable in the circumstances (see section 37(6)). It must also affirm the decision if that decision was not unfair or unreasonable according to section 37(3). For the decision to be reasonable, it must be within reason, and for the decision to be fair it must be just, equitable, unbiased and impartial.

The Tribunal then said that the "role of a tribunal is to decide whether or not the correct or preferable decision has been made". Turning to the definition of "totally and permanently disabled", the Tribunal said it must "decide whether or not [the respondent] satisfies that definition". The Tribunal then examined the medical evidence "including the later report" from Dr Dodge, and said:

The Tribunal notes that it may consider this later evidence as it refers to [the respondent's] situation in relation to his ability to return to work. Dr [Dodge] was of the opinion that [the respondent] would never be fit to return to work. His heart disease was serious enough to cause limitations on his effort tolerance and weekly attacks of angina. He also suffers from shortness of breath on exertion. When this is coupled with [the respondent's] lower back pain, [the respondent] is unemployable, according to Dr [Dodge]. In contrast, Dr [McLellan] and Dr [Bogetic] were of the opinion that [the respondent] could return to his light duties as a quality control inspector for four hours a day. [The respondent's] treating GP believed that he was unfit for all work because of his medical condition.

(Dr Bogetic did not express the opinion attributed to him. It may be that the Tribunal intended to refer to Dr Krafchek, who said the respondent could engage in work that was not strenuous.)

The Tribunal then said that the respondent

would be unable to return to his employment as a quality control inspector because of the heavy lifting on an occasional basis and the standing for 25 per cent of the time. Both of these activities have been described as unsuitable by both his doctors. The Tribunal is satisfied that [the respondent] was unable to return to even those light duties.

(In fact no medical practitioner described the lifting and standing as unsuitable, although Dr Dodge certainly implied that it was.)

The Tribunal concluded its determination by stating that, for the reasons it had given, both the trustee's and the insurer's decisions were not fair or reasonable.

"fair and reasonable"

In Pope v Lawler (unreported, 7 May 1996) Nicholson J considered the meaning of these words in s37(2) of the Act in its original form (ie before s37 assumed its present form as a result of s5 and Schedule 5 of the Superannuation Industry (Supervision) Legislation Amendment Act 1995 ). In its original form s37(2) required the Tribunal to affirm the trustee's decision if satisfied that the decision "in its operation in relation to the complainant, was fair and reasonable in all the circumstances". Nicholson J said:

... I do not consider that the reference to "fairness" in s37(2) is a reference to procedural fairness. ... The effect of this provision is to require the Tribunal to apply the criteria of fairness and reasonableness to the operation of the decision in relation to the applicants. So far as the criterion of fairness is concerned, this requires the Tribunal to examine whether the decision of the Trustees is fair in that operation, not whether it has been arrived at by fair process.

I respectfully agree that the words "the decision was fair" in the former s37(2) were directed to whether the actual decision, rather than the process that led to it, was fair. I see no reason to doubt that this is the meaning of the identical words in the current s37(6). As to the meaning of "fair and reasonable", Nicholson J said:

"Fair" is relevantly defined in The New Shorter Oxford Dictionary 4th ed (1993) at 907 as "just, unbiased, equitable, impartial". "Reasonable" is defined in the same dictionary at 2496 relevantly as "within the limits of reason; not greatly less or more than might be thought likely or appropriate".

The Tribunal correctly instructed itself as to meaning of the expression "fair and reasonable".

Error of law

The matter to which the Tribunal must first direct its attention under s37, in a case such as the present, is whether it is satisfied that the decision, in its operation in relation to the complainant, was fair and reasonable in the circumstances. That is made clear by s37(1)(b) - the obligation to make a determination under sub-s(3) is "subject to subsection (6)" - and by sub-s(4) - the Tribunal's power to make a determination under sub-s(3) is conditioned upon it having found that the decision was unfair or unreasonable or both.

In my view the Tribunal did not address itself to the question posed by sub-s(6). It initially asked itself the right question - "whether or not the decision of the Trustee was fair and reasonable in its operation to" the respondent. But then the Tribunal showed that it misunderstood what that question involved it doing, by saying that this "will involve the Tribunal considering whether the evidence before it enables the Tribunal to conclude that [the respondent] satisfies the requirements to be classified as totally and permanently disabled ...". The emphasis is mine. The sub-s(6) inquiry is not whether the Tribunal is of the opinion that the respondent is totally and permanently disabled, but whether it is satisfied that the trustee's and the insurer's decisions that he was not so disabled were fair and reasonable in the circumstances.

The Tribunal repeated what in my view is the erroneous understanding of its task when it said "the role of a tribunal is to decide whether or not the correct or preferable decision has been made". The context in which this was said shows that the words "a tribunal" mean a tribunal such as the Tribunal. Later the Tribunal said that it must look at the definition of "totally and permanently disabled" when "making its decision concerning whether or not [the respondent] was entitled to be paid a total and permanently disabled benefit". The emphasis is mine. And later - "the Tribunal ... must now decide whether or not [the respondent] satisfies that definition".

The Tribunal then considered Dr Dodge's report, which was not before the trustee or insurer, and concluded that the respondent was unable to return to his employment as a quality control inspector, and was unfit for any other work for which his education and training qualified him.

The Tribunal's ultimate conclusion is expressed in words which suggest attention to the sub-s(6) enquiry - the decisions below were not fair or reasonable. But it is clear from the Tribunal's initial statement of its understanding of its task, and from the process of its reasoning, that it did not ask itself whether the decisions complained of were fair and reasonable in the circumstances, but whether in its opinion the respondent was totally and permanently disabled.

Fresh evidence

The Tribunal received and acted upon medical evidence that was not before the trustee or insurer. In particular, it placed much reliance on Dr Dodge's report, and his opinion that the respondent was unemployable and could never return to work. The Tribunal's satisfaction that the respondent was unable to return to light duties as an inspector was based on Dr Dodge's report. Counsel for the insurer submitted that the Tribunal's task was to decide whether, on the material before the decision-maker, the decision was fair and reasonable. She relied in particular upon s37(6), which requires the Tribunal to determine whether the decision under review "was fair and reasonable in the circumstances". The words I have emphasised were said to indicate that what is to be decided is whether, on the material before the decision-maker, the decision was fair and reasonable. In view of the error I have identified under the preceding heading I need not decide whether the Tribunal may receive evidence in addition to that which was before the trustee or insurer, and in the absence of argument on behalf of the applicant (see under the heading Costs), I do not propose to do so. The fact that for the purposes of carrying out its review the Tribunal has all the powers, obligations and discretions that are conferred on the trustee and the insurer (s37(1)(a)), and that a decision made by the Tribunal in substitution for a decision of a trustee or insurer is to be taken to be a decision of the trustee or insurer (s41(3)), are relevant in this connection. See Re Brindle; Ex parte F B & F A McMahon Pty Ltd [1992] FCA 203; (1992) 108 ALR 470 at 473-474.

Conclusion

I am conscious of the warning in Minister for Immigration and Ethnic Affairs v Wu [1996] HCA 6; (1996) 185 CLR 259 against an overzealous scrutiny of a tribunal's reasons in search of error. But the error I have discerned does not arise out of inadequacies of expression or looseness of language. A reading of the whole of the Tribunal's reasons discloses that it failed to appreciate the role assigned to it by s37(6). The appeal must be allowed and the matter remitted to the Tribunal to be determined again in accordance with these reasons.

Costs

Section 45(6) provides that the Court is not to make an order for costs against a complainant who does not "defend an appeal instituted by another party to the complaint". The respondent's solicitors entered an appearance to the insurer's notice of appeal. They attended before a Registrar in relation to the preparation of the draft index of appeal papers, and attended before a judge when the matter was given a date for hearing. They filed a ten page statement of facts and contentions a few days before the hearing date. When the case was called on, counsel announced his appearance for the respondent, and submitted that the appeal should be struck out as an abuse of the process of the court. Despite a direction that the trial be by affidavit, there was no material filed in support of the application to strike out. No notice of motion had been filed, and counsel for the insurer had not been warned that an application to strike out would be made. In those circumstances I refused counsel's request that he be permitted to call oral evidence to support the strike out application. Thereupon he informed me that he proposed to withdraw, though he wanted to return at the conclusion of the appeal to argue the question of costs. The matter proceeded in the absence of counsel and solicitors for the respondent.

In those circumstances, did the respondent defend the appeal within the meaning of s46(5)? I do not think he did. He evinced an intention to defend it, but when it came to the crunch, he did not. Although written submissions were filed for the respondent, his counsel did not stay to hear the insurer's counsel's attack on the Tribunal's decision, and to defend the decision against that attack. In those circumstances, I do not consider that the respondent defended the appeal. Accordingly I will not make any costs order against the respondent.

I certify that this and the preceding twelve pages are a true copy of the reasons for judgment of the Honourable Justice Sundberg

.................................................

Associate

8 May 1997

Counsel for the Applicant: D S Mortimer

Solicitor for the Applicant: Kevin Le Plastrier

Counsel for the Respondent: J A Riordan

Solicitors for the Respondent: Vadarlis & Associates

Date of Hearing: 28 April 1997

Place of Hearing: Melbourne

Date of Judgment: 8 May 1997