[2015] AATA  343

Division	Veterans' Appeals Division	
File Number(s)	2013/2138	
Re	Stuart Smith	
	APPLICANT	
And	Military Rehabilitation and Compensation Commission	
	RESPONDENT	
Decision

Tribunal	Ms A F Cunningham, Senior Member

Date	 19 May 2015 	
Place	Hobart	
Decision under review varied as follows:
1.	The correct hourly rate to be used for the purposes of calculating the civilian component of the applicant’s NWE as at 29 May 2001 is $15.36. 
2.	During the period 29 May 2001 to 30 June 2009 the civilian component of the applicant’s NWE should be adjusted annually, commencing 1 July 2002 by the applicable indexation figure pursuant to section 8 (9B) of the SRC Act. 
3.	The applicant is not entitled to any other adjustments to the civilian component of his NWE.

………………………………………….
Ms A F Cunningham, Senior Member

Catchwords
Workers Compensation - incapacity payments - calculation normal weekly earnings - increment in a range of salary - indexation rate – decision under review varied

Legislation
Safety, Rehabilitation and Compensation Act 1988 (the SRC Act)
Administrative Appeals Tribunal Act 19075 (the AAT Act) 
Safety, Rehabilitation and Compensation and other Legislation Amendment Act 2009

Cases
Chun v Comcare 209 FCR 399
Military Rehabilitation and Compensation Commission v David Perry (2007) FCA 1586

Secondary Materials
Safety, Rehabilitation and Compensation Regulations 2002

REASONS FOR DECISION

Ms A F Cunningham, Senior Member

  

1.	The applicant, Stuart Smith seeks the review of a reviewable decision dated 18th February 2013 regarding the calculation of his incapacity payments for the period 29 May 2001 until 14 June 2012. The reviewable decision revoked an earlier determination and substituted a decision that pursuant to the Safety Rehabilitation and Compensation Act 1988 (the SRC Act), Mr Smith was entitled to the recalculated incapacity entitlements set out in the decision.
2.	Mr Smith disputes a number of the findings made by the Review Officer in her decision and claims that it is inconsistent with the terms of an order entered by the Administrative Appeals Tribunal (AAT) by consent on 12 June 2009.
3.	Mr Smith’s claim for compensation arises from an injury to his back suffered during an army reserve exercise when a camouflage net fell on him on 10 November 1992. Liability was accepted for “muscle strain of the lower back” by a determination dated 27 November 1992. The description of his condition was extended to include “mechanical lower back pain” by a decision dated 12 August 2002.
4.	Mr Smith represented himself at the hearing and gave oral evidence. The respondent was represented by David Wilson who tended the T documents pursuant to section 37 of the Administrative Appeals Tribunal Act 1975 (the AAT Act) and a further document setting out the Statutory Rates under subsections 8 (9 B) and 8 (9 F) of the SRC Act.
Background facts
5.	Mr Smith commenced employment as a joiner with Joinery Products Sales Proprietary Limited (Joinery Products) in Devonport Tasmania in 1988. On 25 May 1989 he enlisted in the Army Reserve. He sustained an injury to his back during an Army Reserve exercise on 10 November 1992 and was discharged from the Army Reserve on 12 July 1996 at his own request.
6.	In 1998 Mr Smith ceased employment at Joinery Products and moved to Western Australia where he commenced employment with Ausdrill Limited as a shotfirer’s assistant on a mining site.
7.	Mr Smith suffered an aggravation to his injury on 29 October 1998 while pushing his motorbike through a shed door. By a determination dated 18 January 1999, liability to pay incapacity payments was accepted with effect from 5 November 1998. Mr Smith’s employment with Ausdrilll Ltd was terminated on 22 March 1999.
8.	Following a reconsideration of a decision denying Mr Smith’s application for permanent impairment, liability was accepted on 29 May 2002 based on a Wage Price Index (WPI) of 10%.
9.	In a determination dated 3 August 2000 Mr Smith’s claim that his inability to participate in the Army Reserves should be accommodated in the calculation of his incapacity entitlements, was denied. The basis of the refusal was that Mr Smith had voluntarily left this employment in 1996 which was two years prior to the incident that had caused his incapacity to work and he had continued to be employed in civilian employment. In his decision the Review Officer confirmed that the relevant period for calculating incapacity payments related to employment prior to the date of injury in November 1992.
10.	From 17 July 2003 to 3 September 2003 Mr Smith engaged in a work trial with Simplot, working in the laboratory. During this period Mr Smith worked between six hours per week and up to 20 hours per week in the period 21 August 2003 until 27 August 2003. Mr Smith continued the work trial from 10 November 2003 until 24 December 2003. In the period from 20 November 2003 to 26 November 2003 he worked 12 hours, from 27 November 2003 to 3 December 2003 he worked 29 hours and for the following periods he worked between 20 and 21 hours per week.
11.	Mr Smith then studied for a Certificate 3 Laboratory Technician qualification through TAFE which he successfully completed in November 2005. In a determination dated 28 March 2006 he was deemed to earn no less than $599.10 gross per week as a Level 1 Laboratory Technician.  This determination was affirmed on review. 
12.	On 1 April 2007 Mr Smith commenced employment with Technical Edge Proprietary Limited working a minimum of 20 hours per week on a permanent part-time basis. On the 1 September 2011 a review of Mr Smith’s entitlement to incapacity payments from 29 May 2001 onwards was conducted. Mr Smith sought a review of the decision. In accordance with section 9 of the SRC Act, the Review Officer determined the relevant period for calculating Mr Smith’s Normal Weekly Earnings (NWE) before the injury on 10 November 1992 was between 26 October 1992 to 9 November 1992.
13.	On 12 June 2009 a consent determination was entered by the AAT setting aside the reviewable decision and determining that “during the period from 1 March 2006 to 31 October 2006 the applicant was totally incapacitated for work as a result of his compensable back condition; accordingly, the applicant is entitled to compensation pursuant to section 19 of the SRC Act in respect of the incapacity period; as at 1 November 2006 to the present date and as at the present date, the applicant has a deemed ability to earn in suitable employment at a rate of 20 hours per week.”
14.	The decision of the AAT was implemented by a determination dated 7 October 2009 which decided that Mr Smith had a gross entitlement of $67,065.94 for the period 30 June 2006 to 30 September 2009 and an ongoing weekly entitlement of $410.01. This was calculated by applying annual WPI increases to the applicant’s NWE from 1 July 2006 onwards.
15.	Following a request for a review of the calculation of his incapacity payments, the Review Officer revoked the determination of 1 September 2011 and substituted recalculated incapacity entitlements for the period from 29 May 2001 to 14 June 2012. The recalculated benefits were based on Mr Smith’s NWE calculated by reference to his earnings from employment with Joinery Products during the two week period prior to his injury on 10 November 1992. The NWE was adjusted by increases that Mr Smith would have received in that employment had it continued up to 30 June 2002.  Thereafter it was adjusted pursuant to section 8 (6) of the SRC Act by wage increments that would have been received had Mr Smith still been employed by Joinery Products and, by the wage cost index (WCI) or WPI as required by section 8 (9B) of the SRC Act. Deductions for Mr Smith’s ability to earn were also applied using the hours determined by the AAT decision dated 12 June 2009 and employment as a Laboratory Technician as suitable employment.
The issues
16.	The two issues identified for  determination by the Tribunal are as follows:
(1)	The correct hourly rate to be used for the purposes of calculating the civilian component of the applicant’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.
The legislation
17.	The NWE is calculated pursuant to section 8 of the SRC Act.
18.	Section 8 (3) provides that if at the date of an injury an employee was employed by the Commonwealth in part-time employment then the employee’s earnings from any other employment are to be treated as earnings of the employee from his or her employment by the Commonwealth.
19.	Mr Smith was, at the date of the injury, employed in a part-time capacity with the Army Reserve and worked as a joiner with Joinery Products. It was not disputed that 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 is $15.36 as advised in a letter from the paymaster at Joinery Products dated 25 July 2001 ( T 33).
20.	Prior to 1 October 2009, S 8 (9) provided for NWE to be adjusted in line with changes in the minimum wage payable to “employees included in a class of employees of which the employee was a member at the date of injury”. With effect from 1 October 2009 the former S 8 (9) was repealed by the Safety, Rehabilitation and Compensation and other Legislation Amendment Act 2009 and replaced with a new S 8 (9)-(9D):  
“(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.”

21.	The effect of the amendments was that employees who ceased to be employed by the Commonwealth would no longer have their NWE adjusted in the manner provided by the former S 8 (9). Instead, their NWE would be adjusted on each “indexation date” by reference to an index prescribed under S 8 (9B). The first indexation date for those who had already ceased to be employed by the Commonwealth was 1 July 2002 (S 8 (9C)).
22.	Initially the index prescribed by regulation 5 of the Safety, Rehabilitation and Compensation Regulations 2002 was the Wage Cost Index (WCI). In 2008 the name of the index was changed to the Wage Price Index (WPI).
The evidence
23.	Mr Smith accepts that for the purposes of calculating the civilian component of his NWE the initial figure is $15.36.  However he contends that this amount should be adjusted in accordance with the provisions of the subsection 8 (6) (c) . This provision reads as follows:
“(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;”

24.	It is Mr Smith’s contention that if not for the injury he sustained in the Army Reserve, he would have been appointed as foreman with Joinery Products and earning $33 per hour. Mr Smith contends that he was next in line for the foreman’s position but it was instead filled by Clinton Howe.
25.	Mr Wilson on behalf of the respondent, contended that there was no corroborating evidence that Mr Smith would have been appointed foreman.  In any event, the appointment to foreman would have constituted a promotion which does not fall within the provisions of section 8 (6) (c) because it does not constitute “an increment in a range of salary, wages or pay”. Mr Wilson contends that on the basis of the documentary material available, there is no evidence that Mr Smith was entitled to any increments within his level of salary during the relevant period.
26.	Included in the T documents is correspondence provided by Mr Smith’s former employer, Joinery Products further to his requests for information regarding the rates of pay that he would have received if he was still employed with Joinery Products.
27.	In a letter dated 14 August 2008 the Manager of Joinery Products Marcus Kelly advised that the base hourly rate for a qualified joiner as at that date was $22.50 which equated to an annual package of $51,698.70 plus overtime. It was further stated that:
“Due to growth of the company and more so the labour shortage I believe that you would have been offered several promotions within the company if you were still there which would obviously involve more money than detailed above. This would be the minimum that you would earn if you were still with Joinery Products.   I have two employees still working at Joinery Products that work with you and were in my opinion of similar levels of quality and production to you. The rate detailed above indicates what they currently earn and in my opinion would be the minimum you would have earned without accepting any offers of promotion should they have occurred.  I confirm that the pay rate detailed above is equivalent to that of other joiners we currently employ along with similar skills and experience to you.”
28.	Further to a request from Mr Smith for more detailed information, Mr Kelly forwarded a letter dated 27 August 2008. This letter listed the then current hourly rates of pay for a joiner level 1 at $18.80 through to the position of foreman at $25 per hour. The hourly rate of $22.50 equated to a joiner level 8. Mr Kelly stated that if Mr Smith had been able to continue in his trade he would have accumulated 20 year’s trade experience and with this amount of experience, skill and productivity, would have been paid more per hour than previously stated. The amount advised was $23.50 per hour which equates to joiner level 10. It was further stated that over time with the retirement of other staff members, Mr Smith would have had the opportunity to apply for other positions and would have been promoted if he had been able to continue in employment if not for his back injury. His estimated salary package would have ranged from approximately $65,000 to $100,000 per annum depending on the position held.
29.	A further letter from the manager of Joinery Products dated 10 November 2010 received by the Department of Veterans Affairs, stated that in Mr Kelly’s opinion, an hourly rate of $15.36 per hour for 2002 “does not reflect Mr Smith’s high skill level, productivity and diversity as a top-level employee”. Further, that if Mr Smith had been able to continue his employment with Joinery Products, he would have been paid a higher hourly rate back in 2002. Mr Kelly noted that three employees who had worked with Mr Smith and of equal skill level, “have been promoted to staff” and receive significant salary packages of up to $70,000 per annum. Mr Kelly went on to state:
 “I also believe he should have received regular increases since 2002 as pay rates climbed upwards of one dollar per hour per year in the market to reach what they are today.”
30.	In a letter dated 22  July 2011 addressed to the Department of Veterans Affairs, Mr Kelly stated:
“In regard to the hourly rate that I believe Stewart would receive had he continued in his employment; Stuart has specifically asked for me to state the pay increment level he would have been paid if he had continued his employment as a Joiner and only within the range of qualified Joiners at our company. Therefore in line with my previous letters, if Stuart had continued his employment, I believe he would be paid as a leading hand joiner or Workshop Foreman rate of $33.60 per hour plus overtime.  Please see my previous (sic) letters for further information. Stewart has also informed me that he has a payslip from the Workshop Foreman back in November 2003 and at that time he was paid $19.30 per hour plus overtime and I have been shown this and verify that it is true and correct.”
31.	It was Mr Smith’s evidence that Clinton Howe filled his position when he was no longer able to work due to his back injury. Mr Howe went on to become a Foreman which position Mr Smith contends he would have occupied if he had been able to continue his work with Joinery Products. Included in the T documents were a number of payslips for Mr Howe as follows: payslip dated 13/02/2002 recording his hourly rate at $15.36; 12/11/ 2002 $17.40 per hour; 16/12/2009 $25.00 per hour; 3/02/2010 $34.61 per hour.
Determination
32.	The Tribunal accepts the evidence that Mr Smith was held in high regard by his former employer, Joinery Products and that had he been able to continue in this employment, he would have been considered for a number of promotions over the years on account of his experience and quality work skills. The question for the Tribunal to determine is the correct adjustment of Mr Smith’s NWE in accordance with the provisions of the relevant legislation in this case, section 8 of the SRC Act.
33.	It is accepted that the relevant period referred to in subsection 8 (1) and as defined in section 9, is a two week period prior to Mr Smith’s injury on 10 November 1992. The uncontradicted evidence provided by Joinery Products is that the hourly rate for that period was $15.36.  In this case the relevant provisions relating to adjustments by way of increases to that hourly rate can be considered in accordance with the following provisions under section 8. Namely, subsection (6), where there is evidence of an increase in the hourly rate by way of an “increment”, alternatively, under subsection (9A) or (9 B).
34.	The first issue to determine is whether Mr Smith’s NWE should be adjusted in accordance with the provisions of subsection 8 (6). The evidence with respect to the rates of pay and the range of hourly rates payable from Joinery Products is contained in a letter dated 27 August 2008 (T 82). This letter from the Manager of Joinery Products also states that employees with the equivalent experience, skill and productivity of Mr Smith were paid the amount of $23.50 per hour which equates to a joiner level 10. 
35.	At the time of ceasing work with Joinery Products Mr Smith had accumulated 10 years of employment. It was Mr Wilson’s contention that by that stage Mr Smith would have reached a joiner level 10 and therefore not entitled to any further increments within his wage range.
36.	The relevant part of subsection 8 (6) is (c) which refers to an increase in salary, wages or paid 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.
37.	This provision was considered by the Federal Court in Chun v Comcare 209 FCR 399 were Robertson J said at paragraph 61:
“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  S8 (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 S8 (9B). It is therefore unnecessary to consider other aspects of Perry.”
38.	The Federal Court in Military Rehabilitation and Compensation Commission v David Perry (2007) FCA 1586 was concerned with the retrospectivity of section 8 (9B) of the MRC Act and also the effect of section 8 (6) of the SRC Act on the construction of section 8 (9B). At paragraph 27 Bennett J said:
“The normal weekly earnings of the employee are as calculated under ss 8 (1) to 8 (8) of the Act. That includes the increment (S8 (6)). Section 8 (6) is directed to increments in remuneration payable to an employee by reason of the attainment of a level of seniority or the passage of time, including actual increments and hypothetical increments.”
39.	 The Federal Court held that section 8 (9B) did not deprive Mr Perry of his entitlements under section 8 (6). In that case Mr Perry was entitled to flying allowances which were based on seniority and increased automatically every two years. As he was in receipt of the increments as at the date of discharge and would have been entitled to the increments had he not been medically discharged due to his compensable condition, his NWE was accordingly adjusted in line with the provisions of sub section 8 (6).”
40.	It was Mr Smith’s contention that the adjustments to his hourly rate should correlate with the hourly rate that he would have received had he continued employment with Joinery Products. He maintains that this would have been at the level of foreman at an hourly rate of $25 in accordance with the letter of advice from Mr Kelly dated 27 August 2008. Included in this letter was a list of the then current hourly rates of pay from joiner level 1 through to foreman.
41.	Mr Smith ceased work with Joinery Products in 1998 after 10 years of employment. In his letter of 10 November 2010 Mr Kelly stated that as at that date, a quality tradesman would receive between $17.50 and $20 per hour depending on quality, skill level, versatility, output and productivity. He believed that a leading hand, the position occupied by Mr Smith when he was injured, would have received between $18.50 and $22.50 per hour. Whilst these figures relate to pay levels in 2010 they are consistent with the hourly rates of pay from Joiner level I through to Joiner level 10 as detailed in Mr Kelly’s letter of 27 August 2008. 
42.	Mr Kelly had earlier stated that if Mr Smith had continued his employment with Joinery Products he believes that he would have been promoted to staff who received significant salary packages. A staff promotion however is not contemplated by the provisions of subsection 8 (6) (c) which refers to increments in a range of salary, wages or pay applicable to the employee’s office, position or appointment. These words suggest that the increment must be referable to the employee’s position as at the date of the injury. Whilst Mr Smith was obviously held in high regard by his employer, many factors can influence a promotion and no such appointment could be guaranteed. In a letter from Mr Kelly to the Department of Veterans Affairs dated 22 July 2011 he stated that he believed that Mr Smith would have been paid as a leading hand joiner or workshop foreman at the rate of $33.60 per hour plus overtime if he had continued his employment. For the reasons outlined however, this evidence cannot assist with the calculation for the purposes of calculating Mr Smith’s NWE because it was not the position held by him at the date of injury.
43.	The hourly rate used for the purpose of calculating the civilian component of Mr Smith’s NWE as at 29 May 2001 was $15.36. This is also the hourly rate of pay identified in a payslip for Clinton Howe dated 13 February 2002. Mr Smith did not contend that the amount was incorrect but maintained that it was simply the starting point for any adjustment. The amount applied by the Review Officer was $1.00 per hour for the period 29 May 2002 until 29 May 2012.  This is consistent with Mr Kelly’s advice to the Department on 10 November 2010 when he advised that Mr Smith should have received regular increases since 2002 as pay rates climbed upwards of one dollar per hour per year. 
44.	On 29 May 2008 the Review Officer calculated an hourly rate of pay of $22.36 which is consistent with Mr Kelly’s advice of the rate of pay for a leading hand with Joinery Products in 2010. This rate also roughly equates to a Joiner level 8 in the Rates of Pay tabled in Mr Kelly’s letter of 27 August 2008. Although Mr Kelly’s letter also refers to average overtime hours worked by similarly qualified tradespersons within the last year, there is no allowance within the NWE provisions of section 8 to make adjustments for overtime payments.
45.	Prior to 1 October 2009, section 8 (9) provided for NWE to be adjusted in line with changes in the minimum wage payable to “employees included in a class of the employees of which the employee was a member at the date of injury”. With effect from 1 October 2009 the former section 8 (9) was repealed by the Safety, Rehabilitation and Compensation and other Legislation Amendment Act 2009 and replaced with a new section 8 (9)-(9D). The effect of the amendments was that employees who ceased to be employed by the Commonwealth would no longer have their in NWE adjusted in the manner provided by the former section 8 (9). Instead, their NWE would be adjusted on each “indexation date” by reference to an index prescribed under section 8 (9B). The first indexation rate for those who had already ceased to be employed by the Commonwealth was 1 July 2002 (section 8 (9C)).
46.	Initially the index prescribed by Regulation 5 of the Safety, Rehabilitation and Compensation Regulations 2002 was the wage cost index (WCI). In 2008 the name of the index was changed to the Wage Price index (WPI). Tendered in evidence was an extract from the Statutory Rates in Table 6 which sets out the percentage increase rates for NWE adjustment. In the determination of 18th of February 2013, the Review Officer applied the WPI increase to Mr Smith’s hourly rate of pay commencing 29 May 2002 until 1 July 2012 in accordance with these prescribed statutory rates.
47.	There is no evidence of any applicable wage increase falling within the former section 8 (9) of the SRC Act between 29 May 2001 and 1 October 2001 when the former section 8 (9) was repealed. The evidence was that wage increases at Joinery Products were paid annually and took effect on 29 May 2001. The estimated market rate increases since 2002 of one dollar per hour per year referred to by Mr Kelly in his letter dated 10 November 2010, are not increases falling within section 8 (6) of the SRC Act but general wage rises for a class of employees such as would fall within the former section 8 (9) of the SRC Act. The Tribunal accepts the Secretary’s submission that these increases are superseded by the indexation provisions dating from 1 July 2002.
48.	For the reasons identified above, the Tribunal has found that there is no evidence that Mr Smith was entitled to an increment in his salary, wages or pay under the provisions of subsection 8 (6). Between 29 May 2001 and 1 October 2001 his NWE fell for calculation under the provisions of the former section 8 (9) of the SRC Act. Any general wage increases payable under the former subsection 8 (9) are superseded by the indexation provisions the first applicable indexation date was 1 July 2002. The accepted hourly rate as advised by Mr Smith’s paymaster on 25 July 2001 was $15.36 as from 29 May 2001 . Accordingly as at 1 October 2001, the correct hourly rate to be used for the purpose of calculating the civilian component of Mr Smith’s NWE is $15.36 and from that date until 30 June 2009 the only annual adjustments that can be made are pursuant to sub section 8 (9B) of the SRC Act.
49.	In line with the above findings the Tribunal varies the decision under review and decides that:
(1) The correct hourly rate to be used for the purposes of calculating the civilian component of the applicant’s NWE as at 29 May 2001 is $15.36;
(2) During the period 29 May 2001 to 30 June 2009 the civilian component of the applicant’s NWE should be adjusted annually, commencing 1 July 2002 by the applicable indexation figure pursuant to section 8 (9B) of the SRC Act.
(3) The applicant is not entitled to any other adjustments to the civilian component of his NWE.	

I certify that the preceding 49 (forty -nine) paragraphs are a true copy of the reasons for the decision herein of Ms A F Cunningham, Senior Member	
........................................................................
Administrative Assistant
Dated   

Date(s) of hearing	24 March 2015	
Applicant	In person	
Solicitors for the Respondent	Mr David Wilson, Australian Government Solicitor