McDonald v Director-General of Social Security

1 FCR 354
1984 - 0324C - FCA

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(Judgment by: Woodward J)

Between: McDonald
And: Director-General of Social Security

Court:

Judges:
Woodward JNorthrop J
Jenkinson J

Subject References:
Social Security
Crown

Hearing date: 12 December 1983
Judgment date: 27 March 1984

Melbourne

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Judgment by:
Woodward J

This is an appeal from a decision of the Administrative Appeals Tribunal which affirmed a decision of a delegate of the Director-General of Social Security to cancel an invalid pension which had previously been awarded to the applicant.

The appeal, provided for by s 44 of the Administrative Appeals Tribunal Act 1975, ('the AAT Act') is limited to questions of law. The two short questions which emerged in the course of argument, and which are adequately covered by an amended notice of appeal, filed by leave of the Court, are

"(a)

does either party in a case such as this before the Tribunal bear any onus of proof, and if so what is the extent of that onus?

(b)

what is the meaning of the word "permanent" in the phrase "permanent incapacity"?

The facts of the case, so far as they are relevant to this appeal, may be summarized as follows:

The applicant was born in 1948 in Malta. She came to Australia as a child. She has been married twice and has four children, born between 1967 and 1974.

She applied for and was granted an invalid pension in 1979 because she was suffering from Crohn's disease, an inflammatory disorder of the bowels. The report of a Commonwealth Medical Officer ('CMO') at that time certified that she was "permanently incapacitated for work to the extent of 85% or more" (a figure stipulated by the Social Security Act 1947 as a prerequisite for the grant of an invalid pension).

However the certificate of the CMO went on to say that the applicant's position should be reviewed in one year's time. Such a review was duly carried out by the same CMO in May 1980. He certified that, although her condition had improved in the previous twelve months, she was still permanently incapacitated for work to the extent of 85% or more. This time he recommended a further review in two years.

This report was referred to a delegate of the Director of Health who gave the formal opinion that the applicant was not permanently incapacitated to the extent of 85%. Since he did not see the applicant himself this opinion must have been based on the CMO's report together with the delegate's knowledge of the disease.

A somewhat misleading letter was then sent to the applicant telling her, "As a result of your recent medical examination, it has been certified that you are regarded as not permanently incapacitated for work and therefore it will be necessary to cancel your Invalid Pension". Three months later a further letter was sent which contained the apparently quite untruthful statement (which counsel for the respondent could not explain), "Your pension was cancelled due to the Commonwealth Medical Officer deciding that you were no longer medically entitled". This letter contained a form, which the applicant could use if she wished, appealing to the Social Security Appeals Tribunal. She exercised that right and her appeal was considered and recommended for dismissal by that Tribunal in March 1981. The part played by the Social Security Appeals Tribunal is not relevant to these proceedings. The applicant then exercised her further right of appeal to the Administrative Appeals Tribunal ('the AAT').

The AAT heard evidence in August 1982 and gave its considered reasons for rejecting the applicant's appeal in September.

Medical evidence put before the AAT was somewhat conflicting. It referred to the applicant's domestic problems, and what were variously described as 'personality' and 'psychological' problems, as well as to Crohn's disease. The case for the applicant was that it was a combination of these factors, a major part of which amounted to physical or psychological illness, which rendered her 85% incapacitated.

It is clear that there was evidence before the AAT on which it could properly find, as it did, that the applicant was not 85% incapacitated, provided that it did not misdirect itself on questions of law in the process of reaching that decision.

As I have said, only two matters are alleged, on behalf of the applicant, as amounting to misdirections in law. The first relates to onus of proof. It must be said at the outset that no such question was raised by the original notice of appeal, and it was conceded by counsel for the applicant that he conducted her case before the AAT on the assumption that such onus as existed was on his client - to establish her entitlement to a pension. Further, I take the view that the AAT's reasons for decision did not depend on any onus of proof, and indeed they disclosed a clear view that the evidence showed that the applicant was not permanently incapacitated.

Any discussion of the subject thus becomes rather academic, but since questions arose in the course of argument which were then debated, and the applicant was permitted to amend the notice of appeal to raise the question, I think it is appropriate to say something about it.

The first point to be made is that the onus (or burden) of proof is a common law concept, developed with some difficulty over many years, to provide answers to certain practical problems of litigation between parties in a court of law. One of the chief difficulties of the concept has been the necessity to distinguish between its so-called 'legal' and 'evidential' aspects. The concept is concerned with matters such as the order of presentation of evidence and the decision a court should give when it is left in a state of uncertainty by the evidence on a particular issue.

The use outside courts of law of the legal rules governing this part of the law of evidence should be approached with great caution. This is particularly true of an administrative tribunal which, by its statute "is not bound by the rules of evidence but may inform itself on any matter in such manner as it thinks appropriate" (AAT Act s 33(1)(c)).

Such a tribunal will still have to determine practical problems such as the sequence of receiving evidence and what to do if it is unable to reach a clear conclusion on an issue, but it is more likely to find the answer to such questions in the statutes under which it is operating, or in considerations of natural justice or common sense, than in the technical rules relating to onus of proof developed by the courts. However these may be of assistance in some cases where the legislation is silent.

Whether the principles adopted by such a tribunal, arising from these various considerations, are appropriately dealt with under the heading 'onus of proof', becomes a matter of choosing labels. It would probably be more convenient to avoid using that expression in cases such as the present.

There is certainly no legal onus of proof arising from the fact that this is an "appeals" tribunal, because the AAT is required, in effect, by s 43 of the AAT Act, to put itself in the position of the administrator in carrying out its review and, in the light of the material before the AAT, (not the material before the administrator, Drake v Minister for Immigration and Ethnic Affairs 1979 24 ALR 577 at 589) make its own decision in place of the administrator's. The AAT itself, in a series of cases beginning with re Ladybird Children's Wear Pty. Ltd., 1 ALD 1 , has taken the view that there is no presumption that the administrator's decision is correct. This is clearly the right approach to the matter.

It is possible to imagine a case where the act which the administrator is applying places a requirement or onus on one or other of the parties to an issue to establish a particular state of facts on which the administrator's decision would be based. If that were so, the same requirement or onus would apply before the AAT. But that is not this case. Here s 24 of the Social Security Act 1947 provides simply that "a person above the age of sixteen years who . . . is permanently incapacitated for work . . . . shall be qualified to receive an invalid pension". Obviously someone must set in motion the process which establishes the entitlement, and that will normally be done by or on behalf of the person concerned, but the Act does not create a legal onus to prove all relevant aspects of a claim of permanent incapacity such, for example, as the state of the labour market for disabled persons. Certainly if no material is available to the decision-maker, or if available material leaves the decision-maker quite uncertain whether the person is permanently incapacitated, the claim must fail. But I think it would be artificial to describe this situation in terms of the legal onus of proof.

I say this in spite of the apparently contrary view taken by Ormerod J. (as he then was) in broadly comparable circumstances in Dickinson v Minister for Pensions 1953 1 QB 228 at 232, where he said:

"It is, I think, axiomatic in the administration of our law that, if a person thinks that he has a claim against another person, or against a Ministry, the duty is on him to establish that claim. The mere fact that an Act of Parliament does not state that that duty is on him, if it establishes a right, must, I think, automatically establish the duty on him to prove what he thinks is his right before he can succeed in his claim."

There is however one important distinction between the case his Honour had before him and the present case. There the Royal Warrant giving entitlement to pensions made use of the expression "onus . . . to prove" in certain cases, and this led his Honour to imply the concept in the case before him.

The next question which arises is whether, once an invalid pension has been granted, there is an evidential onus on the Director-General to satisfy himself, or on appeal the AAT, of changed circumstances before cancelling the pension. This was the main issue argued before us under the first question of law.

The provisions of the Social Security Act 1947 under which the Director-General could have reviewed the applicant's pension in the present case are ss 14 and 46(1). Section 14 reads,

"Whenever it appears to the Director-General that sufficient reason exists for reviewing a determination, direction, decision or approval of an officer under this Act (including a determination, direction, decision or approval of the Director-General), the Director-General may review the determination, direction, decision or approval and may affirm, vary or annul it."

Section 46(1) reads,

"If,

(a)

having regard to the income of a pensioner;

(b)

by reason of the failure of a pensioner to comply with section 44 or 45; or

(c)

for any other reason,

the Director-General considers that the pension which is being paid to a pensioner should be cancelled or suspended . . . . . the Director-General may cancel or suspend the pension . . . . . accordingly."

Whichever provision the Director-General chooses to act under, (and in this case, although it is not entirely clear, he seems to have purported to act under s 46(1)), if he is of the opinion that a person is not, or is no longer, permanently incapacitated, he has both a right and a duty to terminate that person's pension. In doing so he must act in good faith on the information available to him, but no question of onus arises.

In my view, the answer is the same when the AAT seeks to put itself in the position of the Director-General. It must act on the material which is before it but, as I have already pointed out, it is not bound by rules of evidence and may inform itself on any matter in such manner as it thinks appropriate.

It is true that facts may be peculiarly within the knowledge of a party to an issue, and a failure by that party to produce evidence as to those facts may lead to an unfavourable inference being drawn - but it is not helpful to categorize this common sense approach to evidence as an example of an evidential onus of proof. The same may be said of a case where a good deal of evidence pointing in one direction is before the Tribunal, and any intelligent observer could see that unless contrary material comes to light that is the way the decision is likely to go. Putting such cases to one side there can be no evidential onus of proof in proceedings before the AAT unless the relevant legislation provides for it, and in the present case the Social Security Act 1947 does not.

If the AAT finds itself in a state of uncertainty after considering all the available material, unable to decide a question of fact either way on the balance of probabilities, it will be necessary for it to analyse carefully the decision it is reviewing. If, for example, it is a decision whether or not to cancel a pension in the light of changed circumstances, then it has failed to achieve the statutory requirement of reaching a state of mind that the pension should be cancelled. If, on the other hand, it is a decision, to be made in the light of fresh evidence, whether or not the pension should ever have been granted in the first place, then it has failed to be satisfied that the person ever was permanently incapacitated for work. For a comparable analysis as to the onus of proof (properly so-called) before a judicial tribunal see Phillips v The Commonwealth (1964) 110 CLR 347 at 350.

The present case falls within the former category - there was some evidence of improvement in the applicant's medical condition - and the Director-General purported to act under s 46(1) of the Act. Therefore a state of indecision by the AAT (if it had existed) should have been resolved in the applicant's favour. But, as I have said, I would prefer not to refer to the concept of onus of proof in arriving at this result. It is rather a question of a proper interpretation of the Social Security Act 1947. And in any case the AAT experienced no indecision.

Accordingly it cannot be said that the AAT was wrong in law in failing to discern an onus of proof on the Director-General in this case.

On the second question, as to whether the AAT correctly instructed itself as to the meaning of "permanent" incapacity, the AAT had this to say in its reasons for decision,

"We have taken into account the interpretation given to that phrase in Re Panke and Director-General of Social Security (1981) 4 ALD 179 at p 192, namely that "permanent incapacity must be taken to refer to an incapacity which is likely to last indefinitely as opposed to one which is likely to last only for a time". To this we would add that compliance with the statutory requirement of permanency demands, in our opinion, that the decision-maker should be able to form, on the evidence, a settled expectation of the likelihood of such indefinite continuance of the incapacity. We think that it would be quite wrong to conclude that the applicant,' incapacity is permanent in this sense. There was evidence before us of deficiencies in her management of her medication, of the possibility of the medication itself being improved, and of the possibility of maturation of personality. She is, as we have said, only 32, and it would be in accordance neither with the letter nor the spirit of the legislation to regard the applicant as qualifying for invalid pension on the basis of the permanency of her incapacity."

In order to test the accuracy of this approach to the meaning of "permanent" incapacity it is necessary to look first at the scheme of the Social Security Act 1947. The Act provides in s 108 that a person "is qualified to receive a sickness benefit in respect of a period . . . . if, and only if, . . . . the person satisfies the Director-General that, throughout the relevant period, he was incapacitated for work by reason of sickness or accident (being an incapacity of a temporary nature) and that he has thereby suffered a loss of salary, wages or other income".

I note in passing that this provides an example of a legal requirement, which some might call an onus of proof, being cast by statute on the person concerned to satisfy the Director-General - and thus, on review, the AAT - of certain relevant facts.

This provision has to be compared and contrasted with s 24 of the Act, referred to earlier, which entitles a person "permanently incapacitated for work" to an invalid pension. The Act obviously intends that a line be drawn between "temporary" and "permanent" incapacity and that all relevant forms of incapacity must fall on one side or the other of that line. Since the incapacity referred to is not mere physical incapacity, but incapacity for work, factors such as physical and mental health, skills, training, qualifications and the state of the labour market will all be relevant in determining both the degree of incapacity and its likely duration. The work referred to must be work generally and not restricted to the person's normal occupation. I say this, first, because the provisions can apply to a person over the age of 16 who has never worked at all and, secondly, because common sense dictates that a person who can earn a legally prescribed wage in an occupation which he is capable of performing, should not be entitled to a pension simply because he is incapacitated from performing his normal occupation.

So far as degree of incapacity is concerned, the Act provides in s 23 that "a person shall be deemed to be permanently incapacitated for work if the degree of his permanent incapacity for work is not less than 85%". I assume without deciding (because the matter was not argued before us) that this means that a person who is able to work part-time or irregularly and so earn more than 15% of a prescribed wage is not entitled to an invalid pension.

The vital contrast between temporary and permanent incapacity must be based upon an assessment of future prospects at the time the decision is made. It is not inconsistent with the notion of permanent incapacity that the pensioner's position should be reviewed from time to time. Unexpected improvement in the person's condition, advances in medical science, the achievement of fresh skills, or even changes in the labour market, could bring to an end an incapacity which had been thought to be permanent.

In my view the true test of a permanent, as distinct from temporary, incapacity is whether in the light of the available evidence, it is more likely than not that the incapacity will persist in the foreseeable future. (Cf. Re Tiknaz and Director-General of Social Services 1981 4 ALN N44.)

This test involves two questions. The first is whether it is more likely than not that the disability will terminate (or fall below 85% in the sense referred to above) at some time in the future. Even if the answer to this question is 'Yes', I think it would be inaccurate in the context of employment to describe as "temporary" a condition which was likely to last for a number of years. Hence the two elements of degree of likelihood of improvement and time-span for that improvement, should be weighed together in determining what is permanent and what is temporary. The greater the likelihood of substantial improvement and the earlier that it is likely to occur, the more accurate will be a "temporary" label. The longer the period and the less probable the improvement, the more appropriate will be a finding of permanent incapacity.

I do not regard what I have just said as conflicting in any way with the passage from Re Panke and Director-General of Social Security (above), quoted by the AAT. The choice is indeed between incapacities "likely to last indefinitely" - meaning for a long and indeterminate time but not necessarily forever - and incapacities "likely to last only for a time" - meaning a time which is predictable and capable of being quantified, though not necessarily with any precision.

The gloss added to this decision by the AAT does however create difficulty. The Tribunal said,

"To this we would add that compliance with the statutory requirement of permanency demands, in our opinion, that the decision-maker should be able to form, on the evidence, a settled expectation of the likelihood of such indefinite continuance of the incapacity. We think that it would be quite wrong to conclude that the applicant's incapacity is permanent in this sense. There was evidence before us of deficiencies in her management of her medication, of the possibility of the medication itself being improved, and of the possibility of maturation of personality. She is, as we have said, only 32, and it would be in accordance neither with the letter nor the spirit of the legislation to regard the applicant as qualifying for invalid pension on the basis of the permanency of her incapaicity."

In the first sentence of this passage the AAT seems to be saying that the decision-maker must have some strong degree of satisfaction ("settled expectation") of the likelihood of indefinite continuance of incapacity. Anything less would render the incapacity temporary only. I cannot agree with this view. There will be many cases in the difficult borderline region between temporary and permanent incapacity where the Director-General or the AAT will have to decide which is the more appropriate description. It is not necessary to have a "settled expectation" of permanency before so finding; a belief - even on a fine balance - that indefinite duration is more likely than foreseeable termination, will suffice.

Since, as the conflict of medical opinion referred to earlier demonstrates, the facts of the present case, (which I need not canvass), clearly fall in the borderline area, this misdirection of itself by the AAT on a point of law could have affected its decision.

The decision of the AAT should therefore be set aside and the case remitted to be heard and decided again in the light of this Court's reasons for decision. Whether the Tribunal will wish to hear further evidence will be a matter for it to decide. It is unfortunate that delay in the prosecution of this appeal has led to an unwarranted gap between the original hearing and the necessary rehearing.

Before leaving the matter I should say that I have not considered, because it was not raised before us, another question referred to by the AAT, but not decided. The AAT said, "In fact we think that the applicant's personality disorder is the prime and dominant feature in her condition as a whole". After quoting from a decision of the AAT, constituted by Davies J., in Re Sheely and Director-General of Social Security 1982 4 ALN N206 to the effect that "permanent incapacity" within the meaning of the Act must result from a medical disability, the AAT continued,

"In this case however it may be very much doubted whether there are grounds for concluding that the disabilities suffered by the present applicant are comprehended by the words "incapacitated for work". There is in our opinion much to be said for the view that the applicant's real problem is her "limited personality resources", to use Dr Nicholson's expression, rather than psychic illness in the sense described in the passage quoted."

The AAT then assumed this issue in the applicant's favour and went on to affirm the decision cancelling her pension on the ground I have already dealt with.

I only wish to say that I see this other matter raised by the AAT as a difficult question into which I would not wish to venture without the benefit of argument, even though it could possibly become relevant in the re-hearing.