2.3.8 Reversal of liability | Military Compensation SRCA Manuals and Resources Library, Liability Handbook, Ch 2 Initial Liability, 2.3 Investigating Liability - Principles

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2.3.8 Reversal of liability

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Liability to pay compensation only persists while the injury continues to give rise to medical consequences. For those injuries which do not produce ongoing or permanent impairments, payment of compensation ceases when the medical condition has been 'cured' and the client is no longer incapacitated or impaired by the accepted condition. Cessation of payments may also occur where a non-compensable condition has overtaken the compensable one. For instance there would be no liability to pay compensation for loss of movement in the fingers of one hand if a later (non service-related) accident resulted in the amputation of that whole arm.

Cessation of payments due to these sorts of factors arises out of the general administration of the case and are discussed in each of the relevant compensation chapters..

There is an important difference between acceptance of Liability at the first instance following investigation of the original claim and ongoing liability to pay compensation or provide rehabilitation during the life of the client. Once 'initial liability' is accepted it can only be reversed in the exceptional circumstances outlined below. However, the client may have no entitlement to for example medical treatment or compensation if at that particular time they are not suffering the effects of the accepted condition.

The Court in Lees v Comcare found five factors which need to be present in order for a case to be accepted under s 14 (i.e. initial liability accepted):

First, that an appropriate notice of injury has been given to the relevant authority as required by s 53 of the Act; secondly, that a claim for compensation has been made as required by s 54 of the Act; thirdly, that the person who made the claim or on whose behalf the claim was made was an "employee" at the time of the alleged injury (ss 4 and 5); fourthly, that the employee suffered an injury (s 4); and finally, that the injury has resulted in death, incapacity for work or impairment.

In the case of Australian Postal Corporation v Ouyden it was clear that only those cases that do not meet all five factors above may be reversed. The Court said:

A determination on reconsideration that one or more of the elements did not exist is a determination that there was at no time a liability under s 14 of the Act to pay compensation for the particular injury. The position is different to, and to be contrasted with, the situation where a benefit is being paid under a particular section, in consequence of a determination having been made under s 14.

Therefore, liability may be reversed:

1.By a reconsideration Delegate (or the AAT) after review of the original decision, i.e. a formal re-determination of the case at the client's request. Section 62 reconsiderations are dealt with in the 'Reconsiderations and Appeals' section in Volume 1 of this Handbook.

2.By an ordinary Delegate discovering that an earlier decision was made an error. While Delegates have the power to redetermine matters 'on own motion' i.e. independently of the formal reconsideration process, you should be fully aware of the consequences of that action. Delegates considering such an action should not do so lightly. You are encouraged to discuss the matter with RCG policy personnel before taking action. Reconsideration decision 'on own motion' can only be made at the APS6 level.

3.The main points to consider when reversing liability are:

  • Such decisions should not be made merely on the basis of a subjective or alternative opinion of the evidence in such cases. The former decision must be clearly, obviously wrong on the evidence available at the time when the delegate made the decision.
  • The doctrine of 'natural justice' requires that the client be informed of the proposed re-determination and be allowed 28 days to respond to that proposal.
  • Any re-determination should have only prospective and NOT retrospective application – i.e. it should be effective only from the date you redetermine it and not create large overpayments from benefits already received in good faith.

However, this should not be read as discouraging the practice of correcting errors where these occur. That is the duty of a Delegate. RCG in fact requires locations to conduct a program of regular or ongoing reviews to detect faulty decisions as well as cases where circumstances have since changed. However, care must also be taken to minimise disadvantage to clients and embarrassment to RCG.