Under the 1971 Act and the 1930 Act, compensation was paid for the physical effect of certain impairments (maims) however there was no entitlement to compensation for non-economic loss (NEL) such as pain, suffering, effect on social relationships, etc.

Accordingly, in the early days of the 1988 Act, when a pre-1/12/1988 impairment was compensated for permanent impairment, a payment was made under S24 (calculated on the basis of the 1971/1930 entitlement) but no payment was made under S27 for NEL.

In Schlenert v Australian and Overseas Telecommunications Corporation (1994) [6], [6]the Full Federal Court held that an impairment which became permanent under the 1971 Act or the 1930 Act must be compensated both under S24 for the physical effect of the impairment (with the quantum calculated under the previous Acts) and under S27 for non-economic loss (NEL).  The decision was based on a particular statutory interpretation of Ss24, 27 and 124 of the 1988 Act by the Court and resulted in pre-1/12/1988 clients receiving NEL compensation even though NEL was not compensated under the 1971 or 1930 Acts.

The Safety, Rehabilitation and Compensation and Other Legislation Amendment Act 2001 [7]introduced a new subsectin 27(3), which effectively reversed the Schlenert decision, stating that no entitlement to a NEL payment for pre-1/12/1988 impairment arises where the claim for NEL was made on or after 7 December 2000.

Therefore, from 1 October 2001, NEL amounts are excluded from 1971 Act or 1930 Act impairments where the application is made on or after 7 December 2000 as a result of legislative amendments discussed below.

Where an assessment or reassessment involves only 1971 Act or 1930 Act impairments, R&C ISH ensures that an appropriate assessment is made and NEL compensation is not awarded.

For a first assessment under the 1988 Act, the appropriate scores to be entered are those recorded in the Questionnaire as resulting from the effects of the 1988 impairments alone.

In a reassessment where impairments have deteriorated, the appropriate scores to be entered are the higher of the score recorded in the Questionnaire and the previous NEL score (which is likely to include the effects of the 1971/1930 impairments as well as 1988 impairments).  Choosing the higher score ensures that a previous lawful NEL entitlement is not recovered by default and avoids the inherent difficulty in dissecting a NEL Questionnaire completed several years earlier.

Where an assessment of entitlement to compensation for a pre-1/12/1988 permanent impairment was carried out before the Schlenert decision was implemented (generally between 1 December 1988 and 30 September 1995), it is likely that compensation for NEL was not paid even though it was subsequently established by the Federal Court that an entitlement existed.  In most cases, such assessments predate the introduction of Defcare.

If such a case is discovered in an investigation or a reassessment, the original assessment should be reinvestigated using R&C ISH (using the date of the prior determination as the Date of Assessment). The Calculator will calculate the total entitlement amount including NEL. The compensation previously paid under S24 should be entered as a reassessment. The resulting S27 entitlement should then be paid to the client.

A second assessment should then be conducted for the later claim (for the subsequent deterioration).

Examples

Scenario 1

A client served between 1984 and 1990 and had liability accepted for bilateral sensorineural hearing loss in June 1997. The date of injury and permanence was determined as being 7 January 1988, and based on liability being accepted for the condition, the client subsequently submitted a claim for permanent impairment compensation. The assessment of the client’s hearing indicated a 5.6% loss and resulted in an offer of lump sum compensation for the LOEU under the 1971 Act and included a section 27 payment for the NEL component as the assessment was pre-Schlenert.

The client is now seeking a reassessment of the hearing loss based on a current audiogram which indicates a current loss of 17.4%. How should this client’s entitlement to compensation be reassessed?

The date of permanence of the injury is pre-DRCA, and therefore the client is entitled to the additional compensation for the LOEU less any previous amounts of compensation payable to the client for the impairment. This will exclude any deductions for the NEL component of his previous offer of compensation, that is only the amount of compensation paid to the client under section 24 of the DRCA for the LOEU should be deducted from the amount of compensation payable for the 17.4% loss and the amount paid for the NEL should not be recovered from any additional amounts of compensation offered. This is because the NEL payment was offered based on the case law interpretation of the legislation and policy at the time, and therefore the client’s entitlement to that payment should not be recovered during a reassessment based on the current legislative provisions. Noting that based on the operation of subsection 27(3) at the time of the reassessment the client is not entitled to any additional NEL payment as his loss is compensated under the 1971 Act.

Scenario 2

A client served between 1984 and 1990 and had liability accepted for his bilateral osteoarthritis of the knees in June 1995. The date of injury and permanence was determined as being 7 December 1987 based on the medical evidence that this is when the client first sought medical treatment for the condition. The client subsequently submitted a claim for compensation, and was offered lump sum compensation for the 10% LOEU under the 1971 Act which included a section 27 payment for the NEL component as the assessment was pre-Schlenert.

The client is now seeking a reassessment of the osteoarthritis following extensive surgical treatment of the knees. The treating specialist reports a change in the underlying pathology of the condition which became permanent in 2018 and indicates a loss of 20% WPI under the PI Guide. How should this client’s entitlement to compensation be reassessed?

Based on the current medical evidence, there has been a change in the underlying pathology of the osteoarthritis due to the surgery, resulting in the development of a new impairment with a date of permanence in 2018. Based on a permanence date after the commencement of the DRCA (1 December 1988), the client’s entitlement to compensation for permanent impairment should be assessed under the DRCA provisions, which will mean the client is entitled to section 24 and 27 compensation amounts.

The reassessment will result in an amount of section 24 compensation calculated on the basis of the current 20% WPI. The previous amount of LOEU compensation should be deducted on a dollar for dollar basis. Furthermore, the client will be entitled to a further section 27 amount for the NEL compensation payable based on the current degree of impairment, in the calculations the amount calculated should be reduced by the NEL component of the compensation offer that was previously paid.

The entitlement to NEL for pre-1/12/1988 clients was contrary to the original intention of the 1988 Act and was expressly excluded by the insertion of new S27(3) into the SRCA by the Safety, Rehabilitation and Compensation and Other Legislation Amendment Act 2001 which commenced on 1 October 2001. Subsection 27(3) states:

27(3) This section does not apply in relation to a permanent impairment commencing before 1 December 1988 unless an application for compensation for non-economic loss in relation to that impairment has been made before the date of introduction of the Bill for the Act that inserted this subsection.

The date of introduction of the Bill was 7 December 2000.  Accordingly, an application for PI lump sum compensation made on or after Thursday 7 December 2000 is affected by the new NEL rules. An application is 'made' when it is received by DVA or another relevant authority.

The new rule that NEL is not payable under S27 applies to clients whose compensable impairment became permanent before 1 December 1988 and who made an application for compensation for permanent impairment (under S24 and/or S27) on or after 7 December 2000 (either as new claim or as a reassessment).

The new NEL rule does NOT apply to clients in the following circumstances:

• the client's date of injury is on or after 1 December 1988, or
• the client's pre-1988 impairment became permanent on or after 1 December 1988, or
• the client made a written application for compensation for permanent impairment before 7 December 2000.

Note that, where a person applied for compensation for permanent impairment before 7 December 2000 and an interim payment under S25 was made because the impairment was not yet stable, the client is entitled to a NEL payment when a final assessment is made, whether or not the request for reassessment was made before or after 7 December 2000. In this case, the original application for compensation is taken to preclude the effect of S27(3).

A claim for compensation under S54 does NOT constitute an 'Application' for compensation for permanent impairment for the purposes of S27(3).

Rather, the client must have made a specific, written application for compensation for permanent impairment under S24 and/or for non-economic loss under S27. Such an application would usually be in one of the following forms:

• a 'Benefit Election Record' with Permanent Impairment Question 6 ticked 'Yes'
• a partly completed 'Permanent Impairment and Non-Economic Loss Questionnaire', or
• a letter specifically requesting compensation for permanent impairment or non-economic loss.

A general enquiry about possible entitlements, or a request for compensation without mentioning 'permanent impairment', 'Section 24', 'Section 27', 'non-economic loss' or some other explicit, equivalent term should not be accepted.

An application must be in written form. This includes applications received by facsimile or by e-mail.

For the purposes of S27(3), policy is that an application is 'made' when it is actually received by DVA or, if the application is given to Comcare or the ADF, when it is actually received by those bodies.

In most cases, a date stamp on the document, or its entry in a register, should be taken as best evidence of the date of receipt, however this presumption about date of receipt may be set aside by other evidence in the particular circumstances of the case.

References

• JPA 2001/13 [13]: Claims for non-economic loss in respect of permanent impairments which occurred before 1 December 1988 (October 2001)
• JPA 2001/04 [14]: Claims for non-economic loss in respect of permanent impairments which occurred before 1 December 1988 (April 2001)
• Safety, Rehabilitation and Compensation and Other Legislation Amendment Act 2001 [15](No 144/2001), item 21, Part 4, Schedule 2 : Reversal of Schlenert entitlement to NEL
• Schlenert v Australian and Overseas Telecommunications Corporation (1994) [6]49 FCR 139 [6]: Compensation for NEL in respect of 1930 and 1971 impairments