AN01 Full Federal Court Decision in Connell

Advisory Note from Rehabilitation & Entitlements Policy Branch

No. 1/2012

FULL FEDERAL COURT DECISION IN CONNELL

This is an advisory note only.  It is not a Repatriation Commission Guideline or a Departmental Instruction.  The advice is not intended to conflict with the proper application of the Veterans' Entitlements Act 1986 or the judgements of the Courts.  It may be subject to change as a result of further interpretation by the Courts of the legislation.  Nevertheless it represents a considered view that should be taken into account by all delegates.

Summary

1. The decision in Repatriation Commission v Connell [2011] FCAFC 116 (Connell) has changed the interpretation of paragraph 23(1)(c) of the Veterans' Entitlements Act 1986 (VEA) and the meaning of the words “prevented from continuing to undertake remunerative work that the veteran was undertaking.” 

Decision

2. The Full Federal Court considered an appeal by the Repatriation Commission against a decision by the Administrative Appeals Tribunal (AAT) which found that Mr Bruce Connell should be paid the Intermediate Rate of pension (IR).  The Full Federal Court affirmed this decision.
3. The decision by the AAT to grant Mr Connell an IR pension was made on the grounds that, in addition to his incapacity being assessed at 70% of the General Rate of Disability Pension, one of his accepted conditions, namely Post Traumatic Stress Disorder (PTSD), had specifically prevented him from undertaking some of the remunerative activities that he had been undertaking as a self-employed painter, resulting in a loss of earnings. 
4. In particular, Mr Connell had contended that during the period in question, he worked an average of 15 hours per week as opposed to 19 hours which he worked in a good week.  He also contended that difficulties in his concentration were causing the quality of his work to deteriorate.  These factors, and in particular, the resultant loss of earnings he suffered, were seen as sufficient to satisfy the requirements of paragraph 23(1)(c) of the VEA.
5. In its deliberation and decision, the Court solely considered the interpretation of paragraph 23(1)(c) and the meaning of the words “prevented from continuing to undertake remunerative work that the veteran was undertaking.”  The Court indicated that the phrase was not confined to the actual type of work, but would also apply to its nature and quality.  In this decision, the Court considered that Mr Connell's reduced hours due to health related restrictions gives the work an entirely different character and therefore “cannot be sensibly said ... is a continuation of the work previously undertaken”.   
6. The Court's interpretation and finding that a reduction in work hours in the veteran's employment satisfies this criterion of prevented from continuing remunerative work  is contrary to how IR legislation has been applied in practice in the past.

Interpretation of the 'prevented test' pre-Connell

7. Prior to the Connell decision, the application of the 'prevented test' applied across IR and SR determinations was that a veteran must have been completely prevented from continuing the paid work they were undertaking, but they may be able to do other work for no more than the relevant IR or Special Rate (SR) thresholds.  The interpretation together with the 'alone test' meant the requirement was that a veteran had to discontinue that employment due only to the impact of their accepted condition/s.
8. The phrase 'prevented from continuing' was regarded as requiring cessation of the work, so the test was not satisfied if the veteran had reduced the amount of hours but remained in their existing remunerative work.  The focus of the investigation was whether the veteran was still engaged in the particular type of work, and to satisfy the 'alone test' requirement, the reasons for the veteran being unable to continue the kind of work they were doing. 
9. This interpretation of the 'prevented test' was viewed as consistent with the commentary made by Tamberlin J of the Federal Court in Wright v Repatriation Commission (2005) 144 FCR 302.  It should be noted the determining factor in the Wright case was that the claimant failed to meet the 'alone test' in paragraph 24(1)(c) for SR.
10. In the case Re Repatriation Commission and Thorpe [2011] AATA 491, the Commission's application was upheld by the AAT as Mr Thorpe was actually working in a self-employed capacity in excess of 20 hours per week, and therefore fails the work threshold for SR.  However, the Tribunal commented that a veteran would be found as meeting the requirement in paragraph 23(1)(c) in the context of the other provisions of that section, if s/he was prevented from continuing to undertake the remunerative work s/he had been undertaking in a quantitative sense, such as, from continuing to engage in full-time work.
11. Until Connell, the focus of case law has been on SR and there was an absence of judicial decisions on, or reference to IR cases.  The basis for making the appeal application to the Federal Court in relation to Mr Connell's case was to clarify the operation and interpretation of paragraph 23(1)(c) of the VEA and in particular, the construction and meaning of the words “prevented from continuing to undertake remunerative work that the veteran was undertaking”.

Application of Connell

12. The Full Federal Court in Connell found no valid reason to confine the expression 'remunerative work' to an occupation or work of a particular type.  Instead, the Court considered the requirements should be whether the veteran is prevented from continuing some of the remunerative activities.
13. The effect of the Connell decision is a broadening of the interpretation of the meaning of  “prevented from continuing to undertake remunerative work that the veteran was undertaking” to include the nature and quality of the veteran's work (e.g. reduction in work hours) and not just the actual type of work. 
14. Given the identical wording of paragraph 23(1)(c) of the IR provisions and paragraph 24(1)(c) of the SR provisions, legal advice was sought on whether the Connell decision would also apply to SR.
15. Legal advice received indicates that while the Full Federal Court in Connell specifically limited its consideration to the IR pension, the interpretation of paragraph 23(1)(c) taken in this decision should also apply to the identical phrase in paragraph 24(1)(c) relating to SR pension.

16. In light of the legal advice and the binding nature of the Connell decision, the Repatriation Commission decided at its 2 February 2012 meeting that the Full Federal Court's interpretation of paragraph 23(1)(c) for IR pension should also apply to paragraph 24(1)(c) for SR pension i.e. for IR and SR determinations, the requirement of being “prevented from continuing to undertake remunerative work that the veteran was undertaking” must include consideration of any restrictions to the nature and quality of the veteran's work.

17. This decision also applies to s 25 Temporary payment of Special Rate (TSR) determinations as a veteran must satisfy all of the SR requirements, with the exception that the veteran is temporarily incapacitated from their accepted conditions.

18. The Connell decision does not apply to the work requirement test for SR/TSR/IR applicants aged 65 and over, as the last paid work concept continues to apply for these cases.

Result

19. The Full Federal Court decision in Connell effectively extends the application of “prevented” element in paragraphs 23(1)(c) and 24(1)(c) of the VEA to include whether the veteran is continuing to undertake the type of work but on a materially restricted basis.

20. The change in interpretation may mean some individuals are now eligible for SR/TSR/IR when they would not have been under the previous approach.  However, the fact that other criteria remain unchanged means that the impact of the decision is likely to be limited.

21. When determining whether the “prevented” aspect of paragraphs 23(1)(c) and 24(1)(c) of the VEA has been met, delegates must consider if there is a continuation of the work the veteran was previously undertaking, but on a materially restricted basis (for example, from full-time to part-time or intermittent, or part-time to limited irregular hours) due to their war-caused injury/disease alone and suffered a resultant loss of salary or wages.

22. Regardless of the post-Connell application of the 'prevented test', delegates need to be mindful that SR/TSR/IR claimants must meet all of the individual elements of the SR/TSR/IR provisions at the same point in time within the assessment period.

23. A revised Commission Guideline will be issued shortly encompassing both IR and SR eligibility and will reflect the new interpretation of the 'prevented test' .

{signed}

Jennifer Stephenson

Assistant Secretary (A/g)

Rehabilitation & Entitlements Policy Branch

14  March 2012