Part 3 of Chapter 10 [2] of the MRCA deals with a situation where a member or former member was injured, contracted a disease, suffered damage to, or loss of, a medical aid or died as a result of their service (the 'cause of action'), and a third party appears to be liable to pay damages. In this situation, the member or former member, their dependants, legal personal representative or the MRCC may instigate common law action against that third party. Also, the MRCC can take over an existing claim against a third party once that claim has been instigated.
These provisions are designed to allow for a compensation outcome for an affected party to be sought where the liability for the injury, disease or death does not fully lie with the Commonwealth. The conditions that led to the cause of action must still have the necessary causal connections to ADF service, however, through the actions or inaction of a third party, liability rests with that third party.
Unlike actions against the Commonwealth, that are restricted to actions for non-economic loss and actions by dependants, a third party common law action can pursue damages for all aspects of the cause of action. This in turn has different impacts on the claimant's access to compensation or benefits under the MRCA. If damages are recovered, access to certain forms of compensation (including treatment eligibility) cease or are restricted under the MRCA and compensation that has already been paid will be recovered.
For the above reasons, it is imperative that a delegate fully informs a claimant of the impacts of a third party claim on their entitlements and access to further compensation under the MRCA.
While there is no legislative requirement for the claimant to advise that they intend to sue a third party, subsection 391(2) [4] states that the claimant must advise the MRCC of a claim under common law not later than 7 days after the third party common law claim is lodged. This requirement is to allow for the proper application of any restrictions or cessations of compensation under the MRCA.
The need for this requirement to be met is to be communicated strongly in any communication that the delegate has with the claimant. Currently the D2051 claim form has a question at point 23 that asks whether the claimant has or intends to claim common law damages against the Commonwealth or a third party. While this question can be used to determine whether there is a claim for the Commonwealth to make or take over, it is not legislatively required for the claimant to fill this out if they intend to claim but haven't yet done so. However, the requirement for the claimant to inform the MRCC of any actual claim made is still to be fulfilled.
Subsection 391(3) [4] provides that a failure to notify the MRCC within the 7 day time period is an offence and carries a penalty of 5 penalty units. Since 1 July 2017, one penalty unit is $210. However, the amount of the penalty unit is automatically indexed every three years in line with inflation. The indexation occurs by reference to the March quarter CPI figures of the year in which indexation occurs. Hence the amount of a penalty unit will increase over time. This offence is also identified as an offence of strict liability by subsection 391(4) [4].
For an explanation of an offence of strict liability see 4.2.4 [5].
Division 3 of Part 3 of Chapter 10 [7] of the MRCA deals with the effects of a person themselves recovering common law damages from a third party related to an accepted cause of action.
Chapter 4.3.3 [8] deals with a situation where the Commonwealth recovers the damages on behalf of the person or dependant.
When a person recovers damages related to a cause of action (being the injury, disease, death, or loss of/damage to, medical aids) then there are legislative requirements and implications that result.
Similar to the requirement of a person to inform the MRCC of the lodgement of a claim for common law damages, section 400 [9] of the MRCA requires a person to inform the MRCC of the recovery of damages no later than 28 days after the damages are recovered.
The need for this requirement to be met is to be communicated strongly in any communication that the delegate has with the claimant, as a failure to meet this requirement creates an offence of strict liability and a monetary penalty.
For more information on strict liability and the monetary penalty see 4.2.4 [5].
If the person has already received compensation for the cause of action, once they recover damages related to the cause of action the MRCC is to pursue the repayment of some or all of the damages so recovered. The amount to be repaid is the lesser of the amount of compensation already paid to the person related to that cause of action and the amount of damages awarded.
As with the damages repayment calculations for third party claims pursued by the MRCC (see 4.3.3 [8]), the calculation of the amount of compensation awarded to the person under the MRCA for the purpose of determining the amount of the repayment, is not to include any compensation paid for:
Therefore, if the amount of compensation already paid to the person is calculated as being less than the amount of damages recovered by the person, they are liable to pay back the calculated amount. However, if the amount calculated is more than the damages awarded, they are only liable to repay the amount of the damages.
The delegate must be mindful when calculating the amount of the repayment that the amount of damages awarded to the person relates to the cause of action that the compensation under the MRCA has been paid for. If the delegate determines that any amount of the damages is awarded for any outcome other than those covered under the MRCA, the repayment must be apportioned to allow for only the proportion of the damages relating to the MRCA to be repaid.
Under section 402 [15], a person's eligibility for much of the compensation otherwise available under the MRCA in relation to a cause of action ceases upon the recovery of third party damages.
Section 5 [16] of the MRCA defines “compensation” to include medical treatment provided under Chapter 6. Accordingly subsection 402(2) [15] precludes the plaintiff from receiving any compensation, including compensation for treatment provided under Chapter 6. This may require a treatment card to be withdrawn, if all of the client’s accepted condition/s are subject to third party recovery. If the person has a White or Gold Card and has other accepted disabilities (under either the MRCA or the VEA) that are not the subject of common law action, the client will not lose their entitlement to the Gold Card, however they will not be able to access treatment at the expense of the Department for the accepted conditions for which the damages from the third party were received. Treatment eligibility after the common law settlement will continue to be assessed based on the overall impairment points attributable to all accepted compensable conditions including those which were included in the common law action.
Section 402 [15] applies regardless of whether the person has already received MRCA compensation or not. This means that from the day that damages are recovered (the date of actual receipt of monetary damages) the person's eligibility for compensation (including treatment eligibility) under the MRCA for the cause of action for which compensation has been recovered ceases.
This may have a very severe impact on the person's potential wellbeing, hence the strong requirement for the repercussions of third party damages pursuit to be communicated to the person by the delegate. At any stage when the delegate is communicating with the claimant about their claim, they must reiterate the potential impacts of their choice to instigate or continue common law action.
Not all compensation entitlements cease upon the recovery of damages. The same exemptions apply to this eligibility as to the calculation of amounts of damages for repayment. Therefore, while most compensation ceases, the following continue:
These exemptions are based on the idea that allowances to cover expenses and compensation in relation to a person's dependants (that are not linked directly to the cause of action) are not to be quantified in relation to general damages and are therefore exempt from calculations and cessation of payment. Dependant compensation, such as Wholly Dependant Partner compensation is still to be included in the calculations.
Note – A person's eligibility to benefits does not cease if the claim was made or taken over by the MRCC as per 4.3.3 below, however payment of benefits is affected by the amount of the settlement.
The MRCA regards payments made as the consequence of the settlement of a claim as being damages (see section 399 of the MRCA). Therefore, the fact that a person settles a case relating to a cause of action through a settlement that awards a general head of damage, or purports to be for general pain and suffering will not exempt them from the operation of sections 401 and 402.
Division 2 of Part 3 of Chapter 10 [2] of the MRCA allows for the MRCC to instigate or take over a third party common law claim for damages.
4.3.2 deals with the recovery of compensation from a third party by the person or the dependant themselves.
These provisions are designed to allow for the affected person to receive compensation from the third party in substitution to the compensation available under the MRCA. Unlike the prohibition of common law claims against the Commonwealth when the Commonwealth has sole liability for a cause of action, the third party provisions allow for damages to be pursued through common law to prevent the Commonwealth from paying compensation when the cause of action creates a legal liability for a third party other than the Commonwealth or a potentially liable member. An example of this would be when a member is travelling home from duty and is run into by another person in their car, creating a liability on the driver of the other car.
In these circumstances, where the affected party has not made a claim against the liable third party, or has made a claim but not prosecuted it (ie lodged the intention to sue with the courts but has not had a hearing), the MRCC can either commence a claim or take over the conduct of the existing claim.
When the delegate becomes aware that there is a common law action that might be instigated or taken over by the MRCC, they must contact the Director of the Benefits, Payments and Rehabilitation Policy section, as the MRCC alone has the power to instigate this action and must be done through liaison with Business Integrity and Legal Services Group.
Delegates may be made aware of the potential for a third party claim either by the information provided surrounding the nature of the incident that led to the accepted condition or where the claimant has indicated that they intend to or have already instigated common law action on the approved claim form.
Once the MRCC decides that a claim against a third party can be commenced or taken over there are certain legislative requirements that must be met by certain parties.
Signing of Documents and Actions Required.
The person (the plaintiff) who would have had the right to claim against the third party is required by sections 396 [2] and 397 [2] of the MRCA to sign any document required by the MRCC to pursue the claim and also to undergo any reasonable request that the MRCC may put on them in order to pursue the claim. These requirements do carry sanctions if the plaintiff fails or refuses to comply.
If the plaintiff refuses to sign a document required by the MRCC, the MRCC can apply to the tribunal or court hearing the matter, or the Federal Court if otherwise, to have a person appointed by the MRCC made eligible to sign the document on the plaintiff's behalf. If this course of action is taken the MRCC must inform the plaintiff in writing that it is doing so and allow the plaintiff to be represented at the hearing.
If the plaintiff fails or refuses to comply with a reasonable request for action from the MRCC in relation to the pursuit of common law damages, then the MRCC can suspend the plaintiff's right to compensation under the MRCA until they do comply.
Note carefully that the suspension of compensation that can be made does not affect the plaintiff's right to treatment or compensation for treatment under Chapter 6.
In order for this suspension to be enforced the MRCC must ensure that they have informed the plaintiff of this course of action and given them adequate time to give evidence of a reasonable excuse for a failure to act. If this excuse is accepted, then a suspension of compensation cannot be enforced.
When a plaintiff's compensation is suspended under section 397 [2] a determination must be made of an end date to the suspension if the plaintiff provides a reasonable excuse for failure within 14 days of the date set for compliance with the request. Once a plaintiff provides such evidence a delegate, that is required by subsection 397(4) [2] to be a different delegate to the one that applied the suspension, can determine a reinstatement of the plaintiff's right to compensation.
If the person subsequently complies with the request, their entitlement to compensation is reinstated under subsection 397(1) [2].
Legal Proceedings and Costs
If the MRCC instigates a claim against a third party, then all associated costs are to be met by the Commonwealth. However, if the MRCC takes over the conduct of an already existing claim, then the Commonwealth is liable to pay the costs of, or incidental to, the claim that would normally have been paid by the plaintiff, such as investigation or lodgement fees. These costs do not extend to costs that the plaintiff incurred that are considered unreasonable for the prosecution of the claim such as excessive investigation or unreasonable travel costs.
In relation to the actual conduct of the prosecution of the claim, the MRCC is empowered by section 395 [2] to undertake any steps deemed necessary to conclude the claim. This can be effected by settling a claim with or without a judgement if it is before a court, and if a judgement is received in favour of the plaintiff taking any necessary steps to enforce the judgement.
Damages Awarded
Once a judgement has been passed or a settlement reached that is in favour of the plaintiff, any damages awarded are payable to the Commonwealth when the MRCC has instigated or taken over a claim.
Once the Commonwealth has received the damages a number of calculations must be made.
If the plaintiff has been paid compensation under the MRCA in relation to the relevant cause of action then the amount of that compensation (including the cost of any treatment or rehabilitation provided) is to be deducted from the damages amount. The amount so deducted is not to include the following compensation amounts:
Once these amounts have been calculated the total is to be deducted from the damages recovered. If a positive balance remains then the balance has to be paid to the plaintiff. However, once this balance is paid to the plaintiff, the plaintiff is not entitled to any further compensation under the MRCA until the compensation related to the cause of action pursued that would have been paid equals the balance that was paid to the plaintiff.
This is to ensure that the plaintiff is not compensated twice for the same injury, disease, death or loss, or damage to, a medical aid and that the damages recovered and paid to the plaintiff are in lieu of any compensation that would have been paid to them under the MRCA.
This would require the recall of a person's treatment card or cessation of payment for treatment costs and the person to provide evidence of treatment accessed and paid for. The delegate will need to keep records of other compensation that would have been paid but for the receipt of damages. This would include calculation of incapacity payments, SRDP etc until the balance of the damages is exhausted.
Where a person successfully recovers common law damages related to a MRCA compensable cause of action, and as a result loses their treatment eligibility, along with their other compensation related to that cause of action, then there are questions around whether other treatment eligibility under the Veterans' Entitlements Act 1986 (VEA) could compensate them for those conditions.
If a person was to be prevented from receiving MRCA treatment compensation for a condition after successful common law action, there could be a situation where their coverage under a VEA Gold Card could conceivably provide them with Commonwealth funded treatment for those conditions.
Given there is no existing functionality to prevent the use of a Gold Card for certain condition/s, this will mean that the client’s future card usage will need to be monitored on a regular basis to ensure compliance with section 402(2). This may require the client to examine future expenditure lists, itemise any treatment related to his damages claim (if applicable) and repay further amounts. The client should also be asked to acknowledge this limitation.
Links
[1] https://clik.dva.gov.au/user/login?destination=comment/reply/18795%23comment-form
[2] https://clik.dva.gov.au/service-eligibility-assistant-updates/all-determinations-order-date-signed-oldest-most-recent/determinations-under-mrca
[3] https://clik.dva.gov.au/user/login?destination=comment/reply/18804%23comment-form
[4] clik://LEGIS/MRC-ACTS/MRCA/S391
[5] https://clik.dva.gov.au/military-compensation-mrca-manuals-and-resources-library/policy-manual/ch-4-liabilities-arising-apart-act/42-common-law-action-against-commonwealth-or-potentially-liable-member/424-notification-common-law-actions
[6] https://clik.dva.gov.au/user/login?destination=comment/reply/18801%23comment-form
[7] clik://LEGIS/MRC-ACTS/MRCA/Ch 10/Pt 3/Div 3
[8] https://clik.dva.gov.au/military-compensation-mrca-manuals-and-resources-library/policy-manual/ch-4-liabilities-arising-apart-act/43-liability-third-parties-and-access-common-law-actions-against-third-party/433-mrcc-instituting-or-taking-over-common-law-action-against-third
[9] clik://LEGIS/MRC-ACTS/MRCA/S400
[10] clik://LEGIS/MRC-ACTS/MRCA/S221
[11] clik://LEGIS/MRC-ACTS/MRCA/S245
[12] clik://LEGIS/MRC-ACTS/MRCA/S242
[13] clik://LEGIS/MRC-ACTS/MRCA/S253
[14] clik://LEGIS/MRC-ACTS/MRCA/S255
[15] clik://LEGIS/MRC-ACTS/MRCA/S402
[16] clik://LEGIS/MRC-ACTS/MRCA/S5
[17] https://clik.dva.gov.au/user/login?destination=comment/reply/18805%23comment-form
[18] https://clik.dva.gov.au/user/login?destination=comment/reply/18790%23comment-form