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SRC Act Revisited

Edington v Superannuation Complaints Tribunal (2010) FCA 504 By Lisa Norris | June 2010 Area of Expertise | Insurance & Financial Services

Summary The Federal Court of Australia recently re-examined the role of the Superannuation Complaints Tribunal (‘SCT‘) in considering a complaint in the context of a declined application for a total and permanent disablement (‘TPD’) benefit. While the decision turned on its facts, it is a useful case study demonstrating the SCT’s role pursuant to s37of the Superannuation (Resolution of Complaints) Act 1993(Cth) (‘the SRC Act’). The case also provides some useful guidance regarding the extent to which medical evidence considered by decision makers should be mentioned in the documents setting out their material findings.

Who Does This Impact? Superannuation fund trustees, insurers and their legal advisers.

What Action Should Be Taken? Fund trustees and insurers who are subject to determinations of the SCT should review those determinations on receipt to ensure that the SCT adopted the process required by the SRC Act. To avoid the inference that a particular medical report has not been considered in forming an opinion, rather than referring to ‘all the evidence’ in general terms, it is safer to identify the specific medical evidence considered.

Background Mr Edington, who had already been diagnosed with schizophrenia in 1994, commenced work for the Department of Primary Industries (Queensland) in the Fire Ant Eradication Program on 10 September 2001. On 2 January 2002, in the course of his employment, there was an incident at a property Mr Edington was inspecting involving two Rottweiler dogs. While there were several different descriptions given of what transpired, the Court accepted that in running away from the dogs and jumping a gate, Mr Edington fell and injured his back and right foot. He subsequently claimed he experienced either post-traumatic stress disorder (‘PTSD’) or an anxiety disorder as a result of this incident. Mr Edington sought a TPD benefit. The Board of Trustees of his Employer’s superannuation fund,the State Public Sector Superannuation Scheme (known as the QSuper Scheme) (‘the Trustees’) were satisfied that Mr Edington was unlikely ever to be able to work in a job for which he was reasonably qualified by education, training or experience, due to a ‘medical condition’. He would therefore be entitled to a TPD benefit upon termination of his employment (which subsequently transpired), but for a further clause of the Trust Deed. That clause of the Trust Deed provided that no TPD benefit was payable unless ‘it is established to the satisfaction of the board

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SRC Act Revisited Edington v Superannuation Complaints Tribunal (2010) FCA 504 by Lisa Norris

that the total and permanent disablement ...was not related to a condition that ought reasonably to have been disclosed had a personal medical statement been submitted at or about the time of entry of membership’ . The Trustees decided that, in reality, it was schizophrenia and not PTSD that prevented Mr Edington from returning to work. This was considered to be a condition that ought reasonably to have been disclosed had a personal medical statement been submitted at or about the time of entry of membership, and as a result the Trustees considered that no TPD benefit was payable. The Trustees’ decision was the subject to a series of complaints, appeals and remittance to the Trustees. The matter before the Federal Court on this occasion related to a decision on 11 September 2009 by the SCT to uphold the Trustees’ decision on 25 September 2008 again rejecting the TPD claim, following remittance of the matter by the Federal Court on 15 August 2008. In their decision of 25 September 2008, the Trustees assessed the medical evidence before them in the form of medical reports by Doctors Butler, Reddan and De Leacy. Based upon that evidence, the Trustees made a series of material findings. In those material findings, they stated that they preferred the opinions in the reports of Dr Reddan: ‘because of the different medical histories given by Mr Edington to Dr Butler and Dr De Leacy’. In particular, the opinion of Dr Reddan that they relied upon (report dated 15 July 2008) was that: ‘.. the dog incident in 2002 was not a severely traumatic event for a diagnosis of post traumatic stress disorder. Further, ... that it was the schizophrenia which prevented Mr Edington from successfully maintaining a longitudinal work history ’. The Trustees therefore again determined that: 1. Mr Edington was TPD pursuant to the applicable Trust Deed; however 2. Mr Edington’s disablement was related to his schizophrenia, which he should reasonably have disclosed when he joined QSuper. Having reviewed the evidence, the SCT reached the same decision as the Trustees. It upheld the Trustees’ decision as fair and reasonable in its operation in relation to the Complainant.

The role of the SCT The Federal Court provided a useful summary of the existing body of case law with respect to the SCT’s obligations in considering a complaint under s37 of the SRC Act1. Reeves J concluded from the cited authorities that the role of the SCT was to review the decision of the Trustees to ascertain whether it was fair and reasonable in its operation in relation to Mr Edington. His Honour specified that the SCT was required to identify how the Trustees actually came to their decision, requiring it to identify the reasoning process that the Trustees employed to reach their decision. The SCT would then be able to make a proper assessment as to whether, having regard to that reasoning process, the decision was just, unbiased and equitable and was within the bounds of reason, ie. fair and reasonable. His Honour found that although the SCT had stated what the Trustees’ decision was, it had not described the reasoning process the Trustees had employed to come to that determination.

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SRC Act Revisited Edington v Superannuation Complaints Tribunal (2010) FCA 504 by Lisa Norris

In terms of specifics, his Honour considered that to determine whether it was fair and reasonable for the Trustees to accept and rely upon Dr Reddan but not the other two doctors, it was necessary for the SCT to: 1. Consider the ‘different medical histories’ that the Trustees said Mr Edington gave to Dr Reddan on the one hand, and to Doctors Butler and De Leacy on the other; then 2. Determine whether, and how, those different histories affected the cogency of the various opinions given. As noted above, the Trustees relied upon Dr Reddan’s opinions in preference to those of Doctors Butler and De Leacy. However, in its reasons, the SCT had accepted and relied upon the opinions of both Doctors Reddan and Butler. His Honour queried how it could have been fair and reasonable for the Trustees not to accept Dr Butler’s opinions when the SCT thought they should be accepted and relied upon. His Honour also emphasised the ‘critical difference’ between the medical opinions the Trustees relied upon to reach their decision, and those relied upon by the Tribunal. Dr Reddan was of the opinion that it was Mr Edington’s schizophrenia that prevented him from working, but Dr Butler had stated: ‘... If indeed his inability to continue employment is primarily related to his having a schizophrenic illness then it automatically begs the question of what his work performance was like prior to his injury and why appropriate action was not taken at that time’. His Honour also observed that both the Trustees and the SCT came to the same final conclusion about the relationship, or causal link, between Mr Edington’s total and permanent disablement for work and his schizophrenia condition. However, they came to that final conclusion by quite a different process of reasoning: 1. The Trustees essentially formed that opinion because the dog incident did not cause Mr Edington to have PTSD; whereas 2. The SCT essentially formed its opinion because the dog incident only caused a temporary anxiety reaction. Therefore, in both situations, total and permanent disablement for work was caused by the schizophrenia condition. His Honour felt that it was incumbent upon the SCT to examine whether it was fair and reasonable for the Trustees to use a different reasoning process to come to the same conclusion as it did on this causation issue. His Honour also emphasised the words ‘the decision, in its operation in relation to ... [Mr Edington]’ in s 37(6) of the SRC Act Act. Here, this required the SCT to consider the interaction between the Trustees’ decision and the concurrent decision of Mr Edington’s employer to compulsorily retire him on the grounds of his total and permanent disablement for work. His Honour concluded that the SCT had proceeded to decide the claim afresh, reach what it thought the correct decision was, and it then conclude that, because the Trustees’ decision was to the same ultimate effect as its decision, their decision must have been fair and reasonable. His Honour concluded that: ‘On almost every front, this approach is contrary to the observations made in the various authorities I have referred to’. Mr Edington had also complained that the Trustees had not considered Dr Butler’s report dated 15 July 2004, as it was not referred

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SRC Act Revisited Edington v Superannuation Complaints Tribunal (2010) FCA 504 by Lisa Norris

to in the Trustees’ reasons. He argued that it was not fair and reasonable for them to have rejected the doctors’ opinions without having considered them. The Trustee responded that it did have all the relevant evidence before it at the time it made its decision. The SCT did not give detailed consideration to this issue in its determination. His Honour concluded that as the Trustees did not mention that report of Dr Butler in their material findings, it would have been impossible for the SCT to assess whether the way in which the Trustees dealt with his opinions was fair and reasonable. As a result, a more considered response by the SCT to this aspect of the complaint had been called for. His Honour concluded that the decision of the SCT should be set aside. The matter was remitted to the SCT to be re-considered according to law. Whether the Trustees’ decision should be set aside was left for the SCT to decide.

Implications While this case clearly turned on its own facts, it illustrates the requirement of the SCT to review the process by which a decision is reached, rather than forming its own view of the merits of the claim and then upholding the decision if it accords with the SCT’s view, irrespective of differences in rationale or process. The case also provides a helpful reminder of the potential practical effect of omitting to refer to a particular body of evidence in the document setting out reasons for a decision. Had Dr Butler’s report dated 15 July 2004 been referred to by the Trustees, there would have been no basis for the complaint that it was not considered by the Trustees, eliminating one basis for the complaint to the SCT regarding the Trustees’ September 2008 decision (and the Appeal).

Citation: Edington v Superannuation Complaints Tribunal (2010) FCA 504 Endnotes 1

It specifically referred to Briffa v Hay (1997) 75 FCR 428, Colonial Mutual Life Assurance Society Limited v Brayley (2002) FCA 1333, Cameron v Board of Trustees of the State Public Sector Superannuation Scheme (2003) 130 FCR 122, Hornsby v Military Superannuation and Benefits Board of Trustees (No1) (2003) 126 FCR 484, Retail Employees Superannuation Pty Ltd v Crocker (2001) 48 ATR 359, National Mutual Life Association of Australia Ltd v Campbell (2000) 99 FCR 562, Commonwealth Superannuation Scheme Board v Dexter (2004) 142 FCR 151 and and HEST Australia Ltd v Sykle Sykley (2005) 147 FCR 248.

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SRC Act Revisited Edington v Superannuation Complaints Tribunal (2010) FCA 504 by Lisa Norris

For more information, please contact: Lisa Norris Partner T: 02 8257 5764 lisa.norris@turkslegal.com.au

Sydney | Level 29, Angel Place, 123 Pitt Street, Sydney, NSW 2000 | T: 02 8257 5700 | F: 02 9239 0922 Melbourne | Level 10 (North Tower) 459 Collins Street , Melbourne, VIC 3000 | T: 03 8600 5000 | F: 03 8600 5099 Insurance & Financial Services | Commercial Disputes | Workers Compensation | Business & Property

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SRC Act Revisited