Note: Where available, the PDF/Word icon below is provided to view the complete and fully formatted document
Senate Legislative and General Purpose Standing Committees Consolidated reports on the consideration of bills July - December 2011 Volume 2- Education, Employment and Workplace Relations; Environment and Communications; Finance and Public Administration; Foreign Affairs Defence and Trade; Legal and Constitutional Affairs


Download PDF Download PDF

Australian Senate

Senate Legislation Committees

Reports on the consideration of bills July-December 2011

Volume 2

PP

JSt/2-o'l

Australian Senate

Senate Legislation Committees

Reports on the consideration of bills

July-December 2011

Volume 2

Education, Employment and Workplace Relations Committee

Environment and Communications Committee

Finance and Public Administration Committee

Foreign Affairs, Defence and Trade Committee

Legal and Constitutional Affairs Committee

©Parliament of the Commonwealth of Australia 2011

ISSN 1834-4062

This document was printed by the Printing Unit, Department of the Senate, Parliament Ho use, Canberra .

TABLE OF CONTENTS

Education, Employment and Workplace Relations Committee " Safety, Rehabilitation and Compensation Amendment (Fair Protection for Firefighters) Bill 2011 *, dated September 2011 .... ....... ..... ...... ................... ............ 1

" Work Health and Safety Bill 2011 * and Work Health and Safety (Transitional and Consequential Provisions) Bill 2011 *, dated August 2011 ......... ...... ............. ......... .............. ......... ..... .......... ......... ...... .... 61

Environment and Communications Committee " Australian Renewable Energy Agency Bill 2011 * and Australian Renewable Energy Agency (Consequential Amendments and Transitional Provisions) Bill 2011 *, dated November 2011 .......... ...... ............... 105

Finance and Public Administration Committee " Government Advertising (Accountability) Bill 2011, dated September 2011 ................... ................. ................. ...... ...................... ..... 131

" National Health Reform Amendment (Independent Hospital Pricing Authority) Bill 2011 *, dated September 2011 ............ ......... ............. ...... ............ 159

" Public Service Amendment (Payments in Special Circumstances) Bill 2011, dated August 2011 .................... ... ............... ....... ...... .......... .............. ....... 209

Foreign Affairs, Defence and Trade Committee " Veterans' Entitlements Amendment Bill 2011*, dated August 2011 ......... ........ ... ............... .......... ............. ........ ............. .......... ............. 235

Legal and Constitutional Affairs Committeet " Crimes Legislation Amendment Bill (No. 2) 2011, dated August 2011 ........ ................... ..... ..... ............................. .................. .......... ........ 303

" Deterring People Smuggling Bill 2011 , dated November 2011 ............... .......................... ............... ............ ..... ......... .......... ..... 349

t Volume 3 contains further reports of the Legal and Constitutional Affairs Committee

The following report has been printed separately and therefore not included in this consolidation: Finance and Public Administration Committee-Exposure Drafts of Australian Privacy Amendment Legislation Part 2-Credit Reporting [PP 268/2011]

*Provisions of bill referred to conunittee.

The Senate

Education, Employment and Workplace Relations Legislation Committee

Safety, Rehabilitation and Compensation Amendment (Fair Protection for Firefighters)

Bill 2011 [Provisions]

September 2011

©Commonwealth of Australia 2011

ISBN 978-1-74229-520-6

This document was produced by the Senate Standing Committees on Education, Employment and Workplace Relations and printed by the Senate Printing Unit, Parliament House, Canberra.

2

MEMBERSHIP OF THE COMMITTEE

Members

Senator Gavin Marshall, Chair, ALP, Vic.

Senator Chris Back, Deputy Chair, LP, WA

Senator Catryna Bilyk, ALP, Tas.

Senator Bridget McKenzie, Nat., Vic.

Senator Lee Rbiannon, AG, NSW

Senator Matt Thistlethwaite, ALP, NSW

Substitute Member

Senator Penny Wright, AG, SA replaced Senator Lee Rhiannon, AG, NSW for the committee's inquiry into the Safety, Rehabilitation and Compensation Amendment (Fair Protection for Firefighters) Bil12011.

Participating Members

Senator the Hon. Eric Abetz, LP, Tas.

Senator Gary Humphries, LP, ACT

Secretariat

Mr Tim Watling, Secretary

Ms Bonnie Allan, Principal Research Officer

Ms Natasha Rusjakovski, Senior Research Officer

Mr Jarrod Baker, Research Officer

Mr Dylan Harrington, Administrative Officer

PO Box 6100 Parliament House Canberra ACT 2600

111

3

Ph: Fax: E-mail:

02 6277 3521 02 6277 5706 eewr.sen@ aph.gov.au

4

TABLE OF CONTENTS

MEMBERSHIP OF THE COMMITTEE ...................................................... iii

RECOMMENDATIONS ................................................................................. vii

CHAPTER 1 ........................................................................................................ 1

Background .............................................................................................................. . 1

Reference ..................................................................... .-.......................................... 1

Conduct of the inquiry and submissions ................................................................ 1

Acknowledgement .................................................................................................. 1

Background .......................... .... .... .... ........... .... ......................... .......... ..................... 2

Purpose of the Bill .................................................................................................. 2

Provisions of the Bill .............................................................................................. 6

CHAPTER 2 ........................................................................................................ 9

The science ................................................................................................................. 9

International studies ...... ..... ..... ........ .... ..... ........ ...... .... ............................................. 9

The healthy worker effect. ..... ............. ................ ......... ........ ............ .................. ... 13

Exposure and protection ... .... .............................................. ..... ..................... .... .... 14

CHAPTER 3 ...................................................................................................... 21

Key issues ................................................................................................................. 21

Burden of proof ........ ....... ...... ............ .... ........... .... ......... .... ................................... 21

The SRC Act. .................... ................ ... ................ ............. ................................. ... 22

Costs ..... ......... ........... ...... ........ ............................ ....... ...... .............. ................. ..... . 30

Coverage of volunteer firefighters ............. .... .......................... ....... ..... ...... .... ..... .. 32

Cause of illness and period of employment ..................................... ...... ... ...... ..... 33

The case for non-rebuttable legislation ................................... ..... ...... ........ ...... .... 34

CHAPTER 4 ...................................................................................................... 3 7

Personal accounts ................................................................................................... 3 7

5

Conclusion ..... ................................................................... .............. ...................... 45

COALITION SENATORS' ADDITIONAL COMMENTS ........................ .47

APPEND IX 1 ..................................................................................................... 49

Submissions received by the Committee .............................................................. 49

Additional Information received by the Committee ........................................... 50

APPENDIX 2 ................................................................................................... .. 51

Witnesses who appeared before the Committee .................................................. 51

6

RECOMMENDATIONS

Recommendation 1

2.19 The committee recommends that the types of cancer listed by the proposed Bill be expanded to include multiple myeloma, primary site lung cancer in non-smokers, primary site prostate, ureter, colorectal and oesophageal cancers.

Recommendation 2

3.58 The committee recommends that proposed subsection 7(8) of the Bill be amended to replace the term 'dominant' cause with 'significant' cause.

Recommendation 3

3.59 The committee recommends that proposed subsection 7(9)(b) of the Bill be amended to replace the term 'several periods' with 'more than one period'.

Recommendation 4

4.43 The committee recommends that this Bill be passed subject to the foregoing recommendations.

7

8

CHAPTER I

Background

Reference

1.1 On 5 July 2011, the Senate referred the prov1s10ns of the Safety, Rehabilitation and Compensation Amendment (Fair Protection for Firefighters) Bill 2011 to the Senate Standing Legislation Committee on Education, Employment and Workplace Relations for inquiry and report by 15 September 2011.

1.2 The Bill was introduced into Parliament by Mr Adam Bandt MP on 4 July 2011 and co-sponsored by Ms Maria Vamvakinou MP and Mr Russell Broadbent MP .

Conduct of the inquiry and submissions

1.3 The committee advertised the inquiry in The Australian on 20 July 2011, calling for submissions by 29 July 2011. Details of the inquiry were placed on the committee website.

1.4 The committee contacted a number of organisations inviting submissions to the inquiry. Submissions were received from 2 7 individuals and organisations , as listed in Appendix 1.

1.5 Public hearings were held in Melbourne on 9 August, Canberra on 23 August and Perth on 2 September 2011. Witness lists for the hearing are at Appendix 2.

1.6 The committee also conducted a number of site visits in Melbourne, Geelong and Brisbane.

Acknowledgement

1. 7 The committee thanks those individuals and organisations who made written submissions and gave evidence at the committee's hearings.

1. 8 The committee particularly wishes to extend its apprec1at10n to the frrefighters, and families of frrefighters, who made submissions and those who travelled to relate their personal experiences to the committee at its hearings. These individuals invested valuable time and effort knowing that they personally did not stand to benefit from the provisions of this Bill. Their evidence was both important and extremely moving. The committee thanks them and recognises their efforts to help current and future generations of frrefighters.

1.9 The committee is grateful to the United Firefighters Union of Australia for facilitating a series of site visits over the course of this inquiry, which have given the committee valuable exposure to the functions, duties and responsibilities of frrefighters. The committee greatly appreciates the time and cooperation it has

9

2

received staff at from Aviation Rescue and Fire Fighting (ARFF), a division of Air Services Australia (Tullamarine Station), the Country Fire Authority (CFA) in Geelong, the Queensland Fire and Rescue Service (QFRS) and the Queensland Combined Emergency Services Academy (QCESA) at Whyte Island.

1.10 The committee also extends a particular note of gratitude to Mr Alex Forrest and Fire Chief Ken Block, who travelled from Canada to share with the committee their valuable and extensive experience with presumptive legislation overseas.

Background

1.11 For several decades scientific studies have shown that firefighters are at increased risk of developing certain types of cancer. This is due to ongoing exposure to carcinogenic particles released by combusting materials of varying toxicity , which firefighters routinely encounter during the normal course of their employment:

Firefighters are by the nature of their work exposed to a large range of chemical carcinogens. Although most chemicals have not been tested for their toxic effects there are a number of chemicals that arise as the products of combustion that have been shown to be carcinogenic. 1

1.12 Studies have been conducted across a number of countries, and have in recent years been bolstered by comprehensive meta-analyses which provide strong evidence that firefighters are at increased risk of certain types of cancer through accumulated exposure to carcinogens .

1.13 These studies are discussed further in Chapter 2 of this report, which explores the science that underpins the proposed legislation.

Purpose of the Bill

1.14 The Safety, Rehabilitation and Compensation Amendment (Fair Protection for Firefighters) Bill 2011 (the Bill) seeks to amend provisions in the Safety, Rehabilitation and Compensation Act 1988 (the SRC Act) relating to injuries sustained by firefighters.

1.15 The Bill would provide for a rebuttable presumption that the following cancers developed by qualifying firefighters will be presumed to be work related under Commonwealth law. Subject to qualifying periods set out in the Bill as outlined below, the burden of proof would be removed from the cancer sufferer.

1.16 The seven primary site cancer types covered by the Bill and the respective qualifying periods are:

1. Brain cancer (5 years);

1 Michael Smith, Deputy Chief Officer , South Australian Metropolitan Fire Service, Attachment, Submission 13, p. 35.

10

2. Bladder cancer (15 Years); 3. Kidney cancer (15 years); 4. Non-Hodgkin's lymphoma (15 years); 5. Leukaemia (5 years); 6. Breast cancer (10 years); and 7. Testicular cancer (10 years).

1.17 The committee received the following definition of a presumption in law:

A presumption in law is a rule of law which permits a court to assume a fact is true until such time as there is a preponderance (greater weight) of evidence which disproves or outweighs (rebuts) the presumption. Each presumption is based upon a particular set of apparent facts paired with established laws, logic, reasoning or individual rights. A presumption is rebuttable in that it can be refuted by factual evidence. One can present facts to persuade the judge that the presumption is not true. 2

1.18 To qualify, frrefighters would need to meet the following threshold tests:

" They must suffer from a prescribed illness;

3

" They must have been employed as a frrefighter for the applicable qualifying period; and

" They must have been exposed to the 'hazards of fire' during the qualifying period. 3

1.19 In effect, the establishment of this legal presumption would facilitate access to workers' compensation for firefighters who fit the qualifying criteria by shifting the burden of proof from the firefighter to the employer or insurance company seeking to dispute the occupational linkage between a firefighter's cancer and his or her

employment duties.

1.20 However, even when the above threshold criteria are met, the presumption that the cancer in question is related to employment would remain rebuttable. The nature of the rebuttable presumption would mean that a frrefighter's claim for compensation would remain ' ... subject to any legal defences otherwise available.' 4

1.21 This means that acceptance of occupational causation is not automatic:

[I]t does not mean that the employee's claim will automatically be accepted. The employer may provide evidence to show that the disease is due to some other factor that is not employment related and, if that evidence is sufficiently strong, it may rebut the presumption that the disease is

2 Department of Education, Employment and Workplace Relations , Submission 25, p. 7.

3 See Schedule 1, Safety, Rehabilitation and Compensation Amendment (Fair Protection for Firefighters) Bill 2011.

4 Slater & Gordon Lawyers, Submission 14, p. 3.

11

4

employment related. As in all claims, the decision maker has to be satisfied, on the balance of probabilities, that the disease is due to the person's employment. Nevetiheless, in the case of the proposed subclause 7(8), the decision maker will be starting with the presumption that, if the condition is a listed disease, and all the other factors are met, then the disease is compensable. 5

1.22 This would protect employers and insurance bodies, and ensure the policy response is appropriately based on scientifically demonstrable evidence.

1.23 This differs from non-rebuttable presumptive legislation insofar as the latter is based on consistent epidemiological evidence that an illness is linked to a particular cause associated with the workplace or work process in almost every case, as in the case of mesothelioma resulting from asbestos exposure. 6

Coverage

1.24 The SRC Act has limited coverage:

Each state and tetTitory has its own workers compensation legislation. Coverage of the SRC Act is limited to Commonwealth employees, ACT Government employees and the employees of licensed entities. As a result, coverage of the SRC Act is limited to only a relatively small proportion of the Australian workforce. 7

1.25 The proposed Bill would therefore cover only employees classified as firefighters under the SRC Act.

1.26 There are currently approximately 2800 firefighters covered by the Act. Of these, around 2000 are employed by the Australian Capital Territory (ACT) Government. Some 1500 of these are volunteer firefighters who would not qualify for coverage by the Bill. Most of the others are firefighters employed by the aviation industry nationwide: 8

Based on ABS Labour Force Statistics (November 2010), it is estimated that employed firefighters covered by the SRC Act represent approximately eight per cent of the Australian firefighting labour force. The remainder

5 Depa1tment of Education, Employment and Workplace Relations , Subm.ission 25, p. 7.

6 See Mario Racco, Parliamentary Assistant to the Minister of Labour, Canada, 'Report to Minister Peters on the treatment of Firefighter Cancer Claims by the Workplace Safety and Insurance Board,' Onta~io Ministry of Labour. Available at http: / /wwv.; .1 abour. gov .on. ca/en gl i sh/hs/pubs/firefighters /revi ew. php (accessed 15 August 2011).

7 Department of Education, Employment and Workplace Relations, Submission 25, p. 4.

8 Department ofEducation, Employment and Workplace Relations , Submission 25, p. 6.

12

5

would be covered under state and territory legislation for workers' . 9

compensatiOn.

1.27 Ultimately, the Bill would cover:

" Professional firefighters in the ACT (approximately 332); and

" Firefighters employed by Aviation Services throughout Australia (approximately 663).10

1.28 Similar presumptive legislation is already in place in much of Canada and the United States, countries which are in many ways analogous to Australia, and is being considered in parts of Europe.

Presumptive legislation overseas

1.29 The majority of jurisdictions in Canada and the United States have enacted comparable presumptive legislation.

1.30 The Canadian province of Manitoba was the first to introduce presumptive legislation of this kind in 2002, following a report on the scientific links between cancer and frrefighting commissioned by the province. 11 Being the frrst jurisdiction to take this step, Manitoba's initial legislation was cautious in nature, covering only five cancers: brain, bladder, kidney, non-Hodgkin's lymphoma and leukaemia.

1.31 Since then, nine of the thirteen Canadian jurisdictions have passed presumptive legislation recognising the link between certain types of cancer and frrefighting. 12

1.32 Manitoba itself today covers fomieen cancers, with the scope of the legislation expanded following further research linking a greater number of cancers with frrefighting as an occupation. 13

The committee was advised that the few

remaining Canadian provinces which do not currently have similar presumptive legislation in place are either in the process of implementing it or considering doing so:

We have 10 provinces and three territories . Right now seven provinces have it, two provinces are in the process of putting legislation or regulations forward and in one province two days after I get back to Canada I will be

9 Department ofEducation , Employment and Workplace Relations, Subm ission 25, p. 6.

10 United Firefighters Union of Australia, Submission 19, p. 11.

11 The report by Dr Tee Guidotti is discussed by Mr Alex Forrest , Submission I, p. 14.

12 For discussion see Mr Alex Forrest , Submission 1, p. 6 and Proof Committee Han sard, 2 September, pp 4-6.

13 Canadian jurisdictions today list 14 cancers in their presumptive legislation. For discussion see Proof Committee Hansard, 2 September 2011, pp 5-6.

13

6

meeting with the premier of that province and I believe that province will enact the legislation before the end of the year. Even within our territories two of the three have just passed legislation. The template right now is the 14 cancers that were initially put forward in Manitoba and have now been replicated in Alberta. So now there are 14 cancers and I can tell you that every single province is now looking at moving to the 14 cancers, largely because ofthe LeMasters study of2007.14

1.33 In the United States presumptive legislation is in place in roughly half of the state jurisdictions, with more pending. The legislation is far from uniform, varying between states in the cancers covered, qualifying periods and other requirements necessary for firefighters to fulfil the criteria for compensation. 15

1.34 Canada and the United States have responded to science and moved away from the system currently in place in Australia. Here, the onus is on frrefighters with cancer to pinpoint a single event, or fire, which caused their illness if they seek to obtain compensation for their illness. For reasons to be discussed later in this report this requirement is very difficult to satisfy and has to date served as an almost insurmountable obstacle to firefighters seeking compensation. In many cases this has left sick firefighters and their families struggling not only physically and emotionally , but also financially, at their time of greatest need. It has meant that frrefighters who put their health and lives at risk to help the community are let down when they themselves are in need of assistance .

Provisions of the Bill

1.3 5 Schedule 1 of the Bill inserts provisions into the SRC Act relating to cancers developed by frrefighters .

Subsection 7 (8)

1.36 A new subsection 7(8) would be added to Part 1 of the SRC Act, providing that frrefighters diagnosed with one of seven primary site cancers after a set number of years of employment will have their employment taken to have been the dominant cause of the cancer, unless the contrary is established. Cancers listed in the Bill will not be covered if they are found to be secondary, that is, if they originated in and spread from other parts of the body.

1.37 Subsection 7(8)(a) confines the presumption of occupational illness to cancers identified in the paragraph 1.16. This ensures that 'only the clearest examples of occupational disease can seek to access the presumptive gateway.d6

14 Mr Alex Forrest , Proof Committee Han sard, 2 September 2011, p. 6.

15 Department ofEducation , Employment and Workplace Relatio ns, Subm ission 25, p. 8.

16 Slater & Gordon Lawyers, Submission 14, p. 4.

14

7

1.38 The inclusion of the qualifying period in provisional subsection 7(8)(b) reflects that:

... broadly considered, the evidence of work relatedness of disease strengthens as the duration of potential occupational exposure increases ...

As an alternative, the medical evidence as to the latency periods for the prescribed diseases from occupational exposure could equally have operated as part of the rebuttal process. That is, claims could have been contested on the basis of insufficient latency to support a work contribution . The approach adopted ought properly be viewed as a concession to finding an approach to the operation of presumptive legislation that takes into account the natural fears that scheme administrators might hold from time to time.17

1.39 Subsection 7(8)(c) makes reference to the 'hazards of frre' . Slater and Gordon Lawyers informed the committee that this was ' ... an important statement of principle going to the heart of the subject matter of the Bill- that the hazards of a fire scene are both pervasive and insidious.t1 8 This recognises that the hazards of frre may be transported away from the frre scene by frrefighters and the equipment they carry:

The one complicating factor is that when we talk about the hazards of a fire scene that immediately invokes images of attending the fire itself or the immediate aftermath, but the thing with the cancers and the chemicals that firefighters are exposed to in this context is that quite often the hazard can migrate. It might not be the primary exposure at the site; it might be that the hazard is also experienced when cleaning fire equipment or cleaning out the truck back at the station if those chemicals have imposed themselves upon the clothing or the apparatus of a firefighter or on the truck itself. I understand that there is clearly a distinction between a clerical officer working for the department and the firefighter in confronting the hazards of the scene, but I think that we ought not to limit the concept of 'exposure to the hazards of a fire scene' to the immediate emergency because these things have a tendency to migrate away from the scene.19

1.40 The committee heard that the proposed legislation draws a line around frrefighters and those engaged in frrefighting activities. Coverage would not expend to other officers-such as mechanics or clerical officers--employed by the frre services :

The duties of the clerical officer who is running the accounts back at the station do not involve frrefighting as a substantial portion of their role; therefore, I do not believe they would fall within the confines of the proposed amendment. I guess the point that I was making was more that a

recognised firefighter may have had exposure beyond just at the primary scene, but I think those who are not employed to undetiake firefighting

17 Slater & Gordon Lawyers, Submission 14, p. 4.

18 Slater & Gordon Lawyers, Submission 14 ,p. 5.

19 Mr Craig Sidebottom, Slater and Gordon Lawyers, Proof Committee Hansard, 2 September 2011, p. 16.

15

8

duties will not benefit, so I do not believe it is going to open the floodgates, as it were, to a vast an∑ay of claims from perhaps unintended beneficiaries. 20

Subsection 7 (9)

1.41 A new subsection 7(9) would also be added to Part 1 of the SRC Act. This subsection would stipulate that workers must have been involved in frrefighting duties as a substantial portion of their employment in order for subsection 7(8) to apply. Subsection 7(9) also allows frrefighters who were employed over several separate periods which add up to the qualifying period to be taken to have been employed for the qualifying period.

1.42 The committee also notes that item 8 listed in the Bill would provide that other cancers prescribed in the future would also be governed by the provisions established by this Bi11.21

1.43 These qualifying periods are a conservative but certain benchmark for the latency periods for various cancers. The committee understands that not all frrefighters who develop cancer will be captured by the legislation due to these qualifying requirements. They are, however, necessary in order to create a culture of acceptance and certainty for firefighters, employers and insurers. 22

20 Mr Craig Sidebottom, Slater and Gordon Lawyers, Proof Committee Hansard, 2 September 2011, p. 16.

21 Slater & Gordon Lawyers, Submission 14, p. 4.

22 For more on qualifying periods see Proof Committee Hansard, 2 September 2011, pp 8-9.

16

CHAPTER2

The science

2.1 The science underpinning this legislation is pivotal to its justification. The committee received as evidence a large amount of the research that has been conducted into the link between frrefighting and cancer. These studies were used to inform this report and are all publicly available. 1 Given the quantity and quality of evidence presented, the committee is confident that a link between frrefighting and an increased incidence of certain cancers has been demonstrated beyond doubt.

International studies

2.2 The health consequences of frrefighting have attracted substantial academic research due to the occupational risks frrefighters are exposed to. Studies have progressively become more sophisticated. The committee was informed that policymakers are now able to access several large-scale studies which conclusively

show that a link exists between frrefighting and cancer: 2

It has been stated that frrefighting is the most studied occupation in the world when it comes to cancer. There are literally dozens of major studies from around the world spanning over twenty years and they have made a definitive connection between fire fighting and elevated cancer risk. 3

2.3 One of these studies, commissioned by the Canadian province of Manitoba in 2002, looked at evidence gathered from 1994 to 2002. Led by Tee L. Guidotti, the study analysed research conducted worldwide looking at frrefighters and five specific types of cancer: brain, bladder, kidney, non-Hodgkin's lymphoma and leukaemia. Processing enormous volumes of information, the researchers concluded that a frrm

link exists between frrefighting and these primary-site cancers. In his report to the Workers Compensation Board of Manitoba, Guidotti stated:

The evidence available since 1994 suggests it is reasonable given the available scientific evidence to adopt a policy of presumption for brain cancer, bladder cancer, kidney cancer, non-Hodgkin's lymphoma (lymphatic cancer) and leukaemia (hematopoietic cancer) for claims associated with occupation as a firefighter . 4

1 See Submission I Attachments.

2 Mr Alex Forrest, Proof Committee Hansard, 9 August 2011, p. 2.

3 Mr Alex Forrest, Submission I, p. 6.

4 Tee L. Guidotti and David F. Goldsmith, 'Report to the Workers Compensation Board of Manitoba on the Association Between Selected Cancers and the Occupation of Firefighter,' Submission I Attachm ent 5, p. 26.

17

10

2.4 The conclusions were used to inform Manitoba's presumptive legislation, the first of its kind in the world, and subsequent presumptive legislation in other jurisdictions . 5

2.5 Other studies have confirmed a link between more than just the abovementioned cancers and frrefighting. Bates et a! conducted a retrospective cohort study of mortality and cancer in professional New Zealand frrefighters in 2000, following a cluster of testicular cancers detected in Wellington frrefighters in the

1980s. They looked at the incidence of testicular cancer in a cohort of frrefighters and compared it to the incidence among the general population, using data obtained from the New Zealand Health Information Service (NZHIS). The committee was told that the results of the Bates study:

... put the scientific world on its heels. They found that the level of testicular cancer for New Zealand firefighters - ! believe they looked at 4800 New Zealand firefighters within about three decades-was upwards of five times that of the general population . 6

2.6 Mr Alex Forrest, President of United Fire Fighters of Winnipeg and Canadian Trustee of the International Association of Fire Fighters, told the committee:

When this study came out I read it and said: ' Five times the level-it just cannot be true.' Almost immediately different epidemiologists around the world took on the challenge of discrediting this study out of New Zealand. A gentleman by the name of Jockel out of Germany looked at all firefighters in Getmany. What he found surprised him. His study almost exactly replicated the results-the rate of testicular cancer in New Zealand was the same as the rate in Germany. That just shows you the global aspect of this. 7

2.7 Another large meta-study confirmed these results in 2006. Researchers led by Grace LeMasters ' .. .looked at 110 000 frrefighters and replicated the rate of testicular cancer .... You have three studies-one from New Zealand, one from Germany and one from the United States-all showing the same rate of cancer.' 8

2.8 The LeMasters study was commissioned by the Department of Environmental Health at the University of Cincinnati college of Medicine and is the largest study of its kind fmalised to date. It looked at 32 other studies which addressed the cancer risk to firefighters who are routinely exposed to harmful substances such as lead, cadmium, uranium, chemical substances, harmful minerals and 'various gases that

5 Since then and following further research Manitoba has expanded its list of recognised occupational cancers for firefighters from five to fourteen.

6 Mr Alex Forrest, Proof Committee Han sard, 9 August 2011, p. 2.

7 Mr Alex FmTest, Proof Committee Hansard, 9 August 2011, p. 3.

8 Mr Alex Forrest , Proof Committee Hansard, 9 August 2011, p. 3.

18

11

may have acute, toxic effects.' 9 The LeMasters study found ' ... an elevated metarelative risk' of certain cancers among firefighters. 10 ∑

2.9 Studies conducted in the years since Manitoba first introduced presumptive legislation in 2002 have led that province to expand the number of cancers its legislation covers from five to 14.11

2.10 The committee heard that most overseas jurisdictions with similar legislation in place have moved substantially beyond the five cancers covered by Manitoba's initial legislation in 2002 and those listed by the proposed Bill. Today, with the benefit of a large volume of scientific research, every province in Canada is moving towards covering 14 cancers. 12

2.11 This increase in the number of cancers covered has been driven by growing scientific evidence over the past decade, with lung cancer being a strong example of how legislation has progressed:

... [T]here was a major study done out of British Columbia by Tee Guidotti which looked at lung cancer. Once you take out the factor of smoking, firefighters had a risk of lung cancer three or four times as high as the general population. So, within a few months of that study, we saw the provinces of first Manitoba and then Alberta, British Columbia and

Saskatchewan add lung cancer in nonsmokers. Again, that shows the specific nature and narrow scope of the legislation, but it also shows that science really drives this more than anything. 13

Scientific consensus

2.12 A submission from the ACT Chief Minister and Cabinet Directorate argued that a lack of scientific consensus exists on this issue among researchers and clinicians, posing challenges to this Bill. 14

2.13 This view does not, however, appear to be supported by evidence received by the committee, nor was it expressed by representatives of the ACT Government subsequently . Mr Andrew Kefford, Deputy Director-General of the ACT Chief Minister and Cabinet Directorate, confirmed that a link between frrefighting and

cancer is recognised, explaining that he was not in a position to ascertain the strength of the scientific link:

9 Grace LeMasters et al, 'Cancer Risk Among Firefighters: A Review and Meta-analysis of 32 studies,' Submission 1 Attachment 7, p. 1189.

10 Grace LeMasters et al, 'Cancer Risk Among Firefighters: A Review and Meta-analysis of32 studies,' Submission 1 Attachment 7, p. 1189.

11 See http://news.gov.mb.ca/news/index.html ?item=1 0328 (accessed 9 September 2011).

12 Mr Alex Forrest, Proof Committee Hansard, 2 September 2011, p. 6.

13 Mr Alex FmTest, Proof Committee Hansard, 2 September 2011, p. 7.

14 ACT Chief Minister and Cabinet Directorate, Submission 24, p. 2.

19

12

I do not think anyone is contesting that there is a link in the exposure of firefighters to smoke for at least the increased risk of contracting cancer later.

But whether that is absolute or somewhere in between is not something in which I am in a position to comment. That is not my area of expertise. 15

2.14 In the absence of clear evidence before the committee refuting the causal link between cancer and frrefighting as defmed by this Bill, the committee is satisfied that the science underpinning this legislation is sound.

Committee view

2.15 The committee is confident in the quality of the studies it has seen and considers them to be compelling evidence in support of this Bill.

2.16 The committee emphasises that, as outlined in Chapter 1 of this report, claims under the proposed legislation would be rebuttable . This reflects the fact that science tells us that if a firefighter with a certain number of years of service develops cancer, that cancer is most likely to be caused by occupational exposure to carcinogens. Not definitely caused by occupational exposure, but most likely. In that light, any potential lack of absolute scientific consensus-which is incidentally absent in most fields of study-becomes immaterial:

Adjudication under workers' compensation requires an examination of the weight of evidence, not scientific certainty. 16

2.17 The committee also notes that the body of scientific evidence has expanded since presumptive legislation was first introduced to cover five cancers in Canada in 2002. Researchers have since demonstrated that frrefighters are at risk of a greater range of occupational cancers.

2.18 The committee is concerned that, even if passed, the proposed legislation would only serve to bring Australian commonwealth law into line with outdated jurisprudence. Considering that similar legislation has been in place overseas for nearly a decade, and has in fact been strengthened to cover more cancers as a result of

growing scientific evidence, the committee would prefer to see Australia enact legislation in step with the most advanced jurisprudence available . The committee sees no reason to ignore scientific evidence demonstrating a link between frrefighting as an occupation and a greater number of cancers than the seven listed by this Bill.

Recommendation 1

15 Mr Andrew Kefford, Deputy Director-General , Chief Minister and Cabinet Directorate , Proof Committee Hansard, 23 August 2011, pp 7-8.

16 Tee L. Guidotti , 'Evaluating Causation for Occupational Cancer Among Firefighters: Report to the Workers' Compensation Board of Manitoba,' Submission 1, Attachment 4, p. 52.

20

13

2.19 The committee recommends that the types of cancer listed by the proposed Bill be expanded to include multiple myeloma, primary site lung cancer in non-smokers, primary site prostate, ureter, colorectal and oesophageal cancers.

The healthy worker effect

2.20 Studies looking at firefighters and occupational disease also highlight the impact of what is known as the 'healthy worker effect'. The phenomenon is found across scientific literature and describes the protective effect of above-average health status on morbidity and mortality levels among groups who are otherwise at elevated risk of illness .

2.21 In the case of firefighters, the impact of the healthy worker effect means that their health and fitness levels, which are markedly higher on average than those of the general population, may protect them from diseases-including cancer-to a certain extent. In turn this suggests that were frrefighters' health and fitness levels the same as those of the rest of the community, given their occupational exposure to carcinogens, they would suffer from cancers at a far greater rate than is currently the case.

2.22 It also means that the relatively high rates of certain types of cancers among frrefighters are still lower than the rates we would see among the general population were the latter regularly subjected to similar carcinogenic environments.

2.23 The healthy worker effect therefore may mask the true level of risk frrefighters are exposed to:

One would expect the morbidity and mortality rates to be lower among firefighters than in the general population containing people who are ill , infirm and generally not suited for fire service.

Because of this, a study may show no difference in morbidity or mo1iality rates between firefighter and the general population when, in reality, the firefighters may be sustaining greater illness and death than would be expected in a similar healthy group. Additionally , only healthy firefighters stay on the job. Those who become ill may leave the fire service without documented disability before retirement. Others may leave seemingly healthy, only to suffer the long-te1m effects long after their association with the fire service has ended. 17

2.24 The effect has been observed where specific cancers, such as, for example, colon cancer, are concerned. Evidence exists suggesting that physical fitness and activity should protect individuals from certain types of cancer. This does not appear to be the case for frrefighters :

17 Michael Smith, Deputy Chief Officer , South Australian Metropolitan Fire Service, Subm ission 13, p. 5.

21

14

Despite the reports of a consistent inverse relationship found in other studies between physical activity and risk of colon cancer ... we observed an increased risk of colon cancer among Philadelphia firefighters, suggesting factors exist that negate the protection that might be expected from the increased physical activity. 18

2.25 Mr Forrest referred in his evidence to studies which concluded that:

.. .if firefighters never fought a fire, the mortality and morbidity rates for their particular health group would probably be anywhere from 60 to 70 per cent of that for the general population. 19

2.26 Mr Forrest concluded that studies looking at cancer risk among firefighters were in all likelihood conservative in their conclusions due to the healthy worker effect. 20

Exposure and protection

2.27 As outlined, studies and meta-studies conducted around the world, including in Australia in the 1980s, demonstrate that certain types of cancer are caused by the release of carcinogens from combusting materials in structure fires. These known carcinogens can include benzene, styrene, chloroform and formaldehyde, and are absorbed by firefighters through the skin or by way ofinhalation. 21

2.28 Submissions to this inquiry discussed the protection available to firefighters through the world-class safety gear and clothing Australian firefighters utilise. 22 The committee heard that this protective gear, although consistent with all national and international safety regulations, cannot and does not form an impenetrable barrier between firefighters and the toxins they work amidst.

Toxins

2.29 Mr Brian Whittaker, Commander of the Hazardous Materials (HAZMAT) Scientific Unit of the Metropolitan Fire Brigade, Melbourne, provided the committee with extensive evidence based on his expertise in HAZMAT response and public safety. Mr Whittaker concluded the following concerning the risk to firefighters:

18 Dalsu Barris eta!, 'Cohort Mortality Study of Philadelphia Firefighters', American Journal of Industrial Medicine, vol. 39, p. 723.

19 Mr Alex Forrest, Proof Committee Hansard, 9 August 2011, p. 4.

20 Mr Alex Forrest , Proof Committee Hansard, 9 August 2011, p. 4.

21 Thomas Fabian et al, 'Firefighter Exposure to Smoke Particulates,' (Final Report) 1 April 2010, including Table 3-4 Effluent gases detected in combustion of material-level test samples, Submission 19, Attachment 10 and Appendix A.

22 See for example Mr Brian Whittaker, Submission 16; Mr Philip Taylor, Submission 17; United Firefighters Union of Australia , Submission 19.

22

Their workplace is an uncontrolled environment where safety controls cannot eliminate all hazardous products encountered. Risk exposure to various toxic gases, vapours and particulate matter found in fire smoke does exist. These products can be carcinogenic and cause irritation , incapacitation, systemic toxicity and asphyxiation. The effects from exposure to the above products can be both acute and chronic.

Many studies have concluded that the combustion or pyrolysis (heating) of general household materials can generate many carcinogenic products. The prediction of combustion products is a complex area and there is potential for generation of a huge range of products depending on the nature of the

fire and the conditions ofbuming.23

15

2.30 Most operational activities undertaken by urban firefighters are structural and non-structural frre incidents. Car fires, although technically considered non-structural, produce toxic chemicals rivalling those found in structure frres. This, the committee heard, is due to the prevalence of plastic components found in cars. 24

2.31 Unsurprisingly, even ordinary houses and household products release toxic chemicals when they burn.

It is estimated there are tens of thousands of toxins and chemicals in the average household fire. Fabrics, furniture and construction materials give off a range of toxic gasses when burning. These toxins include acetic acid, phenol, formaldehyde, benzene, styrene, ammonia, carbon monoxide and

cyanide. In a fire, the combination of these chemicals increases the toxicity significantly. 25

2.32 The committee heard that although all frres have individual characteristics, there are a number of common toxic chemicals which may be present in most fire effluent:

" Polycyclic Aromatic Hydrocarbons (PARs): naphthalene, benzo[a]pyrene;

" Irritant gasses: formaldehyde, acrolein, oxides of nitrogen; and

" Asphyxiant gasses: carbon monoxide, hydrogen cyanide.

2.33 Many of these are either known or suspected carcinogens. P AHs, for instance, are substances found in particles of soot and linked to certain types of cancer. 26 As far

23 Mr Brian Whittaker, Submission 16, p. 1.

24 Mr Philip Taylor, Submission 17, p. 3.

25 United Firefighters Union of Australia, Submission 19, p. 19.

26 Dalsu BmTis et al, 'Cohort Mmtality Study of Philadelphia Firefighters,' American Journal of Industrial Medicine, vol. 39, p. 724.

23

16

back as the year 1775, an increased rate of cancer among chimneysweeps routinely exposed to soot had already been reported. 27

Smoke

2.34 Smoke is an aerosol cons1stmg of liquid or solid particles dispersed in a gaseous medium. This gaseous medium consists largely of toxic gases. 28

2.35 The toxicity of these gases has been rising with modernisation of industry practices, meaning that the modem environment presents greater hazards to firefighters than their colleagues in past years. This is partly due to changes made by the construction industry, namely the shift away from natural materials such as wood

to lighter construction materials that feature synthetics and petroleum-based materials:

These materials ignite and bum 2-3 times hotter and faster than conventional materials and when heated, emit a gas or smoke that will also ignite 2-3 times faster and burn 2-3 times hotter. 29

2.36 Synthetic materials used extensively in commercial and residential properties include plastics, polymers such as styrofoam and polyutherine foam and nylons. Combustion has a marked effect on these synthetics and the smoke they produce when burning. They are commonly carbon based and bonded with nitrogen, sulphur, hydrogen and chlorine atoms. The increased sfceed at which they ignite and bum helps in the speedy creation of a toxic environment. 0 .

2.37 It is this growing prevalence of synthetic materials that is an enormous cause for concern:

Chemicals are highly pervasive in the modem world. Since World War II, astronomic increases in the variety and production volumes of synthetic chemicals have occurred. Today more than 70 000 distinct chemicals are used commercially in the United States and are registered with the U.S. Environmental Protection Agency. Approximately 1 000 new chemicals are registered each year. These chemicals are combined into more than 7 million mixtures, formulations and blends that are found in homes, public buildings and workplaces across the United States.

Testing of chemicals for their carcinogenic and other toxic effects has not kept pace with chemical production. Despite decades of concern about the toxic effects of chemical substances, the toxic effects of most of the chemicals cmTently in commercial use have never been evaluated ... The absence of toxicity data on the majority of chemicals in commercial use means that firefighters are exposed on a daily basis to chemicals with unknown effects. It is quite likely, therefore that in addition to their

27 'Smoke', Vol. 2, 2009, Submission 16, Attachment I, p. 1.

28 'Smoke', Vol. 2, 2009, Submission I6, Attachment I, p. 1.

29 'Smoke', Vol. 2, 2009, Submission 16, Attachment I, p. 1.

30 'Smoke', Vol. 2, 2009, Submission 16, Attachment 1, p. 3.

24

exposures to known carcinogens, firefighters experience exposures to carcinogenic chemicals whose cancer-causing potential has not yet been .d .fi d 31 1 ent11e .

Protective clothing and equipment

17

2.38 The committee heard that occupational environments involving fire inherently preclude the design of personal protective clothing (PPC) that would provide an impermeable physical barrier between firefighters and the toxic smoke to which they are exposed.

2.39 Nevertheless, firefighters work hard to mitigate and eliminate workplace hazards in an emergency situation . Hazards are mitigated through a process known as the Hierarchy of Controls, which includes a range of options:

" Elimination of hazard; " Substitution of hazard;

" Isolation of hazard;

" Engineering controls;

" Administrative controls; and

" Personal protective clothing . 2.40 The key principle of the hierarchy is to try and eliminate hazards at their source:

In regards to the 'Hierarchy of Controls' the core activity of firefighters is to eliminate, substitute and isolate hazards. This is routinely achieved by the use of engineering controls (equipment), administrative controls (skills and operational protocols) and PPC /E [personal protective clothing and equipment]. However with the inherent nature of fire fighting it is impossible to eliminate all hazards. 32

2.41 As all hazards cannot be eliminated or isolated, engineering and administrative controls, as well as PPC, remain the principal hazard control mechanisms available. These are far less reliable methods of hazard mitigation, are ' ... more costly and require more work to ensure they are maintained.' 33

31 Philip J. Landrigan et al, 'Occupational Cancer in New York City Firefighters,' Submission I Attachment 6, p. 3.

32 Mr Brian Whittaker, Submission 16, p. 2.

33 Mr Philip Taylor, Subm.ission 17, p. 3.

25

18

2.42 Respiratory equipment available to firefighters can also help eliminate inhalation as a source of exposure or contamination. Protective clothing, however, is limited in its capacity to mitigate contamination, so hazards are managed rather than eliminated through its use.

2.43 Managing hazards is achieved through standards for protective equipment set by the National Fire Protection Association (NFPA):

" Level A: Fully encapsulating gas tight suit with breathing apparatus (BA);

" Level B: Chemical splash suit (protection from liquids and solids) with BA;

" Level C: Chemical splash suit (protection from liquids and solids) with respirator; and

" Level D: Structural fire fighting ensemble with breathing apparatus. 34

2.44 Levels of protection are chosen to be fit for purpose. Levels A, B and C offer protection for incidents which involve hazardous materials but not fire or risk of fire. Therefore, Level A protection is suitable, for example, when firefighters attend an incident involving a chemical spill. The kind of protection required could change if the chemical spill involved fire or if detection equipment indicated a flammable environment.

2.45 In incidents involving fire or risk of fire, Level D protection is designed to offer the best possible protection. However, although it protects firefighters m environments involving fire, it does not offer fully encapsulated protection as provided by Level A:

Structural fire fighting ensemble has limited protection from gases, vapours and particulate matter due to the requirement and necessity to have a compromise between protection from radiated heat exposure and the release of metabolic heat build up. In shmt the breathability is in effect a hazard to firefighters that cannot be eliminated. 35

Breathability

2.46 An average structure fire can expose firefighters to temperatures approaching 1000 degrees Celsius. 36 This means that the protective clothing firefighters wear in fire incidents must be able to breathe in order for them to be able to operate in these extreme temperatures. If the clothing did not breathe, firefighters would suffer heat stress and could quickly perish from metabolic heat buildup damaging their internal organs.

34 Mr Brian Whittaker, Submission 16, p. 2.

3 5 Mr Brian Whittaker, Submission 16, p. 3.

36 Mr Philip Taylor, Submission 17, p. 2.

26

19

2.4 7 This requirement for breathability in protective clothing prevents firefighters from wearing fully encapsulated suits designed to seal all routes of chemical entry. The protective clothing they wear when fighting fires protects them from flames, but leaves them exposed to toxins through inhalation or absorption through eyes, skin, or wounds.37

2.48 Therefore, the very nature of the environment firefighters operate in prevents the design of protective clothing and equipment which could offer complete protection and isolation from toxic smoke.

'Flash-over' and response time

2.49 To minimise loss of life, property damage and interruption to business , ' ... fire services mandate a quick response by applying standards for their firefighters to respond to emergencies.' 38

2.50 This response time standard is considered crucial:

Underpinning fire services response time standards is scientific research that dictates that a fire must be suppressed within five to 10 minutes of ignition. The physical characteristics of fire cause the temperature in a building to rise extremely rapidly, and a sudden and dramatic simultaneous ignition of most combustible materials and gases is called flash-over. The time required for flash-over to occur varies according to building construction and furnishing materials and usage. The fire spreads quickly once flash-over has occuned. In order to maximise the potential of saving life and minimize damage to property, firefighters must enter the building to commence suppression activities to avoid flash-over . In short, firefighters must enter the toxic environment.. .It is not an option for a firefighter to delay enterin g a structure to commence rescue operations and suppression activities . 39

Committee view

2.51 The committee understands that firefighters work in uncontroll ed environments which make it necessary for their protective gear to breathe, therefore leaving them vulnerable to toxins and carcinogens.

On the weight of considerable evidence supplied to the committee supporting a likely causal link between frrefighting and certain cancers, as well as the understanding that claims for compensation would be legally contestable , the committee is confident that rebuttable presumption is a solid-and fair-foundation for workers' compensation policy fo.r career frrefighters.

37 Mr Brian Whittaker, Submission 16, p. 3.

38 United Firefighters Union of A ustralia, Submission 19, p. 6.

39 United Firefighters Union of Australia, Submission 19, p. 7.

27

28

CHAPTER3

Key issues

Burden of proof

3.1 Firefighters who are killed or injured attending a fire incident are given compensation for work-related injuries. However, firefighters who develop cancer and believe their illness to be work-related currently face substantial obstacles to seeking compensation.

3.2 The committee was informed that, at present, any attempt to obtain compensation requires firefighters to undertake adversarial, costly and often protracted legal proceedings to establish:

a) The link between firefighting and cancer; and

b) Causation between a specific fire incident and their illness.

3.3 The United Firefighters Union of Australia (UFUA) informed the committee that medical practitioners generally advise firefighters with cancer to minimise stress and focus on their cancer treatment. 1 Many firefighters, as the committee heard from personal accounts relayed in the next chapter, fund their own leave from work and even their treatment. Their families cannot access compensation in the event that they d

. 2

1e.

3.4 As a result, the emotional and fmancial costs of litigation involved mean that not many firefighters who develop cancer seek to access any entitlement or compensation:

These transactional costs and the potential stress and delay often act as a disincentive for firefighters with cancer to pursue their proper entitlements. I myself have seen firsthand several firefighters with potential claims discouraged from pursuing those claims for these reasons. Often the shock and trauma of a cancer diagnosis and subsequent treatment places a great strain on those affected and their families. The threat of litigation is often overwhelming and the need to focus on treatment and improving health is often paramount. In this way, the scheme can sometimes be as confronting as the injury.

The introduction of presumptive legislation will therefore lead to greater transactional efficiency . It will remove some of the emotional and financial

1 United Firefighters Union of Australia, Submission 19, p. 8.

2 United Firefighters Union of Australia, Subm.ission 19, p. 8.

29

22

hurdles facing workers at the most vulnerable times in their lives. This in tum will improve client satisfaction with the scheme and hopefully drive down litigation costs. 3

3.5 Those who would pursue compensation face considerable litigation costs. Representatives from Slater and Gordon Lawyers informed the committee that presumptive legislation in other jurisdictions often results in a reduction in litigation:

The presence of the rebuttable presumption means that it is open to insurers to still defend those claims where the cause of the cancer may be in question. However, I have certainly seen it in the proclaimed diseases provisions within the Accident Compensation Act in Victoria, where it does create more of a culture of acceptance of the claim rather than disputation. To give you an example, it might be the occurrence of Q fever amongst abattoir workers. Rather than having a protracted legal argument as to whether that disease has been caused by that type of employment, I have noticed that where that has occurred here it has been more readily accepted. That is to be applauded. It means that we are putting the resources into the appropriate places; they are not going to be expended on litigation. In litigation it is not only the cost; it is the emotional toll too. For workers who are quite ill and who quite often have a battle for their lives, the emotional toll of going to see doctor upon doctor for independent opinion or going to see a lawyer or going to court to give evidence can be quite stressful. Those people are, I guess, discouraged from pursuing that and sometimes will relinquish what their proper entitlement might otherwise be. So when we speak of these amendments not creating a new entitlement, it does not, but it does make it more efficient and more readily available for those who perhaps are most deserving of our support. 4

The SRC Act

3.6 The Safety, Rehabilitation and Compensation Act (the SRC Act) sets up the framework for workers' compensation and rehabilitation for the Government's Comcare 5 scheme. The Department of Education, Employment and Workplace Relations provided the following on the Act:

It establishes a fully funded premium based system and a licensed self " insurance based system of compensation and rehabilitation for emp loyees who are injured in the course of their employment. The scheme covers approximately 211,000 Australian and ACT government employees and approximately 163,000 employees of self-insured licensees (as of 30 June 2010).

It provides a comprehensive benefit structure that includes:

3 Mr Craig Sidebottom, Slater and Gordon Lawyers, Proof Committee Hansard, 2 September 2011, p. 15.

4 Mr Craig Sidebottom, Slater and Gordon Lawyers, Proof Committee Hansard, 2 September 2011, p. 19.

5 For more on Comcare see: http://www.comcare .gov.au/ (accessed 29 August 2011).

30

" the payment of the reasonable cost of medical treatment;

" income replacement for periods of incapacity for work;

" payment of a lump sum for permanent impairment; and

" payment for rehabilitation programs.

In general, access to benefits under the SRC Act depends upon whether or not the injury, illness or disease can be demonstrated, on the balance of probabilities, to be work related. 6

23

3. 7 'Disease' is defmed by the SRC Act as an ailment suffered by an employee that was contributed to by employment:

The way that scheme works is that there is an ILO [International Labour Organisation] list of occupational diseases. There is an expert panel that assesses exposure and likelihood of causation. Once a disease is on that list, under the provisions of the act as it applies, if-to take a hypothetical -one of our firefighters were to acquire a disease to which these deeming provisions apply, then that would bring into effect the workers compensation arrangements under the act. 7

The fLO list of occupational diseases

3. 8 All Australian jurisdictions except Queensland already include in their respective workers' compensation legislation lists of biological agents and chemicals with known links to certain diseases. These, including those listed under the SRC Act, are all based on the International Labour Organisation's (ILO) List of Occupational Diseases. 8

3.9 The ILO list was created following the Workmen's Compensation (Occupational Diseases) Convention (Revised) 1934. Australia ratified this convention in 1959. The diseases included in the ILO's list adhere to set criteria:

(i) there is a causal relationship with a specific agent, exposure or work process;

(ii) they occur in connection with the work environment and/or in specific occupations;

(iii) they occur among groups of persons concerned with a frequency which exceeds the average incidence within the rest of the population ; and

(iv) there is scientific evidence of a clearly defmed pattern of disease following exposure and plausibility of cause. 9

6 Department of Education, Employment and Workplace R elations, Submission 25, pp 4-5.

7 Mr Andrew Kefford, Deputy Director-Gene ral, Chief Minister and Cabinet Directorate, Proof Committee Hansard, 23 August 2011, p. 2.

8 Department of Education, Emp loyment and Workplace Relations, Submission 25, p. 7.

9 Department of Education, Employment and Workplace Relations, Submission 25, p. 8.

31

24

3.10 Although most Australian jurisdictions list some of the toxins cited by the ILO's list, not all have updated their respective lists of deemed diseases to reflect reviews and updates made by the ILO. 10

3.11 Furthermore, the committee heard that the list of deemed diseases in the SRC Act, which is based on the ILO list, does not in fact include all the cancers listed by the proposed Bill:

Advice from Comcare is that their preliminary research-noting that that research has not been conducted through a medical or scientific expert " indicates that the existing list of declared diseases that can be caused by exposure to relevant toxins would encompass certain cancers but may not encompass all cancers listed in the firefighters bill. Comcare have further advised that this would continue to be the case even if the current list of declared diseases and toxins under the SRC Act is updated to bring it into line with the current ILO list of occupational diseases . 11

Subsection 7(1) of the SRC Act

3.12 Subsection 7(1) of the Act provides that:

Where:

(a) an employee has suffered , or is suffering, from a disease or the death of an employee results from a disease;

(b) the disease is of a kind specified by the Minister, by legislative instrument, as a disease related to employment of a kind specified in the instrument ; and

(c) the employee was, at any time before symptoms of the disease first became apparent, engaged by the Commonwealth or a licensed corporation in employment of that kind;

the employment in which the employee was so engaged shall , for the purposes of this Act, be taken to have contributed, to a significant degree, to the contraction of the disease , unless the contrary is established. 12

3.13 That is, arguably the SRC Act already ' ... makes specific provision for what is intended by this Bill.' 13 It provides presumptions for certain presclibed occupational diseases , although, as seen in paragraph 3.11, not for all the cancers listed by this Bill.

10 Department of Education, Employment and Workplace Relations, Submission 25, p. 8.

11 M s Michelle Baxter, General M anager, Workplace Relations Implementation and Safety Group, Department ofEducation, Employment and Workplace Relations , Proof Committee Hansard, 23 August 2011, p. 9. For the ILO list of occupation al diseases see: http://www .il o.org/global/publications/ilo-bookstore/order-online/books/WC MS 150323/lang- " en/index.htm (accessed 12 September 2011).

12 Subsection 7(1), Safety, Rehabilit ation and Compensation Act 1988.

13 Slater & Gordon Lawy ers, Subm ission 14, p. 3.

32

3.14 It does so by enabling:

... the Minister to specify certain diseases are related to employment of a specific kind, unless the contrary can be proved. This presumes that certain diseases (specified by the Minister) , that are contracted by an employee in a specific kind of employment, are related to that employment. 14

25

3.15 The ACT Government argued that the above subsection of the SRC Act already provides adequate coverage for ACT frrefighters. Mr Andrew Kefford, Deputy Director-General in the ACT's Chief Minister and Cabinet Directorate stated:

... all of those firefighters we have mentioned are covered in the course of their duties by the act to which this bill relates . We note in that context that that act provides a reverse onus of proof where a worker-and they are all classified as workers for this purpose-contracts a disease that is specified under the act. The act provides for compensation for all territory workers where diseases associated with particular toxin exposure in their employment on the balance of probabilities involved exposure to such toxins. This means in practice that, if a firefighter contracts cancer and that disease is linked to exposure to toxins during their employment, then it would more than likely be taken to be a compensable injury, although I note for the information of the committee that to the best we have been able to ascertain from the history there has not been a claim for occupational cancer amongst the territory's firefighters. 15

3.16 Mr Kefford added that records of incident notifications kept by the ACT's fire services would help ACT frrefighters obtain compensation:

If we were in the situation of someone who had been a firefighter in the ACT contracting cancer then part of the process that applies at the moment is that they would need to show that they had been a firefighter and exposed in the course of their work. There would be records that would pennit them to do that. 16

3 .1 7 The records in question refer to the Australian Incident Reporting System (AIRS). The committee heard that AIRS data, however, is used to measure emergency response effectiveness and is not designed to collect information which could be reliably used in compensation claims:

AIRS is a mechanism for fire services to collect data as to the incidence of fire and is used to identify trends in fires and incidents . It is not a system designed to record the event from the firefighter's perspective, experience " 17

or exposure to toxms.

14 Department of Education, Employment and Workplace Relations, Submission 25, p. 5.

15 Mr Andrew Kefford, Deputy Director-General , Chief Minister and Cabinet Directorate , Proof Committee Hansard, 23 August 2011, pp 1-2.

16 Mr Andrew Kefford, Deputy Director-General, Chief Minister and Cabinet Directorate, Proof Committee Hansard, 23 August 2011, p. 5.

17 United Firefighters Union of Australia , Supplementmy submission 19, p. 6.

33

26

3.18 UFUA provided the committee with an excerpt from the Australasian Fire and Emergency Service Authorities Council (AF AC) website, which acknowledges the limitations of AIRS:

Some anomalies in the data exist due to separate development of the reporting systems by each fire service. It is not required that AIRS repmis be supported by irrefutable evidence. 18

3.19 UFUA expanded on the limitations of the AIRS system, citing the following drawbacks:

" The system does not record firefighters' exposure to toxins as a result of combustion at the fire scene;

" The exposure recorded refers to exposure from the fire scene-for example from spread to another structure-not exposure to the firefighter ;

" The use of breathing apparatus and specialist protective equipment is recorded as the number of sets used without details about which firefighter used the equipment;

" The recording of respiratory protection and protective equipment IS not compulsory for structure fires;

" It is not mandatory to fill each field in the system; this may mean that important information is at times omitted;

" The recorded data relies on what is visible to the officer at the scene; and

" Due to the short timeframes firefighters operate in, officers do not have adequate time to record precisely which toxins or carcinogens are present in the environment. 19

3.20 Therefore the records available do not appear sufficiently reliable to form the basis of solid compensation claims.

Does the SRC Act provide adequate cover?

3.21 The ACT Government's evidence that any ACT firefighters who wish to make a claim can already do so under subsection 7(1) of the SRC Act reaffirmed the position expressed by the ACT Government earlier in its submission:

The SRC Act already provides presumptions for prescribed occupational diseases. 20

18 Quoted in United Firefighters Union of Australia, Supplementmy submission 19, p. 6.

19 For more detail on AIRS see appendices to United Firefighters Union of Australia , Supplementmy submission 19.

34

3.22 However, the same part of the above submission goes on to explain:

That is, the disease is deemed to∑ be work-related if the worker's employment involved exposure to certain chemicals, toxins and biological agents. 21

27

3.23 This means that ACT firefighters who develop cancer may technically seek and obtain compensation under the SRC Act as it stands. Importantly however, they still have to prove on the balance of probabilities:

(i) That the disease (cancer) was caused by the exposure to the particular chemical or toxic compound; and

(ii) That the employee was exposed to that particular chemical or toxic compound. 22

3.24 Mr Steve Kibble of Com care outlined for the committee the tests and process involved in determining claims under subsection 7(1) of the SRC Act as it stands:

When we determine claims under that subsection there are two evidentiary tests considered. The first one is disease of a kind- and I am referring to the legislation - and the second is employment of a kind, which involves exposure to a specified risk. For example, the notice of the deemed diseases provides coverage for occupational diseases caused by benzene, for those employees whose employment involves exposure to benzene.

With that example, firstly, it must be established that the disease is of a kind caused by benzene and the person who is making a decision about the claim would rely on specialist medical evidence or research that provides a scientific and medical link to the contraction of a kind of disease caused by benzene. Secondly, the delegate would rely upon the information provided on the claim form or obtain factual evidence from the employer and/or the employee to establish that the employee was engaged in a kind of employment involving exposure to the risk-that is, of benzene-before they contracted the disease and their employment involved exposure to the risk. For example, if a firefighter fought structural fires , therefore it can be taken that he or she had been exposed to benzene. 23

3.25 However UFUA reminded the cormnittee that:

Firefighters cannot prove 'exposure' to the particular chemicals or toxins at the specific fires or incidents they have attended. It is simply not possible or practicable for the detection of the numerous toxins firefighters are exposed to at each particular fire. This problem is exacerbated as the exposure can be over a long period of time at a number of fires/incidents and the cancers have various latency periods.

20 ACT Govemment , Chief Minister and Cabinet, Submission 24, p. 2.

21 ACT Government, ChiefMinister and Cabinet, Submission 24, p. 2.

22 United Firefig hters Union of Australia , Supplem entary submission 19, p. 4.

23 Mr Steve Kibble, Comcare, Proof Committee Hansard, 23 August 2011, p. 10.

35

28

Therefore, without being able to prove that exposure at any particular time in the employment, the firefighter fails to meet the test for the presumptive threshold as specified in section 7(1) [of the SRC Act]. The firefighter is left in the impossible position of having to prove the link of the cancer with their particular work as a firefighter. 24

3.26 Asked how a firefighter could prove exposure under subsection 7(1) of the SRC Act as it stands, representatives of the ACT Government stated the following:

If we were in the situation of someone who had been a firefighter in the ACT contracting cancer then part of the process that applies at the moment is that they would need to show that they had been a firefighter and exposed in the course of their work. There would be records that would permit them to do that. I might come back to what you were saying before about knowledge of the provisions. I should say that safety generally and workers' safety generally in our fire services are things that are at the front of the government's mind. They are at the front of the minds of all of the people involved in it. So I am confident that any firefighter who contracted a disease or work injury that even might have been related to their work would know about the appropriate channels through which they should go to pursue their claim, whether they be a member of our ESA or a volunteer brigade. 25

3.27 The onus, therefore, would still be on the sick firefighter to prove occupational exposure to carcinogens. In fact, given that cancer results from cumulative exposure, firefighters seeking compensation could be required to provide a trail of evidence on exposure going back a decade or more.

3.28 This, the committee understands, would be achievable only if, after every fire event, authorities conducted a thorough scientific analysis of chemicals present in the fire, and then provide each firefighter involved in the response with a detailed list of chemicals they were exposed to. The administrative burden and cost of such an endeavour would be prohibitive. Easing the extremely difficult task of proving the link between their work and their cancer goes, as outlined earlier in this report, to the very heart of the proposed legislation.

3.29 In addition, this question of proving exposure leads to the fme point of difference between the current SRC Act and amendments proposed by this Bill. The latter would not require frrefighters battling cancer to go out of their way to prove exposure. It would assume exposure to carcinogens for frrefighters with a set number of years of service.

3.30 Slater and Gordon Lawyers pointed to the out that the Bill does not represent a significant departure from the SRC Act, but rather a narrowing of its intentions:

24 United Firefighters Union of Australia , Supplementmy submission 19, p. 4.

25 Mr Andrew Kefford, Deputy Director-General , Chief Minister and Cabinet Directorate , Australian Capital Territory , Proof Committee Hansard, 23 August 2011, p. 5.

36

This Bill therefore represents an outcome of a type not only already specifically contemplated by the drafters of the current Section 7 [of the SRC Act], but is also narrower in application than that envisaged. It would be errant logic to conceive of this Bill as some new tipping point that will promote a flood of claims. 26

29

3.31 The Slater and Gordon submission argued that the effect of the proposed Bill is limited to:

... shift[ing] the balance of an evidentiary burderi away from a severely injured worker and their family at a time where that family is likely experiencing significant stress. It shifts this burden to a professional administrator who has ready access to the resources and expertise necessary to assess the merits of the situation. Indeed, it is in many ways the core business of this administrator to make such assessments. It does not deny the administrator any legal defence that it may otherwise consider appropriate to rely upon in the given circumstances. 27

Committee view

3.32 The committee recognises that subsection 7(1) of the SRC Act already allows for a presumption that employment contributed significantly to a listed disease. However, critically, the Act still requires proof of exposure to be established by the claimant before the presumption can take effect. A firefighter would have to:

1. suffer from a disease listed under the SRC Act (which appears not to include all the cancers covered by the proposed legislation);

2. show that their employment involved a risk of exposure to particular chemicals prior to the disease; and

3. prove a link between the chemical and disease in question .

3.33 The committee considers the SRC Act an inadequate mechanism to achieve the objectives of the current Bill because of the heavy evidentiary burden it places on firefighters with cancer.

3.34 The Bill being considered relies on scientific evidence and assumes an association between the length of occupation as a firefighter and certain cancers. If the Bill is passed, firefighters with these primary site cancers w ill only have to prove length of service.

3.3 5 The committee acknowledges the volume of evidence received-partic ularly that from Slater and Gordon Lawyers- pointing out that the ultimate effect of this Bill would be to merely shift, not scrap, the evidentiary burden. The committee recognises

26 Slater & Gordon Lawyers, Submission 14, p. 3.

27 Slater & Gordon Lawyers, Submission 14, p. 3.

37

30

that the opportunity would still exist for employers and insurance agencies to overcome claims for compensation in cases where such claims were not warranted.

Costs

3.36 Workers' compensation clain1s through Comcare are funded by premiums paid for by governments:

The way our scheme operates is that it is very much an experience based scheme. You may be aware of some of the state and territory workers compensation schemes which have some elements of an experience base in terms of some of the claims experience and performance of individual employers but because of the size of the schemes and the number of employers they quite often operate on an industry basis et cetera. But our scheme is very much an employer based experience, so the premium which is charged in each year is based on the actual claims experience of the individual employers as well as the overall costs of the scheme itself. 28

3.3 7 The committee explored the possibility that the Bill could bring about significant increases in premiums by improving the ease with which firefighters can access compensation. However, based on overseas experience as well as the fact that the legislation would not provide for any new grounds to claim, the committee is of the view that there would be negligible impact on the Commonwealth or ACT budget.

3.38 For information on the cost impacts of similar presumptive legislation in other jurisdictions the committee considered evidence provided by the Fire Chief Ken Block of Edmonton Fire Rescue Services in Canada. Fire Chief Block informed the committee that the cost impact of presumptive legislation in Canada had been

'minimal if not negligible. '29

3.39 To illustrate the point, Fire Chief Block cited the example of the province of Alberta, Canada, for the cormnittee. Alberta introduced presumptive legislation in 2003, starting with seven cancers listed. In 2005 the province added lung cancer in non-smokers to its list of covered cancers, then expanded the list in 2010-2011 to include another six cancers. In all, Alberta now covers 14 cancers in its presumptive legislation.

3.40 There are approximately 13 500 firefighters in Alberta, of which 3500 are full-time firefighters and 10 000 volunteer or part-time. Figures provided for the committee show that in the period 2006-2010 there were 19 occupational cancer claims with the Alberta Workers Compensation Board (WCB). 30

28 Mr Steve Kibble, Comcare, Proof Committee Hans ard, 23 August 2011, p. 12.

29 Fire Chief Ken Block, ProofCmmnittee Ha nsard, 2 September 2011, p. 3.

30 Fire Chief Ken Block, Submission 26, p. 6.

38

31

3.41 The committee heard that the total cost of the WCB-including all workplace injury and illness claims-to the Edmonton Fire Rescue Services budget is less than two per cent of its $15 8 million recurrent operating budget:

Within the two per cent of the Edmonton Fire Rescue Services recurrent operating budget it is estimated that there would be a very small percentage of work related illness falling within presumptive legislation coverage. Again, that two per cent encompasses all of the work related injuries, not just cancer.

From 2003 the WCB cost for Edmonton Fire Rescue Services was $916,347, increasing over a seven-year period to $2,332,414 in 2010. To put that into perspective, that is the equivalent of a $202,295 increase per annum in total for all claims, not just occupational cancer under WCB " and, again, all claims include the range of work related illnesses, such as back injuries, sprains, strains etcetera . 31

3.42 The committee also heard that much of the increase in costs can be attributed to increased staffmg levels, with the Edmonton fire department growing by approximately 15 per cent over the past decade.

3.43 Fire Chief Block discussed with the committee the 'immeasurable but beneficial' impacts of presumptive legislation in Edmonton, Alberta. Raised awareness of the correlation between frrefighting and certain cancers has led to a proactive approach to health awareness through the Edmonton Fire Rescue Services Health and Wellness program, introduced in 2005. The program encourages frrefighters to undergo regular, voluntary medical assessments , which have resulted in early detection of cancers and subsequently a much higher survival rate. 32

Through early occupational cancer detection, there is transfening of costs between death benefits and issues such as lost time and medical claims. This is essentially a balancing and neutral costing, while detecting a cancer early and hopefully saving a firefighter , which is the right thing to do. 33

3.44 Raised health awareness and a proactive approach to health and wellbeing have also resulted in a positive change in employee engagement and have helped Edmonton Fire Rescue Services with recruitment and retention. 34

Committee view .

3.45 The committee notes the experience-based evidence provided by Fire Chief Block. The committee also notes the very small number of claims lodged in Alberta,

31 Fire Chief Ken Block, Proof Committee Hansard, 2 September 2011, p. 3.

32 Fire Chief Ken Block, Submission 26, p. 7.

33 Fire Chief Ken Block, Submission. 26, p. 7.

34 Fire Chief Ken Block, Submission. 26, p. 7.

39

32

Canada, and has no reason to believe that the introduction of presumptive legislation here would lead to a flood of claims. Evidence suggests otherwise, as only a small number of firefighters will be in the unfortunate position of having to make a claim for occupational cancer.

3.46 On the basis of this evidence, the committee is confident that the cost impact of the proposed legislation would be as insignificant in Australia as it has been elsewhere.

3.4 7 The committee also notes with great interest that presumptive legislation overseas has led to greater health awareness, earlier detection of cancers and consequently a higher survival rate. First and foremost this is positive in terms of the firefighters' lives saved. However, it also leads to a reduced number of death benefits needing to be paid.

Coverage of volunteer firefighters

3.48 Some submissions sought clarification on which firefighters the Bill would cover. 35

3.49 The proposed legislation does not expressly differentiate between volunteer and professional firefighters, but subsection 7(9) includes the following definition of being employment as a firefighter:

(9) for the purpose of subsection (8):

(a) an employee is taken to have been employed as a firefighter if firefighting duties made up a substantial portion of his or her duties; and

(b) an employee who was employed as a firefighter for several periods that add up to the qualifying period is taken to have been so employed for the qualifying period. 36

3.50 This definition means that volunteer frrefighters would not be covered by the legislation because frrefighting does not comprise a substantial portion of their duties, nor would they be able to satisfy the requirements of the qualifying periods outlined in Chapter 1.

3.51 During the course of its inquiry the committee sought clarification as to why the proposed legislation did not seek to cover volunteers, who are covered in certain jurisdictions overseas. In response to its questions, the committee heard that the definition of volunteer frrefighter differs between Australia and overseas:

35 See for example ACT Departm ent of the Chief Minister and Cabinet, Submission 24, p. 1.

36 Subsection 7(9), Safety, Rehabilit ation and Compensation Amendment (Fair Protection for Firefig hters) Bi 11 2011.

40

The definition of 'volunteer' in Canada is different from the definition of 'volunteer' here. In Canada, there is no such thing as a person who gives their labour or their services for no remuneration. They are paid on-call or are part-time frrefighters. 37

Cause of illness and period of employment

3.52 Subsection 7(8) of the proposed legislation states:

(8) If an employee:

(a) suffers a disease mentioned in the following table; and

(b) before the disease was first diagnosed, was employed as a firefighter for the qualifYing period mentioned for that disease; and

(c) was exposed to the hazards of a fire scene during that period;

the employment is taken to have been the dominant cause of the contraction of the disease, unless the contrary is established .

33

3.53 Slater and Gordon Lawyers questioned why subsection 7(8) of the Bill employs the term 'dominant' instead of 'significant' cause, since the threshold test for entitlement elsewhere in the SRC Act is that employment contributed to a disease to a 'significant' degree:

It is not clear why the term dominant has been selected. The threshold test for entitlement to compensation for disease under the Act is that employment has contributed to a significant degree. The threshold test for significance is less than for dominance, so the use of the higher test will not disadvantage workers who otherwise qualifY. 38

3.54 Slater and Gordon Lawyers also pointed out to the committee that section 7(9) of the Bill could result in unintended consequences. It currently states: (9) (b) an employee who was employed as a firefighter for several periods that add up to the qualifYing period is taken to have been so employed for

the qualifying period. 39

3.55 The above subsection may risk being misinterpreted as not covering firefighters who have only accrued two, instead of 'several' , periods of employment. Two periods and several periods can add up to the same number of years, each satisfying the required qualifying period.

37 Mr Peter Marshall, National Secretary, United Firefighters Union of Australia, Proof Committee Hansard, 2 September 2011, p. 34.

38 Slater & Gordon Lawyers, Submission 14, p. 5.

39 Subsection 7(9)(b), Safety, Rehabilitation and Compensation Am endment (Fair Protection for Firefighters) Bill 2011.

41

34

Committee view

3.56 The committee agrees with the concerns expressed by Slater and Gordon Lawyers, and believes the reference to 'dominant' cause in the Bill should be revisited in order to preserve consistency within the SRC Act.

3.57 The committee also supports the view that the term 'several periods' of employment should be amended to 'more than one period' of employment.

Recommendation 2

3.58 The committee recommends that proposed subsection 7(8) of the Bill be amended to replace the term 'dominant' cause with 'significant' cause.

Recommendation 3

3.59 The committee recommends that proposed subsection 7(9)(b) of the Bill be amended to replace the term 'several periods' with 'more than one period'.

The case for non-rebuttable legislation

3.60 The committee is aware that some submitters , such as the ACT Branch of UFUA, believe the Bill should go further and provide stronger presumption of occupational cancer possible for firefighters. This would require the legislation to be non-rebuttable. 40

3.61 As already outlined, the Bill as it stands reverses the onus of proof from the individual to the employer or insurer , who can then rely on the rebuttable nature of this legislation to deny a firefighter's claim for compensation and have the case heard before the Administrative Appeals Tribunal or the Federal Court. 41 Making the presumption non-rebuttable would render it automatic and not provide employers and insurers with the opportunity to reject a weak or unfounded claim for compensation.

3.62 The committee is not aware of significant support for this alternative approach. Furthermore, this is not the approach taken by leading jurisdictions across Canada and the United States.

3.63 The Bill as it stands enjoys support from the overwhelming majority of submissions to this inquiry. This, it should be mentioned, includes support from the ACT Branch of UFUA , which represents the frrefighters who would be directly affected by this Bill:

40 See for example United Firefighters Union of Australia , ACT Branch, Submission 18, p. 5.

41 See United Firefighter s Union of Australia , ACT Branch, Submission 18, p. 5.

42

The fact remains that whether it is one fire or one hundred fires, our compensation system should be designed in such a way that it protects firefighters, so that they can continue protecting Australian communities. 42

35

3.64 The committee is satisfied that the proposed presumptive legislation should remain rebuttable.

Committee view

3.65 The committee understands that this legislation would not create a new right or entitlement, and would not bring about a flood of new claims. Nor would it fundamentally change the nature of the Australian compensatory system. Rather, it would shift the burden of proof from a sick individual to their employer or insurer, and only in defined cases founded on premises supported by scientific research.

3.66 The committee notes that the proposed legislation as it stands could lead to firefighters with two periods of service, which nonetheless add up to the qualifying period, being denied compensation. For this reason the committee has recommended amending subsection 7(9)(b) of the Bill to replace the term 'several periods' with 'more than one period'. Similarly, noting that the threshold test for significance is less than for dominance, the committee has recommended that subsection 7(8) be amended to maintain consistency throughout the SRC Act.

3.67 The committee is convinced that this legislation removes, at least for some firefighters, the unreasonable impedin1ent to compensation that currently exists . It is, the committee believes, legislation which frnally recognises the scientifically demonstrated link between frrefighting as an occupation and certain forms of cancer. As stated in 2002 when the Canadian province of Manitoba was considering the introduction of such legislation:

A presumption assumes that, all other things being equal, most cases of a certain type of cancer will be associated with occupational exposure, even though it is not possible to determine which case is actually caused by the occupation. A presumption is a way of being inclusiv e in the acceptance of such claims given that it is not possible to distinguish among them.

A presumption is also appropriate when the condition is rare and there is a pattern or strong suggestion of strong association with an occupation that may be concealed by other factor that complicate interpret ation of the risk . 43

estimate.

42 United Firefighters Union of Australia, ACT Branch, Submission 18, p. 5.

43 Tee L. Guidotti and David F. Goldsmith, 'Report to the Workers Compensation Board of Manitoba on the Association Between Selected Cancers and the Occupation of a Firefighter' , 28 March 2002, p. 8, as quoted in United Firefighters Union of Australia , Submission 19, p. 10.

43

36

3.68 On the weight of evidence the committee believes presumptive legislation is the most appropriate protective policy response to recognise the personal risk that firefighters take in the course of their careers and the sacrifices some of them will make.

44

CHAPTER4

Personal accounts

4.1 The committee heard that firefighters are, upon recruitment, within the top 5-1 0 percent of the general population in terms of physical health and fitness. Yet, within a few years of employment, firefighters are between 2 and 5 times more likely to develop one of the cancers listed in the Bill than the general population. 1

4.2 Currently , as outlined earlier in this report, firefighters who develop cancer are required to prove-often through litigation-a causal link between the cancer and their work. The committee received extensive evidence about the hardship and stress this causes firefighters who are battling a serious disease. This Bill, the committee heard, would simply remove that hardship and stress and give firefighters a better chance at recovery. 2

4.3 The committee received submissions and heard from a number of firefighters, and families of firefighters , whose lives have been changed by cancer. The committee again thanks them for taking the time to make submissions and give evidence. A few of their stories are outlined below.

Janet Reed

4.4 Janet Reed's husband, Robert James Reed, had been a firefighter for 14 years when he was diagnosed with kidney cancer in 2008. He died ten months later, leaving behind a wife, two children and many friends in the firefighting community.

4.5 As a firefighter, the committee heard that Robert Reed was always conscious of safety. He was nevertheless exposed, as all firefighters are, to toxins which were beyond his ability to control:

In Rob's everyday work where he looked after people in our communities as a fire fighter, performing road crash rescues, confined space rescues, dealing with hazardous material spills and other work he was regularly exposed to toxins and risk. He was a safe and conscientious worker and he wore protective clothing and used special safety equipment but it did not prevent him from being exposed to all sorts of toxins and some of that exposure was cumulative throughout his career. 3

1 United Firefighters Union of Australia , Submission 18, p. 1; p. 21.

2 See United Firefighters Union of Australia , ACT Branch, Submission 18, p. 4.

3 Mrs Janet Reed, Subm ission 20, p. 1.

45

38

4.6 His widow, Janet Reed, told the committee of the difficult and stressful months of her husband's ultimately unsuccessful treatment:

The circumstances of Rob's treatment was extremely difficult emotionally and physically .. .ln July Rob had routine testing 6 months after his surgery and a CT Scan revealed that the cancer had returned to his lymph nodes in his chest. Rob was hospitalised and had a biopsy which was complex procedure because his lung had to be collapsed to perform the biopsy, and the results confi1med that it was secondary cancer originating from the renal cell cancer. That diagnosis was dreadful and very stressful. Rob was then refened to an Oncologist and he commenced a course of chemotherapy treatment. 4

4. 7 Robert Reed's family remained hopeful for a positive outcome despite a serried of hurdles and discouraging results :

Rob's health declined and the cancer spread to his brain. In September Rob had a course of radiotherapy treatment for 4 weeks to treat the cancer in his head and chest. I supported Rob through this tenible time and we were optimistic for a good outcome. Rob wanted to carry on as though it was "business as usual" to minimise the impact of his illness for everyone else. 5

4.8 Shortly after this treatment, the family went on a short holiday to spend some quality time together. Within two weeks of the break Robert Reed was hospitalised with swelling on his brain. Janet Reed told the committee that her husband died three days later on 29 October 2009, their 21st wedding anniversary .

4.9 On 2 September 2011 Janet Reed attended one of the committee's hearings to tell the committee of the emotional and fmancial stress Robert Reed and his family had to undergo because Robert was forced to return to work for financial reasons:

I am here to ask you to carefully go through this presumption legislation and to consider it, because if this had been available to Rob and me when he had cancer it would have made our life easier. I am here for Rob. That is why I am here. And I believe that if Rob had not had to return to work after he had his operation - he had his kidney removed-after he thought that the cancer was all gone, I believe there would have been a lot less stress in our lives and maybe the lower stress would not have accelerated his cancer so quickly.6

4.1 0 Robert Reed and his family did not have ready access to compensation, and could not face having to go through lengthy and costly litigation to seek any sort of payment or support:

There was no compensation readily available to us and it was not something that we had strength to go and seek money for liti gation of any kind when

4 Mrs Janet Reed, Subm ission 20, p. 2.

5 Mrs Janet Reed, Submission 20, p. 2.

6 Mr s Janet Reed, Proof Co mmittee Han sard, p. 20.

46

we were going through such a hard time especially when his cancer came back six months after he was diagnosed. The last thing that any person needs to do in that situation is to wony about seeking compensation when you are already worrying about how you are going to get through the cancer. That is why I think it is important for me to be here today to let you know that just having cancer alone is a struggle and the fmancial part is a bigger struggle again that you do not have the strength to fight. 7

39

4.11 The committee thanks Janet Reed for her evidence, and acknowledges how difficult it must have been for her to attend the public hearing.

Dean Symmans I 4.12 The committee also took evidence from Mr Dean Symmans, a firefighter for 26 years. In April 2009 he was diagnosed with leukaemia, and has been undergoing treatment since that time. He is currently in remission, undergoing chemotherapy, monthly blood tests and bone marrow aspirate tests every three months.

4.13 He told the committee ofhis treatment:

Upon diagnosis I was given a 70 per cent survival. Treating doctors had less than two weeks to use chemotherapy drugs to place me into remission. Stationed in Albany 400km south of Perth, I was air lifted to Perth by Royal Flying Doctor to Sir Charles Gardner Hospital where chemotherapy and intravenous drugs were initiated. 8

4.14 Being away from home for treatment meant that his family had to travel, at their own cost, to see him:

Over the next 6 months, I received 3 x monthly intravenous chemotherapy treatments in SCGH hospital. My wife and sons travelled regularly to visit me at my hospital bedside. This was obviously disruptive to family life, schooling and an expensive exercise. My wife had to reduce her hours of work and we relied heavily on friends to assist with childcare and transport. 9

4.15 Mr Symmans had always been healthy, and had accrued many hours of unused sick leave dming his time as a firefighter. He used over 1000 hours of sick leave during his treatment. He was told that, if he relapsed after treatment, he would need a stem cell transplant and more time off work.10

4.16 Having exhausted their resources, Dean Symmans and his family had to turn to his colleagues for help:

7 Mrs Janet Reed, Proof Committee Hansard, p. 20.

8 Mr Dean Symmans, Submission 23, p. 2.

9 Mr Dean Symmans, Submission 23, p. 2.

10 Mr Dean Symmans, Submission 23, p. 2.

47

40

During my illness with leukaemia fire fighters and my Union rallied to support my family with monetary assistance to help cover the costs with travel and other expenses. Fire fighters maintained my family car and house in my absence over the initial 12 months. Albany fire fighters also travelled 400kms to visit me in hospital. Perth fire fighters sat with me bedside whilst treatment was administered. 11

4.17 Today, like other cancer sufferers in remission, Mr Symmans now lives with the fear of a relapse:

My big fear was if I did not stay in remission-which I am at the moment, thankfully-! would need to have stem cell transplants. If that takes place it would further chew out sick leave and I would then have to fall onto a charity that the firefighters themselves have set up. It is a sick and death benefit fund. I was, as I said, trying to preserve what sick leave I had left so that I could battle through my treatment. 12

4.18 He told the committee of the financial strain he and his wife faced during his illness, and the impact on their family and lifestyle:

In my case, being the main breadwinner, it was immense. During my illness my wife, who at that point was job sharing, had to cut back on those hours as well. I guess we were very grateful to her employer, who did the right thing and looked after her-offered her time off and supported her during my ordeal. I have the privilege here today to say how disappointed I was in the return-to-work system of my employer. All that was in place as far as retum to work goes was an account-keeping process, which I probably

come across as a little bit bitter with at the moment. All they wanted to know was how many hours I was working that day. The hours I did not work they were going to take off my remaining sick leave. That made me livid. I had worked for an organisation for such a long period of time and that was what they were offering me. I thought it was pretty ordinary. 13

4.19 He added:

I went to the point of contacting my area manager and asking 'How the hell do you work this soti of thing?' It should not be pushed down to people in fire stations and their area managers to tty to make the thing work. There should be something put in place. That, to me, is part of this process of getting presumptive legislation up so that I would not have to worry about how much sick leave I have and my family would be looked after. 14

11 Mr Dean Symmans, Submission 23, p. 3.

12 Mr Dean Symmans, Proof Committee Hansard, p. 22.

13 Mr Dean Symmans, Proof Committee Hansard, p. 23.

14 Mr Dean Symmans, Proof Committee Hansard, p. 23.

48

41

4.20 Although Dean Symmans believes he was exposed to iridium radiation , he informed the committee that he did not think he could confidently identify a single incident which had caused his leukaemia:

In 1991, I believe, I was probably exposed to radiation caused by iridium. There are ongoing diesel fume concerns at fire stations and on the fire ground. The leukaemia I have is believed to be caused by an exposure to a chemical or radiation, and benzene gets the green light there. I guess there has been an accumulation of carcinogens over 24 years. The more I look into things, the more I find things. I have only just learnt from a fellow

firefighter that the firefighting foam we have been using over the years can be a carcinogen. A lady who is doing research into leukaemia contacted me one time and told me that a chemical called 2-butoxyethanol, I think it is, was in AFFF foam. I'm not a scientist; I did my own home research come home. She indicated that there is a carcinogen in firefighting foam. I don't know how I can nail it down to one specific thing. 15

Scott Morrison

4.21 Mr Scott Morrison is a leading firefighter with Melbourne's metropolitan fire brigade. He was diagnosed with non-Hodgkin's lymphoma in 2001:

My journey with cancer began 10 years ago. In August 2001 I was admitted into hospital as it was not known what was wrong with me. I was diagnosed with non-Hodgkin's lymphoma. I had large cell cancers which are considered aggressive . That was the start of a battle for my life that would span six years and is something I am still very vigilant and concerned about

d .1 b . 16 on a a1 y as1s.

4.22 On 11 September 2001 Scott Morrison began his chemotherapy treatment:

The date 11th September 2001 is a day of sadness and shock for firefighters as the New York Fire Department lost more than 300 firefighters in the terrorist attacks . For me that day also marked the first round of chemotherapy. I had six rounds of chemotherapy ending on the 24th December 2001. By that stage I had not even told my mother I had cancer as I thought the chemotherapy would be the end of it.

17

4.23 Unfortunately , chemotherapy did not produce the results Mr Morrison had hoped for, and he had to undergo further rounds of the treatment. Due to ongoing chemotherapy and tests his veins collapsed and a fme tube had to be inserted into his body in order for the chemotherapy to continue:

Then I went back for more tests, and they showed that that had failed, so I had to have a stem cell transplant in February. In March 2002 I went through the procedure, and I was in hospital for eight days. I was returned

15 Mr Dean Symmans , Proof Committee Hansard, 2 September 2011, p. 24.

16 Mr Scott Morrison, Submission 7, p. 2.

17 Mr Scott Morrison, Subm ission 7, p. 2.

49

42

home for four days because those four days could have been my last four days, but then I went back to the hospital for six weeks-! was in isolation. I fmally got through that, and I was sent back for more tests . They said, 'You've still got something there near your left kidney,' and I had to go through six weeks' radiation . In between that, I spoke to the doctor. He said, 'If this doesn't work you're going to palliative care.t1 8

4.24 Fortunately , Mr Morrison responded to treatment and in 2002 went into remission for five years. He was re-diagnosed with non-Hodgkin's lymphoma in 2007, which was successfully treated with radiation therapy. The committee was shocked to hear that he had to rely on the generosity of his colleagues who gave up their own leave entitlements to allow him to take the necessary time off work:

I was lucky because my wife had her own dancing school. She spent the whole time at the hospital when I was there . I had a few hours of sick leave, but I was off for nearly 18 months. When I did run out of sick leave I was lucky enough to have great work mates who put their annual leave up for me so I would not lose money. I cannot thank them enough.

They helped me get through everything. I love those guys. Ever since I went back to work I have said 'I owe you all that much .' I learnt to cook and from then on I have cooked lunches every day for the guys. Whatever I could do for them, if they need something, I would go in the car and do it for them. Still to this day I thank them for helping me survive w hat I w ent through.19

4.25 He told the committee of his emotional struggle to survive:

When I was extremely ill there were times when I thought I was dying. I felt that I was going to die. There were times when it was extremely painful and I hoped I would die. When I looked at my two sons and m y wife I thought, 'I cannot die yet because I want to enjoy my life with them.'20

Paul Henderson

4.26 Paul Henderson began his career as a firefighter in 1976, and has w orked his way to becoming Senior Station Officer. He was diagnosed w ith testicular cancer in 2007. His treatment included surgery, radiation therapy and six courses of chemotherapy. He chose to speak to the committee with the full know ledge that he would not benefit from the proposed Bill:

18 Mr Scott Mo rrison, Proof Committee Ha nsard, p. 22.

19 Mr Scott Mo rrison, Proof Committee Hansard, p. 23.

20 Mr Scott Mo rrison, Proof Committee Hansard, p. 23.

50

I will not personally benefit from this Bill, and neither will my family. But I feel just as strongly about this as ∑ if. it was going to cover me and my c. .1 21

1am1 y.

43

4.27 Mr Henderson's experience reminded the committee of the benefits, outlined earlier in this report, of health awareness and early detection:

I found the lump myself though self examination and mentioned it to my doctor at a health monitoring appointment that is standard practice for the fire brigade. I was being vigilant because I knew ∑ of other firefighter that had testicular cancer and knew the earlier it was diagnosed the better chance the person had. I was aware of the link between firefighting and testicular cancer. I understand that testicular cancer is more commonly a young man's disease, but I had known older firefighters to be diagnosed with it so I remained vigilant. 22

4.28 He related his experience with illness and accident insurance:

I started off with 1,900 hours of sick leave. I exhausted all that sick leave and ended up on a policy that I had when I joined the fire brigade for sick and accident insurance. I ended up on that for a further two months. When I was cleared to be operationally fit to resume duties and got back to the work the insurance company kindly notified me that they no longer wished to cover me and my policy was cancelled. I appealed and in the wisdom of sunlight they agreed to keep the policy running but refused to cover cancer. I did not get any discounts in the policy.

23

4.29 Mr Henderson reflected on whether it would be possible to reduce the risk posed to firefighters by controlling the materials used in manufacturing. He stated :

I think that what a lot of it comes down to is probably the expansion of globalism. We have ships with containers full of all sorts of goods going from one country to another. We have ships of convenience now, and no " one can systematically keep enough records to link all the dots to find a trend or a commonality in something that is being abused. I think we do have a system, but I think the system also has some holes in it that other people are using to drive their goods through. There is the fire load in this room- these tables and the formaldehyde in them, or what they use in the

carpet. You have already had this discussion in Melbourne. From our point of view, we would like to see a system that is fail safe, accountable and credible .

21 Mr Paul Henderson, Submission 4, p. 2.

22 Mr Paul Henderson, Submission 4, p. 2.

23 Mr Paul Henderson, Proof Committee Hansard, p. 28.

51

44

I think it comes down to the lowest common denominator. We want products, and we want them as cheaply as we can get them. To get them cheaply, we have to manufacture them cheaply, and shortcuts are taken. 24

4.30 Paul Henderson's prognosis is, fortunately, good. Nonetheless, like other cancer sufferers, he lives with the spectre of cancer even when in remission :

When I did not have cancer I never walked around thinking, 'What's going to happen when I get cancer?' Now that I have had cancer and now that I am in remission, is that little monkey going to tap me on the back with 'Knock, knock.' 'Who's there?' 'It's cancer.' I live with that. 25

Ross Lindley

4.31 Ross Lindley joined Melbourne's Metropolitan Fire Brigade in 1984. He served as a firefighter for 26 years before being retired for medical reasons in 2010.

4.32 He was diagnosed with multiple myeloma in January 2009 after an MRI scan. He immediately undenvent an aggressive chemotherapy regime and had a stem cell transplant. The treatment itself was so intensive that it necessitated 18 months of recovery.

4.33 Ross Lindley told the committee how daunting a task he faced when he considered seeking workers' compensation:

I actually applied. I was one of the firefighters that Craig Sidebottom spoke about. The wife and I went in. It is very frightening when they tell you this is w hat you have to prove, this is what you have got to do: you will take it to court; you will have to fight the insurer; if you lose you are going to have comt costs; chances are you are going to lose it because you have to find this information , which is near impossible . So we let it slide. We thought it was just too hard- let's get better. 26

4.34 Having given up on pursuing compensation, he later sought to obtain records of chemicals he might have been exposed to during the course of his duties. He found that no records existed:

I rang the BA department to try to chase up these records and was informed that the records do not exist - after 24 hours they get thrown out.. . They were all gone. So there were no records of exposures of any kind. I then sent a letter to the metropolitan fire brigade requesting all the calls I had been to for my entire 26 years in the job and any exposures that I had been to and so forth and so forth- all the incidents and whatever. They sent a letter back saying, 'All we can give you is the reporting system. There are no records on exposures at all.' That was the brick wall I hit. You just

24 Mr Paul Henderson, Proof Committee Hansard, p. 28.

25 Mr Paul Henderson, Proof Committee Hansard, p. 26.

26 Mr Ross Lindley, Proof Committee Hansard, 2 September 2011, p. 27.

52

cannot prove which fire you went to that supposedly started this off. You have nothing to go with. With that we gave it up-we thought it was just going to be too hard. We can't prove a thing. 27

45

4.35 His words echoed previous evidence the committee had received concerning the difficulty firefighters faced when seeking to access records of exposure, records which, even when available, are unreliable and often inaccurate.

4.36 Mr Lindley used up his sick leave, and, like many others, turned to income protection:

That reduces your income down to 70 per cent, which you have to pay tax on as well. Then I returned to work on light duties because it was just too much of a financial struggle being on income protection and still having a mortgage and family commitments, medical expenses and so forth. On light duties I could only work two-day shifts, so I was taking the night shifts off as annual leave which I had accumulated while I was crook. Once all that went I then had to go out on a pension. I was not allowed to return to work as a firefighter and I took a pension and left. Financially it has been very hard. I have redrawn on my housing loan, I am paying off a tax debt that I have incurred from the income protection and at this stage I am not working. I am just plodding along trying to make ends meet. 28

Conclusion

4.37 The community holds a deep respect and gratitude for those who serve to protect and assist. If we are honest, however, along with this respect and gratitude comes a generous dose of expectation. We expect firefighters to come to our assistance when our homes, schools, hospitals and businesses are ablaze. We expect that a firefighter will enter a burning building when every human instinct tells us to leave. We expect they will search for those trapped inside and bring them out alive. We expect them to do what they can to minimise loss of life and damage to property. While everyone else is fleeing danger, it is the firefighter's duty to tackle it head-on, to

enter an extreme and dangerous environment, armed with the best protective gear available.

4.38 It is a duty firefighters take seriously, aware of the inherent risks to their own health and safety. This awareness on their part does not mitigate the community's responsibility towards them.

4.39 The committee has carefully examined the large amount of evidence with which it has been presented. Study after study has pointed to a higher risk of cancer for firefighters than the general population. Science has confirmed what firefighters suspected for decades: that a disproportionate number of them in the prime of their lives are brought down with illnesses usually reserved for the old and the infirm.

27 Mr Ross Lindley, Proof Committee Hansard, 2 September 2011, p. 27.

28 Mr Ross Lindley, Proof Committee Hansard, 2 September 2011, p. 26.

53

46

4.40 The committee recognises that cancer is an illness that touches many fit, healthy people in the non-firefighter population as well. In many cases it is unpredictable and incomprehensible, due to genetics or factors we do not yet . understand. But when the science tells us that a particular group of people who are

routinely exposed through their service to the community to known carcinogens are at higher risk of developing certain types of cancer, then the response becomes clear.

4.41 The committee recognises that when a person spends their professional career inhaling and absorbing known-and probably some as yet unknown-carcinogens in the course of public service, it is the moral duty of the community to enable them to seek compensation should they fall ill as a consequence. For this reason the committee believes this Bill needs to be passed after being improved upon through incorporation of the committee's amendments.

4.42 The committee has conducted its analysis in the hope that similar legislation will be introduced across state jurisdictions in future as part of the harmonisation of workers' compensation laws. If this Bill is passed, the committee encourages state jurisdictions to engage in a dialogue which will eventually see a positive, and fair,

outcome for firefighters across Australia.

Recommendation 4

4.43 The committee recommends that this Bill be passed subject to the foregoing recommendations.

Senator Gavin Marshall

Chair

54

COALITION SENATORS' ADDITIONAL COMMENTS

Coalition senators welcome the opportunity to inquire into this important issue, and broadly support the arguments underpinning the committee majority's report . Coalition senators wholeheartedly share the committee majority's objective of securing a workable compensatory system for frrefighters who fall ill with cancer related to their service. However, coalition senators remain to be convinced that presumptive legislation is necessarily the best mechanism to achieve this.

Recommendation

Coalition senators recommend that further consideration be given to ascertain how best to streamline firefighters' access to compensation for occupational cancer without necessarily resorting to presumptive legislation.

Senator Chris Back Senator Bridget McKenzie

Deputy Chair

55

56

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

APPENDIX 1

Submissions received by the Committee

United Fire Fighters of Winnipeg

Mr Mick Busst

Mr Phillip Wigg

Mr Paul Henderson

Mr Frank Besanko

Mr Guy McCrorie

Mr Scott Morrison

Mr Ross Lindley

Mr Philip Brown

Ms Karen Lindley

Fire Brigade Employees Union and United Voice, Northern Territory Branch

WorkSafe Victoria

Mr Michael Smith AFSM

Slater and Gordon

Australian Council of Trade Unions

Mr Brian Whittaker

Mr Phil Taylor

United Firefighters Union of Australia, ACT Branch

United Firefighters Union of Australia

Mr Janet Reed

Ms Sarah Reed

Mr Corey Reed

Mr Dean Symmans

ACT Department of Chief Minister and Cabinet

57

50

25

26

27

1

2

3

4

Department of Education, Employment and Workplace Relations

MrKenBlock

Volunteer Fire Brigades Victoria

Additional Information received by the Committee

DVD and transcript tabled by the United Firefighters Union of Australia, on 9 August 2011

Document tabled by Mr Ken Block, on 2 September 2011

Film Clip tabled by Mr Ken Block, on 2 September 2011.

Film Clip tabled by Mr Ken Block, on 2 September 2011.

58

APPENDIX2

Witnesses who appeared before the Committee

St James Court Conference Centre, Melbourne, Victoria 9 August 2011

FARRELL, Mr Mick, National President and Aviation Branch Secretary , United Firefighters Union of Australia

FORREST, Mr Alex, Private capacity

MARSHALL, Mr Peter, National Secretary, United Firefighters Union of Australia

TAYLOR , Commander Philip Taylor, Private capacity

WATSON, Ms Joanne, National Industrial Officer, United Firefighters Union of Australia

WHITTAKER, Commander Brian, Private capacity

Parliament House, Canberra, Australian Capital Territory 23 August 2011

BAXTER, Ms Michelle, General Manager, Workplace Relations hnple1nentation and Safety Group, Depart1nent of Education, Employment and Workplace Relations

BRIGHTON, Ms Meg, Director, Continuous Improvetnent and Workers' Cmnpensation Branch, Chief Minister and Cabinet Directorate , Australian Capital Territory

KEFFORD , Mr Andrew , Deputy Director-General , Chief Minister and Cabinet Directorate, Australian Capital Territory KIBBLE, Mr Steve, Cmncare

LIS, Mr Henry, Branch Manager, Workplace Relations Legal Group, Department of Education, Etnploytnent and Workplace Relations

59

52

SULLIVAN, Ms Sarah, Acting Branch manager, Safety and Compensation Policy, Departrnent of Education, Employment and Workplace Relations

Cliftons Conference Centre, Perth, Western Australia 2 September 2011

BLOCK, Mr Ken, Private capacity

FORREST, Mr Alex, Private capacity

HENDERSON, Mr Paul Xavier, Private capacity

LINDLEY, Mr Ross Edward, Private capacity

MARSHALL, Mr Peter, National Secretary, United Firefighters Union of Australia MORRISON, Mr Scott, Private capacity

REED, Mrs Janet Lucille, Private capacity

SIDEBOTTOM, Mr Craig Andrew, Practice Group Leader, Workers Compensation Department, Slater and Gordon Lawyers

SYMMANS, Mr Dean, Private capacity

WATSON, Ms Joanne, National Industrial Officer, United Firefighters Union of Australia

60

The Senate

Education, Employment and Workplace Relations Legislation Committee

Work Health and Safety Bill 2011 [Provisions]

Work Health and Safety (Transitional and Consequential Provisions) Bill 2011 [Provisions]

August 2011

61

© Commonwealth of Australia 2011

ISBN 978-1-74229-500-8

This document was produced by the Senate Standing Committees on Education, Employment and Workplace Relations and printed by the Senate Printing Unit, Parliament House, Canberra.

62

MEMBERSHIP OF THE COMMITTEE

Members

Senator Gavin Marshall, Chair, ALP, Vic.

Senator Chris Back, Deputy Chair, LP, W A

Senator Catryna Bilyk, ALP, Tas.

Senator Michaelia Cash, LP, W A

Senator Lee Rhiannon, AG, NSW

Senator Matt Thistlethwaite, ALP, NSW

Participating Members

Senator the Hon. Eric Abetz, LP, Tas.

Secretariat

Mr Tim Watling, Secretary

Ms Bonnie Allan, Principal Research Officer

Ms Natasha Rusjakovski, Senior Research Officer

Mr Jarrod Baker, Research Officer

Mr Dylan Harrington, Administrative Officer

PO Box 6100 Parliament House Canberra ACT 2600 Ph: 02 6277 3521

Fax: 02 6277 5706

E-mail: eewr.sen@aph.gov.au

111

63

64

TABLE OF CONTENTS

TABLE OF CONTENTS ................................................................................... v

MEMBERSHIP OF THE COMMITTEE ...................................................... iii

RECOMMENDATIONS ................................................................................. vii

CHAPTER 1 ........................................................................................................ 1

Background ............................................... ...... ............................. ............................. 1

Reference .......... ............ ........................................... .... .... ...... ..... ........... .... ..... .... .... 1

Conduct of the inquiry and submissions .......................... .............. ............. .... ... .... 1

Acknowledgement ... .... ....... ....... ... ....... ... ...... ......... .... ......... ........ .......... .............. .... 1

Background ... ....... ................... ... ........... ............... ..... ....... ................ ..... ................ .. 1

Purpose of the bills ....................... ..... ........... .... ....... .................. ......... .......... ..... ..... 2

Status of State and Territory mirror legislation ........ ..... ....... ... ......... ..... ........ ......... 3

Note on references ...... ................. ........ ....... ...... ... ...... .................. .............. ....... ...... 4

CHAPTER 2 ........................................................................................................ 5

Key Issues .................................................................................................................. 5

Intergovernmental agreements and parliamentary scrutiny ............. .................. .... 5

Matters identified by the Senate Scrutiny of Bills Committee .......... ......... ............ 8

D

. . . . . . 9

1scnrmnation prov1s1ons .............. ......... ......... ......... ............................ ............ .... .

Offences under the bill .......................................... ...................... ......................... 11

Requirement for Work Health and Safety permit holders to provide photographic identification ............................................. ..... ... ........ ................ ........... ................ . 14

Regulation of Health and Safety Representatives ........ ................ .......... .... ......... . 16

Management of psychosocial hazards in the workforce .............. ........... ............. 18

Labelling ................ ..................... .......... .... ....... ..... ............. .... ....... ....... ..... .... ..... ... 19

Coalition Senators Dissenting Report ............................................................. 23

Introduction .............. .... ............... ....... ......................................... ........... .............. 23

65

The principle of Harmonisation and Unions Right to Prosecute ........ .... .... ...... ... 23

Regulations and regulatory impact statement ........ .......... .... ........ ......... ... .... ........ 25

Training ... .... ... ...... .......... ..... ........ ... ... ............ ...... ........... ........................ ... ... ........ 26

Removal of the right to silence and protection from self-incrimination ... ........... 27

Failure to include the term 'control' in identification of Duties ofCare ........ ...... . 28

Timeframe ....................................................................... ....... ... .......... ...... ... ........ 29

Voluntary Organisations ...... .... ......... ............ ........ ...... .......... ...... ...... ....... ...... ....... 29

Health and Safety Representatives Training .................................... ... ................. 29

Committee Recommendations 1-2 ...................... .... .... .... .... ................. ..... ......... 30

Conclusion ..................... ......... ..... ..... ... ........... .... ............. ......... ... ..... .... ... ............. 30

APPEND IX 1 ..................................................................................................... 33

Submissions received by the Committee .............................................................. 33

Additional Information received by the Committee ........................................... 33

APPENDIX 2 ........................... ...................... ... .................................... ............. 35

Witnesses who appeared before the Committee .................................................. 35

VI

66

RECOMMENDATIONS

Recommendation 1

The Committee recommends that the Work Health and Safety Bill 2011 be amended to remove the substantial and dominant reason tests from the discrimination provisions in Part 6.

Recommendation 2

The Committee recommends that Category 1 offences should also include gross negligence. To achieve this, subparagraph 31(1) of the Work Health and Safety Bill2011 should be amended to include a test of 'gross negligence'.

Recommendation 3

The Committee recommends that the Senate pass the bills, subject to the foregoing recommendations.

Vll

67

68

CHAPTER!

Background

Reference

1.1 On 7 July 2011 the Senate jointly referred the Work Health and Safety (Transitional and Consequential Provisions) Bill 2011 and the Work Health and Safety Bill2011 for inquiry and report on 26 August 2011.1

Conduct of the inquiry and submissions

1.2 The Committee advertised the inquiry in The Australian on 20 July 2011, calling for submissions by 28 July 2011. Details of the inquiry were placed on the Committee website.

1.3 The Committee also contacted a number of organisations inviting submissions to the inquiry. Submissions were received from 11 individuals and organisations , as listed in Appendix 1.

1.4 A public hearing was held in Melbourne on 10 August 2011. The witness list for the hearing is at Appendix 2.

Acknowledgement

1.5 The Committee thanks those organisations and individuals who contributed to this inquiry by preparing written submissions and giving evidence at the hearing.

Background

1.6 In February 2008, the Workplace Relations Ministers Council (WRMC) agreed that the use of model legislation is the most effective way to achieve harmonisation of occupational health and safety (OHS) laws. The Commonwealth and each of the States and Territories subsequently signed the Intergovernmental Agreement for Regulatory and Operational Reform in OHS which commits all jurisdictions to implement the model laws by December 20 11.2

1. 7 The model bill is based on the WRMC's responses to recommendations made in the first and second reports of the National Review into Model OHS Laws (National Review). The National Review was completed in January 2009 and made recommendations on the format and content of a model bill that could be adopted in all jurisdictions.

1 Senate Standing Committee for the Selection of Bills, Report No 9 of 2011, 7 July 2011, p. 1.

2 Council of Australian Governments, Meeting Outcomes 2008, available at: http://www .coag.gov .au/coag _meeting_ outcomes/2008-07 -03/docs/OHS _I GA. pdf.

69

2

1.8 The National Review included wide consultation with stakeholders , including a six week public comment process that resulted in 243 written submissions.

1.9 On 18 May 2008, the WRMC made decisions on each of the National Review recommendations and asked Safe Work Australia to begin developing the model legislation .3 Many, but not all, recommendations made by the review were accepted bytheWRMC.

1.10 In September 2009 an exposure draft of the model bill was circulated by Safe Work Australia for public comment. Safe Work Australia received 480 submissions from individuals, unions, businesses and industry associations, governments, academics and community organisations. The WRMC agreed to the provisions in the model bill on 11 December 2009.4

Purpose of the bills

Work Health and Safety Bil/2011

1.11 The Work Health and Safety Bill 2011 (the bill) seeks to implement the Model Work Health and Safety Bill (the model bill) within the Commonwealth jurisdiction and if passed, would form part of a system of nationally harmonised OHS laws. The bill would apply to businesses and undertakings conducted by the

Commonwealth, public authorities , and, for a transitional period, non-Commonwealth licensees (organisations that used be Commonwealth entities before privatisation, and insured under the Commonwealth Scheme).

1.12 The model bill is intended to be 'mirrored' in all jurisdictions. Separate bills would be introduced into each jurisdiction's parliament to give effect to the model bill.

1.13 The bill includes the following key elements:

" a primary duty of care requiring persons conducting a business or undertaking to ensure, so far as is reasonably practicable, the health and safety of workers and others who may be affected by the carrying out of work;

" duties of care for persons who influence the way work is carried out, as well as the integrity of products used for work;

" a requirement that 'officers' exercise 'due diligence' to ensure compliance;

3 Safe Work Australia was established to improve occupational health and safety outcomes in Australia. Safe Work Australia comprises representatives of the Commonwealth , State and Tenitory governments, and employer and employee associations .

4 Department ofEducation , Employment and Workplace Relations , Submission 3, p. 2.

70

3

" reporting requirements for notifiable incidents such as the serious illness, injury or death of persons and dangerous incidents arising out of the conduct of a business or undertaking;

" a framework to establish a general scheme for authorisations such as licences, permits and registrations (e.g. for persons engaged in high risk work or users of certain plant or substances);

" provision for consultation on work health and safety matters, participation and representation provisions;

" provision for the resolution of work health and safety issues; and

" protection against discrimination for those who exercise or perform or seek to exercise or perform powers, functions or rights under the bill.

1.14 As discussed above, the model bill has been subject to an extensive consultation process. Most recently, an exposure draft of the bill was released by Safe Work Australia on 26 May 2011 for the purpose of consulting on the workability of specific provisions. Safe Work Australia has advised that the submissions received during the consultation have informed the development of the fmal bill.

1.15 Key provisions that were identified in written submissions and at the hearing are outlined in Chapter 2.

Work Health and Safety (Transitional and Consequential Provisions) Bil/2011

1.16 The Work Health and Safety (Transitional and Consequential Provisions) Bill 2011 would make transitional and consequential provisions in relation to the new Commonwealth OHS laws set out in the Work Health and Safety Bill 2011.

1.17 The Work Health and Safety (Transitional and Consequential Provisions) Bill 2011 would:

" repeal the Occupational Health and Safety Act 1991;

" make a range of transitional provisions ; and

" make consequential amendments to the Safety, Rehabilitation and Compensation Act 1988 and the Social Security Act 1991.

Status of State and Territory mirror legislation

1.18 All states (except Western Australia) have agreed to implement the new laws by the end of2011. 5

5 Steve O'Neill and Mary Anne Neilson, Work H ealth and Safety Bill2011, Bills D igest, No. 29, 2011-12, Parliamentary Library, Canberra, 2011, p. 8.

71

4

Australian Capital Territory

1.19 The model bill was introduced to the ACT Legislative Assembly on 23 June 2011.

NewSouth Wales

1.20 The NSW Work Health and Safety Bill 2011 was passed on 1 June 2011 and assented to on 7 June 2011. Initial amendments to the model bill that were introduced by the then Labor Government, were removed by the Liberal National Government, and then restored following Legislative Assembly Amendments . Significantly, the amended model bill, as adopted in NSW, includes a right for unions to prosecute; this right does not exist in the model bill .

Queensland

1.21 The Queensland Parliament introduced the model bill on 1 0 May 2011, and passed the model bill on 1 June 20 11.

South Australia

1.22 South Australia (SA) was the first jurisdiction to introduce the model bill on 7 April 20 11 but it was withdrawn on 3 May 20 11 after clain1s by the SA Opposition that it attacked the subcontracting sector in SA.

Other States and Territories

1.23 Tasmania, Victoria, the Northern Territory and Western Australia have not yet introduced the model bill.

Note on references

1.24 References in this report to the Hansard for the public hearing are to the proof Hansard. Please note that page numbers may vary between the proof and the official transcripts.

72

CHAPTER2

Key Issues

2.1 All submitters to the inquiry expressed in-principal support for the harmonisation of Australia's Occupational Health and Safety (OHS) laws. It was generally accepted that harmonisation would improve business efficiency and worker protections. 1

2.2 Some submitters viewed the Work Health and Safety Bill 2011 (the bill) as a minimum national standard which could be built upon. 2 In contrast, other submitters argued that the bill should be passed in its current form. 3

2.3 The key issues raised by the submitters and considered by the Committee were:

" consistency with the Fair Work Act 2009;

" Category 1 offences;

" regulation of Health and Safety Representatives (HSRs ), including proposed provisions to prohibit discriminatory, coercive and misleading conduct;

" management of psychosocial hazards; and " regulation of chemical labelling.

2.4 The Committee also considered the importance of parliamentary scrutiny of proposed legislation, not withstanding its part in a broader national scheme. It is to this matter that the Committee frrst turns.

Intergovernmental agreements and parliamentary scrutiny

2.5 As discussed in Chapter 1, the creation of harmonised OHS laws is underpinned by intergovernmental negotiations and agreement between the Workplace Relations Ministers Council in each state and territory. This agreement was substantially reached in 2009, culminating in the Intergovernmental Agreement for Regulatory and Operational Reform in Occupational Health and Safety (IGA).4

1 With the exception of CropLife, Submission 4 and Accord, Submission 11.

2 For example, Australian Manufacturing Workers' Union, Submission 1; Community and Public Sector Union, Submission 5; Australian Council of Trade Unions, Submission 7.

3 Department ofEducation, Employment and Workplace Relations , Submission 3; Safe Wo rk SA , Submission 9; Master Builders Australia, Submission 2.

4 Council of Australian Govemments, Meeting Outcomes 2008, available at: http:// www.coag .gov.au/coag meeting outcomes/2008-07-03/docs/OHS IGA.pdf. Accessed 15 August 2011.

73

6

2.6 The IGA relevantly states:

5.1.6 For the purpose of ensuring that model OHS legislation applies throughout Australia, each Party to this Agreement will, subject to its parliamentary and other law-making processes, take all necessary steps to enact or otherwise give effect to model OHS legislation w ithin its jurisdiction within the timeframes agreed by WRMC.

5.1.8 The adoption and implementation of model OHS legislation is not intended to prevent jurisdictions from enacting or otherwise giving effect t o additional provisions, provided these do not materially affect the operation of the model legislation, for example, by providing for a consultati ve mechanism within a jurisdiction. 5

2.7 The Committee asked the Department of Education, Employment and Workplace Relations (the Department) during the hearing to comment on the limitations imposed by the IGA. The Department acknowledged that the IGA did not bind Parliament:

I suppose the agreement is an agreement between the governments. Governments and parliaments are not necessarily the same thing, so I do not think governments could purport to bind to their parliaments through an agreement of this type. 6

2.8 The Department explained:

The govemment view would certainly be to encourage the parliament to pass the legislation as introduced, because it does reflect the agreed national position which the government has committed to. 7

2.9 Senate parliamentary committees, as an extension of the Senate itself , have a crucial role in reviewing proposed legislation . This role is diminished in circumstances where national legislati ve schemes are presented to Parli ament with the suggestion that they cannot, or should not, be amended because they are supposed to be uniform around the country. The Committee is concerned that the trend towards national schemes could potentially limit the role of the parliament by reducing or negating its investi gative powers.

5 Council of A ustralian Governments, Meeting Outcomes 2008, available at: http://www .coag.gov.au/coag m eeting outcomes/2008-07-03/docs/OHS IGA.pdf. Accessed 15 August 201 1.

6 Ms Flora Carapullucci, Branch Manager, D epartm ent of Education, Emp loyment and Workplace Relations, Proof Committee Hansard, 10 August 2011, p. 34.

7 Ms Flora Carapullucci, Branch M anager, D epartment of Education, Employment and Workplace Relations , Proof Comm ittee Hansard, 10 August 2011, p. 36.

74

7

2.10 Though not commenting specifically on the current bill , the Committee notes with approval the stated position of the Senate Scrutiny of Bills Committee on uniform schemes:

While the [Scrutiny of Bills] Committee understands the arrangements through which cooperative schemes are often implemented and the arguments in favour of a uniform national approach, it is concerned to ensure that legislation is subject to appropriate legislative scrutiny . The Committee would welcome an opportunity for it to consider and comment on an exposure draft of any proposed amendments prior to their adoption. 8

2.11 The Scrutiny of Bills Committee's comments are consistent with recent recommendations made by the Senate Select Committee on the Reform of the Australian Federation:

Recommendation 3

2.56 The committee recommends that exposure drafts of legislation intended as the foundation for a referral of power to the Commonwealth be made available for examination by parliamentary committees, including, as appropriate, the Joint Standing Committee proposed in Recommendation 17 of this report and the Senate Standing Committee for the Scrutiny of Bills, prior to their adoption. 9

Recommendation 17

8.41 The committee recommends the establishment of a Joint Standing Committee of the federal parliament to be administered by the senate and with a senator as its chair. The committee should have a mandate to conduct its own inquiries and be assigned a range of oversight responsibilities that would enable it to assume a significant and integral role in helping to manage Australia' s modern federation . This should include the responsibility to provide regular oversight ofCOAG .10

Committee view

2.12 The Committee recognises and affirms the extensive consultation that the Department and Safe Work Australia have conducted to reach agreement on OHS laws. However, the Committee also is cognisant of the importance of parliamentary oversight and sees merit in the recommendations of the Senate Scrutiny of Bills and

Senate Reform of the Australian Federation Committees that, in general, the better

8 Senate Committee for the Scrutiny of Bills, Alert Digest 8111, 17 August 2011, p. 4.

9 Senate Committee on Reform of the Australian Federation, Australia's Federation: an agenda for reform, June 2011, p. 37.

10 Senate Committee on Reform of the Australian Federation , Australia's Federation: an agenda for reform, June 2011, p. 122. (The most developed idea for this new committee came from Professor John Uhr, Submission 47).

75

8

approach is for parliament to consider exposure drafts before intergovernmental agreements are fmalised.

Matters identified by the Senate Scrutiny of Bills Committee

2.13 The Committee also has had reference to the report tabled by the Senate Scrutiny of Bills Committee which considered this bill.

2.14 The Scrutiny of Bills Committee asked Senator the Hon Christopher Evans, Minister for Tertiary Education, Skills, Jobs and Workplace Relations to comment on possible inappropriate delegation of legislative power. In particular, the Minister has been asked to comment on:

" whether subclauses 12(7) and 12(8) which enables a regulation to amend primary legislation are needed, and if they are needed, whether it would be appropriate to limit the delegation of legislative power to a set . d II d peno ; an " whether subclauses 12C(1) and 12D involve an inappropriate delegation

of legislative power (as it permits an administrator, with the permission of the Minister, to modify the operation of the statutory requirements). I2

2.15 The Scrutiny of Bills Committee has also asked the Minister to comment on whether instruments made under subclauses 12D(2) and 273B(2) are legislative instruments, and, if so, whether these instruments are governed by the Federal Legislative Instruments Act 2003. 13

2.16 The Scrutiny of Bills Committee has also raised some concerns about the offences provisions in the bill. For example,

" reversal of onus of proof;

" strict liability; and

" privilege against self-incrimination.I 4

Committee view

2.17 The Committee has considered the Scrutiny of Bills Committee's comments on these matters. The Minister's response is unlikely to be received before the tabling of tlus report. The Committee considers that the matters raised by the Scrutiny of Bills Committee should be satisfactorily resolved before the bill proceeds.

11 Senate Committee for the Scrutiny of Bills , Alert Digest No .8 2011, 17 August 2011, p. 41.

12 Senate Committee for the Scrutiny of Bills , Alert Digest No . 8 2011, 17 August 2011, p. 42.

13 Senate Committee for the Scrutiny of Bills , Alert Digest No.8 2011, 17 August 2011, p. 43.

14 Senate Committee for the Scrutiny of Bills, Alert Digest No. 8 2011, 17 August 2011, pp 43-45.

76

9

Discrimination provisions

2.18 The Australian Council for Trade Unions (ACTU) and the Australian Manufacturing Workers Union (AMWU) identified concerns with the substantial reason test in the proposed discrimination provisions that deal with civil provisions , and also noted that these provisions are inconsistent with the Fair Work Act.

2.19 Clause 104 of the bill proposes that it is an offence for a person to engage in discriminatory conduct for a prohibited reason.

2.20 Clause 105 describes discriminatory conduct, which includes certain actions:

" that may be taken in relation to a worker (e.g. dismissing a worker or adversely changing the position of the worker);

" that be may be taken in relation to a prospective worker (e.g. treating one job applicant less favourably than another); and

" relating to commercial arrangements (e.g. refusing to enter or terminating a contract with a supplier of materials to a workplace). 15

2.21 Clause 106 states that discriminatory conduct is undertaken for a prohibited reason if it is taken because the worker or prospective worker:

" is involved in, has been involved in, or intends to be involved in work health and safety representation in the workplace;

" undertakes , has undertaken, or proposes to undertake another role under the bill;

" assists, has assisted, or proposes to assist a person exercising a power or performing a function under the bill;

" gives, has given, or intends to give information to a person exercising a power or performing a function under the bill;

" raises, has raised, or proposes to raise an issue or concern about work health and safety ;

" is involved in, has been involved in, or proposes to be involved in resolving a work health and safety issue under the bill ; or

" is taking action, has taken action, or proposes to take action to seek compliance with a duty or obligation under this bill.

2.22 Civil and criminal proceedings may follow if a person engages m discriminatory conduct for a prohibited reason.

2.23 In relation to criminal proceedings:

15 Work Health and Safety Bill2011, paragraphs 105(1)(a)- 105(1)(c).

77

10

" a person will only commit an offence if the prohibited reason is the dominant reason for the discriminatory conduct (subclause 104(2)); and

" the reason for the discriminatory conduct is presumed to be the dominant reason for the conduct unless the accused proves otherwise (subclause 110(2)).

2.24 In relation to civil proceedings :

" a person will only commit an offence if the prohibited reason is the substantial reason for the discriminatory conduct (subclause 112(4); and

" the reason for the discriminatory conduct is presumed to be the substantial reason, unless the accused proves otherwise (subclause 113(2)).

2.25 The Explanatory Memorandum explains the purpose of the discrimination proVISIOnS:

The purpose of these provisions is to encourage engagement in work health and safety activities and the proper exercise of roles and powers under the Bill by providing protection for those engaged in such roles and activities from being subject to discrimination or other forms of coercion because they are so engaged. They clearly signal that discrimination and other forms of coercion that may have the effect of deterring people from being involved in work health and safety activities or exercising work health and safety rights are unlawful and may attract penalties and other remedies. 16

2.26 The unions have argued that the intention of protecting HSRs, as outlined in the explanatory memorandum, is not achieved in the clauses as they are currently constructed.

2.27 The ACTU submitted that employers often act with mixed motives:

We are concerned about the case where an employee makes a safety complaint; six months later the employer selects them for redundancy. The redundancy is overwhelmingly motivated by legitimate business objectives, but a small factor in the decision (say 1 0%) is the desire to punish the complainant.

Under the model Bill, the employer will not be liable for a civil penalty if they can prove that the illegitimate reason was not a 'substantial' reason for the decision. 17 However, we think that the Parliament should penalise decisions in which the illegitimate motive plays any real role.

This is the position under the Fair Work Act. An employer is liable to a civil penalty (for taking adverse action against an employee who has made

16 Explanatory Memorandum , Work Health and Safety Bill2011, p. 44.

17 Work Health and Safety Bill, subclause 113(2).

78

a complaint) if the illegitimate reason is just one of the 'real' reasons for a decision 18 -even if it is only a small part of the overall reasons. 19

\Ve submit that the model Bill should be made consistent with the Fair Work Act. The Parliament should not tolerate employers bringing illegitimate reasons to bear in making decisions affecting workers. 20

11

2.28 The ACTU submitted that the legal tests contained in subclauses 1 04(2) and 110(2) (which refer to dominant reason test with respect to offences under the Act) and subclauses 112(4) and 113(2) (which refer to a substantial reason test in civil proceedings) ought to be removed. The latter creates an inconsistency with the general protections in the Fair Work Act and should be amended.21 The CPSU supports this argument. 22

Committee view

2.29 The Committee agrees that the substantial and dominant reasons tests should be removed from the bill. The bill should be amended to prohibit decisions in which a prohibited reason plays any role at all in the decision maker's mind. Such an amendment would ensure consistency with the Fair Work Act, ensure appropriate protections are in place for HSRs and will be consistent with the current explanatory memorandum.

Recommendation 1

The Committee recommends that the Work Health and Safety Bill 2011 be amended to remove the substantial and dominant reason tests from the discrimination provisions in Part 6.

Offences under the bill

2.30 A number of submitters raised technical concerns about the construction of Category 1 offences in the bill.

2.31 The bill proposes that three categories of penalties apply to breaches of the work health and safety duties:

" Category 1 -for reckless conduct that exposes an individual to a risk of death or serious injury or illness and is engaged in without reasonable excuse;

18 Bowling v General Motors-Holden Pty Ltd (1975) 8 ALR 197 (High Court); recently applied in Barclay v Board of Bendigo Regional Institute ofTAFE [2011] FCAFC 14 (Full Federal Court) 19 Fair Work Act 2009, s. 360.

20 Australian Council of Trade Unions, Submission 7 (Supplementmy), p. 1.

21 Australian Council of Trade Unions, Submission 7, p. 8.

22 Community and Public Sector Union, Submission 4, p. 2.

79

12

" Category 2-failure to comply with a health and safety duty and exposing an individual to a risk of death or serious injury or illness; and

" Category 3 -failure to comply with a health and safety duty.

2.32 The Category 1 offence would require the prosecution to prove the fault element of recklessness in addition to the physical elements of the offence. 23 Category 2 and 3 offences are strict liability offences. 24

2.33 The bill contains no reverse onus of proof. Prosecutors must prove all matters relating to non-compliance with duties of care, including whether the person conducting the business or undertaking failed to do what was 'reasonably practicable' to ensure the health and safety of workers (and, in relation to category 1 offences, whether the reckless conduct was engaged in without reasonable excuse). 25

2.34 In most circumstances, the prosecution would only have to prove the conduct of the accused. However, there is an exception. This is where the accused produced evidence of an honest and reasonable (but mistaken) belief in the existence of certain facts which, if true, would have made the conduct innocent. In such a case, the prosecution must establish that there was not an honest and reasonable mistake of fact.

2.35 The ACTU submitted that the Category 1 offence should also include a test of gross negligence, explaining that:

A test of recklessness requires foresight of the likelihood of an outcome of a breach of duty. To be guilty of a criminal offence where recklessness is an element, it must be established that the accused is subjectively aware of the substantial risks, there is a probable chance the consequences will occur and the accused catTies out the breach, despite the risks.

The test for recklessness is more difficult to establish than a test for gross negligence. Gross negligence does not require subjective intent to be proved, and the accused is judged against the standard of the hypothetical reasonable person. A test for gross negligence is more suitable in the context of workplace health and safety , where much more effort is put into

establishing appropriate standards of safety and enforcing those standards when duty holders fall short of meeting those duties. 26

2.36 During the hearing, the AMWU described its concern about the absence of 'gross negligence' as a test in the Category 1 offence:

We are talking about category 1 offences when somebody either has been killed or is at high risk of being killed, and these are extremely serious events. It has long been the position of the union movement and the

23 Work Health and Safety Bill2011, clause 31.

24 Work Health and Safety Bill2011, clauses 32 and 33.

25 Work Health and Safety Bill2011, subclause 31(2).

26 Australian Manufacturing Workers' Union, Submission 1, p. 4.

80

AMWU, as part of that movement, that if it can be shown that an employer was grossly negligent we think that that is the test that should have to be met for category 1 offences. 27

13

2.3 7 The AMWU also explained the special circumstances in which the offences operated

In the area of occupational health and safety there is a huge amount of information, advice and support from the regulatory agencies and from the general community of employers, unions and health and safety specialists ...

... So it is not as if the duty holder is actually functioning in a vacuum. If they decide to flout that knowledge and the well known risk controls I think they should be subject to prosecution for being grossly negligent. 28

2.38 In a supplementary submission, the ACTU noted the possible operation of state and territory manslaughter and negligence laws:

While it is our preference that the model Bill create an express Category 1 offence for grossly negligent conduct exposing another to risk of serious injury or death, we note that if such conduct actually causes death or serious injury, this could constitute a crime of manslaughter (where death resulted), or else the crime of 'negligently causing serious injury', under State law.

At the very least, we submit that the Bill should make it clear that grossly negligent conduct may lead to liability under State criminal laws (despite the operation of section 109 of the Constitution) . 29

Committee view

2.39 The Committee acknowledges that given the criminal penalties, the test for Category 1 offences should be high. However, the test should not be so high that it is impossible for the regulator to prosecute. Further, actions that are grossly negligent and cause serious injury or death to workers should be captured by the criminal offence provisions. For these reasons the Committee believes that the test of 'gross negligence' should be included in the Category 1 test.

Recommendation 2

The Committee recommends that Category 1 offences should also include gross negligence. To achieve this, subparagraph 31(1) of the Work Health and Safety Bill2011 should be amended to include a test of 'gross negligence'.

27 Ms Deb Vallance, National Occupational Health and Safety Coordinator, Australian Manufacturing Workers' Union, Proof Committee Hansard, 10 August 2011, p. 18.

28 Ms Deb Vallance, National Occupational Health and Safety Coordinator , Australian Manufactming Workers' Union, Proof Committee Hansard, 10 August 2011, p. 18.

29 Australian Council of Trade Unions, Submission 7 (Supplementmy), pp 1-2.

81

14

Requirement for Work Health and Safety permit holders to provide photographic identification

2.40 Clauses 124 and 125 of the bill state that Work Health and Safety (WHS) permit holders must not enter a workplace unless he or she also holds and entry permit under the Fair Work Act and has photographic identification and the entry permit available for inspection upon request.

2.41 A number of submitters to the inquiry identified inconsistencies between the Work Health and Safety Bill2011 and the Fair Work Act. The CPSU , the AMWU and the ACTU have stated that the words and photographic identifi cation in clause 125 should be deleted so that the provision is consistent with the Fair Work Act. 30

2.42 Their rationale is based on clause 124 of the bill, which requires that a WHS permit holder must also hold a permit under the Fair Work Act. In order for a person to hold this permit, he or she would be subject to the 'fit and proper person test' under the Act, and have been issued with a permit under the industrial scheme. 31

2.43 The Community and Public Sector Union (CPSU), the AMWU and the ACTU have stated that for these reasons a WHS permit holder should not be required to have further photographic identification under the bi11.32 The ACTU explained its reasonmg:

There should be a presumption that a permit holder, also issued with a Fair Work Act pem1it that is subject to the fit and proper person test is not entering inappropriately or with any improper or malicious intent. 33

2.44 The ACTU elaborated during the hearing:

The reality is that people who will have pe1mits under this act when it becomes law will more than likely be the same people who have pe1mits under the Fair Work Act. It is mostly a question of inconvenience but as a point of principle we would like to see the Work Health and Safety Act

integrated as far as possible with the Fair Work Act, not only for matters of practicality but really the right to a safe workplace. 34

2.45 During the hearing, the AMWU also identified pnvacy concerns with photographic identification:

30 Australian Manufacturing Workers' Union, Submission 1, p. 3; Community and Public Sector Union, Submission 5, p. 2; Australian Council of Trade Unions, Submission 7, p. 4.

31 Fair Work Act 2009, s. 512.

32 Australian Manufacturing Workers' Union, Submission 1, p. 3; Community and Public Sector Union, Submission 5, p. 2; Australian Council of Trade Unions, Submission 7, p. 4.

33 Australian Council of Trade Unions, Submission 7, pp 8-9.

34 Mr Joel Fetter , Director ofPolicy and Industrial , Australian Council of Trade Unions, Proof Committee H ansard, 10 August 2011, p. 2.

82

The concern that we have raised is about consistency with the Fair Work Act but if, as currently written, it could be possible that the person who is the entry permit holder may, if they are asked for photographic evidence " often the only photographic evidence that someone has on them is their drivers licence and that evidence therefore has on it personal details. We do not think that any employer should have access to that. 35

15

2.46 The Master Builders Association took a different view, describing the benefits of requiring photographic identification and distinguishing the right of entry provisions under the Fair Work Act to those in the bill:

[T]here are some key differences in that under the Work Health and Safety Bill an entry permit holder can enter premises without giving prior notice to the person with management or control of the workplace. Conceivably there could be situations where there is a person on site who people may not be aware of their status and their identity . That is not the case under the Fair Work Act where notice needs to be provided before entering . That is a key difference between the two pieces of legislation . Given the statutory rights that entry permit holders can exercise on site, we believe it is appropriate to establish their identity. A certain point is that there have been cases of people posing as work health and safety inspectors from the regulator. 36

2.47 The Committee asked the Department to comment on the issue during the hearing. The Department told the Committee

Inspectors are required to have available photographic ID when they enter a workplace and it was therefore considered appropriate that entry permit holders should also have photographic ID ... The issue has been raised in the Safe Work Australia forums and there has been a reluctance to make an amendment to the model Act to deal with that issue. 37

2.48 The Department advised that it was seeking an administrative solution to resolve the concerns, explaining to the Committee:

Representatives from each jurisdiction have undertaken to hold discussions with their authorising authority, which in the case of the Commonwealth will be Fair Work Australia, to explore whether the authorising authority as an administrative process can put a photo on the entry permit so that the one permit can be used to satisfy both those elements in the model legislation . 38

35 Ms Deb Vallance, National Occupational Health and Safety Coordinator, Australian Manufacturing Workers' Union, Proof Committee Hansard, 10 August 2011, p. 17.

36 Ms Suzanne Williams, OHS Research Officer , Master Builders Australia, Proof Committee Hansard, 10 August 2011, p. 25.

37 Ms Flora Carapullucci, Branch M anager, Department of Education, Employment and Workplace Relations , Proof Committee Hansard, 10 August 2011, p. 39.

38 Ms Flora Carapullucci, Branch Manager, Department ofEducation, Employment and Workplace Relations, Proof Committee Hansard, 10 Au gust 2011, p. 39.

83

16

2.49 The AMWU told the Committee that it preferred amendment to the bill, but if this was not possible, it would accept an administrative arrangement sought by the Department. 39

Committee view

2.50 The Committee understands the concerns raised by the unions and the Master Builders Association but is satisfied that the Department is taking adequate steps to reach an acceptable compromise.

Regulation of Health and Safety Representatives

2.51 The ACTU, AMWU and CPSU raised concerns about the proposed regulation of Health and Safety Representatives (HSRs) under the bill. The bill seeks to provide for the appointment, powers and functions of HSRs who represent groups of workers within a business or undertaking. 40

2.52 The bill would provide for HSRs to issue Provisional Improvement Notices (PINs) if they reasonably believe that a person is contravening a provision of the bill, or have contravened such a provision in circumstances that make it likely that the contravention will continue or be repeated.

2.53 The bill would also provide for HSRs to direct a work group member to cease unsafe work if they have a reasonable concern that to carry out the work would expose the worker to a serious risk, emanating from an immediate or imminent exposure to a hazard. Before giving the direction, the HSR must consult with the person conducting the business or undertaking and attempt to resolve the issue using the issue resolution procedure under the bill. This is not required, however, if the risk is so serious and immediate or imminent that would not be reasonable to consult before giving the direction. 41

2.54 The bill proposes that HSRs would not have the power to issue PINs or stop work notices until after training has occurred.

2.55 When a HSR requests health and safety training , the person conducting the business or undertaking must allow the health and safety representative time off work to attend the course of training 'as soon as practicable', but within the period of 3 months.42 It would be an offence for an employer not to provide training. 43

39 Ms Deb Vallance, National Occupational Health and Safety Coordinator , Australian Manufacturing Workers' Union, Proof Committee Hansard, 10 August 2011, p. 17.

40 Provision is also made for Health and Safety Representatives to operate across multiple businesses or undertakings by agreement between all relevant parties. See Part 5, Divisions 3-7, Work Health and Safety Bill2011.

41 Work Health and Safety Bill 2011, clause 85.

42 Work Health and Safety Bill2011, subparagraph 72(2)(a).

84

17

2.56 The unions argue that this would create the potential for a HSR to be without the full range of powers provided for in the bill for up to 3 months. 44

During the

hearing, the ACTU drew the Committee's attention to provisions in Victoria which require that only two weeks' notice be given:

The approach of the ACTU in advocating with regard to what should be model legislation is that we have taken the best from various jurisdictions. The provision that has been in existence in Victoria for the last 26 years is seen by and large as the best provision. That provides for a health and safety representative to give two weeks' notice of the intention to attend the course. The employer ... has then to enact that with the two weeks' notice. That is the provision that we have advocated for. The bill steps away from that by changing the emphasis on the ability of the health and safety [representati ve] to give the two-week notice period. 45

2.57 The AMWU took a similar view:

We have found, particularly in some of the industries where we have a similar provision for at least two weeks' notice for union training leave, that that works extremely well.. .It is important because, as has been mentioned previously, under the proposed bill health and safety [representati ves] in the Commonwealth, who until next year will have been able to issue a 'cease work' or a provisional improvement notice upon their election, from next

year will have had to have been trained before they will be able to do that. So it is a change in and limitation of their powers. If that is the provision , people really need to have access to training as soon as possible . 46

2.58 The second report of the National Review into Model OHS laws considered whether or not HSRs should be required to have training before having the power to issue PINs and to stop work. The report noted that all stakeholders emphasised the importance of training, and a number argued that the power to issue PINs and stop work notices should be limited to those HSRs who had completed the appropriate training.

47

The Report does not discuss the notice that a HSR must give an employee of prospective training.

43 Work Health and Safety Bill , subclause 72(7).

44 Australian Manufacturing Workers' Union, Submission 1, p. 4; Australian Council ofTrade Unions, Submission 7, pp 11-12.

45 Ms Margot Hoyte, Health and Safety Officer and Workers Compensation Officer, Australian Council of Trade Unions, Proof Committee Hansard, 10 August 2011, p. 3.

46 Deb Vallance, National Occupational Health and Safety Coordinator , Australi an Manufacturing Workers' Union, Proof Committee Hansard, 10 August 2011, p. 10.

47 National Review into Model Occupational Health and Safety laws, Second Report, January 2009, pp 140-146.

85

18

Committee view

2.59 The Committee appreciates the concerns that the unions have raised . Howe ver the Committee is satisfied that the bill contains appropriate measures to ensure that HSRs receive adequate training to perform their role effectively. The clause does not require that 3 months notice be given, rather, the clause requires employers to allow

the HSR to receive training 'as soon as practicable' (but no later than 3 months).

2.60 However, the committee would be concerned if employers delayed permitting HSRs to attend training. The committee will have an ongoing interest in this issue, and will monitor the operation of this provision, should the bill proceed. 48

Management of psychosocial hazards in the workforce

2.61 The ACTU, AMWU, CPSU and the Financial Services Union (FSU) contended that the proposed management of psychosocial hazards in the workforce is inadequate.

2.62 The FSU explained to the Committee that while the finance sector has one of the lowest rates of illness and injury in any industry, psychosocial injury and illness is increasing. For this reason the FSU continues to call for 'strong regulation and supporting codes of practice around psychosocial hazards'. The FSU believes that effective regulation, combined with mandatory risk management should 'go some way to preventing a continued rise in illness and injury attributable to such hazards'. 49

2.63 The AMWU acknowledged that psychosocial hazards are mentioned in the bill , and are included in the definition of 'health'. 50 However, the bill would not impose a duty to manage such hazards leaving this to the Model Work Health and Safety Regulations (the regulations) and the code of practice. 51 The AMWU explained to the Committee that the bill lacked a 'general risk management obligation'. The AMWU submitted:

The object of ensuring health and safety is to eliminate the hazard, and if that is not possible, to control it and require the duty holder to be proactiv e [by] utilising a systemic process as distinct from an ad hoc reacti ve response. The Commonwealth WHS Bill must be amended by the insertion of Model WHS Regulations 19, 20, 21 and 22 into the Bill.. .Mandating of a comprehensive risk management approach for ALL work related risks to health would be a very useful regulatory tool in addressing those risks. 52

48 Work Health and Safety Bill2011, subparagraph 72(2)(a) .

49 Financial Services Union, Submission I 0, pp 1 and 6.

50 Work Health and Safety Bill 2011, clause 4.

51 The Regulations and the Code of Practice have not yet been released publically so the Commhtee has not been able to form its own opinion on the detailed content of these documents.

52 Australian Manufacturing Workers' Union, Submission I, p. 4.

86

19

2.64 During the hearing, the AMWU emphasised the benefits of regulating the managements of all workplace risks in the legislation, rather than by regulation or codes of practice. However, the AMWU stated that it was happy risk management had been added to the regulations:

We are, however, pleased that we have it in the regulations because in the draft model regulations that went out for public comment, it was not there. 53

2.65 The Committee asked the Department why psychosocial hazards were explicitly addressed in the proposed regulations, but not in the bill. The Department explained that while it is not mandatory to comply with the codes of practice, employers must show they are doing equal or better than the codes:

The codes of practice have a specific role under the legislation. They can be admitted as evidence in proceedings and a court can take them into account as evidence of what is known about particular hazards and risks, and what is reasonably practicable in the circumstances. While it is not compulsory to comply with the code of practice, in a court of law if challenged you have to show that you are doing equal to or better than the code of practice if you are doing something different. So, they do have quite a strong position in the whole legislative framework. 54

Committee view

2.66 The Committee believes that it is important that the risks of psychosocial hazards in the workplace are appropriately managed. The Committee accepts that the bill defmes health as 'physical and psychological health' and that the Department has made efforts to regulate the management of such risks in the regulations.

Labelling

2.67 CropLife Australia and Accord expressed concern about a change to the labelling requirements in the proposed regulations for the bill . Both organisations supported the overall objectives of OHS reform and acknowledged that they had participated in the Department and Safe Work Australia's extensive consultation processes, although they had some reservations about the quality of those consultations.

2.68 CropLife has identified some inconsistencies between the bill and existing regulation. CropLife is particularly concerned that the bill imposes requirements for agricultural product labels that are inconsistent with the existing regulatory scheme for agricultural chemical products. CropLife recommended amendments to the bill to

53 Ms Deb Vallance, National Occupational Health and Safety Coordinator, Australian Manufacturing Workers' Union, Proof Committee Hansard, 10 August 2011, p. 11.

54 Ms Flora Carapullucci , Branch Manager, Department of Education, Employment and Workplace Relations , Proof Committee Hansard, 10 August 2011, pp 49-50.

87

20

ensure that Australia's regulatory system for agricultural chemicals remains compliant with best practice guidelines developed internationally by the World Health Organization, the United Nations Food and Agriculture Organization (FAO) and .CropLife International.

2.69 CropLife asked the Committee to ensure

[T]hat agricultural chemical labels should continue to be regulated by the Australian Pesticides and Veterinary Medicines Authority (APVMA) . The Work Health and Safety Bill 2011 should reinstate previous recognition that APVMA approved labels are sufficient for workplace labelling requirements . Implementation of this change will have no impact on the availability of hazard information available to workers, while preserving the integrity of the APVMA's risk based system. 55

2. 70 Accord agreed, arguing that the bill, and proposed regulations, would :

" lead to increased regulatory burden;

" duplicate regulatory effort by Commonwealth regulatory agencies and safe work entities at the State and Territory level;

" lead to conflicting regulatory requirements;

" lead to a system that did not reflect the COAG best practice principles for regulation or consultation. 56

2.71 The Committee asked the Department to respond to the issues raised by CropLife and Accord. The Department advised that the specific requirements in relation to hazardous chemicals are included in the draft regulations, which are not yet fmalised. 57

2.72 The Department explained that the relevant draft regulations are based on the National Standard for the Control of Workplace Hazardous Chemicals (National Standard) which uses the United Nations' Globally Harmonised System of Classification and Labelling of Chemicals. The National Standard was developed

following extensive public consultation and reviews.

2.73 The Department described the consultation process undertaken to develop the draft regulations:

The approach to hazardous chemicals reflected in the model WHS Regulations has been developed through Safe Work Australia processes, having regard to the views of all stakeholders represented on Safe Work Australia . There has also been significant consultation between Safe Work

55 CropLife, Submission 4, p. 1.

56 Accord, Submission II, p. 1.

57 Department of Education, Employment and Workplace Relations , answer to question on notice, 15 August 2011 (received 19 August 2011).

88

Australia, the Department and interested stakeholders, including CropLife and ACCORD. The approach taken in the model WHS regulations has the strong support of the state and territory representatives on Safe Work Australia.

In recognition of the issues raised by industry representatives, the approach includes a long transition period to maximise the benefits and minimise the costs to industry. 58

Committee view

21

2.74 The Committee appreciates the concerns raised by CropLife and Accord. However, the Committee is satisfied that the Department and Safe Work Australia have consulted widely on chemical labelling and notes that this consultation process is ongomg.

Recommendation 3

The Committee recommends that the Senate pass the bills, subject to the foregoing recommendations.

Senator Gavin Marshall

Chair

58 Department of Education, Employment and Workplace Relations , answer to question on notice, 15 August 2011 (received 19 August 2011).

89

90

Coalition Senators' Dissenting Report

Introduction

1.1 The importance of harmonised occupational health and safety (OHS) laws has long been recognised as a critical area of regulatory reform and indeed the process of harmonisation was commenced by the Howard Government.

1.2 In February 2008, the Workplace Relations Ministers Council agreed that the use of model legislation is the most effective way to achieve harmonisation of OHS laws. The Commonwealth and each of the States and Territories subsequently signed the Intergovernmental Agreement for Regulatory and Operational Reform in OHS which commits jurisdictions to implement the model laws by December 2011.

1.3 This Bill is accompanied by the Work Health and Safety (Transitional and Consequential Amendments) Bill 2011.

The principle of Harmonisation and Unions Right to Prosecute

1.4 Coalition Senators strongly support the principle of harmonisation and note that it was the Howard Government in October 2006 that initiated the process.

1.5 The Coalition is concerned that unions see the harmonisation as setting a minimum national standard which could be built upon. 1

What the bill represents for us is a ground floor of OHS legislation . It is the ground floor that we think is a minimum that should apply in all jurisdictions. That is the commitment that governments have given. They have said that they will implement this ground floor legislation in all jurisdictions and it will be operational by 1 January 2012.2

1.6 This is despite the Prime Minister's comments at the Leaders' Debate on her greatest achievement:

Perhaps less transparent to the Australian people: getting new occupational health and safety laws. Laws around the country. Businesses have been complaining for 30 years that they have different obligations in different states and at the same time not every individual worker had the same safety standards . Now, I have delivered that.

Thirty years - on the day we delivered it there were some public servants that had tears in their eyes because they spent all their working life waiting

1 For example, Australian Manufacturing Workers' Union, Submission I; Community and Public Sector Union, Submission 5; Australian Council of Trade Unions, Subnzission 7. 2 Mr Jarrod Moran, Australian Council ofTrade Unions, Proof Committee Hansard, 10

August 2011, p. 1.

91

24

for someone to deliver that refmm. Wasn't easv, but I got it done. And what I think that shows is if you believe in something passionately, then you will work through. 3

1.7 It was her own Labor Party in New South Wales (NSW) that changed the model bill. The Prime Minister remained silent in the face of this departure from harmonisation.

1.8 Not only did the Prime Minister try to claim that something that was yet to be achieved was her greatest achievement, she claimed something, started by the Coalition in Government, as her own.

1.9 Coalition Senators are curious as to whether public servants had tears in their eyes to see NSW Labor destroy harmonisation for that state .

1.10 Coalition Senators note amendments may be sought to the Commonwealth's Work Health and Safety Bill to introduce union right of prosecution along the lines of the provisions in the NSW Bill, added by amendments from the Greens supported by Labor.

1.11 Coalition Senators agree with the Master Builders Association who 'strongly rejects union right of prosecution'. The authority to prosecute and to commence criminal proceedings should rest solely with the State. The Master Builders Association rightly point out in their submission:

A prosecutor represents all members of their community and cannot, therefore, act as if representing private or factional interests .

Unions, by their very nature, represent the interests of employees and therefore cannot represent the entire community. To empow er them with the ability to prosecute is akin to empowering employers with the ability to prosecute employees for a breach of health and safety, an issue that would be viewed as inappropriate by the community.4

1.12 Further, the Expert Review Panel considered and made recommendations in this area. The Review Panel identified three major concerns with private prosecutions:

There are serious practical difficulties (such as lack of resources which may unde1mine the evidence base).

Private prosecutions are not subject to the same safeguards as prosecutions brought by the State, such as application of prosecution policies , review of decisions and other public sector accountability measures.

3 The Hon Julia Gillard MP , Prime Minister, Leaders D ebate, National Press Club Canberra, 25 July 2011. Emphasis added.

4 Submission 2, p. 4.

92

Private prosecutions can disrupt other enforcement activities, such as enforceable undertakings or other measures that the regulator considers as more appropriate or proportionate in the circumstances of a particular case. 5

Recommendation 1

25

Any attempt to add third party or union right to prosecute be strongly opposed.

Regulations and regulatory impact statement

1.13 The Work Health Safety Bill is 'coat-hanger' legislation. The regulations will be determinative of any benefit of this change. Model regulations were circulated and are exceptionally restrictive. The 'fmal' regulations have not yet been released nor has the regulatory impact statement.

1.14 This is despite the objectives of harmonisation laid out m the Access Economics' Draft Regulation Impact Statement:

" Reducing compliance costs for business. For multi-state businesses , nationally consistent Acts should equate to lower compliance costs, ceteris parabus. For single-state businesses the outcome is not clear, a pnon.

" Improving efficiency for regulatory agencies. Rather than having ten regimes (including Seacare) being reviewed every five years (ie, at least one per year on average), under hatmonisation, there should effectively only be one national regime reviewed every five years.

" Improving safety outcomes. The reduction of red tape and greater certainty for duty holders should allow business to focus more pro " actively on health and safety improvements, rather than on mere compliance. Regulatory efficiencies should also allow more scope for regulators to actively improve safety in workplaces. In addition , the model Act applies to a broader range of modem employment relationships and thus aims to protect all types of workers from hazards and risks arisin g from work. 6

1.15 Further , the Intergovernmental Agreement states that the fundamental objective of OHS reform is to produce the optimal model for a national approach to OHS regulation and operation which will:

" enable the development of uniform, equitable and effective safety standards and protections for all Australian workers;

" address the compliance and regulatory burdens for employers with . operations in more than one jurisdiction ;

5 National Review into Model OHS Laws, Second Report to W RM C, January 2009.

6 Decision Regulation Impact Statement for a Mod el Occupational Health and Safety Act, Access Economics, 9 December 2009.

93

26

" create efficiencies for governments in the provision of OHS regulatory and support services; and

" achieve significant and continual reductions in the incidence of death, injury and disease in the workplace. 7

1.16 In Answers to Questions on Notice from Senate Estimates, the Government could not decisively say that the fmal Regulations will achieve these objectives. 8 Instead, the Government pointed back to the Access Economics report from 2009 which is considerably out of date and by the Government's own admission does not take into account the fmal regulations still under consideration by the Work Health and Safety Ministers' Conference. Nor has it taken into account the departure from harmonisation by NSW and, potentially, the Western Australian, Governments.

1.17 The Coalition Senators recognise that harmonisation of OHS legislation is part of the COAG National Reform Agenda that aims to reduce regulatory burdens and create a seamless national economy. The Coalition Senators also accept that reforms "aim to deliver more consistent regulation across jurisdictions and reduce

excessive compliance costs on business, restrictions on competition and distortions in the allocation of resources in the economy". However, we have great concern with the bill being passed through the Parliament without having had the benefit of viewing the Regulations, the Regulatory Impact Statement or to consult with the wider community about their impact.

Recommendation 2

The Coalition Senators recommend that the final regulations and final regulatory impact statement be released prior to further debate on the Work Health and Safety Bill 2011.

Training

1.18 In a submission to the Committee, Dr John Culvenor said:

Training in occupational health and safety is always an important issue. At this time of transition to new arrangements the availability of courses is vital. Unf01iunately the availability of accredited courses has been reduced by 26% since restrictive changes were introduced by the Safety Rehabilitation and Compensation Commission in 2010.9

1.19 Coalition senators have serious concerns about the changes to the guidelines that supports union training at the expense of a private provider with no beneficial outcomes.

7 Intergovemmental Agreement for Regulatory and Operational Health and Safety.

8 Answer to Question on Notice EW0041_12 - EW0044 _12.

9 Submission 6, p. 1.

94

27

1.20 Senator Abetz has explored this issue at length at Senate Estimates and despite several lines of questioning, officials have been unable to provide a rational and justification for the change.

Recommendation 3

Coalition Senators recommend an amendment to the Work Health and Safety (Transitional and Consequential) Bill enabling the continuance of courses accredited under the 2006/2007 guidelines.

Removal of the right to silence and protection from self-incrimination

1.21 Prosecutions under current OHS laws are criminal matters.

1.22 Under normal criminal law everyone has the right to silence and protection from self-incrimination. That is, you cannot be forced to say something to an investigator (the police) unless the investigator first obtains a court order and so on. This protection is a right we all have and is essential to community confidence in our criminal justice system and the rule of law. It is this protection that stops abuse of power.

1.23 The passing of the bill in each jurisdiction will abrogate the privilege against self incrimination in New South Wales, Western Australia, Tasmania, the Australian Capital Territory and the Northern Territory. The South Australian legislation provides that a person is not required to provide information if it would incriminate them of an offence. The Victorian and Queensland legislation also provides that an individual may refuse to provide information on the grounds that it may incriminate them. The Commonwealth OHS Act is currently silent on the issue, and therefore the privilege against self-incrimination is considered to remain.10

1.24 The model OHS laws take away the right to silence and protection from self " incrimination. This will apply not only to employers but to all managers and workers in workplaces. It will give powers to OHS inspectors not available to the police.

Recommendation 4

Coalition senators recommend that subclause 172 the Work Health and Safety Bill 2011 be amended to include a right to silence and protection from self " incrimination, in line with criminal law and current OHS laws in New South Wales, Queensland, South Australia and Victoria.

10 Answers to Questions on Notice, Question 4, received 19 August 2011.

95

28

Failure to include the term 'control' in identification of Duties of Care

1.25 The modem principles of OHS safety were first created in the UK in 1972 ∑ under the Robens Review.11 The principles hold that responsibility for safety is allocated according to what is reasonable and practicable to control.

1.26 These are the internationally accepted benchmarks embedded in International Labour Organisation (ILO) Conventions to which Australia become a signatory in 2004. The ILO Convention 155 (article 16) states:

Employers shall be required to ensure that, so far as is reasonably practicable, the workplaces, machinery, equipment and process under their control are safe and without risk to health.

1.27 The National Review into OHS laws stated that there was much dissent in submissions over the inclusion of the word 'control' in Duties of Care. Recommendation 8 called for the removal of the word 'control' from the definition of reasonable and practicable. This is implemented in the national model OHS laws.

1.28 The model laws also introduce a new and untested legal concept of connecting Duties of Care to a 'person conducting a business or undertaking'.

1.29 The removal of the word 'control' not only creates confusion over who is responsible for what in work safety but is a major shift away from known OHS principles in all Australian jurisdictions except NSW. Further, it removes a key element of the ILO OHS Conventions to which Australia is a signatory; and creates a legal 'vacuun1' due to unknown application and interpretation of Duties of Care under a new concept.

1.30 It is reasonable to expect that, with the removal of the word 'control', legal uncertainty will occur and will require many, many years of judicial testing before clarity is achieved.

1.31 Coalition senators believe that OHS legislation must not just operate with legal clarity. The wording of the Act must give unambiguous signals in clear, lay language to every person involved in workplaces. People understand, in a practical sense, that if they 'control' something (or even share control), that they are responsible. With the word 'control' removed, clarity and focus on personal responsibility for safety is diminished and becomes confused. This works against the objective of achieving safe workplaces.

Recommendation 5

Coalition Senators recommend that the Work Health Safety Bill 2011 be amended to include 'control' in the identification of duties of care. This

11 Safety and Health at Work: Report of the Committee 1970-72, Lord Robins, 1972.

96

29

amendment will bring the bill in line with current practice, International Labour Organisation conventions and will bring legal clarity.

Time frame

1.32 Coalition Senators are concerned with the 1 January 2012 timeframe given that it is now August 2011 and regulations haven't been released and several Codes of Practice are still in the consultation period.

1.33 There is concern in the community that the harmonisation of OHS laws in Australia may not be complete until December 2011. As a consequence, there will be a considerable strain placed on employers, employees and enforcement bodies to know their rights and obligations, and to change the way that they practice with such short notice.

Recommendation 6

The Coalition Senators recommend that the Australian Government request consideration by First Ministers of a delay of the full implementation of the legislation until 6 months after the finalisation of the last Code of Practice or Regulation.

Voluntary Organisations

1.34 Coalition Senators fmd it very disturbing that there is still no clarification on the extent of how the Work Health and Safety Bill will apply to voluntary organisations.

1.35 It is vital that voluntary organisations have certainty as they go about their important work.

Recommendation 7

The Coalition Senators recommend that the Australian Government provide clarity as to the impact of the Work Health and Safety Bill 2011 on voluntary organisations.

Health and Safety Representatives Training

1.36 Coalition senators are concerned with changes under the Work Health Safety Bill in relation to Health and Safety Representatives (HSRs).

1.3 7 Employers who seek the services of a consultant to advise on OHS practices in their workplace will also be required to pay for training for a HSR in the workplace.

1.38 Coalition senators are concerned that should there be an industrial dispute, there is potentially nothing to stop frequent changes to the HSRs in the workplace. This would place a large burden by way of training costs on the employer.

97

30

1.3 9 The commonsense test dictates that changes to Health and Safety Representation in the workplace should be kept to a minimum .

Committee Recommendations 1 - 2

1.40 The model legislation has been a number of years in development. Parties have had a number of opportunities to consider a number of concepts and Coalition Senators would have thought that this issue had been considered and canvassed by all industry and relevant stakeholders.

1.41 These issues have been well and truly ventilated and it has been decided that they do not have a place in the model act.

1.42 In particular, gross negligence raises a new area of Occupational Health and Safety law which shouldn't be included in this legislation by an amendment given the ramifications that it would have.

1.43 It is clear that the consequences of the Committee Report put forward by Labor Party Senators has not been thought through to the full extent. Recommendations 1 and 2 seek to open up whole new areas of law without the close examination of other aspects of the bill .

1.44 On the other hand, Coalition senators' recommended amendments have been the subject of significant debate and despite this, concerns still continue to be raised. The response has been unsatisfactory, and it is vital that the recommended amendments prevail as they seek to provide legal clarity.

Recommendation 9

1.45 The Coalition senators recommend that recommendations 1 and 2 by the committee majority be ignored.

Conclusion

1.46 While Coalition Senators support the principle of harmonisation, there 1s some room for improvement in this bill.

1.4 7 Although Western Australia was somewhat reluctant, it has continued to take part in the harmonisation process. The W este1n Australian Government has stated that it is likely to adopt significant portions of the model laws when it enacts its version of the legislation. The areas which have been flagged as possible departure points by the

Western Australian Government include the maximum quantum of the penalties, the right of union entry provisions, powers of Health & Safety Representatives to direct work to cease and to issue provisional improvement notices and the reverse onus in discrimination matters.

1.48 Coalition senators support the position of the Western Australian Gove1nment in expressing these concerns.

98

31

1.49 Further, Coalition senators do not feel it appropriate to debate the bill while there are still many questions unanswered as the Regulations and Codes of Practice are still not available .

Senator Chris Back Senator Michaelia Cash

Deputy Chair

99

100

APPENDIX 1

Submissions received by the Committee

1. Australian Manufacturing Workers Union

2. Master Builders Australia

3. Department of Education, Employment and Workplace Relations

4. CropLife Australia

5. Community and Public Sector Union

6. Mr John Culvenor

7. Australian Council of Trade Unions

8. Australasian Convenience and Petroleum Marketers Associat ion (ACAPMA)

9. Safe Work South Australia

10. Finance Sector Union of Australia

11. Accord

Additional Information received by the Committee

1. Document tabled by the Department of Education, Employment and Workplace Relations on the 10 August 2011.

2. Master Builders Australia response to written questions on notice, received 19 August 2011.

3. Department of Education, Employment and Workplace Relations response to written questions on notice, received 19 August 20 11.

101

102

APPENDIX2

Witnesses who appeared before the Committee

StJames Court Conference Centre, Melbourne, Vic. 10 August 2011

CARAPELLUCCI, Ms Flora, Branch Manager, Occupational Health and Safety Harmonisation Project Branch, Department of Education, Employment and Workplace Relations

FETTER, Mr Joel, Director of Policy and Industrial, Australian Council of Trade Unions

HARNISCH, Mr Wilhelm, Chief Executive Officer, Master Builders Australia

HOYTE, Ms Margot, Health and Safety Officer and Workers Compensation Officer, Australian Council of Trade Unions

LIS, Mr Henry, Branch Manager, Institutions and Workplace Safety Branch, Workplace Relations Legal Group, Department of Education, Employment and Workplace Relations

MORAN, Mr JatTod, Senior Occupational Health and Safety and Workers Compensation Officer, Australian Council of Trade Unions

NICOLAIDES, Mr Mike, National Secretary, Technical, Supervisory and Administrative Division, Australian Manufacturing Workers Union

VALLANCE, Ms Debi, National Occupational Health and Safety Coordinator, Australian Manufacturing Workers Union

WILLIAMS, Ms Suzanne, Workplace Safety Research Officer, Master Builders Australia

103

104

The Senate

Environment and Communications

Legislation Committee

Australian Renewable Energy Agency

Bill 2011 [Provisions]

Australian Renewable Energy Agency (Consequential Amendments and Transitional Provisions) Bill 2011 [Provisions]

Nove1nber 2011

105

© Commonwealth of Australia 2011

ISBN 978-1-74229-545-9

This document was printed by the Senate Printing Unit, Parliament House, Canberra

106

Committee membership

Committee members Senator Doug Cameron (ALP , NSW) (Chair) Senator Mary Jo Fisher (LP, SA) (Deputy Chair) Senator Catryna Bilyk (ALP , TAS) Senator Bridget McKenzie (NATS, VIC) Senator the Hon. Lisa Singh (ALP , T AS) Senator Larissa Waters (AG , QLD)

Substitute members for this inquby Senator Christine Milne (AG, TAS) to replace Senator Larissa W aters (AG, QLD)

Participating members participating in this inquiry Senator Simon Birmingham (LP, SA)

Committee secretariat

Mr Stephen Palethorpe , Secretary Ms Monika Sheppard, Acting Principal Research Officer Ms Aleshia Bailey, Research Officer Mrs Dianne Warhurst, Administrative Officer

Committee address PO Box 6100 Parliament House Canberra ACT 2600

Tel: 02 6277 3526 Fax: 02 6277 5818 Email: ec.sen@aph.gov.au Internet: www.aph.gov.au/senate /committee/ec _ ctte/index.htm

111

107

IV

108

Table of Contents

C . t b h" ... omnnt ee m.em. ers 1p " " " " " " " " " " " " " " " " " " " " " " " " " " " " " " " " " " " " " " " " " " " " " " " " " " " " " " " " " " " " " " " " " " " " " " " " " " " " " " " " " " " III

Chapter 1 -Introduction .................................................................................... !

Conduct of the inquiry ................. .... .... .................................... ............................... 1

Context of the bills ................................................................ ........ ......................... 1

Overview of the bills ...... .......... ....... ........................ ... ... ... ............. .......... ........... ... . 2

Issues regarding the bills ............... .... ................................................. .................. 11

Chapter 2 -Key issues ...................................................................................... 13

Funding arrangements for the Australian Renewable Energy Agency ................ 13

Transferred Commonwealth funding agreements ................................................ 14

Conclusion .... ...... ............... ....... ... ............................................................. ............ 15

Coalition Senators' Additional Comments ..................................................... 17

Appendix 1 -Submissions and answers to questions taken on notice ......... 19

v

109

vi

110

Chapter 1

Introduction

Conduct of the inquiry

1.1 On 13 October 2011, the Senate referred the. provisions of the Australian Renewable Energy Agency Bill 2011 and the Australian Renewable Energy Agency (Consequential Amendments and Transitional Provisions) Bill 2011 (the bills) to the Environment and Communications Legislation Committee (the committee) for inquiry and report by 7 November 20 11. 1

1.2 On 14 October 2011, the committee advertised the inquiry on its website and wrote to relevant organisations inviting submissions. The committee received five submissions (see Appendix 1). One of these submissions, from the Australian Geothermal Energy Association (AGEA), was received after the committee had concluded its deliberations and therefore was not able to be considered in this report. The committee decided to receive and note the AGEA submission which can be found on the committee's website along with other submissions to this inquiry at www.aph.gov.au/senate /committee/ec ctte/arena/submissions.htm. The committee thanks those organisations which contributed to the inquiry at short notice.

1.3 Due to the small number of submissions received, the committee decided not to hold a public hearing for this inquiry. Instead, the committee decided to pose a range of issues raised in submissions to the Department of Resources, Energy and Tourism (the department) in the form of questions on notice.2

Context of the bills

1.4 In September 2010, the Australian Government announced the establishment of a Multi-Party Climate Change Committee (the MPCCC). The MPCCC was tasked with investigating options for the implementation of a carbon price and building consensus on how Australia will tackle climate change. 3

1 Journals of the Senate, No. 59, 13 October 2011, p. 1631.

2 The department's responses to questions on notice are available from the committee's website at: www.aph.gov.au/senate/committee/ec ctte /arena/submissions.htm.

3 www .climatechan ge.gov .au/media /whats-new/ eli mate-change-committee.aspx (accessed 31 October 2011 ).

111

2

1.5 On 10 July 2011, the MPCCC released its Clean Energy Agreement, which outlined a package of key elements designed to reduce Australia's carbon pollution .4 In addition to the introduction of a carbon pricing mechanism, one proposed measure was the consolidation of around $3.2 billion in existing government support for research and development, and demonstration and commercialisation , of renewable

energy technologies into a new Commonwealth authority with an independent board (ARENA). 5

Overview of the bills

Australian Renewable Energy Agency Bill2011

1.6 On 12 October 2011, the Australian Renewable Energy Ag ency Bill2011 (the bill) was introduced into the House of Representati ves. 6

Summar y of the bill

1. 7 The bill forms part of the Australian Government's plan to move to a clean energy future, 7 with the objective of ilnprovin g the competitiveness of renewable energy technologies (as defmed) and increasing the supply of renewable energy in Australia. 8

1. 8 The bill aims to:

" create an independent statutory authority called the Australian Renewable Energy Agency (ARE N A) to administer Australian Government funding to improve the competiti veness of renewable energy and related technologies and to increase the supply of renewable energy;

" create the Board and Chief Executive Officer of ARENA ; and

4 www.c limatechange.gov.au/en/government/initiat ives/m pccc/resources /clean-energy-agreement.aspx (accessed 31 October 2011). M ost of t hese proposals have been adopted by the A ustralian G overnment i n the package of Clean Energy Bills introduced into the H ouse of Representatives on 13 Septemb er 2011.

5 The Clean Energy Agreem ent noted that the existing govemm ent support included more than $1.5 billion in unallocated funding. However, the Au stralian Government estim ates that the figure is closer to $1.7 billion: see www.ret.gov.au/Department/Documents/clean-energv " future/ARENA-FACTSHEET.pdf (accessed 31 O ctober 2011).

6 The Hon. M artin Ferguson MP , M inister for R esomc es and Energy, H ouse of Representative s H ansard, 12 O ctober 2011, p. 13.

7 The Hon. M artin Ferguson MP , Minister for Resomces and Energy, House of Representativ es H ansard, 12 O ctober 2011, p. 13.

8 Clause 3, Au stralian Renewable Energy Agency Bill 2011.

11 2

3

" set out ARENA's governance and funding arrangements. 9

1.9 Some of the key provisions of the bill are described below.

Establishment of the Australian Renewable Energy Agency

1.10 Part 2 of the bill creates ARENA whose primary function is to provide fmancial assistance (as defined) for research into renewable energy technologies, or the development, demonstration, commercialisation or deployment of renewable energy technologies. 10

1.11 A related function, which is specified in the Australian Renewable Energy Agency (Consequential Amendments and Transitional Provisions) Bill 2011 (C & T bill), is to provide fmancial assistance for similar purposes as agreed by the Commonwealth in funding agreements made prior to 1 July 20 12 and as agreed by Australian Solar Institute Limited (ASI) in funding agreements made prior to

1 January 2013.11

1.12 The bill provides general rules concerning how ARENA is to perform its functions. For example, ARENA must ensure that decisions about the provision of fmancial assistance are merit-based. 12 If guidelines are developed for a program, those guidelines must include the merit criteria against which applications are to be assessed. 13

1.13 The bill also sets out various requirements regarding ARENA's operation. For example:

" ARENA can only provide financial assistance in accordance with the general funding strategy in force at the time; 14

" ARENA is required to consider any request from the Minister for Resources and Energy (the minister) to provide fmancial assistance for a particular project; 15 and

9 Australian Renewable Energy Agency Bill 2011, Explanatory Memorandum , p. 1. The bill confers other functions on ARENA and provides for additional functions to be prescribed by regulation: see subclauses 8(b)-(h) of the Australian Renewable Energy Agency Bill2011.

10 Clause 8, Australian Renewable Energy Agency Bill2011; Australian Renewable Energy Agency Bill2011, Explanatory Memorandum, p. 4.

11 Items 4 and 9, Schedule 2, Australian Renewable Energy Agency (Consequential Amendments and Transitional Provisions) Bill 2011. Australian Solar Institute Limited is a solar technologies research and development company established by the Australian Government in 2009.

12 Subclause 9(b ), Australian Renewable Energy Agency Bill 2011.

13 Australian Renewable Energy Agency Bill 2011, Explanatory Memorandum, p. 5.

14 Clause 10, Australian Renewable Energy Agency Bill2011. Proposed provisions regarding the general funding strategy are described below in the section titled 'Governance arrangements'.

15 Clause 11, Australian Renewable Energy Agency Bill 2011.

113

4

" ARENA cannot make grants exceeding $50 million for a particular project without the minister's written approval. 16

1.14 The minister may direct ARENA to provide advice in relation to renewable energy technologies. 17 However, such a direction is not a legislative instrument by virtue of item 5 of the table in section 7 of the Legislative Instruments Act 2003.18

1.15 The bill states that ARENA may perform its functions only within Constitutional limits. 19 For example, for purposes related to external affairs (paragraph 51(xx) of the Constitution) , including giving effect to the 1992 United Nations Framework Convention on Climate Change.20

Governance arrangements

1.16 Part 3 of the bill sets out the proposed governance arrangements for ARENA, commencing with the establislunent of the Board and its three functions:

" the functions relating to the general funding strategy, guidelines and work plans; 21

" deternuning the other strategies, objectives and policies to be followed by ARENA; and

" ensuring ARENA's compliance with the bill. 22

1.17 The Board must develop a general funding strategy (the strategy) for each fmancial year, commencing 1 July 2012. The strategy must relate to the current fmancial year and the next two fmancial years, and it must be approved by the minister (whereupon the strategy becomes a legislative instrument made by the minister). However, the legislative instrument is not disallowable under section 42 of the Legislative Instruments Act 2003.23

16 Clause 12, Australian Renewable Energy Agency Bill2011.

17 Clause 13, Australian Renewable Energy Agency Bill 2011. This is a function cuJTently undertaken by the Australian Centre for Renewable Energy Board.

18 Au stralian R enewable Energy Agency Bill 2011, Explanatory Memorandum , p. 5.

19 Clause 14, Australian Renewable Energy Agency Bill 2011.

20 Australia signed and ratified the Gnited Nations Framework Convention on Climate Change on 4 June 1992 and 30 Decemb er 1992, respectively . It entered into force on 21 March 1994. The Convention is available at: http: //unfccc.int/resou rce/docs/convkp/conveng.pdf (accessed 14 October 2011).

21 Division 2 of Part 3 of the bill sets out the general funding strategy, guidelin es and work plans.

22 Clause 18, Australian Renewable Energy Agency Bill2011.

23 Subclauses 19(1) and (3), and clause 20, Australian Renewable Energy Agency Bill2011. The Board is required to regularly review and m ay vary the general funding strategy throughout the financia l year, subject to ministerial approval: see clause 22, Australian Renewable Energy Agency Bill 2011.

114

5

1.18 The Board may develop written guidelines for the provision of fmancial assistance under the Act (the guidelines) and must do so in the case of a grant program where the total of all grants for a particular project might exceed $15 million. In this situation, the minister must approve the guidelines, including non-minor variations and revocations. 24

1.19 The Board must also develop a work plan for each fmancial year, commencing 1 July 2012. Each work plan must specify how the strategy is proposed to be implemented in that year, and also the main activities proposed to be undertaken by ARENA and the Board for that year, and how they are proposed to be undertaken. The minister's approval is not required for a work plan. 25

1.20 The Board will consist of the secretary of the department, and up to six members appointed by the minister (the appointed members). An appointed member must have experience or knowledge in at least one of four specialised fields: renewable energy technology; commercialisation; business investment; or corporate governance. 26

1.21 The term of appointment for each member is capped at two years, with a maximum continuous period of appointment of six years. The Chair and other board members (other than the secretary) will be appointed by the minister on a part-time basis and have their remuneration determined by the Remuneration Tribunal. The minister also holds the power to terminate an appointment on various grounds (for example, misbehaviour, physical or mental incapacity, bankruptcy, absence from three consecutive meetings, failure to disclose interests). 27

1.22 The bill sets out additional provisions relating to meetings of the Board, including: convening meetings; the secretary's nomination of an alternative to attend meetings; who presides at meetings; quorum requirements; voting at meetings; conduct of meetings; minutes of meetings; and decisions without meetings. 28 The bill also provides for the establishment of committees to advise or assist in the performance of either ARENA or the Board's functions. 29

Establishment of the office of the Chief Executive Officer

1.23 The bill sets out provisions relating to the appointment of a Chief Executive Officer of ARENA (CEO), and ARENA's staff and consultants. 30

24 Subclauses 24(1), (2) and 25(1), Australian Renewable Energy Agency Bill 2011.

25 Subclauses 27(1), (3) & (5), Australian Renewable Energy Agency Bill 2011 .

26 Clauses 29-30, Austra1ian Renewable Energy Agency Bill 2011.

27 Clauses 31-32, 34 and 38, Australian Renewable Energy Agency Bill 2011.

28 Division 4 of Part 3, Australian Renewable Energy Agency Bill 2011.

29 Division 5 of Part 3, Australian Renewable Energy Agency Bill2011.

30 See Part 4, Australian Renewable Energy Agency Bill 2011.

115

6

1.24 The CEO will be responsible for the daily administration of ARENA. The CEO must act in accordance with policies determined by the Board and comply with written directions given by the Board in relation to the performance of the CEO's responsibilities . 31

1.25 The minister will appoint the CEO on the recommendation of the Board , with the term of appointment not to exceed three years. However, the CEO is eligible for re-appointment pursuant to section 3 3AA of the Acts Interpretation Act 1901. Special provision is made for the appointment of the first CEO to enable that officer to take up office on the day when ARENA is first established (1 July 2012).32

1.26 The minister may terminate the appointment of the CEO for misbehaviour, or physical or mental incapacity, subject to consultation with the Board, and for various other reasons set out in the bill (for example, bankruptcy, absence for 14 consecutive days, failure to disclose material personal interests, engagement in external

employment). 33

1.2 7 The bill also sets out prov1s10ns relating to the employment of a chief fmancial officer, operational and administrative support from the department, and the engagement of technical and specialist advisory services. 34

Financial arrangements

1.28 The bill proposes payments to ARENA of up to specified amounts for the financial years 2012-13 to 2019-20.35 The yearly maximum payments are shown below in Table 1.1.

1.29 If an amount is not paid to ARENA in a particular fmancial year, it is to be rolled over to become available to ARENA in the following fmancial year. 36

1.30 In addition, it is proposed that an amount of money may be determined by the Finance Minister after 1 July 2012, to be debited from the Clean Energy Initiative Special Account and to be made available to ARENA in the 2012-13 financial year. 37

31 Subclauses 51(1), (3) and (5), Australian Renewable Energy Agency Bill 2011.

32 Subclauses 52(1) and (3), Australian Renewable Energy Agency Bill2011; and item 29; Schedule 2, Australian Renewable Energy Agency Consequential Amendments and Transitional Provisions) Bill 2011.

33 C lause 59, Australian Renewable Energy Agency Bill2011.

34 Clauses 61-63, Australian Renewable Energy Agency Bill 2011.

35 Subclause 64(1), Australian Renewable Energy Agency Bill 2011.

36 Subclause 64(2), Australian Renewable Energy Agency Bill 2011.

37 Subclauses 64(3) and (4), Australian Renewable Energy Agency Bi112011.

116

7

According to the Explanatory Memorandum, the determination of the Finance Minister would be a legislative instrument. 38

1.31 Similarly, the bill provides for an amount of money currently held by ASI, which will become Commonwealth money as a result of the C & T bill, to be made available to ARENA in the 2012-13 financial year.39

Table 1.1-Amounts available for payment to ARENA

Yearly maximum payments to ARENA

Item Financial year Amo unt for

financial year

1 2012-13 $292,565,000.00

2 2013-14 $344,904,000.00

3 2014-15 $436,640,000.00

4 2015-16 $321,810,000.00

5 2016-17 $299,550,000.00

6 2017-18 $221,000,000.00

7 2018-19 $23 7,000,000.00

8 2019-20 $368,340,000.00

Source: Subclause 64(1) of the Australian Renewable Energy Agency Bill 2011

1.32 During a fmancial year, ARENA may request payments from the Commonwealth to meet liabilities which are either due for payment or will, or are expected to, become due for payment during that fmancial year. Each request must specify the amount required from the available funds, with the requested amounts not to exceed the total amount available in the relevant fmancial year. 40

1.33 Amounts paid to ARENA are to be paid out of the Consolidated Revenue Fund, 41 and the bill strictly curtails how ARENA is to spend those monies, for example, for the purpose of providing fmancial assistance in accordance with the bill. 42

1.34 The bill sets out miscellaneous provisions , including : extra matters to be included in the annual report; delegation of a power or function by ARENA or the

38 Australian Renewable Energy Agency Bill2011, Explanatory Memorandum , p. 16.

3 9 Subclause 64( 5), Australian Renew able Energy Agency Bill 2011.

40 Subclauses 65(1 ), (2) and ( 4), Australian Renewable Energy Agency Bill 2011.

41 Clause 66, Australian Renew able Energy Agency Bill 2011.

42 Clause 67, Australian Renewable Energy Agency Bill2011.

11 7

8

Board; sub-delegation of a power or function by the CEO; and the making of regulations by the Governor-General. 43

Australian Renewable Energy Agency (Consequential Amendments and Transitional Provisions) Bill2011

1.35 On 12 October 2011, the Australian Renewable Energy Agency (Consequential Amendments and Transitional Provisions) Bill 2011 (the C & T bill) was also introduced into the House of Representatives. 44

Summmy of the C & T bill

1.36 The stated purpose of the C & T bill is to deal with the transitional and consequential matters arising from the bill. At present, the funding and administration of renewable energy and related technology innovation projects is undertaken by the department and ASI.

1.37 Accordingly, the C & T bill sets out provisions relating to:

" the transfer of responsibilities from the department to ARENA, including projects oversighted by the Australian Centre for Renewable Energy (ACRE) Board; and

" the transfer of projects, assets, liabilities and staff from ASI to ARENA or the Commonwealth on or before 1 January 2013.45

1.3 8 The C & T bill also prepares for ASI to be deregistered and for its functions to be assumed by ARENA. 46

1.39 In addition to these transitional arrangements, the C & T bill makes two consequential amendments: first, the repeal of the Australian Centre for Renewable Energy Act 2010 (thereby abolishing the ACRE Board); and second, by amending the

43 See Part 6, Australian Renewable Energy Agency Bill 2011.

44 The Hon. Martin Ferguson MP, Minister for Resources and Energy, House of Representatives Hansard, 12 October 2011, p. 13.

45 Australian Renewable Energy Agency (Consequential Amendments and Transitional Provisions) Bill 2011, Explanatory Memorandum , p. 1. The transition date (being 6 months after the establishment of the Australian Renewable Energy Agency) is intended to allow Australian Solar Institute Limited sufficient time to complete its work in selecting and funding projects from a recent call for funding applications : see the Hon . Martin Ferguson MP , Minister

for Resources and Energy, House of Representatives Hansard, 12 October 2011, p. 15.

46 Australian Renewable Energy Agency (Consequential Amendments and Transitional Provisions) Bill2011, Explanatory Memorandum, p. 1.

118

9

Clean Energy Regulator Act 2011 to allow protected information to be disclosed by the clean energy regulator to ARENA .47 .

1.40 The proposed key transitional provisions are briefly described below.

Transfer of assets and liabilities (Commonwealth to ARENA; AS! to Commonwealth or ARENA)

1.41 The C & T bill identifies the Commonwealth funding agreements which will, in future, be administered by ARENA (transferred Commonwealth funding agreements). These agreements are identified by reference to the relevant Commonwealth funding program, including :

" the Solar Flagships Program;

" the Renewable Energy Demonstration Program;

" the Renewable Energy Venture Capital Fund;

" the Emerging Renew ables Program;

" the Geothermal Drilling Program;

" the Second Generation Biofuels Research and Development Program; and

" solar energy projects known as 'ACRE solar projects' or funded from the Low Emissions Technology Demonstration Fund.48

1.42 From 1 July 2012, the assets and liabilities of the Commonwealth under the transferred Commonwealth funding agreements will become assets and liabilities of ARENA . Accordingly, ARENA will be responsible for providing the contracted financial assistance using funding provided to it by the Commonwealth under Part 5 of the bill. 49

1.43 The C & T bill makes similar provision for the transfer of assets and liabilities under funding agreements administered by ASI prior to 1 January 20 13 (the transferred ASI funding agreements). In addition, any remaining assets and liabilities

47 Parts1 and 2, Schedule 1, Australian Renewable Energy Agency (Consequential Amendments and Transitional Provisions) Bill2011. At the date of writing, the Clean Energy Regulator Bill 2011 has not been enacted.

48 Item 2, Schedule 2, Australian Renewable Energy Agency (Consequential Amendments and Transitional Provisions) Bill 2011.

49 Item 3 of Schedule 2 ofthe Australian Renewable Energy Agency (Consequential Amendments and Transitional Provisions) Bill 2011.

119

10

of ASI will be concurrently transferred to the Commonwealth , a prerequisite to deregistration of the company. 50

1.44 The C & T bill enables the minister to specify , by legislative instrument, additional transferred Commonwealth funding agreements. According to the Explanatory Memorandum, this would enable agreements entered into between 12 October 2011 (when the C & T bill was introduced into the House of Representatives) and 1 July 2012 (when ARENA is formally established) to be transferred to ARENA (for example, the Australian Biofuels Research Institute initiative). 51

1.45 Special prov1s10n is made in respect of an extstmg funding agreement between the department and Geoscience Australia. This agreement relates to a project involving the establishment of solar resource monitoring ground stations and the collation of solar mapping and site selection data (the Provision of Spatial Inform ation for Solar Resource }vfapping Relating to the High Solar Prospectiv ity Regions and

Expansion of the Solar Observation Network). At present , the agreement is in the form of a Memorandum of Understanding (the MOU), which is not legally binding. The bill deems the MOU a transferred Commonwealth funding agreement as from 1 July 2012.52

Office holders and staff of the Australian Centre for Renewable Energy and AS!

1.46 The C & T bill addresses the treatment of existing ACRE and ASI office holders and staff upon enactment of the bills. For example, there is no transfer of appointment of a member of the ACRE Board to the ARENA Board, or ASI directors and employees to either ARENA or the Commonwealth; and the minister may tem1inate the appointment of any director of ASI prior to 1 January 2013.53

1.4 7 Section 72 of the Public Service Act 1999 enables the Public Service Commissioner, if satisfied that it is necessary or desirable in order to give effect to an administrative re-arrangement, on behalf of the Commonwealth, to engage any person

50 Items 7, 8 and 10, Australian Renew able Energy Agency (Consequenti al A mendment s and Transitional Provisions) Bill2011; Australian Renewable Energy Agency (Consequential Amendments and Transitional Provisions) Bill2011, Explanatory Memo randum , p. 7. The Explanatory Memorandum notes that the effect of the Australian Renewable Energy A gency (Consequential Amendments and Transitional Provisions) Bill 2011 is to terminate any rights Australian Solar Institute Limited has under its head funding agreement w ith the

Commonwealth.

51 Australian Renewable Energy Agency (Consequential Amendments and Transitional Provisions) Bill2011, Explanatory Memorandum, p. 5.

52 Item 6 of Schedule 2, Australian Renewable Energy Agency (Consequentia l Amendments and Transitional Provisions) Bill 2011.

53 Items 16, 17 and 18, Schedule 2, Australian Renewable Energy Agency (Consequential Amendments and Transitional Provisions) Bill 2011.

120

11

as an APS employee in a specified agency. 54 According to the Explanatory Memorandum:

It is intended that ASI Limited employees who are engaged in RET in these circumstances would be among the staff made available to ARENA under [item 62 of the bill]. 55

Miscellaneous

1.48 Part 4 of the C & T bill sets out various miscellaneous provisions relating to references in certain instruments, legal proceedings and records; Part 5 of the C & T bill sets out accountability provisions relating to the ACRE Board's final annual report, and various ASI reports and returns; and Part 7 of the C & T bill deals with various transitional matters, for example, delegation by the minister and regulations. 56

Issues regarding the bills

1.49 The committee received broad support for the establishment of ARENA and in particular, from two of the entities which it is replacing- ASI and ACRE. 57

1.50 Submissions identified concerns with the provisions regarding ARENA's fmancial arrangements; and transferred Commonwealth funding agreements. 58 Chapter 2 of this report discusses the concerns raised in submissions, as well as providing the committee's conclusions and recommendation.

54 Paragraph 72(1 )(d), Public Service Act 1999.

55 Australian Renewable Energy Agency (Consequential Amendments and Transitional Provisions) Bill 2011, Explanatory Memorandum, p. 9. Australian Solar Institute Limited employees who become Australian Public Service employees will be taken to have an accrued entitlement to benefits, continuity of service , long service and maternity leave: see item 19, Schedule 2, Australian Renewable Energy Agency (Consequential Amendments and Transitional Provisions) Bill 2011.

56 Items 20-25, 26-28 and 30-34, Schedule 2, Australian Renewable Energy Agency (Consequential Amendments and Transitional Provisions) Bill 2011, respectively. Part 6 of the Australian Renewable Energy Agency (Consequential Amendments and Transitional Provisions) Bill2011 is discussed under the heading 'Establishment of the office of the Chief Executive Officer'.

57 Submission 1, p. 1 and Submission 3, respectively. Also see the Clean Energy Council, Submission 4, p. 1.

58 See, for example, GE Energy, Submission 2; and Australian Centre for Renewable Energy, Submission 3.

121

12

122

Chapter 2

Key issues

2.1 This chapter discusses the key issues raised in submissions, including:

" funding arrangements for the Australian Renewable Energy Agency (ARENA); and

" transferred Commonwealth funding agreements.

Funding arrangements for the Australian Renewable Energy Agency

2.2 The Multi-Party Climate Change Committee's Clean Energy Agreement noted that, in addition to the $3.2 billion in existing government support for renewable energy technologies, ARENA would receive funding from:

" the dividends from investments made by the Clean Energy Finance Corporation (CEFC) (another measure proposed in the Clean Energy Agreement); 1 and

" a share of the future carbon price revenue notionally allocated to the Jobs and Competitiveness Program, should that revenue be made available following reviews by the Productivity Commission. 2

2.3 GE Energy noted that the bills do not refer to the two additional funding sources identified in the Clean Energy Agreement. 3 In answer to a question on notice, the Department of Resources, Energy and Tourism (the department) responded that it would be appropriate for the future legislation establishing the CEFC to give effect to the commitment for dividends from its investments to be paid to ARENA. 4

2.4 Further, the department noted that amounts potentially payable to ARENA from the two additional funding sources are not currently quantifiable. Therefore, the bill does not include any such amounts in subclause 64(1) (which is reproduced at

1 The Clean Energy Finance Corporation is not one of the measures addressed in the package of 'Clean Energy Bills'. Instead, an independent panel of experts has been appointed to advise on the design of the $10 billion Clean Energy Finance Corporation. The panel is due to report by mid-March 2012, with the Corporation expected to commence operations in 2013-14:

www.cleanenergvfuture.gov.au/clean-energy-finance-corporation-expeiis-appointed/ (accessed 31 October 2011).

2 Division 5 of Part 7 of the Clean Energy Bill2011 provides for the periodic review of certain matters under the Jobs and Competitiveness Program, including the operation of assistance arrangements.

3 Submission 2, p. 3.

4 Answer to question on notice, received 28 October 2011, p. 2.

123

14

paragraph 1.28) and provides a means of including such amounts as 'ARENA's money' in subclause 67(1). The department informed the committee:

It is intended that any money received as dividends from the CEFC or from a share of the future carbon price revenue notionally allocated to the Jobs and Competitiveness Program would be paid to ARENA under subclause 67(1)(b). 5

Transferred Commonwealth funding agreements

2.5 Some submissions referred to programs and initiatives under which existing Commonwealth funding agreements will not be transferred to ARENA.

Renewable Energy Equity Fund

2.6 The Australian Centre for Renewable Energy (ACRE) identified six existing programs and measures whose funding agreements will be transferred to ARENA on 1 July 2012.6 Its submission also identified the Renewable Energy Equity Fund (REEF) as a transferred Commonwealth funding agreement however REEF is not described as such in the C & T bill.

2.7 The department advised that REEF (which is closed for new applicat ions, the fund being fully invested) 7 will not be transferred to ARENA, with the department to maintain responsibility for this concluding program. 8

Connecting Renewables initiative

2.8 During the 2010 election campaign, the Labor Party announced a $1 billion, 10-year Connecting Renewables initiative (the initiative), with the ain1 of bringing more renewable energy onto the Australian electrical grid. 9 Funding for the initiative

5 Answer to question on notice, received 28 October 2011, p. 2.

6 Submission 3, p. 1. The Depmtment of Resources, Energy and Tourism advised that the reference to the Renewable Energy Equity Fund was in error, with the department to maintain responsibility for the program: see Answer to question on notice, received 28 October 2011, p.l.

7 www.ausindustry.gov.au /VentureCapital /Renewab leEnergyEquitvFundREEF/Pages/home.aspx (accessed 31 October 2011).

8 Answer to question on notice, received 28 October 2011, p. 1. The Department of Resources, Energy and Tourism noted that it will also retain responsibility for the Advanced Electricity Storage Technologies Program.

9 The Hon. Martin Ferguson AM MP , Minister for Resources and Energy and Minister for Tourism, 'Connecting Renewable Energy to Australian Homes', Media Release, 23 July 2010, www .martinf erguson.com.au/page 15090/Connecting-renewables.aspx (accessed 31 October 2011 ).

124

15

was provided for in the 201 0-11 Mid-year Economic and Fiscal Outlook, through monies originally set aside for the Renewable Energy Future Fund. 10

2.9 However, while the Australian Government has indicated that ARENA will have responsibility for managing the unallocated funds from the Connecting Renewables initiative, 11 GE Energy noted that the C & T bill makes no mention of the initiative . 12 The Clean Energy Council similarly called for clarification on this issue. 13

2.10 By way of response, the department observed that the C & T bill transfers agreements to which the Commonwealth was a party before 1 July 2012. However, at present:

There are no funding agreements to transfer under the Connecting Renewables Initiative. Should a funding agreement be entered into before 1 July 2012 it would transfer pursuant to subclause 2(1)(a)(vii) as a funding agreement under a program or initiative specified by the Minister, or pursuant to subclause 2(b) as an agreement specified by the Minister. 14

2.11 In contrast to unquantifiable funding sources, the department added that the unallocated funds from the initiative are included in subclause 64(1) of the bill. 15

Conclusion

2.12 The committee supports promoting the competitiveness of renewable energy technologies and increasing the supply of renewable energy throughout Australia. In the committee's view, central to these objectives is the establishment of an independent authority to administer the Australian Government's existing renewables funding, such as is proposed in the bills.

2.13 While only a short time frame was allowed for this inquiry, the committee considers contributors' responses indicative of the broad level of support for the various proposals contained in the bills.

10 Mid-year Economic and Fiscal Outlook 2010-11, November 2010, p. 202, www.budget.gov.au/2010-11 /content /myefo/htmllindex .htm (accessed 1 November 2011).

11 Department of Resources, Energy and Tourism, 'Clean Energy Package-Australian Renewable Energy Agency' factsheet, available at: www .ret.gov.au/Department /Documents/clean-energv- future / ARENA- F ACTSHE ET.pdf (accessed 31 October 2011); and the Hon . Martin Ferguson AM MP , Minister for Resources and Energy and Minister for Tourism, Hou se of Representativ es Hansard, 12 October 2011, p. 15.

12 Submission 2, pp 2-3.

13 Submission 4, p. 2.

14 Answer to question on notice , received 28 October 2011, p. 1.

15 Answer to question on notice , received 28 October 2011, p. 1.

125

16

2.14 The committee notes that, due to the unquantifiable nature of additional funding, for example, the dividends from the yet to be established CEFC, there is necessarily an element of uncertainty regarding ARENA's future funding allocation above the $2.5 billion specified in clause 64. However, the committee is satisfied with the department's responses on these and other issues, which the committee found to be logical.

Recommendation 1

2.15 The committee recommends that the bills be passed.

Senator Doug Cameron Chair

126

Coalition Senators' Additional Comments

Coalition Senators do not oppose the establishment of the Australian Renewable Energy Agency (ARENA).

We accept that ARENA's establishment provides an opportunity for administrative and other efficiencies in the provision of government support to the renewable energy sector as well as for better, appropriate corporate governance of this support.

Given the Government's abominable track record in this and other policy areas the Government has. sought to influence, Coalition Senators hold serious reservations about the capacity of this Government to capitalise on such opportunities. Nevertheless, Coalition Senators are not opposed to the establishment of this agency with the regulatory functions proposed.

Coalition Senators are, however, concerned at some of the proposed investments and spending of taxpayers' money that are planned to be given oversight by ARENA, which includes $3.2 billion in existing government support for renewable energy technologies. It should certainly not be concluded that in not opposing ARENA's establishment we will not be opposed to certain programs and/or funding overseen by ARENA- in fact, the opposite will almost certainly be the case.

Coalition Senators note, by way of example, the collapse of the ZeroGen project near Rockhampton towards which this Government provided $40 million of taxpayers' money ultimately for no return. This is but one example of many we could cite to highlight Labor's wasteful spending of taxpayer dollars.

Also, Coalition Senators are strongly opposed to the proposed establishment of a Clean Energy Finance Corporation (CEFC) . We take this opportunity to again state our opposition given that, while the bills make no mention of CEFC dividends being a source of ARENA funding, such a measure has been proposed in the Multi-Party Climate Change Committee's Clean Energy Agreement. We note that the Department of Resources, Energy and Tourism has suggested this funding be given effect by legislation establishing the CEFC, so Coalition Senators will revisit the matter at such time as this legislation is brought forward for consideration.

127

18

Notwithstanding the serious reservations and concerns outlined above in relation to specific aspects of its proposed functions, Coalition Senators do not oppose the . establishment of ARENA as a better vehicle for the delivery of renewable energy technology project funding and support and do not oppose these bills .

Senator Simon Birmingham Senator Mary Jo Fisher

Senator Bridget McKenzie

128

Appendix 1

Submissions and answers to questions taken on notice

Submissions

1 Australian Solar Institute

2 GEEnergy

3 Australian Centre for Renewable Energy (ACRE)

4 Clean Energy Council

5 Australian Geothem1al Energy Association

Answers to questions taken on notice

Department of Resources, Energy and Tourism-answers to written questions taken on notice (received 28 October 2011)

129

20

130

The Senate

Finance and Public Administration

Legislation Committee

Government Advertising (Accountability)

Bill2011

Septe1nber 2011

131

© Commonwealth of Australia 201 1

ISBN 978-1-74229-517-6

Senate Finance and Public Administration Committee Secretariat:

Ms Christine McDonald (Secretary)

Dr Bu Wilson (Principal Research Officer)

Ms Kyriaki Mechanicos (Senior Research Officer)

Ms Victoria Robinson-Conlon (Research Officer)

Mr Hugh Griffm (Administrative Officer)

Ms Penny Bear (Administrative Officer)

The Senate Parliament House Canberra ACT 2600

Phone: 02 6277 3439

Fax: 02 6277 5809

E-mail: Internet: fpa.sen@aph.gov .au http://www.aph.gov.au/senate /committee/fapa ctte/index.htm

This document was produced by the Senate Finance and Public Administration Committee Secretariat and printed by the Senate Printing Unit, Parliament House, Canbena.

11

132

MEMBERSHIP OF THE COMMITTEE

43rd Parliament

Members

Senator Helen Polley, Chair

Senator Scott Ryan, Deputy Chair

Senator Richard DiNatale

Senator Sean Edwards

Senator the Hon John Faulkner Senator the Hon Ursula Stephens

Participating Members for this inquiry

Senator Nick Xenophon

111

133

ALP, Tasmania

LP, Victoria

AG, Victoria

LP, South Australia

ALP, New South Wales ALP, New South Wales

IND, South Australia

134

TABLE OF CONTENTS

MEMBERSHIP OF THE COMMITTEE ...................................................... iii

Cll~)lt~.- 1 .............................................................................................................. 1

Government Advertising (Accountability) Bill 2011 ....................................... !

Introduction ..... .............................. ....... .... .... ... ....... .............. ..................... ........ .... . 1

Conduct of the inquiry ................... ..... ........ .......... ........ .................................. ........ 1

The bill. ..... ....... ... .... .............. ........ ............. ............... ...... ........... .......................... ... 1

Background ................... ...................... .................. ....... .................. ........ ......... ........ 2

Previous committee inquiries into government advertising .................. ................ .4

Issues .......... ............. ..... ... .... ............. .... ... ........ ..... ........... ............. .... .................. .... 8

Coalition Senators' Report ............................................................................... IS

Dissenting Report by Senator Xenophon ........................................................ 19

APPENDIX 1 ..................................................................................................... 21

Submissions and Additional Information received by the Committee .............. 21

v

135

136

Chapter 1

Government Advertising (Accountability) Bill 2011

Introduction

1.1 The Government Advertising (Accountability) Bill 2011 (the bill) was introduced into the Senate by Senator Xenophon on 21 June 2011. On 7 July 2011, the Senate, on the recommendation of the Selection of Bills Committee, referred the bill to the Finance and Public Administration Legislation Committee for inquiry and report by 21 September 2011.

Conduct of the inquiry

1.2 The committee advertised the inquiry on the Internet and in The Australian and invited submissions from interested organisations and individuals . The committee received four public submissions. The list of public submissions received is at Appendix 1. Submissions can be accessed through the committee's website at: http:// www .aph.gov.au/senate /committee/fapa ctte/index.htm.

1.3 The committee agreed not to hold a public hearing for this inquiry.

The bill

1.4 The bill seeks to amend the Financial Management and Accountability Act 1997 (FMA Act) by repealing the existing section 14, and inserting a new section 14, so that the use of taxpayers' money by the government to fund advertising of a policy not yet enacted in legislation, would be in breach of the FMA Act. This would ensure that public funds are not spent on advertising government policies that are not approved by the Parliament.

1.5 Proposed section 14 reintroduces the provision relating to the misapplication or improper use of money by an official or Minister and provides for a further improper use in relation to government advertising. Pursuant to proposed section 14, it is an improper use of public money if it is used for advertising for a government policy, unless:

" the policy has been enacted in legislation; or

" a resolution has been passed by both Houses of Parliament , agreeing to the expenditure of the money for the purpose of advertising a particular policy; or

137

2

" in the event of a national emergency, the Minister has obtained consent from the Leader of the Opposition to spend public money for the purpose of advertising a particular policy. 1

1.6 In relation to the definition of a national emergency, the bill's Explanatory Memorandum states:

A 'national emergency' is considered to be events such as urgent health issues, natural disasters, defence issues, critical issues of public safety and importance and the like. Under this subsection, it would be up to the discretion of the Leader of Opposition to provide consent, and in doing so, decide whether he or she considers the event to be an emergency. 2

1. 7 Proposed section 14 reapplies the penalty for a breach of the section as imprisonment for 7 years.

1.8 In the second reading speech, Senator Xenophon outlined the objective of the bill :

There is an impmiant principle of accountability here-taxpayer funds should not be spent promoting a policy that has not been authorised by the Parliament.. .If passed ... you can only use taxpayer dollars to explain how a policy which has become law will affect people.

But you can't use tax-payer dollars to tty and build support for an idea that the Government wants to become law.3

1.9 Further, Senator Xenophon stated that the Prime Minister's profile generated enough exposure to be able to inform the Australian population of new government policies without spending taxpayers' money on advertising. 4

Background

Current guidelines on government advertising

1.10 Government advertising is currently subject to the Guidelines on Information and Advertising Campaigns by Australian Government Departments and Agencies (the guidelines) which were introduced in 2008 and updated in March 2010. These guidelines set out the principles for information and advertising campaigns undertaken by FMA Act bodies. The guidelines were introduced to promote transparency and accountability and ensure that:

1 Government Advertising (Accountability) Bill 2011, Explanatory Memorandum, p. 1.

2 Government Advertising (Accountability) Bill2011, Explanatory Memorandum, p. 1.

3 Senator Nick Xenophon, Senate Hansard, 21 June 2011, p. 3418.

4 Senator Nick Xenophon, Senate Hansard, 21 June 2011, p. 3418.

138

3

" members of the public have equal rights to access comprehensive information about government policies, programs and services which affect their entitlements, rights and obligations;

" governments may legitimately use public funds to explain government policies , programs or services , to inform members of the public of their obligations , rights and entitlements, to encourage informed consideration of issues or to change behaviour; and

" government campaigns must not be conducted for party political purposes. 5

1.11 The guidelines distinguish between advertising campaigns and information campaigns. An advertising campaign generally involves 'paid media placement and is designed to inform, educate, motivate or change behaviour'. Whereas an information campaign usually 'appears only once or twice, contains factual statements and typically has a low creative content'. 6

1.12 The guidelines provide for five principles that set out the context in which government advertisements should be conducted, they are:

" Principle 1: Campaigns should be relevant to government responsibilities ;

" Principle 2: Campaign materials should be presented in an objective, fair and accessible manner and be designed to meet the objectives of the campaign;

" Principle 3: Campaign materials should be objective and not directed at promoting party political interests;

" Principle 4: Campaigns should be justified and undertaken in an efficient, effective and relevant manner; and

" Principle 5: Campaigns must comply w ith legal requirements and procurement policies and procedures.

1.13 Principle 1 of the guidelines ensures advertising campaigns are within the scope of the government's responsibilities . This principle states that government advertisin g campaigns must be relevant to government responsibiliti es and that 'only policies or programs underpinned by:

" legislativ e authority; or

" appropri ation of the Parliament ; or

" a Cabinet Decision which is intended to be implem ented during the current Parliament should be the subject of a campaign'.7

5 Guidelines on Information and Advertising Campa igns by Australian Government D epartments and Agencies, M arch 2010, p. 1.

6 Guidelines on Information and Advertising Campaigns by A ustralian Government D epartments and Agencies, M arch 2010, p. 2.

7 Guidelines on Information and Advertisin g Campaigns by Australian Government D epartm ents and Agencies, M arch 2010, p. 3.

139

4

1.14 The guidelines state, therefore, that the government must have legislative authority to carry out an advertising campaign. However, the fmal requirement provides the government with the flexibility to advertise a policy which it intends to . introduce during the current Parliament.

1.15 The guidelines were updated m 2010, following the release of the Government commissioned Independent Review of Government Advertising Arrangements (the Hawke review). This review provided eight recommendations to the government, including the abolition of the Auditor-General's role in reviewing

proposed advertising campaigns.

1.16 The Government accepted six of the recommendations outright and accepted another two in part. As a result, the Independent Communications Committee (ICC) was established as an independent review panel to take over the Auditor-General's role to ensure government advertising campaigns comply with the guidelines.

1.17 The Independent Communications Committee plays a key role in the accountability regime of government advertising in reviewing compliance with the guidelines. The ICC is independent of government and the membership is made up of three former public servants.

1.18 Where advertising campaigns (not information campaigns) are valued at more than $250 000, the ICC considers the campaign and provides advice to the agency's Chief Executive on compliance with Principles 1 - 4 of the guidelines. The agency is then responsible for providing a report to the Chief Executive on compliance with Principle 5.

1.19 The Chief Executive must receive and consider the report on campaign compliance from the ICC before it is able to certify that the campaign complies with the principles as set out in the guidelines. The certification is then provided to the relevant Minister to launch or approve the launch of the advertising campaign.

1.20 After the campaign has been launched, the ICC's conclusions relating to the campaign are published on the website of the Department of Finance and Deregulation and the Chief Executive's certification of the campaign is published on the relevant agency or department's website.

1.21 As part of this process, the Government is also required to provide reports to the Parliament (currently biannually) that detail expenditure on all campaigns (advertising and information) of FMA Act agencies with expenditure in excess of $250 000.

Previous committee inquiries into government advertising

1.22 In recent years, the committee has carried out several inquiries relating to public spending on government advertising and the administration of the campaign advertising guidelines . In addition, the committee has questioned extensively the portfolios of the Prime Minister and Cabinet and Finance and Deregulation during the

140

5

estimates process in relation to public spending on government advertising. The committee's inquiries that are most pertinent to the bill are discussed below.

Inquby into Preventing the Misuse of Government Advertising Bil/2010

1.23 One of the committee's most recent reports on government advertising examined the Preventing the Misuse of Government Advertising Bill 2010. This bill was introduced 'to establish a legislative framework for accountability of expenditure on information and advertising campaigns undertaken by Australian government departments and agencies' .8 The bill provided, along with other reforms, that the Auditor-General be reinstated with the powers and functions to review and report on government information and advertising campaigns.

1.24 The committee recommended that the bill not be passed as 'the 2010 guidelines meet the requirements of transparency and rigour with regard to the oversight of proposed government advertising'. 9 This bill lapsed at the end of the previous Parliament and was reintroduced into the Senate following the 2010 federal election. It is currently before the Senate.

Inquby into Government advertising and accountability

1.25 In 2005, the Finance and Public Administration References Committee tabled its report Government advertising and accountability. The report also addressed the issue of the Government advertising policies before being passed by the Parliament. The report stated:

... no expenditure of public money for mass media advetiising should be undertaken until the govemment has obtained passage of the legislation giving it authority to implement the relevant policy, program or service. Where a proposed public information or education campaign covers a matter which does not require legislation, an appropriation for the specific purpose of the campaign mu st be obtained. The requirement should not be enforced in situations where major issues of public health, safety or public order have arisen at short notice. 10

1.26 The report recommended these requirements be included in the Joint Committee of Public Accounts and Audit (JCP AA) draft guidelines and the Government adopt the amended guidelines.

1.27 A matter discussed in the report was the High Court judgement in Combet v C01nmonwealth, which dealt with the constitutionality of government spending on

8 Senate Finance and Public Administration Legislation Committee, Preventing the Misuse of Government Advertising Bill2010 , June 2010, p. 1.

9 Senate Finance and Public Administration Legislation Committee, Preventing the Misuse of Government Advertising Bill2010 , June 2010, p. 20.

10 Senate Finance and Public Administration References Committee, Government advertising and accountability , December 2005, p. 84.

141

6

advertising of a particular policy not specifically authorised by the Parliament. The case related to the W orkChoices advertising campaign conducted by the Department of Employment and Workplace Relations. The report noted that: In the action they brought against the Commonwealth government in the

High Court, the ACTU and the ALP (the plaintiffs) assert that the withdrawal of money from the Treasury of the Commonwealth to pay for advertisements promoting proposed future changes to federal industrial relations laws was unlawful, because it was not specifically authorised by the Appropriation Act (No. 1) 2005-06.11

The High Court ruled that the campaign was lawful, and that the money appropriated for the department could be used for such campaigns.

1.28 In a paper by former Clerk of the Senate, Mr Harry Evans, the following comments relating to the case were made:

The judgment reinforced the point that annual appropriations are now in such a form that there is very little limitation on the purposes for which the money may be spent. The effect of the judgment is that the court will not correct this situation . It is Parliament's responsibility to ensure that expenditure is appropriate . 12

1.29 The bill has a similar intention to Mr Evans' comments, requiring that the Parliament has a greater role in approving public expenditure. Mr Evans went on to state 'It is now clear that control of expenditure must be undertaken by Parliament or it will not be undertaken at all' . 13

1.30 In addition, the report recommended that the Government adhere to the Senate order of continuing effect of 29 October 2003 14 which relates to agency advertising and public information projects . It requires that the Minster of the agency undertaking advertising or public information projects, table in the Senate a statement indicating, among other requirements, the purpose and nature of the project and its compliance with the Auditor-General's and the JCP AA's guidelines. 15

11 Senate Finance and Public Administration References Committee, Government advertising and accountability, December 2005, p. 39.

12 Harry Evans, 'Parliamentary Control of Finance: Bringing back the Revolution', The Table, vol. 75, 2007, p. 13.

13 Harry Evans, 'Parliamentary Control of Finance: Bringing back the Revolution' , T7te Table, vol. 75, 2007, p. 15.

14 The Senate, Procedural orders and resolutions of the Senate of continuing effect, June 2009, so 12. 15 These guidelines are set-out in Australian National Audit Office, Taxation Refonn: community education and information programme, Audit Rep01t no. 12, 1998-99 and Joint Committee of

Public Accounts and Audit, Guidelines for govermnent advertising, report no. 3 77, October 2000. The guidelines set out in these reports were used to form the basis of the Government's cmTent guidelines on advertising campaigns.

142

7

1.31 The Government Response to this report was provided on 8 September 2011. The response accepted in principle the majority of the 13 recommendations contained in the report and noted that 'all of the substantive issues raised by the Committee have been overtaken by considerable reforms aimed at improving the governance, transparency and accountability processes for campaign advertising'. 16

1.32 In relation to the specific recommendations outlined above, the response accepted both in principle, stating that the 'current Guidelines on Information and Advertising Campaigns retain the key features of the draft guidelines as proposed by the JCP AA in 2000' and in relation to the Senate order of continuing effect 'the

Government is satisfied that its framework of biannual reporting provides timely disclosure, transparency and accountability in relation to campaign advertising'. 17

Report by the Joint Committee of Public Accounts and Audit

1.33 In March this year, the Joint Committee of Public Accounts and Audit tabled its report entitled The role of the Auditor-General in scrutinising government advertising. While the report focussed on the role of the Auditor-General in scrutinising government advertising, it also reported on the processes involved in agencies' compliance with the Guidelines on Iriformation and Advertising Campaigns by Australian Government Departments and Agencies.

1.34 In relation to the role of the Auditor-General, the committee stated:

.. .it is important to note that by the end of this inquiry process, all Committee members agreed that being involved in the scrutiny of proposed advertising campaigns was not an appropriate role for the Auditor-General. They considered that it bluiTed the boundary between executive decision " making and audit review.

As mentioned previously, some Committee members had concerns that a positive review report by the Auditor-General could be seen to be publically endorsing government policy. 18

1.35 Further, the JCP AA stated that it:

.. .is pleased that the ANAO has agreed to undertake a conventional performance audit on at least one campaign per year or the administration of the campaign advertising framework. The Committee has a stat utory

16 Australian Government, Final Government response to the Senate Finance and Public Admirtistration References Committee R eport-Government Advertising and Accountability, December 2005, September 2011, p. 1.

17 Australian Government, Final Government response to the Senate Finance and Public Administration References Committee Report- Government Advertising and Accountability, December 2005, September 2011, pp 3-4.

18 Joint Committee on Public Accounts and Audit, The role of the Auditor-General in scrutinising government advertising, March 2011, p. 49.

143

8

duty to examine all Auditor-General's reports on behalf of the Parliament and will do so on all advertising reports. 19

1.36 This ensures that the Parliament, through the JCP AA, is involved in the review process of campaign advertising as well as reviewing the administration of campaign advertising. This conclusion also provided clarity on the revised role of the Auditor-General in campaign advertising.

1.37 Further, the Auditor-General's next report on the administration of government advertising campaigns is due to be provided to the Parliament in Spring 2011. The audit will examine the administration of the government advertising guidelines, compliance by agencies and departments with the guidelines and the process for exempting campaigns.

Issues

1.38 Much of the evidence received in relation to the bill (and previous inquiries) acknowledged the importance of government advertising in providing information to the Australian population. However, concern was expressed about the possible abuses of power relating to government advertising. The Accountability Round Table (ART) stated that 'government public information advertising should be reserved for the provisions of information in the public interest and should not be used by the Executive in the interests of its political party or coalition'. 20 Other submitters shared this view and noted that while government advertising is important for disseminating information to the public there are possible abuses of power associated with it.

1.39 Submitters supported the introduction of further regulations to enhance transparency of government spending on advertising. ART , for example, submitted:

... the use of government funds for public advertising should be codified and legislated so as to put its interpretation and implementation on a secure basis, in which it would be free from risks that the Executive could use prerogative powers to circumvent, subvert or ovettum the principle for incumbent party advantage. 21

1.40 Professor Charles Sampford, in his submission to the inquiry into the Preventing the Misuse of Govermnent Advertising Bill 2010 commented on the possible abuses of power associated with government advertising and the need for transparency mechanisms. He stated:

19 Joint Committee on Public Accounts and Audit, The role of the Auditor-General in scnttinising government advertising, March 2011, p. 49.

20 Accountability Round Table, Submission 3, p. 1.

21 Accountability Round Table, Submission 3, p. 1.

144

The whole point of good governance is to try to create institutions that do not need saints to run them and can inspire public confidence despite the fact that they are run by mere mortals. 22

9

1.41 Dr Graeme Orr noted that while the guidelines for government advertising have been adopted, they do not go far enough to 'address deeper problems with the size and selectivity of campaigns from a whole of government perspective'. 23

1.42 The intention in the bill, to legislate the Parliament's role in allowing public money to be used for government advertising, was generally supported by submitters as an appropriate check and balance mechanism of government spending, particularly when that advertising takes place prior to parliamentary consideration. Dr Orr provided evidence to the committee's previous inquiry into government advertising, and commented on this issue:

Such campaigns by definition become advocacy campaigns: there are after all no legal obligations, rights or mechanisms yet in place to explain. Such campaigns may be completely wasteful if the policy changes or is rejected by Parliament. 24

He recommended that if these campaigns were completely necessary that there should be two options available to the government of the day if they wished to advertise certain policies before the policy was considered by Parliament: first, to 'cap expenditure on each and every such campaign'; and secondly, to 'borrow the referendum model, in which pro and con campaigns would be run'. 25

1.43 At the budget estimates hearings in May 2010, the Auditor-General also commented on government advertising and put a different view in relation to use of taxpayers' money to promote a policy that may not necessarily be passed by the Parliament. The Auditor-General commented:

Without having given deep consideration to the issue, there will be circumstances where legislation will not be applicable, in a sense, other than the standard existing agency appropriations to allow the matter to be funded. So I am not sure that a legislative basis will always be the right answer. It may be unduly constraining.

26

22 Professor Charles Sampford, Submission 4, p. 1, Senate Finance and Public Administration Legislation Committee, Preventing the Misuse of Government Adverti sing Bill 20I 0, June 2010.

23 Dr Graeme On , Submission I, p. 1.

24 Dr Graeme On, Submission I, pp 2-3, Senate Finance and Public Administration Legislation Committee, Preventing the Misuse of Government Advertising Bill20IO, June 2010.

25 Dr Graeme Orr, Submission I, pp 2-3, Senate Finance and Public Administration Legislation Committee, Preventing the Misuse of Government Advertising Bill20IO, June 2010.

26 Mr Ian McPhee, Committee Hansard, 25 May 2010, p. 21.

145

10

1.44 While generally supporting the need for greater accountability in relation to govemment advertising, submitters raised issues in relation to the scope of the bill including the possible extension to all advertising campaigns.

1.45 Dr Orr commented on the breadth of the bill and stated that it did not target the specific issue of governments using 'large scale campaigns to sell contentious legislative policy prior to parliamentary consideration'. He noted that there are a range of situations where governments are able to introduce new or modified policies without being required to pass legislation. In such circumstances, the provisions of the bill would not apply. 27

1.46 Professor Sampford held a similar view stating that he had reservations about the bill due to the fact that 'much government policy does not require legislation -either because it is part of the prerogative incorporated into the Federal Executive power or because it falls within executive powers granted by legislation'. 28 Similarly, ART commented that 'there is nothing proposed in the Bill to stop a government engaging in blatant party political promotion of policies that have been enacted'. 29

1.4 7 On the other hand, advertising campaigns of policies that are not controversial and serve the purpose of providing information to the community could be captured by the bill and place unnecessary burden on the Parliament. To avoid this situation , Dr Orr recommended that the term 'advertising' be defined in the legislation and 'campaign' apply only past a certain level of expenditure. This could avoid the Parliament having to approve excessive numbers of advertising campaigns. 30

1.48 Similar to the issues raised by Dr Orr, the Auditor-General stated that the bill could potentially cover all advertising campaigns, including recruitment advertising, regardless of expenditure or function. The Auditor-General commented that if the bill is passed, amendments or guidance are required to provide 'exclusions for the business as usual functions of agencies'. 31

1.49 ART also recommended that the bill address the issue of truthfulness in government advertisements, 'otherwise it would be possible for governments to publish misleading advertisements'. 32 Further, Professor Sampford stated that one of the current problems with advertised policy debate that still needs to be addressed is 'the use of misleading and deceptive statements' . 33

27 Dr Graeme Orr, Submission 1, p. 2.

28 Professor Charles Sampford, Submission 4, p. 1.

29 Accountability Round Table, Submission 3, p. 2.

30 Dr Graeme Orr, Submission 1, p. 2.

31 Australian National Audit Office, Submission 2, p. 2.

32 Accountability Round Table, Submission 3, p. 6.

33 Professor Charles Sampford, Submission 4, p. 2.

146

11

1.50 The Auditor-General stated that to ensure transparency surrounding the use of public money for government advertising purposes, the bill could specify the reporting requirements expected of campaigns or refer to administrative policies as currently exists in the government advertising guidelines . 34

1.51 A further matter raised related to the penalty of 7 years imprisonment. Professor Sampford submitted that the criminal sanctions were 'unnecessary and likely to be seen as over the top'. Professor Sampford commented that a better approach to breaches of the bill would be for the official or the political party that authorised the advertisement to pay back the misapplied public money. 35

1.52 Submitters also addressed the issue of regulating public debate of proposed government policies. In relation to the approach of the bill and this issue, Professor Sampford stated:

.. .I have severe reservations about this measure, particularly if pursued in

isolation from other reforms to ensure a level playing field in which policy is debated with achievable levels of integrity . 36

1.53 Professor Sampford went on to state that:

The most fundamental, and systemic, problem with government advertising has been the possibility of governments gaining an advantage in an unbalanced debate on policy ... However, playing fields can be skewed from both sides and the risks from the corporate end are at least as great. 37

1.54 Dr Orr and ART expressed similar sentiments, and Dr Orr noted

.. .if govemments do the right thing and announce policy proposals early with a view to wide consultation, it is unfair for them to be nakedly exposed to advertising retaliation by deep-pocket interest groups. 38

1.55 ART also stated 'any regulation must not leave government handicapped in defending the public interest against special interests' and that compliance with advertising guidelines should enhance the credibility of government campaigns. Further, the government should have the opportunity to respond to any 'false or misleading statements by those campaigning against the policy proposals of the government'. 39

1.56 Professor Sampford and ART proposed mechanisms to address this Issue. ART proposed that government advertising must:

34 Australian National Audit Office, Submission 2, p. 2.

35 Professor Charles Sampford, Submission 4, p. 1.

36 Professor Charles Sampford, Submission 4, p. 1.

37 Professor Charles Sampford, Submission 4, p. 1.

38 Dr Graeme Orr, Submission I, p. 1.

39 Accountability Round Table, Submission 3, p. 6.

147

12

" be directly relevant to Government responsibilities and functions;

" be in the public interest;

" only occur in relation to matters affecting the public interest and within the powers of government and:

" after Government has applied existing policy or adopted new or amended policy, &/or

" after government policy has been adopted under existing powers, & /or

" where those powers are inadequate, legislated for by parliament;

" provide objective, factual and explanatory information, free from partisan promotion of government policy; and

" not be designed to promote the policies, past performance, achievements or intentions of a program or the government with a view to advancing or enhancing a political party's reputation rather than informing the public. 40

1.57 ART also proposed the establishment of an Independent Advertising Reviewer responsible for examining government campaigns with expenditure over $250 000. In the ART proposal, campaigns can only proceed once the Campaign Advertising Reviewer has certified that the campaign, including in emergencies, complies with the provisions of the Act. The Independent Reviewer would be appointed on the recommendation of the Joint Committee on Electoral Matters with the recommendation supported by at least a two-thirds majority of the committee's membership. 41

1.58 Professor Sampford went further and recommended that advertising by governments and corporations should be regulated by the same independent review body to avoid an unbalanced public debate. He stated that 'corporations claim deductions for corporate advertising and are, in a sense, spending public money'. 42 Professor Sampford proposed that:

Government campaigns should be subject to independent vetting with no exceptions (though there may be speedier processes for emergencies). So should those by corporations, unions and NGOs. This should either be through applying the same vetting process as government advertising, a similar vetting process or by changes to the Competition and Consumer Act 2010 (CCA) and reporting rules to subject 'political' statements to the same legal scrutiny as statements made in ordinary commerce. 43

40 Accountability Round Table, Submission 3, p. 5.

41 Accountability Round Table, Submission 3, p. 5.

42 Professor Charles Sampford, Submission 4, p. 3.

43 Professor Charles Sampford, Submission 4, p. 2.

148

13

1.59 ART also raised the issue of reviewing government advertising in election campaigns. While the bill does not specifically refer to this matter, ART recommended these campaigns be subject to independent reviewing. Further, the current provisions in the Electoral Act do not go far enough to protect the truth in political debates and that:

... the rule used in the Trade Practices Act, that applies to corporations in their advertising and conduct, should equally be used in politics. That is political parties, candidates and other organizations should not '"engage in conduct that is misleading or deceptive or is likely to mislead or deceive." The role of adjudicating such decisions should be referred to an

independent body such as the Australian Competition and Consumer Commission (ACCC) or the Australian Electoral Commission (AEC). 44

Comments and conclusion

1.60 The committee considers that the current guidelines for government advertising adequately cover many of the issues raised by submitters relating to government advertising. While the committee acknowledges that government advertising has the potential to be abused, the current guidelines adequately combat the improper use of public funds for government advertising by Ministers and officials.

1.61 The committee is also of the view that the bill, as drafted, does not provide adequate flexibility for the government to be able to advertise campaigns in the public interest, such as health and well-being campaigns. In addition, the bill appears to capture all government advertising campaigns and as a consequence would lead to an overly burdensome process not only for the government, but also for the Parliament.

Recommendation 1

1.62 The committee has considered the Government Advertising (Accountability) Bill2011 and recommends that the bill not be passed.

Senator Helen Polley Chair

44 Accountability Round Table, Submission 3, pp 7-8.

149

150

COALITION SENATORS' REPORT

BACKGROUND AND PAST INQUIRIES

This issue has been considered by the Senate previously in recent times, notably in June last year in the inquiry by this committee into the Preventing the Misuse of Government Advertising Bill 2010.

It was also the subject of an inquiry by the Finance and Public Administration References Committee in 2005.

Coalition Senators have previously opposed proposals to place the Auditor-General at the centre of decisions regarding Government advertising. Amongst other issues, the main reasons for this view are twofold:

1. Placing the Auditor-General in a position to approve or otherwise advertising campaigns would potentially put the Auditor-General in a conflicted position -having to both approve decisions, then to be responsible for their examination and audit.

2. Placing the Auditor-General in this position would not necessarily guarantee the outcomes desired by the supporters of this proposal.

Both of these positions are expounded further in other reports of this Committee and of the Joint Committee on Public Accounts and Audit earlier this year.

The Government accepted this position after it commissioned the Independent Review of Government Advertising Guidelines (the Hawke Review) in early 2010.

However, as the passage of time was to illustrate, the guidelines subsequently adopted by the Government were to prove nothing more than a charade to facilitate the further expenditure of public funds on advertising to support Labor's political agenda.

LABOR'S 2010 BACKFLIP

Public concern regarding the role of Government advertising has reached new heights since the Labor Government so spectacularly back-flipped and circumvented their own guidelines in 2010. This is demonstrated by a simple timeline of events in 2010.

In the months prior to the release of the Henry Review in May 2010, the Labor Government commissioned a research company to undertake work to dete1mine the level of community understanding of tax reform.

151

16

On 21 April 20 10 the so-called Independent Communications Committee established as a result of the Hawke Review was provided with a communications strategy for a proposed campaign. The ICC approved the strategy and a number of advertising agencies were briefed.

Following the release of the Henry Review, the Treasurer almost immediately sought an exemption from the guidelines established following the Hawke Review, on 10 May 2010.

That same day agencies were scheduled to present their creative proposals to officials at The Treasury. The following day, in the Budget, the Treasurer announced that a so " called 'communications campaign' would proceed, with an appropriation of $38.5 million.

On 14 May 2010, the Department ofFinance provided a brief to the Cabinet Secretary which included a draft letter to the Treasurer and a draft Statement to Parliament. Tlus was not released for ten days.

On 24 May 2010, the Cabinet Secretary approved the Treasurer's request for an exemption from the advertising guidelines, citing 'extreme urgency' and 'compelling reasons.'

Despite this, the notification to Parliament was delayed by a further four days - finally being tabled on 28 May.

Of particular note is the fact that this was the day after Senate Estimates hearings into government advertising had concluded.

This timeline of events with respect to the Labor Government's failed mining tax advertising campaign illustrates just how hollow Labor rhetoric has been on this subject.

Labor's subsequent behaviour with respect to advertising its carbon tax legislation demonstrates that hypocrisy continues.

LABOR'S CARBON TAX HYPOCRISY

Public concern about government advertising has escalated further in response to Labor's misleading campaign regarding the carbon tax.

The $25 million dollars dedicated to the carbon tax advertising campaign has provoked outcry about both the notion that the Government should use public funds to advocate a hotly contentious political topic, even more so given the Government's dishonesty regarding the carbon tax prior to the 20 10 election.

Furthermore, questions have arisen about the honesty of the Labor Government's advertising campaign - in particular the notion that the carbon tax would reduce

152

17

Australia's emissions when the truth is taxpayers' funds will be used to purchase abatement from overseas.

Labor's hypocrisy regarding using public funds for political government advertising can be illustrated with their own words.

In the 2005 inquiry by the Finance & Public Administration References Committee Government Advertising and Accountability, Labor Senators stated:

First, the Committee considers that no expenditure of public money for mass media advertising should be undertaken until the government has obtained passage of the legislation giving it authority to implement the relevant policy, program or service. 1

They went on to say that:

'material should not be directed at promoting party political interests'. 2

In their conclusion to Chapter 6 of the 2005 report, Labor Senators also stated that

No expenditure of public money should be undertaken on mass 1nedia advertising, telephone canvassing or information services, online services, direct mail or other distribution of unsolicited material until the government has obtained passage of legislation giving it authority to implement the policy, program or service described in the public information or education campaign. 3

And:

The only exclusions to these requirements are where major issues of public health, public safety or public order m.ay arise at short notice. 4

It is immediately apparent that the current carbon tax advertising campaign does not meet any of these hurdles.

Labor has no credibility on this issue. Labor's record speaks for itself.

1 Senate Finance & Public Administration References Committee, Go vernment Advertising and Accountability, (Majority Report), paragraph 6.68, December 2005.

2 Ibid, paragraph 6.69.

3 Ibid, paragraph 6.72 (a).

4 Ibid, paragraph 6.72 (d).

153

18

CONCLUSION

Coalition Senators do not agree with the conclusion of Labor Senators that the current .guidelines for government advertising adequately address the concerns raised by submitters given the behaviour by the Labor Government in this regard. This is demonstrated by the current scandal of the carbon tax advertising campaign.

However, the bill as proposed does not provide for adequate flexibility for legitimate public information campaigns.

Accordingly, Coalition Senators agree with the recommendation that this bill not be passed.

Senator Scott Ryan Senator for Victoria

154

Senator Sean Edwards Senator for South Australia

Dissenting Report by Senator Xenophon

'Ads Nauseum - the need for legislative reform of Government advertising'

1.1 The Govenunent Advertising (Accountability) Bill 2011 was introduced following the Government's announcement that it was going to spend $12 million of taxpayers' money on an advertising campaign about their plans to price carbon, well before the legislation had been introduced into Parliament,

let alone passed into law.

1.2 This Bill represents community frustration about the use of taxpayer funds on party policies that are not yet legislated for; from the GST and W orkChoices ad campaigns under the Howard Government, to the mining tax and carbon price plan more recently.

1.3 Indeed, this Bill mirrors comments made in 2005 in the Senate Finance and Public Administration References Committee Report, Government advertising and accountability, which stated that:

" ... no expenditure of public money for mass media advertising should be undertaken until the government has obtained passage of the legislation giving it authority to implement the relevant policy, program or service. Where a proposed public information or education campaign covers a matter which does not require legislation, an appropriation for the specific purpose of the campaign must be obtained. The requirement should not be enforced in situations where major issues of public health, safety or public order have arising at short notice".

1.4 In its submission to the Inquiry, the Accountability Round Table said:

"Government public information advertising should be reserved for the provisions of information in the public interest and should not be used by the Executive in the interests of its political party or coalition".

1.5 It is noted that Government advertising is currently subject to the Guidelines on Information and Advertising Campaigns by Australian Government Departments and Agencies, which was introduced in 2008.

1.6 These guidelines are designed to ensure that:

* members of the public have equal rights to access comprehensive information about government policies, programs

155

20

and services which affect their entitlements, rights and obligations;

*governments may legitimately use public funds to explain government policies, programs or services, to inform members of public of their obligations, rights and entitlements, to encourage informed consideration of issues or to change behaviour; and

* government campaigns must not be conducted for party political purposes.

1. 7 There is a distinct difference between Government's spending taxpayer funds on advertising policies which are initiatives that are underway, as opposed to those which are party specific, such as in the case of the carbon price.

1. 8 Under this Bill, Governments will be banned from using taxpayer funds to advertise policy, unless the policy has been enacted in legislation, except in particular circumstances such as by resolution of the Parliament or with the consent of the Leader of the Opposition in the event of a national emergency.

1.9 This Bill will strengthen the transparency of government expenditure on advertising and ensure that millions of dollars of taxpayer funds aren't spent on policies that are not yet passed into law.

Recommendation

That the Bill be passed.

NICK XENOPHON Independent Senator for South Australia

156

APPENDIX 1

Submissions and Additional Information received by the Committee

1 Dr Graeme Orr

2 Australian National Audit Office (ANAO)

3 Accountability Round Table

4 Prof. Charles Sampford

157

158

The Senate

Finance and Public Administration Legislation Committee

National Health Reform Amendment (Independent Hospital Pricing Authority) Bill 2011 [Provisions]

September 2011

159

© Commonwealth of Australia 20 II

ISBN 978-1-74229-516-9

Senate Finance and Public Administration Committee Secretariat:

Ms Christine McDonald (Secretary)

Dr Bu Wilson (Principal Research Officer)

Ms Kyriaki Mechanicos (Senior Research Officer)

Ms Victoria Robinson-Con1on (Research Officer)

Ms Penny Bear (Administrative Officer)

The Senate Parliament House Canberra ACT 2600

Phone: Fax:

02 6277 3439 02 6277 5809

E-mail: Internet: fpa. sen@aph. gov .au http://www.aph.gov.au/senate /committee/fapa cttelindex.htm

This document was produced by the Senate Finance and Public Administration Committee Secretariat and printed by the Senate Printing Unit, Parliament House, Canberra.

11

160

MEMBERSHIP OF THE COMMITTEE

43rd Parliament

Members

Senator Helen Polley, Chair

Senator Scott Ryan, Deputy Chair

Senator Richard DiNatale

Senator Sean Edwards

Senator the Hon. John Faulkner Senator the Hon. Ursula Stephens

Participating Members for this inquiry

Senator Sue Boyce Senator Concetta Fierravanti- Wells

111

161

ALP, Tasmania

LP , Victoria

AG, Victoria

LP, South Australia

ALP, New South Wales ALP, New South Wales

LP , Queensland

LP, New South Wales

162

TABLE OF CONTENTS

MEMBERSHIP OF THE COMMITTEE ...................................................... iii

ABBREVIATIONS ..................................................................................................... vii

Cll~J>t~Jr 1 .............................................................................................................. 1

Background .......................................................................................................... !

Introduction ............................................. ............................................................... 1

Conduct of the inquily ..... ........... ............................... ............ ............ ............ ....... .. l

Background to the Bill. ................................................. ......... ....... ...... ............. ....... I

Overview of the Bill ...... .............. ..... .... ..... ...... .................. ....... .............. ................ 5

Related inquiries ............ ................ ........... ....... ...... ......................... ............ ............ 9

CllaJ>t~r ~ ............................................................................................................ 11

Issues ................................................................................................................... ll

Introduction .......................................... ........... ...... .............. .............. ................... 11

Proposed Part 4.2-IHP A establishment, functions, powers and liabilities ..... ... 12

Proposed Part 4.3-Cost-shifting disputes and cross-border disputes ................. 24

Proposed Part 4.4-Constitution and membership of the IHPA ......... .......... ....... 25

Proposed Part 4.10-Clinical Advisory Committee (CAC) ......... ............ ........... 27

Proposed Part 4.12-Other Committees ............................ ............ ..................... . 28

Proposed Part 4.13 -Reporting obligations of the IHP A ......... ...... ............ ......... 29

Proposed Part 4.14-Secrecy .............. ............................................. ................. ... 30

Other matters raised in submissions ... ...... ....... ........ ........ ................. ............... ..... 31

Conclusion ..... ............................................ ......... .................................................. 3 2

Additional comments by Coalition Senators ................... ............................... 35

APPENDIX 1 ..................................................................................................... 39

Submissions and additional information received by the committee ................ 39

APPENDIX 2 ..................................................................................................... 41

Public Hearing ........................................................................................................ 41

v

163

164

ABBREVIATIONS

ACSQHC Australian Commission on Safety and Quality in Health Care

ABF Activity Based Funding

AHHA Australian Healthcare and Hospitals Association

AIHW Australian Institute of Health and Welfare

AIPCA Australian Institute for Primary Care∑ and Ageing

AMA Australian Medical Association

APHA Australian Private Hospitals Association

AR-DRGs Australian Refined Diagnosis Related Groups

CAC Clinical Advisory Committee

CHA Catholic Health Australia

CHF Consumers Health Forum of Australia

COAG Council of Australian Governments

DoHA Department of Health and Ageing

EBM Evidence Based Medicine

HRIG Health Reform Implementation Group

ICD-10-AM International Statistical Classification of Diseases and Related Health Problems, Tenth Revision, Australian Modification

IHPA Independent Hospital Pricing Authority

JAC Jurisdictional Advisory Committee

LHN Local Hospitals Network

NHPA National Health Performance Authority

NHRA National Health Reform Agreement

NRHA National Rural Health Association

OAIC Office of the Australian Information Commissioner

VHA Victorian Healthcare Association

WCHA Women's and Children's Hospitals Australasia

Vll

165

166

Chapter 1

Background

Introduction

1.1 On 25 August 2011, on the recommendation of the Selection of Bills committee, the Senate referred the provisions of the National Health Reform Amendment (Independent Hospital Pricing Authority) Bill 2011 (the Bill) for inquiry and report by 15 September 20 11. The reasons for referral and principal issues for consideration were:

This Bill will establish the Independent Hospital Pricing Authority - the lynchpin of the Government's health reforms and will operate alongside the Quality and Safety Commission and the National Performance Authority.

" Relationship of the IHP A with the Safety and Quality Commission

" Relationship ofthe IHPA with the National Performance Authority

" Impact of the IHP A on the nation's hospitals. 1

Conduct of the inquiry

1.2 The inquiry was advertised in the newspaper The Australian and through the Internet. The committee invited submissions from interested organisations and individuals.

1.3 The committee received 16 submissions relating to the Bill and these are listed at appendix 1. The committee considered the Bill at a public hearing in Canberra on 7 September 2011. Details of the public hearing are referred to in appendix 2. The submissions and transcript of evidence may be accessed through the committee's website at http:/ /www.aph .gov.au/senate /committee/fapa cttelindex.htm.

Background to the Bill

1.4 In April 2010 the Council of Australian Governments (COAG) reached an agreement on health and hospitals reform that included the establishment of a National Health and Hospitals Network (NHHN). The NHHN agreement did not, however, include Western Australia. At the time COAG described the agreement as:

... the most significant reform to Australia's health and hospitals system since the introduction of Medicare, and one of the largest reforms to service delivery in the history of Federation. 2

1 Selection of Bills Committee, Report No. 11 of 2011, 25 August 2011, Appendix 1.

2 Council of Australian Govemments Meeting, Canberra 19 and 20 April2010, Communique, p. 1, http://www.coag.gov.au (accessed 30 August 2011).

167

2

1.5 Major reforms to Commonwealth and state and territory responsibilities were agreed to, including the Commonwealth becoming the majority funder of Australian public hospitals. It was also anticipated that newly formed Local Hospital Networks (LHN) would become responsible for hospital management, and that those networks would 'be paid on the basis of a national efficient price for each public hospital service they provide to public patients', but that some small regional and rural public hospitals, and other agreed services, would continue to be block funded. The reform measures included the establishment of an Independent Hospital Pricing Authority. COAG also agreed to new clinical and safety standards to be developed by the Australian Commission on Safety and Quality in Health Care.

1.6 On 13 February 2011, governments signed a Heads of Agreement on National Health Reform and a revised National Partnership Agreement on Improving Public Hospital Services. Commitment was also given to signing a full National Health Reform Agreement by 1 July 2011. On 2 August 2011, the National Health Reform Agreement (NHRA) was agreed to by COAG. 3

1. 7 The NHRA builds on principles and objectives for the health system contained in the National Healthcare Agreement (NHA), agreed by COAG in 2008 and amended in July 2011.4

1.8 The NHRA 'sets out the shared intention of the Commonwealth , state and territory governments to work in partnership to improve health outcomes for all Australians and ensure the sustainability of the Australian health system'. It also establishes 'new fmancial and governance arrangements for Australian public hospital services and new governance arrangements for primary health care and aged care'. 5 The COAG Communique of 19 August 2011 stat ed that the NHRA 'will deliver the funding public hospitals need, with unprecedented levels of transparency and accountability , and less waiting time for patients'. 6

1.9 Three key statutory bodies will oversee and implement these health reforms:

" the National Health Perfonnance Authority (NHP A) - 'will ensure that Australians can access accurate and up-to-date information about how their health system performs so they can choose the best care' ; 7

3 Explanatory M emo randum , National Health Reform Am endm ent (Independent H ospital Pricing Authorit y) Bill 2011, p. 2.

4 Council of Australian Governments, National Health R eform Agreem ent, Aug ust 2011, p. 4.

5 Council of A ustralian Go vernments, National Health R eform A greem ent, August 2011, p. 4.

6 Council of Australian G overnments M eeting, Canberra 19 August 2011, Com mun ique, http:// w>vw.coag.gov.au (accessed 30 August 2011).

7 Council of Austra lian Go vernme nts Meeting, Canberra 19 August 2011, Communique, http: //www .coag.gov.au (accessed 30 August 2011).

168

3

" the Independent Hospitals Pricing Authority (IHP A) - 'will set the national price for public hospital services and will develop a national activity based funding system'; 8 and

" the Australian Commission on Safety and Quality in Healthcare (ACSQHC) " 'will lead and coordinate improvements in safety and quality in healthcare in Australia'. 9 ACSQHC was established on 1 January 2006, becoming an independent, statutory authority on 1 July 2011, under the National H ealth and Hospitals Network Act 2011.10

1.10 The Commonwealth has introduced legislation to implement the reforms. The National Health and Hospital N etworks Act 2011 was passed in March 2011 and established the ACSQHC as a statutory authority.

1.11 The National Health Reform Amendment (National Health Performance Authority) Bill 2011 was introduced into the House of Representati ves on 3 March 20 11 and establishes the NHP A and provides for its functions , pow ers and liabilities; amends provisions relating to the ACSQHC; and amends the NHHN Act to change its title to the National H ealth Ref orm Act 2011.11 The Bill was referred to both the House Standing Committee on Health and Ageing12 and the Senate Community Affairs Legislation Committee. During its inquiry , the Communi ty Affairs Committee received proposed amendments to the Bill from the Department of Health and Ageing. The Community Affairs Committee recommended that the Bill be passed subject to the recommended amendments.13 The Bill was agreed to by the House of Representatives on 17 August 2011 with amendments 14 and was introduced in the Senate on 22 August 2011.

8 C ouncil of Australian Governm ents Meeting, Canben∑a, 19 Aug ust 2011, Communique, http:// ww w .coag.gov.au (accessed 30 Augu st 2011).

9 N ational Health Reform A greem ent, p. 39, http: //www .coag.gov.au (accessed 30 August 2011).

10 Australian Commis sion on Safety and Qu alit y in Health C are, http://www.safetyandguality.!Wv.au (accessed 31 August 2011).

11 E xplanatory M emorandum , N ational Health R eform Ame ndme nt (Independent Hospital Pricin g Authority) Bill 2011, p. 2.

12 House of Representatives Standing Commi ttee on Health and Ageing, Advis01y Report on the National Health Refonn Amendment (National Health Pelfonnance Authority) Bill2011, M arch 2011.

13 Senate Communi ty A ffairs Legislation Commi ttee, National Health Reform Amendment (National H ealth Pe1formance Authority) Bill 2011, June 2011.

14 The Senate Community Affairs Legislation Com mittee, National Health Reform Amendment (National H ealth Pe1formance Authority) Bill 2011, June 2011 inquiry m ade three recomm endations for amendm ents to the Bill. Recomm endation 1, regarding specifying greater detail around processes that wo uld lead to inclusion of new bodies or organisat ions in the NHPA's monitoring functions, and the granting of new functions to the NHP A; and Recomm endation 2 regarding involvement of state and tenitory M inisters in the reporting

process, are reflected in am endm ents to the legislation. H owever, Recomm endation 3, regarding a broader range of man dated representation on the NHP A , is not.

169

4

1.12 The National Health Reform Amendment (Independent Hospital Pricing Authority) Bill 2011 establishes the IHP A as an independent statutory authority under the Financial Management and Accountability Act 1997. The Bill introduces a principally activity based funding model, as recommended by the National Health and Hospitals Reform Commission in 2009,15 and agreed to in the National Health and Hospitals Network Agreement in 2010.16 It is a model that has already been operational in the private health sector. 17

1.13 The activity based funding model replaces the previous arrangements whereby states received block grants, negotiated through health care agreements. 18

The IHP A will set the price for each service or activity 19 having regard for principles of access, clinical safety and quality, efficiency and effectiveness and fmancial sustainability. 20 There will still be some circumstances in which block funding will apply, where hospitals have low levels of activity, such as rural hospitals and specialised units. The IHP A will also have a role in determining amounts for block funding. 21

1.14 An interim Independent Hospital Pricing Authority commenced operations as an executive agency on 1 September 20 11. Under the NHRA, it was agreed that an interim IHP A would be established prior to passage of the enabling legislation . 22

15 National Health and Hospitals Reform Commission, A Healthier Future for All Australians: Final Report June 2009, p. 21.

16 Council of Australian Governments Meeting, Canberra 19 and 20 April 2010, Communique, p. 3, http://www .coag.gov.au (accessed 30 August 2011).

17 The Ron. Nicola Roxon , Minister for Health and Ageing, Second Reading Speech, National Health Reform Amendment (Independent Hospital Pricing Authority) Bill2011, House of Representatives Hansard, 24 August 2011, p. 9.

18 The Ron. Nicola Roxon, Minister for Health and Ageing, Second Reading Speech, National Health Reform Amendment (Independent Hospital Pricing Authority) Bil12011, House of Representatives Hansard, 24 August 2011, p. 8.

19 The Ron. Julia Gillard , Prime Minister and the Ron. Nicola Roxon, Minister for Health and Ageing, A Better Deal for Patients , Joint R elease, 13 February 2011, [p. 3].

20 The Ron. Nicola Roxon, Minister for Health and Ageing, Second Reading Speech, National Health Reform Amendment (Independent Hospital Pricing Authority) Bi112011, Hou se of Representatives Hansard, 24 August 2011, p. 10.

21 The Ron. Nicola Roxon, Minister for Health and Ageing, Second Reading Speech, National Health Reform Amendment (Independent Hospital Pricing Authority) Bill2011, House of Representatives Hansard, 24 August 2011, p. 10.

22 Department of Health and Ageing, Submission 13, p. 6.

17n

5

Overview of the Bill

Purpose of the Bill

1.15 The National Health Reform Amendment (Independent Hospital Pricing Authority) Bill 2011, amends the National Health Reform Act 2011 to establish the IHP A, as agreed by COAG, in the NHRA on 2 August 2011. The Bill provides for the functions, powers, accountabilities and liabilities of the Independent Hospital Pricing Authority, as well as the establishment of committees and bodies to assist the IHP A . 23

1.16 As outlined in the Bill, the IHP A's main functions are:

(a) to determine the national efficient price for health care services provided by public hospitals where the services are funded on an activity basis;

(b) to determine the efficient cost for health care services provided by public hospitals where the services are block funded;

(c) to publish this, and other information , for the purpose of informing decision makers in relation to the funding of public hospitals . 24

Provisions of the Bill

Objects, functions , powers and operation of the IHPA

1.17 The object of the IHP A, as provided for in proposed section 130, is to promote improved efficiency in, and access to, public hospital services through the provision of independent advice to Commonwealth , state and territory governments regarding the efficient costs of these services , and though developing and implementing systems to support activity based funding for such services . 25

1.18 Proposed section 131 provides for the functions of the IHP A and specifies the matters that the IHP A must have regard to when performing these functions . Among other provisions , the IHP A's functions will include:

" determining the national efficient price for healthcare services provided by public hospitals where the service s are funded on an activity basis;

" determining the efficient cost for health care services provided by public hospitals where the services are block funded;

" developing and specifying classification systems for health care and other service s provided by public hospitals;

23 Explanatory M emorandum , p. 2.

24 National Health R eform Am endm ent (Independent Ho spital Pricing Authority) Bill 2011, Item 21, proposed section 128.

25 Explanatory M em orandum , p. 5.

171

6

" determining adjustments to the national efficient price to reflect variations in the costs of delivering health care services; and

" determining data requirements and data standards in relation to data that is to be provided by states and territories.

1.19 Proposed section 134 outlines the Constitutional limits on the IHP A 's functions. 26

Cost-shifting disputes and cross-bord er disputes

1.20 Proposed Part 4.3 sets out how the IHPA will deal with disputes about cost " shifting and cross-border health costs, reflecting clauses A88-A101 of the National Health Reform Agreement. 27

1.21 The procedures for assessing cost -shifting disputes by the IHP A are set out in proposed section 139. The procedures to be followed by the IHPA in making reconunendations on cross-border disputes, as set out in proposed section 140, are very similar.

Constitution and memb ership of the IHP A

1.22 The IHP A is established as a body corporate with perpetual succession , with a seal, which is able to sue and be sued and is able to deal with real and personal property, under proposed section 142.28

1.23 Proposed subsection 6(3) and proposed section 143 effecti vely set the minimum number of members of the IHP A at nine members, including the Chair and Deputy Chair. 29

1.24 Members , including the Chair, are appointed by the Minister , and can be appointed on a full-time or part-time basis, for up to a maximum five year period, and can be reappointed, as provided for in proposed sections 144 and 145.30

1.25 Proposed section 144 provides that at least one of the members of the IHP A is to have substantial experience or knowledge and significant standing in regional or rural health care. 31

26 Explanatory Memorandum , p. 6.

27 Explanatory Memorandum , p. 7.

28 Explanatory Memorandum , p. 8.

29 Explanatory Memorandum , pp 4 and 8.

30 Explanatory Memorandum , p. 8.

31 Explanatory Memorandum, p. 8.

172

7

Chief Executive Officer of the IHP A

1.26 The provisions for the Chief Executive Officer (CEO) of the IHP A are contained in proposed Part 4.8 of the Bill. The IHP A CEO is appointed by the IHP A under a written instrument, in consultation with the Minister. The appointment must not exceed five years, however the CEO may be reappointed. 32

Clinical Advisory Committee

1.27 The Clinical Advisory Committee (CAC) is established under proposed Part 4.10 to advise the IHP A on the formulation of casemix classifications for healthcare and other services provided by public hospitals, to provide advice on matters referred to it by the IHP A and to do anything incidental to or conducive to the performance of those functions. The Chair of the CAC is required to prepare and provide to the Minister an annual report for presentation to the Parliament, as soon as practicable after the end of each fmancial year. 33

Jurisdictional Advisory Committee

1.28 Proposed Part 4.11 establishes the Jurisdictional Advisory Committee (JAC) and provides that the IHP A must have regard to the advice provided by the JAC. Under proposed section 196, the JAC's functions include the provision of advice to the IHP A, including the following:

(a) developing and specifying classification systems for health care and other services provided by public hospitals;

(b) determining adjustments to the national efficient price to reflect variations in the costs of delivering health care services; and

(c) standards and requirements in relation to data relating to health care services provided by public hospitals that are provided by States and Territories.

Other committees

1.29 Other committees may be established to provide assistance or advice to the IHP A. These committees may be made up wholly of IHP A members, wholly of persons who are not members, or a combination of members and non members. The IHP A may determine the committee's terms of reference, terms and conditions of its members, and procedures to be followed. 34

32 Explanatory Memorandum, pp 10-11.

33 Explanatory Memorandum, pp 12 and 14.

34 Explanatory Memorandum, p. 16.

173

8

Reporting obligations of the IHP A

1.30 Under proposed section 208 the Minister or a state /territory Health Minister may require the IHP A to prepare reports and documents, and on written notice to prepare documents about one or more specified matters relating to the performance of the IHP A's functions. 35

1.31 Proposed subsection 209(1) requires the IHP A to keep the Minister and the Standing Council on Health informed of its work and operations. However, this is limited by proposed subsection 209(2) stating that the IHP A is not required to inform the Standing Council on Health about the performance of its functions and powers under the Financial Management and Accountability Act 1997.36

1.32 Proposed subsection 210 requires the IHP A, as soon as possible after the end of each financial year, to prepare and give to the Minister an annual report on the information and advice given by the IHP A in that particular year for presentation to the Parliament. 37

1.3 3 The IHP A is prohibited, under proposed section 211, from publishing a report unless the report , and a period of 45 days to comment on the report , has been given to the Minister and each state or territory Minister . However, under proposed section 212, this does not apply to a report under section 200 which is an annual report prepared and given to the Minister for presentation to the Parliament about its operations during the fmancial year. 38

Secrecy

1.34 Proposed Part 4.14 of the Bill contains provisions related to secrecy. As the Explanatory Memorandum explains , a person commits an offence if that person is or has been an official of the IHP A, has obtained information in the course of their work relating to another person, referred to as protected information , and discloses or uses the information. Exceptions are made where the disclosure or use is authorised under Part 4.13 or is compliant with Connnonwealth or prescribed state law (proposed subsections 213 ( 1) and (2)). 39

1.35 In addition , under proposed subsection 213(3) an official of the IHP A is not to be required to produce or disclose protected information to a court or tribunal except where it is necessary for giving effect to the Act. 40 Proposed subsections 214-223

35 Explanatory Memorandum , p.16.

36 Explanatory Memorandum , p. 17.

37 Explanatory Memorandum , p. 17.

38 Explanator y Memorandum , p. 17.

39 Explanatory Memorandum , p. 17.

40 Explanatory Memorandum , pp 17-18.

174

9

provide a list of exceptions from the prohibition for disclosure of protected information set out in this part. 41

Other matters

1.36 Proposed section 225 requires the HIP A to publish on its website at least once each fmancial year a statement setting out its work program and seek submissions form interested parties about the work program.

Chapter 5 Miscellaneous

1.3 7 As the Explanatory Memorandum explains, the proposed Chapter 5 includes several provisions relating to privacy and confidentiality, a statement of the relationship between the Act and state laws, the non-application of the Commonwealth Authorities and Companies Act 1997 and regulation making power.42

Part 2 Transitional Provisions

1.38 Item 22 provides for the Minister, in consultation with the Standing Committee on Health to appoint a person to act as IHP A CEO before the end of the six months period from the commencement of Item 22 during the vacancy in the office of the IHP A CEO, so long as no appointment has previously been made. 43

Financial impact

1.39 The Commonwealth Government allocated $91.8 million in funding for the IHP A over four years in the 2010-11 Budget. 44

Related inquiries

1.40 The following Senate committee reports have been tabled in relation to the COAG health and hospital reforms:

" Senate Finance and Public Administration References Committee: Council of Australian Governments reforms relating to health and hospitals, June 2010;

" Senate Economics Legislation Committee: Federal Financial Relations Amendment (National Health and Hospitals Network) Bill 2010, January 2011;

" Senate Community Affairs Legislation Committee, National Health and Hospitals Network Bill2010, November 2010; and

41 Explanatory Memorandum , p. 18.

42 Explanatory Memorandum , p. 20.

43 Explanatory Memorandum, p. 21.

44 Explanatory Memorandum , p. 2.

175

10

" Senate Community Affairs Legislation Committee, National Health Reform Amendment (National Health Reform Amendment (National Health Pe1formance Authority) Bill2011, June 2011.

176

Chapter 2

Issues

Introduction

2.1 The Independent Hospital Pricing Authority (IHP A) is central to a new approach to activity based funding of public hospitals. It also heralds a fundamental change in the nature of Commonwealth and state and territory arrangements for public hospital funding. Since 1984, the Australian Government has provided block funding to state and territory governments to support the delivery of free public hospital services. 1

2.2 Despite periodic agreements, tensions between the Commonwealth and states and territories in relation to funding of hospitals have been ongoing. States and territories have disputed the adequacy of the Commonwealth contribution. The Commonwealth, in tum, has found it difficult to determine if states are maintaining levels of service provision appropriate to the population level, and have been concerned that states have shifted public hospital provided services to private practice arrangements that draw subsidies from Commonwealth programs. This new approach addresses these issues through a shift to primarily activity based funding (ABF) and the setting of a national efficient price, while maintaining a provision for block funding where required. 2

2.3 There was broad support for the establishment of the IHP A from submitters. 3 Mr Martin Laverty, Catholic Health Australia (CHA), stated that: ... we do support the intent of the bill. We think this is sensible legislation. We think once a pricing authority is established, if the definition of a public

hospital price is adequately worked through, it will give the opportunity for Commonwealth, state and NGO hospital providers, and indeed the ultimate consumers of those hospitals, to understand the price drivers of the delivery of public health care and for public health care to then be purchased from the most efficient providers . That is why we are unabashed supporters of this component of the health reform agenda.

4

1 Department of Health and Ageing, Submission 13, p. 8.

2 Department ofHealth and Ageing, Submission 13, pp 8-9.

3 Consumers Health Forum of Australia, Submission 1, p. 1; Australian Institute of Health and Welfare, Submission 4, [p. 1]; Victorian Healthcare Association , Submission 8 p.l; Australian Medical Association, Submission 9, p. 3; Women's and Ch ildren's Hospitals Australasia , Submission 10, p. 1; Dr Kathryn Antioch, Submission 14, [p. 5]; Catholic Health Australia , Submission 6, p. 2; Australian College of Rural and Remote Medicine, Submission 15, p. 1.

4 Mr Martin Lave1iy, Chief Executive Officer , Catholic Health Australia, Committee Hansard, 7 September 2011, p. 6.

177

12

2.4 Ms Carol Bennett, Consumers Health Forum of Australia (CHF), also expressed support for the IHP A and stated:

CHF supports the establishment of the hospital pricing authority. Developing a national efficient price for hospital services on which Commonwealth hospital funding will be based has the potential to introduce into the system the efficiency and transparency that has been sorely lacking to date. This includes public reporting and transparency in appointments to all advisory structures. 5

2.5 Submitters, however, raised some matters in relation to specific provisions of the Bill.

Proposed Part 4.2-IHP A establishment, functions, powers and liabilities

Proposed section 131-Functions of the Pricing Authority

2.6 Proposed subsection 131(1) provides for the functions of the IHPA, something that occasioned much interest from submitters, in particular proposed paragraphs 131(1)(a)-(e). Submitters also commented on proposed subsection 131(3) which pertains to the matters that the IHP A must have regard to in performing its functions. A number of submitters proposed additional matters they believed the IHP A should also have regard to.

Proposed section 131(1) - National efficientpriceforactivity basedfunding (ABF)

2. 7 Proposed paragraph 131 ( 1 )(a) provides for the IHP A to determine the national efficient price for health care services provided by public hospitals where the services are funded on an activity basis. The Department of Health and Ageing (DoHA) stated that ABF will:

... provide incentives for most hospitals to treat more patients more efficiently, while still ensuring the viability of smaller hospitals and some particular kinds of services for which ABF is not appropriate. 6

2.8 Many submitters supported moving to a national activity based funding system.7 CHA, for example, commented that proposed paragraph 131(1)(a), together with proposed paragraph 131(1)(d) (provision for adjustments), provide reasons that 'the Bill should be supported as benefiting the future planning of resource allocation across the Nation's public hospital system'. 8

5 Ms Carol Bennett, Chief Executive Officer, Consumers Health Forum of Australia, Commi ttee Hansard, 7 September 2011, p. 1.

6 Department of Health and Ageing, Submission 13, p. 4.

7 Dr Kathryn Antioch, Submission 14, [p. 5]; Catholic Health Australia, Submission 6, p. 2.

8 Catholic Health Australia , Submission 6, p. 2.

178

13

2.9 However, a number of concerns were raised by submitters. CHA observed that whereas the Bill provides a mechanism to determine a national efficient price, 'it does not set a nationally agreed public hospital payment'. CHA noted that, through the Council of Australian Governments (COAG) agreement, there will be certainty as to how much the Commonwealth will contribute, but it is not certain how much the states or territories will contribute. 9

2.10 Similar concerns were raised by the Australian Medical Association (AMA), which noted that the National Health Reform Agreement (NHRA) allows state and territory governments to pay public hospitals less than the full efficient price determined by the IHP A (clause A65). The AMA submitted that this information should be included in the report the IHP A must make to Parliament each year, pursuant to proposed section 210, and should also be provided to the National Health Performance Authority (NHP A), so that it is clear when poor performance is linked to insufficient funding. 10

2.11 In responding to these concerns, Mr Peter Broadhead, DoHA, told the committee that 'under the agreement reached in early August there is a role for a national health fund administrator and the national health funding pool', and that these may be established by legislation later in the year. 11 He explained further:

It is a very strong principle through the agreement that the aim here is to have the amount of funding, the source of funding, the destination of funding and the basis upon which the quantum was ani.ved at all publicly reported. This would mean that, to the extent that a state's contribution to activity -based funding for a pa1iicular local hospital network was less than or more than the national efficient price or the same as the national efficient price, it would be visible for people to see in the reporting that is required . That includes not only the reporting to parliament but also the public reporting that is required. 12

2.12 In relation to the contribution of states and territories to the national efficient price, Mr Broadhead, DoHA, stated that there is an underlying efficient basis for providing funding to hospitals . However, states have a capacity to adjust their contribution so they are not bound to simply pay exactly the balance of the national

efficient price, and that in some areas it may be more and, in some, less. 13

9 Catholic Health Australia, Submission 6, pp 2-3.

10 Australian Medical Association, Submission 9, p. 3.

11 Mr Peter Broadhead, Acting First Assistant Secretary, Health Reform Transition Office, Department ofHealth and Ageing, Committee Hansard, 7 September 2011, p. 29.

12 Mr Peter Broadhead, Acting First Assistant Secretary, Health Reform Transition Office, Department ofHealth and Ageing, Committee Hansard, 7 September 2011, p. 28.

13 Mr Peter Broadhead, Acting First Assistant Secretary , Health Reform Transition Office, Department of Health and Ageing, Committee Hansard, 7 September 2011, p. 29.

179

14

2.13 Mr Broadhead also noted that government does not generally cover 100 per cent of costs as hospitals have their own revenue sources, particularly in metropolitan areas. He also noted that the states' contribution will undoubtedly take into consideration other factors that may vary locally for that hospital, in terms of both costs and revenue. 14

2.14 The Victorian Healthcare Association (VHA), while supporting the standardisation of ABF across Australia, drew on their experience of ABF in Victoria over the last 18 years - in the form of casemix funding - to sound a note of caution. VHA noted that in Victoria, grants have been introduced to cover various shortfalls due to differential pricing. These grants, however, are not transparent as not all agencies receive them. 15

2.15 Dr Kathryn Antioch, drawing on her experience leading the reform of ABF in Victoria, also noted that extra 'risk adjusted' funding was required in the Victorian situation, 'given hospitals incurred significant funding deficits under the ABF arrangements because funding does not meet the health need in the absence of such adjustments'. 16

2.16 Dr Anthony Sherban, Acting Chief Executive Officer, interim Independent Hospital Pricing Authority, responded to these comments and stated that 'most defmitely we will take into account the Victorian experience'. 17 Dr Sherban explained further:

As you know, South Australia also has an activity based funding system. It is not quite the same as the Victorian system, and some would argue that it is perhaps not as comprehensive as the Victorian system.

But there are other systems all around the world as well, of course, some of which have been operating for some time. So we will seek to draw from the experience of many jurisdictions across the world, but the Victorian experience will be very much to the fore in our consideration. 18

2.17 The Australian Healthcare and Hospitals Association (AHHA) argued that there is a risk that introduction of ABF could reinforce existing models of care, with 'the potential for . skewing of incentives resulting in some patients being treated inappropriately as inpatients'. AHHA advocated an innovative use of ABF, including 'developing comprehensive understanding of how ABF systems for non-admitted

14 Mr Peter Broadhead, Acting First Assistant Secretary, Health Reform Transition Office, Department of Health and Ageing, Committee Hansard, 7 September 2011, p. 30.

15 Victorian Healthcare Association, Submission 8, p. 1.

16 Dr Kathryn Antioch, Submission 14, [p. 1].

17 Dr Anthony Sherbon, Acting Chief Executive Officer, interim Independent Hospital Pricing Authority, Committee Hansard, p. 36.

18 Dr Anthony Sherbon, Acting Chief Executive Officer, interim Independent Hospital Pricing Authority, Committee Hansard, pp 36-37.

180

15

patients are constructed in order to fund care delivery in the setting most appropriate to the patient needs'. 19

2.18 Mr Broadhead described at length to the committee the preparatory work that is currently being carried out in the Health Reform Transition Office and the Health Reform Implementation Group. This includes work on what are known as tier 2 clinics. He explained:

These are a list of a little over 100, I think, clients of non-admitted or outpatient clinics that will be used as the initial classification for non " admitted patients. Again, there has been a lot of work done with states and territories, and indeed with clinical input, to look at those as the initial basis for activity based funding and outpatients. 20

Proposed section 131 (1) -Efficient cost for health care services provided by public hospitals where the services are block funded

2.19 Proposed paragraph 131(1)(b) provides for the IHPA to determine the efficient cost for health services provided by public hospitals where the services are block funded. The National Rural Health Alliance (NRHA) emphasised the importance of the IHP A taking into account the full price of care through the provision of block funded hospitals in rural and remote areas. The NRHA noted that the cost of providing care in these circumstances includes:

the costs of travel and accommodation for locum and agency staff to cover shortages, staff leave and continuing professional development, higher operational and infrastructure costs due to the higher costs relating to location and more limited services, and the need for local capacity building and training for management and administrative staff. 21

2.20 The VHA advocated that maternity services be funded as a strategy, rather than on the basis of an activity, as otherwise low-volume maternity services will become less viable. 22

2.21 Dr Sherbon, interim IHP A, explained to the committee that the interim authority is currently analysing 'what is an appropriate scope of activity based funding in accordance with the agreement...as well as some criteria for the application of activity based funding versus block funding in various situations'. He went on to explain that 'no decisions will be made until the authority proper is established'. 23

19 Australian Healthcare and Hospitals Association, Submission I2, p. 5.

20 Mr Peter Broadhead, Acting First Assistant Secretary , Health Reform Transition Office, Department of Health and Ageing, Committee Hansard, p. 30.

21 National Rural Health Alliance, Submission II, [p. 1).

22 Victorian Healthcare Association, Submission 8, p. 3.

23 Dr Anthony Sherban, Acting Chief Executive Officer, interim Independent Hospital Pricing Authority, Committee Hansard, 7 September 2011, p. 33.

181

16

Proposed section 131 (1) - Classification systems and data collection

2.22 Proposed paragraphs 13l(l)(c) and 13l(l)(e) provide for the development of classification systems for health care and other services and to determine data requirements. In general submitters were supportive of a move to national consistenc y in data management. The Australian Institute of Health and Welfare (AIHW) observed that they view the data related functions of the IHP A as providing:

... a valuable opportunity to improve the quality of statistical information on Australia's hospitals . It is anticipated that the Authority's work will result in better information becoming available over time on the nature of public hospital services, the costs of the services, and the efficiency with which they are provided. The information is not only likely to be more comprehensive and accurate than is currently available , i t is also likely to allow better comparability between the states and territor ies and over time

than is currently the case. 24

2.23 AIHW went on to make a strong case for the IHP A to draw upon the current sets of nationally agreed data defmitions and standards for the national hospital collection which have been 'developed and agreed by the jurisdictions and AIHW through multijurisdictional processes auspiced by Health Ministers through the National Health Information Agreement'. 25 AIHW argued that this would ensure:

... that the definitions, classifications and data collections used by the Authority were consistent with those in the current national collections , allowing the total national hospital information resource to expand in a way that would be most useful for a wide range of data users. It would also contribute to greater efficiencies in the national processes to collect and report data, with the objective to collect one consistent set of data on each aspect of hospital activity. This should be suitable for multiple uses,

including those of the Authority (and others involved in the establishmen t of activity based funding) and the wider purposes for which national hospitals data are required. 26

2.24 However, a number of submitters expressed concerns about how the IHP A will classify, collect and manage data. Concerns included the challenges in aligning the differences in how health services are delivered and counted between and within the states and territories , the need to link patient-centric data sets, the burden of compliance on hospitals and the timeframe to resolve data issues. Ms Prue Power, AHHA, commented:

The IHP A will have a key role in determining new classifications and data requirements . This will be a significant challenge to overcome because we need to make sure that the costing and clinical data across Australia is of a

24 Australian Institute for Health and Welfare, Submission 4, [p. 1].

25 Australian Institute for Health and Welfare, Submission 4, [pp 1-2]. 26 Australian Institute for Health and Welfare, Submission 4, [p. 2).

182

consistent nature before it can be properly analysed. At the moment, it is inconsistent between states and territories. 27

17

2.25 The Australian Private Hospitals Association (APHA) sought clarification as to whether the Government intended that the IHP A would develop a separate or replacement system to that of the Australian Refmed Diagnosis Related Groups (AR-DRG's), believing that the Bill implies a new system. The APHA argued that the development of a new system 'would be an unnecessary and costly duplication of resources'. APHA explained further:

DRGs are a patient classification system that provides a clinically meaningful way of relating the types of patients treated in a hospital to the resources required by the hospital. AR-DRGs are used in the public and private sectors and have been under development for many years in

collaborative work amongst the Commonwealth, States, Territories and the private sector through the Clinical Casemix Classification Committee of Australia and its various coding and clinical groups. 28

2.26 Women's and Children's Hospitals Australasia (WCHA), however, raised concerns that 'the current classification used to fund acute inpatient care (AR-DRGs) in general do not differentiate adult from paediatric care and yet there are significantly higher costs in paediatric care compared to adults'. WCHA went on to observe that a published study it had commissioned in 2008 into healthcare costs in Australian

Specialist Paediatric Hospitals found that the AR-DRG system:

... fails to account for a large number of complications and comorbidities that materially affect the cost of care of children particularly those cared for by specialist paediatric hospitals, because the Australian DRG does not include almost 1,500 diagnosis codes included in the international ICD-1 0-AM [International Statistical Classification of Diseases and Related Health

Problems, Tenth Revision, Australian Modification] .29

2.27 The AHHA argued that there is significant work to be done to 'ensure consistency in classifications and linkages between data sets held by various jurisdictional bodies' and that this will be essential to enabling 'meaningful analysis of the performance and cost of the public hospital system across Australia'. 30 AHHA

went on to note that currently the disparate data sets cannot be linked. 31

27 Ms Prue Power, Australian Healthcare and Hospitals Association , Committee Hansard, 7 September 2011, p. 10.

28 Australian Private Hospitals Association , Submission 2, [p. 2].

29 Women's and Children's Hospitals Australasia , Submission 10, p. 6.

30 Australian Healthcare and Hospitals Association , Submission 12, p. 8.

31 Australian Healthcare and Hospitals Association, Submission 12, p. 9.

183

18

2.28 The AHHA also observed that 'there are still major gaps in the measurement tools available', making particular note of the absence of nationally acceptable measures for out-patients and mental health. 32

2.29 The AMA submitted that the IHP A must have regard to any, and all, performance indicators that hospitals are required to achieve as mandated by COAG. 33 The AMA explained that the NHP A will be required to report on the performance of public hospitals against performance indicators contained in a Performance and Accountability Framework as mandated by COAG. The AMA argued that this also has an impact on the IHP A:

If hospitals are expected to perform to a certain standard, the national efficient price and the efficient cost must provide sufficient funding to achieve those standards. The AMA considers this to be the 'effective' cost. 34

2.30 Mr Broadhead, DoHA , told the committee that significant work over many years has been undertaken on standardisation of hospital data, with less work on non " admitted data or outpatient data being undertaken. He further explained that ahead of the arrival of the pricing authority, further work has been undertaken on what standards will apply and what data will be collected. Mr Broadhead provided further details:

There is a rather large group of all jurisdictions and three deputy secretary level representatives from each jurisdiction which oversees, under COAG, implementation of health reform. It gets spoken of by its acronym, HRIG, the Health Reform Implementation Group. That body agreed a set of initial classifications that would be used for activity based funding several months ago-in fact, from memory it was in 2010. So there has been work going on apace to further develop those classifications so they will be fit for purpose from 1 July next year and to implement data collections that will enable them to be used.

For example, in the Health Reform Transition Office there have been people working on a thing called urgency related groups. This is a particular classification that was originally developed in Western Australia which will be used for emergency department services. We have now got a detailed specification which has gone to states and teiTitories for trialling. This is consistent with the agreement that HRIG reached on the classification that would be used initially. All states are aware of the data requirements to populate, if you like, or to meet that classification. 35

32 Australian Healthcare and Hospitals Association , Submission 12, p. 8, fn 1.

33 Australian Medical Association, Submission 9, p. 5.

34 Austral ian Medical Association, Submission 9, p. 1.

35 Mr Peter Broadhead, Acting First Assistant Secretary , Health Reform Transition Office, Department of Health and Ageing, Committee Hansard, 7 September 2011, p. 30.

184

19

2.31 Mr Broadhead, DoHA, also clarified that once the legislation is passed, this work 'will go to the statutory authority to then be the custodian of those standards that are used to count and classify hospital activity for the purposes of funding'. 36

2.32 In relation to the burden on hospitals of complying with additional data collection, classification and reporting, the AHHA noted that hospitals currently are required to submit data to a plethora of Commonwealth agencies and state/territory departments of health/human services. 37 These comments were echoed by the AMA, which submitted that 'every effort should be made to minimise data collection duplication and therefore unnecessary administrative burden on health care providers'. The AMA went on to argue that:

Clarity on the relationship between the three agencies will assist in achieving this. The Bill should require that the Authority, the National Health Performance Authority and the Commission collaborate with each other and other relevant bodies to ensure that data collection requirements are consistent, synchronised and streamlined. 38

2.33 Dr Sherbon, interim IHP A, explained to the committee that the interim IHP A 'will be an active partner in attempting to streamline as much as possible any data requests on states and territories'. He noted that at the Australian Health Ministers Conference held in Darwin in early August, health ministers had resolved to 'seek to rationalise the data impact on states, territories and the Commonwealth ... and other data providers'. 39

2.34 The AMA noted that the NHRA addressed the funding of teaching, training and research within the public hospital system. Yet the AMA observed that the funding of these functions and the role of the IHP A in calculating costs is not made explicit in the Bill. 40 The AMA was of the view that proposed paragraph 131(3)(c) should be amended to have regard to:

... the need to ensure that public hospitals are able to fulfil their role and function to provide teaching and training and to undertake clinical research. 41

36 Mr Peter Broadhead, Acting First Assistant Secretary, Health Reform Transition Office, Department of Health and Ageing, Committee Hansard, 7 September 2011, p. 30.

37 Australian Healthcare and Hospitals Association, Submission 12, p. 9; see also Ms Prue Power, Australian Healthcare and Hospitals Association, Committee Hansard, 7 September 2011, p. 1.0.

38 Australian Medical Association, Submission 9, p. 3.

39 Dr Anthony Sherbon, Acting Chief Executive Officer, interim Independent Hospital Pricing Authority , Committee Hansard, 7 September 2011, p. 34.

40 Australian Medical Association, Submission 9, p. 1.

41 Australian Medical Association , Submission 9, p. 5.

185

20

2.35 Mr Broadhead, DoHA, addressed the cormnittee at length on the issue of teaching, training and research. He observed:

There are a number of specific provisions in the reform agreement which deal with teaching, training and research. In particular, initially teaching, training and research are to be funded on a block basis. The amount in the first year is to be settled between the Commonwealth minister and the minister of each state and territory . This is because there is not at the moment a basis for funding teaching, training and research on an activity basis, if you like, although some may wish to put forward particular ways in which it might be done, but there is no agreement that it could be done at this juncture. There is a clause in the agreement which does say that the pricing authority should provide advice by, I think, 2018 on the feasibility of moving teaching, training and research funding to an activity basis, but the general view amon gst all of the jurisdictions in the development of this agreement is that the particular costs of teaching, training and research are not currently well identified separately within the existing funding arrangements and so it is not possible at this juncture to try and move to a more particular or activity based approach. 42

Proposed section 131 (1)-Advice and public submissions

2.36 Proposed paragraphs 131(l)(h) and 131(1)(i) go to advice in relation to the funding model for public hospitals and confidential advice on costs for health care services to be provided to the Commonwealth and states and territories. Proposed paragraph 131 ( 1 )(1) provides for the IHP A to call for and accept, on an annual basis, public submissions. Concerns raised in relation to proposed paragraphs 131 ( 1 )(h)' and

(i) were also raised by other submitters in relation to Part 4.13 on the reporting obligations of the IHP A . These are discussed below.

2.3 7 The AHHA sought clarification on whether the advice provided pursuant to paragraph 131(1)(h) will also be made available to the public and the public hospital sector. The AHHA argued that 'the acute sector will be responsible for implementing decisions and hence informed stakeholder involvement will be critical to the success of the program'. 43

2.38 Some submitters took issue with proposed paragraph 131(1)(i) which gives the IHP A a pow er to make confidential advice to government on future cost as it w as argued that the provision of confidential advice is at odds with proposed subsection

42 Mr Peter Broadhead, A cting First Assistant Secretary, H ealth R eform Transition Office, D epartment of H ealth and Ageing, Committee H ansard, 7 Septemb er 2011, p. 27; see also p. 28.

43 A ush∑alian Healthcare and Hospitals Association, Subm ission 12, p. 6.

186

21

129(2) which provides a commitment to transparency. It was argued that the workings of the IHP A should be public and transparent. 44

2.39 Mr Graeme Head, Deputy Secretary, Health Reform Transition Office, DoHA, told the committee that 'there are a range of other provisions in the bill that clearly reinforce the intention of governments to increase greatly the transparency in respect of these financing arrangements'. He explained further that this provision simply provides that one of its functions can be to provide confidential advice. 45

2.40 Mr Broadhead, DoHA, also added that the confidentiality provision is the same as the usual practice on the part of the Commonwealth in not publishing the parameters that underpin Commonwealth indexation: 'we put out forward estimates of future expenditure but some of the bases on which those are estimated we do not publish because it is sensitive information'. 46 He emphasised that confidentiality pertains to:

... the advice it provides to governments about the costs of providing healthcare services in the future. It is not meant to be about the present or the past...It is only where it is venturing into territory which is in a sense speculation, if you like, or projections that it has the opportunity to remain confidential in advising governments about what it thinks might happen in the future.47

Proposed subsection 131 (3) -Matters which the IHP A must have regard to in pe1jormance of its functions

2.41 Pursuant to subsection 131(3) there are a range of matters that the IHP A, in performing its functions, must have regard to, including relevant expertise and best practice within Australia and internationally, as well as the range of public hospitals and the variable affecting the actual cost of providing health care services in each of

these hospitals .

2.42 Dr Antioch argued that adequate risk adjustment must also be taken into account in order to 'enable reasonable access, quality , predictability of costs and effectiveness, efficiency and financial sustainability given the price could more accurately reflect the costs required to meet health need'. Dr Antioch cited the experience of ABF in Victoria and stated that:

44 Catholic Health Australia Submission 6, p. 3;Australian Healthcare and Hospitals Association, Submission 12, p. 3; see also Mr Martin Laverty, Chief Executive Officer , Catholic Health Australia, Committee Hansard, 7 September 2011, p. 9.

45 Mr Graeme Head, D eputy Secretary, Health Reform Transit ion Office, Department of Health and Ageing, Committee Hansard, 7 September 2011, p. 25.

46 Mr Peter Broadhead, Acting First Assistant Secretary, Health Reform Transition Office, Department of Health and Ageing, Committee Hansard, 7 September 2011, p. 25.

47 Mr Peter Broadhead, Acting First Assistant Secretary, Health Reform Transition Office, Department ofHealth and Ageing, Committee Hansard, 7 September 2011, pp 25-26.

187

22

This is a serious matter and should not be taken lightly given the experience where ABF has been implemented in Victoria. ABF in the absence of adequate risk adjustment has been associated with underfunding of hospital networks and would have further implications for patient safety (in the absence of adequate EBM [evidence based medicine] initiatives) and stretches the capacity of dedicated staff. 48

2.43 Dr Antioch went on to submit that:

The legislation could be amended to include reference to the need for adequate risk adjustment in the deliberations of the Independent Hospital Pricing Authority to avoid reductions in quality that may result from underfunding if the funds do not adequately match health need. 49

2.44 As previously stated Dr Sherbon, interim IHP A, noted to the committee the intention to heed the Victorian experience. 50

2.45 The CHF observed that proposed subsection 131(3)(a) of the Bill requires that the IHP A 'must have regard for relevant expertise and best practice within Australia and internationally'. The CHF advocated that in this case relevant expertise 'must include the expertise of health consumers, as the users, and ultimately the funders, of the health system'. 51

2.46 The CHF submitted that the views of consumers 'provide an important balance to the views of other stakeholders, including clinicians, health economists and state and territory bureaucrats' and argued that:

There is increasing recognition, both within Australia and internationally , that involving consumers in healthcare policy and decision-making leads to better outcomes for both health consumers and the health system as a whole. 52

2.47 Dr Sherbon, interim IHP A, responded to concerns about consumer engagement with the IHP A noting that 'over the years in my practice . leading healthcare organisations, usually one invites the peak body that is relevant to either the task in hand or the jurisdiction they are working in to participate in ongoing processes'. He explained:

From the interim authority's point of view, the consumer input into the work that we are doing around the activity based funding technical systems and also the very important work on the strategic pricin g framework will be

48 Dr Kathryn Antioch, Submission 14, [pp 3-4].

49 Dr Kathryn Antioch, Submission 14, [p. 4].

50 Dr Anthony Sherban, Acting Chief Executive Officer, interim Independent Hospital Pricing Authority, Committee Hansard, 7 September 2011, p. 36.

51 Consumers Health Forum of Australia , Submission I, p. 2.

52 Consumers Health Forum of Australia, Submission I, p. 2.

188

very important, and we will be seeking participation of the Consumers Health Fomm in that process. 53

23

2.48 Medibank raised the issue of the need to take account of the significant differences in the comparability of cost data across public and private hospitals, with a number of factors making a direct comparison of technical efficiency between public and private hospitals complicated. 54

2.49 CHA voiced similar concerns and noted that there is a lack of recognition of the unique position of some Catholic hospitals which are defmed as private by statute, yet maintain a public service orientation and deliver public health services. CHA argued that:

If the intent of the Bill is to empower the Authority to determine an efficient price for every Australian hospital identified in practice as being public, the Bill should require the Authority to have regard to the different efficient price components that operate in (at least) the 21 public hospitals operated by Catholic services. 55

2.50 For this reason CHA recommended that proposed subsection 131(3)(d) be amended to require the HIP A to have regard to the cost components of delivering public hospital services by non-government hospitals , such that it reads:

... the range of public hospitals and non-government hospitals providing public health services and the variables affecting the actual cost of providing health care services in each of those hospitals. 56

2.51 In responding to these concerns about the non-government provision of public hospital services Mr Broadhead, DoHA, told the committee that:

... the authority, in reaching its dete1mination about the national efficient price, is required to have regard to the actual costs of service delivery in as wide a range of hospitals as practicable. It also has a function to produce adjustments or loadings to that price in respect of hospital characteristics , including type, size and location . 57

2.52 Dr Sherbon, interim IHP A, also commented on this matter:

... the interim authority will establish a preparatory pathway for the receipt of public submissions and it will gather the evidence around the world of

53 Dr Anthony Sherbon, Acting Chief Executive Officer, interim Independent Hospital Pricing Authority, Committee Hansard, 7 September 2011, p. 36.

54 Medibank, Submission 7, pp 4-5.

55 Catholic Health Australia, Submission 6, p. 3; see also Mr Martin Laverty, Chief Executive Officer , Catholic Health Australia, Committee Hansard, 7 September 2011, p. 7.

56 Catholic Health Australia , Submission 6, pp 3-4.

57 Mr Peter Broadhead, Acting First Assistant Secretary, Health Reform Transition Office, Department of Health and Ageing, Committee Hansard, 7 September 2011, p. 26.

189

24

efficient practice in preparation for the authority proper's commencement. That public process will include submissions from any interested organisation-no doubt, Catholic Health Australia will be an interested organisation-and it is appropriate that they express their view of what they think is an efficient price and an appropriate time. 58

Proposed section 134-Constitutional limits

2.53 Proposed section 134 sets out the Constitutional limits of the IHP A. Pursuant to proposed subsection 134(a) the IHP A may perform its functions only for purposes related to (i) the provision of pharmaceutical, sickness or hospital benefits; or (ii) the provision of medical or dental services.

2.54 The AMA submitted that there is nothing in the NHRA to support the involvement of the IHP A in determining an efficient price or efficient cost related to the provision of pharmaceutical, sickness or hospital benefits. The AMA also commented that the intended purpose of this provision is not clear and should be removed. The AMA concluded that 'if the government has a particular role in mind for the Authority in this regard, it should undertake full and proper consultation with the health sector'. 59

2.55 Mr Broadhead, DoHA, explained that this is standard drafting procedure to set out the Constitutional limits . Rather than extending the functions of the IHP A or the powers of the IHP A into the areas listed, this provision sets out that, in performing its functions and exercising its powers, the IHP A cannot go beyond things for which the Commonwealth has a head of power under the Constitution. 60

Proposed Part 4.3-Cost-shifting disputes and cross-border disputes

2.56 Proposed section 139 provides for assessment of cost-shifting disputes, with a Health Minister able to request the IHPA to make an assessment about a cost-shifting dispute between his or her jurisdiction and another jurisdiction.

2.57 The AMA noted that 'AMA members working in public hospitals have experienced many examples of activities that could be interpreted as a state or territory government cost-shifting to the Commonwealth'. Consequently, the AMA submitted that the Bill should also allow for individuals or non-government organisations, in addition to jurisdictions, to report cost -shifting to the IHP A. 61

58 Dr Anthony Sherban, Acting Chief Executive Officer , interim Independent Ho spital Pricing Authority , Committee Hansard, 7 September 2011, p. 33.

59 Australian Medical Association , Submission 9, p. 2.

60 Mr Peter Broadhead, Acting First Assistant Secretary , Health Reform Transition Office, Depa1iment of Health and Ageing, Committee Hansard, 7 September 2011, p. 27.

61 Australian Medical Association , Submission 9, p. 2.

190

25

2.58 Dr Sherbon, interim IHP A, explained that in the past there have been references to voluntary arbitration in previous healthcare agreements. However, for the first time there is now a clear legislative mechanism for resolving cross-border and cost-shifting disputes, with the legislation outlining a process and an authority 'whose job it is to take those complaints, examine them, assess them and make a

recommendation'. 62

Proposed Part 4.4-Constitution and membership of the IHP A

2.59 Proposed section 144 provides for the appointment of members of the IHP A. Pursuant to proposed subsection 144(4) the Minister must ensure that at least one member of the IHP A has substantial experience or knowledge and significant standing in regional or rural health care.

2.60 A number of submitters proposed greater specificity regarding membership of the IHP A. By way of example, WCHA submitted that section 144( 4) be amended to require inclusion of at least one person with substantial experience and knowledge, and significant standing in children's and young people's healthcare. 63

2.61 Similarly, the CHF proposed a requirement for the IHP A to include a member with expertise or knowledge in consumer experiences of health care. This proposal was also supported by WCHA and Dr Antioch. 64

2.62 Dr Antioch noted that the Senate Community Affairs Legislation Committee inquiry into the National Health Reform Amendment (National Health Performance Authority) Bill 2011 recommended 'that COAG should consider a broader range of mandated representation on the Authority and in particular should consider representation of consumers and indigenous health stakeholders'. 65 Dr Antioch went on to note that the current Bill has not addressed this issue in the context of the IHP A for either indigenous health stakeholders or consumers. Dr Antioch submitted that subsection 144( 4) be amended to address the issue of indigenous inclusion . She concluded that 'this will enable consistency with all Federal-State fmancing agreements which include indigenous health as an overarching top priority for Australian Governments'. 66

2.63 CHA submitted that the Bill would be enhanced by requiring the appointment of members skilled and experienced in non-government hospital service provision on the IHP A . CHA noted that it operated 21 public hospitals , in some cases large, iconic

62 Dr Anthony Sherbon, Acting Chief Executive Officer , interim Independent Hospital Pricing Authority, Committee Han sard, 7 September 2011, p. 35.

63 Women' s and Children's Hospitals Australasia , Submission 10, pp 2 and 3.

64 Consumers Health Forum of Au stralia , Submission I, p. 1; Women's and Children's Hospitals Australasia , Submission 10, pp 3 and 5; Dr Kathryn Antioch, Submission 14, [p. 4].

65 Dr Kathryn Antioch, Submission 14, [pp 4-5].

66 Dr Kathryn Antioch, Submission 14, [pp 4-5].

191

26

and well-known hospitals, which provided 2 700 public beds. Mr Laverty stated the Bill ignores the requirements of how these beds are operated by CHA. Although this oversight was not seen as intentional, CHA assert that it is important that these considerations be taken into account. It stated:

Over time, govemment purchasers of hospital services will be able to make informed decisions as to where the most efficient service can be obtained from. In order for the Authority to enable a genuine comparison of costs between government-owned hospitals and non-government owned hospitals, the definition of what a national efficient price comprises will need to be informed not just by practices of govemment owned hospitals, but also by non-government owned hospitals. 67

2.64 Mr Laverty concluded:

The remedy that this inquiry can recommend is pretty simple. We are simply suggesting that provision be made, in two of the bill's provisions, for a director on the board of govemance to have experience in the operation of NGO public hospital services. We are not arguing that the number of directors be expanded from the proposed eight to nine; we are simply saying that one of those eight should be skilled and understand the differences ofNGO public hospitals and, similarly, that the workings of the authority in the setting of the price should give consideration to the variances of running a public hospital. 68

2.65 The APHA also expressed disappointment that there is no reference in the Bill to the need to draw on the knowledge held by the private sector. They observe that the 'private hospital sector should be an integral part of developing reform solutions' and that:

... the new Authority would be well advised to draw some of its membership and some of its staffing as well, from the ranks of people who have appropriate experience in the private hospital sector. 69

2.66 In support of their case, the APHA cited the 2009 Productivity Commission Research Study into Public and Private Hospitals. The APHA noted that the Commission found that:

" on average treatment in Private Hospitals costs $130 per case-mix adjusted separation less than in public hospitals;

" when analysing the costs that private hospitals can control they cost 32% or $1,089 less than public hospitals;

" private hospitals have a more complex casemix than public hospitals;

67 Catholic Health Australia , Submission 6, p. 3.

68 Mr Martin Laverty, ChiefExecutive Officer, Catholic Hospitals Australia , Committee Han sard, 7 September 2011, p. 7.

69 Australian Private Hospitals Association, Submission 2, [p. 3].

192

" where comparable safety and quality data exists in the report private hospitals are shown to be safer than public hospitals;

" private hospitals offer more timely access to elective surgery; and

" analysis by the Commission shows that private hospitals carry out more elective surgery with patients from disadvantaged socioeconomic backgrounds than public hospitals. 70

27

2.67 Mr Head, DoHA, explained to the committee that there are many different kinds of opportunities for inputs to the processes of the IHP A:

The provisions that relate to the membership of the pricing authority, while they only prescribe two forms of specific expertise, of course leave it open to COAG in determining appointments to choose people from a wide range of backgrounds. There are also provisions in the bill that allow for the authority to establish committees other than those that it is required to establish .. .it is open to the authority to establish other advisory bodies and it will call for public submissions, so there are a range of opportunities in the existing terms that do provide for the input. 71

Proposed Part 4.10-Clinical Advisory Committee (CAC)

2.68 Proposed Part 4.10 provides for the establishment (section 176), functions (section 177), and membership (sections 178-190) of the CAC. The Explanatory Memorandum states that the CAC advises the IHP A on the formulation of casemix classifications for healthcare and other services provided by public hospitals , provides advice on matters referred to it by the IHP A and is empowered to do anything incidental to, or conducive to, the performance of those functions. 72

Proposed section 179-Appointment of CAC members

2.69 Pursuant to proposed subsection 179(3), for a person to be eligible for appointment to the CAC, they must be a clinician. A clinician is defmed under the National Health and Hospitals Network Act 2011 (Cth) to mean 'an individual who provides diagnosis, or treatment, as a professional : (a) medical practitioner; or (b) nurse; or (c) allied health practitioner ; or (d) health practitioner not covered by paragraph (a), (b) or (c)'. 73

2.70 The AMA supported the requirement to establish a CAC comprised of clinicians to provide advice to the IHP A . However, it noted that the Bill does not specify the process for selecting members, apart from the fact that membership is a Ministerial appointment. The AMA submitted that at a minimum , the Bill should

70 Australian Private Hospitals Association , Submission 2, [p. 3].

71 Mr Graeme Head, D eputy Secretary , Health Reform Transition Office, Department of Health and Ageing, Committee Hansard, 7 September 2011, p. 24.

72 Explanatory Memorandum , p. 12.

73 Australian Institute for Primary Care and Ageing, Submission 5, pp 1-2.

193

28

require that the process should be 'transparent and apolitical'. In addition, at least one member of the CAC should be appointed from nominations provided by the AMA. 74 Mr Francis Sullivan, AMA, stated in relation to the CAC:

... what you are looking for, one assumes, is a specific set of advice to do with clinical practice inside the hospital. That clinical practice is obviously medical, but there are other clinical areas that would need to have a voice in a committee as such. That is why we have gone with the idea that, at least, an AMA nominee on the committee would ensure that there is a broader medical voice than, say, just a specific voice. 75

2.71 The Australian Institute for Primary Care and Ageing (AIPCA) submitted that the definition of clinician should be narrowed so that appointment to the CAC be only open to health professionals registered under the national1aw, and only to those who have practice experience in public hospitals. They further suggested that in order to provide a minimum core of health professionals possessing a broad range of expertise there could be further specification 'for example that there must be a minimum of one

medical practitioner, one nurse, one pharmacist and one other allied health professional (e.g. podiatrist, psychologist)'. 76

2.72 The WCHA welcomed the commitment to establish a CAC. However, WCHA submit that proposed section 179 be amended to allow the Minister to appoint individuals to the CAC with coding and classifications expertise in addition to clinicians. 77

2.73 Mr Broadhead, DoHA, responded to these matters and stated that in the legislation establishing the ACSQHC, the term clinician was not defined, but it was later defmed in a subsequent amendment to mean 'essentially people who have a clinical role in respect of patients. It is not purely medical but includes nurses, allied health practitioners and so on'. He went on to explain that as the Bill is amending legislation, that same definition of clinician will also apply. 78

Proposed Part 4.12 - Other Committees

2.74 Proposed section 205 provides for the IHP A to establish committees to advise or assist it in the performance of its functions. The CHF proposed the establishment of

74 Australian Medical Association, Submission 9, pp 2 and 5.

75 Mr Francis Sullivan , Secretary-General, Australian Medical Association, Committee Hansard, 7 September 2011, p. 17.

76 Australian Institute for Primary Care and Ageing, Submission 5, p. 2.

77 Women's and Children's Hospitals Australasia, Submission 10, p. 5.

78 Mr Peter Broadhead, Acting First Assistant Secretary, Health Reform Transition Office, Department of Health and Ageing, Committee Hansard, 7 September 2011, p. 31.

194

29

a Consumer Advisory Committee under this section to enable 'genuine consumer engagement and involvement in the work of the Pricing Authority' . 79

Proposed Part 4.13 -Reporting obligations of the IHP A

2.75 Pursuant to proposed Part 4.13 of the Bill, which provides for reporting obligations of the HIP A, there is provision for the Minister or state /territory Minister to require the IHP A to prepare reports or give information (section 208), for the IHP A to keep the Minister informed (section 209), for the IHP A to report to Parliament (section 210), for the Minister or state/territory Minister to provide comment before public reports (section 211) and for the IHP A to prepare and give to the Minister an annual report for presentation to Parliament (section 212). Reporting obligations are also provided for in sections 131 and 193.

2. 7 6 A number of submitters raised issues of transparency and access in relation to these provisions. The AMA submitted that all reports should be made available on the internet. 80 The APHA noted that the Minister stated in the second reading speech on the Bill that:

The authority will have strong independent powers: it will be for public hospitals what the independent Reserve Bank is for monetary policy. This is unprecedented for the public hospital system. The result will be a thorough and tigorous determination without fear or favour to governments. The government is confident that the authority will provide the health system with the stability and robustness that the Reserve Bank has provided for monetary policy for decades. 81

2. 77 However, the APHA argued that the provisions contained in sections 208, 211 and 212 'fall a long way short of the practise of the Board of the Reserve Bank of releasing its decisions and monthly minutes publicly with no prior comment by the Executive'. The APHA went on to observe:

If the Authority is to truly 'be to public hospitals what the Reserve bank is for monetary policy' then its governing legislation should require the Authority to publish on its website the minutes of its meetings and the reasons for its decision in regard to pricing. This would be in the best interests of hospitals, health consumers and the broader community. We urge the Committee to look closely at the disclosure and reporting regime of the Authority as specified in the Bill, as we believe there is room for significant improvement in terms oftransparency and accountability.

82

79 Consumers Health Forum of Australia, Submission I, p. 1

80 Australian Medical Association, Submission 9, p. 3.

81 Australian Private Hospitals Association, Submission 2, [p. 3] citing The Hon. Nicola Roxon, Minister for Health and Ageing, Second Reading Speech, National Health Reform Amendment (Independent Hospital Pricing Authority) Bill 2011, House of Representatives Hansard, 24 August 2011, p. 9.

82 Australian Private Hospitals Association, Submission 2, [p. 4].

195

30

2.78 Pursuant to section 211, the IHPA must not report publicly unless the report, and a period of 45 days in which to comment on the report, has been given to the Minister and each state/territory Health Minister. This does not apply, however, to a ∑report under section 212.

2.79 The CHF submitted that 'in the interests of transparency, it is important that health consumers have access to complete and uncensored information on hospital pricing and any jurisdictional disputes that have arisen'. Further, the CHF sought clarification on:

... whether the comments of Ministers will influence the final report that is released to the public, and whether the comments of Ministers on the report will also be made public. 83

2.80 DoHA provided evidence on transparency issues. Mr Head noted in relation to section 131 that 'there are a range of other provisions in the bill that clearly reinforce the intention of governments to increase greatly the transparency in respect of these financing arrangements'. 84 In responding to questions about the provisions of section 211, Mr Broadhead confmned that it does not cover changing or varying a negative report. 85 He explained further that section 211:

is essentially about a 'no surprises' provision in terms of people who may be asked to respond to the things that are published, particularly state and federal ministers . There is nothing in this provision which prevents the publication of something, but it does give to people who will likely be called on as soon as such a repmi is published the opportunity to understand it and therefore respond in an informed way 86

Proposed Part 4.14-Secrecy

Proposed sections 221, 222 and 228 - Disclosure to researchers, disclosure with consent and protection of patient confidentiality

2.81 The Office of the Australian Information Commissioner (OAIC) noted that in addition to the IHP A's obligations under the Privacy Act, proposed sections 221 and 228 prevent the disclosure of indentifying information. The OAIC concluded that 'it appears to the OAIC that appropriate privacy safeguards will be built into the regulatory framework governing the IHPA'.87 Similarly, Dr Antioch

83 Consumers Health Forum of Australia, Submission 1, p. 3.

84 Mr Graeme Head, Deputy Secretary, Health Reform Transition Office, Department of Health and Ageing, Committee Hansard, 7 September 2011, p. 25.

85 Mr Peter Broadhead, Acting First Assistant Secretary , Health Reform Transition Office, Department of Health and Ageing, Comm .ittee Hansard, 7 September 2011, p. 26.

86 Mr Peter Broadhead, Acting First Assistant Secretary , Health Reform Transition Office, Department of Health and Ageing, Committee Hansard, 7 September 2011, p. 26.

87 Office of the Australian Information Commissioner, Submission 3, [pp 1-2].

196

31

considered that 'these privacy inclusions are an excellent development and clarify the privacy issues in the NHRA (July 2011 )'. 88

2. 82 Pursuant to section 222, an official of the IHP A may disclose protected IHP A information that relates to the affairs of a person if (a) the person has consented to the disclosure; and (b) the disclosure is in accordance with that consent. 89

2.83 Pursuant to section 228, the IHP A, NHP A and the ACSQHC must protect patient confidentiality with some provision for consent. The CHF argued that the legislation should specify that this must be informed consent, so that the consumer or another person who is able to give consent is fully aware of the implications of providing consent. 90

2.84 The CHF noted that the National Health and Hospitals Network Bill2010 was amended in the Senate to include reference to informed consent in the relevant provisions of that Bill and submitted that it is appropriate that this is reflected in the current Bill. 91

Other matters raised in submissions

2.85 Principal among the reasons for referral of this Bill to the committee was consideration of the relationship of the IHP A and the ACSQHC, and the relationship of the IHP A with the NHP A. 92

2.86 The AIPCA observed that the current/proposed legislative scheme contains no real obligation for the three statutory bodies to work together to avoid duplication when collecting similar and related data.93 The AIPCA further noted that:

The only real legislative connection between the Pricing Authority, the Performance Authority and the Commission is found in the secrecy provisions of the Bill, enabling disclosure of protected information by the Pricing Authority to assist the other two statutory bodies.

94

2.87 Similarly , the AMA argued that more detail needs to be provided by governments on the circumstances in which information would be shared between the three agencies. 95

88 Dr Kathryn Antioch, Submission 14, [pp 2-3].

89 Consumers Health Forum of Australia, Submission 1, p. 3.

90 Consumers Health Forum of Australia, Submission 1, p. 3.

91 Consumers Health Forum of Australia, Submission 1, p. 3.

92 Selection of Bills Committee, Report No. 11 of 2011, Appendix 1.

93 Australian Institute for Primaty Care and Ageing, Submission 5 , p. 3.

94 Australian Institute for Primary Care and Ageing, Submission 5, p. 2.

95 Australian Medical Association , Submission 9, p. 3.

197

32

2.88 The AIPCA suggested that consideration could be given to recommending an amendment to the Bill to establish a duty of cooperation between the three bodies. The AIPCA explained that such a provision is contained in the United Kingdom's Health and Social Care Act 2008.96

2.89 However, DoHA submitted that the IHP A will have a legislative requirement to have a strong consideration of how its functions will interact with the safety and quality of health services. They also note that disclosures of information between the IHP A and the ACSQHC in regard to ensuring safety and quality in healthcare services are provided for by proposed section 220. DoHA also submitted that the NHP A reports and its performance framework will play a vital role in ensuring that the IHP A can drive improvements and efficiencies within the health sector. 97

Conclusion

2.90 The establishment of the IHP A represents a key part of the Government's health reforms. The Bill reflects the historic agreement concluded by the Council of Australian Governments on 2 August 2011. The IHP A will have a pivotal role in increasing the efficiency of hospital services through determining a national efficient price for activity based funding and determining amounts for block funding. Critically, it will do this in an independent manner. This provides a guarantee of Commonwealth funding for hospital services based on an efficient price for each kind of service. In addition, the IHP A will, for the first time, provide a legislative mechanism for resolving cost-shifting and cross-border disputes. The Government's health reforms provide a different, and more transparent, approach to funding hospital services in the future.

2.91 The committee notes the broad support for both the IHP A and the national activity based funding system. The IHP A will be drawing on experience from many other jurisdictions, including Victoria which has had activity based funding for 18 years.

2.92 The committee considers that the measures set out in the Bill will ensure that the unique features of Australia's hospital sector will be adequately addressed. There is provision for block funding where circumstances are such that activity based funding is not appropriate. A further feature of the provision of hospital services in Australia is the engagement of non-government organisations in the provision of public hospital beds. In particular, Catholic Health Australia pointed to the large part its hospital network plays. The committee has considered the concerns of Catholic Health Australia that due consideration be given to the difference in provision of public beds by a non-government organisation. Catholic Health Australia recommended that a member of the IHP A have experience in the operation of non " government public hospital services.

96 Australian Institute for Primary Care and Ageing, Submission 5, p. 3.

97 Department of Health and Ageing, Submission 13, p. 7.

198

33

2.93 The committee is satisfied that the Bill provides adequate recognition of the diversity of the hospital sector. In particular, the committee notes that in determining the national efficient price, the IHP A must have regard to the actual costs of service delivery in as wide a range of hospitals as practicable. It also has a function to produce adjustments or loadings to that price in respect of hospital characteristics, including type, size and location. In addition, the IHPA will call for public submissions. Finally, the committee notes that it is open to COAG in determining membership of the pricing authority to choose people from a wide range of backgrounds.

2.94 The committee is also satisfied with information provided by both the Department of Health and Ageing and Dr Sherbon, of the interim IHP A, that there are many opportunities provided by the provisions of the Bill for meaningful consumer input, including the establishment of specific committees if required.

2.95 In relation to concerns about funding of teaching, training and research , the committee notes that the Government has indicated that initially this will be funded on a block basis.

Recommendation 1

2.96 The committee recommends that the National Health Reform Amendment (Independent Hospital Pricing Authority) Bill2011 be passed.

Senator Helen Polley Chair

199

200

Additional comments by Coalition Senators

Coalition Senators do not oppose the recommendation of the report that this bill should be passed.

However, Coalition Senators strongly believe that the Government's co-called health reform package is more about creating the political illusion of health reform than any meaningful improvement or guarantees for patients.

The illusion of reform

This so-called reform represents an enormous back-down by a Prime Minister and Minister for Health desperate to create the impression of health reform, despite this being the third time in only eighteen months that the Government has claimed an 'historic agreement' on health reform. The fact that it only bears a passing resemblance to the supposed agreement promoted by the then Prime Minister last year and further

dilutes the agreement announced by the current Prime Minister earlier this year illustrates exactly how desperate the Labor Government is to create the illusion of achievement in this critical area.

Apart from the establishment of new bureaucracies, key changes in health will not be implemented until 2014-15 - conveniently after the next general election is due. In particular, as well as the commitment to fund 60% of hospital costs being scrapped, the current commitment to 50% of growth funding will not occur until 2017. Furthermore, guarantees about elective surgery have been scrapped and targets for

emergency treatment have been watered down.

Potential for duplication

Considerable concerns were expressed about the possible duplication of effort following the creation of the new authorities . Various submissions commented that there was no legislative requirement for the new authorities to cooperate with existing agencies (so as to not simply duplicate existing work) but also to cooperate with each other.

While it may seem obvious that such cooperation is necessary and beneficial, the lack of a legislative direction in this regard is of concern.

Coalition Senators believe that consideration should be given to an independent review of these agencies' and authorities' operations after their initial establishment and implementation.

201

36

Recognition of non-government hospitals

Catholic Health Australia highlighted one of the major potential problems with his legislation - that while the cost base for treatment in Catholic public hospitals is different from state public hospitals, there is no guarantee of representation for non " government hospitals on the HIP A.

As outlined by Martin Laverty, CEO of Catholic Health Australia:

Very specifically, senators will be aware that Catholic Health Australia represents about 10 per cent of the nation's hospital beds. Within that there are 2, 700 public hospital beds operated by Catholic hospitals, mostly on the east coast, but broadly around Australia. For the bill to be effective it needs to have regard to the unique nature and the slightly different legal status under which those 2, 700 public hospital beds actually operate. We do not see that reflected in the bill at present, but we think minor amendments can adequately incorporate the impacts of the differing legal structures that operate those 2, 700 public hospital beds, and we have proposed that to you in our submission.,.

He went on to outline:

For example, in a non-government owned provider of public hospital services , we have to account for capital, depreciation, insurances, council rates, long-service leave and information technology, even down to whether or not a Microsoft licence per user is applied to each cost of patient admission. Different states and territories use different accounting systems, which affects whether or not these various components will ultimately make their way into what is an efficient price. For an NGO provider of hospital services, all of these form the component of what is the price or the cost of delivering a service. Some states and territories account for these things differently; indeed, within states different areas at present can account for them differently. ,.,.

Coalition Senators believe that this experience and perspective should be reflected in theiHPA.

As outlined by Martin Laverty in evidence before the committee:

Therefore, we argue that the governance of this new authority should allow for the appointment to its board of someone who has experience in the delivery of NGO hospital services. iii

Just as section 144(4) of the Bill requires that at least one member of the Authority has substantial knowledge or experience in the provision of health care in regional or rural areas, Coalition Senators support the submission of Catholic Health Australia that non-government hospitals should also be guaranteed representation.

202

37

Recommendation:

Coalition Senators recommend that section 144(4) of the bill be amended to add an additional requirement to include as a member of the Authority a person who has substantial knowledge or experience in the provision of services in non " government owned hospitals.

Senator Scott Ryan Senator for Victoria

Senator Concetta Fierravanti- Wells Senator for New South Wales

i H ansard ofhearing

ii H ansard ofhearing

iii H ansard of hearing

203

Senator Sean Edwards Senator for South Australia

Senator Sue Boyce Senator for Queensland

204

APPENDIX 1

Submissions and additional information received by the committee

Submissions

1 Consumers Health Forum of Australia

2 Australian Private Hospitals Association

3 Office of the Australian Information Commissioner

4 Australian Institute of Health and Welfare

5 Australian Institute for Primary Care and Ageing

6 Catholic Health Australia

7 Medibank

8 Victorian Healthcare Association

9 Australian Medical Association

10 Women's and Children's Hospitals Australasia

11 National Rural Health Alliance

12 Australian Healthcare and Hospitals Association

13 Department of Health and Ageing

14 Dr Kathryn Antioch

15 Australian College of Rural and Remote Medicine

16 Health Reform, Northern Territory Department of Health

Answer to Question on Notice

1 Consumers Health Forum of Australia (CHF), answer to a Question on Notice asked at the public hearing held on 7 September 2011, provided on 9 September 2011

205

206

APPENDIX2

Public Hearing

Wednesday, 7 September 2011 Committee Room 2S3, Parliament House, Canberra

Witnesses

Australian Healthcare and Hospitals Association Ms Prudence Power, Executive Director

Australian Medical Association Mr Francis Sullivan, Secretary General

Catholic Health Australia Mr Martin Laverty, Chief Executive Officer

Consumers Health Forum of Australia Ms Carol Bennett, Chief Executive Officer Ms Anna Wise, Senior Policy Manager

Department of Health and Ageing Mr Peter Broadhead, Acting First Assistant Secretary, Health Reform Transition Office Mr Graeme Head, Deputy Secretary, Health Reform Transition Office

Interim Independent Hospital Pricing Authority Dr Anthony Sherbon, Acting Chief Executive Officer

Medibank Private Ms Cindy Shay, Group Executive Provider Relations

Menzies Centre for Health Policy, University of Sydney Professor Stephen Leeder, Director

Victorian Healthcare Association Mr Trevor Carr, Chief Executive Officer

207

208

The Senate

Finance and Public Administration Legislation Committee

Public Service Amendment (Payments in

Special Circumstances) Bill 2011

August 2011

209

© Commonwealth of Australia 2011

ISBN 978-1-74229-513-8

Senate Finance and Public Administration Committee Secretariat:

Ms Christine McDonald (Secretary)

Dr Bu Wilson (Principal Research Officer)

Ms Kyriaki Mechanicos (Senior Research Officer)

Ms Victoria Robinson-Conlon (Research Officer)

Mr Hugh Griffin (Administrative Officer)

Ms Penny Bear (Administrative Officer)

The Senate Parliament House Canberra ACT 2600

Phone: Fax: E-mail:

02 6277 3439 02 6277 5809 fpa. sen@aph. gov .au

Internet: http :1 /www .a ph. gov .au/ senate/ committee/fapa ctte/index.htm

This document was produced by the Senate Finance and Public Administration Committee Secretariat and printed by the Senate Printing Unit, Parliament House, Canberra.

11

210

MEMBERSHIP OF THE COMMITTEE

43rd Parliament

Members

Senator Helen Polley, Chair

Senator Scott Ryan, Deputy Chair Senator Richard DiNatale

Senator Sean Edwards

Senator the Hon John Faulkner Senator the Hon Ursula Stephens

Participating Members for this inquiry

Senator Nick Xenophon

Ill

211

ALP, Tasmania

LP, Victoria AG, Victoria

LP, South Australia

ALP, New South Wales ALP, New South Wales

IND, South Australia

lV

212

TABLE OF CONTENTS

MEMBERSHIP OF THE COMMITTEE ...................................................... iii

RECOMMENDATIONS ........................ "........................................................ vii

Public Service Amendment (Payments in ∑Special Circumstances) Bill ~()11 ................................................................................................................ 1

INTRODUCTION ...... ....... ........ .............. ... ...... ... ....... ................ .......... ....... .... ....... 1

THEBILL .......................................................... ... .................................................. 1

BACKGROUND ................ ...... .... .... ........ ............... ...... ...... ........... ... ........ ......... .... 2

ISSUES .............. .... ......... ...... .... ....... .......... .......... ...... ... ..... ..... ............... ........... .... .. 5

Minority Report by Nick Xenophon, Independent Senator

for South Australia ............................................................................................ 13

The Barry Crush Case ..... ........... ................................ ........ .................. ..... ....... .... 13

A CDDA-type Scheme ............ ........ ..... ............ ...................... ..... ....... ... ....... ...... .. 14

APPENDIX 1 ..................................................................................................... 17

Submissions and Additional Information received by the Committee .............. I?

v

213

214

RECOMMENDATIONS

Recommendation 1

1.39 The committee recommends that the Public Service Amendment (Payments in Special Circumstances) Bill2011 be amended as follows:

Schedule 1, page 3 (lines 4 and 5), omit item 1, substitute:

1. Subsection 73( 4)

Omit "$100,000", substitute "$250,000".

Recommendation 2

1.41 The committee recommends that subsection 66( 4) of the Parliamentary Services Act 1999 be amended to increase the limit of payments available in special circumstances to $250,000.

Recommendation 3

1.43 The committee recommends that the consultations taking place among the Department of Finance and Deregulation, Comcare and the Department of Education, Employment and Workplace Relations to implement recommendation 1 contained in the Commonwealth Ombudsman's Report No.4 of2010 be concluded as a matter of priority.

Vll

215

216

Public Service Amendment (Payments in Special Circumstances) Bill2011

INTRODUCTION

1.1 The Public Service Amendment (Payments in Special Circumstances) Bill 2011 (the bill) was introduced into the Senate on 12 May 2011 by Senator Nick Xenophon. On 7 July 2011, the Senate, on the recommendation of the Selection of Bills Committee, referred the bill to the Finance and Public Administration Legislation Committee for inquiry and report by 16 August 2011. In undertaking the inquiry, the committee was requested to consider:

1. The lack of proper compensation scheme for claimants who have been disadvantaged as a result of administrative errors by Government agencies not included under the Scheme for Compensation for Detriment caused by Defective Administration (CDDA)

2. The recommendations of the Commonwealth Ombudsman in the Ombudsman's Report No 4 of 2010 in relation to discretionary payments of compensation

3. The losses caused to claimants because of administrative errors within Government agencies not covered by the CDDA scheme

4. The limited ability for claimants to seek compensation if the Government agency in question is not covered by the CDDA scheme

5. The limitations of discretionary payments in the Public Service Act 1999.1

Conduct of the inquiry

1.2 The committee advertised the inquiry on the Internet and in The Australian and invited submissions from interested organisations and individuals. The committee received six public submissions and one confidential submission. The list of public submissions received is at appendix 1. Submissions can be accessed through the committee's website at: http://www.aph .gov.aulsenate/committee/fapa ctte/index.htm.

1.3 The committee agreed not to hold a public hearing for this inquiry.

THE BILL

1.4 The bill proposes to repeal subsection 73( 4) of the Public Service Act 1999 (Public Service Act).

1 Senate Selection of Bills Committee, Report N o 9, 7 July 2011, Appendix 4.

217

2

1.5 Section 73 of the Public Service Act provides for payments in special circumstances. A minister may authorise a payment in special circumstances which relate to, or arise out of:

" the payee's employment by the Commonwealth; or

" another person's employment by the Commonwealth .

1.6 Payments may be made as a lump sum or periodic. The minister may authorise the payment even though the payments would not otherwise be authorised by law or required to meet a legal liability. No authorisation can be made for a payment/s in excess of a total of $100,000. Conditions may be attached to the payment and any breach of the conditions could result in the recovery by the Commonwealth of the payment/s.

1. 7 A note under section 73 makes clear that payments under the section must be made from money appropriated by the Parliament. Generally, a payment can be debited against an agency's annual appropriation, providing that it relates to some matter that has arisen in the course of its administration.

BACKGROUND

1.8 In March 2010, the Commonwealth Ombudsman reported on discretionary payments by Comcare and the Department of Finance and Deregulation. 2 The report was the result of an investigation into two separate complaints about errors that had been made by Comcare in the calculation of workers compensation payments. In each case, the errors resulted in underpayments that were not discovered for 10 years (the case ofMs A) and 13 years (in the case ofMr B).

1.9 On detecting its errors, Comcare paid each of the complainants the amounts they should have originally received . In addition, both complainants requested further compensation in recognition that, due to Comcare's error, they had been deprived of the benefit of the money for a number of years. The Ombudsman's investigation confirmed that Comcare had made errors in the calculation of payments. 3

1.10 The Ombudsman's report noted that generally, when a person suffers a quantifiable loss arising from the defective administration of an Australian Government agency, they can make a clain1 for compensation under the Scheme for Detriment Caused by Defective Administration (CDDA scheme). CDDA scheme payments are made where there is a moral obligation to pay compensation rather than

2 Commonwealth Ombudsman , Comcare and Department of Finance and Deregulation: Discretionary Paym ents for Compensation, Report No 04/2010, March 2010. http: //v.rww.ombudsman .gov.au/filcs /comcare dofd discretionary compensation payments.pdf

3 Commonwealth Ombudsman, Comcare and Department of Finance and Deregulation: Discretionmy Payments for Compensation, Report No 04/2010, March 2010, p. 1.

218

3

any legal liability arising under the general law.4 The Department of Finance and Deregulation (Finance) noted that:

Compensation is payable only where an applicant is found to have suffered detriment as a direct cause of the defective administration. There is no financial ceiling on payments, which are generally approved on the basis that there is a moral, rather than legal, obligation to the claimant. 5

1.11 Finance is responsible for development of the guidelines for the CDDA scheme. If a payment is made under the CDDA scheme, the agency against which the claim is made is responsible for making the payment out of its appropriation. The CDDA scheme applies only to Financial Management and Accountability Act 1997 (FMA Act) agencies.

1.12 Comcare is not a FMA Act agency; it is a Commonwealth Authority under the Commonwealth Authorities and Companies Act 1997 (CAC Act). As such, no claim can be made under the CDDA scheme for matters in relation to Comcare. Similarly, the CDDA scheme is not available to individuals who are seeking compensation for defective administration on the part of contracted service providers or state, territory or local government agencies providing a service on behalf of a Commonwealth Government agency.

1.13 As access to the CDDA scheme was closed to Mr B, he was referred to Finance to request an act of grace payment under section 33 of the FMA Act. Mr B's request for an act of grace payment was declined. The Ombudsman noted that an act of grace payment is 'generally not available' in relation to the actions of an agency established under the CAC Act. The Ombudsman went on to observe that, while there are exceptions to the rule, 'act of grace payments are not intended to cover financial losses suffered as the direct result of defective administration by a CAC agency'. The Ombudsman concluded:

For this reason, it became apparent in Mr B's case that Finance was not in a position to deal with a number of the claims made in his requests for additional compensation, particularly relating to Comcare's enors in administration. 6

1.14 The Ombudsman noted that in its response to the investigation, Comcare indicated that it did not consider the incidental powers it commonly relies upon to resolve administrative matters would allow it to compensate a person for a loss that could be characterised as a loss of interest on money owed. Further, the payment of interest is already contemplated by the Safety, Rehabilitation and Compensation Act 2011 (SRC Act) in a defmed set of circumstances and therefore the existence of an

4 Commonwealth Ombudsman, Submission 3, p. 2.

5 Department of Finance and Deregulation, Submission 1, p. 7.

6 Commonwealth Ombudsman , Comcare and Department of Finance and D eregulation : Discretionary Paym ents for Compensation, Report No 04/2010, March 2010, p. 4; see also Department of Finance and Deregulation , Submission 1, p. 5.

219

4

express provisiOn relating to the payment of interest limits its capacity to make discretionary payments to people like Ms A and Mr B .7

1.15 The Ombudsman concluded that the claimants should have been able to rely on Comcare's administrative processes detecting fundamental errors in its calculations within a reasonable time period. However, there is currently no direct means for people who have suffered a fmancialloss due to Comcare's defective administration to have their claims for compensation considered . The Ombudsman considered that, while there were difficulties in settling Ms A's and Mr B's claims for compensation, Comcare should find a way to compensate each of them.

1.16 To address the difficulties faced in seeking compensation, the Ombudsman recommended that Comcare and Finance develop a proposal for establishin g a scheme, similar to the CDDA scheme, whereby people adversely affected by poor administration of the SRC Act can seek compensation. Finance supported this recommendation and proposed that it prepare a submission to the Deputy Prime Minister seeking a direction to allow determining authorities under the SRC A ct to develop and implement a scheme similar to the CDDA scheme. Such a scheme would allow determining authorities like Comcare to deal with claims for compensation arising from defective administration . 8

1.17 In relation to the compensation payments sought by Ms A and Mr B , Comcare arranged for Ms A to be compensated via her original employer. In the case of Mr B , Comcare sought actuarial advice regarding the loss suffered and compensated him under section 73 of the Public Service Act to the full amount available under that section, that is $100,000. 9 In addition, Comcare indicated that it would deal with any shortfall in compensation through the proposed compensation scheme. IO

1.18 Issues arising from access to compensation were also addressed by the Senate Legal and Constitutional Affairs References Committee report on the inquiry into the review of Commonwealth compensation payments tabled in December 2010. I I The Legal and Constitutional Affairs Committee considered the administrati on and effectiveness of other mechanisms that enable governments to make discretionary payments or to waive the payment of debts, including act of grace and ex gratia payments; and the CDDA. The Legal and Constitutional Affairs Committee concluded that the CDDA scheme provides a useful mechanism for addressing harm caused by

7 Commonwealth Ombudsman , Co mcare and D epartment of Finance and D eregulat ion: Discretionmy Paym ents for Comp ensation, Rep01i N o 04/2010, March 2010, p. 4.

8 Commonwealth Ombudsman , Com care and Departm ent of Finance and Deregulation: Discretionary Paym ents for Comp ensation, Repo1i N o 04/2010, March 2010, pp 6-7.

9 Commonwealth Ombudsman, Subm ission 3, p. 3.

10 Commonwealth Ombudsman , Com care and Department of Finance and D eregulation: Discretionmy Payments for Compensation, Report N o 04/2010, March 2010, pp 6-7.

11 Senate Legal and Constitutional Affairs R eferences Committee, Review of C ommonwealth Compensation Paym ents, Decemb er 2010.

220

5

defective administration; however, it had not 'kept pace' with changes in Commonwealth public administration. In particular, the committee commented that the application of the CDDA scheme to FMA Act agencies only appears to create anomalous outcomes: if a person suffers loss or damage due to defective administration, appropriate restitution should be available regardless of whether the loss or damage was caused by a FMA Act agency, a CAC Act body or a third party contracted to provide a Commonwealth service. The Legal and Constitutional Affairs Committee recommended that Finance investigate the extension, in appropriate circumstances, of the CDDA scheme to CAC Act agencies and to third party providers performing functions or providing services on behalf of the Commonwealth. 12

ISSUES

1.19 Submitters commented on both the proposed amendment to section 73 and the mechanism to address claims for compensation arising from defective administration by agencies not covered by the CDDA scheme.

Section 73 payments

1.20 As noted above, the proposed amendment to the Public Service Act would remove the $100,000 limit on payments for special circumstances. The Community and Public Sector Union (CPSU) welcomed the proposal. The CPSU noted that the amount of $100,000 in subsection 73(4) had not been increased since 1999 and therefore, in relative terms, the maximum payment available has decreased over time.13

1.21 Mr Barry Crush, who sought compensation from Comcare for defective administration, commented on the removal of the limit:

By removing the $100,000 cap on discretionary payments I believe that myself and others who have been denied compensation through no fault of their own, will finally be able to avail themselves of a mechanism equipped to provide more realistic and individually appropriate compensation. 14

1.22 However, other submitters did not agree with the proposed amendment. The Australian Public Service Commission (APSC) commented that rather than removing the limit, consideration could be given to increasing the limit and/or introducing a mechanism for automatic adjustment of the limit.

1.23 The APSC noted that the amount available under section 73 had remained unchanged since 1999. The APSC explained that the restriction was intended to ensure that where an amount might exceed $100,000 it would have to be referred for

12 Senate Legal and Constitutional Affairs References Committee, Review of Commonwealth Compensation Payments, December 2010, p. 53.

13 Community and Public Sector Union, Submission 2, p. 1.

14 Mr Barry Crush, Submission 6, p. 14.

221

6

decision by the Minister for Finance and Deregulation under the general arrangements for act of grace payments by the Conunonwealth. This reflected the then requirement for act of grace payments above $100,000 to be subject to a report by an Advisory Committee before the Finance Minister could authorise such an amount under section 33 of the FMA Act. The APSC noted that a report by the Advisory Committee now applies to amounts over $250,000.15

1.24 According to the APSC's understanding, the section 73 payment mechanism is used rarely. The APSC also provided the committee with information on the intended uses of section 73 as set out in the Explanatory Memorandum to the Public Service Bil11999:

" the reimbursement of legal costs incurred by APS employees in the course of, or in connection with, their employment;

" payments in lieu of entitlements lost as a result of incorrect advice;

" the settlement of unfair termination claims; or

" the payment of compensation following a recommendation of the (former) Merit Protection and Review Agency.16

1.25 The APSC explained that it did not support the removal of the limit on payment in section 73 as:

... the Parliament specifically legislated for a ceiling in the interests of providing an appropriate level of accountability and centralised oversight for any larger payments (through the act of grace payment mechanisms under s.33 of the FMA Act), while providing the Public Service Minister (and by delegation, Agency Heads) with a reasonable capacity to make payments relating to circumstances arising out of a person's Commonwealth employment.17

1.26 The APSC saw it as 'prudent' that payments made under section 73 remain subject to a greater level of accountability where they involve large amounts of public money. However, as already noted, the APSC considered that the limit could be increased by tying the amount available under section 73 to the amount available under the FMA Act, hence restoring the link to the FMA Act ceiling. The APSC further commented that it will give consideration to amending the Public Service Act in this way as part of the amendments currently being drafted to reflect the Blueprint for the Reform of Australian Government Administration . 18

1.27 Comcare also commented on the proposed amendment to section 73 and noted that it is 'an important section in the context of discretionary government

15 Australian Public Service Commission, Submission 5, p. 2.

16 Australian Public Service Commission, Submission 5, p. 2.

17 Australian Public Service Commiss ion, Submission 5, p. 3.

18 Australian Public Service Commission, Submission 5, p. 4.

222

7

payments'. Comcare agreed that it would be reasonable to review the level of the section 73 limit, however, Comcare suggested that as a proxy for defective administration under the SRC Act it is an imperfect mechanism. In this regard, Comcare pointed to the following issues:

" there are some practical and legal constraints when considering compensation for defective administration using section 73, in particular, the requirement for there to be a nexus with employment; and

" Comcare administers claims under the SRC Act for all workers employed by Commonwealth departments and most Commonwealth authorities and the ACT Government, providing safety, rehabilitation and compensation services. Self-insurers, licensed by the Safety, Rehabilitation and Compensation Commission (SRCC), provide the same services to their employees. However, only APS employees have access to payments under section 73, thus ACT employees and employees of other non-APS statutory authorities would not have access to this mechanism. Section 73 also does not go any way towards addressing defective claims administered by a self insurer under the SRC Act.19

1.28 Comcare concluded that:

It is Comcare's view that for the purposes of equity and fairness , any CDDA options available to claimants under the SRC Act should be available to all claimants, not just APS employees.

Comcare notes that whether section 73 of the PS Act is used as a proxy CDDA scheme or not, the original purpose of this section, i.e. to compensate for special circumstances that arise connected with Commonwealth employment still remains. Given that the quantum of the maximum payable under this section has not been increased since its inception, it would seem reasonable to review the amount. 20

1.29 Finance also commented on the proposed amendment to section 73 and stated that 'it would be inappropriate to completely remove the threshold of $100,000'. Finance went on to note that while the Public Service Act and Parliamentwy Service Act 1999 have a financial limit of $100,000, the FMA Act has increased its

authorisation limit to $250,000 before the consideration of an Advisory Committee report. Finance stated that it 'considers there is a need for consistency in the fmancial limitations that exist in the discretionary compensation mechanisms'. 21

19 Comcare, Submission 4, p. 6.

20 Com care, Subm ission 4, pp 6-7.

21 Department of Finance and D eregulation, Submission I, p. 8.

223

8

Claims for compensation arising from actions of agencies not covered by the CDDA scheme

1.30 While welcoming the amendment proposed in the bill, the Commonwealth ∑Ombudsman noted that it will not fully address current inequities in compensation across different agency types. The Ombudsman submitted that more comprehensive work needs to be done to establish CDDA-type schemes to address defective

administration by non-FMA Act agencies, contracted government service providers and state, territory and local government authorities which provide services on behalf of Commonwealth Government agencies. 22

1.31 Mr Barry Crush commented:

I believe that in my particular case, very serious administrative errors were made by Comcare, for which I am currently unable to seek appropriate compensation, due to the fact that Comcare is not included under the Scheme for Compensation for Detriment caused by Defective Administration. 23

1.32 Mr Crush provided information on the significant impact of the defective adtninistration on his fmancial position and personal life. Mr Crush added that if a CDDA-type scheme were established, its objectives should reflect the objectives of the CDDA scheme 'in order to achieve a just outcome in terms of compensation'.

24

1.33 Comcare also commented that there is only a limited ability to seek compensation if the government agency involved is not covered by the CDDA scheme. Comcare stated that apart from section 73 payments, the only existing option for payment of interest on the delay of payment of compensation is contained in section 26 of the SRC Act in respect of the payment of permanent impairment. Section 26 of the SRC Act provides that where a compensation payment for a permanent impairment is delayed over 30 days, interest is payable. Comcare went on to state that there are some limitations in the use of this provision, for example, this

section applies only to compensation for permanent impairment and interest is not payable where Comcare has been requested to reconsider the determination or where the matter has been appealed to the Administrative Appeals Tribunal.

1.34 Comcare considered that interest is not sufficient to cover the broader set of economic losses that might be covered in a CDDA scheme. Comcare concluded that:

... the only way of being able to 'put things right' where defective administration occurs, so that the process is open, accountable and

22 Commonwealth Ombudsman, Submission 3, p. 5.

23 Mr Barry Crush, Submission 6, p. 5.

24 Mr Ban-y Crush, Submission 6, p. 6.

224

transparent, and applicable to all claims managed under the SRC Act, will involve legislative amendment. 25

9

1.35 Comcare commented on the Ombudsman's recommendation in relation to the introduction of a CDDA-style scheme and stated that it 'continues to work with Finance and DEEWR [Department of Education, Employment and Workplace Relations] to develop a proposal addressing this recommendation'. Com care suggested that the following plan could be implemented:

" Step 1: Amendment to the SRC Act, specifically section 69 of the SRC Act that sets out Comcare's functions . This section should be amended to confer on Comcare an additional function authorising it to provide compensation to claimants for fmancial detriment caused by defective administration.

" Step 2: The Minister for Education, Employment and Workplace Relations issue directions and guidelines to the whole of the Comcare jurisdiction in applying the CDDA requirements. 26

1.36 Finance also commented on the possible avenues for compensation available to CAC Act bodies. Finance noted that there may be mechanisms for CAC Act bodies under their enabling legislation, the CAC Act and the Corporations Act 2001. Finance stated that:

CAC Act bodies are different from other Commonwealth entities in that they are legally and financially separate from the Commonwealth and their directors and officers are subject to a range of directors' duties.

Both the C01porations Act 2001 and the CAC Act include penalties for misconduct. It would be inappropriate for appropriations and taxpayers to fund administrative errors by CAC Act bodies, including Government Business Enterprises. 27

1.3 7 Finance concluded that it is unnecessary and inappropriate to expand the scope of the CDDA scheme to encompass bodies that are fmancially and legally separate from the Commonwealth and stated:

Finance considers that a compensation payment under the CDDA Scheme for a non-FMA agency for reasons purely relating to the administrative actions of the agency could be considered to be circumventing the intention of Parliament. The CDDA Scheme is not available to Comcare and there may be alternative avenues available to CAC Act bodies that would allow for individuals to be compensated. 28

25 Comcare, Submission 4, p. 6.

26 Comcare, Submission 4, p. 4.

27 Department of Finance and Deregulation , Submission 1, Attachment 1, p. 1.

28 Department of finance and Deregulation , Submission 1, p. 9.

225

10

1.38 Finance indicated that it has been consulting with Comcare and the DEEWR in in1plementing the reconn11endations in the Ombudsman's Rep01i.29

Conclusion

1.39 The lack of adequate compensation arrangements for non-CDDA scheme agencies has come under scrutiny by the Commonwealth Ombudsman and the Senate Legal and Constitutional Affairs References Committee. The committee notes the conclusions of Senate Legal and Constitutional Affairs References Committee that the present arrangements do not reflect current Commonwealth public administration and do not provide adequate mechanisms for addressing financial loss arising from defective administration by non-FMA Act government agencies.

1.40 The committee is supportive of these conclusions. However, the committee does not consider that the removal of the limit contained in subsection 73(4) of the Public Service Act is warranted. Rather, the committee supports the alignment of the amount contained in section 73 with the authorisation limit of $250,000 for act of grace payments under the Financial Manag ement and Accountability Act 1997.

Recommendation 1

1.41 The committee recommends that the Public Service Amendment (Payments in Special Circumstances) Bill2011 be amended as follows:

Schedule 1, page 3 (lines 4 and 5), omit item 1, substitute:

1. Subsection 73(4)

Omit "$100,000 ", substitute "$250,000 ".

1.42 In addition, the committee notes that the $100,000 limit is also contained in the Parliamentary Service Act 1999. As a matter of equity, the committee considers that consideration should also be given to amending the Parliamentary Service Act to increase the limit in line with the FMA Act.

Recommendation 2

1.43 The committee recommends that subsection 66(4) of the Parliamentary Services Act 1999 be amended to increase the limit of payments available in special circumstances to $250,000.

1.44 In relation to the development of a CDDA-type scheme to address defective administration in non-FMA Act Commonwealth Government agencies, the committee considers that it is important that claims for defective administration are treated in an equitable manner across public sector agencies. The committee therefore considers that the consultations taking place among the Department of Finance and

29 Department ofFinance and D eregulation , Subm ission 1, p. 5.

226

11

Deregulation, Comcare and the Department of Education, Employment and Workplace Relations to implement the recommendations of the Commonwealth Ombudsman be concluded as a matter of priority.

Recommendation 3

1.45 The committee recommends that the consultations taking place among the Department of Finance and Deregulation, Comcare and the Department of Education, Employment and Workplace Relations to implement recommendation 1 contained in the Commonwealth Ombudsman's Report No.4 of 2010 be concluded as a matter of priority.

Senator Helen Polley Chair

227

228

Minority Report by Nick Xenophon, Independent Senator for South Australia

The Barry Crush Case

1.1 In 1988, Mr Barry Crush was Master and Chief Engineer of the MV Candela, a Federal Department of Transport and Communications lighthouse support vessel.

1.2 During a severe gale, Mr Crush fell 10 metres onto the deck of MV Candela while trying to secure equipment.

1.3 Mr Crush suffered severe injuries to his back, neck, ankles, hips, left knee, left arm and elbow, broken ribs, as well as massive soft tissue damage to his entire body.1

1.4 Upon eventually returning to Adelaide, Mr Crush's injuries were assessed. As Mr Crush states in his submission:

" ... after many medical procedures and operations , the treating orthopaedic surgeon, in an initial 8 page written report , and many subsequent reports to Comcare, advised Comcare that he had diagnosed me as having a 90% whole of body disability .

These injuries and disabilities were clearly noted on my Comcare file for all to see in early 1989 ."2

1.5 Mr Crush began receiving payments from Comcare in 1989, however these payments had been miscalculated and he was being grossly underpaid. Over the next 13 years, Mr Crush contacted Comcare on a weekly basis to request a review of his case.

1.6 Comcare was unwilling do this, as Mr Crush details in his submission:

"Comcare continually told me , that they were either too understaffed , or too under-re sourced to investigat e my claim, but advised m e to keep writin g."3

1.7 He continues:

"My requests continued m writing until 1999, and still Comcare did nothing.

In 1999 I again applied to Comcare in writin g and resent a large bundle of documents containin g my Ma sters qualifications , areas of operations , and other detail s.

1 Mr Barry Crush, s ubmission 6, pg 2

2 Ibid

3 Ibid, pg 3

229

14

. . . Comcare misplaced or lost this bundle of documents on five separate occasions. "4

1. 8 In August 2001, Com care accepted the material provided to them by Mr Crush and determined that he had been underpaid and provided him with two back payments.

1.9 On 10 September 2003 Mr Crush wrote to the then CEO of Comcare, Mr Barry Leahy requesting $450,000 in compensation in relation to the fmancial losses and expenses Mr Crush incurred due to the underpayment.

1.10 In a letter dated 12 November 2003 Mr Leahy advised:

"Comcare has not, however, any capacity to pay you more than the amount already paid. The SRC Act makes no provision for payment of interest or other recompense where the amount originally determined is subsequently discovered to have been less than the entitlement. The only possible avenue available to you is to apply for an act of grace payment by writing to the Hon Peter Slipper MP, Parliamentary Secretary to the Minister for Finance and Administration ... "5

1.11 Three different Ministers and Parliamentary Secretaries considered separate act of grace payment applications by Mr Crush; each one was refused. The basis for the refusals did not rest in a technicality but rather on the fact that:

"Comcare ... provided incorrect information to the Department of Finance and Deregulation, stating that Barry had received $1 million in entitlements, was paid $50,000 a year, and that there was no underpayment, amongst other incorrect statements "6

1.12 It was only in the Ombudsman's Report (04/201 0) did the fact that an "act of grace payment 'is generally not available ' in relation to the actions of an agency established under the CAC Act" 7 become apparent to Mr Crush.

A CDDA-type Scheme

1.13 As discussed in the majority report, employees of government agencies covered under the Financial Management Accountability Act 1997 can apply for compensation for maladministration under Compensation for Detriment caused by Defective Administration (CDDA) Scheme.

4 Ibid, pg 4

5 Mr Barry Leahy, Letter to Bany Crush, 12 November 2003, pg 1-2 6 Senator Nick Xenophon, Public Service Am.endment (Payments in Special Circumstances) Bill 2011, Second Reading Speech, 12 May 2011 7 Commonwealth Ombudsman , Comcare and Department of Finance and D eregulation:

Discretionmy payments of compensation, Report 4, March 2011, pg 4

230

15

1.14 The CDDA Scheme is an administrative , not statutory scheme established under section 61 of the Constitution, enabling Ministers and authorised departmental officers to authorise payments to those who have suffered fmancial losses as a result of defective administration. 8

1.15 Comcare is established as a body corporate under section 74 of the Safety, Rehabilitation and Compensation Act 1988, and therefore falls within the definition of a 'Commonwealth Authority' as detailed in the Commonwealth Authorities and Companies Act 1997. As such, CDDA claims cannot be made against Comcare for maladministration.

1.16 Neither Comcare nor the Department of Finance have an appropriate mechanism for handling claims of maladministration against Comcare.

1.17 In its March 2010 Report, The Commonwealth Ombudsman recommended that "Comcare work with Finance to find a way to resolves these claims and to develop a strategy for dealing with similar claims in the future "9.

1.18 As Recommendation 1 of the Ombudsman's report reads:

"I recommend Comcare and Finance develop a proposal for establishing a scheme, similar to the CDDA, whereby people adversely affected by poor administration ofthe SRC Act can seek compensation." 10

1.19 The Committee recommends that under section 73 of the Public Service Act 1999, the maxin1um amount of a discretionary payment should be increase from $100,000 to $250,000.

1.20 This does not allow for adequate compensation for victims such as Barry Crush and will not come close to compensating for his actual loss and damage.

1.21 Given Mr Crush is not eligible for a discretionary payment under the CDDA scheme or an act of grace payment, there is effectively no way for Mr Crush to be appropriately compensated for his losses.

Recommendation 1

The Public Service Amendment (Payments in Special Circumstances) Bill 2011 be passed, with a view that it be repealed once a CDDA-style scheme is established to address defective administration for agencies covered under the Safety, Rehabilitation and Compensation Act 1988.

8 Department of Finance and D eregulation, The Scheme for Comp ensation for D etriment caused by D efective Adm inistration (the CDDA Scheme), htto://www.fmanc e.gov.au/financi al-framew ork/discretionary-comp ensation/cdda-scheme.html, accessed 16 August 2011

9 Common wealth Ombudsman , Comcare and Department of Finance and D eregulati on: Di scretiona~y payments of compensation, R ep011 4, March 2011, pg 1

10 Ibid, pg 7

231

16

Recommendation 2

Taxation on discretionary payments received under the Public Service Amendment (Payments in Special Circumstances) Bill2011 be waived.

Nick Xenophon Independent Senator for South Australia

232

17

APPENDIX 1

Submissions and Additional Information received by the Committee

1 Department of Finance and Deregulation

2 Community and Public Sector Union (CPSU)

3 The Commonwealth Ombudsman

4 Comcare

5 Australian Public Service Commission

6 Barry Crush

233

234

The Senate

Foreign Affairs, Defence and Trade Legislation Committee

Veterans' Entitlements Amendment Bill 2011 [Provisions]

August 2011

235

© Commonwealth of Australia 2011

ISBN 978-1-7 4229-501-5

Printed by the Senate Printing Unit, Parliament House, Canberra.

236

Members of the committee Core members

Senator Mark Bishop, ALP, WA (Chair) until7.7.2011 Senator Russell Trood, LP, QLD (Deputy Chair) until 7.7.2011 Senator Michael Forshaw, ALP, NSW- until 7.7.2011 Senator Helen Kroger, LP, VIC- until 7.7.2011 Senator Steve Hutchins, ALP, NSW- until 7.7.2011

Senator the Ron Ursula Stephens, ALP, NSW (Chair) from 7.7.2011 Senator Alan Eggleston, LP, W A (Deputy Chair) from 7. 7.2011 Senator Mark Bishop, ALP, W A Senator David Fawcett, LP, SA Senator Scott Ludlam, AG, W A Senator Anne McEwen, ALP, SA

Substitute member:

Senator Penny Wright to replace Senator Ludlam for the committee's inquiry into the provisions of the Veterans' Entitlements Amendment Bill2011.

Secretariat

Dr Kathleen Dermody, Committee Secretary Mr Michael Klapdor, Senior Research Officer Ms Angela Lancsar, Administrative Officer

Senate Foreign Affairs, Defence and Trade Committee Department of the Senate PO Box 6100 Parliament House Canberra ACT 2600 Australia ∑

Phone: + 61 2 6277 3535 Fax: + 61 2 6277 5818

Email: fadt.sen@aph.gov.au Internet: www .aph.gov .au/Senate / committee/fadt_ ctte/index.htm

ll1

237

238

Table of contents

Members of the committee ..... ............... ...... .... ........ ... ..... .... ... .... .................. ........ ........ .iii

Acronyms and abbreviations ............ ..... ...... ...... ........ ..... ............. ..... .......... ............ ...... vii

CHAPTER! INTRODUCTION ............................ .......................................... ....................... ........... !

Background ... .............. ...... ........ ............... ............... ..... ......... ........ .... ..... ....... ........ ...... 1

Purpose of the bill. ...... .......... .......... .... ............... ...... ........ ................ ........ ..... ... ........... 1

Conduct of the inquiry ..... ................ .................. ...... ................... ..... ..... .......... ......... ... 2

Previous reviews .... ....... ........ ............ .............. ...... .............. ........... .......... ............. .. 2

Acknowledgements ..... ............. .............. .............. .................... ........... .... ... ... ............ . 2

CHAPTER2 PRISONER OF WAR SUPPLEMENT ......................... ............................................ . 3

Background .... .... ........ ... ........ ...... ...... ......... ......... ............ ................ ......... ..... ... ..... .. 3

Eligibility for, and payment of, POW supplement. .... ...... ..... ...... ........ ....... ....... ..... 5

Support for the measure ...... ......... ... ....... ...... ...... ..... ........... ...... ....... ............... ......... 6

CHAPTER3 IN CAP A CITY ALLOW A NCE A ND LOSS OF EARN ING S A LLOW A NCE ... .. 7

The temporary incapacity allowance ........ ............... ............. .... ...... ...... ............ ...... 7

The loss of earnings allowance .......... ..... ... .............. ...... ........ ...... .... ............... ....... . 8

CHAPTER4 THE PRINCIPLE UNDERPINNING COMPENSATION OFFSETTING ....... .. ll

Relevant legislation-YEA and SRCA ... ...... ... .... ........... ........ ...... ... ... ... .............. 11

Background to offsetting ......... ......... ............ ... .... ... .............. ... ........ ..... ........ .... ....... . 12

The purpose of compensation offsetting ................... ... ......... .............. ................. .... 14

Recent reviews ........ ........... ................ ......... .... .......... .... ......... ..... ............. ......... .... 14

CHAPTERS PURPOSE AND UNINTENDED CONSEQUENCES OF THE PROPOSED

OFFSETTING PROVISIONS ...................... ........ ........................................ ........ .... 17

Purpose of provisions in schedule 2 .... ........ ......... ......... .... ...................... ........ ..... .... 17

Reasons for change ..... ...... .......... ....... ............ ......... ....... ....................... ...... .............. 18

Commonwealth v David Ronald Smith ............. ...... ......... ... ...... ......... ..... ..... ... ..... 18

The amendments ........ ......... ....... ........ .... .................... ....... ..................... ....... .......... .. 20

Commission may request veteran to institute proceedings ....... ... ....... ........ ...... ... 22 The ex-service community .... ............ .......... ......... ........ ... ...... ...... .......... .... ........ ....... 25

Legacy .... .................... ..... ...... ........... ....... ........ ............ .... .... ..... ......... ... ..... ..... ...... 25

Vietnam Veterans' Federation ..... ................. .......... ..... ........ ..... ......... .... ... .......... .. 26

The RSL's opposition to the proposed amendments .... ........ ......... .... ........ .... ...... . 27

The Department of Veterans' Affairs response to the RSL's objection s .............. 30

v

239

Communication and information ....... ............. .................. ...... ........ ... ....... ............ .... 32

Keeping the ex -service community informed ...... ....... ........... ............ ...... .............. .. 3 3

Conclusion ............................................................. ............. ............. ..... ........ .... ........ 34

COALITION SENATORS' DISSENTING REPORT ................ ..... ....................... 35

APPENDIX 1

PUBLIC SUBMISSIONS ....................... ..................... ............................. ................. . 43

APPENDIX2 PUBLIC HEARING AND WITNESSES ... ........................ ....... ............................... 45

APPENDIX3 DEPARTMENT OF VETERANS' AFFAIRS-ANSWERS TO WRITTEN QUESTIONS ............................ ................................................................................... 47

Vl

240

AAT

ADF

GARP

LOE

MRCA

POW

PTSD

RSL

SRCA

T&PI

TI

VEA

Acronyms and Abbreviations Administrative Appeals Tribunal

Australian Defence Force

Guide to the Assessment of Rates of Veterans' Pensions

Loss of Earnings Allowance

Military Rehabilitation and Compensation Act 2004

Prisoners of War

Post Traumatic Stress Disorder

Returned and Services League Ltd.

Safety, Rehabilitation and Compensation Act 1988

Totally and Permanently Incapacitated

Temporary Incapacity Allowance

Veterans' Entitlement Act 1986

Vll

241

242

Chapter 1

Introduction

Background

1.1 On 1 June 2011, the Veterans' Entitlements Amendment Bill 2011 (the bill) was introduced into the House of Representatives. By resolution of the Senate, the provisions of the bill were referred to the Foreign Affairs, Defence and Trade Legislation Committee on 15 June 2011 for inquiry and report by 16 August 2011.

Purpose of the bill

1.2 The bill has three schedules which amend the Veterans' Entitlem ent Act 1986 (VEA).

" Schedule 1---creates a prisoner of war recognition supplement. It defmes who is eligible for this supplement and sets down the rate of payment and the procedures for claiming and determining eligibility for the supplement.

" Schedule 2---clarifies and affirms the original intention of the compensation offsetting policy in relation to disability pensions, it is intended to prevent double payments of compensation for the same incapacity. 1

" Schedule 3-rationalises temporary incapacity allowance and loss of earnings allowance through the abolition of temporary incapacity allowance with effect from 20 September 2011. Thereafter , veterans will be entitled to seek access to the loss-of-earnings allowance.

1.3 The committee notes that, when recommending an inquiry into the provisions of the bill, the Selection of Bills Committee focused on Schedule 2. It stated that the purpose for the inquiry would be 'to seek further information about the changes proposed by Schedule 2 and to enable feedback from the veteran and ex -service community about the changes'. 2 This approach is consistent with that of the opposition which flagged its intention to refer the bill for inquiry in order to afford the ex-service community 'the opportunity to have a say and provide input into the proposed changes'. 3

1 The Hon Warren Snowdon, Minister for Veterans' Affairs, Minister for Defence Science and Personnel, Minister for Indigenous Health, House of Representatives Hansard, 20 June 2011, p. 6479.

2 Selecti on of Bills Committee, Report No. 7 of2011, 15 June 2011, Appendix 3.

3 See second reading speeches: Mr Stuart Robert, House of Representatives Hansard, 16 June 2011, p. 6342; Mrs Karen Andrews, House of R epresentatives Hansard, 16 June 2011, p. 6352; Mrs Natasha Griggs, House of Representatives Hansard, 20 June 2011, p. 6469; Mr Michael McCormack, House of Representat ives Hansard, 20 June 2011, p. 6474.

243

2

Conduct of the inquiry

1.4 The committee advertised the inquiry on its website and in the Australian on 22 June 2011 and 6 July 2011. It wrote to relevant ministers and departments calling for written submissions and also contacted numerous ex-service organisations. The committee received five submissions which are listed at Appendix 1.

1.5 The committee considered the submissions and decided to hold a public hearing on 11 August 20 11 in order to further examine the concerns raised by the Returned and Services League (RSL) in regards to Schedule 2. The witnesses who appeared are listed in Appendix 2. Prior to the public hearing, the committee lodged a series ofwritten questions with the Department of Veterans' Affairs on 27 July 2011, intended to clarify some aspects of the bill. Answers were provided to the committee on 5 August 20 11 and are included in Appendix 3.

1.6 The report is divided into two sections. The first is a brief section on Schedules 1 and 3. Neither measure attracted substantial criticism. Indeed, Schedule 1 had overwhelming suppmt from both sides in the House of Representatives and by the ex-service community. With regard to Schedule 3, most of those who commented on the proposal to remove the temporary incapacity allowance understood and supported the logic behind this measure. Compensation offsetting, however, has for some years been a contentious issue for veterans. In light of this history and the main reason for establishing the inquiry, the committee considers carefully the evidence before it on this matter.

Previous reviews

1.7 A number of significant studies of veterans' entitlements have been undertaken over recent years. In this report the committee draws on the fmdings of two such comprehensive reviews:

" Report of the Review of Veterans' Entitlements (Clarke Review), January 2003;and

" Review of Military Compensation Arrangements Report, released 18 March 2011.

1.8 In 2003, the Senate Foreign Affairs, Defence and Trade Legislation Committee also inquired into aspects of the VEA and the Military Compensation Scheme. This inquiry focused on the dual eligibility arrangements and the offsetting calculations applied to veterans and ex-service personnel who receive a pension and a benefit by way of lump sum under the VEA and SRCA.

Acknowledgements

1.9 The conunittee thanks all those who assisted with the inquiry.

244

Chapter 2

Prisoner of war supplement

2.1 In its Budget statement, the government announced that it would provide $27.8 million over five years to recognise the severe hardship and suffering experienced by former prisoners of war (POWs) of Japan and Europe from the Second World War, and former POW s from the Korean War.

2.2 Due to commence on 20 September 2011, this measure, if passed, will introduce a Prisoner of War Recognition Supplement of $500 per fortnight for eligible former POWs. This new, non-taxable payment will complement an existing range of special benefits available to former POW s and be made to former military personnel and civilians alike who were interned as prisoners. All known ex-prisoners will receive the payment automatically the first being paid from 6 October 2011. 1 It is not to be counted as assessable income for the purposes of means testing of other government payments administered by the Department of Veterans' Affairs and Centrelink. 2 The payment will also be indexed annually in line with the consumer price index. 3

2.3 According to the Budget statement, the capital cost of $0.5 million for this measure will be met from within the existing resources of the Department of Veterans' Affairs.

Backgrou1td

2.4 This is not the frrst time that the government has provided assistance to Australia's ex-prisoners of war in recent times. Since World War II, the community and successive Australian governments have recognised that veterans who were POWs deserve special benefits to assist the repatriated POW and his/her carer in the provision of care.

2.5 In 2001, all former Japanese POWs received a $25,000 tax-free ex gratia payment from the Australian Government. The government made this payment in recognition of the unique suffering and hardships that POWS endured as a group

1 See second reading speeches: Mr Michael McCormack, H ouse of R epresentatives H ansard, 20 June 2011, p. 6474; the Hon Warren Snowdon , Min ister for Veterans' Affairs, Minister for Defence Science and Personnel, Minister for Indigenous H ealth, H ouse of Representatives H ansard, 20 June 2011, p. 6478.

2 Mrs Natasha Griggs, H ouse of Representatives H ansard, 20 June 2011, p. 6469.

3 Mr R ob Mitchell, H ouse of R epresentatives H ansard, 16 June 2011, p. 6345.

245

4

under the Japanese over and above those experienced by other POWs. The payment was not intended as an additional benefit to all POW s. 4

∑ 2.6 During its inquiry , the Review of Veterans' Entitlements (the Clarke review) received submissions from former prisoners of war held captive in Europe (POWs(E)) and in Korea (POWs(K)) and their war widows/war widowers. The submissions argued that these POW s should also receive compensation payments on the basis that they experienced similar levels of deprivation and hardship. 5 In their view, the failure to recognise the suffering ofPOWs(E) and POWs(K) was inequitable and they did not receive the same level of public attention and sympathy. 6

2.7 In January 2003, after a comprehensive examination of veterans' entitlements , the report of the Clarke review found significant evidence that POW s(K) as a group did experience treatment and circumstances similar to POWs(J) . It formed the view that an extension of the $25,000 one-off payment would be consistent with the government's original intention to make a one-off payment to POWs(J) . As a consequence, it recommended that an ex-gratia payment be extended to all surviving Australian POWs held captive by the North Korean Forces during the Korean War and to the surviving widows of those who have died.

2.8 Soon after, former Korean POWs received a similar payment to that granted to former Japanese POWs.

2.9 With regard to POWs held captive in Europe, the Clarke review found that their experiences could not equate with those of POW s(J) and considered that a one " off payment of $25,000 would not fulfil the government's intention behind the payment to POWs(J) . Consistent with this view, the review recommended that:

... an ex-gratia payment should not be made to all surviving Australian POWs(E), civilian detainees and intemees who were held by the German " Italian forces during World War II, or to their surviving widow /ers.7

2.10 Nonetheless, in 2007 the ex-gratia payment was extended to former POWs interned in Europe during World War II. 8

4 Review ofVeterans' Entitlements (J Clarke, chair), Report of the Review of Veterans' Entit lements, Department of V eterans ' Affairs , January 2003, vol. 1, p. 14.

5 Review ofVeterans' Entitle m ents (J C larke, chair) , Report of the Review of Veterans' Entitlements, Department of Veterans' Affairs , January 2003, vol. 1, p. 13.

6 Review ofVeterans' Entitlement s (J Clarke, chair) , Report of the Review of Veterans' Entit lements, Department of Veterans' A ffairs , January 2003, vol. 2, p. 417.

7 Review of Veterans' Entitlements (J Clarke, chair) , R eport of the Review of Veterans' Entitl ements, Department ofVeterans' Affairs , January 2003, vol. 1, p. 14.

246

5

2.11 POW s and their families are also entitled to other benefits including residential aged care packages, which provide care similar to low-care residential facilities in the veteran's home, fees for extended aged care at home, which provide care similar to high-care residential facilities in the veteran's home , automatic gold card and funeral benefits, and granting of war widow /war widowers pension to the partner on the death of the former POW. 9

Eligibility for, and payment of, POW supplement

2.12 All former POWs who are still alive on 20 September will be entitled to receive the payment. According to DV A the payment is 'not dependent on the person having suffered a war-caused injury or disease and is not considered compensation. The department estimates that up to 900 former civilian and veteran POWs who are either residing in Australia or overseas and are alive on 20 September 2011 will receive the initial payment. 10 To be eligible for the supplement, a civilian must have been domiciled in Australia immediately before their internment. This provision is consistent with those governing the ex-gratia payments. The department noted that domiciled in Australia has not the same meaning as 'resident in Australia' and generally a person's domicile 'is the place that they considered to be "home"'.

2.13 The majority of those who are eligible are already known to the department as a result of the $25,000 ex-gratia payment and will be paid the supplement automatically. The department recognises, however, that it may not be aware of all former POWs entitled to the supplement. Those unknown to the department can apply and be assessed on the eligibility criteria. The department informed the committee that a number of new claims have been received following the budget announcement of the supplement. It explained that those POW s previously unknown to the department and who are eligible will also receive the lump sum of $25,000 in addition to the supplement.

2.14 Although war widow or widowers of former POWs were entitled to the lump sum payment of $25,000, they will not be eligible for the POW Supplement. Also, those imprisoned or detained during a conflict, period of hostilities or peacekeeping missions other than World War II or the Korean War are not eligible for the supplement. The payment of the supplement is intended to recognise the severe hardships and deprivations endured by the POWs in World War II and the Korean War .

8 The Hon Pat Farmer, Parliamentary Secretary to the Minister for Education, Science and Training, House of Representativ es H ansard, 9 M ay 2007, p. 1. See also Second reading speeches: Mr Stuart Robert, House of Representativ es Hansard, 16 June 2011, p. 6341; Mrs Natasha G riggs, House of Representatives Ha nsard, 20 June 2011, p. 6469; Mr Michael McCormack , House of Representatives Hansard, 20 June 2011, p. 6474.

9 Mr Rob Mitchell, House of Representatives Hansard, 16 June 2011, p. 6346.

10 The Hon Justine Elliott , Parliamentary Secretary for Trade, House of Representat ives Hansard, 20 June 2011, p. 6466.

247

6

2.15 As noted earlier, the supplement of $500 per fortnight would be made in addition to the payments and benefits currently received by former POWs from the Commonwealth. The payment will not be an income support payment and not subject to the income test. The payment will not be subject to the offsetting provisions of the YEA.

Support for the measure

2.16 This measure had strong bipartisan support in the House of Representatives with members from both sides commending the supplement. I I Submissions to the inquiry raised no concerns with this Schedule.

2.17 The committee joins with the ex-service community m welcoming this measure.

11 See second reading speeches: Mr Stuart Robert, House of Representatives Hansard, 16 June 2011, p. 6341; the Hon Bruce Scott, House of Representative s Hansard, 16 June 2011, p. 6355.

248

Chapter 3

Incapacity Allowance and Loss of Earnings Allowance

3 .1 The changes introduced in Schedule 3 are intended to rationalise the Temporary Incapacity (TI) Allowance and Loss of Earnings (LOE) Allowance. In effect the amendments will abolish the TI Allowance from 20 September 2011. This measure is designed to continue 'the government's commitment to streamlining and enhancing services and support to our veterans and members and their families'. 1

3.2 Currently, both allowances are paid under the VEA for a temporary inability to work due to a war or defence caused condition. They provide similar compensation, though 'the loss of earnings allowance provides compensation to a broader group but is restricted to veterans who experience an actual loss'. 2

The temporary incapacity allowance

3.3 The TI Allowance is payable to an eligible veteran who has undergone hospital or other institutional treatment and has been off work for more than 28 days. The 28 days commences from the date of hospitalisation and may include post " discharge out-patient treatment or post-discharge medically recommended rest and recuperation. 3

3.4 Under this provision, there is no requirement that income is actually lost, but the veteran must have been prevented from undertaking his or her usual remunerative work for the whole period.

3.5 Temporary incapacity allowance is paid at a rate that is the difference between disability pension already received and the special (totally and permanently incapacitated-T &PI) rate. Payment of loss of earnings allowance for this period will affect the amount of temporary incapacity allowance. If any lump sum permanent impairment compensation has been received under the Safety, Rehabilitation and Compensation Act 1988 the payment of temporary incapacity allowance will be

1 The Hon Warren Snowdon, Minister for Veterans' Affairs , Minister for Defence Science and Personnel, Minister for Indigenous Health, House of Representatives Hansard, 20 June 2011, p. 6478.

2 Mrs Karen Andrews, House of Representatives Hansard, 16 June 2011, pp. 6352-6353.

3 DVA Factsheet, DP77, Veterans' Entitlements Act 1986 (VEA), Temporary Incapacity Allowance http://factsheets .dva.gov.au/factsheets /documents/DP77 % 20Temporary% 20Incapacitv%20Allo wance.htm (accessed 29 July 2011)

249

8

reduced. This applies to lump sum compensation for any incapacity , irrespective of whether the incapacity is included in the assessment of the allowance. 4

3.6 Payment of the allowance will also be affected by any entitlement to weekly incapacity payments under the Military Rehabilita tion and Comp ensation Act 2004.

The loss of earnings allowance

3. 7 Loss of earnings allowance compensates an eligible veteran for salary, wages or earnings lost due to absence from work for treatment of war or defence caused disabilities or to attend certain appointments. It may also compensate the veteran's authorised representative or attendant who accompanies the veteran at the time of receiving treatment or attending the appointments. 5

3.8 Loss of earnings allowance can be paid where a veteran:

" receives treatment for a war or defence-caused disability (including waiting for the supply or repair of an artificial limb or other surgical aid);

" has used part or all of employer provided sick leave for a war or defence " caused disability, and now has no benefit to cover an absence for another illness;

" attends an appointment arranged by the department for the investigation of a claim for disability pension; or

" has an authorised attendant to provide assistance when obtaining treatment or another person acting on behalf of the veteran in relation to the veteran's claim for disability pension, who loses salary , wages or earnings. 6

The above situations must result in a loss of earnings.7

3.9 The amount of loss of earnings allowance payable is: the difference between the special rate (T &PI) and the veteran's present disability pension, or the amount of

4 DVA Factsheet , DP 77, Veterans' Entitlements Act 1986 (YE A), Temp orary Incapacity Allowance http://factsheets.dva.gov.au/factsheets/documents/DP 77% 20Tempormy % 20Incapacity% 20A llo w ance.htm (accessed 27 July 2011)

5 DVA Factsheet, DP75 , Veterans' Entit lements Act 1986 (YEA) , Loss ofEamings Allowance, http://factsheets.dva.gov.au/factsheets/docum ents/D P75% 20Loss% 20ofl /o20Earnings% 20A llo w ance.htm (accessed 27 July 2011)

6 DVA Factsheet, DP 75, Veterans' Entitlements Act 1986 (YEA ), Loss ofEamings Allowance, http://factsheets.dva.gov.au/factsheets/docum ents/DP 75% 20Loss% 20ofl/o20Eam ings% 20A llo wance.htm (accessed 27 July 2011)

7 DVA Factsheet, DP 75, Veterans' Entitlements Act 1986 (YE A), Loss of Earnings A llowance, http://factsheets.dva .gov.au/factsheets/docum ents/DP75% 20Loss% 20ofl /o20Earnings% 20Allo wance.htm (access ed 27 July 2011)

250

9

salary, wages or earnings actually lost (including loadings or other allowances that would have been payable); whichever is the lesser amount.

3.10 Applications that result in the payment of loss of earnings allowance will be reduced if any lump sum permanent impairment compensation has been received under the Safety, Rehabilitation and Compensation Act 1988. The same rule applies to lump sum compensation for any incapacity, irrespective of whether the incapacity is included in the assessment of the allowance.

3.11 The maximum amount of compensation that an eligible veteran can receive under either one or both of these allowances is equivalent to the special rate (T &PI) of disability pension.

3.12 From 20 September 2011 eligible veterans will have access to the LOE Allowance only. Thus, payments of temporary incapacity allowance will cease from this date with future payments made through the LOE Allowance. According to the Minister:

This measure has no impact on a veteran's or member's existing disability pension payment. From 20 September 2011, all eligible veterans and members in this situation will be assessed consistently against the criteria for loss -of-earnings allowance. 8

3 .13 The change in arrangements will simplify the assessment of eligibility for payments and better target compensation expenditure. According to the government, this 'provides greater simplicity for clients in understanding their entitlements'. 9 The department explained:

In order to receive the LOE Allowance, the veteran or member must have experienced some loss of earnings, which is not a requirement for TIA. Veterans or members who do not suffer a loss of earnings are not eligible to receive the loss of earnings allowance. 10

3.14 Approximately 200 veterans or members received TI Allowance in the last 12 months. Those receiving TI Allowance that are not eligible for the LOE Allowance from 20 September 2011 will not receive any allowance as they have not suffered a loss of earnings during their temporary incapacity. Any veteran on TI Allowance at that time will need to apply for LOE allowance.

3.15 There are transitional provisions whereby veterans and members will be able to claim TI Allowance within 12 months of the commencement of the treatment , if the

8 The Hon Warren Snowdon , Minister for Veterans' Affairs, Minister for D efence Science and Personnel, Minister for Indigenous Health, House of Represent atives Hansard, 20 June 2011, p. 6478.

9 Australian Government, Budget Paper no. 2, Budget Measures 2010-11, 'Part 2: Expense Measures, Veterans' Affairs ', p. 330.

10 Submission 2, p. 7.

251

10

treatment period commenced prior to 20 September 2011. The department explained fm1her that:

Transitional provisions will also mean that veterans and members may be eligible for TIA for any period of treatment that commences in the four weeks prior to 20 September 20 11, where the treatment period would extend beyond four weeks, they would still receive TIA for the period up to and including 19 September 2011. 11

3.16 Although not opposed to 'this rationalisation, the opposition called on the government to ensure the changes are appropriately and effectively communicated to the veterans and ex-service community'.12 More broadly, the committee considers the importance of keeping veterans informed about entitlements and changes to policy or procedures later in this report.

3 .1 7 The bill 'will remove the current overlap in the allowances paid to veterans and members who are unable to work due to episodes of medical treatment and recuperation for war or defence caused injuries or diseases'. 13

3.18 No concerns were raised about this measure during the committee's inquiry.

11 Subm ission 2, p. 8.

12 See Second reading speeches: Mrs Natasha Griggs, House of Representatives Hansard, 20 June 2011, p. 6469; and M r Mi chael McCormack, H ouse of Representativ es Hansard, 20 June 2011, p. 6474.

13 The H on W arren Snowdon, Minister for Veterans' Affairs, M inister for D efence Science and Personnel, Minister for Indigenous Health, H ouse of R epresentatives Hansard, 20 June 2011, p. 6478.

252

Chapter 4

The principle underpinning compensation offsetting

4.1 The main reason for this inquiry is to better understand the offsetting of compensation arrangements under the legislation and to explore fully whether there are any unintended consequences or any issues arising from the proposed changes that need further consideration. 1

4.2 The main stated purpose of Schedule 2 is to clarify offsetting rules for veteran compensation under the Veterans' Entitlement Act 1986 (VEA). The measure will cost $2.7 million over four years, to be met from within the existing resources of DV A. 2 Compensation offsetting under the VEA involves a reduction in the level of a disability pension where another compensation payment has been made for the same incapacity. This clarification is intended to ensure that offsetting continues to be applied on the basis of a person's level of incapacity. Mrs Andrews explained:

Currently, under Australia's repatriation system, compensation is paid for incapacity, not for a specific injury. These amendments have come about in response to the ruling of the full Federal Court in the case of the Commonwealth of Australia v Smith in 2009. In essence, the court found that the facts of Mr Smith's case meant that the Repatriation Commission's determination to offset his compensation under each scheme, in line with the principle of compensation offsetting, was inappropriate. Therefore, the full Federal Court determined that Mr Smith's separate incapacities should be separately compensated because they were different injuries with different incapacities. 3

4.3 The Explanatory Memorandum noted that the maJonty of compensation offsetting cases arise from an entitlement under the VEA and the Safety, Rehabilitation and Compensation Act 1988 (SRCA) and their predecessors, for the same incapacity. Compensation from other sources, including third party insurance and common law cases may also be subject to compensation offsetting under the VEA. 4

Relevant legislation-VEA and SRCA

4.4 Schedule 2 amends the Veterans' Entitlement Act 1986 (VEA). The roots of this legislation reach back to the Australian Soldiers' Repatriation Act 1917 which among other things, provided for benefits and assistance to discharged servicemen;

1 Mr Stuart Robert, House of Representatives Hansard, 16 June 2011, p. 6342.

2 Australian Government, Budget Paper no. 2, Budget Measures 2010-11, 'Part 2: Expense Measures, Veterans' Affairs', p. 327.

3 Mrs Karen Andrews, House of Representatives Hansard, 16 June 2011, p. 6352.

4 Explanatory Memorandum, p. 8.

253

12

children under 18 of the deceased or incapacitated; and to widows in special circumstances . This legislation was repealed by the Australian Soldiers' Repatriation Act 19 20 which expanded the entitlement for pensions providing cover in respect of death or incapacity resulting from any incident occurring during the period of service.

It also introduced the concept of a 'special rate' pension for those totally and permanently incapacitated. Over the decades, it was amended approximately 80 times before being replaced by the VEA in 1986.5 The VEA has also undergone many changes since then.

4.5 In this chapter, the committee also refers to the Safety, Rehabilitation and Comp ensation Act 1988 (SRCA). Under its predecessors , the Commonw ealth Employees' Compensation Act 1930 and later the Compensa tion (Common wealth Employees Act) 1971, ADF members were entitled to compensation in respect of periods of service not covered by deployments to conflicts such as Korea or Vietnam. The SRCA provides the legislative basis for the Commonwealth Government's workers' compensation arrangements and provides for the compensation and rehabilitation of employees who are injured in the course of their employment. The

legislation covers Commonwealth and ACT Public Service employees and includes members of the ADF .6

Background to offsetting

4.6 Before the early 1970s, there were effectively two separate compensation systems running in parallel under the repatriation and compensation arrangements for ADF members. One applied to veterans of overseas conflicts and the other to members on peacetime service. Thus, warlike and non-warlike service ('operational service') were covered under the repatriation system and peacetime service m Australia came under the Cormnonwealth employees compensation system. 7

4. 7 This system changed in 1973 when serving members with certain peacetime service became eligible for benefits under the Australian Soldiers' Repatriat ion Act 1920 (replaced by the VEA). 8 At that time, they also retained eligibility under the Comp ensation (Governm ent Employees) Act 1971-1973 (replaced by the SRCA) . This development created a situation of dual entitlement for incapacities relating to defence service. As a consequence, provisions were included in the Repatriation Act to avoid the payment of double compensation by the Commonwealth. These provisions were designed to offset payments made under the Compensation (Government Employees)

5 Review of Veterans' Entitlements (J Clarke, chair), R eport of the Review of Veterans' Entitle m ents, Department ofVeterans' Affairs , January 2003, vol. 1, pp. 81-91.

6 Review ofVeterans' Entitlements (J Clarke, chair) , Report of the Review of Veterans' Entitl em ents, Department ofVeterans' Affairs , January 2003, vol. 3, p. 576.

7 Submission 2, p. 3.

8 DVA explained that this change w as intended 'to encourage addition al personnel to join the ADF following the cessation of national service'. Subm ission 2, p. 4.

254

13

Act against entitlements under the Repatriation Act to ensure that an individual could only be compensated once for service-related incapacity.

4.8 According to the RSL these offsetting provisions applied only 'to disability pensions paid in respect of incapacity from disabilities arising out of "defence service"' . 9 They did not apply to pensions in respect of incapacities from disabilities arising out of 'war service', 'special service' or 'Malayan service' (collecti vely known under the VEA, as 'operational service') .10 Offsetting provisions were included in the VEA when it replaced the Repatriation Act in 1986.

4.9 In 1994, the enactment of the Military Comp ensation Act 1994 removed dual eligibility, under the VEA and SCRA, for ADF members rendering peacetime service. There were some exceptions. 11 The Act, however, extended compensation coverage under the SRCA from peacetime defence service only to include operational service . This extension resulted again in dual eligibility under the VEA and SRCA. DV A explained that, in response, 'identical offsetting provisions were introduced for cases where otherwise duplicate compensation would have been paid'. 12

4.10 The RSL also noted that the changes to legislation in 1994 allowed veterans who rendered operational service after April 1994 to make compensation claims under the Military Compensation Scheme in the SRCA , as well as under the VEA. It explained:

Taking advantage of consequential requirements of that amendment, the Act was amended in a way that further extended offsetting of disability pensions for any compensation received in respect of a war-caused injury or disease after that date, even if it related to operational service for w hich claims could not be made under SCRA. 13

4.11 Dual eligibility under the two Acts continued until the commencement of the Military Rehabilitation and Compensation Act 2004 in July 2004 which provides compensation for all service -related injuries, diseases and deaths, related to either peacetime or operational service occurring after 20 June 2004.

4.12 The Explanatory Memorandum stated that since compensation offsetting was first introduced in 1973, it has applied 'on the basis of the same incapacity , irrespective of whether or not a common injury or disease exists'. The YEA defmes 'incapacity' as the 'effects of that injury or disease and not a reference to the injury or disease itself. 14

9 Submission 3, [p. 4].

10 Submission 3, [p. 4].

11 Submission 2, p. 4.

12 Submission 2, p. 4.

13 Submission 3, [p. 5].

14 Explanatory Memorandum , p. 9.

255

14

The purpose of compensation offsetting

4.13 Compensation offsetting is a longstanding practice under Australia's repatriation system and rests on the fundamental principle that payments of compensation are for incapacity not for a specific injury. The Department of Veterans' Affairs (DVA) submitted that:

The policy intention of the offsetting provisions has always been to offset where a person is compensated twice for the same incapacity and the policy has consistently been implemented on this basis. 15

Recent reviews

4.14 The 1999 Tanzer review of the Military Compensation Scheme considered the eligibility arrangements to clain1 disability compensation under both the VEA and SRCA. It defined this dual eligibility as having 'an entitlement to claim benefits under both the VEA and SCRA for an injury or illness that arises out of or in the course of ADF service'. 16 It noted, however , that this arrangement:

... does not mean being compensated for the same injury /illness twice. Claimants are required to make two separate claims and where the benefits are for the same injury /illness under different Acts, offsetting arrangements apply.I7

4.15 The Clarke review in 2003 also looked at dual eligibility. It noted that in effect, veterans are able to access, simultaneously, different benefit components of each Act. The Clarke review explained:

The result is that these veterans are able, with some restraints, to constmct a package of benefits to suit their individual circumstances. In many cases, this results in a veteran receiving a higher level of benefit than would be possible under the provisions of one Act alone. 18

4.16 It found that this arrangement can result in 'i nequitable outcomes amongst veterans with identical disabilities'. The review supported the principle that a person should not be compensated twice for the same disability . Payments received for similar purposes, including invalidity superannuation, would be offset dollar for dollar against a veteran's economic loss compensation. 19 It stated that 'where a veteran is

15 Submission 2, p. 4.

16 Review of the Military Compensation Scheme (N Tanzer, chair), Report of the Review of the MilitaJy Compensation Scheme, Department of Defence, March 1999, p. 20.

17 Review of the Military Compensation Scheme (N Tanzer, chair), Report of the R eview of the MilitaJy Comp.ensation Scheme, Department of Defence, March 1999, p. 20.

18 Review of Veterans' Entitlements (J Clarke, chair), Report of the Review of Veterans' Entitlements, Department ofVeterans' Affairs, January 2003, vol. 1, p. 637.

19 Review of Veterans' Entitlements (J Clarke, chair), Report of the Review of Veterans' Entitlements , Depmiment ofVeterans' Affairs , January 2003, vol. 1, p. 28; vol. 3, p. 624.

256

15

provided with workers' compensation, invalidity superannuation or other disability insurance benefits, any compensation provided under the VEA for the same disability would be reduced first on a dollar-for-dollar basis. This would be consistent with offsetting arrangements in workers' compensation schemes.20 It recommended that:

A veteran who has dual entitlement to claim disability compensation under both the YEA and the SRCA, but has not yet made a claim, be required to make a one-time election that restricts him to receiving benefits under one Act at that time and in the future. 21

4.17 Released in June 2011, the report on the Review of the Military Compensation Arrangements also considered offsetting arrangements between the VEA and SRCA. In its opinion, the arrangements had 'been the subject of widespread criticism and concern in the veterans' community for some years' .22 It explained that offsetting occurs because certain claimants have dual eligibility and are able to claim compensation under different legislation. It explained:

Offsetting typically occurs when a claimant receives a pension under the YEA and subsequently elects to receive a SRCA lump sum payment for the same incapacity or death. The legislation that governs the offsetting anangements requires that the lump sum be converted to give a fortnightly payment equivalent. 23

4.18 The report noted that while submissions were critical of the methodology to determine the offsetting amounts, they did not take issue with the principle underlying offsetting. It stated:

The driving principle behind compensation offsetting is equity, in that it ensures that an ADF member with eligibility under two or more pieces of legislation does not receive more compensation for impaitment compared to what another member might receive under one piece of legislation for the same impairment. More generally, compensation offsetting is also intended to ensure an individual is only compensated once for incapacity resulting

fr d d

. . 24

om accepte con ttlons.

4.19 Thus, in its view:

20 Review of Veterans' Entitlements (J Clarke, chair) , Report of the Review of Veterans' Entitl ements, Department ofVeterans' Affairs, January 2003, vol. 3, p. 624.

21 Review ofVeterans' Entitlements (J Clarke, chair), Report of the Review of Veterans' Entitlements, Depmtment of Veterans' Affairs, January 2003, vol 1, p. 37.

22 Department of Veterans' Affairs, Report of the Review ofMilitaJy Compensation Arrangements, February 2011, p. 259.

23 Department of Veterans' Affairs , Report of the Review of Milita1y Compensation Arrangements, February 2011, p. 259.

24 Department of Veterans' Affairs , Report of the Review of Military Compensation Arrangements, February 2011, p. 298.

257

16

Total compensation under all three Acts should not exceed the maximum compensation intended to be paid by the Commonwealth for a person's defence service under the MRCA. Compensation should therefore remain capped at the maximum permanent impairment compensation under the MRCA. 25

4.20 While recogrusmg that the offsetting principle was widely accepted, the Review of the Military Compensation Arrangements found, however, that:

Dual eligibility continues to be a key source of complexity, confusion and misunderstanding among administrators, claimants and their representatives. It was a central reason for the development and enactment of MRCA as a single piece of compensation legislation covering all forms of service. 26

4.21 In the following chapter, the committee considers how the principle of offsetting will apply under the proposed changes and, as a result of the changes, whether there are any unintended consequences.

25 Depmiment of Veterans' Affairs, Report of the Review of Military Compensation Arrangements, February 2011, p. 293.

26 Department of Veterans' Affairs, Report of the Review of Militmy Compensation Arrangements, February 2011, p. 262.

258

Chapter 5

Purpose and unintended consequences of the proposed offsetting provisions

5.1 The amendments in the bill are designed to ensure that in the future, the compensation offsetting provisions will apply in respect of the same incapacity and do not require that the incapacity results from the same injury or disease. Before considering the provisions covering offsetting, the committee looks at the reasons for amending existing legislation.

Purpose of provisions in schedule 2

5.2 During his second reading speech, the Minister noted that offsetting is intended to prevent double payments of compensation for the same incapacity. He made clear that the bill was not about changing the principles which have been in operation in the repatriation system since 1973. 1 The Minister explained that the measures 'maintain the status quo': that they 'simply clarify and affirm existing arrangements that have been operating under all governments since 1973 '. 2 In his words, the legislation intends to:

... ensure that veterans cannot get compensated twice for the same incapacity ... these amendments do not deny or change any existing veterans' entitlements. 3

5.3 DVA reinforced this message. It stated that the amendments seek to affirm and give clarity to the original intention of the legislation-that 'offsetting occurs where a person receiving a disability pension under the VEA for an incapacity receives duplicate compensation for the same incapacity'. 4 It stated:

Broadly, the policy objective of the amendments is to provide some certainty that the offsetting provisions in the VEA can continue to be administered as they have been for nearly 40 years, so to prevent duplicate compensation being paid to veterans for the same incapacity. 5

1 The Hon Wa1Ten Snowdon, Minister for Veterans' Affairs, Minister for Defence Science and Personnel, Minister for Indigenous Health, House of Representatives Hansard, 20 June 2011, p. 6479.

2 The Hon Warren Snowdon, Minister for Veterans' Affairs, Minister for Defence Science and Personnel, Minister for Indigenous Health, House of Representatives Hansard, 20 June 2011, p. 6479.

3 The Hon Warren Snowdon, Minister for Veterans' Affairs, Minister for Defence Science and Personnel, Minister for Indigenous Health, House of Representatives Hansard, 20 June 2011, p. 6479. See also, Mr Bruce Scott, House of Representatives Hansard, 16 June 2011, p. 6355.

4 Submission 2, p. 6.

5 Submission 2, p. 6.

259

18

5.4 The legislation is also intended to ensure 'equity between a claimant who is entitled to compensation for a level of incapacity under two schemes, compared to a claimant who is entitled to compensation for the same level of incapacity under only one scheme'. 6

Reasons for change

5.5 The decision to amend the VEA in this way stems from a decision of the Full Federal Court in the case of Commonwealth v Smith. The committee considers briefly the Court's decision.

Commonwealth v David Ronald Smith

5.6 The main issue before the court was the interpretation of section 30C of the YEA in respect of 'incapacity from that injury'.

5.7 Mr Smith had served in the Royal Australian Navy and was on HMAS Melbourne on 10 February when she collided with HMAS Voyager. He also served in Vietnam between October 1969 and October 1970. This service was accepted as 'operational service' within the meaning of the Act. In 1993, the Repatriation Commission accepted his claim for a disability pension, with effect from 26 August

1991, on the ground that he was suffering from a duodenal ulcer and from post traumatic stress disorder (PTSD). It found that there was a reasonable hypothesis connecting Mr Smith's duodenal ulcers and PTSD with his war service . Mr Smith was assessed with a 40% incapacity due to these war caused injuries and was granted a pension under Pmi II of the Act.

5.8 In December 2007, Mr Smith won a settlement for damages against the Commonwealth on the basis that the collision between Melbourne and Voyager had been caused by the negligence of Commonwealth officers and as a result he had suffered injury, loss and damage. The Court noted, importantly, that in this case the particulars of injuries included only 'severe shock'. It stated:

As a matter of construction, it is plain that the common law action was settled on the footing that the plaintiffs injury was 'Severe Shock' and that did not include PTSD or duodenal ulcer. 7

5.9 The Repatriation Commission argued that the amount of pension paid to Mr Smith under the Act was repayable from the moneys he had received in the settlement of the common law action citing section 30C in support of its claim.

5.10 The court noted that section 30C(l) of the Act could be seen to apply in the following way:

6 Mr Rob Mitchell, House of R epresentativ es H ansard, 16 June 2011, p. 6346.

7 Commonwealth of Australia v Smith [2009] FCAFC 175, Court Order, 16 December 2009, at para. 9.

260

As to the pension, the Commission found that there was a reasonable hypothesis connecting the duodenal ulcers and the PTSD with Mr Smith's war service on the basis they were causally linked to or aggravated by his service.

The pension was paid in respect of the incapacity arising from the injuries of ulcers and PTSD. The compensation payment, however, was made in respect of 'severe shock' and not in respect of the injuries of duodenal ulcers and PTSD.

5.11 The court found:

On this basis, whether or not the compensation payment (referred to in s 30C(l)(b)) and the pension received and granted (referred to in s 30C(l)(c)) were in respect of the same incapacity, as to which the parties were in dispute, they were not of the same injury.

As a matter of ordinary language, the injury identified in subs (b) and (c) must be the same. Therefore, common to both the compensation payment and the pension is the underlying injury for which both payments for incapacity are made. The clear dichotomy between 'incapacity' and 'injury' or 'disease' reinforces the deliberate emphasis placed upon the need for there to be a common injury. 8

19

5.12 The court found in favour of the respondent, Mr Smith. It formed the view that the Commonwealth's submissions failed 'to give sufficient weight to the complete operation of section 30C, in particular the reference to 'incapacity from that injury' as found in section 30C(1)(c)' (emphasis added). 9 The court decided that in Mr Smith's case, it had not been appropriate to offset 'because the condition for which he was granted disability pension was a different condition from that compensated at common law'. 10

5.13 The government was of the view that this decision of the Full Federal Court underlined the need to clarify this aspect of the legislation . 11 In its Portfolio Budget Statements for 2011-12, the government indicated that following this decision it intended to amend the offsetting provisions in the VEA. 12 In its submission, the department explained further:

8 Commonwealth of Australia v Smith [2009] FCAFC 175, Com1 Order, 16 December 2009, at paras. 26, 27.

9 Commonwealth of Australia v Smith [2009] FCAFC 175, Court Order, 16 December 2009, at para. 22.

10 Submission 2, p. 5.

11 The Hon Warren Snowdon , Minister for Veterans' Affairs , Minister for Defence Science and Personnel, Minister for Indigenous Health, House of Representatives Hansard, 20 June 2011, p. 6479.

12 Por1folio Budget Statements 2011-12, Budget Related paper No. 1.5B, D efence Portfolio (Department of Veterans' Affairs), p. 16.

261

20

It is considered that the decision of the Full Federal Court that offsetting should not have occurred applies only to the unique circumstances of Mr Smith's case. These included that, with the agreement of the Commonwealth, the common law claim for compensation was expressly changed to remove the two conditions that were being compensated under the VEA.

Nevertheless, the Government decided to amend the offsetting provisions of the VEA to ensure that the legislation is clear in its intent. 13

5.14 It stated further that if passed the amendments 'should avoid the likelihood that, on the basis of the Smith case, those seeking future compensation payments could circumvent the offsetting provisions by exclusion of specific injuries or diseases from the terms of the compensation settlements' .14

The committee now examines the proposed changes.

The amendments

5 .15 The proposed changes to the YEA affect:

" Division 4 of Part II-Rates of pensions payable to veterans;

" Division 5A of Part II-Effect of certain compensation payments on rate of pension; and

" Division 4 of Part IV-Pension and other compensation.

5.16 Under the YEA, a pension under Part II or IV is payable for incapacity resulting from war or defence-caused injury or disease . Pensions under Part II are payable to veterans , while pensions under Part IV are payable to current or former defence force members with certain peacetin1e service. If a person is receiving a pension under Part II or IV of the YEA and receives additional compensation from another source, in respect of the incapacity or death from that injury or disease for which that person is being paid under Part II or Part IV, the amount of the YEA pension is reduced on a dollar for dollar basis by the amount of additional compensation.

5.17 Schedule 2 substitutes the words 'the incapacity from that injury or disease or the death,' contained in the YEA, with the phrase 'the same incapacity of the veteran from that or any other injury or disease or in respect of that death' to make clear that: 15

... the compensation offsettin g provisions are to apply where pension under Part II and IV of the VEA and compensation from another source are

13 Submission 2, p. 6.

14 Submission 2, p. 6.

15 Mrs Karen Andrews, H ouse of Representatives H ansard, 16 June 2011, p. 6352.

262

payable in respect of the same incapacity and do not require that the incapacity result from the same injury or disease. 16

21

5.18 For example, section 30C of the VEA, which applies the compensation offsetting rules in relation to lump sum compensation payments, will be amended. Currently it states:

(I) If:

(a) A lump sum payment of compensation is made to a person who is a veteran or a dependant of the veteran; and

(b) The compensation payment is paid in respect of the incapacity of the veteran from injury or disease or the death of the veteran; and

(c) The person is receiving, or is subsequently granted, a pension under this Part in respect of the incapacity from that injury or disease or the death;

The following provisions have effect:

(d) The person is taken to have been, or to be, rece1vmg payments of compensation at a rate per fortnight determined by, or under the instructions of, the Commonwealth Actuary;

(e) The person is taken to have been, or to be, receiving those payments for the period of the person's life determined by, or under the instructions of, the Commonwealth Actuary;

(f) The period referred to in paragraph (e) begins:

(i) on the day that lump sum payment is made to the person; or

(ii) on the day the pension becomes payable to the person;

whichever is the earlier.

5.19 Under proposed amendments, the underlined phrase in paragraph 30C(1)(c) noted above, that is, 'the incapacity from that injury or disease or the death', will be omitted and the subsection amended to read:

(c) The person is receiving, or is subsequently granted, a pension under this Part in respect of the same incapacity of the veteran from that or any other injury or disease or in respect of that death;

5.20 The Explanatory Memorandum stated:

For the purposes of the compensation offsetting provisions, lump sum compensation payments are converted to a fortnightly amount as detetmined or instructed by the Commonwealth Actuary. The amendments make it clear that pension payable under Part II of the Veterans' Entitlements Act is to be reduced by the converted fminightly amount of lump sum compensation where lump sum compensation and pension under

16 Explanatory Memorandum , p. 9.

263

22

Part II are paid, or are payable, in respect of the same incapacity. The incapacity that entitles the veteran to both pension under Part II and a compensation payment from another source may be from the same injury or disease or a different injury or disease.

17

5.21 For consistency, the same amendments are proposed for subsections 30C(2) and (3). These subsections apply specifically to lump sum payments made under sections 137 and 30 of the SRCA respectively.

Commission may request veteran to institute proceedings

5.22 Section 30E allows the Repatriation Commission to request a person, other than the Commonwealth, who appears to be legally liable to pay damages, to pay to the Commonwealth an amount no greater than the total amount of pension paid under Part II up to the date of the damages payment. The Repatriation Commission was established on 1 July 1920 by proclamation of the Australian Soldiers' Repatriation Act 1920. When this Act and several other related Acts were replaced in 1986 by the

Veterans' Entitlements Act 1986 (VEA), the Repatriation Commission was retained.

5.23 The current section reads:

If:

(a) a pension is payable or has been paid under this Part [II] in respect of:

(i) the incapacity of a veteran from a war-caused injury or disease; or

(ii) the death of a veteran; and

(b) a person other than the Commonwealth appears legally liable to pay damages in respect of the incapacity of the veteran from that injury or disease or the death of the veteran; and

(c) the veteran, a dependant of the veteran or a person on behalf of the dependant has:

(i) not instituted proceedings against the person for the recovery of damages for the incapacity or death; or

(ii) not properly prosecuted proceedings that have been instituted ; or

(iii) discontinued proceedings that have been instituted;

The Commission may, by written notice, request the veteran or dependant;

(d) to institute proceedings or new proceedings against the person; or

(e) properly to prosecute proceedings against the person.

17 Explanatory Memorandum , p. 10.

264

23

5.24 The words underlined above in paragraph 30E(b) are to be omitted and the following inserted: 'the same incapacity of the veteran from that or any other injury or disease or in respect of that death'.

5.25 The words underlined in subparagraph 30E(c)(i) are to be omitted and the following words inserted: 'in respect of the same incapacity of the veteran or in respect of that death'.

5.26 Similar changes apply to sections 30G and 30H-where a third party has agreed to pay damages or damages have been awarded to a veteran.

5.27 Section 30L operates so that the Commonwealth may recover from a veteran who has been paid compensation from another country or international organisation, an amount equal to the total amount of pension paid to the veteran under Part II

5.28 Subsection 30P makes clear that any overpayment of pension because of the operation of sections 25A, 30C or 30D is recoverable from any amount of pension payable under Part II.

5.29 The same principle regarding compensation offsetting applies to Part IV. Section 74 operates so that in cases where a member receives compensation from a source other than the VEA, for the same incapacity, a pension received under the VEA will be offset by that compensation. Amendments are made to this section to make clear that this section 'applies where the compensation and the pension paid or payable under Part IV of the VEA are in respect of the same incapacity'. 18

5.30 Amendments to paragraphs 74(3) (3A) and (3B) are intended to make clear that:

The lump sum compensation payments will be converted to a fortnightly rate if the lump sum compensation and pension under Part of the VEA are payable in respect of the same incapacity. 19

5.31 The Explanatory Memorandum states that the incapacity that 'entitles the member to both pension under Part IV and a compensation payment from another source (including section 30 and 137 of SRCA) may be from the same injury or disease or a different injury or disease' . 20

5.32 The amendment to subsection 74(8) is designed to make clear that:

... if a member is receiving either a converted lump sum or a periodic compensation payment for an incapacity and the amount of that compensation equals or exceeds the amount of pension payable under Pa11

18 Explanatory Memorandum , items 15-17, p. 13.

19 Explanatory Memorandum , items 18-23, p. 13.

20 Explanatory Memorandum , items 15-26, pp. 13-14.

265

24

IV of the Veterans Entitlements Act to the member in respect of the same incapacity, then pension under Part IV is not payable to the member. 21

5.33 Again, the Explanatory Memorandum states that the incapacity that entitles the member to both a pension under Part IV and a compensation payment from another source (including section 30 and 137 of SRCA) may be from the same injury or disease or a different injury or disease.

5.34 Subsection 75(1), which deals with proceedings against a third party, is also amended and is consistent with the intention reflected in the amendment to section 30E considered above. The intention is to make clear that the Commission may request a member entitled to a pension under the VEA to institute or prosecute proceedings against a person, other than the Commonwealth, who may be legally liable to pay damages to the member where the damages and the pension entitlement are in respect of the same incapacity.

5.35 According to the Explanatory Memorandum, this amendment enables the Repatriation Commission to request a member who is entitled to a pension under Part IV of the VEA 'to institute or prosecute proceedings against a person, other than the Commonwealth , who may be legally liable to pay damages to the member'. 22 It stated that the amendments make it clear that:

... the Commission may request a member entitled to pension under Part IV to institute or prosecute proceedings against a person, other than the Commonwealth, who may be legally liable to pay damages to the member where the damages and the pension entitlement under Part IV are in respect of the same incapacity . The incapacity that entitles the member to both pension under Part IV and a compensation payment from another source may be from the same injury or disease or a different injury or disease. 23

5.36 For consistency, amendments similar to those already considered are contained elsewhere in the bill.

5.37 The department stated that the proposed amendments will not affect:

" the formula used for calculating the amount of offsetting to be applied once a decision has been made to offset;

" the offsetting of Commonwealth superannuation payments against certain payments made under the SRCA or the MRCA; and

" the effect of VEA or SRCA payments on the quantum of permanent impairment payments made under the MRCA. 24

21 Explanatory Memorandum, items 24 and 25, p. 13.

22 Explanatory Memorandum , p. 14.

23 Explanatory Memorandum, items 27 and 28, p. 14.

24 Submission 2, p. 6.

266

25

5.38 It recognised that some veterans may be concerned that the amount of disability pension they are receiving will be affected by the proposed amendments. In this regard, as noted earlier, the department noted that the amendments 'will not and are not intended to change the operation of the offsetting provisions in any way'. In other words, 'a person whose disability pension is currently being offset by another payment for the same incapacity will continue to have his or her pension offset at exactly the same rate, unless there is another reason to change that rate' . 25

The ex -service community

5.39 Three ex-service organisations (Legacy, the Vietnam Veterans' Federation and the Returned and Services League (RSL)) made submissions to the inquiry raising issues with the offsetting arrangements as they currently stand as well the proposed amendments.

Legacy

5.40 Legacy did not argue against the principle of offsetting. It was concerned with the way in which offsetting arrangements were applied. The committee considered this matter in 2003.

5.41 In its report the committee expressed its sympathy to those veterans and widows who found themselves in difficult circumstances as a result of the offsets applied to their pensions. 26 In light of the complexity of the offsetting arrangements, the difficulty inherent in reassessing the large number of relevant cases and the cost of restoring offset pensions to their original value, the committee was unable, at the time, to make any recommendations in favour of those affected by the offsetting arrangements. 27

Committee view

5.42 The committee notes the evidence heard during the 2003 inquiry indicating that many of the issues with offsetting arrangements arose from the lack of advice, or incorrect advice, provided to compensation recipients. 28 It believes that the availability of clear and correct information in regards to offsetting arrangements is necessary to minimise any possible negative effects on pension recipients (see the section below on communication and information) .

25 Submission 2, p. 7.

26 Senate Foreign Affairs, Defence and Trade Legislation Committee, Aspects of the Veterans' Entitlements Act 1986 and the Militmy Compensation Scheme, September 2003, p. 26.

27 Senate Foreign Affairs , Defence and Trade Legislation Committee, Aspects of the Veterans' Entitlements Act 1986 and the Military Comp ensation Scheme, September 2003, p. 26.

28 Senate Foreign Affairs, Defence and Trade Legislation Committee, Aspects of the Veterans' Entitlements Act 1986 and the Militmy Compensation Scheme, September 2003, p. 22.

267

26

Vietnam Veterans' Federation

5.43 The Vietnam Veterans' Federation submitted that the amendments were too broad and offsetting should only occur in cases where compensation is paid for the same injury as pension is being paid. 29 This view was similar to that put forward by the RSL (see below).

5.44 The Federation was also concerned that legal costs and disbursements included in compensation payments would be considered part of the total payment amount used for calculating offsetting amounts. The Federation argued that these costs 'are not the compensation for injuries but the cost of obtaining that compensation'. 30 The RSL agreed with this view. It argued that the amount to be counted as compensation for offsetting purposes should be only that amount that the veteran actually receives. 31

5.45 DVA informed the committee that 'party-party' legal costs-which include all amounts specifically included in a court judgement, settlement or payment as 'costs' " are subtracted before any offsetting occurs. 32 Solicitor-client costs are considered separate from these party-party costs and include any costs not specified in the settlement, judgement or payment. These costs are a private arrangement and are not excluded from the compensation payment and are therefore offset. 33 DV A stated that the policy in regards to legal costs is aligned to that applying to other income support payments in regards to compensation recovery. 34

Committee view

5.46 The committee notes the issue raised by the Vietnam Veterans' Federation and supported by the RSL in regards to the inclusion of solicitor-client costs in offsetting calculations. It believes that the issue is worthy of consideration by government to ensure that veterans are not being adversely affected by the inclusion of unspecified costs and other disbursements in the total sum used in offsetting arrangements.

29 Submission 5, [p. 2].

30 Submission 5, [p. 1].

31 Mr Hodges, Proof Committee Hansard, 11 August 2011, p. 6.

32 Department of Veterans' Affairs , answers to written questions, received 5 August 2011.

33 Department of Veterans' Affairs, answers to written questions, received 5 August 2011.

34 The department explained further that this was standard policy in regards to compensation recovery and offsetting. It also suggested that details of costs not specifically included in a court judgement, settlement or payment was a private issue and parties should seek appropriate amounts to cover both their costs and required compensation. Ms Spiers, Proof Committee Hansard 11 August 2011, p. 14.

268

27

The RSL 's opposition to the proposed amendments

5.47 The Returned & Services League of Australia (RSL) opposed the proposed amendments in Schedule 2 on the grounds that:

" the proposed amendments are too far-reaching and unnecessary because current legislation already requires discounting in the assessment of pensions if two injuries contribute to the same impairment; " sufficient provision already exists in Chapter 19 of the Guide to the

Assessment of Rates of Veterans' Pensions (GARP) to discount the assessment of disability pension for the effects of non-service-related disabilities, injuries and illnesses;

" the proposed amendments would effectively allow the Commonwealth to 'double dip' into veterans' disability pensions; and

" the proposed amendments go far beyond the Government's stated intention that the amendments would restore the original intention of the 1973 offsetting legislation . 35

5.48 The RSL was of the view that the amendments, if passed, would have 'a far more widespread impact on veterans than could ever have been intended when offsetting was first introduced into the Repatriation legislation in 1973 '. 36 It argued that if the government's intention was to ensure that veterans are treated equitably and are neither over-compensated nor under-compensated, the legislation should be amended to ensure that any offsetting of compensation payments against disability pension should apply to:

" only that portion of the compensation payment that can be said to represent the compensation directly related to the particular aspect of incapacity for which disability pension is paid; and

" only that portion of disability pension that can be said to represent the particular aspect of incapacity that has been compensated by other compensation and that has been assessed as contributing to the overall rate of disability pension (taking into account the fact that application of Chapter 19 of GARP may have already removed part of the compensation incapacity from the assessment of incapacity). 37

5.49 In explaining its position, the RSL restated the Explanatory Memorandum's description of the introduction of provisions for offsetting in 1973 as being intended to 'avoid the payment of double compensation by the Commonwealth'.38 The RSL

3 5 Submission 3, [p. 1].

36 Submission 3, [p. 2].

37 Submission 3, [p. 5].

38 Explanatory Memorandum, p. 8.

269

28

argued that the amendments proposed by the legislation 'go well beyond that original intention' by applying offsetting not only in regards to:

compensation received in respect of any war-caused or defence-caused injuries but to compensation received for any injuries at all from any other source ... so long as there is some aspect of the compensation that can be traced to an aspect of incapacity for which pension is also being paid. 39

5.50 The RSL argued that the amendments will result in the application of offsetting arrangements in cases where double compensation is not occurring. 40

5.51 It maintained that existing provisions ensure that pensions are only paid in respect of the service-related aspect of a veteran's or member's incapacity. Non " service related injuries or illnesses contributing to that same incapacity are accounted for through the rate assessment process. The GARP sets out how pensions should be reduced according to the proportion of the incapacity that is contributed by non " service related injuries or illnesses and ensures that the Commonwealth only provides a rate of pension commensurate with the service-related aspect of the incapacity.

5.52 The RSL's position was that if a veteran or member is only receiving their pension in respect of the service-related aspect of their incapacity , offsetting should only apply to any compensation received in regards to the same, service-related aspect of their incapacity. It held that it is inequitable for offsetting to occur where compensation is being paid for an aspect of the incapacity for which a pension is not being paid. 41

5.53 The RSL pointed out that different injuries and illnesses are likely to have the same incapacitating effects on 'various aspects of a person's personal relationships, mobility, recreational and community activities, employment activities and domestic activities'. 42 It noted that the proposed amendments require compensation to be paid "'in respect of' the same incapacity', however, the legislation:

does not require any assessment of whether or not only part of the compensation might be attributable to a particular aspect of incapacity that happens to be identical to a particular aspect of incapacity for which pension is being paid. 43

5.54 According to the RSL, the proposed amendments will mean that once compensation is paid 'in respect of the same incapacity for which a pension is being paid (notwithstanding that this incapacity may be the result of a number of different illnesses, injuries or circumstances) then 'all of that compensation must be taken into

39 Submission 3, [p. 5].

40 Submission 3, [p. 4].

41 Submission 3, [p. 5].

42 Submission 3, [p. 4].

43 Submission 3, [p. 4].

270

29

account in offsetting that compensation against the pension on a dollar-for-dollar basis'. 44

5.55 The RSL gave the example of a veteran whose only accepted incapacity results from a war-caused right shoulder injury but suffers a new right shoulder injury in a civilian workplace accident which exacerbates their existing incapacity. 45 Under the GARP, both injuries can be seen to be contributing to the same incapacity but the disability pension will only be paid in regards to the proportion of that incapacity contributed to by the war-caused injury.

5.56 The RSL held that if the veteran in this example were to receive compensation for the workplace injury, offsetting would not occur under existing provisions , despite the compensation being paid for the same incapacity. 46 The RSL argued that 'there would not be any offsetting under the current law because there were two separate and distinct injuries (the effect of Smith's case)'. 47

5.57 In its view, under the proposed amendments, the Commonwealth will'double dip' in discounting pensions. 48 By this it meant that, under the GARP, the veteran in the example will have their pension rate set according to the proportion of their incapacity which is related to their service related injury. The RSL considers this the flrst 'dip'.

5.58 The RSL stated that the Commonwealth will then offset the pension being provided to the veteran by the amount of compensation being received for their civilian injury, as it is paid in regards to the same incapacity for which they are being paid a pension: a loss of movement in the veteran's shoulder. 49 This is what the RSL considers the second or 'double dip'.

5.59 In summary, the RSL maintained that if a disability pension is only being paid in regards to a particular aspect of an incapacity, then only that portion (if any) of a compensation payment directly related to the same aspect of the incapacity should be offset. In the san1e way, offsetting arrangements should only apply to that portion of the pension which can be said to represent the particular aspect of the incapacity that is been compensated for through another source.

44 Subm-ission 3, [p. 4].

45 Submission 3, [p. 2).

46 Submission 3, [p. 2).

47 Submission 3, [p. 2].

48 Submission 3, [p. 3).

49 Submission 3, [p. 3).

271

30

The Department of Veterans' Affairs response to the RSL 's objections

5.60 The department told the committee that the RSL had, in its submission, misinterpreted the intent of the proposed amendments and their effect on veterans. It stated that veterans will not be disadvantaged by the proposed legislation and that it is not the intention of the proposed or current legislation for a 'double dip discount' to occur through the offsetting provisions. 50 ∑

5.61 The department argued that the proposed amendments will not result in offsetting occurring where compensation is paid for a condition which has a small overlap with the accepted condition for which pension is being paid. It states that offsetting will continue to occur only in cases where compensation is paid for the same incapacity for which pension is being paid. The department stated that offsetting provisions are 'administered with the view not to manufacture an overlap in incapacity' and that, generally, it 'would consider that for discrete conditions to have an overlapping incapacity those injuries or diseases must at least affect the same system function'. 51

5.62 The department gave the example of a person receiving pension in respect of incapacity from emphysema who receives lump sum compensation in respect of osteoarthritis of the knees. Both conditions could have similar or overlapping effects such as reducing the person's walking pace but would be not considered to be the same incapacity. 52 This is because the conditions affect different system functions as understood in the assessment methodology contained in the GARP. The incapacity from the emphysema affects the person's cardio-respiratory system while the osteoarthritis affects the motor function of lower limbs (see Appendix 3 for further information and more examples).

5.63 The department also rejected the RSL's recommendations that only the portions of a compensation payment and a pension which relate to the same incapacity be offset. It argued the apportionment methodology proposed by the RSL was not always feasible and it was frequently impossible 'for medical practitioners to assess

the relative contributions of different conditions, particularly where the symptoms of the conditions substantially overlap'. 53 It stated that 'this process is not a valid substitute for offsetting'. 54

50 Department of Veterans' Affairs, answer to written question on notice no. 1.3, received 5 August 2011, see Appendix 3.

51 Department of Veterans' Affairs, answer to written question on notice no. 1.4, received 5 August 2011, see Appendix 3.

52 Department of Veterans' Affairs , answer to written question on notice no. 1.4, received 5 August 2011, see Appendix 3.

53 Depaiiment of Veterans' Affairs, answer to written question on notice no. 1.5, received 5 August 2011, see Appendix 3.

54 Department of Veterans' Affairs , answer to written question on notice no. 1.5, received 5 August 2011, see Appendix 3.

272

31

5.64 The RSL based its concerns in regards to the proposed changes on the Full Federal Court's interpretation of the offsetting provisions in the Smith case. However, the department states that the decision of the court is:

limited in application to the patiicular circumstances of Mr Smith's case and is contrary to [the] way the offsetting provisions have been and are being administered in other cases.

The purpose of the proposed legislation is to prevent a person circumventing the intention of the legislation again in the future. 55

5.65 The department states that it has not been able to identify any other offset cases that reflect Mr Smith's particular circumstances. 56 It made clear that the proposed amendments will not change the operation of the offsetting provisions in any way but that the changes will 'remove confusion about the application of the Smith decision and ensure that the offsetting provisions continue to be administered as intended' . 57

Committee view

5.66 The committee notes the RSL's concerns in regards to the proposed amendments. Both the minister and the department have given assurances that the proposed amendments will not change the operation of the offsetting provisions . They state unambiguously that the proposed amendments simply clarify and affirm existing arrangements. The proposed amendments provide certainty as to how these provisions have been and will be administered.

5.67 Even so, the committee recognises that the RSL was concerned that, over time, the way in which these provisions have been administered could change. It suggests that the Explanatory Memorandum make clear that the current practices in regards to administering offsetting will remain the same.

5.68 The committee is concerned that the existing provisions in the GARP for taking into account the effect of non-service related injuries on a pension recipient's incapacity were not detailed in the Explanatory Memorandum. The committee believes that this aspect of the rate assessment methodology and the provisions for offsetting in the VEA are related. The committee is of the view that detail on chapter

19 of the GARP , the way it operates in relation to offsetting arrangements and the possible impacts on veterans arising from the interaction of these two different provisions under the VEA be detailed in the Explanatory Memorandum.

55 Depa~iment of Veterans' Affairs , answer to written question on notice no. 3.2, received 5 August 2011, see Appendix 3.

56 Department of Veterans' Affairs , answer to written question on notice no. 3.2, received 5 August 2011, see Appendix 3.

57 Department of Veterans' Affairs , answer to written question on notice no. 3.2 and introduction , received 5 August 2011, see Appendix 3.

273

32

Communication and information

5.69 In its 2003 inquiry into Aspects of the Veterans' Entitlement Act 1986 and the Military Compensation Scheme, the committee found that a number of recipients of compensation who had been affected by the offsetting arrangements had been disadvantaged as a result of 'maladministration, lack of advice, or incorrect advice' .

58

The committee recommended, at the time, that:

" comprehensive and expert information be given to potential recipients once claims have been accepted, detailing the MCRS lump sum and VE Act pension, with a complete cost schedule, including the rate of offset; and

" that this information should [be] provided to potential recipients before they are required to make a decision about whether to accept a lump sum or pension. It should also include any other likely payments that will impact on recipients future payments (for example, CPI increases) . 59

5. 70 The Review of Militmy Compensation Arrangements Report, released in March 2011, again noted that the com.plexities of offsetting arrangements make information difficult for many claimants to fully understand and that 'it is important that the advice given to potential claimants is comprehensive, accurate and clear' . 60 The review committee recommended that 'ongoing efforts' by DV A aimed at improving advice to clients regarding the effect of offsetting on their entitlements be continued. 61

5.71 In its 2010-11 Portfolio Budget Statements, the department has undertaken to continue 'to improve the way veterans and their dependants communicate with the Department and will significantly develop its current online services and provide clients with more choice and convenience in the way they interact with the Department'. 62

5. 72 In announcing the budget measure, the government also noted that it would 'improve the administration of offsetting cases through case manager training and enhanced systems support' . 63

58 Senate Foreign Affairs , Defence and Trade Legislation Committee, Aspects of the Veterans' Entitlements Act 1986 and the Militar y Comp ensation Scheme, September 2003, p. 22.

59 Senate Foreign Affairs, Defence and Trade Legislation Committee, Aspects of the Veterans' Entitlement s Act 1986 and the M ilitary Comp ensation Scheme, September 2003, p. 29.

60 Depatiment of Veterans' Affairs , Review of Militmy Comp ensation Arrangements Report, February 2011, p. 32.

61 Department of Veterans' Affairs , Review of Militmy Compensation Arrangem ents Report, February 2011, p. 271.

62 Portfolio Budget Statements 2011-12, Budget relat ed paper no. 1.5B, Defence Portfolio (D epartment of Veterans' Affai rs), p. 16.

63 Australian Government, Budget Paper no. 2, Budget Measures 2010-11, 'Part 2: Expense Measures, Veterans' Affairs' , p. 327.

274

33

Committee view

5.73 The committee believes that the communication of clear and accurate information between the department and claimants is essential to minimise the stress and uncertainty faced by veterans and their families in making important fmancial decisions . The committee supports continued efforts by the department to develop the expertise of staff providing advice to claimants regarding offsetting and to ensuring accurate and accessible information is communicated to veterans and their families .

Keeping the ex-service community informed

5. 7 4 In his second reading speech, the Minister stated that the budget measures in the bill:

... were the subject of wide consultation with the ex-service community. Post-budget briefings of heads of ex-service organisations, or ESOs, were held; an ex-services roundtable, including a separate briefmg on the measures in this legislation, was held; PMAC, the Prime Ministerial Advisory Council, was briefed, and the ESO deputy commissioners in each state and territory discussed the issues with their ESO community. There was widespread discussion and consultation with the veteran community about the budget measures raised in the bill. 64

5.75 In answer to a question on notice on the consultation undertaken by DVA in regards to the legislation, the department stated that briefing sessions were held before and after the budget announcement as well as a separate briefmg session on the details of the legislation with a roundtable of ex -services organisations. 65 These sessions were characterised as providing information on the proposed measures as opposed to seeking feedback or opinions on the changes and any possible amendments.

5. 7 6 The department informed the committee that no concerns with the proposed legislation were raised at any of the briefmgs with ex-service organisations and that, furthermore, no correspondence has been received expressing concerns with the proposed legislation. 66 Departmental officials were satisfied that they had consulted adequately with the ex-service community.67

5. 77 On the other hand, the RSL had a different perspective. In its view there was little, if any genuine consultation. 68 It informed the committee that the department had

64 The Hon Wanen Snowdon , Minister for Veterans' Affairs , Minister for Defence Science and Personnel, Minister for Indigenous Health, House of Representatives Hansard, 20 June 2011, p. 6479.

65 Depmiment of Veterans' Affairs , answer to question on notice, 11 August 2011 (received 12 August 2011).

66 Depa1iment of Veterans' Affairs , answer to written question on notice no. 4.1, received 5 August 2011, see Appendix 3.

67 Ms Spiers, Proof Committee Hansard, 11 August 2011, p. 12.

68 RADM Doolan, Proof Committee Hansard, 11 August 2011, p. 2.

275

34

not consulted with it or its members in regards to the legislation. Rear Admiral Ken Doolan (Retired), RSL National President, suggested that the first RSL knew of the details of the legislation was at the pre-budget briefmg. 69

Committee view

5. 78 The committee is of the view that the department's consultative process could have allowed more time and opportunities for officials and the ex-service community to discuss the proposed changes with regard to the offsetting provisions. While DV A ensured the ex-service community was aware of the budget measures at the time they were announced, it did not provide a consultative process which enabled the community's representatives to assess the detail of the legislation, put their views, and suggest or advise on whether any changes might be considered .

5. 79 Offsetting has long been an issue of concern amongst veterans and the committee believes that the department should have made a greater effort to engage with the ex-service community in the development of this measure.

Conclusion

5.80 The committee supports the measures contained in Schedules 1 and 3. The committee has focused its inquiry on Schedule 2 of the bill which relates to compensation offsetting, a longstanding contentious issue for veterans .

5.81 The committee notes the concerns of those in the ex-service community who believe that the proposed amendments are unnecessary , are too broad or will result in unintended consequences. The committee notes, however, that the amendments are intended only to clarify how the offsetting provisions have been administered to date, and are not intended to change the operation of these provisions in any way.

Recommendation

5.82 The committee recommends that the Senate pass the bill.

SENATOR THE HON URSULA STEPHENS CHAIR

69 RADM Doolan, P roof Comm ittee Han sard, 11 A ugust 2011, p. 2.

276

Veterans' Entitlements Amendment Bill 2011 Coalition Senators' Dissenting Report

The Veterans' Entitlements Amendment Bill 2011 seeks to implement three measures announced by the Gillard-Brown Labor Government in their 2011-12 Budget.

The Bill contains three schedules: " Schedule One provides a $500/fortnight supplement to former Prisoners of War. The Prisoner of War Recognition Supplement is supported by the Coalition. " Schedule Two 'clarifies' arrangements affecting compensation offsetting under

the Veterans' Entitlements Act 1986 (VE Act). Specifically, the Schedule seeks to amend the VE Act following the Smith case. " Schedule Three rationalises temporary incapacity allowances. The Coalition supports Schedule Three.

The Bill passed the House of Representatives on 20 June 2011 and the Coalition did not oppose its passage and noted concerns with the application of Schedule 2, reserving the right to amend the legislation pending the outcome of a Senate Inquiry into Schedule 2. That Inquiry has sought submissions from the veteran and ex-service community and held a public hearing.

In relation to Schedule 2 of the Bill, this Dissenting Report notes as follows:

It is clear from the submissions received and the evidence given at the public hearing that this is a complex area of Commonwealth policy. As a consequence, it is incumbent upon the Parliament to carefully scrutinise complex changes to already complex legislation .

It is not clear, however, that these amendments are in the best interests of veterans and ex-service people. As a consequence, the Coalition does not believe the changes are justified and will seek to oppose Schedule 2 in the Senate.

The Coalition will oppose Schedule 2 of the Veterans' Entitlements Amendment Bi/12011 on the following grounds: " The Government has failed to fully justify the need for the change; " There are already established mechanisms under the Veterans' Entitlements Act

1986 and the Guide to the Assessment of Rates of Veterans' Pensions (GARP), which the Department has acknowledged, which provide sufficient scope to achieve this policy objective; " The Government did not consult with the ex-service community prior to

incorporating these amendments into the 2011-12 Budget; and " The Government believes that no one will be negatively impacted by the proposed amendments, but will only update computer software to confirm this after changing the legislation.

The Coalition accepts the principle of compensation offsetting and supports the principles underpinning the way the present system operates. The Coalition has already raised concerns about the method used to offset payments under the Military Rehabilitation and Compensation Act 2004, and notes that these have been addressed

Page 1 35

277

in the Campbell Review of Military Compensation Arrangements, and notes that this is beyond the scope of this Inquiry and of this Bill.

In accepting the principle of offsetting, however, the Coalition believes that the Parliament's initial intent was for offsetting only to apply with respect to dualjmulti eligibility for compensation under Commonwealth compensation schemes. It is not clear that Parliament's original intention was to extend this to third party compensation, which the Department advises these amendments may have the ability to do.

The Coalition is concerned that, should these amendments pass, 'the best possible outcome' for the veteran cannot be guaranteed. The Coalition is concerned that the Repatriation Commission has indicated it will need to provide clarifying guidelines or instructions to Delegates to ensure the 'intent' of the amendments is followed. This is not a desirable outcome.

Amendments not fully justified

In the submission from the Department of Veterans' Affairs to the Senate on this Bill , the Department writes: Broadly, the policy objective of the amendments is to provide some certainty that the offsetting provisions in the VEA can continue to be administered as they have

been for nearly 40 years, so as to prevent duplicate compensation being paid to veterans for the same incapacity.

Further, the Department writes: The amendments will not and are not intended to change the operation of the offsetting provisions in any way .

The Department has been unable to justify the reasons for the change .

The Department has identified the outcome of the Commonwealth of Australia v Smith (2009) case as the justification for seeking 'clarification' of the legislation. But, in doing so, the Department has identified the 'unique' nature of Mr Smith's case and its limited application to other clients of the Department of Veterans' Affairs. In fact, the

Department has indicated that no other client fits the profile of Mr Smith's case:

" ... since the Smith decision, we have been looking for cases that match the circumstances of Mr Smith, including in those cases that were put on hold. But once the commission made a decision to start processing cases we provided advice to staff saying, 'if you find a case which looks remotely like the circumstances of Mr Smith we need to consider that before any action is taken.'

To date. we have not had any cases with those circumstances. but we continue to look for them." (emphasis added) (FADT Legislation Committee Proof Hansard, 11 August 2011 , p9)

During evidence to the Committee, the Department said that, of 118,000 veteran disability pensioners (under the VE Act), 10,400 compensation pensions were 'offset ' by an average of $99 per fortnight. Further, of this 10,400 pensioners, only 9,450 were disability pensioners, with the balance being war widow(er)s.

The Coalition does not believe that the Smith case is a Trojan Horse that will expose the Commonwealth to additional financial liability . The Department's own figures show that

Page I 36

278

the circumstances of Mr Smith's case are unique and, on the basis that these amendments will not apply to Mr Smith, there is no justification to amend the legislation simply on the basis of the Commonwealth losing the case against Mr Smith.

Established mechanisms under the Act

On 20 June 2011, the Minister for Veterans' Affairs told the House of Representatives that: The compensation offsetting provisions, despite the comments which have been made, are not about changing the current arrangements; they are about ensuring

that the principles of offsetting, which have been in place since 1973, are clear and unambiguous. These measures, quite simply, maintain the status quo. ( ... ) These amendments do not deny or change any existing veterans' entitlements. Let us be very clear about it: these amendments simply clarify and affirm existing arrangements that have been operating under all governments since 1973. (House of Representatives Hansard, Monday 20 June 2011, pp64 78-9)

The Minister claims that the amendments do not do anything, yet the submissions of ex " service organisations make it clear that this is not the case. The Returned and Services League of Australia (RSL), for example, points to the potential for 'double-dipping' by the Commonwealth. The RSL describes 'double dipping' as:

Let us take, for example, a veteran who is covered under the Veterans' Entitlements Act-perhaps he is still serving, but he is still covered under the Veterans' Entitlements Act-and on the weekend he rides his trail bike and crashes and busts his knee. The diagnosis is internal derangement of the left knee. That gets better. In actual fact he sues the manufacturer of the dirt bike and wins a $10,000 payout for the lack of care on the dirt bike trail, so he has got $10,000 cash. A year later he is on board a ship and he falls down a ladder in the rough seas and bangs the left knee again. But this time the diagnosis is not internal derangement of the knee; it is something else. So we have got two discrete injuries of the knee. The department, rightly so, would accept the second condition as being service related, so the medical treatment for that will be paid for once he leaves service, through a white card. Then it comes to the avenue of compensation, a disability pension. What then happens is this chapter 19 of the GARP, where a form is sent to the treating doctor and the doctor apportions how much of the impairment is because of the accepted service related disability. In our submission we just picked a figure of 50 per cent. So the disability pension that he gets for his accepted condition is now discounted by the 50 per cent. Under the bill that is going through at the moment, there could be the possibility that because of the offsetting rules, because it is all one knee and one sort of condition, the money that he got from the insurance company, the $10,000, is also taken into account. The department cannot actually get that money, because that is already being paid to the veteran, but they can further reduce the disability pension to offset the amount that the veteran has already received from the insurance company.

(FADT Legislation Committee Proof Hansard, 11 August 2011, pp2-3)

The Department has advised that the Repatriation Commission intends to provide 'clarifying advice' to Delegates in the interpretation of the law, post-Parliamentary approval of the legislation.

Page I 37

279

Senator WRIGHT: ... It is the department's view that the amendments do not have the effect that is the concern of the RSL because chapter 19 would not apply where these offsetting arrangements will apply. That is my understanding. Given that the RSL consider that there is some capacity for ambiguity, is there any possibility of a clarifying amendment that could put their concerns to rest without affecting the integrity of the amendments being proposed? Mr Farrelly: ... Our view is that the potential for this can be satisfactorily

addressed by a commission policy document. (FADT Legislation Committee Proof Hansard , 11 August 2011, p11)

On the other hand, the RSL states in their evidence to the committee:

CHAIR:

Mr Hodges:

( ... )

Apart from the recommendations that are in your submission, are there any other measures or assurances that you would want to see in any new provisions? The department has many avenues open to it if this bill is actually passed. ( ... ) The RSL's fear with that is that, with due deference to my learned friends behind me, in 20 years time they are not going to be here. In 20 years time the current secretary of the department is not going to be here. So there is nothing really to stop the new regime in 20 years time looking at this instruction to delegates and to say, 'Well, we don't really need this anymore. Nothing has really happened, so we'// just cancel it.' What we would like is something in the legislation so that this double-dipping does not occur.

RADM Doolan: ( ... ), the RSL view is that it is much better to have the legislation being the basis for all these matters than to have it by regulation. (FADT Legislation Committee Proof Hansard, 11 August 2011, p3)

The Coalition believes the current regulations support the intention of the legisla tion. Further, the need to issue 'clarifying' instructions for 'clarifying' am endments is not a desirable outcome.

Th e Coalition comm ends the RSL's analysis of the GARP arrangements, arrangements which were also accepted by the Department of Veterans' Affairs.

Th e submission from the RSL notes this point: The proposed amendments are unnecessary because current l egislation already requires discounting in the assessment of pensions if two differ ent injuries con tribute to the sam e impairment.

On the basis that there is already provision for offsetting under the Act and the GARP, the Coalition does not believe there is a reason to clarify the operation of the law.

Pa ge 1 38

280

Consultation

The Coalition recognises the close relationship between the Department of Veterans' Affairs and the leadership of Australia's veteran and ex-service community organisations.

However, the admission by the Department that they did not conduct detailed consultation with the ex-service community is troubling for the Coalition.

The Department admitted to holding an 'information briefing' with national ex-service organisation leaders on the day of the Federal Budget. This confidential briefing provides information and advice about measures contained in the Budget. It is not designed as a 'feedback' session, but an information session only.

The Coalition is disappointed that this measure, which should not be considered a 'budget' measure, did not attract greater consultation with the veteran and ex-service community. The ex-service community has known of the outcome of the Smith case for some time. Further, the Department refers to the Smith case on page 72 of the 2009-10 Annual Report. In the Annual Report, the Department states:

Commonwealth vs Smith. This Full Federal Court matter considered the operation of compensation offsetting provisions in the case of Mr Smith. The court held that these provisions operate in respect of the same injury or disease and not the same incapacity but also commented on the peculiar facts of Mr Smith's case.

There remain different views on the extent and application of the Smith decision. Work continues on clarifying the operation of the law in light of this decision.

The decision in Smith was made on 16 December 2009. The Annual Report was tabled in October 2010. These legislative amendments were tabled in the House of Representatives on 1 June 2011, after being 'announced' in the Budget on 10 May 2011. The Department, and the Government, had ample time to discuss the outcome of the Smith decision with the veteran and ex-service community, to advise them about the

nature of the legislative changes they viewed as being required prior to tabling the amendments in the Parliament (or including them as a Schedule to another, separate, Bill). That they chose not to do so is regrettable.

The Coalition is deeply disappointed by the Department of Veterans' Affairs response of 12 August 2011 to questions taken on notice during the public hearing about consultation. If nothing else, the response proves that the Department did not hold consultations on the proposed legislation prior to the tabling of that legislation in the

House of Representatives, or the announcement of the measures in the Budget. The letter even states that discussion of offsetting with the Operational Working Party and the Prime Ministerial Advisory Council on Ex-Service Matters (PMAC) about offsetting involved, firstly, discussions about the costs of addressing compensation offsetting under the Military Rehabilitation and Compensation Act 2004, and then of the matters under discussion by the Campbell Review of Military Compensation Arrangements. The

legislative amendments were not discussed until 4-5 July 2011, more than one month after the legislation was tabled and after the Coalition referred this provision to this Senate Inquiry.

Notwithstanding the oft-repeated assurances that the changes 'will have no impact on the application of Departmental policy regarding offsetting rules that have been applied since 1973', the Department's apparent unwillingness to discuss these changes openly is a cause for concern.

Page I 39

281

Potential negative side effects

On page 327 of Budget Paper No .2, the Government states:

Compensation offsetting under the Veterans' Entitlements Act 1986 The Government will clarify offsetting rules for veteran compensation under the veterans' Entitlements Act 1986 (VEA), at a cost of $2.7 million over four years. Compensation offsetting under the VEA involves a reduction in the level of a disability pension where another compensation payment has been made for the same incapacity. This clarification will ensure that offsetting continues to be applied on the basis of a person's level of incapacity.

The Department of Veterans' Affairs will also improve the administration of offsetting cases through case manager training and enhanced systems support. The cost of this proposal will be met from within the existing resources of the Department of Veterans' Affairs.

This statement in Budget Pape r No 2 is ambiguous and is made no clearer by evidence given at the hearing.

When asked about the cost of this initiative, the Departmen t made the following statements:

Senator FAWCETT:

Mr Farrelly:

( ... ) Senator FAWCETT:

Mr Luckhurst:

My reading of the budget papers, though, identifies some $2.7 million for the implementation of this change. I may be completely wrong- please let me know if I am - but that seems an extortionate amount of money for something that has no impact.

That relates not necessarily to any change in the way that the legislation is applied but to improving our own systems. The majority of that money is for building a better information technology system to do the work behind the scenes. At the moment it is largely manual. We need to automate those business rules and processes.

You are looking to spend $2.7 million to automate an area, although you do not believe that you have identified any other veterans who fall into the unique circumstances of Mr Smith?

We are looking at a systems approach for all the individuals who are subject to the offsetting arrangements. We obviously need to look at those cases that have the same circumstances as were highlighted in the Smith cases, but we are talking broadly about how we manage our offsetting responsibilities under the legislation. As Mr Farrelly said, we are not looking to change the way that we interpret the legislation. We are seeking to clarify and amend the legislation so there is clarity for all concerned around what is being offset. The $2.7 million is really about making sure that when we are doing our offsetting cases we have as much of that process as automated as possible.

Page I 40

282

Senator FAWCETT: If we accept the RSL's position and, in fact, your own position that this legislative change will not change the operation nor intent if the Bill were not passed or that part were amended or not there, then that $2.7 million would not be spent? Mr Farrelly: No, I do not believe that is the case. Senator FAWCETT: Are you saying that it is there specifically? Mr Farrelly: It is there to improve the way we do business and the

services we deliver. If it were going to affect individual disability pensioners in terms of their funding then you would see an effect against administered funding. This is departmental funding. (FADT Legislation Committee Proof Hansard , 11 August 2011, pp15-16)

It remains unclear why the Government needs to use the Smith case to update IT systems inside the Department- the Full Federal Court did not find that OVA systems were unacceptable. If the Department believes that IT systems are inadequate, it should address this problem independently of changes to legislation.

The Coalition would prefer the Department fully investigated the scope of the problem they seek to address, through the use of up-to-date IT systems, before changes to the legislation in this area are made.

Conclusion

The Coalition is disappointed that the Gillard-Brown Labor Government has chosen to include this complex, technical and potentially punitive measure in a Bill with two other measures designed to provide greater amenity to the veteran and ex-service community.

The Coalition supports the establishment of a Prisoner of War Recognition (POWR) Supplement. The POWR Supplement builds on lump-sum payments made by the previous Coalition government to former Prisoners of War. This is a welcome measure which the Coalition fully endorses.

Further, rationalisation of temporary incapacity allowances will ensure assistance under the VE Act continues to be relevant to the contemporary needs of the veteran and ex " service community. This change recognises a societal shift in the way medical services are provided to people, particularly where short periods of incapacity or convalescence is

required. The Coalition supports these changes and notes the support of the veteran community for these changes.

However, the Coalition is not comfortable with the changes proposed by Schedule 2 of the Bill. This Inquiry process has failed to answer the concerns of the veteran and ex " service community, and of the Coalition.

The RSL succinctly summed up the issue of 'offsetting ' during the hearing. Mr Hodges stated:

'Offsetting' to anyone in the veteran community at the moment is a big, bad word, mainly because of what is happening with the Military Rehabilitation and Compensation Act and how that treated offsetting with the Safety, Rehabilitation and Compensation Act and the Veterans' Entitlements Act. I feel it behoves the

Page I 41

283

RSL to make sure that when the word 'offsetting' is mentioned in any context, i t is in an act of parliament and if it needs to be changed later in life, we w ill come back here as opposed to having the stroke of a pen. (FADT Legislation Committee Proof Hansard, 11 August 2011 , p3)

The Coalition agrees.

The amendments give the Repatriation Commission greater power than presently exists to determine the 'offset' of compensation payments made by the Commonwealth. The Government has not been able to adequately explain the need for the change, but has instead sought to use the change to make other systems adjustments which, by rights, should be done before legislative change is sought.

Notwithstanding the Department's intention to provide Delegates of the Repatriation Commission with interpretive 'guidelines' about the 'intention ' of the amendments presently before the Parliament, the Coalition does not believe this is in the best interests of the veteran community. The Coalition believes the present measures, which the RSL argues have stood the test of time well, are adequate.

The Coalition acknowledges the Department's concerns with the outcome of the Smi th case. The facts of Mr Smith's case are unique and the Department has not shown that these amendments are necessary to prevent future similar claims. By the Department 's own figures, of 200 cases closely examined, not one comes close to the particular

circumstances of Mr Smith's case.

Further, the Coalition is disappointed with the Department's lack of consultation with the veteran and ex-service community about the measures proposed. 'Information sessions' are not a substitute for meaningful dialogue and consultation, which seeks feedback and input into legislative changes. The Coalition recognises the significant level of understanding in the veteran and ex-service community about legislation affecting veterans and their families; the Department is well placed to use this significant resource to meaningfully seek advice on proposed legislative changes.

On the basis of the veteran and ex-service community's ongoing opposition to the Schedule, the Coalition will recommend Schedule 2 of the Bill be omitted. Should the Government feel this amendment is critical to the operation of the VE Act, they should bring the Schedule back in a new Bill of its own following genuine consultation and feedback with the veteran and ex-service community.

RECOMMENDATION:

That Schedule 2 of the Veterans' Entitlements Amendment Bill 2011 be omitted from the Bill.

SENATOR ALAN EGGLESTON DEPUTY CHAIR

284

Page I 42

Appendix 1

Public submissions

1 Legacy Australia Council Inc.

2 Department of Veterans' Affairs

3 The Returned and Services League of Australia Limited

4 Department of Defence

5 Vietnam Veterans' Federation

285

286

Public hearing and witnesses

Thursday, 11 August 2011-Canberra

Returned and Services League Ltd. DOOLAN, RADM Ken (Rtd), National President HODGES, Mr John, National Veterans' Affairs Advisor

Department of Veterans' Affairs BROWN, Mr Luke, Director , Costing and Implementation Section FARRELLY, Mr Sean, General Manager, Support Division

Appendix 2

LUCKHURST , Mr Adam, National Manager, Rehabilitation and Entitlements Policy Group SPIERS , Ms Carolyn, Principal Legal Adviser, Business Integrity and Legal Services Group

287

288

Appendix 3

Department of Veterans' Affairs-answers to written questions Schedule 2 of the Veterans' Entitlements Amendment Bill 2011 clarifies and affirms the policy intention of the offsetting provisions in the Veterans' Entitlements Act 1986 (VEA) . The policy intention of the offsetting provisions has always been to prevent duplicate compensation being paid for the same incapacity and the policy has consistently been implemented on this basis for almost 40 years.

The amendments will not and are not intended to change the operation of the offsetting provisions in any way. The provisions will operate prospecti vely, and following the passage of the legislation, a person whose disability pension is currently being offset by another payment for the same incapacity will continue to have his or her pension paid at exactly the same rate, unless there is another reason to change that rate.

1. Unintended consequences

1.1 The RSL has raised concerns about Schedule 2. Could you clarif y the following matters?

Can you envisage any circumstances under the proposed legislation whereby a veteran could find him or herself at any time in the future receiving compensation payments that are not commensurate with his assessed level of incapacity?

Compensation under the VEA will continue to be commensurate with the assessed level of incapacity as a minimum. The situation under the current legislation will not change under the proposed legislation.

It should be noted that it is currently possible for compensationfi ~om another source to be more than an assessed level of incapacity under the YEA. For example, if a person receives a compensation payment from another source that exceeds the amount of the Special Rate of disability pension (the maximum amount of compensation payable under the VEA). In these circumstances the person's compensation payment from the other source will exceed his or her level of incapacity as assessed under the VEA. This is because the offsetting provisions of the VEA are only able to take into account compensation payments made under that Act. This will not change under the proposed legislation .

289

1.2 Is the RSL correct in stating that the proposed amendments go 'well beyond' the original intention in 1973 or even 1994?

No, the amendments do not go beyond the original intention or content of the 1973 or 1994 legislation. The original intention referred in the Explanatory Memorandum (EM) is not a reference to offsetting for pensions paid in respect of different types of service. It is a reference to the principle that offsetting should ensure that a person is not compensated twice for the same incapacity, which has been the policy intention since 1973.

In stating that the "amendments in the Bill go well beyond the original intention", the RSL's submission misinterprets the explanation of the reason for the amendments provided in the EM .

The RSL submission correctly recognises that in 1973 compensation coverage under the Repatriation Act 1920 (the predecessor legislation to the VEA) was extended to include peacetime service . This creates a system of dual entitlement with the Comp ensation (Government Employees Act 1971 -1973 (the predecessor to the SRCA), because that Act also provided compensation coverage for peacetime service. Offsetting ensured that a person could not be compensated twice for the same incapacity related to peacetime service under both Acts.

In 1994, compensation coverage for peacetime service generally ceased under the YEA. However, compensation coverage under the SRCA was extended to what is now known as warlike and non-warlike service (still sometimes called operational service) . The YEA was subsequently amended to allow for offsetting to ensure a person could not be compensated twice for the same incapacity related to operational service under both Acts.

As stated above, the original intention of the legislation in the EM was to offset for the same incapacity.

1.3 Are you able to explain the concerns raised by the RSL, particularl y in the example it provides to indicate that veterans may be disadvantaged by the proposed legislation?

Veterans will not be disadvantaged by the proposed legislation . The Department's understanding of the RSL's concern is it believes the proposed amendments will extend the offsetting provisions under the YEA and will result in a "double dip discount " in some cases. This is not the intention of the current or proposed legislation .

The RSL 's submission to the Senate Inquiry states that the proposed legislation will require the Commonwealth to offset an entire compensation payment from another source for a condition not accepted under the YEA against any disability pension received under the YEA for a condition accepted under that Act in circumstances

48

290

where the non-accepted condition only results in a small overlap in incapacity with the accepted condition.

This is not the case - the proposed legislation will ensure that offsetting only same incapacity continues. This is explained in further detail below at 1.4.

The RSL' s submission also states that this perceived extended offsetting requirement under the proposed legislation, in combination with an existing apportionment methodology under Chapter 19 of Guide to the Assessment of Rates of Veterans' Pensions Fifth Edition (GARP V), will result in a "double dip discount" in some cases.

This is not the case. If impairment from a non-accepted VEA condition is removed from the assessment under Chapter 19, then there will be no overlap in incapacity, and therefore no offsetting. Therefore, DVA does not agree that the proposed legislation as drafted will result in a "double dip discount".

1.4 Can you see any way to satisfy its concerns?

As stated above, DVA understands the RSL 's concerns but does believe they are based in fact. The proposed legislation will simply clarify and affirm the policy intention of the legislation and does not require a change to the way the offsetting provisions are applied.

The offsetting provisions are administered with the view not to manufacture an overlap in incapacity. Generally, the Department would consider that for discrete conditions to have an overlapping incapacity, those injuries or diseases must at least affect the same system function and be assessable within the same system-specific chapter of GARP V.

Consider the example of a person receiving disability pension in respect of incapacity from emphysema under the VEA and has received lump sum compensation under the SRCA in respect of osteoarthritis of the knees. Both these conditions might have similar and overlapping effects, such as reducing the person's walking pace; however, the incapacity from either condition would not be considered to be the same. This is because the incapacity from the emphysema would affect the person's cardiorespiratory system and be assessable under Chapter 1 of GARP V, whereas the incapacity from the osteoarthritis would affect motor function low limbs and be assessable under Chapter 3 of GARP V.

Another example would be a person who suffers from tinnitus and post-traumatic stress disorder (PTSD). Though both conditions may have similar effects (disturbed sleeping patterns, etc.) they are not assessable under the same system specific chapters of GARP V. Tinnitus is assessable under Chapter 7 of GARP M (Ear, Nose and Throat Impairment), whereas PTSD is assessable under Chapter 4 of GARP V (Emotional and Behavioural Impairment) and therefore would not be considered to result in the same incapacity and would not be offset.

49

291

Altenmtively , consider the example of a veteran who is receiving disability pension in respect of incapacity from chondromalacia patella (CMP) under the VEA and has received lump sum compensation under the SRCA in respect of osteoarthritis of the knees. The incapacity from both conditions would be considered to be the same if both the incapacity from the CMP and the incapacity from the osteoarthritis affected the veteran's motor function of the low limbs and were assessed under Chapter 3 of GARPV .

1.5 The RSL proposed a different amendment to the VEA. Could you comment on this proposal?

The Department considers that the proposed amendments in Schedule 2 of the Bill are the most appropriate way to clarify and affirm the policy intention of the offsetting provisions. It is arguable that the suggestions for amendment by the RSL go beyond the scope of the amendments contained within the proposed legislation .

The Department has concerns about the RSL proposal's reliance on the use of the apportionment methodology in Chapter 19 of GARP V and the 'but for' test. This process is not a valid substitute for offsetting.

Chapter 19 of GARP V applies "whenever an impairment is not due solely to the effects of accepted conditions" (for example, where impairment is also due to the effect of non-accepted conditions under the VEA , such as age related conditions).

Where the two different conditions contribute to the same incapacity , apportionment under Chapter 19 is not always feasible. Chapter 19 of GARP M requires relative contributions to be determined based on proper medical advice. It is frequently impossible for medical practitioners to assess the relative contributions of different conditions, particularly where the symptoms of the conditions substantially overlap. Indeed, the more closely incapacity from an accepted condition resembles incapacity from a non-accepted condition, the less feasible it is to make an assessment of the relative impairments for the purposes of Chapter 19.

For example, if a person had an accepted condition of PTSD and a non-accepted condition of generalised anxiety disorder , and both would cause a similar symptomatology in the absence of the other, no apportionment could feasibly be made. The 'but for' test proposed in the RSL's submission on apportionment does not resolve this problem. Current practice, which will not change under the Bill, is that the issue is not managed by making an apportionment under Chapter 19.

2. Costs of obtaining compensation

2.1 In its submission, the Vietnam Veterans' Federation state that the legal costs and disbursements should not be taken into account in the offsetting arrangements-they are not the compensation for injuries but the cost of obtaining that compensation.

50

292

Could you explain how the costs of, and other expenses incurred in, obtaining compensation which are then included in the compensation payment, are treated under the legislation?

'Party-party' legal costs are subtracted from a lump sum compensation payment before any offsetting occurs. 'Party-party' costs include all amounts specifically included in any Court judgement, settlement or other compensation payment as 'costs'. 'Party-party' costs are not regarded as being in the scope of the definition of compensation.

'Solicitor-client' costs are separate from 'party-party' costs and include all other costs that are not specifically included in a settlement or judgement. These costs are a private arrangement between the solicitor and the client and are not excluded from the compensation payment and are therefore offset.

This policy is aligned with the policy on legal costs in respect of compensation recovery applying to income support payments.

3. Need for change

3.1 The RSL states that the proposed amendments are unnecessary because the current legislation already requires discounting in the assessment of pensions if two different injuries contribute to the same impairment.

Is this statement correct? If so, why is there a need to make the proposed amendments?

The statement is not correct because the decision of the Full Federal Court in Smith has created some uncertainty about the policy intention of the offsetting legislation. The proposed legislation will confirm and affirm this policy intention.

As stated above, use of the apportionment methodology in Chapter 19 of GARP V is not a valid substitute for offsetting.

3.2 In its submission, DV A stated that if passed the amendments 'should avoid the likelihood that, on the basis of the Smith case, those seeking future compensation payments could circumvent the offsetting provisions by exclusion of specific injuries or diseases from the terms of the compensation settlements' .1

Could you inform the committee about previous examples of, and details on, cases where someone has circumvented the compensation offsetting provisions?

1 Submission 2, p. 6.

51

293

The Department has not been able to identify any other offset cases that reflect Mr Smith's particular circumstances. The decision of the Full Federal Court is limited in application to the particular circumstances of Mr Smith's case and is contrary to way the offsetting provisions have been and are being administered in other cases.

The purpose of the proposed legislation is to prevent a person circumventing the intention of the legislation again in the future.

Furthermore, the proposed legislation will remove any doubt or uncertainty created by the Full Federal Court decision. The Department has received at least one inquiry from a legal firm seeking to rely on the decision of the Full Federal Court in Smith.

While this inquiry has been resolved, the proposed legislation will remove confusion about the application of the Smith decision and ensure that the offsetting provisions continue to be administered as intended, even where the same or similar particular circumstances arise again.

4. Consultation and communication with the ex-service community

4.1 Could you inform the committee about the level of consultation that took place with the ex-service community in respect of the changes contained in schedule 2?

The 14 national ex-service organisations (ESOs) were briefed about the purpose of the proposed legislation a number of times on Budget day and post-Budget. These 14 ESOs are:

"

"

"

"

"

"

"

"

"

"

"

"

"

"

Australian Federation of Totally & Permanently Incapacitated Ex-Servicemen & Women (TPI Federation) Australian Peacekeepers & Peacemakers Veterans' Association (APPVA) Australian Veterans & Defence Services Council (A V ADSC) Defence Force Welfare Association (DFWA) Legacy Co-ordinating Council Partners of Veterans Association (PYA) Returned & Services League of Australia (RSL) Vietnam Veterans Association of Australia (VV AA) Vietnam Veterans' Federation of Australia (VVFA) Naval Association of Australia Royal Australian Air Force Association (RAAF) Royal Australian Regiment Association (RAR) Australian Special Air Service Association (ASASA)

War Widows' Guild of Australia

The Prime Ministerial Advisory Council on Ex-Service Matters (PMAC) was also briefed at the time of the Budget announcement. PMAC is an advisory body appointed

52

294

by the Minister to represent a broad experience and understanding of the Issues affecting the ex-service and defence communities.

DV A Deputy Commissioners in each state and territory also briefed local ESOs about the proposed changes following the Budget announcement.

No concerns with the proposed legislation were raised at these briefmgs. Furthermore, no correspondence has been received expressing concerns with the proposed legislation.

4.2 'rhe committee notes the statement in the Explanatory Memorandum that the High Court [sic} decision highlighted 'the need for greater clarity in the compensation offsetting provisions'. The committee also notes the observation of the Review of the Military Compensation Arrangements which found that:

Dual eligibility continues to be a key source of complexity, confusion and misunderstanding among administrators, claimants and their representatives. It was a central reason for the development and enactment of MRCA as a single piece of compensation legislation covering all forms of

service. 2

In your view, is the intention of Schedule 2 to bring clarity to help the courts interpret the meaning of the legislation or to help veterans and/or their dependants better understand the offsetting arrangements?

Yes, these amendments are concerned with affirming the longstanding policy intention of the offsetting provisions and restoring clarity following the decision of the Full Federal Court in Smith. However, the amendments are separate to the Review of Military Compensation Arrangements (the Review).

The Review commented in its report that one of the reasons for the introduction of the Military Rehabilitation and Compensation Act 2004 (MRCA) was to create a single system for injuries, diseases and deaths related to service rendered on or after 1 July 2004. The MRCA is prospective legislation and does replace the VEA and the SRCA for service rendered before 1 July 2004.

For example, an incident that was a major impetus for the development of the MRCA was the Black Hawk Helicopter accident of 12 June 1996. That accident drew attention to the differences in the form of compensation arrangements that applied to members ∑ of the Australian Defence Force (ADF) who were injured or killed. Depending on dates of enlistment and period of service, some of the members killed or injured in the accident had compensation coverage under both the SRCA and the

2 Review of Military Compensation Arrangements Repmt, p. 262.

53

295

VEA , whereas other members had compensation coverage under the SRCA only. This situation was not addressed retrospectively by the introduction of the MRCA . It was only addressed prospectively for service rendered after 1 July 2004.

∑ The proposed legislation is intended to clarify and affirm the principle of offsetting for same incapacity following the Smith case, which has limited or no application to the arrangements for service rendered before 1 July 2004 and the offsetting provisions within the VEA. The Smith decision has no application to the MRCA in situations were service has been rendered after 1 July 2004.

The proposed legislation is unrelated to the examination of offsetting issues in the Review. This legislation addresses the issue of when offsetting is applied under the VEA, whereas the MRCA Review considered the amount of compensation that should be offset under the VEA, as well as some other issues related to offsetting under the MRCA.

Recommendations made as part of the Review are currently being considered by Government. The Gov ernment has not yet responded to any of the recommendations from the Review.

5. Request member to institute proceedings

5.1 The committee notes that there are a number of provisions that enable the Commission to request a veteran or dependant to institute proceedings against a person who appears legally liable to pay damages in respect of the same incapacity.

Could you explain the extent to which the Commission may compel a member or dependant to take such action? Should these provisions be understood to mean that if an incapacity has arisen from either a service related cause or a cause from another event (such as a motor vehicle accident), or both, that the Commission can compel a member to take

action against another party rather than request compensation from DVA?

The Commission can only request a person to institute action against another party, it cannot compel a person.

Section 30E of the VEA applies where a pension is payable under Part II of the VEA in respect of an incapacity from a war-caused condition and a person other than the Commonwealth appears legally liable to pay damage in respect of that same incapacity . Section 30E provides that the Commission can only request the veteran or dependant to institute proceedings against another party.

Subsection 75(1) of the VEA provides the Commission with similar powers in relation to pensions payable under Part IV of the VEA.

54

296

5.2 What options are open to the Commission should a member or dependant decline such a request?

These circumstances are unlikely to arise in a veteran's compensation matter. For most compensation claims lodged under the VEA , the condition claimed will be related to activities undertaken while a person was on duty as member of the ADF. Therefore, it would be rare for another party to be liable to pay damages in respect of the same incapacity.

Examples of where a third party might be liable to pay damages may include a motor vehicle accident that occurs while the member is travelling to a place for the purpose of performing duty, or other similar travel scenarios such as journeying for the purposes of defence service on a commercial airline or ship.

In these circumstances , under s 30F of the VEA, where a person does not agree to a request under s 30E within a reasonable time, the Commission may , on behalf of the person, institute proceedings against the potentially liable person or take over the conduct of proceedings.

Subsections 75(2) and 75(3) make similar provision for pensions payable under Part IV of the VEA.

5.3 Could you provide the committee with some statistics on how often the Commission under the current legislation has made such a request and how often the request has been declined?

The Commission has not used these provisions in the last 1 0 years and no record has been found of them being used before then.

55

297

Dr Kathleen Dermody Conm1ittee Secretary Senate Standing Committees on Foreign Affairs, Defence and Trade PO Box 6100 Parliament House Canbena ACT 2600

Dear Dr Dermody

Australian Government

Department of Veterans' Mfairs

ACT OFFICE

At the Foreign Affairs, Defence and Trade Legislation Committee hearing of 11 August 2011 into the compensation offsetting amendments contained in the Veterans' Entitlements Amendment Bil/2011 (tabled in Parliament on 1 June 2011), the Deprutment ofVeterans' Affairs (DVA) undettook to provide further information on discussions with the ex-ser vice community related to the measures contained in the Bill.

DV A was unable to engage with stakeholders before the Budget, as the amendments to the Veterans' Entitl ements Act 1986 (YEA) offsetting provisions were patt of the 2011-12 Budget and are Cabinet-In-Confidence prior to formal release as prut of the Budget. Similarly , legislation is not usually made public until it is tabled in Parliament , particularly where the change is designed to continue the operation of the existing legislation.

DVA considers that it has engaged ∑with the key stakeholders (including the relevant Ex-Service Organisations (ESOs)) adequately and appropriately on this measure. It should be noted that the measure, as outlined in the Senate heru∑ing, will have no impact on the application of Departmental policy regarding offsetting mles that have been applied since 1973.

Jn relation to the Budget briefmg held on 10 May 2011, all major ESOs were represented (full attendance list is at Attachment A) and all aspects of the Budget measures for the Veterans' Affairs portfolio were discussed , including offsetting. Some measures were discussed in greater detail, but offsetting was discussec with the 14 attending ESO representatives. Also, copies of the departmental Portfolio Budget Statement were disseminated to all attendees, which outlined the Budget measures and impacts. No concems were raised at this meeting about the measure or the engagement with stakeholders up until this point, and only 3 of the 14 ESOs tendered submissions to the Inquiry.

There was a supplementary briefing provided to representing members of the ESO Round Table at a meeting on 31 May 2011, where the attendees (attendance list attached) were able to engage DVA on a more detailed level ab()ut the legislative measures arisin g from the Budget, including offsetting. The only concem raised a1 this meeting involved whether the measure would affect offsetting of Commonwealth superannuation related to other Commonwealth compensation payments. Members were advised that this is not the effect of the measure. No further concems were raised about the measure or engagement and communication with stakeholders.

13 K eltie Street. Phillip AC T 2606 GPO Box 9998 Canberra AC T 2601 Telephone (02) 6289 Ill! Internet li: 3.Y)Y. .. 9._yg. ~gQ:! : . .

Similarly, DVA Deputy Commissioners in their Budget briefmgs to the state representatives of the ex " service community outlined this measure. As with the Budget briefing, some measures were discussed in more detail at these briefings, but offsetting was discussed with the attending ESOs.

Prior to the Budget measure and the proposed amendments being announced, the engagement with stakeholders on offsetting had been about the departmental response to the decision in Commonwealth of Australia v Smith [2009] FCAFC 175. This issue was discussed at meetings of the Operational Working Party and the Prime Ministerial Advisory Council on Ex-Service Matters (PMAC). These committees

involve key ESOs such as the RSL, or individuals involved in the ex-service community.

Discussions at PMAC meetings involved either offsetting in general and the role of the Australian Government Actuary, the mles behind offsetting and its analysis in the Review of Military Compensation Arrangements, or the proposed amendments to the legislation. The meetings were held on 19 March 2009 (offsetting and the Actuary), 4-5 March 2010 (offsetting mles and the Review) and 4-5 July 2011 (legislativ

amendments).

The Operational Working Party at its 1 July 2010 meeting discussed the impacts of the Smith decision and DVA action on holding offsetting cases pending clarification of the effect ofthe Smith decision.

The RSL has representatives at all of these fomms .

I tmst this further information provides the relevant background.

Yours sincerely

Adam Luckburst N ational Manager Rehabilitation & Entitlements Policy

12 August 20 ll

I 3 K eltie Street, Phillip ACT 2606 GPO Box 9998 Canberra ACT 260 I Telephone (02) 6289 II I 1

' .29~ . .

Safutmg T!je![ £mll(e :sz

ATTACHMENT A

Attendees at ESO Round Table Budget Briefing of 10 May 2010

Commissions Mr lan Campbell Mr Shane Carmody MAJGEN Mark Kelly AO DSC MAJGEN Craig Orme AM CSC

Members Mrs Audrey Blood OAM Mr Ron Coxon OAM RADM Ken Doolan AO RAN (Retd)

Mr Les Dwyer MAJGEN Brian Howard (Retd) COL David Jamison AM (Retd) Mr Tim McCombe OAM

AVM Roxley McLennan AO Mr John Pepperdine

Proxies Dr Rod Bain Ms Lesley Minner Mr John Burrows

Mr Allan Thomas Mr Chris Hudson

Other OVA Attendees Ms Liz Cosson Mr Ken Douglas Mr Barry Telford Ms Narelle Dotta Dr Graeme Killer AO Ms Judy Daniel Mr Sean F arrely Mr Neil Bayles

Ms Glenda Mann

Secretariat Ms Peta Stevenson Mr Robert Hamon Ms Brooke Hill

Chair Deputy President Commissioner Military Rehabilitation and Compensation Commission

Organisation War Widows' Guild of Australia Vietnam Veterans Association of Australia Returned and Services League of Australia Naval Association of Australia Royal Australian Regiment Association Defence Force Welfare Association Vietnam Veterans Federation of Australia

Royal Australian Air Force Association Legacy Co-ordinating Council

Organisation Australian Veterans and Defence Services Council Partners of Veterans Association Australian Special Air Services Association Australian Peacekeeper and Peacemaker Veterans' Association Australian Federation of Totally and Permanently Incapacitated

Ex-Servicemen and Women

General Manager, Executive Division General Manager, Setvices Division General Manager, Support Division General Manager, Corporate Division Principal Medical Adviser National Manager, Primary Care Policy

National Manager, Organisational Change National Manager, F-111 lmplementation/MRCA Review Director, MRCA Review

National Manager, Research, Grants and Consultation Co-ordination National Consultation Secretariat National Consultation Secretariat

13 Keltie Street, Phillip ACT 2606 GPO Box 9998 Canberra ACT 2601 Telephone (02) 6289 1111 Internet ~::w _;.y_Jty !!,_gQL~Y

Attendees at Post-Budget Briefing of 31 May 2011

Attendees:

Audrey Blood, War Widows ' Guild of Australia Narelle Bromhead, Partners of Veterans Association Ron Coxon, Vietnam Veterans Association of Australia Ken Doolan, Returned and Services League of Australia Les Dwyer, Naval Association of Australia Les Sienkiewicz obo Mr David Jamison, Defence Force Welfare Association Tim McCombe, Vietnam Veterans Federation of Australia Roxley Mclennan , RAAF Association David Penson, Australian Peacekeepers and Peacemakers Veterans' Association

lan Wills obo Mr John Pepperdine, Legacy Australia Council Blue Ryan, Australian Federation of Totally and Permanently Incapacitated Ex-Servicemen and Women

ian Kelly-DC SA Mike O 'Meara -DC VIC Jan Hyde -DC TAS

Sean Farrelly- A/g General Manager, Support Division Judy Daniel - A/g General Manager, Services Division Carolyn Spiers-Principal Legal Adviser Kym Connelly-A!g National Manager Primary Care Policy Luke Brown - Director Castings & Implementation

Apologies:

lan Crawford, Australian Veterans and Defence Services Council (overseas) Hori Howard, Royal Australian Regiment Association (not available that day) David Lewis, Australian Special Air Service Association (not available)

301

302

The Senate

Legal and Constitutional Affairs

Legislation Committee

Crimes Legislation Amendment Bill (No.2) 2011

August 2011

303

© Commonwealth of Australia

ISBN: 978-1-7 4229-494-0

This document was printed by the Senate Printing Unit, Department of the Senate, Parliament House, Canberra.

304

l\1EMBERS OF THE COMMITTEE

Members

Senator Trish Crossin, Chair, ALP, NT

Senator Gary Humphries, Deputy Chair, LP, ACT

Senator Sue Boyce, LP, QLD

Senator Mark Furner, ALP, QLD

Senator Louise Pratt, ALP, W A

Senator Penny Wright, AG, SA

Secretariat

Ms Julie Dennett Committee Secretary

Ms Ann Palmer Principal Research Officer

Ms Aleshia Bailey Research Officer

Ms Hana Jones Administrative Officer

Ms Hannah Dibley Administrative Officer

Suite Sl.61 Telephone: (02) 6277 3560

Parliament House Fax: (02) 6277 5794

CANBERRA ACT 2600 Email: legcon.sen@aph.gov.au

111

305

306

TABLE OF CONTENTS

MEMBERS OF THE COMMITTEE ..................................... ... .................. ... iii

ABBREVIATIONS ........................................................................ ........ ........... vii

RECOMMENDATIONS ................................................................................... ix

CHAPTER 1 ....................................................................................................... . 1

INTRODUCTION .................................................................................................... !

Purpose of the Bill ........................ ................ ..... ...... ........ ............. ................. ......... l

Conduct of the inquiry ....... ............................. ........ ............... ............... .................. 2

Acknowledgement .................. ....... ...... ........ .... ........... ..... ... ............................... ..... 2

Note on references ...... ...... .................. .... ...... .................. ...... ...... ........ ............... ..... 2

CHAPTER 2 ...................... ............................. ..................................................... 3

OVERVIEW OF THE BILL ............................................................................. ...... 3

Background to the Bill .......... ..... ........ ........ ............................ ................................. 3

Key provisions of the Bill. .... .... ...... .... ....... ... ........ ... ..... ............ ..... ..... ....... ........ ..... 9

CHAPTER 3 ...................................................................................................... 15

KEY ISSUES ........................................................................................................... 15

Extension of ACLEI's jurisdiction ..... .......... ..... ................ ....................... ...... ...... 15

AFP's power to commence and conduct proceeds of crime litigation .... ........ ..... 17

Cotnmittee view ............. .......... ..... ................... ...... ......... ....... .......... .... .......... ..... .. 27

ADDITIONAL COMMENTS BY LIBERAL SENATORS ........................ 31

APPEND IX 1 ..................................................................................................... 33

SUBI\flSSIONS RECEIVED ................................................................................. 33

APPEND IX 2 ............................................................................................. ........ 35

WITNESSES WHO APPEARED BEFORE THE COMMITTEE ................... 35

307

308

ABBREVIATIONS

ABCPS Australian Customs and Border Protection Service

ACLEI Australian Commission for Law Enforcement

Integrity

ACC Australian Crime Commission

ADJRAct Administrative Decisions (Judicial Review) Act 1977

AFP Australian Federal Police

AGD Attorney-General's Department

ATO Australian Tax Office

Bill Crimes Legislation Amendment Bill (No.2) 2011

CDPP Commonwealth Director of Public Prosecutions

CEO Chief Executive Officer

committee Senate Legal and Constitutional Affairs Legislation Committee

Customs Australian Customs and Border Protection Service

Customs Administration Act Customs Administration Act 1985

Department Attorney-General's Department

DIMA Department of Immigration and Multicultural Affairs

Family Law Act Family Law Act 1975

Law Council Law Council of Australia

LEIC Act Law Enforcement Integrity Commissioner Act 2006

LEIC Bill Law Enforcement Integrity Commissioner Bill 2006

NCA National Crime Authority

PJC-ACC Parliamentary Joint Committee on the Australian

Crime Commission

309

PJC-ACLEI Parliamentary Joint Committee on the Australian

Commission for Law Enforcement Integrity

Proceeds of Crime Act Proceeds of Crime Act 2002

Taskforce Criminal Assets Confiscation Taskforce

Victorian DPP Victorian Director of Public Prosecutions

Vlll

310

RECOMMENDATIONS

Recommendation 1

3.60 The committee recommends that the Memorandum of Understanding between the Australian Federal Police and the Commonwealth Director of Public Prosecutions, which is intended to establish the working arrangements for the Criminal Assets Confiscation Taskforce, should be finalised as soon as possible following commencement of the Bill to provide certainty for officers in those

agencies working on proceeds of crime matters.

Recommendation 2

3.61 The committee recommends that the Commonwealth Director of Public Prosecutions should become a permanent member of the Criminal Assets Confiscation Taskforce.

Recommendation 3

3.62 The committee recommends that the Attorney-General's Department revise and reissue the Explanatory Memorandum to the Bill to specifically include information contained in the Department's submission, and evidence given at the public hearing by the Department and the Australian Federal Police, which explains:

" the rationale for the proposed new powers and functions of the Australian Federal Police with respect to proceeds of crime litigation;

" how it is envisaged that the powers and functions will be used; and

" the relevant scrutiny and accountability mechanisms which will ensure the integrity of the AFP's proceeds of crime litigation function.

Recommendation 4

3.63 Subject to Recommendation 3, and after due consideration of Recommendations 1 and 2, the committee recommends that the Senate pass the Bill.

31 1

312

CHAPTER!

INTRODUCTION

1.1 On 23 June 2011, the Senate referred the Crimes Legislation Amendment Bill (No. 2) 2011 (Bill) to the Legal and Constitutional Affairs Legislation Committee (committee) for inquiry and report by 23 August 2011.

Purpose of the Bill

1.2 The Bill was introduced into the House of Representatives on 23 March 2011 by the Minister for Home Affairs and Justice, the Hon Brendan O'Connor MP (Minister). In his second reading speech, the Minister stated that one of the purposes of the Bill is to bring the Australian Customs and Border Protection Service (Customs) within the jurisdiction of the Australian Commission for Law Enforcement Integrity (ACLEI). The Bill also seeks to amend a range of Acts to enhance processes in relation to the confiscation of criminal assets. 1

1.3 The main functions of the Bill are to:

" include Customs within the jurisdiction of ACLEI by amending the Law Enforcement Integrity Commissioner Act 2006 (LEIC Act) and the Custom s Administration Act 1985;

" allow the Commissioner of the Australian Federal Police (AFP) to commence and conduct litigation under the Proceeds of Crime Act 2002 (Proceeds of Crime Act);

" enable proceedings under the Proceeds of Crime Act to be transferred between the Commonwealth Director of Public Prosecutions (CDPP) and the Commissioner of the AFP;

" amend the Family Law Act 1975 (Family Law Act) to extend Commonwealth procedures relating to proceeds of crime orders and forfeiture applicati ons, and to include the application of state and territory proceeds of crime orders and forfeiture applications in proceedings in the Family Court;

" enhance the interaction between the collection of relevant tax liabilities and proceeds of crime proceedings; and

" extend, add, and make consistent definitions in various Acts, through minor and consequential amendments, to provide certain ty and consistenc y.2

1 The Hon Brendan O'Connor :MP , Minister for Hom e Affairs and Justice, H ouse of Representatives H ansard, 23 M arch 2011, p. 2866.

2 Explanator y Memorandum , p. 1.

313

Pagel

Conduct of the inquiry

1.4 The committee advertised the inquiry in The Australian newspaper on 6 July 2011, and invited submissions by 15 July 2011. Details of the inquiry , the Bill and associated documents were placed on the committee's website.

1.5 The committee received eight submissions, which are listed at Appendix 1. Submissions were placed on the committee's website for ease of access by the public.

1.6 A public hearing was held in Canberra on 4 August 2011. A list of witnesses who appeared at the hearing is at Appendix 2, and copies of the Hansard transcript are available through the internet at http:// www.aph .gov.au/hansard/index.htm.

Acknowledgement

1. 7 The committee thanks organisations and individuals who made submissions to this inquiry and gave evidence at the public hearing.

Note on references

1.8 Submission references in this report are to individual submissions as received by the committee, not to a bound volume. References to the committee Hansard are to the proof Hansard. Page numbers may vary between the proof and official Hansard transcripts.

314

CHAPTER2

OVERVIEW OF THE BILL

Background to the Bill

2.1 In his second reading speech, the Minister noted that the Bill forms part of the Australian Government's response to recommendations of the Parliamentary Joint Committee on the Australian Commission for Law Enforcement Integrity (PJC " ACLEI) in its 2010 interim report on the inquiry into the LEIC Act. 1 These recommendations relate to the inclusion of Customs in the jurisdiction of ACLEI.

2.2 The Minister also noted that the Bill would implement one of the Australian Government's 2010 election commitments in relation to combating serious and organised crime, namely support of the newly established Criminal Assets Confiscation Taskforce (Taskforce), which came into effect in January 2011:

The task force commenced operations in January of this year, bringing together expertise in intelligence, operations , forensic accounting, litigation and specialist law enforcement to ensure a highly integrated approach to criminal asset confiscation . Its main objective is to enhance the identification of potential criminal asset confiscation matters and strengthen their pursuit. To support this work, schedule 2 of the bill will amend the Proceeds of Crime Act 2002 to enable the Commissioner of the Australian Federal Police (AFP) to commence proceeds of crime litigation on behalf of the government's Criminal Assets Confiscation Taskforce.2

2.3 Mr O'Connor stated that the amendments in the Bill relating to proceeds of crime are 'fundamental to achieving the [Australian Government's] proactive and dynamic approach to asset confiscation'. 3

Extension of A CLEI's jurisdiction to Customs

2.4 The statutory office of Integrity Commissioner was established by the LEIC Act, and is supported by ACLEI. ACLEI is an independent body which consists of investi gative, legal, policy, and corporate staff. 4

1 The H on Brendan O'C onnor MP , Minister for H om e Affairs and Justice, H ouse of Representat ives H ansard, 23 M arch 2011, p. 2866.

2 Th e Hon Brendan O'Connor MP , Minister for Hom e A ffairs and Justice, House of Representatives Hansard, 23 M arch 2011, p. 2866.

3 The H on Brendan O'Connor MP , Minister for Hom e A ffairs and Justice, H ouse of Representatives Han sard, 23 M arch 2011, p. 2866.

4 A ustra lian Commi ssion for Law Enforcem ent Integrity, Annual Report of the Integrity Comm issioner, 2006-07, Canben a, 2007, p. 15.

315

Page4

2.5 The role of the Integrity Commissioner is to:

" detect, investigate and prevent corruption in law enforcement agencies;

" maintain and improve the integrity of staff members of law enforcement agencies; and

" collect and process intelligence on corruption in law enforcement. 5

2.6 The LEIC Act extends oversight of Commonwealth law enforcement agencies to ACLEI by regulation. Law enforcement agencies currently under the jurisdiction of ACLEI include the AFP and the Australian Crime Commission (ACC), and also the fonner National Crime Authority (NCA). The extent of ACLEI's jurisdiction is set out in section 5 of the LEIC Act. Section 5 lists the agencies currently within ACLEI's oversight, and also includes:

(d) any other Commonwealth government agency that:

(i) has a law enforcement function; and

(ii) is prescribed by the regulations for the purposes of this paragraph. 6

Previous parliamentary inquiries

2.7 The issue of expanding ACLEI's jurisdiction to other law enforcement agencies has been discussed in two previous parliamentary inquiries. In 2006, this committee held an inquiry into the Law Enforcement Integrity Commissioner Bill

2006 (LEIC Bill). Subsequently, the PJC-ACLEI conducted an inquiry into the operations of the LEIC Act.

2.8 During the course of this committee's inquiry into the LEIC Bill, the extension of ACLEI's jurisdiction to other law enforcement agencies was canvassed. 7

2.9 The committee acknowledged that the LEIC Bill envisaged a broader anti-corruption role for ACLEI in the future:

... [I]t may be one of the Bill's strengths in that it allows for other Commonwealth agencies with law enforcement functions to be added to ACLEI's jurisdiction. While unstated in evidence, this may have operational advantages for the Commission, allowing a more gradual widening of its

5 Australian Commission for Law Enforcement Integrity, Annual Repo11 of the Integrity Commissioner, p. 15.

6 Law Enforcement Integrity Commissioner Act 2006, s. 5.

7 Senate Legal and Constitutional Affairs Legislation Committee, Provisio ns of the Law Enforcement Integrity Commissioner Bill 2006, Law Enforcement Integrity Commissioner (Consequential Measures) Bill 2006, May 2006, pp 24-26.

316

jurisdiction in line with its developing expertise , experience, capabilities and resources . 8

2.10 The committee continued:

... [T]he committee considers that there is a strong rationale for ensuring that a wider group of law enforcement agencies are brought within its jurisdiction, including Customs, the A TO and DIMA [Department of Immigration and Multicultural Affairs]. In the committee's view, it would

be useful for the government to give a public indication of the proposed timetable for this process.9

Page S

2.11 The committee also recommended that the process of expanding ACLEI's jurisdiction through the use of regulations be amended, and instead be dealt with by legislation . 10

2.12 On 14 May 2009, the PJC-ACLEI initiated an inquiry into the operation of the LEIC Act and its regulations. The PJC-ACLEI tabled an interim report on 22 February 2010, and tabled its fmal report on 7 July 2011. The interim report made 11 recommendations. Two of these recommendations were as follows: 11

" as an immediate measure, Customs should be brought under AC LEI's jurisdiction on a whole-of-agency basis by regulation (Recommendation 2); and

" in the longer term, Customs should be prescribed as a law enforcement agency within the LEIC Act through the amendment of section 5 of that Act (Recommend ation 3).

2.13 The Australian Go vernment agreed to these recommendations when it tabled a Government Response to recommendations 2 and 3 of the PCJ-ACLEI's interim report in September 2010.

2.14 The Gov ernment Response stated that, s ubject to resources consultati ons, the Australian Go vernment would:

8 Senate Legal and Constitutional Affairs Legislation Committee, Provisions of the Law Enforcement Integrity Commissioner Bill 2006, Law Enforcem ent Integrity Comm issioner (Consequential Measures) Bil/2 006, M ay 2006, p. 27.

9 Senate Legal and Constitutional Affairs Legislati on Committee, Provisions of the Law Enfon;em ent Integrity Commissioner Bill 2006, Law Enforcem ent Integrity Co mmissioner (Consequential Measures) Bill 2006, May 2006, pp 27-28.

10 Senate Legal and Constitut ional A ffairs Legislation Comm itt ee, Provisions of the Law Enforcem ent Integrity Commiss ioner Bill 2006, Law Enforcem ent Integrity Commis sioner (Consequential M easures) Bill 2006, M ay 2006, p. 28.

11 Parliam entary Joint Comm ittee on the Austra lian Comm ission for Law Enforcem ent Integrity, Interim Report, 22 February 2010.

317

Page6

... extend the jurisdiction of ACLEI to include the Australian Customs and Border Protection Service (ACBPS) in recognition of ACBPS's critical law enforcement and related functions. 12

2.15 The Government Response advised that this jurisdiction would commence in 2011. The Explanatory Memorandum to the Bill notes that, while ACLEI has had oversight of the law enforcement functions of Customs from 1 January 2011, following Customs' prescription in regulations made under the LEIC Act:

The inclusion of [Customs] within ACLEI's jurisdiction under the LEIC Act will enable ACLEI to investigate corrupt conduct relating to all [Customs'] functions. 13

2.16 In its submission to the recent PJC-ACLEI inquiry into the operations of the LEIC Act, ACLEI stated that there are factors to be considered when jurisdiction is to be extended, including issues of agency direction, safeguarding current arrangements, and inclusion of all staff. 14 The submission also stated that ACLEI 'would be prepared to extend corruption prevention assistance to other agencies under special arrangements'. 15

2.17 During that inquiry, the Integrity Commissioner asserted that Customs was at a high risk of corruption by the nature of its role in an area of law enforcement and that, although not all Customs staff have a law enforcement role, the agency as a whole possesses the characteristics of a law enforcement agency.16

Inclusion of all Customs'functions in A CLEf's jurisdiction

2.18 The Explanatory Memorandum notes that, currently, ACLEI's jurisdiction provides that it is able to investigate corrupt conduct relating to the law enforcement functions of Customs. The amendments in Schedule 1 of the Bill will enable ACLEI to investigate corrupt conduct relating to all Customs functions.

2.19 The Explanatory Memorandum outlines the reasons for providing the Integrity Commissioner with the jurisdiction to investigate all Customs staff members, even if the functions perfonned by the relevant staff member fall outside the boundaries of a traditional law enforcement role:

12 Australian Government, Governm ent Response to Recommendations Two and Three of the Interim Report from the Parliamentary Joint Committee on the Australian Commission for Law Enforcement Integrity (PJC on ACLEI) Inquily into the Operation of the Law Enforcement . Integrity Commissioner Act 2006, September 2010, p. 2.

13 Explanatory Memorandum, p. 6. 14 ACLEI, Submission 14, p. 10. (This subillission relates to the PJC-ACLEI inquiry)

15 ACLEI, Submission 14, p. 10.

16 Parliamentary Joint Comillittee on the Australian Commission for Law Enforcement Integrity, Committee Hansard, 14 August 2009, p. 15.

318

... Customs officers may have access to information that is likely to be of interest to those engaged in serious and organised crime, regardless of whether the officer performs a specific law enforcement function within Customs. In addition, Customs also rotates officers between roles of a law enforcement and non-law enforcement nature, such that a Customs officer could use information obtained while in a law enforcement role while performing a non-law enforcement role. Including all Customs' functions within ACLEI's jurisdiction on a whole of agency basis is also consistent with the current application of the LEIC Act to all AFP and ACC staff, regardless of their role. 17

Page 7

2.20 The Integrity Commissioner has previously outlined the reasons why Customs officers would be at a high risk of corruption:

.. .it is a decentralised agency with officers having a high degree of discretion and autonomy in those decentralised locations. Customs protects the border in many ways, and of course the increase of corruption risk goes right up in that context. Customs and Border Protection would be attractive to organised crime- and, in saying 'organised crime', I also say to you 'transnational organised crime'-who have an interest in breaching the border. 18

2.21 Further, the Integrity Commissioner noted the 'other phenomenon' which would lead to a high risk of corruption:

Customs is pushing protection of the border offshore into countries where corruption is sometimes an accepted business practice . So, for those reasons and possibly others as well, I think that Customs and Border Protection would be well suited to inclusion in ACLEI's jurisdiction. 19

Criminal Assets Confiscation Taskforce

2.22 At the time of the introduction of the Bill into Parliament , a joint press release issued by the Attorney-General and the Minister for Home Affairs and Justice stated that the Bill would support the Taskforce, which came into effect in January 2011.20

2.23 The Taskforce was announced by the Australian Government during the 2010 election campaign and was officially launched on 10 March 2011 by the Attorney " General, the Minister for Home Affairs and Justice , and the Commissioner of the AFP . The Taskforce's main function is to 'provide a more coordinated and integrated

17 Explanatory Memorandum , p. 7.

18 Parliament ary Joint Comm itt ee on the Australian Commission for Law Enforcement futegrity , Co mmittee Han sard, 14 August 2009, pp 11-12.

19 Committee Hansard, 14 August 2009, p. 12

20 The Hon . Robert McClelland 'MP, Attorney-General , and the Hon . Brendan O'Connor 'MP, Minister for Home Affairs and Justice, 'Legislation to back new criminal asset taskforce' , Media Release, 23 March 2011.

319

Page8

approach to identifying and removing the profits derived from organised criminal " " I ? I

activity .-2.24 The Attorney-General's Department (Department) outlined the pmpose of the Taskforce in its submission:

The Taskforce commenced operation in January 2011 and is designed to take a more proactive, intelligence-led approach to the identification of potential criminal asset confiscation matters by bringing together intelligence, operations, legal and other specialist resources. The AFP,

Australian Taxation Office and the Australian Crime Commission are participating agencies in the Taskforce.22

2.25 During the election campaign it was announced that the AFP would lead and house the Taskforce, and, subject to the passage of the proposed amendments to the Bill, would assume responsibility for the litigation of 'all proceeds of crime matters relevant to the proceeds investigations undertaken by the Taskforce, and all non " conviction based proceeds of crime matters'. 23

2.26 While the CDPP is not intended to be a permanent member of the Taskforce, it is part of the interim Taskforce which was launched in March 2011. The members of the interim Taskforce are the AFP, the CDPP, the ACC and the AT0. 24 The CDPP has indicated that it will not be a permanent member of the Taskforce because the AFP would be able to take control of litigation action. 25

2.27 The Department has advised that a working group had been established to plan for the transition from interim to permanent Taskforce. These arrangements will be included in a Memorandum of Understanding, which will set out the division of responsibilities between the AFP and the CDPP. 26

2.28 The Taskforce is reported to have withheld more than $43 million in profits from organised criminal activity since its implementation and official launch. 27

21 Australian Federal Police, Proceeds of Crime, www.afp .gov.au/policing /proceeds-of-crime.aspx, (accessed 27 June 2011).

22 Attorney-General's Department, Submission 7, p. 1.

23 Submission 7, p. 2.

24 Commonwealth Director of Public Prosecutions , Submission 5, p. 3.

25 Committee Hansard, 4 August 2011, p. 2.

26 Submission 7, p. 2.

27 Judith h∑eland, 'Cocaine tops record drug haul', The Canberra Times, 23 June 2011, http://www.canberratimes.com.au/news /local/news/general/cocaine-tops-record-drug " haul/220694l.aspx, (accessed 27 June 2011).

320

Page9

Key provisions of the Bill

Schedule 1 -Australian Commission for Law Enforcement Integrity amendments

2.29 Schedule 1 of the Bill amends the LEIC Act to include Customs in the ACLEI's jurisdiction.

2.30 Item 3 of Schedule 1 amends the definition of 'law enforcement agency' in section 5 of the LEIC Act to include 'Customs'. 'Customs' is defmed in the Customs Administration Act 1985 (Customs Administration Act) and covers Customs and its predecessor, the Australian Customs Service. The inclusion of Customs in the

defmition of a law enforcement agency in the LEIC Act has the effect of providing the Integrity Commissioner with the jurisdiction to investigate corrupt conduct engaged in by all past and present Customs staff members, even if the particular functions performed by the staff member fall outside the boundaries of a traditional law enforcement role. 28

2.31 Section 10 of the LEIC Act defmes staff members of law enforcement agencies for the purposes of the Act. Item 4 inserts in section 10 a defmition of 'Customs staff members' (proposed new subsection 1 0(2A)). The purpose of the amendment is to provide the Integrity Commissioner with the jurisdiction to investigate allegations of corruption made against, or relating to, the CEO of Customs, a Customs employee, or a person authorised in writing by the CEO of Customs to perform a function of a person employed in Customs.29

2.32 Item 5 amends subsection 10(5) of the LEIC Act to insert proposed new paragraph 10(5)(ba), which specifies that all persons authorised by the CEO of Customs to perform a function of a person employed in Customs are 'secondees' for the purposes of the Act. Under the LEIC Act, the Integrity Commissioner has an obligation to inform the head of a government agency where a corruption issue involves one of their employees who has been authorised by the CEO of Customs to perform a Customs function.

2.33 Item 6 is an application provision. Item 6 provides that ACLEI's jurisdiction to investigate corrupt conduct by Customs staff extends to all conduct regardless of whether it was engaged in before or after the commencement of the LEIC Act on 30 June 2006, and covers conduct of staff of the predecessor to Customs, the Australian Customs Service. 30

2.34 Schedule 1 of the Bill also amends the Customs Administration Act. Item 1 inserts proposed new paragraph 16(2)( ca) to the Customs Administration Act, which exempts disclosures made for the purposes of the LEIC Act, or regulations under the

28 Explanatory Memorandum , p. 7.

29 Explanatory Memorandum , p. 7.

30 Explanatory Memor andum , p. 8.

321

Page 10

LEIC Act, from the prohibition against disclosure of protected information. This will bring the Customs secrecy provision in line with the ACC and AFP provisions relating to disclosures to the Integrity Commissioner or ACLEI. 31

Schedule 2-proceeds of crime amendments

Part 1 of Schedule 2 - commencement of litigation by AFP

2.35 In his second reading speech, the Minister outlined the reasons why the transfer of power from the CDPP to the AFP are considered to be necessary:

Cun∑ ently, the Commonwealth Director of Public Prosecutions is the only authority that is able to conduct proceedings under the Proceeds of Crime Act. The amendments contained in this bill will ensure that the AFP has that same power.

Extending the act to include the AFP will enable the task force to become a specialised unit focused on proactively investigating and litigating proceeds of crime matters, which will lead to the more effective pursuit of criminal assets. And ultimately, the objective is to ensure that more proceeds of crime money is returned to the community for crime prevention and diversion initiatives . 32

2.36 Part 1 of Schedule 2 of the Bill amends the Proceeds of Crime Act and other Acts to enable the Commissioner of the AFP to commence proceeds of crime litigation.

2.37 Item 1 of Schedule 2 inserts proposed new subsection 69C(3) into the AFP Act. Currently, subsection 69C(l) enables the Commissioner of the AFP to delegate any or all of the Commissioner's powers, functions and duties under that Act. Proposed new subsection 69C(3) will enable the Commissioner to delegate powers,

functions or duties as a 'proceeds of crime authority' to the Deputy Commissioner or a senior executive AFP employee.

2.38 Item 5 inserts the definition of 'proceeds of crime authority' into section 338 of the Proceeds of Crime Act. A proceeds of crime authority is the Commissioner of the AFP or the CDPP .

2.39 Item 4 inserts a defmition of 'principal order' into section 338 of the Proceeds of Crime Act, to mean: a restraining order; a forfeiture order; a pecuniary penalty order; a literary proceeds order; or an unexplained wealth order.

2.40 Item 6 inserts the defmition of 'responsible authority' into section 338 of the Proceeds of Crime Act. Responsible authority means the proceeds of crime authority which made the application for the principal order or, in the case where the

31 Explanatory M em orandum , p. 6. 32 The Hon Brendan O'Connor MP , Minister for Home A ffairs and Justice, House of Representatives H ansard, 23 Ma rch 2011, p. 2867.

322

Page 11

proceedings have been transferred to another proceeds of cnme authority, the authority to which responsibility has been transferred.

2.41 Item 3 inserts proposed new section 315B into the Proceeds of Crime Act. Proposed new section 315B provides for the transfer of responsibility for 'principal orders' and 'applications for principal orders' between the CDPP and the AFP Commissioner where both agencies consent to that transfer.

2.42 The Explanatory Memorandum expands on the transfer of responsibility prov1s10ns:

The provisions are designed to allow a smooth and efficient transfer without causing undue delay or inconvenience, in particular avoiding the d d. 33 nee to recommence procee mgs.

2.43 Proposed new subsection 315B(2) provides that the authority taking responsibility for the proceedings (the transferee authority) must give written notice of the transfer of responsibility to the court hearing the matter and other relevant parties to the proceedings.

2.44 Proposed new subsection 315B(6) sets out the effect of the transfer of responsibility with regards to the conduct of proceedings , including that the transferee authority:

" replaces the transferor authority as a party to any applications or proceedings (proposed new paragraph 315B( 6)( a));

" may initiate, conduct or respond to any related applications or proceedings (proposed new paragraph 315B(6)(b)); and

" is responsible for any functions, powers and duties under the Proceeds of Crime Act to be performed by a responsible authority in relation to the application or the order, any related proceedings , and any order arising out of related applications or proceedings (proposed new paragraph 315B(6)(c)).

2.45 Proposed new subsections 315B(7) and (8) set out the effects of the transfer as between the transferee and transferor authorities. These provisions include that, following the transfer:

" the functions, powers and duties of the transferor authority are extinguished , except with regards to any damages or costs awarded against the transferor authority while it was responsible for the proceedings; and

" the transferee authority is bound by the actions of the transferor authority when it was responsible for the proceedings.

2.46 Items 7-138 provide for the replacement of various references to ensure consistency throughout the Proceeds of Crime Act.

33 Explanatory Memorandum , p. 11.

323

Page12

Part 1 of Schedule 2 - retrospective application of amendments

2.47 Item 139 is the application provision in relation to the amendments set out in . Part 1 of Schedule 2 of the Bill. The amendments will apply in relation to applications for orders, actual orders, and proceedings, regardless of when they were made or started, or when the conduct giving rise to those orders or proceedings occurred.

34

2.48 The Explanatory Memorandum notes that while the provision is retrospective in application, it does not create any retrospective criminal liability. The Explanatory Memorandum states that the amendments need to apply retrospectively because proposed new section 315B of the Proceeds of Crime Act will enable the transfer of

applications for orders and orders which may have been made prior to the commencement of the amendments. The conduct to which the applications, orders and proceedings relate will also have occurred prior to the commencement of the amendments. 35

2.49 Further, the Explanatory Memorandum notes that retrospective application of the amendments will ensure that the Commissioner of the AFP is able to apply for proceeds of crime orders, regardless of when the conduct leading to the orders occurred. 36

2.50 Similar items in the Bill retrospectively apply amendments to other Acts (see, for example, item 194 which sets out the application of amendments to the Family Law Act).

Part 1 of Schedule 2-consequential amendments to other Acts

2.51 The remaining items in Part 1 of Schedule 2 make consequential amendments to a number of other Acts. A number of these amendments substitute references to the DPP in the context of proceeds of crimes applications, orders and proceedings, with appropriate references which will also cover the Commissioner of the AFP when undertaking proceeds of crime litigation.

2.52 For example, item 140 replaces a reference to the DPP with a reference to a proceeds of crime authority in the Administrative Decisions (Judicial Review) Act 1977 (ADJR Act). Currently, decisions of the DPP, or an approved examiner under Part 3-1 of the Proceeds of Crime Act, and decisions of the DPP to apply for an order under the Proceeds of Crime Act, are not decisions to which the ADJR Act would apply. The amendment in item 140 extends this exclusion to the same decisions by the

Commissioner of the AFP under the Proceeds of Crime Act. 37

34 Explanatory Memorandum, p. 17.

35 Explanatory Memorandum, p. 17.

36 Explanatory Memorandum, p. 17.

37 Explanatory Memorandum, p. 18.

324

Page 13

2.53 The Acts amended by these consequential amendments are:

" Administrative Decisions (Judicial Review) Act 1977 (items 140-141);

" Bankruptcy Act 1966 (items 142-150);

" Crimes Act 1914 (items 151-153);

" Crimes Legislation Amendment (Serious and Organised Crime) Act 2010 (item 154);

" Foreign Evidence Act 1994 (items 195-197);

" International Criminal Court Act 2002 (items 198-209);

" International War Crimes Tribunals Act 1995 (items 210-217);

" Mutual Assistance in Criminal Matters Act 1987 (items 218-239); and

" Trade Marks Act 1995 (items 240-242).

Part 1 of Schedule 2-amendments to Family Law Act

2.54 Items 155-194 make amendments to the Family Law Act. The Bill amends the Family Law Act so that state and territory proceeds of crime orders and forfeiture applications can be taken into account in property settlement and spouse maintenance proceedings , in the same way as Commonwealth proceeds of crime orders and forfeiture applications. For example, item 157 amends the definition of 'forfeiture order' to refer to:

" a forfeiture order under the Proceeds of Crime Act; or

" an order made under a state or territory proceeds of crime law and that is of a kind declared by the regulations to be a forfeiture order.

2.55 Similar amendments are made for the definitions of'freezing order' (item 159) and 'restraining order' (item 161).

2.56 Item 163 inserts proposed new section 4C into the Family Law Act. Proposed new section 4C sets out the meaning of 'proceeds of crime authority' in relation to various orders and applications under the Proceeds of Crime Act, or state or territory proceeds of crime law.

2.57 The proceeds of crime authority for restraining orders or forfeiture orders, or applications for forfeiture orders under the Proceeds of Crime Act, is the responsible authority (that is, the Commissioner of the AFP or the DPP) for the relevant restraining order, forfeiture order, or application for forfeiture order (proposed new subsection 4C(2)). For a freezing order under the Proceeds of Crime Act, the proceeds of crime authority is the Commissioner of the AFP or the DPP (proposed new subsection 4C(3)).

2.58 The proceeds of crime authority for proceeds of crime orders, or an application for a forfeiture order, under a state or territory proceeds of crime law is the person or body prescribed in regulations (proposed new subsection 4C( 4)).

325

Pagel4

2.59 Item 165 amends subsection 79B(3) of the Family Law Act. Section 79B of the Family Law Act sets out the notification provisions in relation to proceeds of crime orders.

2.60 Currently, subsection 79B(3) provides that, if a person is a party to property settlement or spousal maintenance proceedings, and the person is notified by the DPP 38 that the property of the parties to the marriage of either of them is covered by a proceeds of crime order or a forfeiture application, the person must notify the Registry Manager in writing of the proceeds of crime order or forfeiture application.

2.61 Proposed new paragraph 79B(3)(c) retains the requirement that the person must notify the Registry Manager in writing of the proceeds of crime order or forfeiture application. Proposed new paragraph 79B(3)(d) provides that the person n1ust also provide the Registry Manager with a copy of:

" the notification from the proceeds of crime authority; and

" the proceeds of crone order, or forfeiture application.

2.62 Items 175 and 185 make similar amendments to the notification provisions in Part VIIIA (Financial Agreements) and Part VIIIAB (Financial matters relating to de facto relationships) where a person is notified of a proceeds of crime order or forfeiture application.

Part 2 of Schedule 2-other proceeds of crime amendments

2.63 Part 2 of Schedule 2 amends the Proceeds of Crime Act in two respects.

2.64 Items 243-245 will amend subsections 131(1) and (2) of the Proceeds of Crime Act to give courts a discretion, when calculating the amount of a pecuniary penalty order, to take into account tax paid after proceedings were commenced under the Proceeds of Crime Act, based on whether the court is satisfied that it is in the interests of justice to do so.39

2.65 Items 247 and 248 will amend paragraph 202(5)(ea) to extend the definition of 'property-tracking document'. Currently paragraph 202(5)(ea) provides that a property-tracking document includes a document relevant to identifying, locating or quantifying the property of a person, if it is reasonable to suspect that the total value of the person's wealth exceeds the value of the person's wealth that was lawfully acquired.

2.66 The amendments in items 247 and 248 will align paragraph 202(5)(ea) with the definition of wealth in subsection 179G( 1) of the Proceeds of Crime Act.

38 Item 164 of the Bill will amend the reference to the DPP in paragraph 79B(3)(b) to 'proceeds of crime authority' to also include the Commissioner of the AFP.

39 Explanatory Memorandum , p. 3.

326

CHAPTER3

KEY ISSUES

3.1 This chapter discusses two substantive issues which were raised m submissions and evidence during the committee's inquiry:

" the need for ACLEI's jurisdiction to be extended to Customs; and

" whether it is appropriate to provide the AFP with the capacity to conduct proceeds of crime litigation.

Extension of ACLEI's jurisdiction

3.2 ACLEI's submission noted that, since 1 January 2011, the law enforcement functions of Customs have, through regulations, come under the Integrity Commissioner's jurisdiction. ACLEI's submission advised that in the first six months of this arrangement:

" the Chief Executive Officer (CEO) of Customs has notified the Integrity Commissioner of 20 corruption issues;

" ACLEI received four referrals of possible corruption 1ssues from other sources;

" ACLEI commenced six investigations into these corruption 1ssues, all of which are being conducted jointly with Customs;

" Customs has conducted several briefmgs to help ACLEI staff to become familiar with the range of the agency's operations and activities;

" the Integrity Commissioner and senior ACLEI staff have provided awareness " raising presentations to Customs staff at site visits across the country; and

" Customs has taken a number of steps to inform its staff about ACLEI and ACLEI's role. 1

3.3 At the public hearing, Customs noted its close involvement with ACLEI since 1 January 2011, and highlighted its support for Schedule 1 of the Bill:

The Customs and Border Protection Service welcomed the change and continues to work closely with the Australian Commission for Law Enforcement Integrity, ACLEI, to be well positioned for a successful transition period. The measure recognises the important role played by officers from the Customs and Border Protection Service in safeguarding Australia's borders and the conuption risk that is associated with this role. 2

1 Australian Commission for Law Enforcement Integrity , Submission 3, pp 4-5.

2 Comm ittee Hansard, 4 August 2011, p. 13.

327

Page 16

3.4 Customs expanded on measures taken since the integrity partnership began with ACLEI to raise awareness and familiarise staff with the new integrity framework:

Initiatives have included site visits in the regions, briefings by senior customs and border protection officers and a joint online media presentation for staff stressing this integrity partnership. The DVD and intranet presentation, jointly developed by customs and border protection and ACLEI and made available to all of our staff, outlines the importance of this relationship between our two organisations. It emphasises the crucial role played by all customs and border protection officers in protecting the integrity of our agency and helps staff to know what to do if they suspect inappropriate, cmTupt or criminal behaviour in the workplace. 3

3.5 A 'community of practice' has also been developed for those involved m corruption prevention:

This community of practice, led by ACLEI, will include all of the agencies in their jurisdiction. While this is in its early stages, we believe that this will provide an avenue for agencies to share best practices and ideas on . . 4

cmrupt10n prevent10n.

Disclosure

3.6 As noted in Chapter 2, Schedule 1 of the Bill will amend the Customs Administration Act to provide an exemption from the general prohibition on disclosure in the case of disclosures for the purposes of the LEIC Act. ACLEI highlighted in its submission why it believes that this particular amendment 1s important:

ACLEI considers that it is important to put beyond doubt that it would be lawful for [Customs] staff or former staff members to provide information direct to the Integrity Commissioner or ACLEI if they have a concem about suspected cmrupt conduct within the agency, or if they are required to do so in the course of an investigation by the Integrity Commissioner. It is foreseeable that a lack of clarity in relation to this matter could inhibit referrals of information or allegations to the Integrity Commissioner of possible corrupt conduct or the thorough investigation of a cmruption issue.5

Resourcing

3. 7 ACLEI noted at the public hearing that extra resources were transferred internally from the Customs budget for the inclusion of Customs in the regulations

3 Comm ittee Hansard, 4 Augu st 2011, p. 13

4 Committee Han sard, 4 Augu st 2011, p. 13

5 Submission 3, p. 6.

328

Page 17

from 1 January 2011. These resources were in the form of five extra positions, to assist with the additional workload. 6

AFP's power to commence and conduct proceeds of crime litigation

3.8 Two submissions received by the committee expressed concern about the proposed measures in Schedule 2 of the Bill, relating to the AFP's power to commence and conduct proceeds of crime litigation.

No rationale for need for change

3.9 The Law Council of Australia (Law Council) noted the lack of rationale provided for the proposed change in both the Minister's second reading speech and the Explanatory Memorandum. 7

3.10 With respect to a lack of information in the second reading speech, Ms Helen Donovan from the Law Council argued:

.. .it does not follow from [the Minister's] statements that in order to establish a criminal assets confiscation task force that is, in the words of the minister, specialised and more effective it is necessary for the AFP to be able to conduct its own proceedings under the Proceeds of Crime Act. Why would that be the case? Why can't the Commonwealth DPP remain a permanent member of the task force and be allocated the necessary resources to allow the director to properly participate in and contribute to its work? That is the obvious question here and there is not really even the hint of an answer to that question in the second reading speech. 8

3.11 Ms Donovan continued that, given the significance of the issues involved in the proposed amendments, more specific information is necessary:

... guesstimates about how much organised crime costs the community are not relevant to and do not help to resolve the question of which agencies should be responsible for proceedings under the Proceeds of Crime Act. 9

3 .12 Ms Donovan asserted that, by not providing a rationale for the proposed amendments, an informed debate could not take place. Ms Donovan noted that the Department's submission did not clarify the issues further:

The department's submission, firstly, states that the current arrangements under the Proceeds of Crime Act are essentially successful. However, it is asserted that the amendments will make the administration of the act more streamlined and more effective . I am not sure how we and other outside stakeholders can even begin to engage with this sort of opaque assertion.

6 Committee Hansard, 4 August 2011, p. 14.

7 Law Council of Australia, Submission 2, p. 2.

8 Committee Hansard, 4 August 2011, p. 6.

9 Committee Hansard, 4 August 2011, p. 6.

329

Page 18

There appears to be an unwillingness to speak frankly on the public record about the current arrangements under the act and the purported shortcomings or frustrations of those arrangements. As a result, it is not possible to have a discussion about whether those frustrations are legitimate or whether the proposed amendment are the best way or an effective way to address any current shortcomings with the act and its administration.

10

3.13 The Law Council also pointed out that the amendments in Schedule 2 of the Bill were not the subject of prior public consultation. 11

AFP!Department response

3 .14 At the public hearing, a representative from the AFP stated that the proposed amendments would allow proceeds of crime matters to be streamlined and made more efficient:

There are significant operational and administrative benefits which can be realised by consolidating proceeds of crime investigations and litigations within the one agency. These benefits include adopting a more proactive approach by being able to respond and take restraint much earlier in the proceedings, effective collaboration in the coordinated use of resources, and

the streamlining of issues between investigative and litigation resources. 12

3 .15 The AFP noted the experience of other agencies, both domestic and international, in which one agency has responsibility for both investigation and litigation processes :

It has made much more of a streamline in terms of how decisions are made, how quickly decisions can be made and how adaptable those decisions are to what the investigation may be facing.13

3.16 Further, the time involved in the process would be shortened by the multi-agency approach of the Taskforce:

... we believe that it will be far more efficient for ... our manager of the criminal assets branch, working alongside the manager of litigation on a daily basis, making daily decisions about the most effective course of conduct that is presented to them at any moment on any particular investigation. This is as opposed to needing to mo ve between agencies, which at times can inefficient, to get advice and to make decisions . This is about making it faster in terms of our ability to react to the criminal environment, and I think out of that will come a lot of efficiencies . 14

10 Committee Ha nsard, 4 August 2011, p. 6.

11 Submission 2, p. 1.

12 Committee Hansard, 4 August 2011, p. 12.

13 Committee Hansard, 4 August 2011, p. 17.

14 Committee Hansard, 4 August 2011, p. 17.

330

Page 19

3.17 In relation to consultation, a representative from the Department advised that 'the consultation that occurred was within the Commonwealth only.I 5 and included consultation with a broad range of 'other agencies and departments who are involved in either law enforcement or process type actions or investigations that might give rise to proceeds actions' . 16

Potentia/for 'conflict of interest'

3.18 In its submission, the Law Council set out the value of the CDPP's involvement in proceeds of crime litigation in ensuring independence. Specifically, the Law Council stated that the involvement of the DPP 'offers a valuable safeguard against the misuse or overuse of the powers available' under the Proceeds of Crime Act:

" first, the involvement of the CDPP guarantees that an authority which is independent of the investigating agency makes an objective assessment about the appropriateness of proceeding with any application, in view of the objectives of the legislation, the available and admissible evidence and the likely prospects of success; and

" second, it guarantees that the person who commences and conducts the proceedings is an officer of the court and the Crown, with all the duties that entails, and thus has a personal obligation to ensure that the court's powers and processes are not abused. 17

3.19 At the public hearing, Ms Donovan expanded on the Law Council's submission in relation to the separation of responsibilities:

... [I]t certainly is better that there is a separation between the agency which does the investigation and then the agency which comes fresh to the available evidence and the speculation about evidence that might become available and makes an assessment about whether or not it is appropriate to proceed at that time and in which way it is appropriate to proceed.

Otherwise there is not the necessary distance and objectivity from the investigation. I think that the AFP itself would acknowledge that. That is why they are suggesting that their internal arrangements will try to build this in ... [T]he model that is proposed is an inferior one because it is based on the idea that that there will be Chinese walls within the Criminal Assets Confiscation Taskforce and that the legal team will somehow sit separately and exercise its judgment objectively and independently .18

3.20 Further, the Law Council argued that a coordinated approach to proceeds of crime matters does not require a transfer of powers to the AFP:

15 Committee Hansard, 4 August 2011, p. 13.

16 Committee Hansard, 4 August 2011, p. 17.

17 Submission 2, p. 2.

18 Committee Hansard, 4 August 2011, p. 8.

331

Page 20

It is not clear why a 'multi-agency approach to combating organised crime' requires the centralisation of functions in the AFP, even if the AFP is responsible for coordinating and housing the [Criminal Assets Confiscation] Taskforce. 19

3.21 The Victorian Director of Public Prosecutions' (Victorian DPP) submission also objected to the AFP being given the powers to commence proceedings under the Proceeds of Crime Act. The Victorian DPP noted that in Victoria under the regime set out in the Confiscation Act (1997) (Vic), it is the Victorian DPP in whom these powers are vested. The Assistant Director of Assets Confiscation Operations within the Victorian DPP can also apply for certain orders, however:

[I]n practice, he/she rarely does so, and even then only after consultation with the [Victorian] Director of Public Prosecutions. In effect, the Victorian regime vests the powers solely in the Director of Public Prosecutions, in the context of serious indictable prosecutions. 20

3.22 Similarly to the Law Council, the Victorian DPP asserted that the strengths of such a regime are operational distance and objectivity, combined with independent prosecutorial discretion as to whether to make or not to make applications as the particular case and evidence may warrant:

The Victorian scheme has thus had the benefit that a consistent high standard (extending to evidentiary, procedural and ethical matters) has been maintained in all court directed proceeds of crime litigation processes. The same observation may be made of the Commonwealth scheme to this

. 21

pomt.

3.23 The Victorian DPP concluded:

There would appear to be no reason in principle why the Commonwealth Director of Public Prosecutions ought not remain the sole applicant in such proceedings. The integrity and efficiency of the process is not necessarily enhanced by the provision of concurrent power. 22

AFP /Department response

3.24 A representative from the AFP explained that the Bill does not make any substantive changes to the kinds of proceeds of crime action that can be taken. These actions include 'the threshold tests for taking that action or the basis on which a court can make proceeds orders'. 23

19 Submission 2, p. 2.

20 Director of Public Prosecutions Victoria, Submission 4, p. 1.

21 Submission 4, p. 1.

22 Submission 4, p. 1.

23 Committee Hansard, 4 August 2011, p. 12.

332

Page 21

3.25 The representative continued that the proposed amendments would only affect civil proceedings:

Under the proposed changes, the AFP will be able to litigate both non " conviction and conviction based proceeds of crime actions. It is important to note that both of these actions are essentially civil proceedings, not criminal proceedings. With conviction based proceeds action, the AFP is not litigating the criminal prosecution but is instead litigating restraint and forfeiture of assets linked to a criminal conviction. The legislation does not change the present arrangements, where the DPP will conduct criminal prosecutions; furthermore, there are safeguards in place to deal with the use ?f inf~rm~tion obtained ~om ~roceeds matters being used in other criminal mvestlgatwns or prosecutiOns.

3.26 According to the AFP, the Bill will enhance efficiency and objectivity:

The arrangements proposed by the bill can, we believe, actually provide for greater independence between the criminal and confiscation processes. The decision to litigate for asset confiscation and the decision to prosecute a person for a criminal offence will now rest with separate agencies. 25

3.27 Domestic and international precedents for agencies with a role in investigation and litigation of proceeds of crime matters, as well as precedent within the Commonwealth, would 'place the AFP well [to] undertake this role'. 26

3.28 The AFP representative outlined the internal integrity measures that it has in place, and the scrutiny to which it is subject:

The AFP's existing accountability framework will also apply to proceeds investi gations and the ultimate litigation. This includes intemal measures, including the AFP's professional standards regime, and extemal measures, including oversight by the Ombudsman and the Australian Commission for Law Enforcement Integrity, and the AFP ... is also accountable to the public through parliamentary joint committees and Senate estimates processes. 27

3.29 The AFP continued that, given the nature of its function as a law enforcement agency, it is subject to comprehensive oversight measures above and beyond those of other agencies:

... the AFP has a very robust and active oversight mechanism that extends a lot further, I would suggest, than that of any Commonwealth agency currently in the Commonwealth. There are many checks and balances on the actions of our officers .28

24 Committee Hansard, 4 Augu st 2011, p. 12.

25 Committee Hansard, 4 August 2011, p. 12.

26 Committee H ansard, 4 August 2011, p. 12.

27 Committee H ansard, 4 August 2011, p. 12.

28 Committee H ansard, 4 August 2011, p. 18.

333

Page 22

3.30 Further, the litigation officers employed under the Taskforce would be subject to the same professional and ethical standards as CDPP officers:

... the AFP, through the commissioner of the AFP, is very accountable and the commissioner will take his responsibilities very seriously in respect of discharging those responsibilities under this act.. .Ultimately, we will be judged by the decisions of the court and there are ... a number of

accountability mechanisms. The Commonwealth DPP currently seek extemal objective advice and we will do the same, particularly on high " value or potentially contentious matters. I do not see that the current atTangements for the Commonwealth DPP are, in effect, all that different from what is proposed for the commissioner of police. 29

3.31 Another representative of the AFP outlined the measures that would be put in place for the permanent Taskforce in relation to litigation action:

.. .litigation action is undertaken in a measured and objective way by the AFP. In terms of planning for the permanent task force, the AFP will draw upon guidelines that are currently in place with the DPP. They have a protocol on the proceeds of crime. There are a number of factors that they and the AFP will take into consideration in initiating litigation under the act. They include: the strength of the evidence available, the seriousness of the alleged crime, the total value of the assets potentially subject to confiscation action, the potential costs of an undertaking as to damages and the potential impact of confiscation action on any ongoing investigation. So, in terms of the litigation framework within the AFP, there will be strong and robust guidelines in regard to the work they will undertake. 30

3.32 The Department also assured the committee that, within the Taskforce, 'suitably qualified and experienced lawyers' would undertake the commencement and conduct of proceeds of ctime matters. 31 At the public hearing, a representative of the Department noted:

... this would not be the only situation where, in the Commonwealth, lawyers were employed by an agency conducting civil litigation and in that process were themselves properly acting as officers of the comi, with the duties and obligations that attend to legal practitioners. So the mere fact that

they are employed by the AFP does not of and in itself remove from them those obligations, provided that they are operating as legal practitioners. There are some conditions set down in the Legal Services directions for the conduct of civil litigation by agencies that the AFP would need to have regard to to ensure that those obligations were not removed from the employees. 32

29 Committee Hansard, 4 August 2011, p. 18.

30 Committee Hansard, 4 August 2011, p. 15.

31 Submission 7, p. 3.

32 Committee Hansard, 4 August 2011, p. 18.

334

Page 23

3.33 The representative continued that, it was envisaged the legal practitioners would have 'professional and ethical duty as officers of the court, as do Commonwealth DPP members currently'. 33

3.34 The Department advised that a Manager of Litigation would be appointed to have oversight of decisions concerning litigation of proceeds of crime matters. The position would 'ensure an objective assessment about the appropriateness of proceeding with a matter'. 34

3.35 The Manager of Litigation would be a delegate of the AFP Commissioner, and would operate 'independently of the operational arm of the Taskforce which undertakes proceeds investigations, and other areas of the AFP undertaking criminal investigations' . 35

3.36 The Department expanded on this appointment at the public hearing, noting that discussions would be ongoing in relation to the separation of the AFP's investigation and litigation functions:

... [W]e are having discussions and need to have those discussions about how to appropriately manage the separation of responsibiliti es between what is properly an investigation decision and what may ultimately be a litigation decision . That is why the manager of litigation is proposed to be quite independent within the task force of the investigation progress ... The commissioner needs to be assured that he is getting good independent advice that is objective. Until the bill is settled and until we can progress the discussions a little further with the DPP on the basis of the bill, we cannot finalise what those anangements are. 36

Withdrawal of the CDPP from the Taskforce

3.37 The Department stated that it is 'envisaged that the DPP would not be a permanent part of the Taskforce once the Bill is passed and the AFP will employ lawyers to litigate on behalf of the Taskforce.' 37

3.38 The AFP advised, however, that CDPP involvement would continue despite the CDPP's withdrawal from the Taskforce. Even so, the AFP expressed the view that it would have no objection to the CDPP becoming a permanent member of the Taskforce. 38

33 Committee Hansard, 4 August 2011, p. 18.

34 Submission 7, p. 3.

35 Submission 7, p. 3.

36 Committee Hansard, 4 August 2011, p. 14.

37 Submission 7, footnote 1, pp 2-3.

38 Committee Hansard, 4 August 2011, p. 16.

335

Page 24

3.39 In relation to the resourcing of the Taskforce, the Department stated that this aspect would be decided after the signing of a Memorandum of Understanding between the AFP and the CDPP . As the administrative detail regarding which agency has caniage of a particular matter is still to be determined, resourcing would not be transferred until those matters are fmalised. 39

3.40 A representative of the AFP elaborated on the issue of resourcing :

In large part, the task force both in its interim form and in its final form is an amalgamation of resources that currently exist within the AFP as well as within other agencies that will form part of the task force. But, of course, when and if the bill is enacted, it will place on the AFP an additional responsibility that we do not have now which is effectively the litigation of proceeds of crime matters both conviction and non-conviction based. 40

AFP's settlement policy

3.41 In its submission, the CDPP raised concerns regarding the number of qualified specialist staff involved in pursuing confiscation matters, and the level of funding that will be available to ensure appropriate legal expertise available to the Taskforce after the withdrawal of the CDPP. Of particular concern was the potential increase in settlement of cases, which may occur if there is an imbalance of non-legal and legal staff:

Although a focus on financial staff may lead to an increase in matters being commenced, if not balanced by adequate legal resources, it may create undue pressure to resolve matters by way of settlement. While settlement may be an appropriate outcome in some matters, in other matters it is necessary to have adequate legal resources and resolve to litigate the proceedings to achieve a satisfactory outcome.41

3.42 The CDPP further expressed the concern that this imbalance could affect the approach to litigation, since 'an approach which is perceived to be too willing to settle may be a far lesser deterrent' .42

AFP response

3.43 A representative of the AFP addressed the issue of a settlem ent policy:

One key issue that is often raised in this type of discussion about an agency having both responsibilities, and certainly in the context of some of the repmiing previously around New South Wales jurisdiction , is negotiated settlement and the policies that have been discussed there. I think it will be useful for me to put on the record some of the thinking of the AFP in

39 Comm ittee Hansard, 4 August 2011, p. 13.

40 Comm ittee Han sard, 4 August 2011, p. 14.

41 Commonwealth Director ofPublic Prosecutions , Submission 5, p. 5. 42 Subm ission 5, p. 5.

336

consultation with AGD [Attorney-General's Department] around that. An AFP negotiation settlement policy is under development at the moment and will incorporate the following elements, which will give the committee some comfort. Approval for any settlement will be decided by the manager of proceeds of crime litigation, the legal practitioner at SES level that I mentioned earlier. 43

Page 25

3.44 Further, the AFP outlined the aspects of the process that will be required to be taken into account by the Manager of Litigation:

" the prospects of a successful litigation;

" the risks of litigation;

" the costs of investigation and litigation, including as to what stage the maximum benefit of a settlement versus litigation are realised;

" the public interest test about whether the return of assets may facilitate the commission of further offences;

" any precedent value the decision may have; and

" the deterrent effect of the litigation. 44

3.45 The AFP representative also explained that the position adopted by the CDPP in regard to settlement would be maintained by the AFP under the proposed amendments:

It is certainly the AFP's intention to maintain the current Commonwealth Director of Public Prosecutions position whereby an agreement to settle a matter will not be used as a trade-off for reduced criminal charges or for any other favourable treatment to the offender in respect of current or potential criminal proceedings and the consent to forfeiture on criminal

cases may be used as mitigation in sentencing as set out in the proceeds of crime legislation at the discretion of the court in only limited circumstances. 45

Concerns about the NSW model

3.46 The Parliamentary Joint Committee on the Australian Crime Committee (PJC-ACC) previously considered the benefits of having a single Commonwealth agency with responsibility for both investigating and commencing proceeds of crime matters. 46

43 Comnzittee Hansard, 4 August 2011, p. 15.

44 Committee Hansard, 4 August 2011, pp 15-16.

45 Committee Hansard, 4 August 2011, p. 16.

46 See: Parliamentary Joint Committee on the Australian Crime Commission, Inquiry into the legislative arrangements to outlaw serious and organised crime groups, http://www .aph.gov.au/senate /committee/acc ctte/laoscg/index.htm, (accessed 10 August 2011).

337

Page 26

3.47 That committee's report noted the multi-agency asset recovery model adopted by NSW. This model allows the NSW Crime Commission to confiscate the assets of those involved in serious criminal activity under the Criminal Assets Recovery Act 1990 (NSW). 47

3.48 The committee recommended that the Australian Government give this issue further consideration. 48

3.49 During the current inquiry, the Law Council submitted that the NSW model of asset confiscation should not be viewed as being a successful model, and indicated that there may be significant problems with the emulation of a model that does not separate between those responsible for investigating and prosecuting proceeds of crime legislation:

Recent experience in New South Wales indicates that apparent success in confiscating criminal assets may, in fact, mask serious problems in practice and procedure. In that regard, it is noted that the NSW Crime Commission and its practices and procedures is the conduct of actions under the Criminal Assets Recove1y Act 1990 (NSW) are now the subject of a Police Integrity Commission inquiry .49

3.50 Ms Donovan expanded on this concern at the public hearing:

What we are flagging is that in New South Wales there is now some suggestion that the Crime Commission has not properly exercised the policy powers that have been given to it. There are some allegations of conuption against individuals who have been involved in that process,

which I understand are subject to proceedings . 50

3.51 Ms Donovan continued:

... [A]t that time [of the release of the PJC-ACC report] there was agreement amongst a lot of law enforcement agencies that the New South Wales model was a particularly good one because New South Wales was seen to be recouping great amounts of assets. I think they had a higher percentage than anybody else. Now there is some suggestion that whilst that may have been the case, the means that were employed to secure those returns were not necessarily proper and there may have been a degree of corruption involved. 51

47 NSW Crime Commission, About Us, http://www.crimecom mission.nsw .gov.au/index.cfm?objectid =51 C6F851 -20ED-709A " EC2A449A8EFF860 1, (accessed 10 August 2011). 48 Parliamentary Joint Committee on the Australian Crime Commission, Legislative an-angements

to outlaw serious and organised crime groups, 17 August 2009, p. 127.

49 Submission 2, p. 4.

50 Committee Hansard, 4 August 2011, p. 10.

51 Committee Hansard, 4 August 2011, p. 10.

338

Page 27

3.52 Ms Donovan recommended that 'the Commonwealth await the outcome and fmdings of that inquiry before moving to emulate the New South Wales model'. 52

Department response

3.53 A representative of the Department noted that the proposal in the Bill can be distinguished from the NSW model because of robust scrutiny measures which apply in the Commonwealth arena:

From a policy perspective we do not believe that the inquiry of the New South Wales Crime Commission is of particular relevance to this situation. As the Law Council witness indicated, there are allegations of corruption involving particular officers. The AFP is subject to extensive scrutiny, not least by ACLEI, in relation to allegations of con-uption . There are also different scrutiny regimes with respect to the exercise of powers under the Proceeds of Crime Act as opposed to under the New South Wales Crime Commission legislation. 53

3.54 Further, there are significant and important distinctions between the NSW model and the proposed model:

... [T]he New South Wales Crime Commission can conduct examinations on its own motion without actually having court supervision whereas examinations of witnesses for proceeds rurposes have to be supervised by the court [in the Commonwealth model]. 4

Committee view

3.55 The two main objectives of the Bill are to provide ACLEI with oversight of Customs on a whole-of-agency basis, and to enable the Commissioner of the AFP to commence and conduct proceeds of crime litigation . The committee believes these objectives will strengthen integrity measures in law enforcement, and, in regard to the second objective , will streamline the proceeds of crime process. The latter will ensure greater efficiency in proceeds of crime matters, and support the Criminal Assets Confiscation Taskforce in its operation .

3.56 The committee acknowledges that concern was expressed in submissions and evidence in relation to measures contained in Schedule 2: in particular , the transfer of powers from the CDPP to the AFP and the issue of a perceived lack of separation between investigation and prosecution functions . The committee believes that the close relationship between the CDPP and the AFP is essential, and encourages the development of a Memorandum of Understanding as soon as possible , in order to provide certainty concerning the delineation of responsibilities.

52 Committee Hansard, 4 August 2011, p. 6.

53 Committee Hansard, 4 August 2011, p. 15.

54 Committee Hansard, 4 August 2011, p. 15.

339

Page 28

3.57 The committee considers that the multi-agency approach of the Taskforce, led by and housed in the AFP , will promote anticipated efficiencies. The committee notes, however, the necessity of a high level of scrutiny and accountability to ensure the integrity of the process. The committee understands the significance of existing accountability measures and scrutiny in place for AFP officers, and stresses the importance of ensuring that the Taskforce is subject to the same measures. The committee believes that the existence of such mechanisms as the Senate estimates process, oversight of the AFP by ACLEI , as well as the internal integrity measures within the AFP, will ensure that the Taskforce operates appropriately and effectively.

3.58 The committee agrees that the appointment of the Manager of Litigation to the Taskforce will aid in ensuring objectivity , but suggests that the Australian Government strongly consider inclusion of the CDPP as a permanent member of the Taskforce. This would allow an added level of objectivity and expertise , and will promote a continued cooperative relationship between relevant agencies.

3.59 As a fmal point, the committee believes that the Explanatory Memorandum to the Bill should have included the information contained in the Department's submission, and evidence given at the public hearing by the Department and the AFP regarding the necessity of the proposed amendments, how it is envisaged the powers to be transferred will be used, and relevant accountability measures. The inclusion of such information would have assisted the committee in its consideration of the Bill. The committee recommends that this oversight be corrected by revising and reissuing the Explanatory Memorandum as soon as possible.

Recommendation 1

3.60 The committee recommends that the Memorandum of Understanding between the Australian Federal Police and the Commonwealth Director of Public Prosecutions, which is intended to establish the working arrangements for the Criminal Assets Confiscation Taskforce, should be finalised as soon as possible following commencement of the Bill to provide certainty for officers in those agencies working on proceeds of crime matters.

Recommendation 2

3.61 The committee recommends that the Commonwealth Director of Public Prosecutions should become a permanent member of the Criminal Assets Confiscation Taskforce.

Recommendation 3

3.62 The committee recommends that the Attorney-General's Department revise and reissue the Explanatory Memorandum to the Bill to specifically include information contained in the Department's submission, and evidence given at the public hearing by the Department and the Australian Federal Police, which explains:

" the rationale for the proposed new powers and functions of the Australian Federal Police with respect to proceeds of crime litigation;

340

Page 29

" how it is envisaged that the powers and functions will be used; and

" the relevant scrutiny and accountability mechanisms which will ensure the integrity of the AFP's proceeds of crime litigation function.

Recommendation 4

3.63 Subject to Recommendation 3, and after due consideration of Recommendations 1 and 2, the committee recommends that the Senate pass the Bill.

Senator Trish Crossin Chair

341

342

ADDITIONAL COMMENTS BY

LIBERAL SENATORS

1.1 Liberal senators agree with the majority report, except for the fmdings and recommendations made in relation to the Bill's provisions which allow the Commissioner of the Australian Federal Police to commence and conduct litigation under the Proceeds of Crime Act 2002 (Cth).

1.2 Liberal senators aclrnowledge the concerns of the Law Council of Australia with respect to these provisions of the Bill.

1.3 Liberal senators support, in principle, separation between bodies of investigation and prosecution as a safeguard of integrity in law enforcement.

1.4 Liberal senators note the ongoing investigation in to the NSW Crime Commission by the Police Integrity Commission:

Recent experience in New South Wales indicates that apparent success in confiscating criminal assets may, in fact, mask serious problems in practice and procedure. In that regard, it is noted that the NSW Crime Commission and its practices and procedures is the conduct of actions under the Criminal Assets Recove1y Act 1990 (NSW) are now the subject of a Police Integrity Commission inquiry. 1

1.5 Liberal senators are unpersuaded that there is a compelling case at present to alter the current separation of powers of investigation and litigation of proceeds of crime matters. At the very least, this legislation should be held back until the NSW Police Integrity Commission inquiry into the NSW Crime Commission is completed.

Recommendation 1

1.6 Liberal senators recommend that the provisions in the Bill which allow the Commissioner of the Australian Federal Police to commence and conduct litigation under the Proceeds of Crime Act 2002 (Cth) not proceed at this time.

Senator Gary Humphries Deputy Chair

1 Law Council of Au stralia, Subm ission 2, p. 4.

343

Senator Sue Boyce

344

Submission Number

1

2

3

4

5

6

7

8

APPENDIX 1

SUBMISSIONS RECEIVED

Submitter

New South Wales Crime Commission

Law Council of Australia

Australian Commission for Law Enforcement Integrity

Director of Public Prosecutions Victoria

Commonwealth Director of Public Prosecutions

Australian Customs and Border Protection Service

Attorney-General's Department

NSW Ministry for Police and Emergency Services

345

346

APPENDIX2

WITNESSES WHO APPEARED BEFORE THE COMMITTEE

Canberra, 4 August 2011

ANDERSON, Mr lain, First Assistant Secretary , Criminal Justice Division, Attorney " General's Department

BAKER-GOLDSMITH , Ms Sarah, Principal Lawyer, Australian Commission for Law Enforcement Integrity

CHIDGEY , Ms Sarah, Assistant Secretary, Criminal Law and Law Enforcement Branch, Attorney-General's Department

COLVIN , Deputy Commissioner Andrew , APM , OAM , Deputy Commissioner, Australian Federal Police

DAVIDSON, Mr Graeme, Deputy Director , Commonwealth Director of Public Prosecutions

DONOVAN , Ms Helen, Co-Director , Criminal Law and Human Rights, Law Council of Australia

MANN , Mr Neil, Deputy Chief Executive Officer , Passenger and Trade Facilitation , Australian Customs and Border Protection Service

McCARTNEY , Commander Ian, Manager, Criminal Assets, Australian Federal Police

MOSS , Mr Philip, Integrity Commissioner, Australian Commission for Law Enforcement Integrity

THORNTON , Mr John, First Deputy Director , Commonwealth Director of Public Prosecutions

WHOWELL, Mr Peter, Manager, Government Relations , Australian Federal Police

347

348

The Senate

Legal and Constitutional Affairs

Legislation Committee

Deterring People Smuggling Bill 2011

November 2011

349

© Commonwealth of Australia

ISBN: 978-1-74229-550-3

This document was printed by the Senate Printing Unit, Department of the Senate, Parliament House, Canberra.

350

MEMBERS OF THE COMMITTEE

Members

Senator Patricia Crossin, Chair, ALP, NT

Senator Gary Humphries, Deputy Chair, LP, ACT

Senator Sue Boyce, LP, QLD

Senator Mark Furner, ALP , QLD

Senator Louise Pratt, ALP, W A

Senator Penny Wright, AG, SA

Substitute Member

Senator Sarah Hanson-Young, AG, SA replaced Senator Penny Wright, AG, SA for the inquiry into the Deterring People Smuggling Bill 2011

Participating Member

Senator Michaelia Cash, LP , W A

Secretariat

Ms Julie Dennett

Mr Owen Griffiths Ms Aleshia Bailey

Ms Hannah Dibley

Ms Hana Jones

SuiteS 1.61

Parliament House

Committee Secretary

Inquiry Secretary

Research Officer

Administrative Officer

Administrative Officer

Telephone: (02) 6277 3560

Fax: (02) 6277 5794

CANBERRA ACT 2600 Email: legcon.sen@ aph.gov.au

lll

351

352

TABLE OF CONTENTS

MEMBERS OF THE COMMITTEE ............................................................. iii

RECOMMENDATIONS ................................................................................. vii

CHAPTER 1 ........................................................................................................ !

INTRODUCTION .................................................................................................... !

Background ............. ....... ........ ...................... ..... ..... .... ...... .... ... ............. ....... ...... ...... 1

Purpose of the Bill ...................... ......... ........ ...... ...... ... ................................ .......... .. 1

Key provisions of the Bill. ...... ................ .............................. .... .......... ........... ..... ... . 2

Conduct of the inquiry ................... .... ............. .... ......... .... ................................... .... 3

Acknowledgement ....... ... .... ... ...... ....... .... .................... ........ ....... ....... ............ ......... . 3

Structure of the report ........... ........ ........... .......................................... .......... ..... .... .. 3

Note on references ... .......... ... ........ ..... ........ ..... .... ........ ... .... ............ ......................... 3

CHAPTER 2 ................................................................................... ..................... 5

KEY ISSUES ........................................................................................... .................. 5

Reason for legislative amendment. ........... ... ... .......... .... ..... ..................................... 5

People smuggling offences and mandatory sentencing ......... ....... ... ....................... 7

Appropriateness oflegislative amendment during legal proceedings .................... 9

Retrospective amendment to criminal law ................ .... ..... ...... ........... ................. 11

International obligations ....... .......... ..... .... .... ....... .... ... ...... ............. ............. ........ ... 15

Parliamentary scrutiny and consultation issues .......... ..... ..... ..... ........ ... ................ 16

Committee view ... .......... ..... ........... ........... ... ......... .................... .... .... ........ ... ... ...... 17

ADDITIONAL COMMENTS BY COALITION SENATORS ................... 21

DISSENTING REPORT BY THE AUSTRALIAN GREENS .................... 23

Introduction ................ ........................................ ........ ... ....... ...... ... ..... ....... .... ...... . 23

Breach of international law ............................... .......... ... ...... ..... ... ................ ..... ... 23

Retrospectivity .............. ... .............................. ..... ..... ............................ ......... .... ... . 24

v

353

Lack of deterrence ...... .... ...... ... ............ .............. ... ........... .... ... .... .... ............. .... ..... 25

Mandatory Sentencing ... ........ ....... ................ .... ............ ............ ..... ... ..... ....... ........ 26

Conclusion ... ..... ........ ............ ........... ....... ........ ......... .... ..... ... .......... ............ ..... ..... . 26

APPEND IX 1 ..................................................................................................... 29

SUBMISSIONS RECEIVED ................................................................................. 29

APPENDIX~ ..................................................................................................... :Jl

WITNESSES WHO APPEARED BEFORE THE COMMITTEE ......... ....... ... 31

V I

354

RECOMMENDATIONS

Recommendation 1 2.50 The committee recommends that the Explanatory Memorandum to the Bill be revised and reissued to explicitly articulate the exceptional circumstances necessary for the introduction of Bill, its retrospective application and its application to current legal proceedings.

Recommendation 2 2.51 The committee recommends that the Australian Government, through the Attorney-General's Department, review the operation of the people smuggling offences in the Migration Act 1958 to ensure these offences continue to effectively deter people smuggling.

Recommendation 3 2.52 The committee recommends that the Australian Government examine the Department of Prime Minister and Cabinet's Legislation Handbook and the Attorney-General's Department's Guide to Framing Commonwealth Offences, Infringement Notices and Enforcement Powers to ensure that the articulation of

policy is clear in relation to the introduction of retrospective legislation and legislation relevant to ongoing legal proceedings, with an emphasis on ensuring that the principles of the rule of law and the separation of powers within Australia's system of government are respected.

Recommendation 4 2.53 Subject to recommendation 1, the committee recommends that the Senate pass the Bill.

Vll

355

356

CHAPTER!

INTRODUCTION

1.1 The Deterring People Smuggling Bill 2011 (Bill) was introduced into the House of Representatives by the Minister for Home Affairs and Minister for Justice, the Hon Brendan O'Connor MP (Minister), on 1 November 2011, and passed on the same day. The Bill was introduced into the Senate on 2 November 2011, and was subsequently referred to the Legal and Constitutional Affairs Legislation Committee (committee) for inquiry and report by 21 November 20 11.1

Background

1.2 The Migration Act 1958 (Migration Act) currently includes several offences relating to people smuggling. Existing section 233A establishes the prinmry people smuggling offence. Under this section, it is an offence for a person to organise or facilitate the bringing or coming to Australia, or entry or proposed entry into Australia, of another person, if that other person is a non-citizen and had or has no lawful right to come to Australia . Existing section 233C establishes an aggravated people smuggling offence where a person, in committing a primary offence of people

smuggling, organises or facilitates the bringing or coming to Australia, or the entry or proposed entry into Australia, of a group of at least five persons who had or have no lawful right to come to Australia . The words 'no lawful right to come to Australia' are utilised in both offences, but are currently undefined in the Migration Act.Z

Purpose of the Bill

1.3 In his Second Reading Speech, the Minister outlined that the purpose of the Bill is 'to give clarity to the laws that have criminalised people smuggling and aggravated people smuggling offences for more than a decade'.3 In particular, the Bill will 'make it clear that the phrase "no lawful right to come to Australia" refers to requirements under Australia's domestic law that people must have a visa that is in effect to lawfully come to Australia, or fall within one of the limited exceptions to that rule outlined by the Migration Act'. 4 This change would apply retrospectively to when these words were inserted into the people smuggling offences in the Migration Act in December 1999.5

1 Journals of the Senate, 3 November 2011, p. 1735.

2 Explanatory Memor andum (EM) , p. 4.

3 H ouse of Representativ es Hansard, 1 November 2011, p. 37.

4 House of Representativ es H ansard, 1 November 2011, p. 37.

5 House of Representativ es Hansard, 1 November 2011, pp 37-38.

357

Page2

Key provisions of the Bill

1.4 The key provisions of the Bill amend the Migration Act.

Commencement

1.5 Subclause 2(1) of the Bill includes a table outlining when each part of the Bill will commence. In particular, Schedule 1 of the Bill commences 'Immediately after the commencement of item 51 of Schedule 1 to the Border Protection Legislation Amendment Act 1999' (Border Protection Amendment Act). Column 3 of the table

(labelled 'Dates/Details') lists this as 16 December 1999.6

1.6 The Explanatory Memorandum (EM) notes that the words 'lawful right to come to Australia' were originally inserted into the Migration Act in December 1999 by the Border Protection Amendment Act. 7

Clarification

1. 7 Item 1 of Schedule 1 inserts proposed new section 228B after existing section 228A in the Migration Act. The new section is titled 'Circumstances in which a non-citizen has no lawful1ight to come to Australia'.

1. 8 The EM outlines that:

This item is an amendment which clarifies the operation of the people smuggling and aggravated people smuggling provisions in Subdivision A of Division 12 in Part 2 of the Migration Act.

New section 228B will make it clear that...a non-citizen has, at a particular time, no lawful right to come to Australia if at that time the person does not meet requirements for lawfully coming to Australia under domestic law. 8

1.9 Proposed new subsection 228B(l) provides that a non-citizen has, at a particular time, no lawful right to come to Australia if, at that time, the non-citizen does not hold a visa that is in effect, and is not covered by an exception referred to in existing subsections 42(2), 42(2A), or 42(3) of the Migration Act. These exceptions allow non-citizens to come to Australia without a visa in some circumstances. 9

1.10 Proposed new subsection 228B(2) is an avoidance of doubt provision which clarifies that references to 'non-citizens' in proposed new subsection 228B(l) include those individuals seeking protection or asylum (however described) and whether or

6 However subclause 2(2) provides that 'Any information in column 3 of the table is not part of this Act'.

7 EM, p. 4.

8 EM,p .4.

9 EM, p. 5.

358

Page3

not Australia has, or may have, protection obligations in respect of the non-citizen under:

" the Convention Relating to the Status of Refugees 19 51 (Refugee Convention), as amended by the Protocol Relating to the Status of Refugees 1967; or

" for any other reason.

Application

1.11 Item 2(1) of Schedule 1 provides that proposed new section 228B applies in relation to an offence committed, or alleged to have been committed, 'on or after commencement of this Schedule'. Item 2(2) provides that proposed new section 228B applies to proceedings (whether original or appellate) commenced on or after the day the Bill receives Royal Assent, and before the day on which the Bill receives Royal Assent.

Conduct of the inquiry

1.12 The committee advertised the inquiry in The Australian newspaper on 9 November 2011. Details of the inquiry, the Bill and other associated documents were placed on the committee's website. The committee also wrote to a number of organisations and individuals, inviting submissions by 9 November 2011.

1.13 The committee received 23 submissions, which are listed at Appendix 1. All public submissions are available on the committee's website at http://www.aph.gov.au/Senate /comn1ittee/legcon ctte/index.htm.

1.14 The committee held a public hearing in Canberra on 11 November 2011. A list of witnesses who appeared at the hearing is at Appendix 2, and copies of the Hansard transcript are available at http://www .aph.gov.au /hansard.

Acknowledgement

1.15 The committee thanks those organisations and individuals who made submissions and gave evidence at the public hearing.

Structure of the report

1.16 Chapter 1 introduces the Bill and provides a brief outline of the key provisions the Bill. Chapter 2 discusses the key issues raised in evidence and includes the conunittee's view and recommendations.

Note on references

1.17 References in this report are to individual submissions as received by the committee, not to a bound volume. References to the committee Hansard are to the proof Hansard. Page numbers may vary between the proof and the official Hansard transcript.

359

360

CHAPTER2

KEY ISSUES

2.1 A number of issues were raised by submitters and witnesses in relation to the Bill. These issues focused on:

" the reason for the Bill's introduction;

" people smuggling offences and mandatory sentencing;

" the appropriateness of legislative amendment during legal proceedings;

" the retrospective application of the Bill;

" Australia international obligations; and

" parliamentary scrutiny and consultation issues.

Reason for legislative amendment

2.2 During the inquiry, it was highlighted that the introduction of the Bill was linked to a pending Victorian Court of Appeal decision in relation to the case of an Indonesian man accused of aggravated people smuggling. 1 These legal proceedings are a 'test case' undertaken by Victoria Legal Aid on behalf of one of its clients. 2 In its submission, Victoria Legal Aid commented:

In people smuggling cases one of the things that the prosecution has to prove is that the people brought to Australia had 'no lawful right to come'. It became clear to our legal staff relatively early that there was a real question over the interpretation of this phrase. In particular, there was a question as

to whether a person who seeks asylum from persecution in Australia can truly be said to have 'no lawful right to come' given Australia's obligations under the Refugees Convention and the extent to which those obligations have been incorporated into Australian domestic law and practice. Having

identified the question, our professional obligation was to raise it on behalf of our clients and have it determined. 3

2.3 The Commonwealth Director of Public Prosecutions (DPP) also provided details about this 'test case'. It noted 'the Victorian County Court has stated a case to the Victorian Court of Criminal Appeal, reserving for determination by the Court of Appeal, questions of law which involve consideration of whether non-citizens ... had a lawful right to come to Australia'. 4 The Victorian Court of Criminal Appeal 'has

1 For example, Farah Farouque and Andrea Petrie, 'Lawyers condemn migration law amendment', The Age, 3 November 2011, p. 12.

2 Victoria Legal Aid, Submission 16, pp 3-4.

3 Submission 16, p. 4.

4 Submission 4, p. 1.

361

Page 6

adjourned this matter until 30 November 2011 pending the consideration of this legislation by Parliament'. 5

2.4 The Attorney-General's Department informed the committee that, in its view, 'under the common law, there is no right for an individual to enter Australia to seek protection or asylum', and that the High Court of Australia 'has expressed the view that refugees do not have a right of entry under either customary international law or the [Refugees Convention]'. 6 The Attorney-General's Department highlighted that the Bill's proposed amendments reaffirm 'the way the provisions have been consistently interpreted since their introduction in 1999':

The Bill makes it clear that references to a 'non-citizen' in Subdivision A of Division 12 in Part 2 of the Migration Act includes a reference to a non " citizen who is seeking protection or asylum (however that may be described). However, the people smuggling offences apply where a person smuggles any person that has no lawful right to come to Australia (that is, any non-citizen that does not hold a visa that is in effect , and is not covered by an exception referred to in existing subsections 42(2), 42(2A), or 42(3) of the Migration Act). The class of persons with no lawful right to come to Australia includes persons who are seeking protection or asylum. 7

2.5 An officer from the Attorney-General's Department noted:

[S]ince 1999 there has been an offence in the Migration Act criminalising the smuggling of five or more people to Australia. There have been over 900 cases since 1999 proceeding on the basis that smuggling five or more persons to Australia when they do not have a visa is an offence. The

Commonwealth [DPP] has run the cases on that basis and the courts have approached the offences on that basis. The bill does not change that position; it simply makes express the understanding that we say always underpinned the people smuggling offences-that smuggling people to

Australia when they do not have a visa is unlawful, and that is the essence of people smuggling. 8

2.6 Similarly, the Commonwealth DPP commented:

Section 228B accords with what has been this Office's understanding of the term 'no lawful right to come to Australia'. In this regard, we note that in a number of people smuggling prosecutions in different jurisdictions, defendants have raised arguments that the people smuggling offences in the Migration Act were inapplicable to the defendant because the non-citizens had a lawful right of entry, said to arise because they had come to Australia

5 Subm ission 4, p. 1.

6 Submission 14, p. 7. In particular citing , Ruddock v Vadarlis (2001) 110 FCR 491 and NA GV v Minister for Immigration and M ulti cultural Affairs (2005) 222 CLR 161.

7 Subm ission 14, p. 1 (emphasis in original).

8 Mr lain Anderson, Attorney-General's Department, Committee Hansard, 11 November 2011, p. 23.

362

to seek asylum. Those arguments have been dismissed by trial courts in Western Australia, the Northern Territory, New South Wales and Queensland. 9

Page 7

2. 7 In contrast, Victoria Legal Aid considered there is 'clearly an argument' about how the words 'no lawful right to come to Australia' should be interpreted . Mr Saul Holt from Victoria Legal Aid argued that the substantial legal resources utilised by the Commonwealth in contesting the 'test case' in the Victorian Court of Appeal suggested that 'there [is] something in [the] argument'. 10 Mr Holt also stated:

From day one, it has been clear to us that the question of the content of the phrase 'no lawful right to come to Australia' is one that needed to be determined finally, legally and early, and we were following in good faith through the ordinary process of taking this to the Court of Appeal to do

that. 11

2.8 Others considered the characterisation of the Bill as merely a 'clarification' of the people smuggling offences of the Migration Act was problematic. 12 In particular, it was noted that, if the case law regarding the interpretation of the people smuggling offences was clear and consistent, there would be no need for the proposed amendments. For example, Professor Sarah Joseph from the Castan Centre for Human Rights Law (Castan Centre) asserted:

I would say there is no such thing as retrospective clarification because either this law does absolutely nothing-that is, it clarifies something that does not need to be clarified-or it removes arguments that would perhaps exonerate the people charged. If it does that latter thing, it enlarges the offence.13

People smuggling offences and mandatory sentencing

2.9 A number of submitters questioned the policy of criminalising people smuggling where the people being 'smuggled' are usually those seeking to claim asylum in Australia as refugees. The Castan Centre noted that the vast majority of people brought to Australia by people smugglers are subsequently found to be genuine refugees, arguing that 'deterrence of people smugglers clearly has the knock-on effect of deterring asylum seekers, who presently have a right under both international and Australian law to seek asylum here'. 14 Similarly, Professor Ben Saul contended:

The effect of criminalising those who smuggle refugees is to prevent the refugees themselves them from reaching safety, unless some effective,

9 Submission 4, p. 1.

10 Committee Hansard, 11 November 2011, p. 13.

11 Committee Hansard, 11 November 2011, p. 14.

12 For example, ChiiOut- Children Out ofimmigration Detention, Submission 19, p. 5.

13 Committee Hansard, 11 November 2011, p. 7.

14 Submission 6, p. 2.

363

Page8

alternative or substitute protection is provided for them elsewhere. It is therefore disingenuous to suggest, as the [EM] does, that criminalising people smuggling does not prejudice the position of refugees.15

2.10 The morality of people smugglers was also frequently questioned during the inquiry. 16 For example, Professor Ben Saul argued that '[i]f Anne Frank had paid someone to help her flee from genocide, it is hardly morally appropriate to criminalise the smuggler, in circumstances where ... the international community had failed to protect her'. 17 Similarly, the New South Wales Council for Civil Liberties stated:

[R ]efugees, having fled persecution, find themselves in unsafe camps with polluted water supply, at risk of cholera, dysentery, rape and murder, they will, properly, seek to move on. Those who assist them should not be demonised on that account. 18

2.11 Others noted that the majority of those who are subject to people smuggling prosecutions are often victims themselves. For example, Victoria Legal Aid informed the committee that '[a]s of 15 March 2011 of 353 people arrested and charged for people smuggling offences 347 were crew ... [O]nly six were organisers' .19 The Australian Lawyers Alliance argued that many of those prosecuted for people

smuggling offences 'were not aware of what they were implicated in' and '[ m ]any have been tricked' . 20

2.12 Victoria Legal Aid, and other submitters, questioned the deterrence value of the people smuggling offences , which were characterised as frequently applying to in1poverished , Indonesian fishermen with little education. 21 As Victoria Legal Aid advised:

Almo st all of the men who are cmTently being prosecuted in Australi a for Aggravated People Smug gling are themselves victims of the trade. They are put on the same boats and exposed to the same risk as the asylum seekers. They are either misled into working on the boats, or offered wh at seems to them to be a s m all fortune. 22

2.13 The appropriateness of the mandatory sentencing penalties of the aggravated people smuggling offences in the Migration A ct w as also raised by submitters and

15 Professor B en Saul, Submission I, p. 2.

16 For example, Centre for Policy D evelopment, Submission 3, p. 1; M s M arilyn Shepherd, Submission 2, p. 1; ChilOut- C hildr en Out oflmmigration D etention, Subm ission I9, p. 3.

17 Subm ission I, p. 2.

18 Submission 5, p. 2.

19 Subm ission I6, p. 7.

20 Submission I8, p. 8.

21 For example, Asylum Seeker R esource Centre, Submission I7, p. 2.

22 Submission I6, p. 11.

364

Page9

witnesses. 23 The Migrant and Refugee Rights Project at the University of New South Wales noted that, under the Migration Act, 'a court must sentence a person convicted under s233C and other "aggravated" smuggling offences to at least five years imprisonment with a minimum three year non-parole period'. 24 Ms Rachel Ball from the Human Rights Law Centre argued:

This [mandatory] sentence contravenes the prohibition on arbitrary detention and the right to a fair trial, also contained in the International Covenant on Civil and Political Rights. These principles require that the punishment fit the crime, but mandatory sentencing prevents the court from differentiating between serious and minor offending and from considering the particular circumstances of the individual. 25

2.14 Mr Saul Holt from Victoria Legal Aid highlighted the impact of mandatory sentencing on the crews of people smuggling vessels who usually come from 'extremely poor circumstances in Indonesia'. He emphasised that these men are often the 'breadwinners' for their families and that their imprisonment for 'three to five years' has broader impacts in their communities. 26

2.15 However, an officer from the Attorney-General's Department noted that the Bill 'does not pu~ort to do anything about mandatory minimums' for people smuggling offences. 7 The officer stated:

Regarding the offences, while a crew might receive a mandatory minimum sentence of five years with a three-year non-parole period, the maximum sentence that could be applied is far greater under these provisions, so the court is able to take culpability into consideration when deciding the sentence to apply to an organiser as opposed to a member of crew.28

Appropriateness of legislative amendment during legal proceedings

2.16 Several submitters and witnesses suggested that the passage of the Bill is inappropriate given that a court is currently considering the relevant issue to be 'clarified' by the Bill. 29 For example, Professor Ben Saul drew the committee's attention to 'questions of the propriety of Parliament legislating on this issue

23 For example, Migrant and Refugee llights Project , Submission 15, pp 13-16; Australian Lawyers Alliance, Submission 18, pp 5-6.

24 Submission 15, p. 13 (emphasis in original).

25 Committee Hansard, 11 November 2011, p. 1.

26 Committee Hansard, 11 November 2011, pp 15-17.

27 Mr lain Anderson, Attorney-General's Department, Committee Hansard, 11 November 2011, p. 27.

28 Mr lain Anderson, Attorney-General's Department, Committee H ansard, 11 November 2011, p. 24.

29 For example, Mr Jonathan Davies, Australian Lawyers Alliance, Committee Hansard, 11 November 2011, p. 21.

365

Page 10

retrospectively , and while judicial proceedings are pending'. 30 Similarly, Legal Aid NSW submitted that 'interpreting the law is the role of the judiciary, and as there is currently a stated case in Victoria on this very issue ... the Parliament could let the Courts perform their constitutional function and await this case before deciding whether to take the unusual step of passing retrospective legislation'. 31

2.17 The Human Rights Law Centre was more explicit, asserting that the 'Bill arguably usurps judicial power, which is inconsistent with the separation of powers under the Australian Constitution and the powers vested in the court by Chapter III'. 32 Ms Rachel Ball from the Human Rights Law Centre considered that the Bill was

intended to 'circumvent current legal proceedings' and this is 'enormously problematic in terms of the maintenance of the rule of law in Australia and the maintenance of the separation of powers'. 33 Similarly, Ms Bassina Farbenblum from the Migrant and Refugee Rights Project considered that a 'very dangerous precedent' is being set:

[I]t is especially problematic for parliament to intervene in a case in which the government is actually a party. The reason we have a judiciary and separation of powers is so that, generally, governments cannot just intervene by passing legislation when they think the court might reach a conclusion that they do not like when they are a party to litigation. 34

2.18 Victoria Legal Aid noted that there is no precedent for the government of the day to bring forward legislation while they are also a party to the relevant legal proceedings:

[H]ad we waited to know what the Court of Appeal had said about this so we truly knew what the law was, this committee could be proceeding on these important issues as a matter of cetiainty. We would not be having this odd argument about whether this bill does something or does not do it. If we actually knew, it would not prevent you from still passing the law in both houses, but we would truly know if this was retrospective legislation. 35

2.19 In contrast, an officer from the Attorney-General's Department noted that the Social Security and Other Legislation Amendment (Miscellaneous Measures) Bill 2011 is a recent example where 'legislation was passed while a matter was before the High Court'. 36

30 Professor Ben Saul, Submission 1, p. 2.

31 Submission 22, p. 1.

32 Submission 7, p. 3.

33 Committee Hansard, 11 November 2011, p. 5.

34 Committee Hansard, 11 November 2011, p. 5.

35 Mr Saul Holt, Victoria Legal Aid, Committee Hansard, 11 No vem ber 201 1, p. 16.

36 Mr lain Anderson, Attorney-General's Department, Committee Hansard, 11 November 2011, p. 25.

366

Page 11

2.20 The Castan Centre highlighted judicial comments made in a High Court of Australia case, Nicholas v The Queen,37 regarding the constitutional validity of laws which direct 'the manner in which judicial power should be exercised'. 38 The Castan Centre commented that the 'courts are presently engaged in the process of interpreting the phrase "lawful right to come to Australia", and the Bill arguably purports to direct the manner in which they should go about this'. 39 In the Castan Centre's view, the intention to intervene in the judicial process is apparent in the provisions of the Bill which provide that the amendments 'apply to proceedings in train (including appeals)'. 4∞ Further:

In the relevant cases/appeals, the issue of refugees' and asylum-seekers' 'lawful right to come to Australia' has been raised in defence of accused people smugglers. Under ss 233A, B or C of the Migration Act, these accused persons face penalties of up to 10 or 20 years' imprisonment. Since

the Bill would effectively decide the issue raised by the defence in these cases, it clearly has the potential to affect the defendants' liberty seriously . In the context of both the presumption against retrospectivity and the doctrine of separation of powers, these amendments constitute dubious law which may well be constitutionally invalid. 41

Retrospective amendment to criminal law

2.21 The Attorney-General's Department acknowledged that the Commonwealth's general approach has been that 'an offence should only be given retrospective effect in rare circumstances where there is a very strong justification', and that '[ e ]xceptions have normally been made only where there has been a strong need to address a gap in existing offences, and moral culpability of those involved means there 1s no substantive injustice in retrospectivity'. 42 In the case of the Bill:

37

38

39

40

41

42

Retrospective application is necessary to ensure the original intent of the Parliament is affirmed, to avoid uncertainty about the validity of previous convictions, and to maintain current prosecutions ...

The effect of the retrospective application is to clarify an existing understanding of the laws, and to ensure convictions for people smuggling offences already made, as well as prosecutions underway, would not be invalidated should a court find that the absence of a specific reference to persons seeking protection or asylum means they are not intended to be the subject of the people smuggling offences ...

1998 [HCA] 9.

Submission 6, p. 3.

Submission 6, p. 3.

Submission 6, p. 4.

Submission 6, p. 4.

Submission 14, p. 8.

367

Page 12

There are exceptional circumstances that justify retrospectivity for this Bill. Those circumstances are that it would not be appropriate to risk a significant number of prosecutions being overturned as a result of a previously unidentified argument in relation to the words 'no lawful right to come to Australia' .43

2.22 The Department of Immigration and Citizenship also explained that 'the effect of retrospective application is to clarify an existing understanding of the laws, and to ensure that convictions for people smuggling offences already made as well as prosecutions underway are not invalidated'. 44 It referenced the Commonwealth DPP's 2010-11 Annual Report as stating that, as at 30 June 2011, there were 304 people smuggling prosecutions involving organisers, captain and crew before the courts. 45

2.23 The EM also suggests the amendments in the Bill are intended '[t]o avoid doubt and to ensure the original intent of Parliament is affirmed'. 46

2.24 A number of submitters and witnesses viewed the retrospective application of the Bill as problematic and urged the committee to recommend the Bill be withdrawn, or that the Bill be amended so that it does not apply retrospectively. 47 For example, the Human Rights Law Centre argued:

In accordance with principles of statutory interpretation, an Act is to be interpreted accordit?:g to the words of a section interpreted in the context of the Act as a whole. In other words, the Commonwealth is bound by the laws Parliament enacted; not what it would have liked Parliament to enact. If Parliament wishes to avoid doubt and either "clarify" or amend the original intent of the Parliament , it should do so prospectively. 48

2.25 Several submissions observed that the Australian Government's Guide to Framing Commonwealth Offences, Infringement Notices and Enforcement Powers outlines that '[a ]n offence should be given retrospective effect only in rare circumstances and with strong justification' .49 The Human Rights Law Centre argued that the EM 'does not contain sufficient justification for the retrospective application

of the Bill'. 50 Similarly, Victoria Legal Aid argued that 'there has to be something extremely rare and serious and a moral culpability of proportion that it would not

43 Submission 14, p. 8.

44 Submission 8, p 2.

45 Submission 8, pp 1-2.

46 EM, p. 1.

47 For example, Castan Centre ofHuman Rights Law , Submission 6, p. 4; Mr Thomas Bland and nine others, Submission 20, p. 2; Rule ofLaw Institute of Australia, Submission 9, pp 1-2.

48 Subm ission 7, p. 2.

49 For example, Human Rights Law Centre, Submission 7, p. 3; Law Society of Au stralia , Submission 11, p. 9; Liberty Victoria, Subm.ission 13, p.3.

50 Submission 7, p. 3.

368

Page 13

render the use of retrospective legislation unjust.. .It is not enough to say that you are merely clarifying the intent'. 51

2.26 However, an officer from the Attorney-General's Department commented:

In a situation where parliament has said that these offences should be penalised by a 20-year maximum sentence and a five-year mandatory minimum sentence, we say that is a serious situation and that people who are convicted of those offences are morally culpable . So we say the retrospectivity is justified ... [P]eople smuggling is viewed as defmitely a very serious activity. It puts lives at risk, bringing people to Australia, and, yes, it is a morally culpable activity for people to be engaged in. 52

2.27 The committee notes that Australia does not have an explicit constitutional prohibition against the enactment of retrospective legislation. However, several submissions highlighted that a number of jurisdictions and international agreements prohibit retrospective legislation with criminal sanctions. These include the United States of America and Article 15 of the International Covenant of Civil and Political Rights (ICCPR).53

2.28 Article 15(1) of the ICCPR states:

No one shall be held guilty of any criminal offence on account of any act or omission which did not constitute a criminal offence, under national or intemationallaw, at the time when it was committed ...

2.29 Victoria Legal Aid argued that concern about retrospective criminal laws 'crosses cultural and political boundaries' and, while it is permitted under Australia's law, 'it nonetheless represents a breach of Australia's obligations under the ICCPR'.54 The Human Rights Law Centre also noted that Australia is a party to the ICCPR, and that Article 15 is 'non-derogable right which means that States are not permitted to suspend this right'. 55 Ms Rachel Ball from the Human Rights Law Centre commented:

The prohibition on retrospective criminal laws is central to the rule of law and respect for the separation of powers. People must be capable of knowing what the law is so that they can abide by it. In cases of uncertainty, it is the courts' role to interpret and apply the law. Of course, parliament can amend the law if it disagrees with judicial interpretations, but it must do so prospectively. Exceptions to this rule are permitted only in exceptional circumstances ... The justifications that have been offered for the

51 Mr Bevan Warner, Victoria Legal Aid, Committee Hansard, 11 November 2011, p. 13.

52 Mr lain Anderson, Attorney-General's Department, Committee Hansard, 11 November 2011, p. 24.

53 For example, New South Wales Council for Civil Liberties, Submission 5, p. 1.

54 Submission 16, p. 5.

55 Submission 7, p. 2.

369

Page 14

retrospective application of this bill set a dangerous precedent for the Australian system of government. 56

230 Many contributors to the inquiry considered that legislation with retrospective application, particularly where it involves criminal sanctions, is contrary to the rule of law. For example, the New South Wales Council for Civil Liberties objected to the retrospective nature of the Bill:

People are entitled to certainty about what the law requires of them; but retrospective laws are arbitrary, and deny them that certainty. Imposing criminal sanctions on people for doing what was legal when they did it is necessarily unjust. 57

2.31 Similarly, the Castan Centre commented:

Retrospective laws are prima facie contrary to the doctrine of the mle of law because they prevent people from ascertaining their rights and duties at law at a particular time. The Commonwealth's own Legislation Handbook makes it clear that "[p ]rovisions that have a retrospective operation adversely affecting rights or imposing liabilities are to be included only in exceptional circumstances". 58

2.32 The Castan Centre also highlighted the High Court of Australia's decision in Polyukhovich v The Commonwealth 59 which considered 'retrospectively criminalised war crimes ... under Australian law'. In that case, the High Court effectively split on the issue of whether the Commonwealth has the power to enact retrospective criminal laws, with some judges considering this was a breach of Chapter III of the Constitution . Professor Sarah Joseph from the Castan Centre described the precedent as 'unclear'. 60 In relation to the Bill, she commented:

It does seem that it arguably could be a retrospective attempt to tell the judges how they are to interpret those words. That could be a breach of chapter III. If you are asking me about the morality of that, I would still maintain that, if parliament made a mistake, parliament can prospectively

fix that but to retrospectively fix that is a breach of the mle of law. 61

2.33 Another view on this case was provided by the Human Rights Law Centre, which stated that a majority of the High Court found it is within Parliament's power to enact retrospective criminal laws, 'but the bench differed in the circumscription of that power'. 62 It argued that the Polyukhovich case could be distinguished because of the

56 Committee Hansard, 11 November 2011, p. 1.

57 Submission 5, p. 1.

58 Submission 6, p. 3.

59 1991 [HCA] 32.

60 Committee Hansard, 11 November 2011, p. 9.

61 Committee Hansard, 11 November 2011, p. 11.

62 Submission 7, p. 3.

370

Page 15

'seriousness of the offence, its status under law at the time of its commission and the moral culpability of[the] purported offenders'. 63

International obligations

2.34 The EM states that the people smuggling offences in the Migration Act 'are consistent with Australia's obligations to criminalise people smuggling and aggravated people smuggling under the Protocol against the Smuggling of Migrants by Land, Sea and Air supplementing the United Nations Convention on Transnational Organised

Crilne (Protocol). 64 Further, it explains that 'the [Bill's] amendments are consistent with Australia's obligations under international law and do not affect the rights of individuals seeking protection or asylum, or Australia's obligations in respect of those persons'. 65

2.35 Similarly, the Attorney-General's Department advised that the people smuggling offences in the Migration Act contribute to Australia's implementation of its obligations to criminalise people smuggling under the Protocol. It explained that the purpose of the Protocol is to 'prevent and combat the smuggling of migrants, as well as to promote cooperation among States Parties to that end, while protecting the rights of smuggled migrants' .66 Further:

Consistent with Australia's obligations under Article 5 of the Protocol, individuals who have been smuggled to Australia will not be subject to criminal charges merely because they were the object of a people smuggling venture. In respect of persons making claims for refugee status, this is also consistent with Australia's obligations under Article 31 of the

[Refugees Convention] which provides that contracting States shall not impose penalties on refugees on account of their illegal ent1y or presence, provided those persons present themselves without delay to the authorities and show good cause for their ille gal entry or presence. 67

2.36 However, this position was disputed by several submitters and witnesses. 68 For example, the Castan Centre argued that the Bill may 'also have the effect of deterring asylum-seeking, which is specifically excluded from the operation of this Protocol under article 19(1)'. 69 Article 19(1) of the Protocol states:

Nothing in this Protocol shall affect the other rights, obligations and responsibili ties of States and individuals under international l aw, including

63 Submission 7, p. 3.

64 EM, p. 4.

65 EM , P: 6.

66 Subm ission 14, p. 6.

67 Submission 14, pp 6-7.

68 For example, Dr Ben Saul, Submission 1, pp 1-2; Immigration Advice and Rights Centre, Submission 21, p. 3.

69 Submission 6, p. 2.

371

Page 16

international humanitarian law and international human rights law and, in particular, where applicable, the 1951 Convention and the 1967 Protocol relating to the Status of Refugees and the principle of nonrefoulement as contained therein .

2.37 Professor Ben Saul emphasised that the focus of the Protocol was on migrants rather than refugees. He argued that '[i]f the Protocol is intended to exclude refugees, it must be doubted whether there exists any offence under international treaty law of "smuggling" a refugee or asylum seeker'. 70 The Immigration Advice and Rights Centre also contended that '[i]t is clear the [Protocol] should not compromise our obligations under international law and in particular the Refugee Convention'. It stated that the amendments in the Bill would rsignificantly affect the rights of those who come here to seek asylum in breach of Australia's obligations under both the

[Protocol] and the Refugee Convention'. 71

2.38 The Human Rights Law Centre considered that the Bill affects the rights of individuals seeking protection 'albeit indirectly, by imposing harsh mandatory penalties for people smuggling in cases where those entering Australia have a lawful right to do so under the Refugee Convention'. 72 It noted that Article 31 of the Refugee Convention provides that contracting states shall not imposes penalties, on account of their illegal entry or presence, on refugees coming directly from a territory where their life or freedom is threatened, as long as they present themselves without delay to the authorities and show good cause for their illegal entry or presence. In the Human Rights Law Centre's view, the Bill 'clearly seeks to undermine Australia's good faith obligation under the Refugee Convention to allow asylum seekers to seek protection in Australia'. 73

2.39 Ms Bassina Farbenblum from the Migrant and Refugee Rights Project concurred:

Australia also has an obligation to implement its treaty obligations in good faith. That comes from the Vienna Convention on the Law of Treaties. By directly fiustrating the ability of asylum seekers and refugees to engage Australia's protection obligations Australia is not implementing those obligations in good faith.74

Parliamentary scrutiny and consultation issues

2.40 A number of submitters highlighted their concerns with the pace of the passage of the Bill through the Parliament, the lack of opportunities for consultation

70 Submission 1, p. 2.

71 Submission 21 , p. 3.

72 Submission 7, p. 5.

73 Submission 7, p. 5.

74 Committee Hansard, 11 November 2011, p. 2.

372

Page I7

and the timeframe allowed for the committee's inquiry. 75 As the Law Council of Australia observed:

[C]oncems about the lack of consultation on the Bill are magnified by the attempt to expedite the Bill through the Parliamentary process ...

In relation to this Bill, the Law Council notes that there was no consultation with stakeholders or the public prior to its introduction. The Law Council also nptes the extremely short time frames for submissions to and reporting by the committee.

The Law Council considers that the work of Parliamentary committees is critical to the development of good legislation and the value of this work is being eroded by short timeframes for consultation. 76

2.41 Similarly, the Queensland Law Society commented:

Section 17 of the Legislative Instruments Act 2003 (Cth) is entitled 'Rule " makers should consult before making legislative instruments'. In our view, this section indicates that it is considered best practice for the government to consult with organisation or bodies that are likely to be affected by the legislation. The [Queensland Law] Society considers that, as it appears that outside stakeholders were not invited to comment on this Bill prior to this consultation by the Senate Committee, the consultation undertaken with only political parties does not represent extensive consultation. 77

Committee view

2.42 While the committee acknowledges the concerns of submitters and witnesses raised during the course of the inquiry, the committee considers that the increasing seriousness of people smuggling to Australia justifies the need for the Bill, its retrospective application and its application to current legal proceedings. The committee considers that it has always been the intention of the Parliament that the words 'no lawful right to come to Australia' mean that the people smuggling offences in the Migration Act also apply to those smuggling individuals who intend to seek asylum in Australia. As recently as last year, this committee, in its report regarding the Anti-People Smuggling and Other Measures Bill 2010, reflected Parliament's clear intention that the people smuggling offences in the Migration Act apply even if those being smuggled are seeking asylum in Australia:

75 For example Liberty Victoria , Submission I3, p.l; Law Council of Australia, Submission II, pp 4-5; Queensland Law Society, Submission I2, pp 1-2; Australian Lawyers Alliance, Submission I8, p. 9.

76 Submission 11, p. 5.

77 Submission I2, pp 1-2.

373

Page 18

Some evidence to the committee suggested that since it is not illegal for refugees to seek asylum in Australia it ought not to be illegal to assist a refugee to do so. The committee rejects this view. 78

2.43 The committee is of the strong view that an oversight made in relation to the wording of the legislation, leading to a potentially adverse legal decision, should not weigh against the broadly supported policy of deterring people smuggling to Australia. As the Minister's Second Reading Speech notes, '[ s ]uccessive Australian governments have condemned people smuggling ventures whether organised by individuals or by transnational criminal networks'. 79 The amendments made by the Bill will ensure that a large number of people smuggling convictions and current prosecutions are not called into question .

2.44 In relation to the Bill's retrospective application, the committee notes that the Attorney-General's Department's own guidelines provide that EMs must contain sufficient explanation and justification for any retrospective effect:

Where a Bill has retrospective effect, the Scrutiny of Bills Committee requires the Explanatory Memorandum to contain sufficient justification. This must include an assessment of whether the retrospective provisions will adversely affect any person other than the Commonwealth . Justification in the Explanatory Memorandum is required even if retrospectivity is imposed only as a result of making a technical amendment or correcting a drafting error. 80

2.45 While the committee does not wish to pre-empt the Senate Scrutiny of Bills Committee's consideration of the Bill , in the view of the committee this requirement is not currently satisfied in the current EM .. The EM to the Bill should be revised and reissued to include sufficient justification for the retrospective application of the Bill's amendments, and its application to current legal proceedings. The revised EM should note the number of current prosecutions and previous convictions which may be affected, and the Bill's potential impact on the administration of justice.

2.46 While mandatory sentencing for aggravated people smuggling offences is not an element of the Migration Act that the Bill seeks to amend, a significant part of the evidence received during the inquiry focused on this issue. The committee is concerned by some of this evidence, particularly from Victoria Legal Aid, regarding the impacts of the application of m andatory sentencing on individuals hired as boat crew for people smuggling vessels and subsequently convicted of aggravated people

78 Senate Legal and Constitutional Affairs Legislation Committee, Anti-People Smuggling and Other M easures Bill2010 [Provisions], May 2010, p. 31.

79 House of Representativ es Hansard, 1 November 2011, pp 37-8.

80 Attomey-General's Depa11ment, A Guide to Framing Commonwealth Offences, Infrin gement Notices and Enforcement Pow ers, September 2011, p. 16, available at http:/ / wv.,~w .ag.gov .au/www /agd/ agd.nsf/Page/Pu blications GuidetoFramingCommonweal thOff ences,Civi !Penaltie sandEnforcementPowers (accessed 15 November 2011).

374

Page 19

smuggling offences. Previously, in considering mandatory minimum penalties for people smuggling offences, the committee has stated:

It is clear that boat crew members are rarely the main organisers of people smuggling syndicates. However, the committee considers that it is critical to deter the practice of people smuggling especially where people are transported in ways that place their lives injeopardy. 81

2.47 In the view of the committee, given that the people smuggling offences in the Migration Act have now been in place for over ten years, it is now timely for the Australian Government, through the Attorney-General's Department, to review these offences to ensure that they continue to effectively deter people smuggling.

2.48 In conclusion, the committee considers that the Bill falls into the very limited circumstances where it is appropriate for the Parliament to consider passing legislation which would affect ongoing legal proceedings because the Bill implements the clear intention of the Parliament in relation to serious people smuggling offences. However, the committee shares the concerns raised by several submitters and witnesses that the Bill could be perceived as a precedent for future proposed legislation directed at ongoing legal proceedings which are relevant to the Australian Government.

2.49 Currently, there does not appear to be a sufficiently detailed policy to guide decisions regarding when it is appropriate for the government of the day to introduce retrospective legislation or legislation which may influence the outcome of ongoing legal proceedings. Accordingly, the committee believes that the guidelines in the Department of Prime Minister and Cabinet's Legislation Handbook and the Attorney " General's Department's Guide to Framing Commonwealth Offences, Infringement Notices and Enforcement Powers should be examined by the Australian Government to ensure that the articulation of policy is as clear as possible in relation to the introduction of retrospective legislation and legislation relevant to ongoing legal proceedings, with an emphasis on ensuring that the rule of law and the separation of powers are respected.

Recommendation 1 2.50 The committee recommends that the Explanatory Memorandum to the Bill be revised and reissued to explicitly articulate the exceptional circumstances necessary for the introduction of Bill, its retrospective application and its

application to current legal proceedings.

Recommendation 2 2.51 The committee recommends that the Australian Government, through the Attorney-General's Department, review the operation of the people smuggling offences in the Migration Act 1958 to ensure these offences continue to effectively deter people smuggling.

81 Senate Legal and Constitutional Affairs Legislation Committee, Anti-People Smuggling and Other Measures Bill2010 [Provisions} , May 2010, p. 32.

375

Page20

Recommendation 3 2.52 The committee recommends that the Australian Government examine the Department of Prime Minister and Cabinet's Legislation Handbook and the Attorney-General's Department's Guide to Framing Commonwealth Offences, Infringement Notices and Enforcement Powers to ensure that the articulation of policy is clear in relation to the introduction of retrospective legislation and legislation relevant to ongoing legal proceedings, with an emphasis on ensuring that the principles of the rule of law and the separation of powers within Australia's system of government are respected.

Recommendation 4 2.53 Subject to recommendation 1, the committee recommends that the Senate pass the Bill.

Senator Trish Crossin Chair

376

ADDITIONAL COMMENTS BY

COALITION SENATORS

1.1 Coalition senators are conunitted to maintaining the integrity of the Migration Act 1958, and in particular of the provisions designed to deter people smuggling. Given the surge in the number of asylum seekers being delivered to Australian waters since the present government relaxed border protection policies in 2008, there is a need for strong policy signals to be sent to people smugglers by the Australian Parliament.

1.2 Coalition senators accept that this legislation is urgent - in that it impacts on matters currently before the courts- and that it requires an element of retrospectivity " in that it clarifies what, arguably, was not clear in legislation previously passed by the Parliament.

1.3 The Bill, properly characterised, does not introduce changes in the architecture of the law designed to discourage people smuggling, a law first introduced in 1999 and strengthened in 2010 with the passage of the Anti-People Smuggling and Other Measures Act 2010. Despite its grandiose title, the Bill merely affirms a regime initiated more than a decade ago.

1.4 In all the circumstances, Coalition senators believe that it is important to affirm the original intention of Parliament in passing the previous legislation that the phrase "no lawful right to come to Australia" refers to requirements under this legislation that people must have a visa that is in effect to lawfully come to Australia, or fall within one of the limited exemptions outlined in the Migration Act.

1.5 Witnesses to the inquiry were unable to point to any convincing evidence that there is any doubt about the Parliament's original intention with respect to the "lawful right to come to Australia" definition. On the contrary, a number of arguments were made in the course of debate in the Parliament by opponents of the 1999 and 2010 bills that their passage would confrrm that it was illegal for people to smuggle asylum

seekers to Australia even if they were subsequently found to be genuine refugees.

1.6 Coalition senators accept that clarifying this intention of the Parliament can be fairly described as retrospective legislation, since interpretation of the intention of Parliament is prima facie the prerogative of the courts. As such the passage of the Bill " might be sent to extinguish the rights of current litigants before the courts.

1. 7 There is an important distinction between legislation which repairs a gap in existing law, and clarifies its meaning, in a manner which does not directly (although may incidentally) retrospectively alter the rights and liabilities of citizens, and legislation - notably tax legislation - whose main purpose is to retrospectively in1pose

a liability or rescind or vary a right. It is legislation of the latter kind which is almost always invidious . This legislation falls into the former category, which is from a jurisprudential point of view more defensible.

377

Page 22

1.8 However, Coalition senators were extremely disturbed by the lack of precision on the part of the relevant departments in evoking a clear case for retrospect1v1ty. The Australian Government's Guide to Framing Commonwealth Offences, Infringement Notices and Enforcement Pow ers sets out circumstances in which retrospective legislation can be considered. However, officers of the Attorney " General's Department and the Department of Immigration and Citizenship were unable to link any of the provisions of that guide to the particular legislation before the Committee.

1.9 The Guide refers to retrospective legislation addressing a "serious gap in the law", but it is unclear as to whether tlus refers to addressing a gap that, arguably, the Parliament has already "closed".

1.10 The Guide also refers to retrospectivity being justified where the "moral culpability of those involved means there is no substantive injustice in retrospectivity". The departments were unable to address the argument put to the committee that, for many people caught up in the people smuggling business, the level of "moral culpability" may actually be very low.

1.11 This lack of an ability to link the rare exercise of retrospecti ve law-making with any clear guidelines operating within the Australian Government is disturbing. Although Coalition senators accept that retrospective legislation is sometimes appropriate - and indeed is appropriate here to clarify what the Parliament intended and what is commonly understood to be Parliament's intention - it should as a matter of principle occur pursuant to well-articulated and well-understood rules of which the community has notice. This is not the case here.

Recommendation

1.12 Coalition senators support Recommendations 1, 3 and 4 of the majority report, but do not support Recommendation 2. Coalition senators do not regard the evidence before this inquiry as justification for a review of the extent to which the provisions of the Migration Act 1958 effectively deter people smuggling.

Senator Gary Humphries Deputy Chair

Senator Michaella Cash

Senator Sue Boyce

378

Introduction

DISSENTING REPORT BY

THE AUSTRALIAN GREENS

1.1 The Senate inquiry into the Deterring People Smuggling Bill 2011 ('the Bill') uncovered a great reservoir of concern and disapproval among the Australian community, human rights advocates and legal experts about the proposed amendment and the legislation it seeks to amend. The depth of concern expressed by submitters is downplayed by the majority report. While the majority report notes the significant criticisms that were raised through the inquiry process, it brushes them aside without due response and recommends passing the Bill through the Senate. The concerns raised should be taken seriously and the Bill should not pass the Senate.

1.2 The Bill ostensibly seeks to 'clarify' the phrase 'no lawful right to come to Australia' as it appears in the hierarchy of Commonwealth people smuggling charges. The Australian Greens opposed the legislation that gives rise to those charges when it was proposed in 2010 for the reasons that were detailed in a dissenting report on the inquiry into the Anti-People Smuggling and Other Measures Bill 2010 ('the 2010 Bill'). The concerns raised by the Australian Greens in that dissenting report still

stand.

1.3 In fact, those concerns have regretfully been borne out by the reality of the prosecutions. Since the 2010 Bill there have been numerous charges laid and prosecutions under Commonwealth people smuggling charges. As a result of the process we now have an improved understanding of the people smuggling industry, the relative roles of those involved and the backgrounds and motivations of

crewmembers on board the vessels . We also know the success or otherwise of deterrence and punishment of our current system of prosecuting and convicting people smugglers.

1.4 The submissions and evidence to the inquiry into this Bill made it clear that the Commonwealth people smuggling charges do little to deter people smuggling; are in breach of various international protocols and treaties; and include mandatory sentencing which is unjust and in breach of the rule of law. These criticisms remain unchanged since the 2010 inquiry. However, the proposed amendment is additionally problematic under the rule of law in that it will be retrospective to 1999; is

strategically intended to scuttle a court case to which the government is itself a party; and is arguably unconstitutional.

Breach of international law

1.5 The submissions and evidence provided by legal experts and human rights commentators raised significant concerns that the Bill breaches aspects of international law. Professor Ben Saul noted that, while Australia is obligated by the Protocol against the Smuggling of Migrants by Land, Sea and Air supplementing the

379

Page 24

United Nations Convention on Transnational Organised Crime to criminal people smuggling, this is specifically intended to mean the criminalisation of migrants, not asylum seekers.

1.6 As in 2010, it remains of great concern to the Australian Greens that the effect of criminalising those who smuggle refugees is to prevent the refugees themselves from reaching safety. In seeking to make it so difficult to claim asylum in our migration zone, Australia acts in violation of Article 31 of the United Nations

Convention for the Protection of Refugees (the Refugee Convention) and its Protocol.

Retrospectivity

1. 7 The submissions and evidence were unequivocal in their condemnation of the retrospectivity proposed by the Bill. One by one the witnesses appearing in the hearing commented that it is against the grain of the rule of law, and against numerous international covenants, to make people criminally liable for acts that were not offences at the tin1e they were done.

1. 8 The Australian Greens concur with the evidence given by legal experts that the retrospective effect of the Bill goes beyond mere 'clarification'. In her evidence Professor Sarah Joseph of the Castan Centre for Human Rights said:

I would say there is no such thing as retrospective clarification because either this law does absolutely nothing- that is, it clarifies something that does not need to be clarified-or it removes arguments that would perhaps exonerate the people charged. If it does that latter thing, it enlarges the offence.

1.9 In its written submission the Law Council of Australia said that the retrospectivity offends principles against retrospective legislation which are set out in Article 10 of the Universal Declaration of Human Rights (the UNHDR) and the International Covenant on Civil and Political Rights (ICCPR).

1.10 Ms Rachel Ball of the Human Rights Centre noted:

First, the bill contravenes the prohibition on retrospective criminal laws contained in article 15 of the Intemational Covenant on Civil and Political Rights. This prohibition is reflected in domestic and regional laws around the world and in Australian common law and govemment guidelines. The prohibition on retrospective criminal laws is central to the rule of law and respect for the separation of powers.

1.11 Victoria Legal Aid pointed out in its submission and evidence that retrospectivity should only be used in rare circumstances, in particular where the moral culpability of the offender is such that it justifies such a departure from law making in accordance with the rule of law. Victoria Legal Aid also commented that retrospective lawmaking is banned in many countries. In Australia, such caution is applied to retrospective criminal legislation that it has only been utilized on three occasions: tax evasion offences in 1980, war crimes offences in 1988 and anti-hoax offences in 2002.

380

Page 25

1.12 The Australian Greens do not accept the finding of the majority report that the criminality of the people being charged under the people smuggling charges is serious enough to take the step of making the proposed retrospective legislation. In the 353 or more people smuggling prosecutions that have been started or completed around Australia thus far, only six were accused to be organisers of the industry . Victoria Legal Aid, which is acting for 53 accused people smugglers in Victoria, expressed it as follows:

While there are people who organise and substantially profit from the trade, the overwhelming majority of the people charged with people smuggling in Australia are impoverished Indonesian fisherman, the totality of whose involvement is to be recruited on to the boats to steer, crew or cook. They are as dispensable to the organisers of people smuggling as the boats that get burnt off the coast of Christmas Island and Ashmore Reef. (page 7)

1.13 The moral and criminal culpability of those being prosecuted under the Commonwealth charges is not adequate to make a departure from the rule of law and common fairness.

1.14 The majority report seeks to suggest that the mere fact of the large volume of previous and current convictions is sufficient to establish the exceptional circumstances required for justifying retrospectivity. It recommends that the Explanatory Memorandum to the Bill be amended to clarify the great necessity for retrospectivity. The Australian Greens vehemently disagree with this conclusion and recommendation. The volume of past convictions and current prosecutions has no bearing on the criteria that should be applied to considering whether to make legislation retrospective , and it can only be seen as cynical and self-serving for the majority report to suggest otherwise.

Lack of deterrence

1.15 There was no evidence provided by the Commonwealth Director of Public Prosecutions or the Attorney-General that the current regime has any useful deterrence effect. The lawyers who are working at the coal face of these prosecutions expressed severe condemnation of the suggestion that the current regime of criminal charges will 'break the people smugglers' model' because the threat of imprisonment is not well known in the impoverished villages of Indonesia where the boat crew are sourced.

1.16 The submission of the Australian Lawyer's Alliance echoes the evidence that was given by a many witnesses at the hearing:

Many of these individuals were not aware of what they were implicated in. Many have been tricked . In some cases, the organisers and facilitators of the people smuggling will go in the boats with the individuals, only to depart at a later stage of the journey before the boat arrives close to Australian waters.

The organisers of criminal syndicates, on the whole, have not been prosecuted in Australia.

381

Page 26

They have constituted 2% of all prosecutions. For the Parliament to seek to uphold convictions that are punishing those who have been exploited in their poverty simply to be seen as 'doing something' about border protection, is inhumane.

Mandatory sentencing

1.17 The mandatory sentences of 5 years imprisonment with 3 years non-parole set out in the Crim.es Act do not allow for differentiation between serious and minor offending or for consideration of the particular circumstances of the individual. Liberty Victoria in its submission notes that under the ICCPR Article 9(1) this renders the sentence of imprisonment as arbitrary .

1.18 The University of New South Wales Migrant and Refugee Rights Project summarised mandatory sentencing as follows:

The sentencing comi is stripped of its discretion to consider mitigating factors, regardless of their compelling nature or the unfairness or disproportionality of the sentence in light of individual circumstances.

1.19 The mandatory minimum sentence means that the heaviest individual burden lands on the very people who are least involved in the people smuggling industry. Victoria Legal Aid makes the following practical suggestion:

If mandatory imprisonment was linked to whether or not the person was an organiser rather than a boat recruit, many of the harsh effects of the regime would be removed and the concetns for the treatment of this population ameliorated.

1.20 It is imperative that the Australian government move to immediately review the mandatory sentencing provisions, to make way for a fairer model which would allow judicial discretion to take into account the facts and circumstances of each case.

Conclusion

1.21 Many of the submitters to the inquiry comn1ented on the extremely tight timeframe around the legislation and inquiry. Liberty Victoria comn1ented that it appears to be a pattern that such a tight timeframe is applied to matters affecting asylum seekers and related issues. The Uniting Church also commented that it has 'long been troubled by the manner in which successive Australia governments have amended (in great haste) the Migration Act'.

1.22 This Bill has been brought on with woefully inadequate consultation and was rushed through the House of Representatives in an attempt to beat a legal challenge. The Attorney-General's Department conceded in the public hearing that it had only been given drafting instructions for the Bill in October when the threat of the legal

challenge became clear. Clearly, if the 'oversight' in the legislation were so desperately in need of remedy, this would have been a priority prior to the test case having reached the Victorian Court of Appeal.

382

Page 27

1.23 It seems to be that successive Australian governments are so desperate to appear strong on border protection that they will make regular wild departures from due legal process. This amendment is a sorry example of such departure and should not, in good faith and legal propriety, pass the Senate.

Recommendations

The Australian Greens recommend:

" That this Bill should not proceed; " That it should not proceed without thorough review of the current deterrence outcomes of the criminal charges of people smuggling as currently structured;

" That it should not proceed without review of the mandatory sentencing regime with reference to the rule of law and natural justice; " That it should not proceed until it has been examined by the Federal Government's parliamentary joint committee on Human Rights and a

statement of compatibility with our international obligations is produced.

Senator Sarah Hanson-Young Greens spokesperson for Immigration

383

384

APPENDIX 1

SUBMISSIONS RECEIVED

Submission Number Submitter

1 Professor Ben Saul

2 Ms Marilyn Shepherd

3 Centre for Policy Development

4 Commonwealth Director of Public Prosecutions

5 New South Wales Council for Civil Liberties

6 Castan Centre for Human Rights Law

7 Human Rights Law Centre

8 Department of Immigration and Citizenship

9 Rule of Law Institute of Australia

10 UnitingJustice Australia

11 Law Council of Australia

12 Queensland Law Society

13 Liberty Victoria

14 Attorney-General's Department

15 Migrant and Refugee Rights Project

16 Victoria Legal Aid

17 Asylum Seeker Resource Centre

18 Australian Lawyers Alliance

19 ChilOut -Children Out of Immigration Detention

385

Page 30

20

21

22

23

Thomas Bland, David Foster, Lyndal Ablett, Nick Laurie, Glyn Ayres, Dylan Maloney, Robyn Barnard, Clare Rawlinson, Heidi Edwards and Julia Wang

Immigration Advice and Rights Centre

Legal Aid New South Wales

South Australia Police

ADDITIONAL INFORMATION RECEIVED

1 Response to questions on notice provided by Victoria Legal Aid on 15 November 2011

2 Response to questions on notice provided by the Attorney-General's Department on 16 November 2011

386

APPENDIX2

WITNESSES WHO APPEARED BEFORE THE COMMITTEE

Canberra, 11 November 2011

ANDERSON, Mr lain, First Assistant Secretary, Criminal Justice Division, Attorney " General's Department

BALL , Ms Rachel, Senior Lawyer, Human Rights Law Centre

DAVIES, Mr Jonathan, Committee Member, Australian Lawyers Alliance

F ARBENBLUM, Ms Bassina, Director, Migrant and Refugee Rights Project, Australian Human Rights Centre, Law Faculty, University ofNew South Wales

FLETCHER, Mr Adam , Manager, Accountability Project , Castan Centre for Human Rights Law

HOLT, Mr Saul, Director , Criminal Law Services, Victoria Legal Aid

JOSEPH , Professor Sarah, Director, Castan Centre for Human Rights Law

PHILLIPSON, Mr Gregory, Acting Assistant Secretary, Legal Framework Branch, Department of Immigration and Citizenship

REID, Mr John, Assistant Secretary, International Law , Trade and Security Branch, Attorney-General's Department

RUTHERFORD, Mr Douglas, Acting Assistant Secretary, Border Management and Crime Prevention Branch, Attorney-General's Department

WARNER, Mr Bevan, Managing Director , Victoria Legal Aid

Y ANCHENKO, Ms Danica, Acting Principal Legal Officer, People Smuggling and Trafficking Section, Attorney-General's Department

387

388

THE PARLIAMENT OF THE

COMMONWEALTH OF AUSTRALIA

PARLIAMENTARY PAPER No. 456 of 2011 ORDERED TO BE PRINTED

ISS N 0727-4181