AEP Industries Australia Pty Ltd v Mahmoud [2007] VSCA 203

1 I have had the advantage of reading in draft the reasons for judgment of Redlich JA. Those reasons set out the basis on which I agreed in the orders which the Court made.

2 For the reasons given by Redlich JA, I agreed that the appeal should be allowed.

**3 At the conclusion of oral argument, the Court announced that the appeal would be allowed. Orders were made setting aside the order of the trial judge and remitting the matter for rehearing before a different judge. What follows are my reasons for joining in those orders.

4 By originating motion the respondent applied to the County Court for leave to commence proceedings in accordance with ss 135A and 135AC of the Accident Compensation Act 1985 ('the Act') in respect of a lower back injury which arose out of or in the course of employment with the appellant on or about 12 March 1996. The appellant sought an order that the proceeding be dismissed or stayed on the grounds that it had been commenced contrary to the provisions of s 135AC of the Act. The proceedings were heard in February 2006.

5 The respondent's back injury occurred on 12 March 1996 when he felt a sharp pain in his back while lifting a heavy cylinder in the course of his work. The respondent had approximately a month off work following the incident and then returned on light duties with reduced overtime. He continued on light duties until April 2001 with no lifting and no bending or repetitive work. He mostly wore a brace when performing light duties. He was made redundant in April 2001 when**

the appellant closed its Victorian operations. He has not been able to obtain other work since that time. The trial judge accepted that the respondent had not come to realise that he had been provided with protected employment until after his redundancy and it was then that he recognised his pecuniary detriment.

**6 The trial judge granted the respondent leave to commence proceedings and dismissed the appellant's summons.

7 Pursuant to leave granted in August 2006 the appellant appeals against those orders. The appellant by its grounds of appeal in substance contends that the learned trial judge failed to ask himself whether the respondent's incapacity for work, his loss of overtime and the pain and suffering he was experiencing, all of which were known to the respondent, constituted knowledge of a 'serious injury' incapacity such that the respondent could not satisfy the criteria of s 135AC(b) of the Act.

8 Section 135AC is in these terms:**

Despite anything to the contrary in the Limitation of Actions Act 1958, proceedings in accordance with section 135 or 135A must not be commenced -

(a) subject to the Limitation of Actions Act 1958, unless paragraph (b) applies, unless an application for a determination from the worker under section 135A(2B) has been made to the Authority or a self-insurer before 1 September 2000; or

(b) if the cause arose before 12 November 1997 and the incapacity arising from the injury was not known until after 12 November 1997, unless an application for a determination from the worker under section 135A(2B) has been made to the Authority or a self-insurer before the expiration of 3 years after the date the incapacity became known.

**9 The respondent did not apply for a determination under s 135A of the Act until 22 March 2003. By reason of s 135AC, the respondent was out of time unless he could satisfy the criteria in s 135AC(b). At the trial the appellant conceded that the respondent had a serious injury. Accordingly, the issue before the Court was whether the respondent had first acquired the relevant knowledge of 'serious injury incapacity' on or after 22 March 2000.

10 As the respondent's injury was a pre-November 1997 injury, it fell to be assessed as 'serious' or not under s 135A of the Act rather than the current s 134AB. The test enunciated in Humphries v Poljak[1] applied. The respondent's injury had to constitute a 'serious long term impairment'. That test could be satisfied by reference to pain and suffering only or by reference to pecuniary loss only, or by reference to both. There is no additional requirement of actual financial loss of the kind now found in s 134AB of the Act.

11 It was accepted on the appeal that s 134AC(b) involves a two-step process. First, the trial judge must identify what the injured worker in fact knew in relation to his injury at the relevant time. Second, the judge must determine whether in the judge's opinion - and this is a matter of fact and degree and value judgment for the judge - those known facts constitute knowledge of serious injury incapacity as explained in Humphries v Poljak. As Ashley JA, with whom Maxwell ACJ and Nettle JA agreed, stated in Papercorp Pty Ltd v Nicolaou:[2]**

It is for the judge hearing a s.135A(4)(b) application to decide what the worker knew about the extent of and probable duration of his or her incapacity arising from the compensable injury at a particular time; and, always assuming that what the worker knew represented the truth of the situation, whether what the worker knew fitted the template of serious injury incapacity, that template involving elements of fact, degree and value judgment.[3]

12 It is of significance that the parties and the trial judge did not have the benefit of this Court's decision in Nicolaou. Although the respondent in his affidavit filed in support of the application set out in some detail the pain and suffering consequences of his injuries prior to the relevant date, he only suggested a lack of knowledge of the consequence of pecuniary disadvantage when dealing with incapacity flowing from injury. The respondent said:

18. The seriousness of my injury has become apparent to me since my redundancy as I have come to realise that my employer since March 1996 has accommodated for my restrictions and limitations and provided me with a degree of protected employment. The nature of the protected employment that my employer provided was primarily either in laminating or clerical duties. However now that I am on the open labour market the prospects of me obtaining alternative and/or suitable employment given my injury, age, skills and education have been greatly diminished if not destroyed.

22. That since my injury on 12th March 1996 I was able to continue in my employ with the defendant in various roles notwithstanding my back injury. I was able to maintain my earning capacity. However since my redundancy on 26 April 2001 I have come to realise that I would require a very accommodating employer for me to re-enter the workforce given my injuries. I am becoming more pessimistic about my opportunities and prospects as time goes by and the number of my job applications are being refused and/or ignored. I have come to realise the seriousness of the incapacity flowing from my injury as and from the 26th April 2001.

13 These portions of the respondent's affidavit were set out in the trial judge's reasons. His Honour quoted a passage from the judgment of Ashley JA in Edwards v McSaveny & Anor[4] and then expressed his conclusion in these terms:

Applying that template[5] to the facts of this particular application and having considered carefully I hope all the evidence placed before the court, this court is satisfied, on balance, that this applicant's required state of knowledge as provided for by s 135AC(b) did not crystallise in the mind of this particular applicant until 26 April 2001, being the date upon which the applicant was made redundant in his employment with the defendant.[6]

**14 As to the first step required under s135AC(b), it is not in controversy that the trial judge made certain findings as to the respondent's state of knowledge of his back injury on or before 22 March 2000. Little of the medical evidence which had been tendered in the form of medical reports was in contention at first instance or on this appeal. The respondent had first consulted his general practitioner some four days after sustaining the injury to his back on 12 March 1996. At that time the general practitioner made a diagnosis of lumbar facet joint strain. The respondent was placed on a conservative regime of medication and restricted work duties. This treatment regime produced only marginal improvement and the respondent was referred to a specialist orthopaedic surgeon in May 1996. A CT scan of his lumbar spine suggested a bulging L4-5 disc but with no discrete prolapse evident. Conservative treatment was instituted. By November 1996 a steady deterioration in the respondent's symptoms was noted by the orthopaedic surgeon. An MRI scan then taken demonstrated significant desiccation of the lumbosacral disc with the appearance of a small right sided prolapse. The trial judge referred to a medical report from the orthopaedic surgeon in February 1997 in which he expressed the opinion that the respondent had demonstrated a strong motivation to maintain his employment activities but that his symptoms would take some time to settle.

15 The respondent's legal advisers had him examined by another specialist in October 1996. The trial judge referred to the content of that report in which it was noted that the respondent continued to have pain in the lumbosacral region which is 'constant, present every minute of his waking hours although it varies in severity'. The report went on to record in some detail the discomfort suffered by the respondent in his daily affairs. The diagnosis made by that expert was of a radiologically proven L4-5 intervertebral disc legion. The trial judge noted that the respondent in cross-examination had agreed that he had made those detailed complaints to the specialist. The trial judge went on to say:**

[The applicant] conceded that in 1997 Mr McArthur had told him that he, the applicant, would not get any better. The applicant indeed conceded that he had not got any better and that whilst he had constant back pain, the level of his pain was very much activity related. He agreed that even with the cessation of work, his pain had remained at that same constant but variable level, indeed that it had not really changed since 1996 right up until the time of this hearing. The applicant further agreed that in about 1997 his general practitioner Dr McInerney told him that he, the applicant, had no hope of getting better.

This Court is of the view that regarding his injury of 1996 the applicant accepted his situation and got on with his life with a large measure of stoicism.[7]

**16 In summary the respondent acknowledged that he had reported constant, ever-present but variable back pain that restricted him from prolonged sitting, standing or walking and was aggravated by bending or lifting. The pain associated with his back condition interfered with his ability to sleep on average once a week. The trial judge stated he had no hesitation in accepting the respondent's testimony.

17 Counsel for the appellant drew attention to other parts of the respondent's testimony, not specifically referred to in his Honour's reasons. The respondent gave evidence that he had been offered denervation surgery prior to 1998 which he had refused because there was no guarantee that it would improve his back. He had further testified that since 1996 he had given up lifting weights, playing tennis, or doing household tasks that involved lifting, bending or repetitive or forceful use of his back; that he felt pain when bending forward and had difficulty brushing his teeth and dressing and washing himself, and on occasions had been in such severe pain that he was unable to do anything. The respondent acknowledged that his condition had remained unchanged from 1996 until the date of the hearing.

18 Based upon this evidence, which was accepted by his Honour, the appellant submits that the respondent knew before the relevant date of the 'pain and suffering' consequences of his injury. In addition, the appellant points to the respondent's testimony that he knew of the restrictions on his capacity for work activities and that he had lost overtime opportunity from 1996 onwards because of his injury.

19 The second step under s 135AC(b) is the determination of whether such knowledge constituted knowledge of 'serious injury' incapacity. I refer again to Ashley JA's judgment in Papercorp Pty Ltd v Nicolaou:[8]**

It appears to me, in the event, that the words "the incapacity arising from the injury" in s.135AC(b) should be taken to mean any consequence, known to the worker, deriving from compensable injury, whether constituted by pain or suffering, or pecuniary disadvantage, or both, which would found a successful serious injury application. So to read the critical words is to recognize that "the [serious injury] incapacity arising from the injury" may be sufficiently constituted for the purposes of the subsection by a single consequence.[9]

**20 The submission advanced by the worker in Nicolaou was that 'serious injury' means injury which in its consequences is serious for the particular worker and that 'the incapacity' for the purposes of s 135AC(b) was indivisible. According to the argument 'the incapacity' meant the totality of the worker's incapacity attributable to compensable injury, so that where consequences of both the pain and suffering kind and the pecuniary disadvantage kind ensue, the worker must know of both.[10] These propositions were rejected. Thus, if the worker has knowledge of pain or suffering consequences which, viewed objectively, constitutes knowledge of serious injury incapacity, the worker will not satisfy the criteria of s 135AC(b) even though the worker has insufficient knowledge of the incapacity as a consequence of pecuniary disadvantage.

21 This appeal has focused upon whether the judge undertook the second step at all or, if he did, whether he recognised that knowledge by the worker prior to the relevant date of any single consequence which would found a serious injury claim would preclude the worker from commencing a serious injury application. The appellant further contends that, if the trial judge determined that the respondent's knowledge of the pain and suffering consequences did not amount to knowledge of serious injury incapacity, such a conclusion cannot be supported by the evidence.

22 The appellant contends that the trial judge reasoned that, because the respondent was still working, he did not have knowledge of 'serious injury' incapacity. Counsel submitted that this was an incorrect test as it rested upon a finding as to when the respondent thought that the known physical consequences of his injury should be categorised as serious. It is not in dispute that such a test would be incorrect and contrary to what had been said in Edwards v McSaveny & Anor.[11] The respondent with some force challenges the contention that this was the test which was applied and submits that the trial judge determined that the facts known by the respondent prior to his redundancy did not amount to knowledge of any incapacity.

23 Counsel for the respondent submit that it is also clear from his Honour's reasons that he considered whether or not the respondent had the relevant knowledge relating to both pain and suffering and economic consequences of the injury before the relevant date. To make good this contention, they point to the fact that the trial judge specifically discussed the meaning of the word 'incapacity.' The trial judge stated that the definition of 'incapacity' could also include 'a serious long term impairment or loss of a body function that is sufficient to affect the earning capacity of a worker or a worker's opportunities for employment'. His Honour then turned to a consideration of how the words 'incapacity arising from the injury' as appearing in s 135A(2)(b) had been interpreted by Winneke P in the State of Victoria v Collins.[12] His Honour also referred to the explanation of 'serious injury' found in Humphries v Poljak.[13]

24 I do not think that these parts of his Honour's reasons advance the respondent's argument on this appeal. His Honour's recognition that the terms 'incapacity arising from the injury' and 'serious injury' cover consequences that relate either to pecuniary disadvantage or pain and suffering, or both, says nothing about what his Honour regarded as the necessary determination under s 135AC(b) in relation to 'incapacity arising from the injury'. Neither does his Honour's specific reference to the respondent's evidence of his injury and the manner in which he was physically incapacitated. These were findings that were relevant to both steps. In particular they related to what the respondent in fact knew in relation to his back condition. His Honour was bound to have regard to the medical reports which contained a range of views as to the respondent's physical condition, prognosis and capacity for employment. These were relevant to the question whether the respondent had suffered 'serious injury', whether constituted by one or both of pain and suffering and pecuniary disadvantage.

25 Counsel for the respondent then point to the observations of the trial judge that a worker's continued employment after a work-related injury will not necessarily be determinative of whether the injury is a 'serious injury'. This passage throws no light upon whether his Honour made the necessary determination required by s 135AC(b).

26 The respondent also places reliance upon his Honour's reference to the passage from the judgment of Ashley JA in Edwards v McSaveny & Anor, which deals with the obligation of the judge to decide the worker's state of knowledge and whether that state of subjective knowledge reveals knowledge of 'incapacity arising from the injury'. As I have said, his Honour sought to apply that template to the facts of this case. As Chernov JA observed during argument, the recitation of the relevant passage from Edwards does not necessarily show that the correct approach was adopted. In any event, the passage from Edwards to which his Honour referred does not deal with the critical proposition that the respondent would fail to satisfy the criteria in s 135AC(2)(b) if he knew of facts which, viewed objectively, established that he suffered from one kind of incapacity but was not aware of facts which established knowledge of another.[14]

27 I accept the respondent's submission that his Honour's reasons sufficiently reveal his Honour's conclusion as to the extent of the respondent's knowledge of his level of pain and suffering and loss of earning capacity prior to the relevant date. That satisfied the first step in the process. But did his Honour then proceed to make a determination as to whether those known facts constituted knowledge of serious injury incapacity? Counsel for the respondent rely upon implication and inference to found an argument that the trial judge did make the necessary determination that the pain and suffering consequences known to the respondent up to the relevant date did not pass the "very considerable" test. In my view that submission has no foundation. There is nothing in his Honour's reasons that indicates that his Honour recognised that he was obliged to make such a determination, or that he did so.

28 The paragraph (set out above) which contains his Honour's conclusion is ambiguous. Either his Honour found that it was only at the time of retrenchment that the respondent came to realise that both consequences of his injury were serious or, alternatively, the finding was that he only realised at that time that he had suffered serious pecuniary disadvantage. On either interpretation, his Honour's approach was incorrect. The fact that a worker does not subjectively appreciate that the injury is serious until after the relevant date will not matter if the worker knew of facts that, viewed objectively, constituted serious injury incapacity. And the fact that the worker acquired the necessary knowledge of one consequence after the relevant date will not bring the worker within s 135AC(b) if the worker had knowledge of another consequence prior to the relevant date that, viewed objectively, constituted serious injury incapacity.

29 I am unpersuaded that his Honour made the necessary determination as to whether the facts known by the respondent as to his level of pain and suffering constituted serious injury. All that is plain from his Honour's explicit conclusion is that it was not until the respondent was made redundant that he had the knowledge specified in s 135AC(b).

30 I am inclined to think that the trial judge based his conclusion upon an acceptance of the case specifically advanced by the respondent, viz that it was not until he was made redundant that he became aware of the consequence of pecuniary disadvantage, which was an incapacity arising from the injury, and that this was sufficient to satisfy s 135AC(b). I am fortified in this view by a number of his Honour's preceding remarks, which were directed to the fact that the respondent did not realise the extent of his economic detriment prior to his redundancy and also by the absence of any apparent assessment of the respondent's knowledge of his pain and suffering.

31 I have concluded that the trial judge erred by failing to consider whether the pain and suffering consequences which the respondent experienced prior to 22 March 2000, together with his knowledge that he was unable to perform other than restricted duties, constituted knowledge of serious injury incapacity. I would therefore allow the appeal. The conclusion of the learned trial judge did not accord with the correct approach to s135AC(b) as explained in Edwards and amplified in Nicolaou.

32 This does not, however, mean that the respondent's application for leave to commence proceedings must fail. The Court invited both parties to make submissions as to the course which should be followed if the appeal was allowed. The appellant initially submitted that his Honour's reasons were sufficient to permit this Court to deal with the substance of the application and that we should refuse leave to commence the proceeding. It was submitted that a finding of serious injury was inevitable, in view of the respondent's knowledge of the pain and suffering which had persisted since 1996, together with his knowledge of loss of overtime earning capacity and his inability to perform the normal duties of his work. On the other hand, counsel for the respondent strenuously resisted the suggestion that the evidence could support a finding of prior knowledge of serious injury incapacity.

33 Neither party's appeal submissions analysed the evidentiary material in a way that would enable this Court to decide the question. A further hearing would be required, which in turn would require further submissions to have been filed dealing with the viva voce evidence of the respondent, the medical reports and video surveillance.

34 Although it was initially suggested that this Court should undertake the further hearing, the appellant submitted in the alternative that the matter should be remitted to the County Court for rehearing by a different trial judge. The respondent resists that course and submits that the matter should be remitted to the same judge for further hearing.

35 The matter should in my view be remitted to the County Court for a re-hearing before another judge. It will be a complete rehearing, in which all questions as to both pain and suffering and pecuniary disadvantage will be agitated. It is not appropriate for this Court to undertake such a course. Amongst other things, the trial judge will have to determine whether what the respondent knew of the pain and suffering consequences should be viewed as a serious injury incapacity. That calls for an objective and qualitative assessment of the respondent's evidence as to his pain and suffering and of his perception of the extent of his incapacity. That will depend, at least in part, upon the impression which the trial judge forms of the respondent.[15]**

[1] [1992] VicRp 58; [1992] 2 VR 129.

[2] [2006] VSCA 143.

[3] Ibid [50]; see also Edwards v McSaveny [2005] VSCA 252, [21].

[4] [2005] VSCA 252, [20].

[5] The "template" was that explained in the passage from Edwards.

[6] Mahmoud v AEP Industries Australia Pty Ltd [2006] VCC 488, [34].

[8] [2006] VSCA 143.

[11] [2005] VSCA 252.

[12] [1998] VSCA 129; [1999] 1 VR 215, 223.

[13] [1992] VicRp 58; [1992] 2 VR 129.

[14] See Papercorp Pty Ltd v Nicolaou, [59] (Ashley JA).

[15] The trial judge had found that the respondent accepted his situation and got on with his life with a large measure of stoicism.