Arnotts Snack Products Pty Ltd v Yacob

(a) In the case of partial incapacity, the weekly payment shall in no case exceed the difference between the weekly amount which the worker would probably have been earning as a worker but for the injury and had he continued to be employed in the same or some comparable employment, and the average weekly amount he is earning, or is able to earn, in some suitable employment or business, after the injury, but shall bear such relation to the amount of that difference as under the circumstances of the case may appear proper.

(2) An employer shall provide suitable employment for his injured worker during the worker's partial incapacity for work but, if the employer fails to do so, the worker shall be compensated as if his incapacity for work were total, unless -

(a) where the employer is an employer referred to in section 18C(2) - the Registrar;

(b) where the compensation is payable under Part IIA - the Registrar; or

provides, or arranges for, such suitable employment having regard to the worker's incapacity and place of abode.

On the hearing of the respondent's application to the Commission, Judge O'Meally found that the respondent failed to establish that he had "a partial incapacity for work, that is that his physical incapacity affects his ability to earn on an open labour market". The judge had earlier found that, though the respondent's work was "essentially clerical", it involved "an amount of climbing, lifting and bending". The learned judge also found that the respondent suffers "physical consequences of his injury". We agree with Mahoney J.A. that the effect of this finding is that the respondent was unable to undertake the activities of lifting, climbing and bending which had been associated with his pre-injury clerical duties. It was because the judge considered that the respondent was still capable of performing clerical work shorn of the additional activities already mentioned that he concluded that the respondent's ability to earn was not impaired.

It is not altogether clear how his Honour reached this conclusion. But, as we read his brief judgment, it seems that his Honour proceeded according to the second of the alternative meanings of "incapacity" which we expressed at the beginning of this judgment and considered that there was no impairment of the respondent's earning capacity because he could earn as much in the performance of duties which were only clerical as in duties which, though mainly clerical, involved some lifting, climbing and bending. This view of his Honour's findings is supported by his statement that he was not satisfied that the physical consequences of the injury "resulted in any reduced ability to earn on an open labour market", the later comment that there was no evidence of what the respondent would have earned had he remained in the appellant's employ and the concluding observation that the respondent had failed to establish that "his physical incapacity affects his ability to earn on an open labour market". The question is not a matter of present importance because the appellant's challenge is to the correctness of the interpretation which the Court of Appeal places on s. 11(2). The appellant, as we understand its case, accepts that, if the Court of Appeal's interpretation be correct, then the Commission erred in law.

In the Court of Appeal Mahoney J.A. (with whom Hope and Samuels JJ.A. agreed) held that the respondent was suffering from "partial incapacity" because he "was physically unable to do some of the things which he could do before, e.g., climbing" and "this inability affected him relevantly and in his employment market". Mahoney J.A. specifically rejected the submission that if the worker is able to earn by work after the injury as much as he could earn before, there is no incapacity for the purposes of the Act. His Honour went on to say:

In the present case, the worker could no longer earn wages as a worker who must climb. The fact that he still could earn as a clerk who need not climb does not, in my opinion, mean that he was not partially incapacitated within the Act. In saying this, Mahoney J.A. was expressing the view which he subsequently stated in State Rail Authority of New South Wales v. Belgrove [1] , in the proposition that "economic loss is not, as such, part of the concept of incapacity". This led Mahoney J.A. to the conclusion that Judge O'Meally had acted on a wrong construction of the Act, that the appeal should be allowed and the proceeding returned to the Commission to be dealt with in such manner as, in the light of the decision of the Court of Appeal, was appropriate. 1. [1982] 2 N.S.W.L.R. 738, at p. 745.

When the matter came before Judge O'Meally again, he seems to have thought that the return of the matter to the Commission was an unnecessary exercise because the Court of Appeal might itself have made an award. However, it was not inappropriate for the Court of Appeal to return the matter to the Commission for the formal making of an award. Judge O'Meally stated that he was unable to recall whether as a result of his injury the respondent could engage in climbing. His Honour's inability to recollect this matter is not material because the transcript of the first hearing shows that it was uncontradicted evidence that the respondent could not engage in climbing and it is not now in dispute that the respondent cannot carry out clerical work which involves climbing. Judge O'Meally made an award in favour of the respondent on the footing that he was totally incapacitated, having regard to the provisions of s. 11(2) of the Act. The Court of Appeal dismissed an appeal from this award and the appellant now appeals from that dismissal.

The appellant argues in favour of the second of the alternative meanings of the concept of incapacity for work, contending that the Act distinguishes between the impairment of physical condition resulting from injury and the economic consequences of that impairment so that an applicant for compensation must establish a lost or diminished ability to earn wages for his work in the open market. The appellant then submits that in order to establish partial incapacity for work an applicant must prove that in consequence of the injury his ability to earn wages by working after the injury is less than his ability to earn by working before the injury.

Although the expression "incapacity for work" is not defined by the Act, its meaning has been examined by this Court in Williams v. Metropolitan Coal Co. Ltd. [2] and Thompson v. Armstrong and Royse Pty. Ltd. [3] . In Williams a majority of the Court (Starke, Dixon and McTiernan JJ.) rejected the notion that incapacity for work, especially in s. 11(1) of the Act, is limited to incapacity for work in the employment or in the industry in which the injury arose: per Starke J. [4] ; per Dixon J. [5] with whom McTiernan J. agreed. Both Starke and Dixon JJ. made the point that compensation is awarded for incapacity for work resulting from injury, compensation being awarded by reference to incapacity which results in a loss of earning power. Starke J. said [4] :

Compensation is not payable for the injury but for loss of power to earn caused by the injury, that is, for incapacity for work which results from the injury. The question is whether the injury has left the worker in such a position that in the open labour market his earning capacity in the future is less than it was before the injury. And Dixon J. observed [5] : It is a commonplace that incapacity is not total if some other employment is reasonably open to the injured man. If he is disabled from his former employment, that in itself implies some incapacity. But s. 11(1) says that in case of partial incapacity, the weekly payment shall in no case exceed the difference between the amount of his average weekly earnings before the injury and the average weekly amount he is earning or able to earn in some suitable employment or business after the injury. That means that his capacity for other work is taken into account and in such a way that it may reduce the compensation to nothing. Central to these statements especially that of Dixon J. is the view that incapacity for work denotes a physical incapacity for doing work in the labour market in which the employee was working or might reasonably be expected to work, though this incapacity may not necessarily attract compensation under s. 11(1) because it results in no loss of earning power. 1. (1948) 76 C.L.R. 431. 2. (1950) 81 C.L.R. 585. 3. (1948) 76 C.L.R., at p. 444. 4. (1948) 76 C.L.R., at p. 449. 5. (1948) 76 C.L.R., at p. 444. 6. (1948) 76 C.L.R., at p. 449.

In Thompson [6] , where the concept of "incapacity for work" in the context of s. 9 of the Act - the principal provision providing for payment of weekly compensation - arose for consideration, the majority of the Court (Latham C.J., McTiernan, Fullagar and Kitto JJ.) decisively rejected the proposition that the receipt post-injury of the same or higher wages than those received pre-injury denied the existence of partial incapacity for work.

That "incapacity for work" means a physical incapacity for actually doing work, resulting from injury (or disease) and that, subject to ss. 11 and 13, compensation is awarded for that incapacity where it reduces the employee's ability to sell his labour in the open market, is brought out in the judgments of the majority, especially those of Latham C.J. and Fullagar J. Latham C.J. said [7] :

The phrase "where total or partial incapacity for work results from the injury" must refer to physical injury resulting in physical incapacity for actually doing work. That incapacity is relevant where it produces an incapacity to earn his living as he did before the injury (per Evershed L.J. in Ruocco v. Surrey County Council [8] ) in a market for his labour which was reasonably accessible to him Fullagar J. said [9] : A man is totally incapacitated for work when he is, by reason of his injury, physically unable to work. The words in their natural and primary sense mean that. When their meaning has been expounded by reference to inability to earn wages, the purpose has been to make the meaning more specific, and the result has been to extend rather than restrict the meaning. The same point was made, though less directly, by Kitto J. who remarked [10] : Loss of wages is in most cases a result of, but it does not itself constitute, the relevant economic fact. That fact is the inability, or the reduced ability, by reason of a physical deficiency, to sell work for wages. See also McTiernan J. [11] . 1. (1950) 81 C.L.R., at p. 595. 2. (1947) 177 L.T. 613, at p. 616. 3. (1950) 81 C.L.R., at p. 613. 4. (1950) 81 C.L.R., at p. 621. 5. (1950) 81 C.L.R., at pp. 602-603.

The judgments in Thompson were discussed by Jacobs J. (with whom Gibbs, Stephen and Aickin JJ. agreed) in The Commonwealth v. Muratore [12] , which related to the Compensation (Commonwealth Government Employees) Act 1971 Cth. His Honour said [13] :

It has always been recognized that "incapacity for work", those words being taken to refer to physical incapacity, is only relevant where it produces an economic incapacity. He was speaking, as the passage at the foot of p. 301 makes plain, of compensable incapacity for work, so that the employee's incapacity is "measured by the extent that the amount per week that he is able to earn in some suitable employment or business is less than his average weekly earnings before his injury". 1. (1978) 141 C.L.R. 296, at pp. 300-301. 2. (1978) 141 C.L.R., at p. 300.

It follows that the concept of partial incapacity for work is that of reduced physical capacity, by reason of physical disability, for actually doing work in the labour market in which the employee was working or might reasonably be expected to work. Under s. 11(1), an applicant's entitlement to compensation will depend on his loss of earning power. This flows, not from the concept of partial incapacity for work, but from the nature of the express limitation which the sub-section places on the amount of compensation payable. On the other hand, the words "partial incapacity for work" in sub-s. (2) must be given their natural and established meaning, there being no limitation or other restricting context which confines the employer's obligation to offer suitable employment to an injured employee who is suffering actual economic loss.

As Fullagar J. indicated in Thompson [14] , the references in the judgments to an incapacity for work which reduces the employee's ability to sell work for wages on the open market have had as their purpose the rejection of the erroneous view that a worker is not partially incapacitated if he can do all the things that he could do before the injury. So, in Ball v. William Hunt & Sons Ltd. [15] , the worker, who had been blind in the left eye, sustained an injury requiring removal of the eye. Although he was able to do all that he had done before the injury, employers were unwilling to employ him. It was held that he was partially incapacitated by injury. It is illegitimate therefore to use the references to reduced ability to sell work for wages as an argument for diminishing the content of incapacity for work.

The concept is well illustrated by the example given by Mahoney J.A. of the violinist and the barrister who lose a finger - the violinist suffers a relevant incapacity for work, the barrister does not. This example, instructive though it is for the purposes of this case, is not a comprehensive illustration. The employee may as a result of injury sustain an incapacity for a particular class of work, work in which he was not engaged at the time he sustained injury, being work in which he might reasonably be expected to engage in the future. The problems, especially in the operation of s. 11(2), created by incapacity for work of this kind, inherent in the conception of incapacity recognized by Dixon J. in Williams [16] , need not be explored here, where the incapacity is for part of the work actually undertaken by the respondent immediately before his injury.

The consequences produced by this interpretation of s. 11 are far-reaching. They are demonstrated by the illustration provided by Mahoney J.A. of the employer who employs only clerks who can climb. A clerk is injured and can no longer climb. The employer, having no employment for a non-climbing clerk, cannot himself offer suitable employment. Yet the worker is entitled to compensation as for total incapacity under s. 11(2) notwithstanding his ability to undertake clerical work which involves no climbing, that such work is available and that he neglected unreasonably to avail himself of it, unless suitable employment is arranged in accordance with the sub-section. However, the interpretation which we favour gives effect to the natural and primary sense of the words and to the meaning which has been consistently given to them in this Court and in recent decisions of the Court of Appeal.

In the present case because the Commission found that the respondent's injury disabled him from performing part of his pre-injury work, it followed that he was partially incapacitated for work - he was unable to undertake clerical duties which involved climbing, lifting and bending. His incapacity for work, due to injury, was clearly relevant to his pre-injury employment and to his ability to sell his labour on the open market. Potential employers, like the appellant, who have jobs for clerks who are required to climb, lift and bend, would not employ him.

Accordingly, the Court of Appeal was correct in holding that the Commission erred in the interpretation which it placed on s. 11. The correct interpretation, when applied to the undisputed facts of the case, sustain the award which has been made in favour of the respondent.

The respondent suffered an injury in the course of his employment on 5 February 1980. He injured his back. He was employed at the time by the appellant, doing clerical work which included the supervising of a store and the checking of products for despatch. Some climbing, lifting and bending were involved in his work. While he was off work recuperating from his injury somebody else was employed in his place. Later, he sought other employment but he was not successful. In reliance upon s. 11(2) of the Workers' Compensation Act 1926 N.S.W. ("the Act"), he sought compensation as if he were totally incapacitated for work. Section 11 reads:

(a) In the case of partial incapacity, the weekly payment shall in no case exceed the difference between the weekly amount which the worker would probably have been earning as a worker but for the injury and had he continued to be employed in the same or some comparable employment, and the average weekly amount he is earning, or is able to earn, in some suitable employment or business, after the injury, but shall bear such relation to the amount of that difference as under the circumstances of the case may appear proper.

(2) An employer shall provide suitable employment for his injured worker during the worker's partial incapacity for work but, if the employer fails to do so, the worker shall be compensated as if his incapacity for work were total, unless -

(a) where the employer is an employer referred to in section 18C(2) - the Registrar;

(b) where the compensation is payable under Part IIA - the Registrar; or

provides, or arranges for, such suitable employment having regard to the worker's incapacity and place of abode.

The claim was heard by the Workers' Compensation Commission constituted by Judge O'Meally. The only issue in contest was whether the respondent was partially incapacitated for work. His Honour addressed himself to the question whether "his physical incapacity affects his ability to earn on an open labour market". His Honour found:

I am not satisfied that [the respondent's condition] has resulted in any reduced ability to earn on an open labour market. The [respondent] is relatively well educated and though he gave his evidence with a moderately heavy accent, he was nevertheless articulate and comprehensible. He said that it was his view that he could carry out clerical work providing he could sit or stand, one assumes as comfort demands, every couple of hours or so. There is no evidence before me of what the [respondent] would have earned had he remained in the [appellant's] employ. But the work he was doing there was essentially clerical. It is his own view that he is still capable of performing clerical work and therefore he has, in my view, failed to demonstrate that he has a partial incapacity for work as that phrase is understood in the Workers' Compensation Act. The claim was rejected and an award in favour of the appellant was made. The respondent appealed to the Supreme Court. Section 37(4)(a) of the Act confers a right of appeal upon a party to proceedings before the Commission who "is aggrieved by any award of the Commission in point of law or in relation to the admission or rejection of any evidence". The decision of the Supreme Court upon the hearing of an appeal is binding upon the Commission and upon all the parties to the proceedings before the Commission (s. 37(4)(d)).

The appeal was heard by the Court of Appeal. Mahoney J.A., with the concurrence of Hope and Samuels JJ.A., said [17] :

In the present case, the worker could no longer earn wages as a clerk who must climb. The fact that he still could earn as a clerk who need not climb does not, in my opinion, mean that he was not partially incapacitated within the Act. An order was made allowing the appeal, setting aside the award and remitting the proceedings to the Commission "to be dealt with in accordance with the decision of this Court". When the matter again came before Judge O'Meally, his Honour expressed surprise that the Court "did not itself enter the award under s. 11(2) which, as I read the judgment, is what I am obliged to do". His Honour made an award in favour of the respondent, apparently in the belief that he was bound to do so. The Court of Appeal had no jurisdiction to make findings of fact that had not been made by the Commission and it had no power to direct the Commission to make an award in favour of the respondent unless the Commission had made or was bound to make the necessary findings of fact. The Court could not substitute a finding of its own for a finding made by the Commission, though it had jurisdiction to set aside a finding made by the Commission if that finding was affected by an error of law. The judgment of Mahoney J.A. may have been thought by Judge O'Meally to contain a finding of fact that he was bound to accept. Mahoney J.A. had said [18] , inter alia: In the present case, the result of the injury was that the worker was physically unable to do some of the things which he could do before, e.g., climbing. And, in my opinion, this inability affected him relevantly and in his employment market. Before Judge O'Meally made the award in favour of the respondent, he said that he was unable to remember from the facts of the case whether or not the respondent could engage in climbing, but he said that the respondent was "excluded from work of a heavy labouring nature which would require him to lift heavy weights and engage in repeated flexion of his spine". 1. [1982] 1 N.S.W.L.R. 632, at p. 637. 2. [1982] 1 N.S.W.L.R., at p. 630.

An appeal from the award made in favour of the respondent was dismissed by the Court of Appeal without argument. The appellant wished to obtain the ruling of this Court on the meaning of s. 11(2). Counsel for the appellant conceded here that the respondent cannot engage in the climbing and lifting activities in which he had engaged immediately prior to his injuries. That concession cannot supply what the Commission alone must have found if the award is to be upheld. On the other hand, it is reasonable to construe the findings first made by Judge O'Meally as having been made in a context where the facts which are now conceded were then common ground. His Honour, having recounted the present respondent's evidence that his work involved "an amount of climbing, lifting and bending", found as a fact what had been in contest, namely, that his work "was as he described it". Having regard to that finding and the passage earlier cited from his Honour's judgment, I construe his Honour's findings to mean this: before the injury the plaintiff was doing clerical work that involved some climbing and lifting; after the injury the plaintiff was still able to do clerical work, sitting or standing from time to time for the sake of comfort, but he was unable to do climbing and lifting as he had done before he was injured. But Judge O'Meally did not find, on either of the occasions when the proceedings were before the Commission, that the respondent's physical incapacity "affected him relevantly and in his employment market". That was an inference drawn by Mahoney J.A., albeit an inference that is easily drawn once it is found that the respondent's capacity to climb and lift had been used by him in doing his work before the accident.

In Ball v. William Hunt & Sons Ltd. [19] Lord Macnaghten said that incapacity for work means "loss or diminution of the capacity to earn wages in the employment in which the injured workman was engaged". Perhaps that is too narrow a test. Regard must be had not only to the employment in which the injured worker was employed before his injury but also to other fields of employment in which he was accustomed to work or in which he might have been expected to seek and find work in the course of his working life. Accordingly, the appropriate question to pose in order to determine whether or not there is incapacity for work is "whether the injury has left the worker in such a position that in the open labour market his earning capacity in the future is less than it was before the injury": Williams v. Metropolitan Coal Co. Ltd. [20] , per Starke J. Earning capacity is not affected if the impaired physical capacity of the injured worker is irrelevant in the open labour market. Where a physical capacity has been exercised by a worker in doing his work, however, an impairment of that physical capacity would usually occasion some diminution of his earning capacity. In competition in the labour market with others whose capacities are unimpaired, the injured worker is disadvantaged: his physical capacity is less than the capacity of an uninjured worker. A diminution in earning capacity is not necessarily disproved if the injured worker gains employment at the same remuneration as he would have received if he had not been injured, for diminution of earning capacity is not necessarily productive at all times of diminished earnings: cf. Commissioner for Railways (N.S.W.) v. Agalianos [21] . In Hawkins v. Australasian United Steam Navigation Co. Ltd. [22] , Jordan C.J. said:

The facts, if they are facts, that he is at present able at times to earn as much as, or more than, he could earn before his injury, and could now earn on an average more than before his injury, but for a general shortage of work, are evidentiary facts assisting an inference as to the existence or non-existence of partial incapacity but they supply no conclusion of law necessarily requiring the inference to be drawn in a particular way 1. [1912] A.C. 496, at p. 501. 2. (1948) 76 C.L.R. 431, at p. 444. 3. (1955) 92 C.L.R. 390, at p. 394. 4. [1938] W.C.R. (N.S.W.) 99, at p. 112.

Although s. 11(1) excludes entitlement to weekly amounts where a partially incapacitated worker earns or is able to earn the amount which he would probably have been earning but for the injury, it is clear that the circumstance that no earnings are lost during a period is not inconsistent with the existence of partial incapacity. The provisions of s. 11(1) envisage that a worker may be partially incapacitated for work during a period, though he does not suffer a loss of earnings during that period. Unless one can predicate of a physical incapacity that it is unlikely to cause the injured worker any diminution of earnings during his future working life in comparison with what he would probably have earned if he had not been injured, one cannot say that the injured worker has not suffered a diminution in his earning capacity.

Whether a partial incapacity for work entitles the worker to payments of compensation during a period is, of course, a further question. It is true that s. 11(2) entitles a partially incapacitated worker who satisfies the conditions of the sub-section to be treated as totally incapacitated and to be compensated on that footing, and that loss of earnings is not one of the conditions expressed by the sub-section. But a partially incapacitated worker who is fully employed during a period can obtain compensation in respect of that period only under s. 11(1), if at all - not under s. 11(2). A fully-employed worker does not attract the benefit of s. 11(2), either because one of the persons mentioned in pars. (a), (b) and (c) has arranged his employment or because, being in other employment during the period, the worker cannot show a failure by those persons to provide him with employment: see R. J. Brodie (Holdings) Pty. Ltd. v. Pennell [23] ; Dowell Australia Ltd. v. Archdeacon [24] . A partially incapacitated worker who is not in full employment may be entitled to compensation under s. 11(2) or under s. 12. In the present case, we are not concerned with the conditions expressed in s. 11(2) other than partial incapacity. The case turns on the answer to only one question: did the respondent's incapacity to climb or lift make him partially incapacitated for work? Judge O'Meally must be taken to have found that the respondent's injury deprived him of the capacity to perform clerical work of the kind which he was performing before he suffered his injury and that he can perform clerical work, but not clerical work that involves climbing or lifting.

1. (1968) 117 C.L.R. 665, at p. 669. 2. (1975) 132 C.L.R. 417.

The issue of fact that remains to be answered by the Commission is whether it can be said that the respondent's physical incapacity to climb or lift is unlikely to cause the respondent any diminution of earnings during his future working life. Though there is much to be said for the inference drawn by Mahoney J.A., the function of finding that the impairment of physical capacity has diminished the respondent's earning capacity must be left to the Commission. Judge O'Meally was wrong to conclude when the proceedings were first before him that, because the respondent retained his capacity to work as a clerk, he had not suffered any diminution of his capacity to earn. Had he found any diminution in his capacity to earn, however small, the operation of s. 11(2) would have been attracted. But it was not open to the Court of Appeal to make the finding that the respondent had suffered a diminution of his capacity to earn. The finding of partial incapacity which is necessary to support an award in favour of the worker under s. 11(2) is a finding of fact that only the Commission has jurisdiction to make. Although the reasonableness of the inference drawn by Mahoney J.A. was not attacked and was not open to attack, Judge O'Meally was not bound to adopt it and was bound to decide whether he drew the same inference. The question whether an impairment of physical capacity has diminished the respondent's capacity to earn awaits determination by the Commission. If the answer is affirmative, the respondent was partially incapacitated and he is entitled to an award. To obtain an answer to the question it is unfortunately necessary to remit the proceedings once more to the Commission.

The appeal must be allowed, the second judgment of the Court of Appeal must be set aside and in lieu thereof the second appeal to that Court must be allowed, the award of the Commission set aside and the proceedings remitted to the Commission to be determined according to law.