While the respondent, Maurizio Gerace, was employed by the appellant, Art Coating Pty Limited, between 1989 and 1990, he was exposed to epoxy resin in paint and, as a result, suffered injury and was not able to return to work. He brought proceedings in the Compensation Court against the appellant and, on 30 July 1992, was awarded compensation at the rate of $200 per week from 19 February 1991. On 7 November 1996, the Chief Judge Justice Campbell increased the weekly payments to the maximum statutory rate.
3 The respondent wished no longer to reside in Australia and to return to Italy, the country of his birth, where he thought his prospects were better. He still wanted to retain his right to receive weekly payments under the Act. Accordingly, on 18 August 1997 he filed a notice of motion in the Compensation Court for a declaration pursuant to s53(1) of the Workers Compensation Act 1987 (the Act) that the Compensation Court determine his incapacity for work resulting from his injury as likely to be of a permanent nature. On 4 September 1997 this application came before the Court for determination. However, on that date the respondent and the appellant signed a document entitled "Heads of Agreement" the relevant terms of which were:
"The Applicant agrees to settle all entitlements to compensation and damages against the Respondent for a total of $130,000.
Settlement is to be effected as follows:
1. By way of Commutation which is:
(a) to include all/any liability to pay compensation including weekly payments, non-economic loss, Section 60 expenses and interest;
(b) to include nature and conditions of employment, together with any injuries sustained in the course of or arising out of the Applicant's employment with the Respondent, and to cover the whole body and any psychiatric injury or condition and industrial deafness;
(c) to be effective from the date if [sic] employment and include a Common Law release.
2. Applicant is to make expeditious application for Commutation and to use best endeavours to secure approval.
……
7. In the event that the Commutation is not approved, matter to be re listed for hearing."
4 By a document dated 13 November 1997, a formal application was made on behalf of the respondent to the WorkCover Authority of New South Wales (the Authority) for commutation in reliance upon s51(1)(c)(ii) of the Act. Section 51 in the form it then took provided, so far as presently material, as follows:
" 51 Commutation in certain cases of weekly payments
(1) This section applies:
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(c) to a liability to make a weekly payment to a particular worker (and to the extent) approved by the Authority in special circumstances such as the following:
(i) the worker requires a lump sum to establish an income-producing business,
(ii) the worker requires a lump sum to enable the worker to move from the area in which he or she lives and there are substantial economic or compassionate grounds for doing so,
(iii) the lump sum would otherwise be likely to assist substantially in the rehabilitation of the worker because of the special circumstances of the case.
(2) A liability in respect of any weekly payment of compensation to which this section applies may, with the consent of the worker, be commuted (either in whole or in part) to a lump sum, determined by the Compensation Court, having regard to:
(a) any dispute as to liability to pay compensation under this Act,
(b) the injury, the age of the worker, and the occupation of the worker at the time of the occurrence of the injury, and
(c) the worker's diminished ability to compete in an open labour market.
(3) If:
(a) the Compensation Court determines any such lump sum,
(b) the worker agrees that payment of the lump sum should remove any liability to make a payment under Division 3 or 4 in respect of the injury, and
(c) the terms of any relevant regulations or approval of the Authority under subsection (1) have been complied with,
payment of the lump sum removes any liability to which the agreement of the worker relates.
(4) The consent or agreement of a worker to a commutation under this section may be dispensed with if, in the opinion of the Compensation Court:
(a) the worker is unable, by reason of infirmity of mind or body, properly to consent or agree to the commutation, and
(b) the commutation would be in the best interests of the worker.
(5) An agreement as to the commutation of a payment to a lump sum shall not, nor shall the payment of the sum payable under the agreement, exempt the person by whom the payment is payable from any liability under this Act unless the sum has been determined by the Compensation Court in accordance with this Act.
…
(7) The Authority may, as a term of its approval under subsection (1), require a worker to produce to it evidence that the worker has received adequate financial counselling.
…
(9) Payment of a lump sum to which liability in respect of any weekly payment of compensation has been wholly or partially commuted under this section or redeemed under section 15 of the former Act (as applied by Schedule 6 to this Act) is taken for the purposes of sections 15, 16, 22A, 122, 151Z and 273 of this Act and section 64 of the former Act (as so applied) to be payment of the compensation concerned in pursuance of the liability to pay the compensation concerned."
5 On 9 December 1997 the Authority wrote to the respondent's solicitors referring to the application for commutation on behalf of their client and stating:
"Following initial perusal of the application, I advise that WorkCover cannot consider the application in its current form. WorkCover is required to be satisfied that special circumstances exist before it can approve an application for commutation. Given the volume of applications received annually, WorkCover has developed guidelines to assist applicants to provide all information to enable prompt and fair consideration of applications. Mr Gerace's application is being returned to you as it does not comply with the guidelines.
I have enclosed a copy of an information bulletin which outlines the Guidelines' requirements. This bulletin is designed to assist you to provide the appropriate documentation. Your attention is drawn to the checklist at Appendix (2) of the Guideline. This checklist should be completed and all necessary documentation attached to your application.
I also advise that documentation addressing the information required under 3.4 (Rehabilitation and return to work) needs to be provided in the form of a current report from an appropriate provider.
As a commutation requires considerable information from the relevant insurer, the application should be prepared in conjunction with the insurer and provided directly by the insurer to WorkCover. Applications which are not complete, including information required from insurers, will be returned to you or to the insurer where appropriate, for completion before the application is considered."
6 The material enclosed included a "Check Sheet for Commutation Applications" and a document headed "Information Bulletin - Commutations" which included the following:
" WorkCover's approach to considering applications for approval to commute
In general, WorkCover will only approve those applications which can demonstrate that the worker's circumstances are exceptional or unusual. Each application will be considered individually, taking into account the worker's particular circumstances and needs.
Applications are to be made by the insurer to WorkCover and must comply with the directions given in the Claims Manual. In order to give full consideration to the application, WorkCover will need to have comprehensive information about the claim, the worker's circumstances and details about how the lump sum, if approved, would be utilised.
To assist insurers to provide this information, this Bulletin outlines what information WorkCover will usually need to make an assessment of each application. It may be that in some cases, further information may be sought, and in such cases the Claims Branch will request further information on a case by case basis. If a party believes that the information sought is not necessary in any particular case, the reason for not supplying the information should be provided so that consideration of the application is not delayed.
EVALUATION PROCESS
Insurer's role
The insurer is the party making the application for commutation, on behalf of the employer who is seeking release of an on-going liability to pay weekly benefits. All applications are to be made by insurers with the consent of the worker. Insurers are responsible for preparing the application for commutation, including compiling the documents required to support the application.
Applications should not be made directly by workers or their legal representatives. All applications are to be forwarded through the relevant insurer.
In its claims manual, WorkCover requests insurers to undertake 5 activities before forwarding applications to WorkCover:
1. ensure that the Scheme has a liability to pay the claim (or in the case of a self insurer, that the insurer has a liability to pay);
2. reach an in-principle agreement with the worker on the sum to be paid;
3. identify separately, the amounts for weekly payments, and section 60 (medical expenses) section 66 (permanent loss) and section 67 (pain and suffering) payments;
4. check that all appropriate and/or recommended rehabilitation activity has been undertaken by the worker;
5. ensure that the commutation proposal is accompanied by the specified documents which will enable WorkCover to evaluate the proposal.
Details are provided below."
7 On 26 March 1998 the respondent's solicitors wrote to the appellant's solicitors, so far as presently material, as follows:
"We refer to our telephone discussions in December 1997 with Mr Peter McCarthy and confirm that WorkCover has returned to us the Application for Commutation with a covering letter dated 9 December 1997 advising that is cannot consider the application in its current form because Mr Gerace's Application does not comply with the guidelines. A photocopy of the letter dated 9 December 1997 received from WorkCover is enclosed herewith together with the Application for Commutation.
We enclose herewith a photocopy of Check Sheet for Commutation Applications for your attention."
8 The letter then went on to deal with particular matters in the Check Sheet and gave details of the respondent's background, the medical evidence and the reasons why the respondent wished to return to Italy. The letter concluded:
"Kindly prepare the Application for Commutation and advise when the documents can be uplifted from you in order that we can deliver them to the WorkCover Authority.
We advise that this matter is listed for mention again on Friday 3 April 1998. It is the applicant's intention to cease to reside in Australia and to proceed with the Notice of Motion to have his Workers Compensation payments paid to him in Italy in accordance with Section 53(1) of the Workers' Compensation Act 1987 (as amended). Do you require Dr Edwards to be available for cross-examination at the hearing of the Notice of Motion?"
9 The re-listing referred to in the last paragraph came before Justice Campbell on 3 April 1998. On that occasion, the following interchanges were recorded in the transcript:
"MS CARTER [who appeared for Art Coating Pty Limited, the appellant]: I am instructed to oppose the Application your Honour. On the last occasion this matter was listed for a Notice of Motion on 4 September 1997, the claim for weekly payments was resolved on the basis of Commutation. The Commutation Application has been prepared and has been submitted to WorkCover and is presently awaiting approval. In light of that fact we say that it is not appropriate that the Orders sought be granted.
HIS HONOUR: Mr Harrington, what is the position about this Commutation then?
MR HARRINGTON [who appeared for Mr Gerace]: As I understand it your Honour the applicant would like to return to Italy, these Commutations can take anything up to two years and, at the present time, are not being improved [sic]. The applicant would like the certification so he has the freedom to make that decision.
HIS HONOUR: Is he going or is he not?
MR HARRINGTON: He is going, as I understand it. Would your Honour excuse me while I obtain instructions. My instructions are he will go when he can go. In other words if he goes at the present time then he does not have the certification for the compensation you [sic] paid overseas.
HIS HONOUR: Can somebody tell me when this Commutation was lodged?
MS CARTER: Beginning of December last year. There's been some correspondence between WorkCover and the respondent and also, I believe, the applicant as to the state of play with that Application. I understand from …..the manager of WorkCover, that it is being urgently attended to, on the basis that the applicant does wish to reside in Italy."
10 The Judge then suggested that those representing the parties seek information from the Authority and there was an adjournment for that purpose. When the matter resumed Ms Carter said:
"We have endeavoured to find out the status, the present status of the Commutation Application but have been unable to speak to the appropriate person who is handling the matter, which is Mr …. I do not anticipate that we will be able to give your Honour a definite opinion today as to when the Commutation Application is likely to be approved."
11 The Judge then determined, pursuant to s 53(1) of the Act, that the applicant's incapacity for work resulting from the injury is likely to be of a permanent nature and ordered Art Coating Pty Limited to pay Mr Gerace's costs of the motion.
12 On 14 April 1998 the appellant's solicitors wrote to the respondent's solicitors as follows:
"We refer to your letter dated 26 March 1998.
We are now in a position to confirm the following:
1. Our client, GIO Workers Compensation (NSW) Ltd confirms that there is consent between them and the worker to commute the claim in the sum of $130,000.00.
We trust that this now satisfies the requirement set down by WorkCover pursuant to the check list for Commutation Applications.
We note in your recent letter that you referred to a Commutation sum of $140,000.00 when in fact on our records the figure is $130,000.00.
We trust this is satisfactory."
13 There, apparently, matters rested until 30 July 1998 when the appellant's solicitors wrote as follows to the respondent's solicitors:
"We refer to the above matter and confirm that, in light of the proposed Exit Provisions which are said to come in force on 1 August 1998, we have sought our client's instructions in relation to whether we should refrain from sending the Application for Commutation to the WorkCover Authority for their further consideration and probable rejection.
We therefore propose to await our client's instructions and will advise further upon receipt of same."
14 This letter was a reference to amendments of the Act by the Workers Compensation Legislation Amendment Act 1998 whereby the need for approval by the Authority of a commutation under s51 was removed. Subsections (1), (3)(c), (4) and (7) of s51 were repealed. An additional paragraph (d) was added to subsection (2) and subsections (2A) and (2B) were inserted. The additions are not relevant to this appeal. Subsection (9) was amended to read as follows:
"Payment of a lump sum to which liability in respect of any weekly payment of compensation has been wholly or partially commuted under this section or redeemed under section 15 of the former Act (as applied by Schedule 6 to this Act) is taken for the purposes of this Act, the 1998 Act and the former Act (as applied by this Act) to be payment of the compensation concerned in pursuance of the liability to pay the compensation concerned."
15 On 12 October 1998, the respondent's solicitors wrote to the appellant's solicitors referring to previous correspondence and an earlier telephone discussion and advising that their client was presently making arrangements to return to Italy to live permanently. The letter continued:
"We are instructed that our client and his wife are concerned about the cost of future treatment in relation to his psychiatric condition and his contact dermatitis. There is also concern that our client will not find any suitable work in Italy because of his medical condition.
Further as the agreement to accept $130,000.00 as a commutation settlement occurred in 1997 and our client was willing to accept that sum at that time if the WorkCover Authority approved the settlement, we are instructed to seek your client's consent to the settlement sum of $130,000.00 being reviewed and increased to the sum of $160,000.00
We are instructed that our client is prepared to accept the sum of $160,000.00 in full and final settlement of his Workers' Compensation rights on the basis that the settlement is approved immediately by his Honour Judge Campbell the Chief Judge of the Compensation Court of New South Wales pursuant to the exit provisions of the Workers' Compensation Act 1987 (as amended)."
16 On 14 October 1998 the appellant's solicitors acknowledged the letter:
"enclosing an offer resolve [sic] this matter by way of Exit Commutation in the sum of $160,000.00.
We confirm that we have now forwarded a copy of your letter to our client for their consideration and expect that all further correspondence in this regard will be directly between your firm and GIO Australia Workers Compensation (NSW) Limited."
17 On 19 November 1998 the respondent applied for the commutation of the appellant's liability under the Act for a lump sum of $130,000.00. The application came before Judge Hughes on 10 December 1998 when the respondent's representative said that the appellant had "decided recently not to adhere to the agreement that took place back in September [1997]". On the basis that the appellant did not consent to commutation, it was agreed that the matter be struck out though the Judge referred to a recent decision of Judge Burke in Tran v JR Manufacturing Industries Pty Limited (1998) 17 NSWCCR 225. On the following day, the respondent successfully applied to have Judge Hughes re-instate the matter.
18 On 24 February 1999 the respondent's solicitors wrote to the appellant's solicitors reciting the history of the proceedings and the correspondence on and after 4 September 1997. The respondent's solicitors requested that the appellant's solicitors consider the matter immediately and advise whether their client proposed to challenge the agreement dated 4 September 1997 or to allow the matter to proceed to commutation. The respondent's solicitors wrote again on the same day saying they had received firm instructions to file a summons and supporting affidavit in the Supreme Court if the appellant's solicitors did not advise them of their client's instructions before noon on 25 February.
19 On 25 February 1999, the respondent began proceedings in the Equity Division of the Court claiming an order that the appellant proceed with the application for commutation and a declaration that there was a binding agreement contained in the "Heads of Agreement" of 4 September 1997. Master Macready heard these proceedings on 14 July 1999 and gave judgment on 20 August 1999. The Master made the following orders:
"1. Declare that there is a valid and enforceable agreement between the plaintiff and the defendant to commute to a lump sum the defendant's liability to make weekly payments to the plaintiff pursuant to the Workers' Compensation act 1987 in the form of the document entitled 'Heads of Agreement' and dated 4 September 1997 which is Annexure 'B' to the affidavit of Anthony Steven Margiotta sworn 25 February 1999.
2. Declare that the said agreement should be specifically performed and carried into execution.
3. Order that the defendant do whatever may be reasonably required of it to seek the commutation to a lump sum of the defendant's said liability by the Compensation Court in the sum of $130,000.00.
4. Order that in the event the Compensation Court determines the lumpsum for the commutation in the amount of $130,000.00 that the defendant specifically perform the said agreement and pay such sum to the plaintiff less any lawful deductions.
5. Order that the defendant pay the plaintiff's costs of the proceedings."