Workers' Compensation - Calculation of weekly earnings pursuant to Workers' Compensation and Rehabilitation Act 1981 (WA) Schedule 1, cl 11(1) - What allowances to be deducted under Workers' Compensation and Rehabilitation Act 1984 (WA) Schedule 1, cl 11(1) and cl 11(4)

Workers' Compensation and Rehabilitation Act 1981 (WA), s 84ZW

Accident Compensation Commission v CE Heath Underwriting & Insurance (Aust) Pty Ltd [1994] HCA 68; (1994) 121 ALR 417

Amalgamated Society of Engineers v Adelaide Steamship Co Ltd (1920) 28 CLR

Craig Williamson Pty Ltd v Barrowcliff [1915] VicLawRp 66; [1915] VLR 450

Ilsley v Wattyl Australia Pty Ltd (1997) 141 ALR 510

Mutual Acceptance Co Ltd v FCT [1944] HCA 34; (1994) 69 CLR 389

Registrar of Titles v Franzon [1975] HCA 41; [1976] 50 ALJR 4

1 OWEN J: This is an appeal against the decision of a Magistrate sitting in the Compensation Magistrate's Court in which the learned Magistrate allowed, in part, an appeal against the decision of a review officer on a claim for workers' compensation by the respondent.

2 The respondent is a professional painter by trade and has been employed by the appellant at various times since 1978. In 1997 the respondent was working for the appellant at Pannawonica. On 20 February 1997 the respondent suffered a disability within the meaning of the Workers' Compensation and Rehabilitation Act 1981 ("the Act") arising out of or in the course of his employment with the appellant. At the time the disability arose the respondent had been working at Pannawonica for approximately 13 weeks and was being paid at a rate of $28 per hour. Had the respondent been working for the appellant in the Perth metropolitan area he would have been paid at a rate of $20 per hour. The respondent also received a payment of $48.26 per week in substitution for annual leave accrual. Both the hourly rate and the annual leave payment were determined between the parties under a contract of employment. These rates were not derived expressly by reference to an industrial award or industrial agreement.

3 In the period after the date of the injury the respondent received weekly compensation payments paid by the appellant. In July 1997 the respondent lodged an application seeking an increase in his payments. After a number of conciliation conferences the application was referred to a review officer. On 20 November 1997 the review officer found that the respondent was entitled to receive a payment of $946.34 per week from the date of incapacitation.

4 In exercise of the right conferred by s 84ZN of the Act the appellant appealed to the Compensation Magistrate's Court against the decision of the review officer. The Notice of Appeal contained 15 grounds of appeal and sought a determination on six questions of law. Four of the six questions related to the issue whether the additional $8 per hour received by the respondent by virtue of his working at Pannawonica and the $48.26 per week received in lieu of annual leave were "allowances" that fell within cl 11(4) of Schedule 1 of the Act. Although the appeal was successful in part, the Magistrate found that for the purpose of calculating the respondent's weekly earnings under cl 11(1) of the Schedule, the only allowances deductable under cl 11(4) were those allowances which were paid to the respondent under the relevant award. The Magistrate found that those allowances received by the respondent by virtue of some arrangement outside the award did not amount to "allowances" of the type contemplated in cl 11(4). As the additional $8 per hour and the annual leave payment of $48.26 were payments received under his contract of employment and not the award, the Magistrate found they did not amount to "allowances" under cl 11(4) and therefore were not required to be deducted from a calculation of the respondent's weekly earnings under cl 11(1).

5 The grounds of appeal, set out in the appellant's amended notice of appeal dated 9 April 1999, are as follows:

"1. The Learned Compensation Magistrate erred in law in finding that clause 11(4) of the First Schedule of the Worker's Compensation and Rehabilitation Act 1981 as amended was to be construed so that the items referred to therein are read with reference to the award and not the terms of the particular agreement between the parties.

2. The Learned Compensation Magistrate erred in law in distinguishing the judgment of the Honourable Justice Steytler in Wishart v MPL Laboratories, unreported, Lib No. 960259 on the grounds that the decision related to clause 11(5) of the First Schedule and it was necessary to look at the terms of the contract of service rather than the award in calculating the weekly payments.

3. (a) The Learned Compensation Magistrate erred in law in interpreting clause 11(4) of the First Schedule of the Act to mean that only bonuses, incentives and allowances provided for in the award should be deductions in determining the Respondent's (Applicant's) rate of weekly compensation in accordance with clause 11(1) of the Schedule.

(b) The Learned Compensation Magistrate should have calculated the Respondent's (Applicant's) entitlement by taking first the amount payable under the Award and then adding to it any over award or service payment payable on a regular basis as part of the worker's remuneration, but then deducting overtime payments and any bonus, incentive or allowance specified in clause 11(4).

4. The Learned Compensation Magistrate erred in law in finding:

(a) the additional $8.00 per hour received by the Respondent (Applicant) for country work was not a bonus, incentive or allowance within the meaning of clause 11(4);

(b) that the amount of $48.26 per week received by the Respondent (Applicant) in substitution for annual leave accrual was not a bonus, incentive or allowance within the meaning of clause 11(4)."

6 The gravamen of this appeal is whether the Magistrate was in error in deciding that where the respondent's weekly earnings are calculated with reference to an industrial award pursuant to cl 11(1), the allowances deducted under cl 11(4) are limited to those allowances defined solely within the award. The appellant contends that the Magistrate should have found that the term "allowances" under cl 11(4) includes any allowances paid to the respondent including those allowances paid to the respondent which were not contemplated under the terms and conditions of the award.

7 During argument on the appeal some suggestions were made (as they have been made on other occasions) that there are conflicting decisions of this Court relating to cl 11. Those decisions are C & M Trimboli Plasterers v Fazzolari, unreported; FCt SCt of WA; Library No 970050; 19 February 1997 and Wishart v MPL Laboratories, unreported; FCt SCt of WA; Library No 960529; 17 September 1996. As will appear later in these reasons, I do not think there is any conflict between the two decisions.

8 In his reasons the Magistrate referred to the statutory scheme and considered the review officer's finding that the extra $8 per hour earned by the respondent for country work did not amount to an allowance. Having referred to the relevant provisions in cl 11 the Magistrate said:

"As identified by the appellant, it is apparent from the above passage that the review officer did not deduct the $8.00 per hour because it was not an allowance under the award. That is the correct construction of clause 11(1) and 11(4).

Having found that the award applied under clause 11(1) the calculation of the respondent's weekly earnings was to be made with reference to the award so as to place the respondent, in the particular circumstances in which he worked, in the position he would have been in had he been employed and paid under the provisions of the award. Such a position can only be reached if clause 11(4) is construed so that the items referred to therein are read with reference to the award and not the terms of the particular agreement between the parties. To reach that point, if the evidence allowed, the review officer was required to make the following findings: ...."

9 The Magistrate then went on to outline a seven point process setting out the findings that, in his opinion, should have been made by the review officer in calculating the respondent's "weekly earnings" under cl 11. Having set out the seven point process the Magistrate went on to say:

"The above 7 point process is, in my view, in accordance with the decision of C & M Trimboli Plasterers v Fazzolari, unreported; FCt SCt of WA; Library No: 970050A 19 February 1997. At page 4 of his reasons for judgment in C & M Trimboli Plasterers Kennedy J stated the following:

'It is apparent from the terms of cl 11 that, if there is an applicable award, it is upon the basis of that award that the weekly earnings are to be calculated, by taking first the amount payable under the award and then adding to it any over award or service payment payable on a regular basis as part of the worker's remuneration, but then deducting overtime payments and any bonus or incentive or allowance specified in cl 11(4)...

To determine what, if any, amount represents an over award payment under the clause, it would appear to be necessary to deduct from the sum of $650 (assuming that the appellant was working a 5 day week) the amount of allowances payable under the award, overtime and the amount payable for a week's work under the award (excluding overtime and allowances). The balance should then represent the over award payment, which is required to be added on to the amount payable under the award for a week's work (excluding overtime and allowances) to arrive at the weekly payment required to be made under cl 7(1) of Schedule 1.'

For the above reasons I do not accept the submissions of the appellant that the review officer was required to deduct, in addition to any bonuses, incentives or allowances under the award, any bonuses, incentives or allowances which were paid under the terms of the particular agreement between the appellant and the respondent. Further I do not accept that Wishart v MPL Laboratories; unreported; FCt SCt of WA; Library No: 960529S; 17 September 1996 is authority for the appellant's submissions. The matter of Wishart related to a determination of weekly earnings of a worker under clause 11(5) of the Schedule 1 to the Act, which reads as follows:

Under clause 11(5) it is necessary, to determine the deductions (if any) to be made under clause 11(4), to look at the terms of the contract of service between the worker and the employer because the matter does not fall within the clause 11(1) or 11(2) of Schedule 1 and there is, therefore, no industrial award or industrial agreement to use to calculate the weekly earnings."

10 The appellant does not dispute the Magistrate's finding that for the purpose of calculating "weekly earnings" under cl 11(1) the correct approach to be taken is the approach adopted by Kennedy J in Trimboli. The problem arises, the appellant says, because the Magistrate misunderstood what was actually said by Kennedy J as to the effect of the term "any allowance" in cl 11(4) on a calculation of "weekly earnings" under cl 11(1). The appellant claims that when read in light of the whole of cl 11 the plain and ordinary meaning of the words in cl 11(4) require that any allowances paid to the worker be deducted and that the words should not be limited to mean only those allowances paid to the worker under the relevant award.

11 Further the appellant contends that the Magistrate was in error in relying on Trimboli for the proposition that where a calculation of weekly earnings under cl 11(1) is made, the application of cl 11(4) is restricted to only those allowances paid to the worker under the award. The appellant argues that the fact that the only allowances deducted in Trimboli were allowances under the award does not give rise to the legal proposition that the word "allowance" under cl 11(4) is limited to those allowances paid under the award. This is because the decision in Trimboli must be read in light of the different factual circumstances involved in that case. In particular, the fact that the only allowances paid to the appellant prior to his injury were allowances stipulated under the award and that there was no evidence that the appellant had received any payments by way of any agreement outside the award. Given that the only allowances applicable in that case were those under the award, it was not necessary for the Court to deal specifically with the question of whether payments made to a worker which fall outside the ambit of the award would come within the meaning of "allowances" for the purpose of cl 11(4).

12 On the other hand the respondent contends that the Magistrate's finding correctly reflects the approach adopted by Kennedy J in Trimboli. The respondent says that for the purpose of determining weekly earnings once it is decided that there is an applicable award and cl 11(1) applies, then the worker's "weekly earnings" can only be determined in relation to that award and that for the purpose of determining deductable allowances under cl 11(4), a review officer can only consider those allowances payable under the award. The respondent says that to construe the meaning of the term "allowances" under cl 11(4) otherwise and include any allowances paid to the worker outside the award would lead to a situation where double dipping occurred. That is, where the same type of allowance was contemplated under the award and under the worker's contract of employment the effect of the appellant's construction would be that both allowances would be deducted from the worker's "weekly earnings". Such a situation the respondent contends would be contrary to the scheme of the Act, as it would result in the worker being unfairly prejudiced.

13 Further the respondent submits that even if this more restrictive interpretation of cl 11(4) is not correct, the payments of $8 per hour and the $48.26 in annual leave accrual cannot be deducted under cl 11(4) as they do not by their very nature fall within the definition of an allowance. This is because the additional $8 per hour was not an allowance for country work but simply a recognition by the appellant of the need to pay "the going market rate" if subcontractors of the requisite skill were to be attracted to this project. In relation to the $48.26 per week the respondent argues that there was no evidence before the Magistrate capable of showing that this payment was meant to represent a substitute for annual leave or that it amounted to a type of payment falling within the definition of allowance under cl 11(4).

The Statutory Regime and the Operation of Clauses 11(1) and 11(4)

14 It is not in dispute that for the purpose of calculating compensation payments under the Act the nature of the work performed by the respondent was work to which the Builders' Construction Award 1978 ("the award") could fairly be applied. Both parties agreed that the respondent's compensation payments were to be calculated in accordance with cl 11(1) of the Act. What is in dispute is whether, having decided that the respondent's weekly earnings were to be calculated with reference to the award under cl 11(1), the Magistrate was correct in limiting the allowances to be deducted under 11(4) to only those allowances that were paid to the respondent under the award.

"Subject to clauses 11A, 12, 13, 14, 15 and 16, for the purposes of this Act 'weekly earnings' means-

(1) where the work performed by the worker in the employment in which the disability occurs is, at the time the disability occurs, subject to an industrial award or industrial agreement or, if it is not so subject but there is an industrial award or industrial agreement which applies to work of the same type or which can be fairly applied to the work, the total wages, salary or other remuneration payable, or which would have been payable if the industrial award or industrial agreement to which the work was subject at the time of the incapacity, for a week's work in such employment, under the industrial award or industrial agreement plus any over award or service payment payable on a regular basis as part of the worker's wages, salary or other remuneration;

but excluding in each case referred to in subclauses (1) and (2) -

(3) overtime, being any payment for the hours in excess of the number of hours stated in the industrial award or industrial agreement as ordinary hours which constitute a week's work; and

(4) any bonus or incentive, shift allowance, week-end or public holiday penalty allowance, district allowance, industry allowance, meal allowance, living allowance, clothing allowance, travelling allowance, or other allowance, and where the work performed by the worker in the employment in which the disability occurs is such that neither subclause (1) or (2) applies, the weekly earnings of the worker means -

(5) the normal wage salary, or other remuneration calculated on a weekly basis payable to the worker under his contract of employment exclusive of the payment for overtime or for the items referred to in subclause (4)."

16 The reasons of the Magistrate indicate that he took the view that cl 11(1) was to be construed as operating to place the worker in the same position he would have been in had he been employed and paid under the provisions of the award. I have already recited the critical part of the Magistrate's reasons above but for completeness I will repeat what was said by the Magistrate at p12:

"Having found that the award applied under clause 11(1) the calculation of the respondent's weekly earnings was to be made with reference to the award so as to place the respondent, in the particular circumstances in which he worked, in the position [that] he would have been in had he been employed and paid under the provisions of the award. Such a position can only be reached if clause 11(4) is construed so that the items referred to therein are read with reference to the award and not the terms of the particular agreement between the parties" (my italics).

17 Having found this underlying purpose of cl 11(1) the Magistrate concluded that to place the worker in the position that he would have been in if he had been working under the award, "weekly earnings" could only be calculated by exclusive reference to the award itself. The Magistrate then found that in order to achieve this underlying purpose it must follow that the term "allowances" under cl 11(4) be limited to only those allowances under the award. The effect of these findings being that for the purpose of putting the worker in the position he would have been in had he been employed and paid under the award, the actual agreement between the worker and the employer could have no relevance to the calculation of "weekly earnings" and must be put aside.

18 I am not sure it is correct to construe the purpose of cl 11(1) as operating to put the worker in the position he would have been in had he been employed and paid under the provisions of the award. This is not what the Act says. It is a construction, which is inconsistent not only with the express terms of cl 11(1) but with the overall policy and rationale of the Act. Further if such an interpretation were correct then the express references in cl 11(1) to over award and service payments which relate to payments made outside the award and under the contract of employment would be otiose. To determine the correct meaning of "weekly earnings" under cl 11(1) the words used within the clause cannot be read in isolation. Clause 11(1) must be read within the context of the Act as a whole, bearing in mind the purpose and policy behind the operation of the Act.

19 Section 18 of the Act provides that where a worker suffers a disability for which he is entitled to compensation payments these payments are to be paid in accordance with Schedule 1 of the Act. Weekly payments of compensation are governed by cl 7 of Schedule 1. Clause 7(1) provides, inter alia, that when total incapacity for work results from the disability, the worker is entitled to a weekly payment during the incapacity equal to the weekly earnings of that worker, calculated and varied in accordance with the schedule. The term "weekly earnings" is defined in cl 11 and is set out above.

20 When read together cl 7 and cl 11(1) outline a procedure under the Act for calculating weekly compensation. This procedure involves two separate steps. First, under cl 7 the worker is entitled to an amount he would earn for a week's work in the position in which the worker is employed. Clause 7 does not limit this amount to an amount under the award but refers to the worker's earnings for a week's work in the position he is in fact working in at the time of the injury. Given its plain and ordinary meaning this would mean that the respondent was entitled to a payment equal to his weekly earnings under his contract of employment. However the operation of cl 7 is subject to the qualification that the worker's weekly earnings must be calculated and varied in accordance with the Schedule.

21 Clause 11 of the Schedule operates to define a worker's "weekly earnings" by placing a limit on what types of payments received by a worker can be included in calculating "weekly earnings" for the purpose of arriving at the appropriate compensation payment. In particular, cl 11(3) and (4) expressly exclude such transitional and variable payments as overtime, bonuses and nominated allowances. However cl 11(1) allows for over award or service payments payable on a regular basis to be included in calculating "weekly earnings". This provision contemplates the inclusion, in the calculation of the weekly earnings under cl 11(1), of an amount that was paid to the worker exclusively under the contract of employment and not the award.

22 Further evidence to support the proposition that it is not the intention behind the operation of cl 11(1) to limit "weekly earnings" exclusively to the award rate can be found from the express words of s 52 of the Act which provide:

"The amount of weekly payment of compensation shall be calculated and varied with reference to the earnings of the worker under the employer from whom the compensation is recoverable."

23 The general policy behind the Act is to provide a scheme to ensure that workers who suffer a disability in the course of their work are adequately compensated by their employers. The underlying principle is to provide the worker with a weekly compensation payment, which reflects, as closely as possible, the amount that the worker would otherwise have been earning under his employer. In other words, a figure is to be arrived at that neither over compensates or unfairly prejudices the worker. In my opinion the only way of arriving at such a figure is to provide the worker with an amount that reflects what he was actually earning prior to the injury subject to the express exclusions. Such a figure seems an appropriate way of ensuring (as least as close as is possible) that neither the worker nor the employer is unfairly prejudiced as a result of the disability.

24 When read in accordance with the policy and spirit of the Act I do not believe that cl 11(1) was intended to operate to limit a worker to compensation payments equal to what the worker would have been paid if he had been working under the award. There is some support for the view in the reference in Trimboli, per Scott J at 11, to the second reading speech in the Legislative Council. In my view, in the absence of express terms, where a worker has been employed and paid at some other rate than that provided by in an award it would be outside the spirit of the Act to determine the worker's compensation payments by reference to a calculation based exclusively on the award rate. In many cases the award rate will bear no resemblance to what the worker was actually earning each week.

25 In my view the reference to the award rate in cl 11(1) operates to provide a worker with a payment at least equal to the amount that he would have received if paid under the award. However cl 11(1) then goes on to allow a worker, in addition to the amount being "the total wages payable under the award...for a week's work", to bring his "weekly earnings" in line with what he was actually earning at the time under a contract of employment, by adding to the total wages payable under the award any amounts actually earned by him on a regular basis that were above and beyond the award rate (excluding at this stage overtime and allowances). These amounts are expressly referred to in cl 11(1) as over award or service payments. These over award and service payments are payments which are not contemplated under the award but rather arise from some separate arrangement between the worker and employer.

26 The plain and ordinary meaning of the words used in cl 11(1) is that "weekly earnings" under cl 11(1) is to be calculated with reference to the award and the contract of employment (if such a contract exists). Allowing any over award and service payments to be included has the effect of equating "weekly earnings" with an amount that resembles the amount that the worker was actually earning under his contract of employment at the time of injury, less those payments specifically excluded by cl 11(3) and 11(4). This interpretation reflects the intention behind cl 7 of the Schedule and s 52 of the Act. In my view the Magistrate was wrong in finding that cl 11(1) was intended to put the worker in the position he would have been in had he been working under the award and that because of this only the award could be relevant to the calculation of "weekly earnings". Such a construction would create an artificial situation by ignoring the fact that a worker may have been working under terms and conditions provided for in his contract of employment which were totally unrelated to the terms and conditions set out under the award.

27 Clause 11(1) provides a process for calculating a worker's "weekly earnings" where the worker is employed in the type of work to which an award can be applied. In this situation the award is used to provide the base wage for calculating compensation payments. However rather than limiting a worker's weekly earnings to the amount under the award, cl 11(1) allows the worker's "weekly earnings" to include any over award payments actually earned by the worker in his employment. By combining both the award and over award payments in a calculation of weekly earnings cl 11(1) operates to provide a fair and equitable outcome in two separate and distinct situations. First, it provides security to a worker who may have been working under a contract which provided inadequate remuneration by ensuring that, if there is an award that can be applied, the worker will receive compensation payments equal to what would have been his weekly total wages under the award (less the express deductions). Secondly, cl 11(1) operates to ensure that where a worker's weekly earnings under his contract of employment exceeds the amount that he would have earned if he had been paid under the relevant award, he is not unfairly compensated by receiving weekly compensation payments reflecting an amount calculated solely on the award. Where such a situation arises cl 11(1) allows for over award or service payments to be added to the total weekly earnings under the award so that his "weekly earnings" will better resemble the amount the worker was actually receiving at the time of the injury. In my view this achieves a fairer outcome for the worker than an amount calculated with exclusive reference to the award.

28 It is in light of this overall statutory framework that the decision of Kennedy J in Trimboli must be read. When this is done the full import of His Honour's summary of the operation of cl 11(1) becomes readily apparent. What his Honour says is as follows. Where there is a relevant award or agreement that can be applied or fairly applied that award forms the basis on which weekly earnings are calculated. The purpose of the award in cl 11(1) is to provide a figure for the worker's " total wages, salary...for a week's work". Once this amount ("base award amount") is determined any over award or service payment that was regularly payable to the worker as a result of some other agreement between the worker and employer will be added to the base award amount to give a total figure for "weekly earnings". This amount is then reduced by the express operation of cl 11(3) and cl 11(4) which require overtime payments and any bonus or incentive or allowances to be deducted. This in its simplest form is the process to be applied.

29 Kennedy J then went on to explain the method to be used for calculating the over award payment. This involves a separate and independent calculation. Given its plain and ordinary meaning an over award payment is the amount, if any, received by the worker under his contract that is greater than the amount he would have received under the award. To determine the amount of a worker's actual total weekly earnings that constitutes an over award payment regard must first be had to the total amount payable for a week's work under the worker's contract of employment. In the fact situation with which Kennedy J was then dealing, this was an amount of $650. To work out how much of this amount can be said to be over the award it is necessary to deduct from it the total amount that the worker would have received if he was being paid under the award. The total amount payable to the worker each week under the award includes the amount payable for a week's work under the award, any overtime paid under the award and any allowances paid under the award. Once these three separate payments are added they represent the total amount the worker would have received if he were being paid under the award. When this amount is deducted from the total amount the worker was actually receiving under his contract of employment, there may be a surplus. If so, the surplus will generally represent the amount actually received by the worker each week under his contract which is over and above what the worker would have been paid if he had been working under the award. The amount of this over award payment is then, in accordance with cl 11(1) added to "the total wages ... for a week's work under the award" to provide the worker's weekly earnings under cl 11(1). Once this amount is determined the next step is to exclude from it any overtime payments and allowances specified in cl 11(3) and cl 11(4).

30 The respondent contends that "weekly earnings" under cl 11(1) are to be calculated solely by reference to the award and that because of the exclusivity of the award it follows that the only allowances to be deducted are those paid under the award. Given what I have already said this submission falls away. In my opinion a calculation of "weekly earnings" under cl 11(1) involves reference to the amount payable under the award (to determine total wages under the award) and the amount paid to the worker under the contract of employment (to determine any over award payment).

31 An over award payment is determined by deducting from the total amount the worker actually received per week under the contract all the relevant payments under the award that the worker would have been paid if he had in fact worked under the award. It seems to me to follow that the overall figure arrived at for the over award payment would include any allowances paid to the worker under his contract of employment. This is because the total sum earned by the worker under the contract would include those allowances, if any, paid to the worker by his employer. As it is clear from the Act that compensation payments are not intended to include allowances it would follow that these allowances paid under the contract must also be deducted from the amount of "weekly earnings" in cl 11(1).

32 This construction accords with the language used by Kennedy J in Trimboli. In describing the calculation of "weekly earnings" under cl 11(1) Kennedy J adopted a broad approach by using the term "any allowances specified in cl 11(4)". However in dealing with the issue of over award payments, a situation requiring a different approach to the word allowances, his Honour adopted a restrictive approach by referring to "allowances payable under the award". In my view if his Honour had intended to limit the operation of cl 11(4) with respect to cl 11(1) only to those allowances paid under the award he could have done so expressly.

33 The respondent argues that that this is not the most appropriate interpretation of the term "allowance". The respondent says that such a construction would result in unfairness because it could involve double dipping. I do not accept this is right. In my view where what is in substance or in essence the same allowance arises under the award and the contract of employment then the allowance to be deducted under cl 11(4) will be whichever of those two allowances is the greater, the greater being seen as encompassing the smaller amount. In most cases this will be the amount actually paid to the worker under the contract. This will not operate to prejudice the worker as the amount deducted will have already been included in arriving at a figure under cl 11(1). This is because the amount deducted, being the greater amount, will have been added as either part of the worker's total wages payable under the award for a week's work or as part of the worker's over award or service payment. The outcome of this is that the worker's weekly earnings will reflect an amount that resembles what would have been considered the worker's usual weekly wage reduced by overtime, bonuses, incentives and allowances. This construction does not give rise to a double deduction as it ensures that the allowance deducted will be the same as the amount included in the overall calculation of weekly earnings. In my view, grounds 1, 3(a) and 3(b) have been made out.

Ground 2 - Were the payments "allowances" for the purpose of c1 11(4)

34 Having identified an error in the reasoning process below, this Court must now determine whether the additional $8 per hour and the payment of $48.26 per week received by the respondent fall within the definition of allowances. If they are, they should be deducted from the respondent's weekly earnings under cl 11(4).

35 Counsel for the appellant submitted that once a finding is made that cl 11(4) is to be construed as meaning any allowances then it automatically follows that the payments of $8 per hour and $48.26 per week must be deducted. This is because, the appellant says, in order for the Magistrate to consider whether the payments were allowances under the award he must first have identified and found the payments to be allowances. If so, and in the absence of a notice of contention by the respondent, the payments must be deducted.

36 The respondent on the other hand contends that once the Magistrate found that the payments were not payments received under the award and were therefore not relevant to cl 11(1), he did not need to consider whether they were capable of falling within the definition of an allowance. As a result, the respondent says, there were no findings as to whether the payments were capable of being defined as allowances and the matter should be remitted back to the review officer to make a determination.

37 It is not immediately clear whether the Magistrate did in fact make the findings for which the appellant contends. A reading of the reasons make it clear that the Magistrate focused primarily on the issue whether payments outside the award could have any relevance to a calculation under cl 11(1). In doing so the Magistrate found that the payments were not allowances under the award and were not deductable. However there is nothing in the reasons that indicates that the Magistrate considered whether the particular payments were of the type or nature that would otherwise be defined as allowances. It seems to me that the Magistrate proceeded on the assumption that they were allowances but only so far as it was necessary for determining the primary issue of whether as allowances outside the award they could apply to a calculation under cl 11(1). Once he found, as a matter of construction, that payments outside the award were not deductable it seems the Magistrate was content to let the question whether those payments were "allowances" fall away.

38 I think it is necessary to consider afresh whether those payments are allowances. The respondent submitted that the evidence before this Court was insufficient to determine the issue and as a result the appropriate course would be to send the matter back to the Magistrate for a determination. Counsel for the respondent was not prepared to concede that the payment of $48.26 per week was a substitute for annual leave payments and suggested that further evidence would need to be led by the appellant. I accept the respondent's contention. At least so far as concerns the payment of $48.26, the most appropriate course would be to remit the matter back to the Magistrate for a determination. However in my opinion there is sufficient evidence for this Court to resolve the issue of the $8 per hour.

39 Before addressing specifically the nature of the additional $8 per hour I wish briefly to say something in relation to the Magistrate's reference to the decision of Steytler J in Wishart v MPL Laboratories (supra). At the hearing before the Magistrate the appellant sought to rely on Wishart as authority for the proposition that the word "allowances" under cl 11(4) whether read for the purpose of calculating weekly earnings under cl 11(1) or cl 11(5) was intended to be construed widely and mean any allowance paid to the worker. However the Magistrate did not accept the argument. His Worship felt that Wishart could be distinguished from the case before him as it related to a determination of weekly earnings under cl 11(5). That clause expressly requires deductions under cl 11(4) to be determined by reference to the contract. This reasoning clearly reflected the Magistrate's overall view that for the purpose of determining "weekly earnings" under cl 11(1), deductions under cl 11(4) were limited to those paid under the award. Given that I have found that for the purpose of calculating weekly earnings under cl 11(1) the term "allowances" under cl 11(4) is to be construed to mean any allowance paid to the worker, I think this aspect of the reasoning involves an error_._

40 I think Wishart is to be regarded as setting out a definition as to what at law amounts to an allowance for the purpose of cl 11(4). The definition provided in Wishart is to be construed as applying generally to a calculation of weekly earnings regardless of whether the calculation is made with reference to cl 11(1), cl 11(2) or cl 11(5). The fact that the decision in Wishart dealt with the issue of "weekly earnings" under cl 11(5) does not restrict the application of that definition of "allowances" to calculations under cl 11(5). Clause 11(4) is designed to operate within the overall scheme of cl 11 and be applied to each subclause. While cl 11(4) may operate differently when applied to each of these subclauses, (that is so far as the allowances may be paid under an award, a contract or a combination of both) this is a result of express restrictions within the relevant subclauses and is not the result of differing definitions as to what at law amounts to an allowance. In my opinion there is no reason why the definition provided by Steytler J in Wishart should not be applied to this situation.

41 In Wishart the Full Court was required to consider whether additional remuneration received by the worker when working in the country as opposed to what he received when working in the city was an allowance within the meaning of 11(4). Having considered the meaning given to the word "allowance" in a number of relevant authorities, Steytler J concluded, at 12:

"It seems to me that the intention behind subcl 11(4) of the First Schedule to the Workers Compensation and Rehabilitation Act 1981, in excluding the various bonuses, incentives and allowances there referred to from the normal wage paid to the worker for the purpose of calculating 'weekly earnings', is that of excluding, inter alia, any additional sums paid to the worker for the purpose of meeting some particular requirement or requirements connected with the service rendered by the employee or as compensation for unusual conditions of that service whether as tropical or 'distance' allowances, 'dirt' money or otherwise, regardless of whether or not such items might otherwise fairly be described as part of wages in the ordinary sense. So much is, I think, necessarily apparent from a reading of cl 11 of the First Schedule as a whole and, in particular subcl (4) and (5) thereof.

Once this is accepted it follows, I think, that the fact that the appellant was paid at one rate for work in Perth and at another for work "in the field" was a sufficient basis, upon the accepted tests, for the Review Officer reasonably to draw the inference that the differential was made up of an allowance or allowances in the sense which I have described."

42 Looked at in this way, I think the approach of Steytler J in Wishart sits comfortably with that of Kennedy J in Trimboli. I can see no conflict between the two decisions.

43 In my opinion it follows from these principles that the additional $8 per hour paid to the respondent for work in the country was an allowance as defined under cl 11(4). The evidence before the Court was that the respondent received an amount of $28 per hour when working in the country as opposed to the $20 per hour he would have received doing the same work for the same employer in the city. There was no evidence that the additional $8 per hour was for any other reason other than that the respondent was working in a remote location. In the absence of any evidence from which a contrary inference could be drawn, the only conclusion to reach is that the additional sum of $8 per hour was an amount paid for the purpose of either meeting some extra expenses or compensating the worker for any additional inconveniences that arose as a result of his working in the country.

44 In my view grounds 3(a) and 3(b) have been made out.

45 The orders that I propose are as follows. The appeal be allowed. The decision of the Compensation Magistrate dated 16 July 1998 be quashed. The matter be remitted back to the Review Officer for a calculation of weekly earnings including a determination as to whether the payment of $46.26 per week comes within the definition of allowance under cl 11(4).

46 STEYTLER J: I have had the advantage of reading the reasons for decision of Owen J. It is consequently unnecessary for me to restate the facts giving rise to the appeal or the grounds advanced in support thereof except insofar as is necessary to make my own, similar, conclusions comprehensible.

47 The respondent is a painter who worked, from time to time, for the appellant. He was injured while working for the appellant. He became entitled to workers' compensation under the Workers' Compensation and Rehabilitation Act 1981 ("the Act"). Section 18 of the Act provides that if a worker suffers a disability as defined in the Act the employer is, subject to the Act, liable to compensate him for it in accordance with Schedule 1 thereof ("the Schedule"). Clause 7(1) of the Schedule in turn provides so far as is material that, when total incapacity for work results from the disability (as it did in this case), the worker is entitled to a weekly payment during the incapacity equal to the weekly earnings of the worker, calculated and varied in accordance with the Schedule. Clause 11 defines the expression "weekly earnings" for the purposes of the Act. The provisions of that clause have, insofar as they are relevant, been set out in the reasons for decision of Owen J and I will not repeat them.

48 There are two issues which give rise to the appeal, each of which bears on the calculation of the respondent's weekly earnings as defined in cl 11. The first arises from the fact that when the respondent did work for the appellant in Perth he received what has been referred to in the judgments below as "the standard rate of $20 per hour" but when working for the appellant in Pannawonica (as he was at the time of his injury) he was paid $28 per hour. The issue is whether the differential of $8 per hour should be categorised as an allowance under cl 11(4) of the Schedule. The second issue arises from the appellant's contention that the amount paid by the appellant to the respondent while he worked in Pannawonica included an amount of $48.26 per week which was paid to him as an allowance to be set aside for annual leave accrual for sub-contract workers. The appellant contends, and the respondent disputes, that this amount too should be treated as an allowance falling within cl 11(4).

49 In this case the payments made to the respondent by the appellant under the agreement reached between them were, as Owen J has said, not derived expressly by reference to an industrial award or industrial agreement. However there was, at the material time, an industrial award, the Building Trades (Construction) Award 1987 ("the Award") which applied to work of the same type or which could fairly be applied to the work performed by the respondent on behalf of the appellant. That being so cl 11(1), (3) and (4) of the Schedule were applicable to the calculation of the respondent's weekly earnings. The effect of those provisions is that the respondent's earnings in this case were to be calculated, for the purposes of the Act, by:

(a) taking the total wages, salary or other remuneration, including overtime and allowances, payable under the Award (upon the assumption that it applied to the work done by the respondent) for one week's work;

(b) adding to that figure any over award or service payment in fact payable to the respondent on a regular basis as part of his wages, salary or other remuneration, including any over award payments in respect of overtime and allowances, and then

(i) overtime, being any payment for hours worked over and above the 38 hours per week stated in the Award as ordinary hours which constitute a week's work and

(ii) any bonus or incentive, shift allowance, weekend or public holiday penalty allowance, district allowance, industry allowance, meal allowance, living allowance, clothing allowance, travelling allowance or other allowance.

50 It is at least implicit in the legislative scheme, if it is to be workable, that, so far as the deductions of overtime and allowances are concerned, if the rate or amount actually paid to the worker in those respects is greater than that provided for by the Award then the sum actually paid will be deducted but, in the hopefully unlikely case in which the Award provides for a rate or sum greater than that actually paid, the award rate or sum will be deducted. In each case the amount deducted in respect of overtime and allowances will equal that already added in the course of implementing steps (a) and (b).

51 This Court has previously held that the allowances referred to in par (c)(ii) above (being those referred to in sub-cl 11(4) of the Schedule) encompass additional sums paid for the purpose of meeting some particular requirement or requirements connected with the service rendered by the worker or as compensation for unusual conditions of that service, whether as tropical or "distance" allowances, "dirt" money or otherwise, regardless of whether or not such items might otherwise fairly be described as part of wages in the ordinary sense (see Wishart v MPL Laboratories, unreported; FCt SCt of WA; Library No 960529; 17 September 1996).

52 It is against this background that the findings of the Review Officer and the Compensation Magistrate must be considered.

53 The Review Officer, when the matter came before him, concluded that the difference between the "standard" rate of $20 per hour and the Pannawonica rate of $28 per hour was not an allowance under sub-cl 11(4). He said, in that respect, the following:

"Although the ... [appellant] argues [that] the $8 is an amount which was clearly added to the standard $20 hour (normally paid for metropolitan work), that in itself does not establish [that] it is an allowance specified in the award for 'country work'. Indeed the award seems to identify the location allowance which ... [is] paid in recognition of the fact [that] a worker works away from home. In the circumstances I do not believe [that] the employer's submission [that] the $304 [$8 per hour multiplied by 38 hours] should be deducted is reasonably made."

54 The location allowance to which the Review Officer referred is one of $18.70 per week which is provided for by Appendix A of the Award.

55 The Compensation Magistrate, on the appeal, in considering what had been done by the Review Officer, said that he "did not deduct the $8 per hour because it was not an allowance under the award". He went on to say that that was "the correct construction of cl 11(1) and 11(4)".

56 I do not consider that it is the correct construction of the clauses referred to. It is no doubt true that the $8 per hour was not an allowance under the Award. However cl 11(4) does not refer to allowances under awards. It refers, when read with cl 11(1), to allowances in fact payable to the worker on a regular basis as part of his or her wages, salary or other remuneration, whether under an award or otherwise. This Court has previously held, in Wishart, that the fact that a worker was paid at one rate for work in Perth and at another for work "in the field" is a sufficient basis, upon the accepted tests, for a Review Officer to draw the inference that the differential was made up of an allowance or allowances in the sense described in that case. It seems to me that that inference should plainly have been drawn in this case. That being so, the sum of $8 per hour was an allowance for the purpose of cl 11(4).

57 I should say, in this respect, that what was said by me in Wishart as regards what comprises an allowance for the purpose of sub-cl 11(4) is as applicable to a calculation of weekly earnings in a case falling within cl 11(1) or cl 11(2) as it is to one falling within cl 11(5). Moreover I am unable to accept the contention, advanced in the appeal, that there is any conflict between what I said (with the concurrence of the other members of the court) in Wishart and what was said by Kennedy J (with the concurrence of Owen J) in C & M Trimboli Plasterers v Fazzolari, unreported; FCt SCt of WA; Library No 970050; 19 February 1997. While Kennedy J did say in Trimboli that in determining what, if any, amount represented, in that case, an over-award payment under cl 11 it appeared to be necessary to deduct "the amount of allowances payable under the award, overtime and the amount payable for a week's work under the award", that was said in a context in which the only allowances under consideration were those provided for by an award, the Building Trades (Construction) Award 1978, which, it was common cause, was applicable to the respondent in that case. His Honour, as I read his judgment, was not suggesting that the only allowances to be deducted by virtue of cl 11(4) are those payable under an award.

58 It follows from what I have said that it was the task of the Review Officer to take the total wages, salary or other remuneration, including overtime and allowances, payable under the Award for one week's work, to add to that total sum the amount of any over-award payment payable to the respondent on a regular basis as part of his wages, salary and other remuneration, including any over award payments in respect of overtime and allowances, and then to deduct any overtime payments referred to in par (c)(i) above and any bonus, incentive or allowance of the kind referred to in par (c)(ii) above. This last category of deductions would include the differential of $8 per hour which, as I have said, should properly be categorised as an allowance for the purpose of cl 11(4). The same would of course be true of the weekly payment of $48.26 if that sum was paid to the respondent as an allowance for the purpose of cl 11(4). However I agree, for the reasons given by Owen J, that the respondent should have the opportunity of leading further evidence (and perhaps making submissions as to the effect of cl 22 of the Award, which deals with annual leave) with respect to the allegation that this sum was paid as an allowance to be set aside for annual leave accrual for sub-contract workers.

59 There is, in the process as I have described it, no question of any "double dipping", notwithstanding submissions on behalf of the respondent to the contrary. If it be accepted that the Award made provision for a "location" allowance of $18.70 per week and that the respondent was in fact paid a greater "location" allowance of $8 per hour, there will, as I have endeavoured to explain above, only be the one deduction of $8 per hour, the former amount being taken to be included within the latter. If, on the other hand, the location allowance provided for in the Award had been greater than that in fact paid then only the amount provided for in the Award would have been deducted. In other words, where an award makes provision for a particular allowance and a contract of employment provides for an allowance for essentially the same purpose, only the greater of the two will be deducted, the smaller amount being taken to be included within or to be part of the greater.

60 It follows from what I have said that, like Owen J, I consider that the appeal should be allowed and that the decision of the Compensation Magistrate made on 16 July 1998 should be quashed as should that of the Review Officer. I, too, would remit the matter to the Review Officer for reconsideration in accordance with these reasons.

61 PARKER J: I have had the advantage of reading in draft the reasons for decision now published by Owen and Steytler JJ. I agree with the reasons of their Honours and with the orders they propose.