Farrell v Metromix Pty Limited

IN THE SUPREME COURT OF NEW SOUTH WALES COURT OF APPEAL

CA 40199/00 CC 33608/98 STEIN JA HODGSON JA IPP AJA

Friday, 8 June 2001 John FARRELL v METROMIX PTY LIMITED

The appellant was involved in a motor vehicle accident when employed by the respondent as a truck driver. As a result of the accident he suffered neck and back pain At the time of the accident the appellant was working significant overtime. Commissioner Hogg of the Compensation Court assessed the appellant's loss of earnings utilising the discretion conferred by s 40(1) of the Workers Compensation Act 1987. He accepted that the reduction in earnings following the accident was not entirely due to the appellant's injury, but also resulted from an attitudinal shift on the part of his employer with respect to the allocation of overtime. An appeal to a judge of the Compensation Court was dismissed. The appellant complains that the Commissioner's discretion miscarried and further, that he gave no reasons to indicate those factors he regarded as relevant to the discretion.

1. The loss of income caused by a change in the employer's attitude with respect to offering the appellant overtime was a factor which could be taken into account in the exercise of the wide discretion imposed by s 40(1) of the Workers Compensation Act . It was a relevant factor to assist in ascertaining the appellant's loss of earning capacity which is due to the work injury, as opposed to loss which is due to other circumstances.

2. The Commissioner gave sufficient reasons for the exercise of the discretion conferred by s 40(1).

3. The Commissioner made no calculation as required under s 40(2)(b) with respect to the appellant's period of unemployment following his redundancy on 11 June 1999. As the appellant had no actual earnings in this period it was necessary for the Commissioner to ascertain what the worker would be able to earn after the injury.

4. The non injury factor causing a loss of overtime could not be a relevant discretionary consideration for this period as it only operated during the time of his employment by the respondent.

2. Award of weekly compensation under s 40 of the Worker's Compensation Act 1987 set aside.

3. There be substituted therefor an award in favour of the appellant pursuant to s 40 of the Act of $75 per week from 15 July 1997 to 11 June 1999.

4. The issue of the amount of weekly compensation payable post 11 June 1999 be remitted to the Compensation Court for determination according to law. oOo

IN THE SUPREME COURT OF NEW SOUTH WALES COURT OF APPEAL

CA 40199/00 CC 33608/98 STEIN JA HODGSON JA IPP AJA

Friday, 8 June 2001 John FARRELL v METROMIX PTY LIMITED JUDGMENT

1 STEIN JA: 2 The appellant, John Farrell, commenced employment with the respondent, Metromix Pty Limited, as a truck driver in 1994. On 8 July 1996 he was involved in a motor vehicle accident whereby he was thrown about the cabin of his vehicle and sustained injuries. He was taken to hospital but was able to resume work the next day. On the following morning the appellant felt his back starting to 'seize-up' and was forced to stop work. He saw the respondent's doctor who put him on light duties. However, he remained on those duties for only a short time and returned to driving the truck. Thereafter, the appellant complained of neck pain and a very sore back, amongst other symptoms. 3 At the time of the accident the appellant was working a significant amount of overtime. He said some 40 hours per week although the Commissioner in the Compensation Court believed this to be an exaggeration. It is apparent however, that from around July 1997, after the appellant returned from holidays, that he was offered less overtime than before. 4 It is difficult to see that he lost any overtime of consequence prior to mid 1997. Certainly the wage schedule, tendered in evidence by the appellant, indicated only a small reduction in average weekly earnings for the year following the accident (July 1996 - June 1997). This, and evidence from Mr Farrell himself, led the Commissioner to conclude that for the period from the date of injury to the middle of 1997, he was not satisfied that the wage loss in the wages summary reflected the effects of the accident. 5 Following the appellant's return from holidays in July 1997 it appears that there was some animosity displayed by the supervisor towards him. According to the appellant, this changed attitude lead to the gradual reduction in overtime offered to him. He said that the employer 'cut back' his overtime. In cross-examination the appellant was asked that if he had been offered the same overtime (after July 1997) as before, whether he would have been able to do it. His answer was equivocal: No if I felt - done it, yes I probably would have, if I could have done it. 6 The next question put to him was: What I am suggesting to you is that physically you could have done it? 7 To which he answered: Well maybe I could have until such time that my back seized us, yes. ['us' may be an error for 'up'] 8 Later he was asked whether the only reason he did less overtime, as time went on, was because of the attitude that the respondent had to him. The appellant answered: The attitude towards me yes because if you said anything to the allocator you got an 8 hours syndrome. Everybody goes through it. 9 With regard to the issue presented by the evidence the Commissioner concluded: … The time when I think the problem really arises is when the applicant says that he resumes work after his holidays in the middle of 1997. This is when some loss of significance is shown in the wages schedule, some $274 odd per week. I have been at pains earlier in these reasons to indicate that it was at this stage that the perceived attitudinal change occurred between management and the applicant, and I was at some pains to point out that I also considered that the applicant did suffer from this time some residual effects of the motor vehicle accident which had an effect on his earning capacity. 10 The Commissioner was satisfied that it was a combination of both matters, the attitudinal change and the effects of his injuries, that caused the worker to lose some moneys after July 1997. But the Commissioner found that the loss referable to the effects of his injuries was 'in no way reflected [by] a figure approaching $275 per week'. The Commissioner also noted that the loss for the last period (July 1998 to June 1999) was, by contrast, $126 per week. Again, the Commissioner emphasised that any losses in earnings occurring during that period was as a result of both factors - the changed attitude of the employer (regarding overtime) and the ongoing effects of his injuries. 11 Commissioner Hogg referred to the worker being unable to change tyres and climb up and down trucks. He said that these were necessary adjuncts to the performance of duties as a truck driver but 'do not indicate a major economic incapacity on the open labour market'. 12 Utilising the discretion under s 40(1) of the Worker's Compensation Act 1987 (the Act) the Commissioner assessed the worker's loss of earning capacity at $75.00 per week from 15 July 1997 to the date of judgment (11 August 1999) and continuing. 13 The appellant appealed to a judge of the Compensation Court who found no error of law and dismissed the appeal. The appeal to this court lies only in respect of error of law. 14 The core of the appellant's complaint is related to the Commissioner's exercise of discretion under s 40(1). As I understand the submission of the appellant, it is contended that, in exercising his discretion, the Commissioner was not entitled to take into account the reduction of overtime offered to the appellant because of the attitudinal change by the respondent employer. It is said to be an irrelevant factor. Further, it is maintained that the Commissioner gave no reasons to indicate what factors he regarded as relevant to the discretion and how he brought them into account. In short it is submitted that the discretion miscarried. 15 As evidence of this, the appellant relies on what it claimed to be an irrational reduction to $75.00 per week of two significantly different figures with respect to two different years, viz $272 per week and $126 per week respectively. 16 The appellant makes a further submission which may be disposed of shortly. It is maintained that the Commissioner transposed the agreed figure of $1,000 comparable earnings from the period July 1998 to June 1999 and used it also with regard to the preceding year. It seems that the Commissioner probably did utilise the $1,000 figure for the July 1997 to June 1998 period. But I see nothing wrong in this. On the face of the agreed wages summary, and in the absence of any explanation as to its meaning, the Commissioner was entitled to assume, using his expertise as he was permitted, that the $1,000 figure also applied to the earlier periods. Given that the appellant's actual earnings, including extensive overtime, was $1,002.70 per week for the 12 months prior to the injury, the inference was more than truly open. There was no other evidence before the Commissioner and he had to do the best he could with the paucity of material. 17 The most elucidating judgment on the process to be followed in relation to quantifying compensation for partial incapacity is that of Kirby P in Australian Wheat Board v Pantaleo (1984) 3 NSWLR 530 at 538 - 541. [See also Australian Wire Industries Limited v Nicholson (Unreported, Court of Appeal, 4 February 1985), Kesen v Luke Singer Pty Limited (1989) 18 NSWLR 566 and Kraturn Pty Limited v Quinn (1990) 6 NSWCCR 326]. 18 The 'first stage' is to calculate a figure for s 40(1)(a) of the Act. This requires the ascertaining of the probable earnings of the worker had he not been injured. Kirby P pointed out that this limb of the paragraph required three hypotheses to be accepted: that an injury had not occurred; that whatever actually occurred, the worker is presumed to have continued earning as a worker and, whatever the real circumstances, that he continued in the same or comparable employment. These assumptions must be made whatever the facts actually establish in the particular case. 19 The next step in the 'first stage' is to determine what the worker is earning, or is able to earn as an average weekly sum in some suitable employment after the injury. This is provided in s 40(1)(b) of the Act. As Kirby P acknowledged, if the worker is earning an average weekly amount, that will normally be an end of the inquiry. See also J.C. Ludowici & Son Pty Limited v Cutri (1992) 26 NSWLR 580. If he is not so earning, then the decision-maker has to fix a hypothetical sum which the worker is able to earn. 20 Having completed stage one of the process of computation, the decision-maker is entreated to deduct (b) from (a). However, the resulting figure is not automatically to be awarded to the incapacitated worker. In the 'second stage', the decision-maker is commanded not to award more than the difference between the two sums. Further, he or she 'is required to exercise a discretion awarding only that amount of the difference as appears "proper" in the circumstances', s 40(1). Kirby P observed that it is here that the artificialities which may result from the required hypotheses in the first stage can be adjusted to take account of the 'realities of law and fact proved in the evidence of the particular case'. 21 For a recent discussion of the necessary steps in the process, see Mitchell v Central West Health Service [1997] 14 NSWCCR 527. 22 In the instant case the Commissioner took into account, under the s 40(1) discretion, the evidence of the applicant as to the change in attitude of his employer after he returned from holidays in the middle of 1997. There was apparently some animosity shown to the worker by his supervisor and this resulted in him being offered less overtime than before. The Commissioner found that he could not be satisfied that all of the loss of overtime resulted from his injury. There was, so he found, a duality of factors leading to a loss of overtime. These were the effects of his injuries and 'some attitudinal change towards him by his employers'. 23 The Commissioner repeated that: … I am satisfied, however, as a combination of both of those matters, that is, the attitudinal change and the effects of the injuries that he did lose some money after July 1997. …

24 The issue in the appeal is whether the loss of overtime caused by the change in attitude of the employer to offer the worker overtime was a matter which could only be addressed under the calculation in s 40(2)(a) and is not to be considered in the discretion to be exercised under s 40(1). I do not see that the particular factor comes within the words used in subsection (2)(a). It does not appear to have been taken into account in the wages schedule tendered to the Commissioner. In my opinion, it was a matter which could be taken into account in the exercise of the wide discretion imposed by s 40(1) while the worker continued to be employed by the respondent. The ultimate purpose of the exercise under s 40(1) is to determine what award of weekly payments should be made for the worker's partial incapacity. It is the ascertainment of the financial loss sustained by the worker by reason of the incapacity (Australian Iron and Steel v Elliott (1966) 67 SR (NSW) 87). Putting it another way, it is to value 'the diminution in the earning capacity of the worker which he suffered as a result of the relevant injury' (Malco Engineering v Ferreira (1994) 10 NSWLR 117). It cannot be more than the difference between the figures produced from s 40(2)(b) and (a), but it may be less if there are discretionary factors which dictate this course. Further, there may not be a doubling-up of consideration of factors under s 40(2)(a) and the s 40(1) discretion. There was no doubling-up here. Finally, the reduction arrived at must be proper in the circumstances of the case and 'proper' given the incapacity in question. See Australian Wheat Board v Pantaleo at 538, 541. 25 The circumstance of an employer reducing a worker's overtime because of animosity or attitudinal change which has nothing to do with a workers' injury or his physical ability to carry out the job is, in my opinion, a proper factor to take into account under s 40(1). It assists in ascertaining the applicant's loss of earning capacity which is due to the work injury, as opposed to what loss might be due to other circumstances. 26 This conclusion means that I see no error of law by the Commissioner in his award of $75.00 per week from 15 July 1997 up until 11 June 1999, when the appellant was made redundant. I should also mention that I see nothing in the appellant's complaint of absence or lack of reasons. The judgment of the Commissioner is replete with sufficient reasons which led to his exercise of the s 40(1) discretion. He gave a sufficient exposition of the essential basis for the exercise of the discretion.

27 From 11 June 1999 the appellant was on the open labour market and, despite looking for work, remained unemployed until and including when he gave evidence to the Compensation Court on 11 August 1999, a period of two months. He gave evidence of his unsuccessful searches for work. 28 With regard to this period, it is conceded by the respondent that the Commissioner made no calculation as required under s 40(2)(b). The appellant had no actual earnings in this period, so it was necessary for the Commissioner to ascertain what the worker 'would be able to earn in some suitable employment' after the injury. As Kirby P pointed out in Pantaleo (at 541) the alternative phrase 'or is able to earn' imposed on the decision-maker the task of fixing a hypothetical sum which the worker is able to earn, although in fact he is not earning. This the Commissioner did not do. Moreover, when the Commissioner came to make the final calculation under s 40(1), it seems to me that the discretion which he exercised regarding the extraneous (non injury related) factor relating to the reduction of overtime by the employer, could not be properly brought into account. It would not be a relevant discretionary factor because it only operated while the appellant was employed by the respondent. 29 With respect to the Commissioner, both of these errors were errors of law and, since the award is a continuing one, have continued impact. 30 In this regard, I do not accept the submission of the respondent that the Commissioner swept up the overtime issue into his conclusions on the economic incapacity of the respondent on the open labour market. The reasoning of the Commissioner is plain and repeated throughout his judgment, that the award he made took account of the fact that part of the appellant's lost earning capacity did not relate to his injury but to an extraneous matter concerning the reduction of overtime offered by the employer. This was the principal factor (if not the only one) which led to the exercise of the discretion under s 40(1) to reduce the loss to $75.00 per week. It is a factor which could not operate after the appellant left the respondent's employ on 11 June 1999. 31 Accordingly, the matter should be remitted to the Commissioner in so far as the award for weekly incapacity post dated 11 June 1999. At the remitter, the Commissioner can determine any application to adduce updating evidence. I propose the following orders.

2. Award of weekly compensation under s 40 of the Worker's Compensation Act 1987 set aside.

3. There be substituted therefor an award in favour of the appellant pursuant to s 40 of the Act of $75.00 per week from 15 July 1997 to 11 June 1999.

4. The issue of the amount of weekly compensation payable post 11 June 1999 be remitted to the Compensation Court for determination according to law. 33 HODGSON JA: I agree with Stein JA. 34 IPP AJA: I agree with Stein JA. oOo

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