Harrington v Harrington

High Court of Australia|1976-02-28|Before: Brennan JJ

High Court of Australia Gibbs C.J. Mason, Aickin, Wilson and Brennan JJ. Harrington v Harrington [1981] HCA 42

ORDER Appeal allowed in part with costs. Cross-appeal dismissed with costs. Order that the order of the Full Court of the Supreme Court of South Australia be set aside and in lieu thereof it be ordered as follows:Appeal dismissed with costs.Cross-appeal dismissed with costs. Order of the Full Court of the Industrial Court of South Australia varied by deleting the answers to questions III(c) and VI of the case stated and in lieu thereof answering those questions as follows: Question III(c). Is it proper for the Court to take into consideration in fixing the maximum liability of the employer pursuant to s. 51(4)(b) the likelihood of monetary inflation? Answer. No; but regard may be had to evidence of likely variations in the weekly rate of compensation pursuant to s. 71. Question VI. If the Court fixes the total liability of the employer pursuant to s. 51(4)(b) in a sum in excess of $25,000, is it appropriate in the circumstances of this case for the Court to redeem the employer's liability to make weekly payments of compensation to the worker and, if so, upon what basis? Answer. The Court has power to order redemption if, acting under s. 51(4)(b), it fixes the total liability of the employer in a sum in excess of $25,000, but it has a discretion to refuse or adjourn an application for redemption when to grant such an application would result in the workman being deprived of the full right to compensation to which he has become entitled by virtue of the order made under s. 51(4)(b). And it is ordered that subject to such variation the answers given by the Full Court of the Industrial Court of South Australia to the questions in the said case stated be in all other respects affirmed.

On this appeal, which is brought by special leave from a judgment of the Full Court of the Supreme Court of South Australia, it is necessary to determine the meaning and effect of ss. 51(4)(b) and 72 of the Workmen's Compensation Act 1971 S.A., as amended ("the Act"), in the form in which those sections were placed by the Workmen's Compensation Act Amendment Act 1973 S.A. ("the Amendment Act of 1973").

On 28 February 1976 the appellant, who was a workman within the meaning of the Act, sustained personal injuries arising out of or in the course of his employment with the respondent. The appellant was then aged sixteen. His injuries were serious, and have rendered him totally and permanently incapable of work, but have not reduced his expectation of life. The respondent is making weekly payments of compensation, which at the date of the proceedings in the Industrial Court of South Australia to which reference is about to be made were at the rate of $135. The respondent made application to the Industrial Court for an order pursuant to s. 72 of the Act redeeming his liability to pay weekly or other compensation to the appellant, and the appellant applied to that Court for various relief including an order that the total liability of the respondent in respect of payments under s. 51 be fixed at $500,000 or such higher or other sum as to the Court might appear appropriate. The two applications came on for hearing together, and a case was stated under s. 46 of the Act for the consideration of the Full Industrial Court. That Court gave its decision answering the questions asked by the stated case, and an appeal from that decision was brought by the present respondent to the Full Court of the Supreme Court. The present appellant cross-appealed. The Full Court of the Supreme Court allowed the appeal by varying the answer to one question, but otherwise affirmed the answers given by the Industrial Court. An appeal has been brought to this Court from the decision of the Full Court and the respondent has cross-appealed.

Before I set out the questions asked in the stated case and the answers given to them, it is convenient to refer to the provisions of the Act which have given rise to the questions. By s. 9 of the Act it is provided that if in any employment personal injury arising out of or in the course of the employment is caused to a workman, his employer shall, except as provided in the Act, be liable to pay compensation in accordance with the Act. The compensation payable where total or partial incapacity for work results from the injury is provided for by s. 51, the relevant provisions of which are as follows:

(1) Where total or partial incapacity for work results from the injury, the amount of compensation shall, subject to subsection (5) of this section, be a weekly payment during the incapacity equal to the average weekly earnings of the workman during the period of twelve months immediately preceding the incapacity if the workman has been so long employed, but if not, then for any less period during which he has been in the employment of the same employer.

(4) The total liability of the employer in respect of payments under this section shall not -

(a) exceed the sum of eighteen thousand dollars unless the injury results in total permanent incapacity for work; and

(b) where the injury results in total permanent incapacity for work, exceed the sum of twenty-five thousand dollars or such greater amount as is fixed by the Court having regard to the circumstances of the case.

(5) No workman shall receive during total incapacity for work a lesser amount per week than an amount prescribed for the purposes of this subsection notwithstanding that the amount so prescribed exceeds the average weekly earnings of that workman immediately before that incapacity occurred.

The provisions of s. 51(4)(b) were materially amended by the Amendment Act of 1973. Before that date the legislation provided that the total liability of the employer in case of total permanent incapacity should not exceed $15,000 and conferred no power on the Court to fix any greater maximum. The Amendment Act of 1973 not only increased the specified maximum from $15,000 to $25,000 but for the first time empowered the court (i.e., the Industrial Court) to fix a greater amount. By s. 59 of the Act the employer is rendered liable to pay as additional compensation reasonable expenses incurred by the workman as a result of his injury for medical and other services and for repairing or replacing damaged clothing, personal effects or tools of trade. The details of this provision do not concern us. Section 71 enables any weekly payment to be reviewed at the request either of the employer or of the workman, and provides, inter alia, as follows: On any such review regard shall also be had to variations in the weekly earnings which would pursuant to any industrial award or agreement have applied to the workman if he had continued in the same employment as that in which he was engaged before the incapacity. Section 72(1) and (2) provides as follows:

(1) The liability for weekly payments or other compensation under this Act may, on application by or on behalf of either the workman or the employer, be redeemed by the payment of a lump sum to be settled, in default of agreement, by proceedings under this Act, and such lump sum may be ordered by the Court to be invested or otherwise applied as abovementioned, and where permanent total or partial incapacity for work results from the injury, any weekly payments made prior to an application under this section shall, notwithstanding anything in this Act, be in addition to any such lump sum but nothing in this section shall be construed as preventing agreements being made for the redemption of a weekly payment by a lump sum.

(2) In settling a lump sum pursuant to subsection (1) of this section, the Court shall not, in any case, take into account any amount, that the employer may become liable to pay by way of weekly payments, beyond an amount of twenty-five thousand dollars.

The provisions of s. 72(2) were inserted by the Amendment Act of 1973.

The appellant challenges the answers given by the Full Court of the Supreme Court to questions V and VI of the stated case. Those questions, and the answers given by the Full Industrial Court to them, were as follows:

case stated answers of full industrial court V. If yes to question IV, in settling a lump sum pursuant to sub-section (1) of section 72, can the Court take into account the fact that the Court has fixed the total liability of the employer pursuant to section 51(4)(b) in a sum in excess of $25,000? No. VI. If the Court fixes the total liability of the employer pursuant to section 51(4)(b) in a sum in excess of $25,000, is it appropriate in the circumstances of this case for the Court to redeem the employer's liability to make weekly payments of compensation to the worker and, if so, upon what basis? The Court has the jurisdiction and power to order redemption of the employer's liability for weekly payments of compensation after the Court fixes the total liability of the employer in a sum in excess of $25,000. But the Court has a discretion to adjourn or refuse an application to redeem if, on the whole of the relevant evidence submitted, it reaches the conclusion that the justice of the case necessitates such application for redemption being adjourned or refused.

In the Supreme Court the answer to question V given by the Industrial Court was affirmed, but the appeal was allowed in relation to question VI and the following answer was substituted for that given to that question by the Full Industrial Court: Yes - upon the basis laid down in s. 72(2) of the Act. Both courts agreed that in fixing the lump sum on payment of which the liability for compensation would be redeemed the Court could not take into account the fact that the total liability of the employer had been fixed under s. 51(4)(b) at a sum greater than $25,000. However, the Full Industrial Court considered that the Court had a discretion to adjourn or refuse an application to redeem in a case in which it would appear unjust to fix a sum on the basis laid down in s. 72(2) of the Act, whereas the Supreme Court considered that an employer who made application had a right to redemption and that there was no discretion to defeat the right by an adjournment or refusal of the application.

The respondent, by his cross-appeal, seeks to set aside that part of the judgment of the Full Court of the Supreme Court which affirmed the answers given by the Full Industrial Court to questions I, III(a) and III(c). Those questions, and the answers given to them, were as follows:

case stated answers of full industrial court I. Which, if any of the agreed facts, set out in paragraph 4 of the case stated, may the Court take into consideration to determine whether the total liability of the employer in respect of payments under section 51(4)(b) should exceed the sum of $25,000? All such facts as bear upon the actual economic consequences of the workman's incapacity as contrasted with the statutory maximum sum of $25,000, and, in the particular circumstances of this case, the age of the workman, the degree of economic incapacity which has resulted from the relevant injury, and the lack of evidence of any moderating benefits resulting to the workman from his employment in consequence of his injury and resultant incapacity. III. If yes to question II - The same facts as are relevant to a determination that the total liability of the employer ought to be increased beyond $25,000 are also relevant to the fixation of actual quantum. However, care should be taken to avoid double counting, having regard to the provisions of section 59 of the Act, and also the possibility of compensating beyond actual need. Due allowance should also be made for any relevant contingencies disclosed by the evidence and which require moderation or adjustment of any figure initially computed. (a) Which, if any, of the agreed facts set out in paragraph 4 of the case stated, is the Court entitled to take into consideration to determine the quantum of the total liability of the employer in respect of payments under section 51(4)(b) where the Court decides to fix a sum in excess of $25,000? (c) Is it proper for the Court to take into consideration in fixing the maximum liability of the employer pursuant to section 51(4)(b) the likelihood of monetary inflation? Yes, if the evidence is sufficiently definitive as to enable it reasonably to do so.

It is convenient to deal first with the cross-appeal, which is concerned with the question what matters the Court may consider in fixing the maximum liability of the employer. The discretion conferred by s. 51(4)(b) to fix a greater maximum than $25,000 is to be exercised "having regard to the circumstances of the case". The Court is thus given a very wide discretion, to be exercised in the light of all the circumstances that may be relevant to the question whether a greater amount than $25,000 should be fixed as representing the total liability of an employer to a workman whose injury has resulted in total permanent incapacity for work. It is clear that the object of the Act is to provide compensation for the loss of the workman's earning capacity (and for the expenses referred to in s. 59) and not for pain, suffering or the loss of amenities of life. Moreover, the employer's liability does not depend on whether he was at fault, or on his capacity to pay (since he is obliged by s. 123 of the Act to be fully insured). Speaking generally, therefore, the circumstances of the case which are relevant will not include those which relate to the manner in which the injury was suffered, the nature and consequences of the injury (except in so far as they establish that the workman is totally and permanently incapable of work) or the financial position of the employer. On the other hand, circumstances will be relevant if they tend to show that the maximum of $25,000 will provide inadequate compensation, particularly having regard to the age of the workman and to the amount of the weekly payment he would be entitled to receive under the Act, and also to the amount of any payments, allowances or benefits within the meaning of s. 68 of the Act that the workman is likely to receive. However, as was correctly said by King C.J. in the Full Court, it is not the function of the court to substitute a formula for the expression "circumstances of the case".

The main argument submitted on behalf of the respondent in relation to question I and III(a) was that upon the proper construction of s. 51(4)(b) it should be held that the legislature intended that the amount of $25,000 should be treated as the standard for cases of total permanent incapacity, and contemplated that the maximum (whether it be $25,000 or a greater amount fixed by the Court) would not necessarily provide to the workman full and complete compensation, if by that is meant the amount that would allow the workman to receive the weekly payment fixed in accordance with ss. 51 and 71 for the whole of his working life. It was accordingly submitted that the Court should fix a greater amount than $25,000 only if it considered that the circumstances showed that there should be a departure from the standard. The answer to questions I and III(a) which the respondent proposed was the following:

All such facts as bear upon the actual economic consequences of the worker's incapacity treating the maximum of $25,000 as the standard for most cases of total permanent incapacity for work.

In one sense, no doubt, the amount of $25,000 is a standard, in that it represents the total liability of the employer unless the Court fixes a greater amount. But there is nothing in the words of the section to reveal an intention that the maximum should be fixed at a level which will provide less than complete compensation, or that an amount greater than $25,000 should only be fixed if special circumstances are shown. There is nothing in the section that suggests that there is any fetter on the discretion of the Court to fix a greater amount than $25,000 if in the light of all the relevant circumstances it considers that that sum would be inadequate to allow the injured workman to receive proper compensation. For these reasons I cannot agree that the questions should be answered by declaring that the amount of $25,000 should be treated as the standard for most cases of permanent incapacity.

On behalf of the respondent it was also suggested that the words "the degree of economic incapacity" used by the court in its answer to question I were not completely apt. However, the question is of course answered on the assumption that the injury has resulted in a total permanent incapacity for work, and the words, "the degree of economic incapacity" are intended to refer, not to the degree of physical incapacity, but to the amount of the weekly wages lost and the period for which the loss is likely to endure having regard to the age of the workman.

For these reasons I agree with the learned judges of the Supreme Court that there was no error of law in the formulation by the Full Industrial Court of the answers to questions I and III(a).

Both counsel agreed that the answer given to question III(c) was likely to be misleading. It is clear that the Court in fixing the maximum liability under s. 51(4)(b) is not concerned with inflation as such. The starting point is the average weekly earnings of the workman during the period of twelve months immediately preceding the incapacity or the amount prescribed for the purposes of s. 51(5) if that is the larger sum. However, the Court in fixing the maximum must take into account that any weekly payment may be reviewed under s. 71 and that on any such review regard will be had to the variations in the weekly earnings which would pursuant to any industrial award or agreement have applied to the workman if he had continued in the same employment. The Court is therefore obliged to consider what variations in the weekly earnings are likely to occur and in answering this question the likelihood of monetary inflation is relevant. This is in substance the reasoning which commended itself to the Full Court of the Supreme Court and to the Full Industrial Court, but to avoid any possibility that the answer given by those courts to question III(c) may be productive of misunderstanding I would substitute the answer upon which the parties agreed, namely:

No; but regard may be had to evidence of likely variations in the weekly rate of compensation pursuant to section 71.

I now turn to consider the question raised by the appeal, which is the most difficult question raised by the case. Before us, counsel for the appellant did not strongly press the argument that if the Court does proceed to settle a lump sum on payment of which the liability for compensation will be redeemed it is permissible, in settling the sum, to take into account the fact that the Court has fixed, or may fix, a greater amount than $25,000 as the total liability of the employer in respect of payments under s. 51. The words of s. 72(2) are unambiguous and clearly forbid the Court to take into account any amount for which the employer may become liable beyond $25,000. However, it was submitted on behalf of the appellant that the Court, on an application by an employer for redemption, has a discretion to adjourn or refuse such application where an order has been made or is likely to be made under s. 51(4)(b) increasing the maximum liability of the employer to a sum in excess of $25,000. It was correctly pointed out that if the Court has no such power it will be possible for any employer to defeat the effect of an order fixing a greater maximum liability than $25,000 by simply making an application to redeem the liability. If the employer has an absolute right to redeem, and the lump sum is settled on the basis that there can be no greater liability for weekly payments than $25,000, the order of the Court fixing a greater amount will be rendered for all practical purposes quite ineffective.

On the other hand, counsel for the respondent submitted that long before 1973 it had become settled that the effect of provisions similar in form to s. 72(1) was to give to the employer a right to redeem, at least if there is sufficient material to enable a reasonable estimate to be made of the sum to be paid in redemption. It was submitted that before the Amendment Act of 1973 was passed the Court had no discretion to refuse or adjourn an application for redemption and that the fact that s. 72(1) was not amended when that Act was passed indicated that it was the intention of the legislature that the employer's right to redeem should remain unaffected by the new power given by s. 51(4)(b) to increase the maximum liability.

Section 72(1) does not in express terms either empower the court to order redemption, or require the court to settle the lump sum on payment of which the liability is redeemed. Under the corresponding English statutes, and until 1971 in South Australia, it was provided that the liability might be redeemed where any weekly payment had been continued for not less than six months, and it was held in a number of cases that the employer had an absolute right to redeem when this condition was satisfied: Kendall & Gent Ltd. v. Pennington [1] ; Elliott Ltd. v. Hobbs [2] . In Michaelis, Hallenstein & Co. Pty. Ltd. v. Lewis [3] this Court accepted the correctness of those authorities, and held that under a section which (like s. 72(1)) provided that the liability might be redeemed on application by either the workman or the employer, the workman also had a right to redeem [4] . Nevertheless, all the members of the Court recognized that it was open to the Board (which under the legislation there in question performed the functions which in South Australia are performed by the Court) to make a declaration of liability rather than a redemption order [5] . In that case the workman, although incapacitated, was in fact, owing to war-time conditions, employed in his former work at a higher wage. The decision of the Court was that the board had jurisdiction to hear and determine the application for payment of a lump sum in redemption of the employee's right to weekly payments, but left it to the discretion of the board to decide what order should be made. Rich J. said [6] : "The form of order is a matter for the discretion of the Board and may be either an order for redemption or a declaratory or suspensory award." In spite of the repetition by some members of the Court of the statement that there is a right to redeem, it is clear that the Court rejected the notion that the board was bound to make a redemption order when it would be unjust to do so.

(1912) 5 B.W.C.C. 335. 2. (1929) 22 B.W.C.C. 509. 3. (1944) 68 C.L.R. 613. 4. (1944) 68 C.L.R., at pp. 619, 625. 5. (1944) 68 C.L.R., at pp. 622, 623, 626. 6. (1944) 68 C.L.R., at p. 623.

The decision of the House of Lords in Clawley v. Carlton Main Colliery Co. [7] is also opposed to the view that a redemption order must be made even though it will result in the workman being deprived of part of the compensation to which the Act entitles him. In that case the workman had before his injury been earning wages of £1.16.4 per week. His employers agreed to find him a house, to find him suitable light work and to pay him wages which would enable him to earn £1.7.6 per week and 8/10d. a week compensation. Subsequently the employers applied to redeem the weekly payments of 8/10d. It was held that they had no right to redeem. Lord Finlay L.C. said [8] :

It is obvious that the redemption under clause 17 [of the First Schedule to the Workmen's Compensation Act 1906 U.K.] was to be a final settlement of all liability on the part of the employer. This it would be if the weekly payment represented the whole compensation to which the workman was entitled under the Act. But where the weekly payment does not represent the whole, but only the balance of liability which remains, after taking into account any benefits or advantages which the workman may receive from the employer and which may or may not be continued, a final settlement by redemption of the weekly payments would be grossly unjust to the workman. The true measure of compensation in such a case is the weekly payment plus so much of the benefits and advantages conceded by the employer as will make up the difference between the statutory liability and the agreed weekly payment, and to cancel the whole liability by redemption of a part only would result in the workman's being deprived of a part of the compensation to which he is entitled. Viscount Haldane said [9] that cl. 17 did not mean that "the whole of the liability of the respondents is to be extinguished by redemption of what is merely part of it", and went on to say [10] : I do not think it was intended to extinguish, by payment of a sum that may be quite inadequate, the liability for the residue of the compensation which the earlier words confer by a clear title. In Michaelis, Hallenstein & Co. Pty. Ltd. v. Lewis [11] , Latham C.J. said that this case depended on the particular provisions of the English statute, but with all respect the construction adopted by Lord Finlay L.C. and Viscount Haldane is founded on considerations of fairness and justice and ought to be applied unless the words of the Act show that it is inapplicable. 1. [1918] A.C. 744. 2. [1918] A.C., at pp. 749-750. 3. [1918] A.C., at p. 754. 4. [1918] A.C., at p. 755. 5. (1944) 68 C.L.R., at p. 621.

After a consideration of these cases, the Supreme Court of South Australia, in Marinakis v. General Motors Holdens Pty. Ltd. [12] , reached the conclusion that the right to a redemption order is not so absolute and unqualified as to compel an arbitrator (whose place has of course now been taken by the Court) to make it even though he has no material before him on which he can make any reasonable estimate of the sum.

In the light of these authorities it cannot be said that it was accepted, before the Amendment Act of 1973 was passed, that an employer had an absolute right to a redemption order even if it appeared that it would be unjust to make such an order.

The amendments made by the Amendment Act of 1973 are at first sight contradictory. Section 72(2) appears to take away what is given by s. 51(4)(b). The provisions of the latter sub-section, empowering the Court to fix a greater sum than $25,000 as the maximum total liability of the employer, would be rendered completely nugatory if the employer had an absolute right to redeem his liability on the basis that the maximum total liability was $25,000. It cannot be supposed that the legislature intended such a result. Full effect may however be given both to s. 51(4)(b) and s. 72(2) if s. 72(1) is not construed as obliging the Court to make a redemption order which would destroy the increased right given by an order under s. 51(4)(b). For the reasons I have given, I do not understand s. 72(1) to have that effect. The result is not an irrational one. The legislature may have taken the view that it was just to allow a workman to receive weekly payments which in total exceeded $25,000, but that it was not right to allow the workman to receive a lump sum settled on the basis of the increased amount; such a sum might be very large, and it may have been thought more beneficial to the workman and fairer to the employer that the workman should continue to receive weekly payments rather than be paid a lump sum of such magnitude. However this may be, in my opinion the true effect of the legislation is that the Court may refuse a redemption order whose effect would be to extinguish the right given under s. 51(4)(b) and allow the employer to discharge his liability by payment of a sum which provides less than the full compensation for which the Act provides.

On behalf of the respondent, it was submitted that the legislature contemplated that a redemption order might result in the workman receiving less compensation than if the order had not been made, and reliance was placed on the fact that weekly payments made prior to the application for redemption are to be disregarded in computing the amount of the lump sum: see the words of s. 72(1) and Perry Engineering Co. Ltd. v. Mermingis [13] . It was said that in these circumstances a workman will receive less compensation if an application for redemption is made sooner rather than later. That is true, but although the redemption order brings the weekly payments to an end, it does not affect any right given to the workman by the Act. The effect of the Act is that the workman is entitled to retain, in addition to the lump sum, the weekly payments made before the application for redemption. The redemption order does not affect that entitlement. But a redemption order, if made, would destroy the right given by an order under s. 51(4)(b). The provision construed in Perry Engineering Co. Ltd. v. Mermingis throws no light on the present question.

For these reasons I have reached the conclusion that the Full Court of the Industrial Court was right in taking the view that the Court has the power to refuse or adjourn an application for redemption when to grant such an application would result in a workman being deprived of the full right to the compensation to which he has become entitled by virtue of an order made under s. 51(4)(b).

I would accordingly allow the appeal and would answer question VI as follows:

The Court has power to order redemption if, acting under s. 51(4)(b), it fixes the total liability of the employer in a sum in excess of $25,000, but it has a discretion to refuse or adjourn an application for redemption when to grant such an application would result in the workman being deprived of the full right to compensation to which he has become entitled by virtue of the order made under s. 51(4)(b). I would dismiss the cross-appeal, but would vary the answer to question III(c) in the manner indicated above. Mason J.

I am in general agreement with the reasons for judgment prepared by Gibbs C.J. and with the answers which he proposes to the questions asked in the stated case.

Questions I and III(a) raise a difficult problem. The form of s. 51(4)(b) and the history of the legislation afford support for the respondent's argument that the provision was not intended to arm the Court with a general discretion to exceed the statutory maximum of $25,000 whenever it considers that the circumstances show that this sum will provide inadequate compensation for the injured worker. Generally speaking, when the legislature fixes a maximum amount as compensation to be paid but gives the Court a discretion to permit the payment of a larger amount, it contemplates that the maximum will serve as an appropriate standard for the majority of cases. By giving the Court a discretion it enables the Court to make appropriate provision in other cases which do not conform to the standard.

And here the respondent's argument gains some additional strength from the provisions of s. 72 and the interpretation which we have decided should be placed upon it. There is, I think, a greater harmony between s. 72 and s. 51(4)(b) if the amount of $25,000 fixed by s. 51(4)(b) applies in the majority of cases. Then the result will be that the Court can exercise its jurisdiction to order redemption by a lump sum payment under s. 72(1) in the majority of cases - it will be called upon to refuse such an order in a minority of cases only. The figure of $25,000 is so low that it will prove quite inadequate to provide full compensation in a high proportion of instances where the employee has sustained total and permanent incapacity for work.

However, in the ultimate analysis these factors are outweighed in my mind by the insuperable problem of identifying the "standard case" for which $25,000 was thought to be the appropriate figure and by the complexity of the task which is thrown on to the Court, if the respondent's construction is to prevail. The respondent's hypothesis is that the standard case is one for which the injured worker is receiving an amount equal to average weekly earnings (presumably to be ascertained from the figures published by the Commonwealth Statistician) and in which the total permanent incapacity affects him for an average or standard proportion of his working life. This, it seems to me, is speculation - it is not supported by anything in s. 51. So is the next step in the argument, namely that because $25,000 yields only a proportion of the proper compensation for the standard case, that proportion must be observed when the Court orders a lump sum payment in excess of $25,000. The considerations which I regard as decisive are, (1) that the principle of proportionality is not mentioned in the statute; and (2) that its application involves an intricate calculation of the proportion to be applied based on the uncertain elements of what constitutes the "standard case" for which $25,000 is fixed as the maximum payment.

To me it seems unlikely that the legislature intended that the courts should apply this principle of proportionality with the difficulties and the problems which it entails, without giving some plainer indication of its intention.

In the result therefore I would allow the appeal and dismiss the cross-appeal. I would answer the questions in the manner proposed by the Chief Justice.

I have had the advantage of reading the reasons for judgment prepared by the Chief Justice in this appeal. I agree with those reasons and with his conclusion and have nothing to add.

The facts and issues raised by the appeal and cross-appeal in this matter are set out in the reasons of the Chief Justice, which I have had the advantage of reading. It is unnecessary for me to repeat them.

With reference to the appeal, I respectfully agree with his Honour's reasoning which leads to the conclusion that the Court has a discretion to refuse or adjourn an application to redeem if to grant such an application would have the effect of depriving a worker of the full compensation by way of weekly payments to which he has become entitled. I shall merely add a brief comment for myself in that regard.

I think it is true to say, as a matter of history, that the fundamental idea implicit in the notion of redemption was always that of a conversion from one form to another of the liability of an employer to pay compensation to a worker. The concept of a fair exchange lay at the heart of it. The point is well made in the observation of Bankes L.J. (dissenting, but approved by the House of Lords on appeal) when referring to the English counterpart of s. 72(1) of the South Australian Act in Carlton Main Colliery Co. Ltd. v. Clawley [14] :

The provisions of par. 17 of the schedule, which provide for the redemption of a weekly payment, appear to me to be based upon the assumption that a payment of the lump sum therein indicated will represent the present money value of the full compensation to which the workman is entitled. This is the view taken by Fletcher Moulton L.J. in Calico Printers' Association v. Higham [15] , where he says that, in exercising the jurisdiction conferred upon him by par. 17, the county court judge is merely putting in another form the compensation which the Act has already given to the workman. The citations which the Chief Justice has taken from the speeches of the Lord Chancellor and Viscount Haldane when the appeal was determined confirm to my mind that it was the capacity of the court when making an order for redemption to effect a just conversion which ordinarily justified the exercise of the power. I do not understand any of the later cases, either in England or Australia, to reflect a departure from such a doctrine. 1. [1917] 2 K.B. 691, at p. 699. 2. [1912] 1 K.B. 103.

The insertion of the new sub-s. (2) in s. 72 by the Workmen's Compensation Act Amendment Act 1973 S.A. introduces a fresh element. Thereafter, in a case to which the provision applies, the lump sum is to be settled on the fictional basis that the liability of the employer for weekly payments does not exceed $25,000. But I do not think that the new element results in any change to the established doctrine. The new provision does not confer on an employer a right to demand the redemption of his liability under the Act. It does not purport to affect the discretion to withhold an order for redemption which is implicit in the grant of the power in s. 72(1). Indeed, consistently with the fundamental rationale to which I have referred, it provides a new criterion by reference to which the Court will embark on the consideration of an application to redeem.

It is unnecessary to speculate on the circumstances which may lead a court in the exercise of a judicial discretion to make an order notwithstanding that the liability of the employer for weekly payments exceeds $25,000. Redemption may be sought by the worker himself, or there may be other circumstances that would make it proper for the Court to make an order notwithstanding that s. 72(2) would operate to control the Court in the fixation of the lump sum.

On the cross-appeal, I have the misfortune to be of a different opinion to that expressed by the Chief Justice on the subject of the answers to questions I and III(a). I concur in the proposed answer to question III(c), as to which the parties were agreed.

The resolution of questions I and III(a) depends upon the construction of s. 51(4)(b). It is convenient to set out the material parts of s. 51, as follows:

(4) The total liability of the employer in respect of payments under this section shall not -

(a) exceed the sum of eighteen thousand dollars unless the injury results in total permanent incapacity for work; and

It has been the practice of the legislature in South Australia to fix a limit to the liability of the employer to pay compensation by way of weekly payments to an injured employee. The maximum was fixed at £3,000 in 1960, at £3,250 in 1961, at £3,500 in 1963, at £6,000 (in the case of total incapacity) in 1965, and at $15,000 (in the case of total permanent incapacity) in 1971. The amendment in 1973, to which reference has already been made, provided that the total liability of the employer in respect of weekly payments shall not, in the case of total permanent incapacity for work, exceed twenty-five thousand dollars "or such greater amount as is fixed by the Court having regard to the circumstances of the case". Both the Full Industrial Court and the Supreme Court have been unanimous in the view that s. 51(4)(b) confers on the Court an unfettered discretion to fix a higher maximum having regard only to the circumstances of the case.

Mr. Lee, for the employer, argues that this view is mistaken. He submits that the context of s. 51(4)(b), together with its history, controls the exercise of the discretion, by establishing the figure of $25,000 as the standard which is intended to apply to the ordinary case. It will then only be the exceptional case which will require the exercise of the discretion, and in the exercise of it a proportionate relationship will be maintained between the new maximum which is fixed and the standard maximum of $25,000. Although pressed to do so by the Court, Mr. Lee had some difficulty in formulating the "standard" to which in his submission the maximum of $25,000 was intended to apply. As I understood counsel, the dominant criterion was to be found in that proportion of the working life of the average worker remaining to him immediately before he suffered incapacity which would be covered by weekly payments before the statutory maximum was reached. Such a criterion can only be useful, so it seems to me, if one can identify the "average worker" having regard both to average weekly earnings and the amount of working life which would have been left to him but for his incapacity. For example, suppose a worker suffers compensable incapacity at forty years of age and receives weekly payments of $200 per week; in such a case, the employer's total liability of $250,000 would be exhausted in two-and-a-half years. In other words, the worker is compensated for one-tenth of the working life of twenty-five years which remained to him at the time of the incapacity. The "standard" is the proportion of an average worker's remaining working life which is covered by weekly payments. Given a worker who is much younger at the time of his incapacity, such as the appellant in this case, or a worker who before his incapacity was earning an income much higher than average weekly earnings, and one has "the circumstances of the case" which could attract the exercise of the court's discretion to fix a higher maximum. But the object in fixing that sum would not be to arrive at a figure which would keep the worker in receipt of his average weekly earnings for the rest of his working life; it would be to maintain the proportion of his remaining working life which will be covered by weekly payments to correspond with that of the "standard".

One thing is certain, so it seems to me. It is that there must be a limit placed on the total liability of the employer in respect of weekly payments. There would be no point in the provision at all if it was intended that every incapacitated worker was entitled to receive weekly payments, adjusted from time to time pursuant to s. 71, for the remainder of his working life. The problem is to discern the considerations which are relevant to the fixation of that limit. It is apparent that the statutory maxima fixed from time to time by the legislation prior to 1973 must have set severe limits on the length of time during which an incapacitated worker was in receipt of weekly payments. Even allowing for the effect of inflation on average weekly earnings in recent years, with maxima ranging from £3,000 in 1960 to $15,000 in 1971, an employer's liability would have been exhausted in a few years. While it does not afford any direct assistance, I think that this history of legislative restraint in this area is of some guidance to the exercise of the discretion under consideration. Again, it will be noticed that the 1973 amendment (s. 51(4)(a)) fixes an unreviewable maximum of $18,000 unless the injury results in total permanent incapacity for work. This means that a worker may be permanently partially incapacitated, or totally but not permanently incapacitated, or a mixture of both, and yet the total liability of the employer to make weekly payments will not exceed $18,000. This limit, coupled with the figure of $25,000 in the case of total permanent incapacity is entirely consistent with the history of legislative restraint to which I have referred. It reflects a policy to determine by the fixation of an arbitrary sum the extent to which industry must bear one aspect of the financial consequences of accidents which arise out of or in the course of employment, leaving the remainder of those consequences to be accommodated within the general framework of community and social welfare services. It is in this context that the new step taken by the legislature in 1973 to confer on the Court a discretion to lift the total liability of the employer for weekly payments in the case of total permanent incapacity beyond $25,000 is to be understood and applied. It is not for the Court to pass judgment upon such a policy.

I do not think it is possible or appropriate to attempt to define with particularity "the circumstances of the case" which will attract the exercise of the discretion and guide the Court in the fixation of a new maximum. In every case it will be a matter for judicial decision within that context and history of the Act that I have endeavoured to expound.

It is my opinion, therefore, that the respondent is entitled to succeed in his cross-appeal. It remains to consider how the answers to questions I and III(a) should be expressed. Both questions seek an indication of which of the facts set out in the stated case the Court may take into consideration in relation to the latter part of s. 51(4)(b). I do not think that there can be any quarrel with the first part of the answer given to both questions by the Full Industrial Court and affirmed by the Supreme Court. That part of the answer referred to "All such facts as bear upon the actual economic consequences of the workman's incapacity". The difficulty arises in expressing the kind of judgment which is to be applied to those facts. The Full Industrial Court took the view - wrongly, in my respectful opinion - that $25,000 would probably be adequate "in many cases of total permanent incapacity for work". Their Honours then contrasted with that assumption the youth of the appellant and the disastrous nature of his disabilities, including his total dependence upon others for his very existence, and concluded that $25,000 would probably fall grossly short of providing "adequate compensation even during the normal span of his working life". They considered it useful in determining a new maximum pursuant to s. 51(4)(b) to take as a starting point the mathematical sum equal to what would have been the likely working life of the worker multipled by the average weekly earnings, and then to adjust that figure up or down having regard to the totality of the evidence adduced. They warned against "double counting", having regard to the provisions of s. 59 of the Act, and the payment of compensation beyond a worker's actual needs.

The approach of the Full Industrial Court was upheld in the Supreme Court. King C.J. observed that the answers related to the facts of the particular case, and were not to be treated as an exhaustive formula applicable to all cases. He could see no error of law therein. Walters and White JJ. agreed.

With great respect, I think it is a fundamental error to interpret the discretion conferred on the Court by s. 51(4)(b) as intended to ensure, leaving redemption aside, the continuance to the worker of weekly payments during the whole period of his likely working life. I have already given my reasons for this conclusion. In my opinion, the exercise of the discretion will be called for in a case where exceptional circumstances render the maximum of $25,000 inadequate notwithstanding the restraints implicit in the section. The present case clearly is such a case. But in the process of arriving at a new maximum, one does not start with the figure of $355,000 being the approximate aggregate of weekly payments of $135 for the rest of the appellant's working life or some higher figure to correspond to the adjustments that must be made to the amount of that weekly payment. The Court will seek to arrive at a figure which will ensure to this worker the same proportionate level of compensation which the stated maximum of $25,000 will ensure to a worker in average circumstances who suffers total permanent incapacity. I do not think it is relevant to the fixation of such a sum to have regard to the other compensation to which the worker may be entitled by reason of the provisions of s. 59. The Act does not impose a ceiling on the liability of the employer to compensate an injured worker for the expenses referred to in that section. Nor, of course, does s. 72(2) operate to impose any limitation on the duty of a court, dealing with an application for the redemption of the liability of the employer to pay compensation pursuant to s. 59, to fix a fair redemption figure in that regard.

For these reasons, I would allow the cross-appeal, and substitute for the answers to questions I and III(a) affirmed by the Supreme Court the single answer:

All such facts as bear upon the actual economic consequences of the workman's incapacity treating the figure of $25,000 as the standard maximum for the average case of total permanent incapacity for work. Brennan J.

Section 51(4)(b) of the Workmen's Compensation Act 1971-1974 S.A. provides that the total liability of an employer in respect of weekly payments of compensation to a workman whose injury results in total permanent incapacity for work shall not exceed "twenty-five thousand dollars or such greater amount as is fixed by the Court having regard to the circumstances of the case". The respondent submits that $25,000 should be regarded as a standard sum, an appropriate maximum for the generality of cases where a workman is totally and permanently incapacitated. There is, of course, much difficulty in the notion of a standard sum appropriate for a large number of individual cases, for the quantum of weekly compensation and life expectancy varies from case to case. Nevertheless, the sum of $25,000 is a provisional maximum, effective until the workman applies for an order fixing a greater amount and satisfies the Court that a greater amount should be fixed in the circumstances of his case. Until the Court makes the order, the sum specified in the statute is, for the purposes of the statute, the maximum sum for which the employer is liable under s. 51.

When an application is made to the Court, s. 51(4)(b) directs that the Court have regard not to a benchmark of $25,000 but to the circumstances of the case. The circumstance that $25,000 would be the effective maximum if the Court's powers had not been invoked does not require the Court to adjust the assessment which it would make having regard to the particular circumstances of each case.

Section 72 provides for the redemption of the employer's liability for weekly payments or other compensation. The subject of redemption is not necessarily a present and subsisting liability to make weekly payments: it is the liability of an employer to pay the full measure of compensation payable under the Act:Michaelis, Hallenstein & Co. Pty. Ltd. v. Lewis [16] . The subject of redemption is the aggregate of undischarged liabilities, including future or contingent liabilities, which the Act imposes upon the employer in respect of the injury suffered by the workman and the incapacity resulting therefrom. In settling the lump sum to be paid in redemption of the liability, therefore, it is necessary to take into account any limit upon the liability of an employer to make weekly or other payments, even though the liability to make those payments is future or contingent. Prima facie, either the limit specified by s. 51(4) or the limit set by the Court under s. 51(4)(b) should be taken into account in settling the lump sum. But there are at least two exceptions to that proposition.

First, s. 72(1) contains a provision which extends the liability of an employer beyond the limit prescribed by s. 51(4), for it provides that:

where permanent total or partial incapacity for work results from the injury, any weekly payments made prior to an application under this section shall, notwithstanding anything in this Act, be in addition to any such lump sum Unless the limit upon an employer's liability to make weekly payments is reached and his liability to make weekly payments is thus wholly discharged before an application for redemption is made, the Court is required to disregard the payments of weekly compensation made prior to the time when an application for redemption is made by a workman whose injury results in permanent total or partial incapacity. The Court settles the lump sum to be paid in redemption of the employer's liability on the footing that none of the employer's payments had diminished the limit of his liability to make further weekly payments. That was the operation attributed to s. 28 of the Workmen's Compensation Act 1932-1963 S.A. by this Court in Perry Engineering Co. Ltd. v. Mermingis [17] , and a like operation should be given to s. 72(1) of the present Act which repeats the language of the earlier provision. 1. (1964) 112 C.L.R. 468.

In settling a lump sum pursuant to subsection (1) of this section, the Court shall not, in any case, take into account any amount, that the employer may become liable to pay by way of weekly payments, beyond an amount of twenty-five thousand dollars.

The phrase "may become liable to pay by way of weekly payments" is not identical with the phrase "the liability for weekly payments" which is found in s. 72(1), but the difference does not import a distinction in meaning. As the subject of redemption in sub-s. (1) includes future and contingent liabilities, and as sub-s. (1) authorizes the settlement of a lump sum on the footing that the employer remains liable to pay by way of weekly payments the whole of an amount specified in or pursuant to s. 51(4), the restriction created by sub-s. (2) is appropriately expressed in terms of an amount "that the employer may become liable to pay by way of weekly payments".

In cases where no order under s. 51(4)(b) has been made, there is no work for sub-s. (2) to do. In those cases, the Court which settles a lump sum could not take into account any amount above the specified limit of $25,000. But if it were not for sub-s. (2), the Court would be required, in cases where the limit of an employer's liability has been enlarged pursuant to s. 51(4)(b), to settle a lump sum which would take into account the higher limit fixed by the Court's order. Apart from sub-s. (2), the settlement of the amount to be paid in redemption of an employer's liability would fix a lump sum equivalent of the compensation payments to which the workman is otherwise entitled under the Act: Michaelis, Hallenstein & Co. Pty. Ltd. v. Lewis [18] . Sub-section (2), however, would deny to a totally and permanently incapacitated workman the right to be paid or to receive a lump sum equivalent to his entitlement to compensation payments under other provisions of the Act.

Although provisions similar to s. 72(1) have been held to confer a right to redeem upon employer and workman, the operation of that sub-section was radically altered by the introduction of sub-s. (2) in 1973. In cases where that sub-section would have an effect upon the settlement of a lump sum, the right to pay or to be paid a lump sum equivalent of the entitlements conferred otherwise under the Act ceased. If s. 72(1) were construed as requiring the Court to make a redemption order in such cases, the redemption order would destroy the benefit which an order under s. 51(4)(b) had conferred upon the workman. The same amending Act empowered the Court to confer a benefit under s. 51(4)(b) and inserted s. 72(2), and the Act should not be construed as intending that the latter provision should sterilize the former. The two provisions can be given effective operation if s. 72(1) is understood to permit the Court to defer the making of a redemption order in conformity with s. 72(2) until it is satisfied that the order would allow the workman the benefit of any order made under s. 51(4)(b). I would therefore agree with the answer to question VI proposed by the Chief Justice.

I would also agree that the answer to question III(c) be varied as the Chief Justice proposes, that the appeal be allowed and the cross-appeal dismissed.

At a glance

Court

Decision date

Before

Source

Judgment (78 paragraphs)

Parties

Cited By (1)