Kostek v Workcover/Mmi Workers Compensation

3 By Notice of Dispute dated 23 July 1996 the worker disputed this assessment. Following conciliation the dispute was referred to judicial determination and pleadings were ordered. The applicant's statement of claim pleaded an ongoing total incapacity for work and that the LOEC assessment was against the weight of the medical evidence, and asserted that no proper assessment was undertaken to ascertain his suitability for the particular work and that proper procedures were not complied with in reaching the assessment.

4 The respondent's defence denied those aspects of the statement of claim and in addition pleaded the defence of set off. The facts pleaded in relation to this plea were, firstly, that the applicant had wrongfully retained certain judgment monies following his claim for damages against a third party, and secondly, that the respondent had obtained a judgment against the applicant pursuant to s 54 of the Act by which the Tribunal had declared that the respondent (in these proceedings) was entitled to recover the sum of $23853.29 from the applicant (Workcover Corporation v Kostek published 23 June 1999 (JD65/1999)). It was therefore asserted that the applicant owes the respondent a greater sum than that to which he would be entitled on an interim assessment of a capital loss for the relevant year, and that the amount which the applicant owes the respondent should be set off against the amount which the respondent owes the applicant on the LOEC (defence par 9 Exhibit A1 at 7).

5 This set off is the only issue in dispute because by letter to the applicant's solicitors dated 22 December 1999, the respondent admitted that the applicant was incapacitated for work for the duration of the relevant LOEC period, namely 28/6/96 to 26/6/97, and indicated that it would be calling no evidence at the hearing.

6 In addition Mr Stanley, counsel for the respondent, conceded that, if his arguments are not upheld, the respondent will be liable to the applicant pursuant to s 42A for a sum of $22339.20 (9).

7 Mr Stanley clarified the respondent's position thus; it disputes its liability to make any payment by way of a LOEC in respect of the relevant period:-

"... not on the basis that it contests the worker's claim to have been incapacitated for work during that period but rather on the basis that in determining the worker's entitlement to a LOEC for the relevant period as a matter of equity and good conscience the Corporation submits that the worker's entitlement is zip, factoring in the liability that the worker has to the Corporation pursuant to section 54 of the Act and the worker's conduct in this whole matter." (9)

8 Although the respondent's defence pleaded a set off, Mr Stanley did not rely on the principles applying to a set off at law or an equitable set off, matters which might well be outside the defined jurisdiction of this statutory body, rather he relied upon the Tribunal's obligation to act according to equity, good conscience and the substantial merits of the case without regard to technicalities and legal forms as provided in s 85 of the Act. This, he submitted, empowers the Tribunal to set off or adjust the amount to be awarded pursuant to s 42A "where it is patently clear that if the adjustment is not made then the Corporation would be paying more than it should to the worker even though that produces a different result than would be achieved by strict application of the Act" (26).

9 In very general terms the stance taken by Mr Carabelas, counsel for the applicant, was that, as the only dispute before the Tribunal is an assessment pursuant to s 42A of the Act, the essential elements of which have been conceded by the respondent, this Tribunal has no jurisdiction or power to take into account "any liability of either party to the other arising from other sources, whether within the legislation ... or otherwise" (35) and hence no power to set off or adjust the applicant's entitlement against any liability which the applicant may owe to the respondent; however it was not conceded that the applicant owed any liability to the respondent for any other amount in any event.

The Course of Events relied upon by the Respondent

10 The history of this matter taken from the books of documents (Exhibits A1 and R1) is complicated but I will endeavor to reduce it to its basics.

11 It is not contentious that the applicant suffered a compensable disability on 28 January 1990 in the course of a journey. He received compensation pursuant to the Act in relation to that disability. He also brought an action for damages against the third party responsible for the occurrence of the accident. The matter went to trial in the District Court and the applicant obtained a judgment of $422290.28 on 16 November 1993. That judgment was the subject of an appeal and the Supreme Court reduced the damages by $75000 to $347290.28.

12 Prior to the District Court trial the respondent served the applicant with a Notice dated 10 June 1993 pursuant to s 54 of the Act, which created a first charge over any damages to which the applicant was entitled from the third party action, and advised that the amount in respect of which the respondent was seeking recovery was $363698.92, being $98712.92 by way of paid compensation, and $264986.00 by way of estimated future payables (Exhibit R1 at 118).

13 However the applicant and the respondent entered into an agreement prior to trial to the effect that the respondent's right of recovery would be limited to an amount representing the filed offer of $123801.65 plus 50 per cent of whatever was recovered by the applicant under the judgment (Exhibit R1 at 117 and 104e).

14 Following the delivery of judgment the applicant's solicitors wrote to the respondent advising of the judgment and confirming the terms of the above agreement. However the letter also foreshadowed that the applicant may be interested in discussing finalisation of his claim on some other basis and inviting discussion (Exhibit R1 at 104e). The letter stated:-

"... our client [the applicant] has expressed considerable interest in negotiating with Workcover to repay all compensation paid to him under the Workers Rehabilitation and Compensation Act 1986 to the present time and to take a lump sum payment over and above the amounts repayable to Workcover upon the basis that he will release Workcover from any further liability under the Act both with regard to weekly payments of compensation, payments for non-economic loss and also with respect to rehabilitation."

15 As the respondent was interested in discussing finalisation of the applicant's claim it wrote to the third party's solicitors confirming that payment of the judgment sum to the applicant's solicitor's Trust account would satisfy its statutory charge (Exhibit R1 at 121 and 122). It was intended that the judgment monies would be held in the solicitor's Trust account pending the outcome of the appeal, save for reimbursement of compensation paid to the applicant to that date (Exhibit R1 at 104g). Shortly thereafter the applicant's solicitors paid the respondent $114916.48 from the judgment monies (Exhibit R1 at 124).

16 Thereafter the arrangements between the parties, as evidenced by the documents contained in Exhibit R1, become a little less straighforward.

17 From late 1993 it had been the respondent's understanding that whilst the balance of the judgment monies were retained in the trust account the applicant was considering two options earlier mentioned in the letter dated 17 November 1993 (Exhibit R1 at 104e).

18 However prior to the outcome of the appeal and prior to any decision being taken as to those options, and in error, the applicant's solicitors paid the applicant the sum of $200000 from the judgment monies held in trust.

19 Notwithstanding the payment of this money, uncertainty as to which option the applicant would take continued at least up to about September 1994 (Exhibit R1 at 124) and during this period the applicant continued to receive compensation. In particular on 19 April 1994 he was paid an interim LOEC in the amount of $21448.34 for the period 19 May 1994 to 17 May 1995 (Exhibit R1 at 15-17).

20 On 18 October 1994 the respondent wrote to the applicant's solicitors confirming that the applicant agreed to "retain his common law damages award in lieu of ongoing Workcover entitlements" (Exhibit R1 at 126). The letter proceeded "Before we can look at offsetting the amount your client has received from SGIC against his section 43 and 42(a) entitlements we will first need to make a full recovery of our payments to date". Accordingly the applicant was requested to reimburse a further sum of $35106.31 (this included the interim LOEC of 1994-1995).

21 Eventually on 9 August 1995 the applicant's solicitors paid that sum (Exhibit R1 at 132) with the result that the applicant has reimbursed the respondent a total of $150022.79.

22 Although the correspondence indicated the applicant's preference to retain his common law damages in lieu of ongoing workers compensation entitlements, it appears that nothing was done by either party to formalise that arrangement before the worker changed solicitors in 1996 (Exhibit R1 at 126, 128, 129 and 131).

23 What did happen in the meantime was that another interim LOEC assessment was made on 9 May 1995 as a result of which the applicant was paid the sum of $21617.69 for the period 18 May 1995 to 15 May 1996 (Exhibit R1 at 24).

24 The further interim LOEC assessment of nil for the period 28 June 1996 to 26 June 1997 was then made on 27 June 1996, and it is this determination which is the subject of the Notice of Dispute. Following the filing of the Notice of Dispute dated 23 July 1996 the respondent's solicitors wrote to the applicant's new solicitors on 23 August 1996 (Exhibit R1 at 137) asserting that an agreement had been reached between the applicant and the respondent, and that the applicant's former solicitors had indicated that the applicant "wished to be removed from the WorkCover system by paying back compensation paid and offsetting the balance of his damages award by Section 42 and Section 43 determinations".

"We confirm our client is prepared to enter into a written agreement with your client and to make written determinations to effect an end to this claim. The basis of that would be that your client effectively retain all monies paid to him to date but receive determinations to end further entitlements to any kind of compensation for all time."

26 By letter dated 12 September 1996 the applicant's solicitors indicated that they were instructed to agree to the proposal in the letter of 23 August 1996. The respondent was then invited to draw draft agreements:-

"... to bring to an end our client's entitlements for WorkCover on the basis that our client attains (sic) all monies paid to him to date; there will be no claim by WorkCover Corporation on any monies paid to our client pursuant to the Common Law judgment and that there will be no recovery of any monies paid to our client since the Common Law judgment pursuant to the Workers Rehabilitation and Compensation Act." (Exhibit R1 at 139).

27 By letter dated 19 November 1996 (Exhibit R1 at 152) the respondent's solicitors wrote to the applicant's solicitors enclosing the redemption documents and setting out the basis of the settlement. The documents were prepared on the basis that the judgment sum was $347290.28 from which the sum of $150022.79 had already been reimbursed to the respondent. Accordingly there was a balance of $197267.49 to which the respondent said it was entitled. This sum was attributed as follows; a nil s 43 assessment, redemption of the respondent's liability to make capital payments by payment of $175000, redemption of the respondent's liability to pay compensation pursuant to s 32 redeemed at $413.38 and a further interim LOEC payment of $21854.11.

"We note that your client remains possessed of the full $197,267.49 and whilst both redemptions and a further LOEC payment are notionally being made, it is a term of the agreement that your client do receive no further payment from our client pursuant to the Workers Rehabilitation and Compensation Act."

29 By written response dated 29 November 1996 the applicant's solicitors rejected this method of resolution as it precluded the applicant from applying for and being granted immediate Social Security benefits.

30 By letter dated 26 February 1997 the respondent's solicitors gave the applicant's solicitors 14 days to accept the method of resolution set out in the draft documents, otherwise it advised its intention to take further action. The applicant's solicitors replied on 7 March 1997 requesting more time to resolve the issues with the Department of Social Security and indicating a willingness to resolve the matter but a need to get "the paper work right".

31 The matter has not yet been finally resolved. However by application pursuant to s 54 of the Act dated 7 November 1997, the respondent sought from the applicant the sum of $23853.29 being the interim LOEC of $21617.69 paid to him for 1995-1996, together with certain other expenses of $2235.60.

32 This application was heard by the Tribunal and, by judgment delivered on 23 June 1999, the Tribunal determined that the respondent in these proceedings was entitled to an extension of time in which to bring the s 54 application, and a declaration that it is entitled to recover the sum of $23853.29 from the applicant (Exhibit A1 par 7 at 6-7).

The Position as revealed by this Course of Events

33 Mr Stanley submitted that, on those facts, the applicant has a liability to the respondent in the amount of $173414.20 from the proceeds of the damages claim together with the judgment debt for $23853.29 in relation to the s 54 proceedings. He submitted that, as to the first sum, the applicant is in breach of his agreement that he would retain the judgment monies and not pursue further claims against the respondent and that in equity and good conscience the s 42A assessment should not be made.

34 Although Mr Carabelas' primary submission was that the Tribunal has no jurisdiction to order the adjustment sought, he also disputed that the applicant was in breach of the agreement and submitted that the correspondence discloses that the fault lay with the respondent, which sought to finalise the agreement on a different basis than previously agreed with the applicant.

35 In addition to the conflicting positions of the parties as to the status of an agreement, upon which I have not made any conclusive findings of fact, other legal issues may well arise from the outlined course of events such as the respondent's entitlement to enforce the Tribunal's judgment of 23 June 1999 against the applicant (s 87A), and the question whether it has exhausted its first charge against the applicant by the Tribunal's judgment of that date. These are not matters which are within the compass of these current proceedings.

The Tribunal's Jurisdiction to Determine this Notice of Dispute

36 The Tribunal is a statutory body which possesses only that jurisdiction conferred upon it by statute (s 79). Pursuant to s 89A certain decisions are reviewable including a decision on a claim for compensation. A s 42A assessment is a decision on a claim for compensation. It is therefore reviewable pursuant to s 89A of the Act. However, the extent to which it is reviewable is limited by s 42A itself which declares certain aspects of the decision not reviewable (s 42A(9)). As this dispute relates to the amount of the assessment it is reviewable.

37 The Tribunal is given the jurisdiction to resolve disputes concerning reviewable decisions by various means, the relevant one here being the making of a judicial determination of a disputed claim (s 94). On a judicial determination the Tribunal is required to rehear the matter in dispute and decide the dispute without regard to decisions taken in earlier proceedings (s 94C). Amongst the provisions dealing with evidence the Tribunal is not bound by the rules of evidence but may inform itself in any way it considers appropriate (s 84) and is to be guided by certain general principles including that "the Tribunal must act according to equity, good conscience and the substantial merits of the case without regard to technicalities and legal forms" (s 85).

38 What is in issue in proceedings at judicial determination is the disputed determination as modified by the reconsideration conducted pursuant to s 91 of the Act (Ietto v Workcover Corporation JD56/1997). However the scope of the dispute can be enlarged pursuant to s 88DA of the Act "to include questions that are not presently at issue in the proceedings" with the consent of the parties. There has been no such consent here and in any event the parties can only consent to enlarge the proceedings within jurisdiction.

39 The jurisdiction of the Tribunal in determining a disputed claim is similar to that expressed to apply to a Review Officer pursuant to the previous dispute resolution provisions of the Act. In Weichmann v Lovering and WorkCover Corporation (1992-93) 59 SASR 203 the Full Supreme Court said that an application for review does not, in any sense, cause the situation of the applicant at large to be the subject of review. The jurisdiction of a Review Officer was said to be restricted to reviewing the actual determination which is sought to be impugned. This was also the effect of Cristea v Workers Rehabilitation and Compensation Corporation [1993] SASC 4356; (1993) 61 SASR 487 at 489 and was accepted in Mitsubishi Motors Aust Ltd v Harbord and Kowalski (1997) 69 SASR 75. That is the statutory context in which the application of s 85 must be considered.

The Application of s 85

40 Mr Stanley's argument assumes that s 85 permits the matters raised by him to influence the Tribunal's substantive consideration of the disputed decision and its ultimate order.

41 In this regard he calls to aid the decisions of the Full Tribunal in Griffin v Workcover Corporation/MMI Workers Compensation (SA) Ltd (Rexco Pty Ltd) JD58/1998 and York Civil Pty Ltd v Workers Rehabilitation and Compensation Corporation (JD30/1998).

42 York Civil concerned an action by the Corporation for recovery pursuant to s 54 of the Act. The learned Member at first instance reduced the liability of the wrongdoer, York Civil, to the Corporation, in respect of compensation paid to the injured worker pursuant to the Act, by an amount of $6016 because he regarded that amount as being an overpayment; he formed the view that, if the Corporation had been more diligent and had resolved to invoke s 36 of the Act at an earlier time, it would have paid less weekly payments to the injured worker. And hence the wrongdoer's liability would also have been less.

43 The finding that there was an overpayment and the resultant adjustment itself were not challenged by the Corporation, the respondent on appeal.

44 The Full Tribunal upheld that aspect of the decision stating that, although the Corporation had a prima facie right to recover all payments made to the worker, the Act ought to be interpreted and applied to enable an overpayment to be taken into account when determining the liability of the wrongdoer.

45 The Tribunal applied the reasoning of the former Chief Justice in Paglia v Trice [1991] SASC 2861; (1991) 56 SASR 62, who was there concerned with a challenge to s 32 expenses; a slightly different situation because that section provides that such expenses are only recoverable if they are reasonably incurred. The Tribunal said that, in the circumstances applying in a recovery action pursuant to s 54 "against a party who had no input into the amounts paid by the Corporation and who received no benefit from their payment", (ibid at 18) compensation payments and in particular payments of income maintenance, even if payments under the Act, ought to be open to challenge as to whether it was reasonable for the Corporation to agree to pay them having regard to the nature of the injury and the condition and circumstances of the worker.

46 Having endorsed a challenge to payments paid under the Act on the basis of reasonableness and being faced with a finding of an overpayment, the Tribunal then considered that the only potential means by which this adjustment could occur is through the use of s 85. It concluded therefore that, although the words of s 54 do not explicitly permit such an adjustment, the expression "equity, good conscience and the substantial merits of the case" as appearing in s 85 and in the context of this Act, "enables the adjustment of the amount of recovery in circumstances where notwithstanding the bona fides of the Corporation it is patently clear that it has paid more than it should have to a worker" (ibid at 19).

47 York Civil may well be the first occasion when the equity good conscience provision, as it has variously appeared in this Act, has been applied so as to modify the ultimate order of the Tribunal in a particular matter. In Santos v Saunders (1988) 49 SASR 556 which concerned the nature of a review hearing, the words of the now repealed s 88(1) were said to apply to do justice between the parties (per Legoe J at 564). Thereafter s 88(1) has been discussed and applied only in the context of procedural issues, the powers of the Review Officer and the evidentiary material which can be relied upon.

48 I acknowledge the binding effect of York Civil and that it has extended the boundaries of s 85 from matters related to procedure and evidence (see Spiel v Workers Rehabilitation and Compensation Corporation (1992) 58 SASR 45; General Motors Holdens Automotive Ltd v Kalogerinis [1994] SASC 5064; (1994) 62 SASR 492; Mitsubishi Motors Australia Ltd v Kowalski Unreported Judgment Supreme Court S5443; Monroe Australia Pty Ltd v Laszczak Unreported Judgment Supreme Court S4278), to matters of substance affecting the ultimate order of the Tribunal, however I distinguish it from the instant matter.

49 The effect of York Civil is to limit the expression "the amount of compensation paid or payable under this Act" in s 54(7)(d) to compensation reasonably paid or payable under this Act, and it does so by reference to the application of s 85 and concepts of general fairness to a party who has had no input into the payments of compensation and has derived no benefit from them.

50 In that matter the application of s 85 occurred within the limits of the Tribunal's invested jurisdiction to determine the recovery of compensation pursuant to s 54 of the Act.

51 That situation can be contrasted with the instant matter. The jurisdiction of the Tribunal is to determine the disputed s 42A assessment. The Tribunal cannot make an assessment at large. The issues to be determined are confined by s 42A which directs the principles to be applied in assessing the worker's loss of future earning capacity as a capital loss (s 42A(2) and (3)). What the respondent seeks pursuant to s 85 is the application of considerations which are outside or extraneous to the jurisdiction of the Tribunal when determining a disputed s 42A assessment. A tribunal "is not empowered to disregard an absolute statutory directive which bears upon the subject matter and manifestly is not intended to be read down in light of a general power of conscience" (Walkley v Dairyvale Co-operative Ltd (Preliminary issues) 1972 39 SAIR Pt 1 327 at 358). Or to put it another way an equity good conscience provision does not empower a Tribunal to decline to give effect to a provision of an Act or to transcend the powers conferred upon it by the Act (Qantas Airways Ltd v Gubbins (1992) 28 NSWLR 26 at 28-30, per Gleeson CJ and Handley JA; Thomas v Airlines of NSW Pty Ltd (1963-64) 64 SR NSW 176 at 185).

52 The respondent's position is not assisted by the other authority relied upon by Mr Stanley. Griffin concerned whether an overpayment to a worker in relation to an earlier s 43 assessment could be offset in any way by other payments made by the Corporation to the worker in relation to other claims. It was argued that s 85 could be relied upon in such circumstances to prevent the worker from gaining an unjust enrichment.

53 The Tribunal expressed no concluded view as to whether the law permitted s 85 to be applied in such circumstances because it took the view that it would be inappropriate to do so in the particular circumstances of the case. The earlier payments which were made to the worker resulted from earlier orders of Review Officers or the Workers Compensation Appeal Tribunal. The Corporation had not challenged those Orders by the lodgment of an appeal in the Tribunal. Accordingly those earlier orders created legally enforceable rights and obligations and s 85 could not be relied upon to interfere with those enforceable rights by permitting the adjustment of the worker's subsequent s 43 entitlement.

54 It is sufficient to conclude here that the application of s 85 for the purposes of adjusting the applicant's entitlement to an interim LOEC for the year 1996-1997 for the reasons and in the manner proposed by the respondent is outside the Tribunal's jurisdiction when it is determining a disputed assessment pursuant to s 42A.

55 The situation between the parties cries out for sensible resolution but that resolution is not to be found in the context of the determination of this interim LOEC assessment.

56 In accordance with the concession at 9 of the transcript, the respondent's determination dated 27 June 1996 is overturned. The respondent is liable to the applicant pursuant to s 42A of the Act for the sum of $22339.20. Mr Carabelas indicated that he wished to be heard on the issue of interest on that sum therefore I will hear the parties further as to the terms of the final order.

Parties are advised that if a party wishes to appeal against any part of this decision which is appealable pursuant to s 86(1) of the Act such appeal must be filed with the Registrar in accordance with Form 11 within 14 days of the delivery of this decision and must be served on all parties.