PUBLISHED THE 19TH DAY OF OCTOBER**, 1998.**

Judicial determination - Section 38A notice - WorkCover Corporation served notice of reduction upon the anniversary of the worker's incapacity - Notional weekly earnings figure contained within the notice was the subject of a review and was ultimately held to be wrong - Whether worker entitled to have weekly payments reinstated to 100% on the basis that the notice was defective - Defect in notice does not detract from the Corporation's right to effect the reduction - Ss.4(3), 35(1)(b), 36, 38A Workers Rehabilitation and Compensation Act, 1986.

Mitsubishi Motors Australia Ltd. v. Harbord (1997) 69 S.A.S.R. 75.

Mitsubishi Motors Australia Ltd. v. Sosa (unreported delivered 8 June 1995 S5084)

Mr. A. Alessandrini (of counsel) for the Applicant.

This is a Judicial Determination of a dispute between Luigi Laudonia (`the worker') and WorkCover Corporation (`the Corporation') which raises an important point concerning a notice that was issued by the Corporation pursuant to section 38A of the Workers Rehabilitation and Compensation Act 1986 (`the Act'), purporting to reduce the worker's weekly payments of income maintenance on account of the fact that his incapacity for work as a result of a compensable disability had extended beyond one year.

The worker sustained the compensable disability that was the subject of the notice on 21 August 1995. When the claim was first lodged, the Corporation, through its agent N.Z.I. Workers Compensation (SA) Ltd. (`N.Z.I.') determined to accept the claim for a closed period between 28 August 1995 and 9 September 1995. The determination stipulated that the worker was to be paid income maintenance at the rate of $750.00 per week for that period.

The worker subsequently submitted a further claim for compensation seeking weekly payments beyond 9 September 1995. In respect of that claim, the Corporation, through N.Z.I., determined to accept it, but it resolved to set a lower amount by way of income maintenance, being the sum of $466.80, in lieu of the previous amount of $750.00. It did so on the basis that the worker was a deemed worker rather than an actual worker such that the level of his income maintenance had to be assessed by reference to the appropriate award rather than by reference to his average weekly earnings: section 4 (3).

The worker filed an application seeking a review of that determination which in turn resulted in the matter being referred to a Review Officer.

In the meantime, on 11 July 1996, whilst the application for review was pending before the Review Officer, the Corporation issued a notice of intention to reduce the worker's weekly payments by reference to section 38A of the Act (`the notice'). The notice stipulated that the decision was to take effect from 21 August 1996 and it did so on the basis that the worker's incapacity for work had extended beyond one year.

The rate stipulated in the notice was $473.80 per week which was marginally higher than the assessment of income maintenance that was the subject of the application for review. That was so because the Corporation had made an upwards adjustment of the worker's average weekly earnings by reference to section 39.

The notice advised the worker that his new rate of income maintenance would be $379.04 per week.

Meanwhile, the application for review continued to run its course and ultimately, on 15 January 1997, the Review Officer resolved the matter in favour of the worker. He did so on the basis that the rate was set by reason of the earlier determination and that the Corporation could not resile from that.

I have some reservations about the correctness of that approach and indeed, about the way in which the proceedings came before the Review Officer in the first place. On one view, what the worker should have been seeking, was a review of the earlier decision to limit his claim for closed period. In any case, assuming that the matter was properly before the Review Officer, I am inclined to think that the fact that the earlier determination set a higher rate did not of itself preclude the Corporation from setting a lower rate in respect of the subsequent claim. See: Mitsubishi Motors Australia Ltd. v. Harbord (1997) 69 S.A.S.R. 75.

Be that as it may, the Corporation seems to accept that the Review Officer's decision was correct and that the worker's notional weekly earnings should have been assessed at $750.00 per week.

And, therein lays the basis of the dispute between the parties.

The worker contends that because the notional weekly earnings figure upon which the section 38A notice was based was wrong, the notice is bad and it was said to follow, that the Corporation had forfeited its right to reduce the amount of weekly payments that the worker was receiving until it issued a notice that contained the correct figure.

At this point I think it is helpful to reflect upon the relevant provisions.

Section 35(1)(b)

`if the period of incapacity for work exceeds one year, the worker is entitled to weekly payments determined in accordance with paragraph (a) for the first year of the period of incapacity and thereafter -

(i) the worker is, if totally incapacitated for work, entitled for the period of incapacity to weekly payments equal to 80 per cent of the worker's notional weekly earnings;

(ii) the worker is, if partially incapacitated for work, entitled for the period of incapacity to weekly payments equal to 80 per cent of the difference between the worker's notional weekly earnings and the weekly earnings that the worker is earning or could earn in suitable employment that the worker has a reasonable prospect of obtaining.

Section 38A(1) If a worker's entitlement to weekly payments ceases or reduces because of the passage of time, the Corporation may, (without proceeding to a review of the worker's entitlement) discontinue or reduce the weekly payments to reflect the cessation or reduction of the entitlement.

(2) On discontinuing or reducing weekly payments under this section, the Corporation must give notice, in the prescribed form, of the discontinuance or reduction and the reasons for it to -

(b) the employer from whose employment the compensable disability arose.'

`The Corporation may, for example, reduce the amount of the worker's weekly payments under this section because the amount to which the worker is entitled has automatically diminished under section 35(1)(b) of the end of the first year of incapacity.'

The case of Mitsubishi Motors Australia Ltd. v. Sosa (unreported delivered 8 June 1995 S5084) concerned a purported reduction based upon the worker's incapacity extending beyond one year. The Supreme Court held that section 35 of the Act as it then was, could not be relied upon to effect the reduction. The decision suggested that the appropriate procedure was for there to be a review of the amount of weekly payments payable to a worker by reference to section 38 of the Act and thereafter for a notice to be issued pursuant to section 36 to effect the reduction. Because of the terms of section 36 as it then stood, the compensating authority was required to give at least 21 days notice before that decision to reduce could took effect.

Subsequent to the decision in Sosa, section 38A was enacted and I think that the reasonable inference to be drawn is that it was enacted at least partially in response to the decision.

Be that as it may, I think that the relevant legislative provisions now contemplate that a reduction made to weekly payments on account of the worker's incapacity exceeding one year is no longer made through the invocation of the review procedure provided by section 38 but rather, because it is permitted and authorised by section 38A.

That is a matter that is in my view of some significance, because I think it follows from the wording of section 36(3a), that such a decision to reduce can take effect before the notice is given. And I think it must follow from that, that the right to reduce is not contingent upon the giving of a notice.

The worker's argument could only be correct if the proper construction of the Act lead to the conclusion that notwithstanding the fact that the compensating authority was lawfully entitled to effect a reduction on account of the passage of time, that lawful right was taken away from it, if it subsequently provided a notice that was defective.

In my view, the terms of the relevant provisions do not lead to that conclusion. Given that the purpose of the notice, unlike the others provided for by section 36, is not to forewarn a worker of an impending reduction to weekly income maintenance, but rather is to inform the worker why it is that a reduction that has already taken effect, was made, I would regard the requirement that a notice be given, as directory rather than mandatory The failure to give adequate notice might be relevant to the issue of time in relation to the lodgement of the notice of dispute, although such failure might not necessarily be decisive: Moody v. WorkCover (1996) 198 L.S.J.S 408 but other than that, I would not regard it as a matter of any significance in respect of the right to effect the reduction. Thus, it seems to me, the fact that the notice contains a defect is not to the point.

For these reasons, I conclude that the worker's challenge to the section 38A notice based upon the fact that it contains an error, cannot be sustained. I would now like to hear from the parties as to what consequential orders I should make as a result of this conclusion and as to the future conduct of this matter.

Parties are advised that if a party wishes to appeal against any part of this decision which raises a question of law 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.