LW Smith Pty Ltd v McErlane

By the judgment appealed from the Full Court of the Supreme Court of New South Wales decided this question affirmatively. The very statement of the question creates a disposition to answer it in that way, for what a man earns by working overtime falls naturally within the description of his pay. The question, however, is not what is meant by the word "pay"; it is the construction of the phrase "weekly pay at the date of the injury" that is in issue and with regard to this the history of the First Schedule is of some significance. Mr. Bowen traced this for us from 1909 but the point of importance is that in 1949 the earlier legislation was amended to introduce an entirely new method of calculating the compensation payable to a seaman incapacitated for work either totally or partially by injury. Immediately before 1949 the basis of the calculation of the weekly payment to which an injured seaman became entitled was his "average weekly earnings". The relevant provisions of the Schedule provided for the weekly payment during incapacity of an amount not exceeding a sum specified and not exceeding two-thirds of the seaman's average weekly earnings during the previous twelve months if he had been so long employed or, if not, for the period of his actual employment, and that "in computing such average weekly earnings amounts paid by way of overtime to the seaman shall be included". Two things are to be observed - (1) that there was an express provision relating to overtime and (2) that the concept of the weekly payment of compensation as a fraction of average weekly earnings over a specified period occasioned no difficulty either of construction or of application in bringing overtime earnings into the calculation. The scheme adopted by the 1949 amendment to the Act was and is substantially different. Total and partial incapacity are dealt with separately and by par. (1) (c) of the First Schedule it is provided, so far as is immediately relevant, that "where the seaman is partially incapacitated for work by the injury - a weekly payment during his incapacity - (i) of the amount (if any) by which the weekly amount that he is earning, or is able to earn in some suitable employment or business, after the injury is less than his weekly pay at the date of the injury" or of a specified sum, whichever be the less. "Pay" for the purpose of the Schedule is defined (in par. (3)) as - "(a) salary or wages of the seaman, and includes - (i) where the seaman receives, as a regular condition of his employment, board or board and lodging in addition to wages - such amount, not exceeding forty-five shillings per week, as is assessed as the value of the board or board and lodging; and (ii) unless otherwise prescribed - any allowance payable to the seaman in respect of his employment, but, subject to the regulations, does not include any allowance which is intermittent or any allowance or sum which is payable in respect of special expenses incurred or likely to be incurred by the seaman in respect of his employment; and (b) any reference to the weekly pay of the seaman at the date of the injury means, if the rate of pay of seamen of the same class is subsequently varied under the terms of any award, order or determination of an industrial authority, any industrial agreement or any law, the rate of pay as so varied."

In considering the Schedule as it was amended in 1949 and as it now stands, the omission of any express reference to overtime earnings is not for present purposes the most significant feature of the amended provisions. What is vitally important is the abandonment of "average weekly earnings" over a specified period as the basis for computing the weekly payments to which an injured seaman is entitled and the substitution therefor of a calculation which depends upon the ascertainment of the injured seaman's weekly pay at a particular date. This change seems to us inconsistent with including overtime as an element in the calculation. The concept of a seaman's weekly pay at a particular date without more, points, we think, to the rate of pay to which the seaman was then entitled and we consider that it would require special provisions to bring into account any other element, particularly a fluctuating element. It would have been possible to say that a seaman's weekly pay at the date of the injury should include his overtime earnings for the week then current or his average overtime earnings during so much of the term of his engagement as had expired or his average overtime earnings for the previous month or two months or year or any other period that might have been chosen but in the absence of an express provision not only is there no necessity for implying any such provision but there is no basis for choosing any one possible implication in preference to any other. It is highly unlikely that overtime earnings during the week current at the time of the injury could have been intended because this would make weekly pay depend upon whether the injury happened early or late in the week and whether, in that part of the week which had then passed, overtime had been earned. To make an implication of this sort would probably result in the calculation of a figure that would give a very distorted idea of what the seaman had been earning in his employment. Mr. Holmes did not contend for this particular implication but sought rather to treat weekly pay at the date of the injury as average earnings during the period of the seaman's engagement, but justification for this is lacking and such a construction would be contrary to the clear intention emerging from par. (3) that regard must be had to the rate of pay fixed by the award or agreement in force at the date of injury or as subsequently varied. It is also improbable that the idea of "average weekly earnings", having been abandoned as the basis for calculating weekly payments of compensation, should be brought back by an implication as a method of determining one element of weekly pay.

The impossibility of introducing overtime earnings as an element in the determination of a seaman's weekly pay at the date of the injury without making what seems to us unjustifiable implications might of itself be sufficient reason for rejecting the respondent's contention, but as already indicated we find in par. (3) (b) of the Schedule, which has already been quoted, a clear indication that "weekly pay at the date of the injury" means a rate of pay. The actual provision is that where subsequently to the injury there has been a variation of the rate of pay fixed by an award or agreement the reference to weekly pay means "the rate of pay as so varied". In the cases to which it applies this provision requires the seaman's earnings at the date of his injury to be disregarded in favour of a lower or higher rate of pay fixed subsequently but its importance extends beyond the cases to which it applies directly, for it illuminates the meaning of the phrase "weekly pay at the date of the injury" by revealing that where this phrase is used the Schedule is concerned with the rate of pay to which a seaman is, or but for his injury would be, entitled and not to his actual earnings for or over any particular period.

We have therefore reached the conclusion that what the seaman has earned as overtime wages is not to be brought into the determination of his weekly pay at the date of the injury.

In coming to the opposite conclusion and in referring the arbitration back to the arbitrator for the calculation of the respondent's weekly pay at the date of the injury, taking into account his overtime earnings, the Full Court observed that in determining the weekly amount that the incapacitated seaman "is earning, or is able to earn in some suitable employment", which has to be deducted from the seaman's weekly pay at the date of the injury to arrive at the weekly payment of compensation to be made to a partially incapacitated seaman, it would be necessary to bring overtime into the calculation, and reasoned that, if overtime has to be brought into account in ascertaining the subtrahend, it should also be brought into account in calculating the minuend. With respect to their Honours, however, this reasoning hardly gives full weight to the change of language in par. (1) (c) where the sum to be deducted is clearly earnings, actual or potential, whereas the sum from which the deduction has to be made is defined as "pay" at a particular date in contradistinction to average or potential earnings.

Two other questions were raised that can be disposed of shortly.

It was claimed and not disputed (although the point did not arise in the courts below) that in calculating the seaman's weekly pay at the date of the injury, there should, in accordance with par. (3) (a) (i) of the Schedule, have been brought into account an amount of 41s. per week for board and lodging which the seaman received as a regular condition of his employment. This is clearly right.

It was also argued upon this appeal but not earlier that the calculation of the seaman's weekly pay at the date of the injury should take into account a weekly sum of £6 17s. 4d. in respect of weekly time off. This contention was based upon cl. 34 of The Seamen's Award 1955 which was in force at the date of the injury and which provides that "for each complete week of employment and 6 days of an incomplete week other than time spent on annual leave every employee shall be entitled to and the employer shall grant time off work and off the ship for 16 working hours to be given in his home port or as to not more than 8 hours thereof in any prescribed port or if the employee so desires and the Master so agrees in any other port". Following the provision that weekly time off may be deferred and accumulated, it is also provided that "unless the employee agrees to have the accumulated leave added to his annual leave all accumulated time off not given shall be paid for during the calendar month next but one following the month in which it became due as to 8 hours in his home port at 12s. 8d. per hour and as to 8 hours at other ports at 9s. 6d. per hour ". Finally, cl. 34 provides that "an employee shall upon his discharge be paid for time off not previously granted at the rates prescribed". A right to time off is not an addition to weekly pay and payment in lieu of time off not taken is not, in our opinion, within the concept of "weekly pay at the date of the injury" either as a matter of the ordinary meaning of those words or by virtue of the special provision in par. (3) of the First Schedule as a regular "allowance payable to the seaman in respect of his employment". Any payment to which a seaman becomes entitled under cl. 34 of the award becomes payable because the seaman has not during a particular time had the time off to which he was entitled by the terms of his employment. What cannot be disregarded is that the primary advantage which cl. 34 of the award gives the seaman is a right to weekly time off and it cannot be predicated that time off will not be taken as it falls due or, if not, that it will not be added to annual leave.

It was agreed between the parties that, if the Full Court was correct in its decision that overtime should be brought into the calculation of the respondent's weekly pay at the time of the injury, the appeal should be dismissed; it was also agreed that if overtime should be excluded from the calculation and if both the figures agreed (i.e. £6 17s. 4d. per week for time off and £2 1s. 0d. per week for board and lodging) should be brought into the calculation of the weekly wage of the respondent at the time of the injury, he would be entitled to some award and the matter would have to go back to the District Court Judge but that, if one or the other of these and overtime should be excluded, the appeal must succeed so that the decision of the District Court Judge would stand. Being of the opinion that both overtime and payments in respect of weekly time off should be excluded from the calculation of the respondent's weekly pay at the date of the injury, our conclusion is that the appeal should be allowed.

This appeal arises out of proceedings which were brought by the respondent, a seaman, to recover against the appellant, his employer, compensation payable according to the First Schedule of the Seamen's Compensation Act 1911-1954 Cth. The proceedings were brought in the District Court at Sydney and heard by his Honour Judge Bruxner. An award was made in favour of the respondent for a weekly payment of compensation from the date of the injury, which was 9th June 1956, until 13th October 1959. This award was made upon the basis that during a certain part of that period the respondent was totally incapacitated and during the rest of it he was partially incapacitated but during the latter time was unable to obtain suitable employment. Although partial incapacity for work resulting from the injury continued after 13th October 1959, the respondent was in a different position from that in which he was before that date because on 14th October 1959 he obtained employment suitable to his capacity and continuously earned in that employment £20 13s. 0d. per week. He contended that he was entitled to be paid a weekly amount of compensation by reason of the provisions of par. (1) (c) (i) of the First Schedule. It became necessary for the Court to compute the respondent's "weekly pay" as a seaman at the date of the injury in order to determine whether he was precluded by the fact that he was earning "a weekly amount" of £20 13s. 0d. The respondent's classification on the ship at the date of the injury was "greaser". The Seamen's Award under which he was working provided that the minimum rate of cash wage per calendar month to be paid to "a greaser" was £55 8s. 6d. and that the overtime rate for all employees other than deck boys was 9s. 6d. per hour. The Court, at the hearing, was furnished with particulars of the respondent's earnings from 10th April 1956 up to the date of the injury, 9th June 1956. Apparently the earnings, prior to 10th April 1956, were not available. The particulars showed that the overtime pay was almost half of the earnings. The employer contended that pay for overtime could not lawfully be included in the computation of "weekly pay" for the purposes of par. (1) (c) (i). His Honour Judge Bruxner said in the course of his reasons for judgment: "The figures before me show that if one looks at his (the seaman's) pre-injury earnings, plus overtime, he would undoubtedly be entitled to an award. On the other hand if one disregards the overtime which he earned before his injury and merely looks at his weekly pay, he is now in fact receiving more than that amount and therefore would not be entitled to compensation". With some hesitation his Honour decided that the overtime earnings could not be included in computing "weekly pay" and for this reason decided that an award ought not to be made covering any period from 14th October 1959. On appeal to the Full Court of the Supreme Court of New South Wales, Evatt C.J., Herron and Collins JJ. decided that overtime pay must be included in computing "weekly pay" for the purposes of par. (1) (c) (i). Their Honours directed the matter be remitted to his Honour Judge Bruxner to determine the amount of the "weekly pay" of the claimant seaman, at the date of the injury, on the basis that it includes overtime pay, and to determine whether he is entitled to an award of compensation as from 14th October 1959 and, if so, for what amount. The present appeal is brought from this order.

Paragraph (3) (a) of the Schedule is a definition of "pay". It is necessary to use this definition in applying par. (1) (c) (i). These provisions include "wages" without altering its meaning. The word "wages" applies to what is paid for overtime. The words of the definition do not manifest any intention to exclude overtime in computing wages. The word "pay" is apt to apply to financial remuneration for overtime by a seaman (see the remarks on the meaning of "pay" in the context which was considered by McCardie J. in Bayley v. Bayley [1] ). It is interesting to notice that the wages for which a seaman contracted formerly covered overtime. Channell J. said in Harrison v. Dodd [2] : "For the wages contracted for in the articles the seaman is bound to give his full services, and there is no such thing recognized as overtime or payment in respect of overtime merely because the seaman is called upon to work for longer hours than are expected by the parties when they enter into the contract" [1] . The Seamen's Award 1955, as stated above, prescribed a minimum rate of wages to be paid in cash to a seaman in every calendar month and as well an hourly rate for overtime. To make up the seaman's monthly pay it would clearly be necessary to include what he earned during the month for overtime. In Sutton v. Attorney-General [2] Lord Sumner said: " "pay" means something narrower than something paid; it means something contractually payable" [3] . Lord Finlay quoted with approval words used by Darling J.: "Pay does not cease to be pay or civil pay because it is temporary. Whether the thing is temporary or permanent so far as anything is permanent depends simply upon the length of the agreement" [4] . It is important to notice that by par. (3) (b) of the Schedule "weekly pay" is assimilated to the "rate of pay" under The Seamen's Award. The "rate of pay" under the award is the pay to which the seaman is entitled for set hours of work and extra labour outside those hours. There is nothing in the First Schedule to warrant narrowing by interpretation the meaning of "weekly pay" so as to exclude overtime pay. The seaman would obviously be prejudiced by the comparison which par. (1) (c) (i) requires if so important an item as the pay to which a seaman is entitled for overtime if he works outside his set hours of labour was omitted in computing his "weekly pay". The comparison, if not a fair one, might result in the extinction of his right to compensation during partial incapacity or in a substantial diminution of it. In my view it would not be possible to maintain consistency between par. (1) (c) (i) and par. (3) (b) if the rate of pay for overtime prescribed by the Seamen's Award was not taken into account in computing "weekly pay".

1. [1922] 2 K.B. 227, at p. 231. 2. (1914) 111 L.T.R. 47. 3. (1914) 111 L.T.R., at p. 49. 4. (1923) 39 T.L.R. 294. 5. (1923) 39 T.L.R., at p. 299. 6. (1923) 39 T.L.R., at p. 297.

The present scheme of compensation in the First Schedule was introduced by the Seamen's Compensation Act 1949. The scheme of par. (1) (c) (i) was compared in argument with that which it supplanted in order to show that it was not intended that "weekly pay" should include overtime pay. The former mode of computing compensation was on the basis of the seaman's average weekly earnings during a fixed period before the injury. Compensation was a weekly amount equal to a certain proportion of the average weekly earnings. In the first Act it was half, but this was in the course of legislation increased to two-thirds. The Seamen's Compensation Act 1938 had introduced a provision into the First Schedule providing for the inclusion of "amounts paid by way of overtime to the seaman" in computing average weekly earnings. "Weekly pay" is a new concept brought in by the Seamen's Compensation Act 1949. There was nothing like the definition of "pay" in the First Schedule before the latter Act was passed. The relation of "weekly pay" to "rate of pay" under an award, which is made by par. (3) (b), was novel. In the provisions making up the present scheme there is no definition of "weekly amount". Why should this expression be read as not including amounts paid by way of overtime? The principle underlying par. (1) (c) (i) is to compare the seaman's "weekly pay" at the date of the accident computed in accordance with the definition of "pay" with the "weekly amount" he is earning or is able to earn, after the injury in some suitable employment or business. Money paid for overtime in the employment would enter into the computation of the weekly amount which he is earning in it. If it did not it would be just to exclude over time pay in computing "weekly pay". In this view the omission to repeat the provisions introduced by the Seamen's Compensation Act 1938 that amounts paid by way of overtime should be included in the computation of average weekly earnings cannot support a contention that "pay" or "wages" does not include amounts paid by way of overtime. I think it is a more cogent argument that pay or wages ordinarily include such amounts and there is no expression to the contrary in the Seamen's Compensation Act 1949. No difficulty would be found in calculating the amount of overtime if the amounts paid by way of overtime during a fixed period had to be brought into account as in the former scheme. But in my opinion it cannot follow from the absence of any direction as to a period to be taken in computing "weekly pay" that overtime should be excluded, if "weekly pay" is a concept covering a rate of pay for overtime. As I have said the concept embraces remuneration for labour and is not confined to pay which is the price for labour within set hours: on the contrary, it covers also pay for work done beyond regular hours. The generalization that overtime may be spasmodic in the case of a seaman's employment may not be a safe one on which to proceed in interpreting what is meant by the words "his weekly pay at the date of the accident". However, in my opinion, it is not a proper principle to apply in the case of a worker's compensation claim that any item forming part of the worker's earnings at the date of the injury, which is difficult to calculate, is not presumed to be included in them. Dixon C.J. said in Nash v. Sunshine Potteries Ltd. [1] : "It is well settled that a right to compensation conferred by the Act is not to be restricted or denied because of the difficulties in fitting the clauses relating to the computation of compensation to the circumstances of the case" [2] . In any event, it would not necessarily be difficult in every case to compute compensation payable to a seaman under the Schedule if pay for overtime is taken into account. On the contrary, it would be easy and practical to do so if he had before injury worked overtime regularly: indeed, a seaman may, at the time of the injury, have been rostered to work overtime and would have done so had he not been injured. It would not be right in one case to exclude pay for overtime because it is difficult to assess and to include it in another where it is not difficult. The expression "weekly pay at the date of the injury" has a constant meaning. Industrial awards provide for payment for work done in set hours and rates of pay for work done beyond those hours; the pay which a worker receives for overtime is an integral part of the remuneration for his work. It enters into the measure of the value of his earning capacity for the total or partial loss of which workers' compensation is provided. This is the principle underlying this Schedule and in the absence of clear words excluding the item of overtime pay from the expression "weekly pay", in my opinion a construction of the Schedule which involves the exclusion of overtime pay is not correct. It appears from the judgment of his Honour Judge Bruxner that he was able to estimate an amount in respect of overtime because he said that, if pay for overtime should be taken into account, the respondent would, on the figures, be entitled to an award since his weekly pay would exceed the amount he was earning in his current employment. With respect, it is not a sound and practical construction of this Schedule to rely on the so-called intermittency of overtime; such an argument is, I think, mere "paper logic". Pay itself, other than overtime pay, may vary from month to month or week to week either because of some condition of the employment, existing at one time and not at another, for example a hazard or because work may be suspended for short periods: nevertheless, it could still be the basis for the computation of "weekly pay", if the worker received a compensable injury. I think that the decision and order of the Full Court of the Supreme Court are correct. The appeal should be dismissed.

1. (1959) 101 C.L.R. 353. 2. (1959) 101 C.L.R., at p. 361.