P & O Berkeley Challenge Pty Ltd in the interest of HIH Winterthur Workers... [2000] NSWCA 214 | Case summary

1 PRIESTLEY JA: Background . In this appeal the appellant raises a question of construction of s 16 of the Workers Compensation Act 1987 (the Act). 2 Mrs Lucia Alfonzo worked as a cleaner at the Clovelly Public School from 1 January 1981 to 11 February 1996. During that time she had two employers. The first was the Government Cleaning Service (GCS) from 1 January 1981 to 28 January 1994. It seems that from 1989 to 28 January 1994 GCS's workers compensation insurer was GIO General Ltd (GIO). The second employer was P & O Berkeley Challenge Pty Ltd (Berkeley) from 29 January 1994 to 11 February 1996. Berkeley's workers compensation insurer was MMI Workers Compensation (NSW) Ltd (MMI) from 29 January 1994 to 31 December 1995 and HIH Winterthur Workers Compensation (NSW) Pty Ltd (Winterthur) from 31 December 1995 to 31 December 1997. Mrs Alfonzo's employment ended on 11 February 1996. 3 The only point argued in the appeal to this court concerned an issue between the two insurers (MMI and Winterthur) of the second employer (Berkeley), but when the appeal came on for hearing appearances were announced for all three insurers and also the worker. The appellant was Berkeley in the interest of Winterthur, the first respondent was Mrs Alfonzo, the second respondent was GCS in the interest of GIO and the third respondent was Berkeley in the interest of MMI. The appellant, in substance Winterthur, then told the court the only issue it wished to raise in the appeal concerned only the other insurer of the second employer Berkeley, that is MMI. At the request of the parties the court then by consent made orders dismissing the appeal against Mrs Alfonzo with costs and dismissing the appeal against the first employer (whose insurer was GIO) with no order as to costs. The appeal then proceeded simply between the two insurers of the second employer. 4 Although the point Winterthur wished to argue had been raised before the trial judge, it does not seem to have been the principal issue before her, and she dealt with it very briefly, on the basis that it was covered by what had been said by Sheller JA in his leading opinion in GIO Workers Compensation Ltd v GIO General Ltd (1995) 12 NSWCCR 187 at 196. 5 In order to give some context to the appellant's point in this court, I will briefly describe the facts of the case and the course of proceedings at the trial. 6 Primary facts. In the course of her employment Mrs Alfonzo developed painful symptoms in her arms and neck. These gradually grew worse and she was referred to Dr Gibbs in April 1993. He put her off work. Her lay-off lasted until August 1993. She was paid workers compensation during this period. During her employment with the second employer her symptoms continued to worsen, but she managed to keep working. In November 1995 she consulted Dr Gibbs again and was taken off work for about five weeks over the holiday period at the end of 1995, for which time it seems that she was paid weekly workers compensation. She worked again for about three weeks in 1996 but stopped on 11 February 1996 and did not work again. 7 The proceedings in the Compensation Court. Mrs Alfonzo filed an application for determination of compensation in the Compensation Court dated 30 July 1997. In her application she claimed weekly compensation from both employers from 12 February 1996 and continuing for partial incapacity or partial incapacity deemed to be total incapacity. She also claimed compensation under s 66 and s 67 of the Act. 8 The first employer filed an answer to Mrs Alfonzo's application which put all her claims in issue. For the second employer two answers were filed. One of these dealt with the period when the second employer was insured by MMI and the other with the period when the second employer was insured by Winterthur. The worker and the three insurers were all separately represented when the case was heard by Truss J in the Compensation Court. 9 Truss J made awards against only the second employer. These were for weekly payments pursuant to s 40 of the Act, for lump sum compensation pursuant to s 66, for an award pursuant to s 67, and for the worker's medical and like expenses pursuant to s 60. 10 The trial judge's reasons. In arriving at her awards the trial judge said that the principal issue in the case was whether the court should characterise the nature of the worker's injury as aggravation of a disease invoking s 16 (as the first employer contended) or as what is generally referred to as nature and conditions of employment involving multiple minor traumata (as the second employer contended). (If the second employer was right on this, then it was submitted both first and second employers would have been liable, and s 22, the apportionment section, would have to be considered.) 11 The trial judge's conclusion was that it was a s 16 case. She said that the worker's uncontested evidence was of the onset of symptoms in 1992 with time off work in 1993 and the worsening of symptoms until by February 1996 the worker was unable to carry on any longer. On that basis the second employer was the only employer liable. 12 This brought the judge to the question which is the point of appeal in this court: which of the second employer's insurers should bear the second employer's liability? 13 In dealing with this Truss J noted that the evidence of Dr Gibbs suggested that the worker had continued to be incapacitated in the physical sense to some extent at least after she resumed work at the end of August 1993, but that s 16 provided that the injury should be deemed to have happened at the time of the worker's incapacity. Relying on what had been said by Sheller JA in the GIO Workers Compensation case (12 NSWCCR at 196) she held that incapacity for the purposes of s 16 was a reference to incapacity for which compensation was claimed. She said that in the case before her the relevant date was the commencement of the worker's inability to earn the wages she would otherwise have earned but for injury and that this occurred on the day she ceased work and her claim under s 40 commenced. This meant that the deemed date of injury within the meaning of s 16 was 12 February 1996. She said that the compensation to be awarded was therefore payable by the insurer on risk at that time which was Winterthur. 14 The result was that Winterthur, which had been on risk from 31 December 1995 to 11 February 1996, became liable for compensation for incapacity arguably referable to a period from 1993 to 1996 during nearly the whole of which time two other insurers were on risk. The seeming incongruity of this result no doubt played a part in an appeal being brought to this court by the second employer in the interest of Winterthur. 15 The appellant's argument. 16 In the appeal the appellant's second employer in the interest of Winterthur contended that on the judge's findings concerning partial incapacity the deemed date of the worker's injury could not be found to have been during the time the second employer's insurer was Winterthur. This submission was based on the words of s 16 coupled with the proposition that the trial judge's findings clearly showed that Mrs Alfonzo had reached a state of partial incapacity, in the sense in which that term is used in the Act as established by cases of authority, well before 1995. 17 Section 16 was relevantly as follows: " (1) If an injury consists in the aggravation, acceleration, exacerbation or deterioration of a disease: (a) the injury shall, for the purposes of this Act, be deemed to have happened: (i) at the time of the worker's death or incapacity; or (ii) if the death or incapacity has not resulted from the injury - at the time the worker makes a claim for compensation with respect to the injury; and (b) compensation is payable by the employer who last employed the worker in employment that was a contributing factor to the aggravation, acceleration, exacerbation or deterioration. (2) Any employers who, during the 12 months preceding a worker's death or incapacity or the date of the claim (as the case requires), employed the worker in any such employment shall be liable to make to the employer by whom compensation is payable such contributions as, in default of agreement, may be determined by the Compensation Court. (2A) [This subsection supplies a formula for determining contributions pursuant to subsection (2).] (3) In this section, a reference to an injury includes a reference to a loss or impairment for which compensation is payable under Division 4 of Part 3. (4) This section does not apply to an injury to which section 17 applies. " [Section 17 deals with loss of hearing.] 18 The two authorities particularly relied on by the appellant were Arnotts Snack Products Pty Ltd v Yacob (1985) 155 CLR 171 and Holden v Toll Chadwick Transport Ltd (1987) 8 NSWLR 222. In Holden this court regarded Yacob as having established that incapacity for work meant a physical incapacity for doing work in the labour market though the incapacity might not necessarily attract weekly compensation because it resulted in no immediate loss of earning power (see at 227.7). The appellant said that incapacity in this sense had befallen Mrs Alfonzo in 1993 and that the injury was therefore deemed to have happened at that time (s 16(1)(a)(i)); this made the last employer (Berkeley) liable under s 16(i)(b), and as this liability must have fastened on Berkeley as soon as it employed the worker, the insurer on risk at that time, MMI, not Winterthur, must be the insurer liable. 19 Discussion. Winterthur's submission might be acceptable, were it not for the fact that " incapacity " is given a particular significance in an important and relevant part of the Act. This happens in the following way. 20 Part 2 of the Act headed "Compensation - Liability" (ss 9-24) contains the foundation provision of the Act. This is s 9(1), which entitles a worker who has received an injury to receive compensation from the worker's employer. The provision however does no more than that; that is, it establishes a worker's entitlement to and the worker's employer's liability for compensation, but it does not say what that compensation shall be. That is left to Part 3, as indicated by its title "Compensation - Benefits". Part 3 (ss 25 to 87C) contains eight Divisions, the first five of which provide for different kinds of compensation; 1, that payable on death; 2, weekly compensation by way of income support; 3, compensation for medical and like expenses; 4, compensation for non economic loss; and 5, compensation for permanent injuries. Division 2, (ss 33 to 58), whose title is "weekly compensation by way of income support", makes total or partial incapacity for work a precondition for the payment of weekly compensation. 21 Although "incapacity" is not defined in the Act in a strict sense, a reference to it in the Act's main definition section (s 3(1)), gives a broad indication of its meaning. In s 3(1) it is said that "incapacity" includes a disfigurement that is sufficient to affect the earning capacity of a worker or a worker's opportunities for employment [1]. This indicates, although of course not conclusively, that the general sense of incapacity in the Act is a state of the health of a worker which affects his or her earning capacity or opportunities for employment. This is, generally speaking, consistent with both Yacob and Holden. 22 However, the way in which Division 2 makes total or partial incapacity the medium for weekly compensation is by means of s 33, which says that where total or partial incapacity results from an injury, compensation "shall include a weekly payment during the incapacity". "Weekly payment" is defined in s 3(1). Reading that definition into s 33, the section provides that compensation payable by an employer to an injured worker for total or partial incapacity for work resulting from an injury shall include a weekly payment of compensation under Division 2 in respect of a period of total or partial incapacity for work. 23 Section 34 then proceeds to give "incapacity" a particular significance. Section 34 provides: " 34. (1) For the purposes of this Division, the first 26 weeks of incapacity, in relation to a worker, is the period of incapacity for work (whether total or partial, or both) not exceeding 26 weeks after the worker becomes entitled to weekly payments of compensation in respect of the incapacity. (2) A reference in subsection (1) to a period of incapacity for work includes, in the case of separate periods of incapacity resulting from the same injury, a reference to the aggregate of those periods. (3) For the avoidance of doubt, the first 26 weeks of incapacity does not include any period during which there is no weekly compensation payable in accordance with this Division, whether because of the operation of section 40 or otherwise. " 24 Section 34 thus makes it plain that incapacity, for the purposes of Division 2, is incapacity falling within the period during which a worker has become entitled to weekly payments of compensation for incapacity. 25 As already mentioned, it is s 9(1) that gives workers their entitlement to receive compensation. It also makes that entitlement depend upon the worker's having received an "injury". This key word is defined in s 4 as meaning, (a), personal injury arising out of or in the course of employment; also, (b)(i), as including a disease contracted in the course of employment to which the employment was a contributing factor and, (b)(ii)), "the aggravation ... of any disease, when the employment was a contributing factor to the aggravation ...". 26 Because some s 4(b)(i) disease injuries are contracted by a gradual process which can cause difficulties in establishing the date of injury, s 15 specifies defined times at which such injuries are deemed to have happened. Section 16 serves the same function in regard to s 4(b)(ii) aggravation disease injuries. Both sections also nominate which employer, if the worker had had more than one during the progress of the disease, is liable to pay compensation, and, in certain cases, regulate the entitlement of the liable employer to obtain contributions from former employers. 27 Sections 15 and 16 reduce the need to analyse in detail at what stage in the gradual process of disease injuries the stage of an injury, or incapacity, for the purposes of the Act, has been reached. The price paid for this is the imposition of rules which cannot altogether eliminate some arbitrariness in their operation. In the present case the appellant seeks to avoid what it regards as an unfairly arbitrary result by submitting that "incapacity" in s 16 should be construed in accordance with Yacob and Holden. However, this construction, if adopted could itself bring strange results. If a cleaner such as Mrs Alfonzo happened to work for four successive employers in four successive years and reached a stage of incapacity (in the Yacob/Holden sense) in the first year through the aggravation of a disease, but continued to work for the first, second and third employers without seeking compensation while her disease injury continued to deteriorate, finally reaching the stage where she could work no longer because of the incapacity while working for the fourth employer, the fourth employer would be liable to pay compensation pursuant to s 16(1)(b) and would be able to claim contribution from the first employer pursuant to s 16(2) but not from the second and third employers because they would not come within the words of s 16(2) [2]. I doubt whether those responsible for the legislation intended such a result. 28 Nor do I think that when the relevant parts of the Act are read together such a result is required. Section 34 in my opinion operates exactly to prevent any such result. In my view the kind of incapacity it is talking about is the kind for which a worker establishes entitlement to weekly payments of compensation. This construction seems plain enough to me from subss (1) and (2) of s 34. The view is confirmed by subs (3). This subsection was added to the section by the Workers Compensation Legislation Amendment Act 1995 No 30, Schedule 8 [1]. The explanatory note appended to item [1] makes it clear that the subsection was added to prevent any argument being raised that the entitlement referred to in subsection (1) arose at the time of the injury. 29 As the particular purpose of both ss 15 and 16 is to assist in some aspects of making orders for weekly payments of compensation under Division 2 of Part 3, it seems clear that incapacity has the same meaning in the two sections as it does in Division 2. 30 In the case which the trial judge relied on (see pars 4 and 13 above) this court previously reached substantially the same conclusion in regard to the meaning of incapacity in s 15 as I have done in regard to s 16. Sheller JA, at 12 NSWCCR 196 said, in regard to the phrase "... at the time of the worker's ... incapacity" (which is the same in both s 15(1)(a)(i) and s 16(1)(a)(i)) "that I have no doubt is a reference to the incapacity for which compensation is claimed". 31 The result is that I do not accept Winterthur's principal submission in the appeal. 32 A question was briefly raised in the course of argument concerning the awards made by the trial judge against Winterthur pursuant to ss 66 and 67 of the Act. These sections are in Pt 3, Division 4, entitled "Compensation for non-economic loss". Compensation is paid pursuant to s 66 for certain losses (elaborately defined) "suffered ... as the result of an injury". Section 67 is constructed on the same basis: see in particular s 67(6). Section 16(3) (see par 17 above) appears reasonably plainly to serve the function of fixing dates for injuries entitling a worker to compensation payable under Division 4 of Pt 3, that is, necessarily including amounts payable under ss 66 and 67. 33 The trial judge evidently took the date fixed by s 16(1) as deciding when the worker's injury should be deemed to have happened for purposes both of Division 2 and Division 4 of Pt 3. For the reasons indicated I agree with her conclusion. 34 My opinion, for the reasons I have given above, is that Winterthur's appeal fails and should be dismissed with costs. 35 FITZGERALD JA: Mrs Lucia Alfonzo received an injury in the course of her employment. By s 9(1) of the Workers Compensation Act 1987 (the "Act"), her injury entitled her to compensation from her employer in accordance with the Act. 36 Mrs Alfonzo's injury consisted in the aggravation of a disease to which her employment was a contributing factor. [3] The aggravation of her disease by her employment occurred over a period of years during which she was successively employed by two employers. Her employment by the first of her two employers is no longer material. 37 Mrs Alfonzo was employed by P&O Berkeley Challenge Pty Ltd ("Berkeley") from 29 January 1994 to 11 February 1996. She was incapacitated for work for about 5 weeks in December 1995 and January 1996. During that period, she received weekly compensation in accordance with Part 3 Division 2 of the Act. 38 Mrs Alfonzo returned to work with Berkeley for about 3 weeks prior to 11 February 1996. Her work continued to contribute to the aggravation of her disease, and, on 11 February 1996, she became permanently partially incapacitated for work as a result of her injury and ceased work. 39 It is now not in dispute that Mrs Alfonzo's compensation is payable by Berkeley, which is the employer which last employed her in the employment that was a substantial contributing factor to the aggravation of her disease.[4] 40 The Compensation Court awarded Mrs Alfonzo "weekly payments pursuant to s 40.. from 12 February 1996 to date and continuing" in respect of her partial incapacity for work, "lump sum compensation pursuant to Section 66" in respect of a permanent impairment of her neck and permanent loss of efficient use of part of her left arm, compensation under s 67 in respect of pain and suffering, and compensation in respect of "medical and like expenses pursuant to Section 60". 41 Mrs Alfonzo's entitlement to compensation under s 40 was for incapacity for work which had resulted from her injury [5]. Her entitlement under s 60 related to expenses which had resulted from her injury. Her entitlement to compensation under s 66 was for physical loss which had resulted from her injury. Her entitlement to compensation under s 67 was for pain and suffering which had resulted from the physical loss which had resulted from her injury. As noted earlier, her injury was the aggravation of a disease to which her employment was a contributing factor over a period of time which included her employment by Berkeley. 42 Berkeley had two workers' compensation insurers in the period during which Mrs Alfonzo worked for it. MMI Workers Compensation (NSW) Ltd ("MMI") was Berkeley's workers' compensation insurer for all of that period except the last 6 weeks. The appellant HIH Wintherthur Workers Compensation (NSW) Pty Ltd ("HIH") was Berkeley's workers' compensation insurer from 31 December 1995 to 11 February 1996, and thereafter to 31 December 1997. 43 Because Mrs Alfonzo's injury resulted in incapacity, it is deemed, for the purposes of the Act, to have happened at the time of her incapacity. [6] The date of her incapacity, and hence of her injury, determines which of MMI and HIH was "on risk" and obliged to pay the compensation to which she is entitled from Berkeley. 44 The Compensation Court found that the date of Mrs Alfonzo's incapacity, and hence of her injury, was 11 February 1996, the date when she became permanently partially incapacitated for work. HIH was then on risk. This appeal is concerned only with HIH's contention that the Compensation Court was in error in that Mrs Alfonzo's incapacity occurred on 29 January 1994 (when Berkeley became Mrs Alfonzo's employer) or between that date and 31 December 1995. MMI, not HIH, was on risk between 29 January 1994 and 31 December 1995. 45 In Arnotts Snack Products Pty Ltd v Yacob, [7]; see also Holden v Toll Chadwick Transport Ltd (1987) 8 NSWLR 222. the High Court held that incapacity was established for the purpose of the Workers' Compensation Act 1926, and in particular s 11 of that Act, if a worker's capacity for doing work in the labour market in which the worker was working or might reasonably be expected to work was impaired by injury. Although a loss of earning power had to be established to entitle a worker to compensation for incapacity, lost earning power was not part of the statutory concept of incapacity. 46 HIH submitted, with little elaboration, that economic loss is similarly not part of the concept of incapacity under the Act [8], and that "the time of [Mrs Alfonzo's] …incapacity" for the purpose of s 16(1)(a)(i) of the Act, and the time when her injury is deemed to have happened by that subsection, was the time when she first had an impaired capacity for doing work in the labour market in which she was working or might reasonably be expected to work. Carried to its logical conclusion, HIH's argument would mean that a worker's incapacity occurs for the purpose of s 16(1)(a) when there is any impairment of his or her physical capacity for doing work in an appropriate labour market, however minor and temporary. 47 However, acceptance that the concept of incapacity under the Act at the relevant time was not significantly different from the concept of incapacity in s 11 of the 1926 Act does not lead to acceptance of HIH's submission, which ignores the purposes of 16(1) of the Act. 48 Subsection 16(1) of the Act is directed to identifying who is liable for a particular type of injury entitling a worker to compensation, namely, an injury which consists of the aggravation, acceleration, exacerbation or deterioration of a disease where the worker's employment has been a contributing factor. Liability is made dependent on when the injury occurred. Subsections 16(1)(b) and (2) deal with the situation where there has been more than one employer who employed the worker in employment that substantially contributed to the injury. Subsection 16(1)(a) is directed to fixing a date for the occurrence of the injury depending on whether it resulted in incapacity, death, [9] or neither incapacity or death. In the present case, Mrs Alfonzo's injury resulted in incapacity. The "incapacity" referred to in the subsection is the "incapacity" which resulted from the "injury" referred to in the subsection. 49 Mrs Alfonzo's material "incapacity' was not the first impairment of her working ability as a result of the aggravation of her disease by her employment but the incapacity which resulted from her material injury, which was the injury which entitled her to the compensation which she was awarded. That incapacity was Mrs Alfonzo's permanent partial incapacity on and after 11 February 1996. The "time" of that "incapacity" was 11 February 1996. That is the deemed date of Mrs Alfonzo's material injury. [10] 50 Mrs Alfonzo's permanent partial incapacity on and after 11 February 1996 was the incapacity for which she claimed compensation. However, I prefer not to equate the "incapacity" referred to in s 16(1)(a)(i) with the incapacity for which compensation is claimed. In most cases, the result will be the same, as it is in this matter. However, s 16(1)(a)(i) is capable of operation when an injury results in an incapacity for which no compensation is claimed. 51 The Compensation Court's conclusion was correct, and the appeal should be dismissed, with costs. 52 CLARKE AJA: I agree with Priestley JA. ********** End Notes

This "definition" was shifted in 1998 to the Workplace Injury Management and Workers Compensation Act 1998, s 4(1), but remains applicable to the Workers Compensation Act 1987; see ss 52A and 53(1AA) of that Act.
In the words of s 16(2) the case here used as an example would require the date of incapacity (s 16(1)(a)(i)) to be taken; neither death (s 16(1)(a)(i)) nor the date of claim (s 16(1)(a)(ii) would be relevant for purposes of s 16(2).
Workers Compensation Act, s 4(b)(ii).
Workers Compensation Act, s 16(1)(b).
See also Act, s 33.
Workers Compensation Act, s 16(1)(a)(i).
(1985) 155 CLR 171
At the material time, there was a partial definition of "incapacity" in s 3(1) of the Act. That definition was repealed by the Workers Compensation Legislation Amendement Act 1998, but continues to apply by virtue of s 3(1AA) of the Act and the definition of "incapacity" in s 4 of the Workplace Injury Management and Workers Compensation Act 1998.
It is unnecessary to consider the position when the injury results first in incapacity and then death: cf GIO Workers Compensation (NSW) Ltd v GIO General Ltd (1995) 12 NSWCCR 187, 196.
See also GIO Workers Compensation (NSW) Ltd, (1995) 12 NSWCCR 187, 196.

P & O Berkeley Challenge Pty Ltd in the interest of HIH Winterthur Workers Compensation (NSW) Pty Ltd v Alfonzo & Ors

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