UNDERWOOD J This is an appeal from an order of a part-time workers' compensation commissioner.

2. The respondent worker sustained a compensable injury on 16 April 1989. He developed calf pain while lifting lids off casting moulds at the appellant's plant at Risdon. Nerve root compression at L4/5 level was later ascertained to be the cause. He underwent conservative, and later surgical, treatment but the pain persisted. A report by the orthopaedic specialist, Mr Mills, dated 20 December 1991 was tendered in evidence before the commissioner. It contained this opinion:

"I would think that Mr Quinn will continue to complain of

ongoing right calf pain which is exacerbated by heavy

lifting and twisting. I think these symptoms are directly

related to his post operative scarring.

I would consider it likely that Mr Quinn will never be able

to return to a job that involves any heavy lifting, twisting

or carrying. He is however fit for light work avoiding

heavy lifting and bending and which allows him the freedom

to change his position frequently."

3. Following the accidental injury, the respondent was off work from time to time and received weekly payments of compensation. When not in receipt of treatment or recovering from surgery the respondent was employed by the appellant on light duties. Recently, those light duties involved cutting hessian bags from a roll. The respondent said he could only do this work for about ten or twenty minutes before needing a rest because of the pain in his leg. At the time of the hearing before the commissioner the respondent was still so employed by the appellant, but absent on holidays.

4. Following a rehabilitation meeting on 12 December 1990, the respondent decided to seek a lump sum payment (s71) and a redemption of weekly payments as it appeared that his partial incapacity for work was permanent. Agreement could not be reached and the worker referred the claims to the commissioner for determination. The claim under s71 was settled and an order made by consent. The claim for a redemption of weekly payments proceeded to a hearing. For reasons given in writing, the commissioner made the following order:

"That the respondent in addition pay to the applicant the

sum of $39,111.80 in redemption of liability to make weekly

payments of compensation pursuant to the provisions of

Section 89 of the Act."

5. The appellant appeals against this order and relies upon the following grounds:

"... the Workers' Compensation Commissioner erred in law in

that he:-

1 Determined the appropriate discount rate to be applied to

the liability for weekly payments in order to determine the

amount of the lump sum to be paid to the Respondent by way

of redemption of the said liability was 2 per cent.

2 Failed to correctly apply a discount rate of 2 per cent to

the liability for weekly payments.

3 Failed to apply an appropriate discount rate, namely 7 per

cent or such other rate greater than 2 per cent which the

Court deems appropriate.

4 Failed to take into account when assessing an appropriate

discount rate:

(a) the possibility of improvement in the Respondent's

physical condition;

(b) the early death of the Respondent;

(c) the ordinary vicissitudes of life."

6. At the hearing, the only oral evidence was given by the respondent. He said that he was a qualified diesel mechanic but he could no longer do that work as it was too heavy. He said he thought he would be able to do some of the jobs done by a fitter but not all of them. He said that he had tried for other positions with the appellant but been unsuccessful. He told the commissioner that he had enrolled at the University to commence a Bachelor of Surveying course starting at the beginning of the 1992 academic year. He said that the course took four years and, at its conclusion, he hoped to be able to get work as a surveyor. He said that he envisaged this as a desk job saying, "lots of surveyors move into town planning, land information, types of land and land systems". There was no evidence of the likelihood of the respondent being able to successfully complete the course, the availability of work for surveyors or the amount of money qualified surveyors earn.

7. The respondent was 34 years old at the time of the hearing before the commissioner. It was an agreed fact that the limit on the weekly payments payable to the respondent was $77,276.40 and that his gross annual salary was $29,562 per annum but of that amount $7,982 was "make-up pay component". It was common ground that the appropriate pay for the work the respondent was doing was $7,982 less than he was being paid. $29,562 was the amount the respondent would have been paid for the work he was doing before the injury. Thus, in the words of s69(1)(b), $7,982 per annum was the difference between the worker's "average weekly earnings" and the amount that the worker was earning during the period of incapacity. It was the compensation payable to the appellant pursuant to that section. It was also an agreed fact that the respondent had received $23,042.96 in weekly payments and that the difference between that sum and the limit of his weekly payments is $54,233.44.

8. The Workers Compensation Act, s89(1) and (2) provides:

"(1) to subsection (4), the liability for weekly payments to

a worker may, after those payments have been made to him for

a period of not less than three months, be redeemed by

payment of such lump sum as may be agreed between the

employer and the worker.

(2) Where the employer and the worker are unable to agree as

to the lump sum to be paid to the worker in respect of the

redemption of a weekly payment, the worker, the employer of

the worker, or the licensed insurer of the employer may, as

prescribed, refer the matter to the Commissioner for a

determination as to the amount of the lump sum to be paid to

the worker."

9. The redemption is the liability of the employer to make weekly payments. See Watkins v Renata [1985] FCA 210; (1985) 61 ALR 153 at 160. Presently that liability is to pay $7,982 per year until the sum of $54,233.44 has been paid. Upon an application for redemption of that liability an appropriate starting point is to take the potential maximum liability and then discount it for early payment. See Perry Engineering Co Ltd v Mermingis [1964] HCA 67; (1964) 112 CLR 468 at 477; Smith Patrick Stevedoring Pty Ltd v Pearson (1976) 13 SASR 478; Vacuum Oil Company Pty Ltd v Pyke, Crisp J 6/1960. The next step is to consider whether or not a reduction should be made for adverse contingencies. The nature of this deduction will depend upon the facts of the case and include such matters as the risk of early death and the possibility that, had the order for redemption not been made, the weekly payments might have been terminated or reduced as provided by s86(1) or following a determination pursuant to s88(2).

10. With respect to a discount for early payment, the commissioner found that one was appropriate. He referred to Todorovic v Waller [1981] HCA 72; (1981) 150 CLR 402 and the Commonwealth of Australia v Blackwell. Unfortunately, the reference cited in the commissioner's reasons ((1986) 67 ALR 61) and his discussion of that case indicate that he was referring to the decision of the Full Court of the Federal Court which was overturned by the High Court. The commissioner directed himself as a matter of law that the reasoning of the High Court in Todorovic did not require him to discount for early payment, holding that the issue of any discount was a matter of fact for him. He did what the Full Court of the Federal Court suggested in Blackwell and used Todorovic, "as assistance for matters of principle" and concluded that a discount was appropriate.

11. The commissioner came to the conclusion that he was not bound by any particular decision in relation to an appropriate discount rate and said, "I intend to follow the real desires of the present Chief Justice of the High Court when, as Mason J in Todorovic's case, he commented that if left to him, 2 per cent would be a fairer approach."

12. In Commonwealth of Australia v Blackwell [1987] HCA 44; (1987) 163 CLR 428, the issues were whether there should be a discount for early payment of a liability to make weekly payments and if yes, at what rate should it be calculated. The High Court reversed the Full Court of the Federal Court decision that, in the absence of relevant material concerning inflation and wage rates, there was no basis for applying any discount. The High Court held (436) that the principles in Todorovic v Waller (supra) applied to orders for redemption of weekly payments and that the adoption by the tribunal at first instance of a discount rate was correct but that it misdirected itself by fixing the rate at 4.5 per cent. In the joint judgment of four of the justices their Honours said at 436:

"In our opinion, this general approach of the tribunal was

correct. Just as it was thought in Todorovic to be

desirable to relieve courts from the complexity and

diversity of result involved in each court exercising its

own discretion in the choice of a discount rate, so it is

desirable in principle to facilitate the task of the

commissioner in determining the amount of a lump sum by way

of redemption. There is no justification for rejecting the

reasoning in Todorovic as having no application to the

commissioner's task and thereby to leave the commissioner,

and on review the tribunal, in the same predicament that

confronted the courts prior to Todorovic."

13. On behalf of the appellant it was urged upon the commissioner and upon the hearing of this appeal that, having regard to the provisions of the Common Law (Miscellaneous Actions) Act 1986, s4, an appropriate discount rate was 7 per cent. The commissioner correctly held that the Act had no application to orders for redemption of the liability to make weekly payments. The section is confined to "an award of damages ...".

14. Unfortunately, the commissioner compounded the error he made by relying on the Full Court's decision in Blackwell. He made no actuarially calculated deduction at all. For reasons which I shall examine shortly, he determined that an appropriate sum without discount for early payment was $39,910 and simply reduced that by 2 per cent viz $798.20 to arrive at the sum of $39,111.80. Accordingly, on any view of the matter, ground 2 of the notice of appeal has been made out and the order should be quashed.

15. With respect to the ultimate disposition of this appeal reference was made to the Rules of Court, O76, r54(1) which provides that:

"... a judge, on the hearing of any appeal from an inferior

court shall have power ... to give or make any judgment

which ought to have been given, or made by the inferior

court and to set aside, reverse, alter, or vary any judgment

given or made by the inferior court ...".

16. On behalf of the respondent, Mr Read submitted that an actuarial calculation alone would not produce the judgment which ought to have been given. He contended that the commissioner had made an error of law which was not a ground of appeal but which this Court could now consider having regard to the provisions of O76, r54(2) which provides:

"The powers under this Rule may be exercised by the court or

judge even if -

(a) any notice of appeal or cross-appeal has not been given -

(i) in respect of any part of the decision of the inferior

court; or

(ii) by any party to the proceeding in the inferior court; or

(b) any ground is not specified in the notice of appeal or

cross-appeal for -

(i) allowing the appeal; or

(ii) affirming the decision of the inferior court; or

(iii) varying the decision of the inferior court."

17. Counsel for the appellant, Mr Wilkins, did not contend that Mr Read's submission was incorrect. See Kaup v Brean and Duggan, Zeeman J No 71/1992 for a discussion on this rule. Once error is made out it is open to this Court to make such order as should have been made if it is appropriate to do so.

18. The commissioner referred to Arnotts Snack Products Pty Ltd v Yacob [1985] HCA 2; (1983-84) 155 CLR 171 where it was held that a partial incapacity for work was a reference to reduced physical capacity, by reason of physical disability, for actually doing work in the labour market in which the employee was working or might reasonably be expected to work regardless of whether or not such partial incapacity was productive of financial loss. See also Holden v Toll Chadwick Transport Ltd (1987) 8 NSWLR 222; Williams v Metropolitan Coal Co Ltd [1948] HCA 8; (1948) 76 CLR 431; Steggles Pty Ltd v Vandenberg (1986) 6 NSWLR 233 at 236. The commissioner then determined:

"I therefore think that the worker is partially

incapacitated because he has a reduced physical capacity for

doing work in the market in which he was working."

19. That determination reflects a partially correct application of the law. He went on to say that the respondent was therefore entitled "in terms of redemption of weekly earnings to a redemption based upon his make-up pay component." The undisputed evidence was that the physical incapacity was permanent. Accordingly, but for redemption, the liability to make weekly payments persists until the statutory limit on those payments is reached. The appropriate next step for the commissioner would have been to reduce the difference between that statutory limit and the amount paid to date ($54,233.44) by 3 per cent for early payment and such other amount he considered appropriate for contingencies, including the contingency that in the future the weekly payments may have been terminated or reduced in accordance with s88(2)(a). Instead of taking that next step the commissioner turned to the appellant's evidence about his intention to commence a four year Bachelor of Surveying course. He said:

"The next question to consider however is whether or not

that make-up pay component (I infer, a reference to weekly

compensation) should be confined to the four years that are

urged upon me by the employer as being reasonable in the

circumstances."

20. The commissioner then referred to some of the appellant's evidence, and considered how long it might be before the appellant gained "meaningful employment" armed with a tertiary degree. He erroneously concluded:

"I think it not impermissible therefore, to draw a

conclusion that the partial incapacity to do work in the

labour market in which the worker was working or might

reasonably be expected to work would last for a period of

five years. The entitlement therefore would be, a make-up

pay component of, $7,982 X 5."

21. The physical incapacity to "work in the labour market in which the (appellant) was working or might reasonable be expected to work" - Arnotts Snack Products (supra) at 177 (my emphasis) will remain unaffected by any employment that might be obtained. The commissioner's conclusion that partial incapacity would last for five years is the result of the application of a wrong principle and an error of law. The error produced the figure of $39,910 which the commissioner reduced by $2 per centum.

22. The evidence concerning the Bachelor of Surveying course and its likely impact upon the appellant's ability to earn income was sketchy to say the least. I set out the whole of it below:

"MR WILKINS: Mr Quinn we haven't heard any evidence but you

intend to go to University at sometime in the near future?

... Yes.

Have you enrolled this year in University? ... Yes.

What's the course which you're proposing to do there? ...

Bachelor of Surveying.

And that course takes how long? ... Four years.

Now at the end of that course would you anticipate that you

would be able to work as a surveyor? ... I hope to, I don't

know.

...

CHAIRMAN: Mr. Quinn have you got any idea what a company

surveyor involves? (sic)

WITNESS: Yes.

...

MR WILKINS: Thank you. What duties do you you - what jobs

do you envisage that you'd be doing as a surveyor on a day

to day basis, in a physical type of way? ... Lots of

surveyors move into town planning, land information, types

of land and land systems.

So you'd envisage it as being a desk job or - ... I think

so."

23. The evidence was that the appellant had worked for the respondent for three years as a casting operator, essentially a heavy manual job, and prior to that had been a diesel mechanic. There was nothing to indicate his academic ability or the likelihood of him successfully completing a Bachelor of Surveying course.

24. In those circumstances and upon the evidence given the liability of the respondent to make weekly payments should be redeemed upon payment of a lump sum calculated as follows:

1 Present weekly compensation is $153.50 per week or $7,982

per annum.

2 At the present rate the statutory limit will be reached in

$54,233.44/7,982 or 6.794 years.

3 The present value of $7,982 per annum, or $153.50 per week

payable over 6.794 years at 3 per cent compound interest

with no allowance for mortality is approximately $48,000.

4 The sum of $48,000 will be discounted by 15 per cent for

contingencies to produce $40,800.

25. The appeal is allowed. The order of the commissioner is set aside and in lieu thereof it is ordered that the respondent's liability for weekly payments to the worker be redeemed by a payment of $40,800.