Serdzeff v Victorian WorkCover Authority [2005] VSCA 320

3 The appellant, Irene Serdzeff, appeals pursuant to s.52 of the Accident Compensation Act 1985 ("the Act" or "the 1985 Act") against the order of a judge of the County Court, made on 17 December 2004, dismissing her claim for compensation under s.92A of the Act arising out of the work-related death of her domestic partner, Steven Underwood ("the deceased"), who died at the age of 47 years on 26 February 2003 as a result of injuries he sustained on 12 April 1999 in the course of his employment. For some time prior to the deceased's injury he and the appellant lived together in a bona fide domestic relationship and, in October 1998, they became engaged to be married. At the time of injury the couple were not married, but it was common ground that the appellant was then a partner of the deceased within the meaning of the Act ("partner"),[1] that this relationship was extant at the time of his death and that the deceased died as a result of work-related injuries. As will be explained more fully later, the appellant sought compensation under s.92A of the Act on the basis that she was a "dependent partner" of the

deceased at the time of his death. The learned judge concluded, however, that the appellant had failed to establish relevant dependency and, accordingly, dismissed her application for compensation. It is against this decision that the appellant has instituted the appeal.

Overview of legislation

4 In order better to understand the appellant's claim and his Honour's decision it is necessary first to outline briefly the legislative scheme that operated at the relevant time and to refer to some of its provisions. The relevant parts of the Act came into operation variously in June and August 1985. As will be explained, a number of its provisions, which are relevant to the appeal, were inserted into the Act by a major amending Act, the Accident Compensation (Miscellaneous Amendment) Act 1997[2], and further amendments were made in 2001.

5 In general terms, the relevant provisions of the Act are concerned with the payment of compensation to those who were dependent on the earnings of a deceased worker who died as a result of work place injuries. Thus, the Act specifies the persons who are entitled to claim such compensation as well as providing a mechanism for determining the amount to which each such claimant is entitled. More specifically, s.82(2) of the Act[3] prescribes the circumstances in which a person may become entitled to compensation. It relevantly provides that "dependants" of the deceased worker "shall be entitled, subject to this Act, to compensation in accordance with [its terms]". So far as is relevant, s.5 defines "dependant" to mean "a person who ... (b) would but for the incapacity of a worker due to the [work-related] injury have been wholly, mainly or partly dependent on the earnings of the worker".[4] (Emphasis added.) Section 92A[5] then prescribes the amount of compensation that is payable under the Act to the various stated categories of dependants of the deceased worker - principally, dependent partners and children - defined by the section. Thus, for example, sub-s.(4) sets out the amount that is to be paid to a dependent partner of the deceased who has left no dependent children. A "dependent partner" is defined to mean a partner who was "wholly or mainly dependent on the worker's earnings". Sub-section 92A(2) provides that in determining for the purposes of the section whether a partner was wholly or mainly dependent on the worker's earnings at the date of his or her death, the earnings of the partner from personal exertion, and any savings from such earnings, are to be disregarded. Importantly, s.92A(3) provides "[i]f a worker's death ... entitles the worker's dependants to compensation, compensation under this section is [to be] determined...in accordance with this section". (Emphasis added.) Thus, one of the matters that a claimant must establish in order to secure a right to payment of compensation under s.92A is that he or she is entitled to compensation in accordance with the Act. Section 92A, however, does not provide the criterion for determining if a claimant is entitled to compensation. The section that deals with this question is s.82(2), which, as I have noted, confers entitlement to compensation on "dependants" of the deceased worker as defined by s.5(1) of the Act.

6 For reasons I give later, I consider that the legislation requires a court in determining an application by a partner to undertake a two-stage analysis before the matter of the quantum of compensation is addressed - first, as is required by s.92A(3), to determine if the claimant partner is entitled to compensation pursuant to s.82(2), and secondly, to determine whether the claimant is a "dependent partner" pursuant to s.92A(2). Although the definitions of "dependant" in s.5 and "dependent partner" in s.92A(1) are not identical, there is a clear and substantial overlap between them, so that it is difficult to see why such a two-stage approach was considered necessary. But given the history of the legislation and, in particular, the frequent piecemeal amendments that have been made to it (often in order to reflect a new government's different view on an aspect of the legislation), it is not productive to seek to resolve such a question by resort to commonsense analysis.

7 Notwithstanding that the legislation has created a two-stage approach to determining these questions as I have noted, the parties presented their respective cases below on the basis that the sole matter for determination by his Honour was whether the appellant was a "dependent partner" within the meaning of s.92A. No evidence or argument seems to have been addressed directly to what might be thought to have been the necessary anterior question, namely, whether the appellant had an entitlement to compensation pursuant to s.82(2) of the Act.

Evidence

8 Be that as it may, so far as the evidence was concerned, much of it was uncontroversial. Thus, there was no dispute that the appellant was approximately ten years younger than the deceased and that she was, at all relevant times, employed as a registered nurse, Division 1, having graduated as a nurse in approximately 1988. Moreover, it was accepted that throughout the relevant period the appellant owned the unit in which the couple lived. The evidence established that, prior to his injuries, the deceased worked for approximately 20 to 25 hours per week, earning in the order of $11 per hour. The records before the court showed that, between 7 September 1998 and 30 June 1999, the deceased earned gross wages of $11,732 from which tax was deducted. After the injury, the deceased received WorkCover payments until his death. As to the deceased's contributions to the household expenses, the appellant's evidence was that she was effectively in charge of paying the relevant accounts and that, although the deceased gave her small weekly cash payments - which varied from week-to-week from nothing to $40 - she paid, through her MasterCard account, their living expenses, such as gas, water, electricity, health insurance, telephone accounts, insurance, car registration, food, clothing, entertainment and medical expenses. The same generally applied, she said, to the cost of meals that they had in restaurants and cafés. The cash that was provided by the deceased, said the appellant, was usually expended on sundry expenses that were not identified other than in general terms. It was said that such money covered the cost of the items purchased by the deceased for his personal use, such as cigarettes, although she said that some of it was put to her use. Importantly, the evidence established that the deceased effectively paid for the petrol that he acquired at his workplace, the cost of which was debited against his wages. That petrol was purchased for the appellant's car, which was usually driven by her for her own purposes, although often he was a passenger in the car. There was very little evidence before his Honour, however, as to the deceased's future employment prospects and earning capacity. It seems that he worked only approximately half of the working week, as I have mentioned, but aspired to return to full-time work in sales. As at the date of his death, however, he had been unsuccessful in his endeavours to locate such work.

Case below

9 The appellant's principal case below was that, since her salary was to be disregarded for the purpose of determining if she was a "dependent partner",[6] on the evidence, the only relevant source of income was that provided by the deceased, so that it was plain that she was wholly or mainly dependent on his earnings and thus, entitled to compensation in the appropriate amount, as prescribed by s.92A. On the other hand, the respondent contended that, on the evidence, relevant dependency had not been established. His Honour essentially found that the evidence did not show that the deceased's earnings were applied for her maintenance and support or to providing the appellant with the necessities of life and thus, concluded that her dependency on his earnings was not established. His Honour came to that conclusion notwithstanding that he had earlier acknowledged that, for the purpose of determining if there was "dependency", he was required "to disregard any money concerning which the [appellant] was the source." Accordingly, the application was dismissed.

Appeal

10 In her notice of appeal, as filed, the appellant contended that two questions of law arose for determination - first, whether the learned trial judge misconstrued the operation of s.92A(2) of the Act; and secondly, whether his Honour erred by failing to give adequate reasons, particularly in relation to the appellant's submission as to the proper operation of that section. No challenge was made in the notice, however, to his Honour's findings, nor was it claimed that his Honour wrongly failed to determine if the appellant had an entitlement to compensation pursuant to s.82(2) of the Act.

11 In support of the contention that his Honour misconstrued the operation of s.92A(2), Mr O'Loghlen, for the appellant, argued that the provision was part of the legislative scheme that adopts a broad brush approach to the provision of compensation to dependants of deceased workers. In particular, it was said, the fiction in sub-s.92A(2) was "a device to protect working wives" and effectively converted a working wife into a non-working wife. More recently, it was said, this principle was extended to domestic partners. Thus, counsel argued, in determining if the appellant was relevantly dependent on the deceased at the time of his death, her earnings were to be disregarded and, given that in those circumstances the only income of her household came from the deceased, she was plainly wholly dependent on his earnings and was, therefore, entitled to compensation on that basis in accordance with the section. It was said that Wattz v. Northey (No.1)[7] supports this conclusion. That decision makes it apparent that the question "who are a deceased worker's relevant dependants" is to be determined in accordance with sub-s.92A(2) and the amount of compensation is to be calculated pursuant to subsequent sub-ss.92A(4)-(9).

12 Counsel further submitted that, although his Honour said in his reasons that he was required to disregard the appellant's earnings, it is plain that he did not do so. Mr O'Loghlen argued that his Honour relied on what was said in Kauri Timber Co. (Tas.) Pty Ltd v. Reeman[8] as to the meaning of "dependant", and then looked to see if, in fact, the appellant depended on the deceased's wages at the relevant time, thereby wrongly failing to give effect to the fiction created by s.92A(2).

13 The separate and second aspect of the appellant's case was, as I have mentioned, that his Honour did not provide sufficient reasons for his decision so that the judgment is vitiated. In the end, however, this argument was not pursued.

14 Mr Ruskin, for the respondent, pointed out that the appellant did not challenge in the notice of appeal his Honour's findings that the deceased worker did not maintain the appellant to the extent that she was "dependent" on him for the purposes of the Act. In reliance on the respondent's notice of contention Mr Ruskin argued that the evidence did not establish that the appellant was even partly dependent on the deceased worker's earnings so as to show that she was a "dependant" for the purposes of s.82(2) and, therefore, s.92A(2) could not artificially convert her into a "dependent partner". It was implicit in counsel's argument that, before the fiction prescribed by s.92A(2) could operate in respect of a partner of the deceased worker for the purpose of determining if he or she was relevantly dependent, it had to be established that the partner was entitled to compensation under s.82(2) and, in order to do that, it had to be demonstrated that he or she was at least "in part" dependent on the deceased's earnings. It was said that, on its proper construction, s.92A(2) does not operate to render a person who is not even partly dependent on the deceased's earnings "wholly or mainly" dependent; the purpose and effect of the provision is to "uplift" a partner who is first shown to be at least partly dependent on the worker's earnings to the status of someone who is "wholly or mainly" dependent, by reason of the operation of the statutory fiction of disregarding that partner's earnings.

15 Although Mr O'Loghlen did not, in terms, argue that the legislation does not prescribe a two-stage analysis of an application such as the present, he did inform the Court that it was common, in applications of this kind, for the matter to be determined by enquiring only whether the claimant partner of the deceased worker was wholly or mainly dependent on the deceased's earnings and, for that purpose, to disregard her earnings pursuant to s.92A(2). It was said that the enquiry contemplated by s.82(2) would be effectively subsumed in that analysis. Furthermore, counsel said, as I understood him, that those experienced in this area of the law adopted this one-stage approach because it was considered that the 1997 amendments merely widened the category of relevant claimants without altering the substance of what had to be established in order to demonstrate a right to compensation and that, prior to 1997, the legislation had adopted a one-stage approach. The Court asked the respondent to provide it with any relevant information it might have regarding the approach taken by it in respect of such dependency claims. In their helpful memorandum of 4 November 2005, the respondent's counsel informed the Court that, essentially, no discernible practice in that regard has been established. It was said that the concept of the two-stage approach, and the correct interpretation of the statute in this context, have not in terms been advanced in other instances. Further, it was said that, in this case, neither party at first instance "turned its mind, in terms, to whether or not there was properly a two-stage approach" that had to be undertaken by the court. In order to analyse, in its proper context, Mr O'Loghlen's implicit contention that a two-stage approach to a claim such as that of the appellant is unnecessary, it is desirable to look briefly at the legislative history of the provisions in question.

Legislative history

16 The Acts of 1914 and 1958, and the 1965 amendments to the latter Act, did not, in terms, directly confer on a dependant of a deceased worker an entitlement to compensation. Rather, the scheme of the legislation was to impose a liability on the employer to pay compensation to dependants with respect to a work-related injury. The statute then provided, by way of a Schedule to the Act (or like mechanism), a criterion by which to determine the quantum of the compensation that was payable to such dependants.

22 The 1997 amending legislation replaced s.92[15] with s.92A, which was substantially in the same form as it is now except that, relevantly, the operation of s.92A(2) was then limited to a "dependent spouse" as defined. In contrast to the earlier legislation, it thereby entitled a widower, as well as a widow, of a deceased worker to claim compensation and take advantage of the statutory fiction. As I have earlier noted, the concept of "dependent partner" was introduced by the amending legislation of 2001 and encompassed de facto relationships within its meaning.[16]

Two-stage approach

23 As has been noted, the position immediately before the introduction of the 1985 Act was that, once a partner satisfied the statutory requirement of entitlement to compensation, the amount of it was then quantified in accordance with the provisions of the Act. In order to demonstrate such entitlement the spouse was required to show that he or she was (wholly, mainly or partly) dependent on the earnings of the deceased worker. Thus, relevantly, the pre-1985 legislation required a "one-stage" analysis to be undertaken before the matter of quantification could be pursued.

24 As I have explained, however, the 1985 Act effectively replaced this process - first in the case of a wife, then spouse and later, partner - with a two-stage process. Under s.92A of the 1985 Act, a partner is required (by s.92A(3)) to show that he or she is entitled to compensation (pursuant to s.82(2)) and that he or she is a "dependent partner" within the meaning of s.92A(1). (For other dependants, the one-stage analysis still applies).[17] Importantly, unlike the situation that prevailed before the 1985 Act, in a claim by a partner (such as the present) the requirement of entitlement to compensation had thereafter to be satisfied without the benefit of the statutory fiction prescribed by s.92A(2).

25 Thus, I consider that in the present case, his Honour was required to undertake the two-step analysis, to which I have referred, before the question of quantum could become relevant. Strictly, his Honour's failure to deal with the claim in this way constituted error on his part. On the other hand, there is much force in Mr O'Loghlen's contention that, in a case such as the present, the determination of the question whether the widow claimant is a "dependent partner" ordinarily also resolved the question of her entitlement to compensation for the purposes of s.82(2). Thus, for example, if it is concluded that, notwithstanding the application of the statutory fiction, such a claimant is not a "dependent partner", her application would necessarily fail because she would not come within any of the categories of persons described in the various sub-sections of s.92A in respect of whom amounts of compensation are prescribed. For obvious reasons, there would then be no need to consider whether the requirements of s.82(2) had been made out.

26 But what if such a claimant establishes that she is a "dependent partner"? Will that also establish that she is at least partly dependent on the deceased worker's earnings at the relevant time and thus, entitled to compensation pursuant to s.82(2)? I think that, ordinarily, the answer would be, yes. Clearly, if the claimant had no relevant income of her own, a determination that she was a "dependent partner" would necessarily mean that she was wholly or mainly dependent on the deceased worker's earnings. It would follow, in such a case, that the lower threshold for dependants for the purposes of s.82(2) - "partly dependent" - would also be made out. The more difficult question arises where the claimant had relevant income but it was disregarded for the purposes of s.92A(2) and it was held that she was a "dependent partner". I consider that, in such a case, a determination that the claimant was a "dependent partner" would also ordinarily carry with it the conclusion that the deceased worker had provided at least some maintenance and support for the claimant out of his or her earnings. Were it otherwise - if the deceased provided no such maintenance - it could not have been properly concluded that the claimant was even "mainly" dependent on the earnings of the deceased worker for the purposes of the definition of "dependent partner". Thus, a finding, in circumstances where the claimant's relevant income is disregarded, that he or she is a "dependent partner", ordinarily means, as I have said, that the deceased worker made at least some provision for his or her maintenance and support. Consequently, in those circumstances, it would follow that the claimant was at least "partly" dependent on the deceased's earnings. No matter how small the extent of the claimant's dependence may have been on the deceased worker's earnings - short of de minimis - it would ordinarily amount at least to partial dependence sufficient to satisfy the requirements of s.82(2).

27 Notwithstanding the strength of Mr O'Loghlen's claim that, here, it was sufficient for the judge to resolve only the issue whether the appellant was a "dependent partner", I am of the view that the court was obliged to follow the two-stage process that is prescribed by the Act. The Court must first determine the question of the partner's entitlement to compensation pursuant to s.82(2). The statutory fiction has no application at this stage, but dependency will be established by showing no more than that the partner was partly dependent on the worker's earnings. Once dependency - and hence entitlement - is established, the Court then proceeds to the second stage, namely, to determine whether the claimant is a "dependent partner" for the purposes of s.92A(1). It may be that the answer to the second question may also resolve the issue of entitlement, but I consider that the court hearing an application such as this must, nevertheless, address each of those questions.

28 These issues were discussed during the hearing of the appeal and, in the result, Mr. O'Loghlen sought leave to amend the notice of appeal to contend error in his Honour's approach to resolving the appellant's claim and to challenge the finding that the appellant was not a "dependent partner". Mr Ruskin did not claim that such an amendment would unduly prejudice the respondent and, in the circumstances, leave to amend the notice of appeal as foreshadowed was granted. Thus, the appellant contended that his Honour erred in not considering the appellant's case by reference to the provisions of s.82(2) as well as s.92A of the Act. It was also claimed that, in any event, on the evidence, his Honour should have found that the appellant was a "dependant" of the worker for the purposes of s.82(2) and a "dependent partner" within the meaning of s.92A.

29 Dealing with the first stage of the analysis, I consider that, for the purpose of determining if the appellant was entitled to compensation pursuant to s.82(2) - notwithstanding that this issue is to be determined in the absence of statutory fiction - the evidence to which I have referred makes it plain that the appellant was, at least to some extent, dependent on the deceased's earnings. She was, in short, partly dependent on his earnings, and that is sufficient for her to be treated as a "dependant" as defined by s.5(1) and entitled to compensation under s.82(2) of the Act.

30 Moving to the second stage of the analysis, I consider that, on the evidence, his Honour erred in his finding that the appellant was not a "dependent partner". More specifically, I think that such a finding was not open to him on the evidence. For the reasons given, this question was to be resolved on the assumption that, at the relevant time, the appellant had no earnings of her own. The uncontested evidence was, as I have noted earlier, that the deceased provided out of his earnings to their household, cash, albeit in small amounts, that was not set aside only for his benefit but was "added into the purse" and was expended for the purposes of the appellant as well as the deceased. Moreover, as I have said, the deceased effectively paid, out of his earnings, for petrol for the appellant's car, which she used essentially for her own purposes. In those circumstances, and bearing in mind the statutory fiction that operated, it cannot be properly said that the appellant was not (at least) "mainly" dependent on the deceased's earnings. The concept of "dependency" in legislation that is concerned to provide compensation to widows of deceased workers who died as a result of a work related injury was briefly dealt with in Kauri Timber. Notwithstanding that the case was concerned with whether the widow was wholly dependent upon her deceased husband's earnings, the court's analysis of this matter is instructive for present purposes. Barwick, C.J., speaking of the meaning of "dependency" said[18] that the underlying concept of dependency is the notion of maintenance and support. But the standard of maintenance contemplated, said his Honour, was not that referable to some part of the community, but was referable to the particular household of which the claimant was a member. Thus, the learned Chief Justice said[19] that the notion of dependence was concerned with expenditure that was "related to the provision of the necessities of life having regard to the manner in which the worker's household in which the claimant to dependency has participated lived." A like view was expressed by Gibbs, J.[20] and his Honour also pointed out[21] that the question of dependency is governed by factual and not theoretical considerations. I consider that, given the statutory fiction which applied to create the artificial situation in which the matter had to be resolved in this case, on the evidence, there was only one source of income for the appellant's household and that was constituted by the deceased's earnings. In the circumstances, I think that the conclusion is inescapable that the appellant was at least "mainly" dependent for her maintenance and support on the earnings of the deceased and, therefore, a "dependent partner". It seems to me that the learned judge focussed unduly on the day-to-day living expenses that were paid by the appellant from her earnings without enquiring whether, given the deceased's contribution by way of cash and payment for petrol, all of which were applied at least in part for the appellant's benefit, and having regard to the artificial situation created by s.92A(2), she was mainly or wholly dependent on his earnings. If that question had been posed, given the circumstances of this case that I have described, the answer had to be in the affirmative.

31 For these reasons, I would uphold the appeal, set aside the decision below and in its place declare that the appellant is entitled to compensation under the Act as a "dependent partner" of the deceased pursuant to s.92A of the Act.

At a glance

Court

Decision date

Before

Source

Judgment (13 paragraphs)

Parties