Transport Accident Commission v McRitchie [2001] VSC 151

Transport Accident Commission v McRitchie [2001] VSC 151 - VSC 2001 case summary — Zoe

[20]

TAC fixed Ms McRitchie's loss of earning capacity benefits at $358 per week on the assumption that $410 per week was factor A, that is, the quantified capacity to earn which was regarded as within the meaning of s.49, notwithstanding that she had not commenced full-time work. It appears that there was conceded error as to the appropriate amount as a weekly figure. But the real debate was whether or not there should be taken into account, for the relevant purpose, assumptions about Ms McRitchie moving on to a higher level of compensation (or because subsequent Federal awards provided for higher hourly rates for overtime and weekend work), none of those events having occurred prior to the disabling event. The argument thus was that the basis of calculation was anchored in the period immediately prior to the accident. Essentially, the Tribunal accepted this view of the matter, namely that the statutory formula in s.49 evinced an intention to provide for a lesser level of compensation that would be provided at common law by way of damages for the lost earning capacity. Within this context, there was some debate before the Tribunal as to the hourly rate, it being argued that her loss of earning capacity had to be assessed on the basis that she may have derived fees as a company director in her father's companies, which were involved in heat treatment applications. Before the Tribunal, the evidence appeared to indicate that she may have derived director's fees in the order of $4,000 per annum. There was evidence that, given her personal qualities and intelligence, she was capable of acting as a director and deriving income from this. The Tribunal dismissed this evidence as irrelevant because it lay in no different situation than matters in relation to pre-accident earnings, the Tribunal taking the view that it was not allowed under the Act to address future losses other than the extrapolation of pre-accident level losses. There was also a minor aspect in relation to earnings by Ms McRitchie as a netball umpire.

[38]

Mr Habersberger also was critical of the Tribunal's approach to the construction of the meaning of "rehabilitation services" as defined in the Act, he claiming that the reference by the Deputy President to the situation prevailing under s.60(1) as an indication that he had gone astray. However, I am of the view that the Deputy President was well aware that the provision in relation to hospital services clearly did not apply to Ms McRitchie's situation at Ivanhoe Manor or Leddy House but was merely using the hospital obligation as of some broad assistance by way of analogy but not as a statutory warrant for his conclusion. He was also criticized for not specifically enunciating his legal construction of the definition of rehabilitation services. It was not necessary, however, that he should do so so long as he acted upon a correct basis which can be derived from the totality of his reasons. What he did conclude was that the services purported to be encompassed by the so-called bed-fee were in these circumstances rehabilitation services because they were so intimately bound up with her whole care and rehabilitation. I do not have to ask the rhetorical question why the provision of food in a particular form so as not to produce major difficulties in a patient would not be rehabilitative, or as forming part of the rehabilitation process. In Ms McRitchie's case, it appears to have been conceded that it was. No criticism could be made of that, as keeping her warm or avoiding fluctuations in temperature that might produce spasms in her, or keeping her in her room with ample space so that she might move around in her wheelchair, or vitamizing her food, were just as important as aids to rehabilitation as the wheelchair in which she sat. The Deputy President closely analysed the facts in relation to the definition without attempting any broad construction of it. But it is not difficult to understand from the way he analysed the facts in relation to the sub-section why he regarded the matters falling under the bed-fee as being incapable of being distinguished from other rehabilitation services. Not surprisingly, the distinction between allowing the cost of raising the bed so that the patient might drink vitamized food through a straw and allowing the cost for the food itself is an unappealing distinction, verging on the intolerable in the approach to legislation which is meant to be benevolent and remedial.

[39]

The evidence referred to before the Tribunal and me made it clear that it is the TAC that really determines the bed fee and how its component parts were to be broadly described. Mr Forrest in effect denoted the system as one of artifice in that the TAC had no statutory warrant for imposing a bed fee itself and therefore managed the matter so that the bed fee was imposed by the relevant institution which, if it did not impose it, would be unlikely to continue to receive the support of the TAC. Ms McRitchie appealed to the Tribunal from the Commission's refusal to pay the so-called bed fee, although it is perfectly apparent from the documents exhibited to affidavits that it was the Commission that contrived it. Mr Forrest contended that the bed fee was a charge fixed by TAC and orchestrated by it as part of a policy to transfer cost to the patient, he claiming the evidence of the TAC expert Blackwood clearly established that. I do not doubt that the objective of this was a revenue-raising one, to seek to transfer some costs arguably related and connected with rehabilitation to the patient by describing them in a particular way. However, there is nothing unlawful about that as the TAC is entitled to manage its revenues in a way that it deems to be most appropriate, so long as it acts lawfully and in accordance with its obligations under the Act. Thus the fact that for years these elements were treated as payable as part of the rehabilitation service could not be decisive in this case or any case, the matter having to be decided on the basis of the facts relevant to the particular case, keeping in mind the provisions of the sections. It does appear that when the TAC commenced funding treatment in community houses such as Ivanhoe Manor and Leddy House that the cost reduction program was devised and imposed. More significant, however, is that no real attempt was made in the evidence to tease out the component parts of the cost of $25 per day, that is how much related to heating, how much to lighting, how much to rent, how much to food, how much to cutting up food, etc. In one sense no criticism can be made of that. The issue is the classification of the service rather than its cost. Nevertheless, the Tribunal was bound to act on the basis of the evidence put before it and, as I have indicated, it was not given much assistance on this aspect. The presentation on behalf of the Commission did not assist the Tribunal to do much other than regard the elements as being indistinguishable one from the other in relation to the rehabilitation service.

[40]

The key argument advanced in support of the decision of the Tribunal here was that a narrow view of rehabilitation ought not be adopted; that if the service provided to an individual were connected with proper care in the rehabilitation of that person from the disabilities occasioned by the transport accident, then it should be treated as a rehabilitation service. I do not accept that the Tribunal fell into error in this respect in this case. Not every case will be the same and the application of the Act and the definition to the different circumstances may lead to different results. In the case of Ms McRitchie, the decision was open to the Tribunal which was not mistaken in my view in approaching the general elements arising under the bed fee as being, in the case of Ms McRitchie, connected with her rehabilitation. The Tribunal was entitled to look at the rehabilitation services in the light of where she was, rather than as an intellectual exercise in isolation from the matters subsumed under the so-called bed fee. It was entitled to look where she was situated, what her necessities were, such as the heating, the special food preparation and delivery, a larger room for her to move around in her wheelchair, what Mr Forrest called a 'holistic' approach. In effect, he contended that not to regard the heating, the place, the rooms, the food, the lighting as all being germane to her rehabilitation and thereby her improvement, was a "pettifogging" argument of a kind so described by Hutley, J. in Thomas v. Ferguson Transformers Pty Ltd.[7]. The argument as advanced to me is persuasive that what was here being provided under the rubric of the bed fee was not normal heating but special heating, not normal food but special food, not a normal size room but a large room sufficient to enable her to move her wheelchair around, all because she needed those matters in order to rehabilitate her to the level to which she might achieve improvement. Some reliance was placed upon the fact that there had been some improvement in Ms McRitchie both at Ivanhoe Manor and Leddy Street with the relevant rehabilitation services of that kind. Reliance was also placed upon the evidence of her father which detailed her specific disabilities, how these special treatments were applied to her and how she had improved under that regime.

[44]

Mr Forrest's argument was directed as to what that expression "pre-accident earning capacity" meant in this Act and at what time that assessment of earning capacity was to be made. He accepted that the legislation sought to distinguish between two types of payments in respect of lost earning capacity, firstly loss of earnings in the first 18 months and then loss of earning capacity payments thereafter. He said the short point was whether in determining loss of earning capacity does the assessor of that fact under s.49 have regard only to matters of established fact or does the assessment task involve having regard to matters relevant to the capacity of the person who exercised a particular skill and qualifications that have been destroyed or diminished by the accident. In this case he claimed, the issue really was whether his client was limited in her claim to what she would have earned as a beautician shortly after the accident occurred and limited to that point of time (it being accepted by the Commission that, although she was unemployed as a beautician at the time of the transport accident, she would have obtained a job as a beautician), or was the Commission required, in assessing the amount, to take into account promotion and future prospects including wage rises occurring by way of Awards. In this case there was also an issue as to whether or not Ms McRitchie would have been able to generate income in the role of a company director in the family companies. I have already referred to some of the facts concerning that aspect. The fundamental question is the meaning of "A" in the formula. The Commission contends that item "A" requires that the weekly amount the earner had the capacity to earn in employment reasonably available to her before the accident is the amount that has to be taken into account in the calculation. "A" does not require, or enable, to be taken into account the weekly amount the earner had the then capacity to earn in the future in employment reasonable available to her, in view of her training skills and experience existing immediately prior to the accident. The Deputy President had held that the definition in the s.49 formula showed a clear intention to provide for a lesser level of compensation than common law damages for loss of earning capacity would provide.

[47]

I note, however, that the Minister referred to the loss of earning capacity arising from that impairment and did not refer to future earnings. The argument was that the essence of the system of benefits under the Act was for victims to receive "loss of earnings" benefits for the first 18 months and thereafter "loss of earning capacity" benefits. He claimed the calculation of loss of earning capacity benefits is provided to be by reference to the amount the victim had the "capacity" to earn pre-accident, rather than being calculated in relation to actual earnings. He claimed that both the decision of the Tribunal and the earlier case of Re Rowe v. Transport Accident Commission failed to take into account the difference between the concepts of loss of earnings and loss of earning capacity. He argued that the common law meaning of lost earning capacity was well-known and that it should be concluded that its adoption in the statutory wording meant that the legislative intention was that it would carry the same meaning as at common law, subject to any clear indication to the contrary or specific qualification. Thus he put it that loss of earning capacity was a flexible concept allowing as a matter of fairness for the estimation of likely career progression arising out of pre-accident that would, but for the event, in due course have found expression in a post-accident career and income progression. With respect Ms McRitchie, she would have continued in her career path after completing her training, risen to a different pay scale at the expiration of 12 months and then onto a Federal award. She also had, in his submission, a well-founded expectation of receiving director's fees in the immediate future and that both expectations were in existence at the time of her accident. He argued there was no restriction implicit in the words of the legislation save for the statutory ceiling placed by s.49 upon the amount of lost earning capacity benefits and the fact that the legislation provided a statutory formula by which those benefits are to be calculated. These matters are not merely incidental variations, he claimed. They are fundamental to the way in which the statute is intended to work in this respect. Provision of a compulsory statutory formula is not an abnegation of the application of the common law principles of assessment of damages in respect of lost earning capacity. It was submitted that calculation of lost earning capacity at common law involves the tasks described in any number of cases; see Cullen v. Trapell[9]; Burden v. Rath[10] and more recently the statements [11]of the High Court in Husher v. Husher. Reliance was also placed upon the High Court's statements in Medlin v. State Government Insurance Commission[12] to the effect that compensation by way of damages for lost earning capacity can be recovered in relation of a future time if there has been an accident-caused loss of capacity which will in the future produce financial loss. It was submitted that both Deputy President McNamara and Presiding Member Coghlan in Re Rowe v. Transport Accident Commission[13] had confused the concepts of loss of earnings and loss of earning capacity. Presiding Member Coghlan had in Rowe decided the reference in factor "A" in the formula was a reference to an assessment of the amount the earner had the capacity to earn before the transport accident occurred and did not refer to the common law concept of loss of earning capacity or the earning capacity the earner would have had after the accident. In my view, a reading of Rowe does not support the claim of confusion between loss of earnings and loss of earning capacity. It proceeded upon the basis that there was a specific provision in the statute that had to be interpreted. The approach in Rowe was to the effect that ss.49 and 50 of the Act directed the Commission on how to assess the amount of the weekly payment in respect of the loss of earning capacity with s.49(2)(a) providing that the amount was 80 per cent of the earner's pre-accident earning capacity, that capacity being specifically defined in s.49(5). It was also said that pre-accident earning capacity therefore had a precise meaning for this Act which did not embrace the loss of earning capacity as it would be in a common law claim. Thus the Tribunal looked at the person's capacity to earn before the accident in employment reasonably available. There were no words used to indicate that the calculations were made by reference to common law loss of earning capacity or what one's earning capacity might have been "but for the accident" or had it not been for the accident.

At a glance

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Before

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Judgment (65 paragraphs)

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Legislation Cited (1)