Aretica Pty Ltd v Fradelakis
[2006] NSWWCCPD 102
•30 May 2006
WORKERS COMPENSATION COMMISSION
DETERMINATION OF APPEAL AGAINST A DECISION OF THE COMMISSION CONSTITUTED BY AN ARBITRATOR
CITATION:Aretica Pty Ltd v Fradelakis [2006] NSWWCCPD 102
APPELLANT: Aretica Pty Ltd
RESPONDENT: Stratis Fradelakis
INSURER:Allianz Australia Workers Compensation (NSW) Ltd
FILE NUMBER: WCC10589-04
DATE OF ARBITRATOR’S DECISION: 3 May 2005
DATE OF APPEAL DECISION: 30 May 2006
SUBJECT MATTER OF DECISION: Sections 40 and 67 of Workers Compensation Act 1987
PRESIDENTIAL MEMBER: Acting Deputy President Bill Roche
HEARING:On the papers
REPRESENTATION: Appellant: Sparke Helmore
Respondent: P K Simpson & Co
ORDERS MADE ON APPEAL: Paragraphs A and C of the Arbitrator's decision of 3 May 2005 are revoked and the following order made:
“The matter is remitted to a different Arbitrator under section 352(7) of the Workplace Injury Management and Workers Compensation Act 1998 for the Respondent Worker's entitlements under sections 40 and 67 of the Workers Compensation Act 1987 to be redetermined in accordance with the reasons set out in this decision.”
Paragraphs B and D of the Arbitrator's decision of 3 May 2005 are confirmed.
No order is made as to costs of the appeal.
BACKGROUND TO THE APPEAL
On 7 June 2005 Aretica Pty Ltd (‘the Appellant Employer’) sought leave to bring an ‘Appeal Against Decision of Arbitrator’ in the Workers Compensation Commission (‘the Commission’) against a decision, dated 3 May 2005.
The Respondent to the Appeal is Mr Stratis Fradelakis (‘the Respondent Worker/Mr Fradelakis’)
At all material times Mr Fradelakis was a working director of the Appellant Employer. The company was involved in painting and he was active as a painter but also in the necessary supervision of other contractors engaged by the company. No issue is taken that Mr Fradelakis was a ‘worker’ under the terms of the relevant legislation at the time of his injury.
On either 28 August 2002 or 12 September 2002 Mr Fradelakis was washing tools in the course of his employment for the Appellant Employer when he slipped and landed on his knees injuring his back, left leg and left knee. The exact sequence of events thereafter is unclear because there are no contemporaneous medical reports and the statement prepared on behalf of Mr Fradelakis on 16 February 2004 is totally inadequate as it deals with virtually none of the relevant issues.
According to the history taken by Dr Lethlean, Approved Medical Specialist (‘AMS’), in the Medical Assessment Certificate (‘MAC’) dated 24 January 2005, the injury occurred on 12 September 2002 when Mr Fradelakis slipped and fell onto his knees on a tiled floor and experienced pain in his left knee. He was helped up, drove home and brought some anti inflammatory cream and a knee guard. He was unable to work the next day and he saw Dr Parras (wrongly spelt in the MAC as ‘Dr Parris’), his general practitioner, who advised rest. The AMS then records that “maybe a month later he developed low back pain” and was reviewed by Dr Parras. He did no further painting, but supervised. About seven months after the accident he tried to paint for two days but was unable to continue because of back pain.
The history recorded by Dr Stenning in his report of 31 October 2003 is that Mr Fradelakis slipped on 28 August 2002 and landed on both knees injuring his back and left knee. He states that Mr Fradelakis tried to get by as best he could “and he continued to work”. The pain got worse and “he had to do supervision [sic] duties”. It is not clear from this history when the supervisory duties started. The clinical notes from Dr Parras do not assist on this issue. They record that Mr Fradelakis attended on 30 September 2002 complaining of right leg and hip symptoms. There is also a note “(L) knee 3/52”. The notes do not suggest any unfitness for work. The next entry is 14 July 2003 which is illegible. The entry for 21 July 2003 records “Left dorsal (back) 1 year ago kneeling on side of bath slipped (L) knee hurt”. Mobic was prescribed. A CT scan of the thoracic spine arranged on 25 July 2003 and of the lumbar spine on 1 September 2003.
The first mention in Dr Parras’ notes of any unfitness for work is the entry on 13 July 2004 which reads:
“Used to paint to help workers
now can’t – can’t bend down
can’t squat, can’t stretch
can’t stand or sit for long
can’t lift
sharp pain (L) foot”
In his report of 5 April 2005 Dr Parras stated “as a result of his injury this man has been unable to engage in his employment as a painter since this accident”.
Other medical histories are equally ambiguous as to when Mr Fradelakis ceased work as a painter and only worked in the management of the business. Dr Lowy records on 5 March 2004 that Mr Fradelakis was off work for two days after his fall and that his back was aggravated “by a work incident in June 2003”. He then refers to the CT scans and adds “Mr Fradelakis no longer works as a painter, he manages a business and does quotes”. Again there is no indication of when Mr Fradelakis stopped work as a painter.
The report of Adrienne Margarian, clinical psychologist, of 8 March 2004 notes an injury on 12 September 2002 and states that Mr Fradelakis “continued to work, however, noted that he was unable to work to full capacity, thus he commenced supervisory duties by managing others to do the work for him”.
Dr Neophyton reported on 9 March 2004 that because Mr Fradelakis was self employed he was able to “stop actively painting and to merely supervise until June 2003 when he returned to doing some more painting, whilst doing this he developed quite severe pain in his back”.
A more detailed history was recorded by Dr Mahony in a report of 8 April 2004. After recording the knee injury on 12 September 2002 the doctor notes:
“He was off work a couple of days and resumed his normal work, working normal hours, however, he would put more weight on the right leg in order to protect the left leg.
About 2 weeks following the incident he developed pain in the low back.
He continued his normal work, however, over the following couple of months the pain in the back and the left knee became worse.
He sought advice from Dr Parras and was advised to cease physical work and continue working in a supervisory capacity, working normal hours.
About mid 2003 he had to complete a job in 3 days. He attempted the physical side of painting and on the second day he had difficulty in moving and ceased the physical work.
He again sought advice from Dr Parras and x rays were ordered and he was treated with physiotherapy.
He continued working in a supervisory capacity, working normal hours and has not resumed the physical activities of painting.” (emphasis added)
A report from Dr Horsley dated 11 March 2004 implies that the supervisory work started shortly after the relevant incident but again it is unclear exactly when.
Mr Fradelakis alleged a lost of income as a result of the incident and sought lump sum and weekly compensation. His claim for lump sum compensation was referred to an AMS for assessment with a MAC being issued on 24 January 2005 certifying Mr Fradelakis to have a 12% whole person impairment as a result of his work accident. The claim for weekly compensation was heard in Arbitration on 14 April 2005 and decided in his favour on 3 May 2005.
THE DECISION UNDER REVIEW
The ‘Certificate of Determination’, dated 3 May 2005 records the Arbitrator’s orders as follows:
“A.The Respondent is to pay the Applicant weekly compensation as follows:
1. The Applicant’s full wage rate of $1,169.23 during the period 28/08/02 to
01/10/03.
2. The Applicant’s full wage rate of $1,204.07 during the period 01/10/03 to 28/02/04.
3. The maximum statutory rate for a person with three dependents from 29/02/04 to 31/03/04 at a rate of $538.60 per week.
4. The maximum statutory rate for a person with three dependents from 01/04/to 30/09/05 at a rate of $548.40 per week.
5. The maximum statutory rate for a person with three dependents from 01/10/04 to 31/03/05 at a rate of $558.40 per week.
6. Such weekly payments to continue in accordance with the provisions of the 1987 Act.
B.The Respondent to pay the Applicant’s section 60 expenses in accordance with the 1987 Act upon production of accounts and receipts.
C.The Respondent to pay the Applicant $20,000 pursuant to s67.
D.The Respondent to pay the Applicant’s costs as agreed or assessed.”
ISSUES IN DISPUTE
The issues in dispute in the appeal are whether the Arbitrator erred in:
(a)awarding compensation at the rate of Mr Fradelakis’ average weekly earnings for the period from 28 August 2002 until 28 February 2004, when he was only partially incapacitated;
(b)failing to correctly apply section 40 of the Workers Compensation Act 1987 ('the 1987 Act') for the whole period of the claim;
(c)failing to apply section 42 of the 1987 Act to the first 26 weeks of compensation;
(d)failing to consider Mr Fradelakis’ award rate of pay in determining compensation in the first 26 weeks of incapacity;
(e)determining the ‘total weekly wage rate’;
(f)failing to have regard to the value to the Appellant Employer of the work performed by Mr Fradelakis in calculating his ability to earn;
(g)failing to take into account the unpredictable nature of the building industry in exercising her discretion under section 40 of the 1987 Act;
(h)awarding Mr Fradelakis the maximum statutory rate of compensation, and
(i)awarding Mr Fradelakis $20,000.00 compensation under section 67.
There is also an issue of whether the time to appeal should be extended.
LEAVE TO APPEAL
Before proceeding to deal with an appeal the Commission must determine whether the application meets the requirements of section 352 of the Workplace Injury Management and Workers Compensation Act 1998 (‘the 1998 Act’).
The quantum in issue on the appeal is in excess of $5,000.00 and therefore the threshold in section 352(2)(a) of the 1998 Act is satisfied.
The appeal was lodged outside 28 days of the Arbitrator’s decision in compliance with section 352(4) of the 1998 Act and it is therefore necessary for time to appeal to be extended if the appeal is to proceed.
The appeal was first lodged (within time) on 30 May 2005 but was rejected by the Registrar because it did not deal with the threshold issue of the amount of compensation in issue on appeal. The appeal was lodged again on 7 June 2005 dealing with the threshold issues and including an Application to Admit Late Documents. This is not the correct procedure to follow when seeking an extension of time to appeal (see Rule 77(9) of the Workers Compensation Commission Rules 2003 (‘the Rules’) and Practice Direction No 8). Nevertheless the Application to Admit Late Documents sets out some of the matters required to be considered under the rules and I have taken it into account in considering whether to extend the time in which to appeal. Mr Fradelakis’ submissions are silent on this issue.
An extension of time in which to appeal can be granted in certain limited circumstances. Rule 77(8) provides that:
“(8) The Commission constituted by a Presidential member may, if a party satisfies the Presidential member, in exceptional circumstances, that to lose the right to seek leave to appeal would work demonstrable and substantial injustice, by order extend the time for making an appeal.”
The question of extending time to appeal was considered by Justice McHugh in Gallo v Dawson (1990) 93 ALR 479 (‘Gallo’) where his Honour said at 480:
“The discretion to extend time is given for the sole purpose of enabling the court or justice to do justice between the parties: see Hughes v National Trustees Executors & Agency Co of Australasia Ltd [1978] VR 257 at 262. This means that the discretion can only be exercised in favour of an applicant upon proof that strict compliance with the rules will work an injustice upon the applicant. In order to determine whether the rules will work an injustice, it is necessary to have regard to the history of the proceedings, the conduct of the parties, the nature of the litigation, and the consequences for the parties of the grant or refusal of the application for extension of time: see Avery v No 2 Public Service Appeal Board [1973] 2 NZLR 86 at 92; Jess v Scott (1986) 12 FCR 187 at 194-5; 70 ALR 185. When the application is for an extension of time in which to file an appeal, it is always necessary to consider the prospects of the applicant succeeding in the appeal: see Burns v Grigg [1967] VR 871 at 872; Hughes at 263-4, Mitchelson v Mitchelson (1979) 24 ALR 522 at 524. It is also necessary to bear in mind in such an application that, upon the expiry of the time for appealing, the respondent has “a vested right to retain the judgment” unless the application is granted: Vilenius v Heinegar (1962) 36 ALJR 200 at 201.”
I have had regard to the following matters in determining whether to extend the time to appeal:
(a) the technical nature of the defect in the initial appeal;
(b) the initial appeal was lodged in time;
(c) the second appeal was lodged only a few days out of time;
(d) that there is a clear error in the award made by the Arbitrator and therefore the appeal must succeed, and
(e) the fact that Mr Fradelakis has raised no opposition to the time being extended.
Considering all of the above matters, I believe that there will be a demonstrable and substantial injustice to the Appellant Employer if time to appeal is not extended. I therefore extend the time to appeal until 7 June 2005.
I grant leave to appeal.
PRELIMINARY MATTERS
Section 354(6) of the 1998 Act provides:
“(6)If the Commission is satisfied that sufficient information has been supplied to it in connection with proceedings, the Commission may exercise functions under this Act without holding any conference or formal hearing.”
Having regard to Practice Directions Numbers 1 and 6, the documents that are before me, and the submission by the Appellant Employer (noting that Mr Fradelakis does not consent to the matter being dealt with on the papers but makes no submissions on this point) that the appeal can proceed to be determined on the basis of these documents, I am satisfied that I have sufficient information to proceed ‘on the papers’, without holding any conference or formal hearing, and that this is the appropriate course in the circumstances.
SUBMISSIONS AND FINDINGS
Section 40 Issue
The first ground of appeal is that the Arbitrator awarded Mr Fradelakis compensation at the rate of his average weekly earnings from 28 August 2002 to 28 February 2004 (78 weeks). In paragraph 24.1 of the Arbitrator's Statement of Reasons for Decision (‘Reasons’) the Arbitrator correctly stated that “s40 is to be applied”. However, at page 6 of her Reasons the Arbitrator has a subheading as follows “First 26 weeks after injury – s37 (1)(a)(i)”. Section 37 of the 1987 Act applies to an award of total incapacity after the first 26 weeks of incapacity. Mr Fradelakis’ counsel submitted that her client was entitled to an award under section 40 of the 1987 Act. There was no evidence of total incapacity for work during any period.
Compensation for a partially incapacitated worker in the first 26 weeks of incapacity must not exceed the weekly payment that would be payable to the worker if it were a period of total incapacity for work (see section 40(5) of the 1987 Act). If Mr Fradelakis was being compensated for ‘total incapacity’ in the first 26 weeks he would be paid his current weekly wage rate as calculated under section 42 of the 1987 Act. If he was being “remunerated under an award” he would be paid at that award rate for 26 weeks. It is not clear if he was being remunerated under an award or under some other method. If some other method was being used then his maximum potential compensation under section 40 for the first 26 weeks would be 80% of his average weekly earnings (see section 42(d) and the definition of ‘prescribed proportion’ in section 42(8)). After the first 26 weeks of ‘incapacity’ (see section 35 of the 1987 Act) section 40 applies subject to the statutory maximums in section 37.
Further, even if there was evidence of total incapacity, an award at the rate of Mr Fradelakis’ average weekly earnings for the period concerned (78 weeks) cannot be sustained on any basis. The proper compensation would be his current weekly wage rate determined in accordance with section 42, but only for 26 weeks. In these circumstances the award for weekly compensation from 28 August 2002 to 28 February 2004 must be set aside.
Nevertheless Mr Fradelakis is still entitled to an award under section 40 of the 1987 Act for the period from 28 August 2002 to 28 February 2004. This period is difficult for me to assess on review because of the lack of evidence of his activities in the period up to mid 2003. That uncertainty is heightened when one considers the medical histories referred to above. The assertion in Dr Parras’ report of 5 April 2005 that Mr Fradelakis has been unfit for work as a painter “since this accident” seems extremely unlikely to be accurate given the entries recorded in the doctor’s notes and the history quoted from Dr Mahony above. It seems reasonably clear from Dr Parras’ notes that significant back pain did not commence until mid 2003. On the evidence available to me I am unable to determine the type or amount of work Mr Fradelakis was performing in the period up to mid 2003. His statement provides no assistance and the medical histories (given well after the event) are inconsistent and inconclusive. In these circumstances it is not sufficient to merely refer to the tax returns for the periods concerned because the pay records were controlled by Mr Fradelakis as a director of the Appellant Employer.
Submissions were made before the Arbitrator that a worker’s actual post injury earnings are prima facie evidence of his or her ability to earn (see Aitken v Goodyear Tyre & Rubber Co (Aust) Ltd (1945) 46 SR (NSW) 26). That is correct for the average employee but Mr Fradelakis was a director of the Appellant Employer. He was in a position to control his wage and it was not appropriate to merely look to his tax return without more.
The Appellant Employer argues that the Arbitrator failed to have regard to the unpredictable nature of the building industry in using her discretion to determine Mr Fradelakis’ entitlement under section 40 of the 1987 Act. The Arbitrator purported to have regard to discretionary factors at pages six and seven of her Reasons (‘Step 4’) where she noted that the company tax returns for the Appellant Employer showed increased profitability to $20,118.00 in 2003 which was “not continued in 2004 where it was reduced to $7,974.00”. In fact the Appellant Employer's tax returns showed a loss of $20,118.00 in 2003 and a profit of $7,974.00 in 2004. It was that turn around which was the basis of the submission from the Appellant Employer’s solicitor that the company’s fortunes were improving. The Arbitrator's suggestion of “an accounting adjustment” to explain the turn around is not borne out by an analysis of the documents produced at the hearing. The Appellant Employer's gross income in 2003 was $132,356.00 and in 2004 was $182,671.00. Therefore, I find that the Arbitrator has misused her discretion in making the necessary section 40 assessment. As a result the section 40 entitlement for the whole period needs to be redetermined.
A further challenge to the award after 28 February 2004 is that the Arbitrator failed to have regard to the value to the Appellant Employer of the work performed by Mr Fradelakis. Reliance is placed on Cage Developments Pty Ltd V Schubert (1983) 151 CLR 584 (‘Schubert’). This submission has some merit though the more helpful judgment in Schubert is the judgement of Justice Glass in the NSW Court of Appeal reported at [1981] 2 NSWLR 227. The case of Schubert was not drawn to the Arbitrator’s attention and no submissions along the lines now sought to be raised were made to the Arbitrator. However, as the matter must be returned for a redetermination of Mr Fradelakis’ entitlements under section 40 of the 1987 Act for the whole period, it is appropriate that the claim be redetermined at a new hearing with the benefit of up-to-date evidence and further submissions from both sides dealing with Schubert and such other matters as may be appropriate.
Section 67 Issue
The Appellant Employer challenges the award of $20,000.00 under section 67 of the 1987 Act as being excessive. The amount is 40% of a most extreme case. It is submitted that Mr Fradelakis took no time off work after his injury and has had no surgery. He continues to work though in a restricted capacity.
Mr Fradelakis’ solicitor submits that it is necessary to look at all of the matters which have flowed from the injury in determining section 67 compensation. With respect what is required is to provide compensation for “pain and suffering resulting from the permanent impairment” (emphasis added) (see section 67(1)).
In assessing Mr Fradelakis’ entitlement under section 67 the Arbitrator stated that she was “impressed by the reports of Dr Lowy and psychologist Ms Margarian who describe in considerable detail the impact this injury has had on the Applicant’s family and working life, outlook and his sexual function” (emphasis added). The AMS found that Mr Fradelakis had no impairment of sexual function. Therefore it was not open to the Arbitrator to take into account the loss of use of sexual function found by Dr Lowy (30%) in assessing Mr Fradelakis’ entitlement under section 67. In this regard the Arbitrator has taken into account a matter which was not permitted under the Act. Therefore the exercise of her discretion has miscarried and the section 67 assessment must be revoked.
As the matter is to be returned for a redetermination of Mr Fradelakis’ entitlement under section 40 and as assessments under section 67 often involve matters of impression, speculation and estimation I think it is appropriate for both reassessments to be conducted at a rehearing before a different Arbitrator.
DECISION
Paragraphs A and C of Arbitrator's decision of 3 May 2005 are revoked and the following order made:
“The matter is remitted to a different Arbitrator under section 352(7) of the Workplace Injury Management and Workers Compensation Act 1998 for the Respondent Worker's entitlements under sections 40 and 67 of the Workers Compensation Act 1987 to be redetermined in accordance with the reasons set out in this decision.”
Paragraphs B and D of the Arbitrator's decision of 3 May 2005 are confirmed.
COSTS
No order as to costs of this appeal.
Bill Roche
Acting Deputy President
30 May 2006
I CERTIFY THAT THIS IS A TRUE AND ACCURATE RECORD OF THE REASONS FOR DECISION OF BILL ROCHE, ACTING DEPUTY PRESIDENT OF THE WORKERS COMPENSATION COMMISSION.
ASSOCIATE
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