Art Coating Pty Ltd v Gerace

[2000] NSWCA 169

CITATION:	ART COATING PTY LIMITED v GERACE [2000] NSWCA 169
FILE NUMBER(S):	CA 40702/99
HEARING DATE(S):	3 July 2000
JUDGMENT DATE:	13 July 2000
PARTIES :	Art Coating Pty Limited - Appellant Maurizio Gerace - Respondent
JUDGMENT OF:	Priestley JA at 1; Sheller JA at 2; Foster AJA at 34

LOWER COURT JURISDICTION :	Supreme Court - Equity Division
LOWER COURT FILE NUMBER(S) :	ED 1516/99
LOWER COURT JUDICIAL OFFICER :	Master Macready

COUNSEL:	CRR Hoeben SC/SG Campbell - Appellant M Cranitch SC/JE Armfield - Respondent
SOLICITORS:	Hunt & Hunt - Appellant Margiotta Solicitors - Respondent
CATCHWORDS:	CONTRACTS - Whether abandonment of contract - Effect of legislative amendment on term of contract. WORKERS COMPENSATION - Entitlement to and liability for compensation - Commutation agreement. - NR
LEGISLATION CITED:	Workers Compensation Act 1926 Workers Compensation Act 1987 Workers Compensation Legislation Amendment Act 1998
CASES CITED:	Tran v JR Manufacturing Industries Pty Ltd (1998) 17 NSWCCR 225 Gosper v Christopherson (1986) 160 CLR 423
DECISION:	1. Appeal allowed; 2. Set aside order 4 made by Master Macready on 23 August 1999 and in lieu thereof, substitute: Declare that in the event the Compensation Court determines the application for commutation in the amount of $130,000 the defendant is bound by the Heads of Agreement of 4 September 1997 to pay that amount to the plaintiff less any lawful deductions; 3. Add the following order: ‘4A. Liberty to apply.’; 4. Otherwise confirm the Master’s orders; 5. The appellant to pay the respondent’s costs of the appeal.

THE SUPREME COURT
OF NEW SOUTH WALES
COURT OF APPEAL

CA 40702/99
ED 1516/99

PRIESTLEY JA
SHELLER JA
FOSTER AJA

ART COATING PTY LIMITED v GERACE

The respondent was awarded weekly compensation against the appellant in the Compensation Court. The respondent wished to have the payments commuted so that he could receive a lump sum and return to Italy. He filed a notice of motion for an order pursuant to s53(1) of the Workers Compensation Act 1987. When this came before the Compensation Court for hearing on 4 September 1997, the parties signed an agreement to settle all entitlements to compensation for an agreed sum. The agreement contained a reference to the need for approval for commutation by the WorkCover Authority which was required by legislation then in force. This need for approval was later removed by the Workers Compensation Legislation Amendment Act 1998, the relevant part of which came into force on 1 August 1998. Subsequently the appellant tried to challenge the agreement and the respondent successfully brought proceedings in the Equity Division of the Supreme Court for an order that the appellant proceed with the commutation application and a declaration that the agreement was binding.

Held (by Sheller JA, Priestley JA and Foster AJA agreeing):

There was no abandonment of the contract as evidenced by the correspondence between the parties and there was no basis upon which the appellant could unilaterally terminate the agreement. If the need for approval disappeared by force of amendment of the legislation, then the requirement for approval in the agreement disappeared with it.

Legislation
Workers Compensation Act 1926
Workers Compensation Act 1987
Workers Compensation Legislation Amendment Act 1998

Cases
Tran v JR Manufacturing Industries Pty Limited (1998) 17 NSWCCR 225
Gosper v Christopherson (1986) 160 CLR 423

ORDERS

1. Appeal allowed;
2. Set aside order 4 made by Master Macready on 23 August 1999 and in lieu thereof, substitute:
‘Declare that in the event the Compensation Court determines the application for commutation in the amount of $130,000 the defendant is bound by the Heads of Agreement of 4 September 1997 to pay that amount to the plaintiff less any lawful deductions’.
3. Add the following order:
‘4A. Liberty to apply.’
4. Otherwise confirm the Master’s orders;
5. The appellant to pay the respondent’s costs of the appeal.

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THE SUPREME COURT

OF NEW SOUTH WALES
COURT OF APPEAL

CA 40702/99
ED 1516/99

PRIESTLEY JA
SHELLER JA
FOSTER AJA

Thursday, 13 July 2000

ART COATING PTY LIMITED v GERACE

JUDGMENT

1    PRIESTLEY JA: I agree with Sheller JA.

2    SHELLER JA:

INTRODUCTION

While the respondent, Maurizio Gerace, was employed by the appellant, Art Coating Pty Limited, between 1989 and 1990, he was exposed to epoxy resin in paint and, as a result, suffered injury and was not able to return to work. He brought proceedings in the Compensation Court against the appellant and, on 30 July 1992, was awarded compensation at the rate of $200 per week from 19 February 1991. On 7 November 1996, the Chief Judge Justice Campbell increased the weekly payments to the maximum statutory rate.

3 The respondent wished no longer to reside in Australia and to return to Italy, the country of his birth, where he thought his prospects were better. He still wanted to retain his right to receive weekly payments under the Act. Accordingly, on 18 August 1997 he filed a notice of motion in the Compensation Court for a declaration pursuant to s53(1) of the Workers Compensation Act 1987 (the Act) that the Compensation Court determine his incapacity for work resulting from his injury as likely to be of a permanent nature. On 4 September 1997 this application came before the Court for determination. However, on that date the respondent and the appellant signed a document entitled “Heads of Agreement” the relevant terms of which were:

“The Applicant agrees to settle all entitlements to compensation and damages against the Respondent for a total of $130,000.
Settlement is to be effected as follows:
1. By way of Commutation which is:
(a) to include all/any liability to pay compensation including weekly payments, non-economic loss, Section 60 expenses and interest;
(b) to include nature and conditions of employment, together with any injuries sustained in the course of or arising out of the Applicant’s employment with the Respondent, and to cover the whole body and any psychiatric injury or condition and industrial deafness;
(c) to be effective from the date if [sic] employment and include a Common Law release.
2. Applicant is to make expeditious application for Commutation and to use best endeavours to secure approval.
……
7. In the event that the Commutation is not approved, matter to be re listed for hearing.”

4    By a document dated 13 November 1997, a formal application was made on behalf of the respondent to the WorkCover Authority of New South Wales (the Authority) for commutation in reliance upon s51(1)(c)(ii) of the Act. Section 51 in the form it then took provided, so far as presently material, as follows:

“ 51 Commutation in certain cases of weekly payments
(1) This section applies:
……
(c) to a liability to make a weekly payment to a particular worker (and to the extent) approved by the Authority in special circumstances such as the following:
(i) the worker requires a lump sum to establish an income-producing business,
(ii) the worker requires a lump sum to enable the worker to move from the area in which he or she lives and there are substantial economic or compassionate grounds for doing so,
(iii) the lump sum would otherwise be likely to assist substantially in the rehabilitation of the worker because of the special circumstances of the case.
(2) A liability in respect of any weekly payment of compensation to which this section applies may, with the consent of the worker, be commuted (either in whole or in part) to a lump sum, determined by the Compensation Court, having regard to:
(a) any dispute as to liability to pay compensation under this Act,
(b) the injury, the age of the worker, and the occupation of the worker at the time of the occurrence of the injury, and
(c) the worker’s diminished ability to compete in an open labour market.
(3) If:
(a) the Compensation Court determines any such lump sum,
(b) the worker agrees that payment of the lump sum should remove any liability to make a payment under Division 3 or 4 in respect of the injury, and
(c) the terms of any relevant regulations or approval of the Authority under subsection (1) have been complied with,
payment of the lump sum removes any liability to which the agreement of the worker relates.
(4) The consent or agreement of a worker to a commutation under this section may be dispensed with if, in the opinion of the Compensation Court:
(a) the worker is unable, by reason of infirmity of mind or body, properly to consent or agree to the commutation, and
(b) the commutation would be in the best interests of the worker.
(5) An agreement as to the commutation of a payment to a lump sum shall not, nor shall the payment of the sum payable under the agreement, exempt the person by whom the payment is payable from any liability under this Act unless the sum has been determined by the Compensation Court in accordance with this Act.
…
(7) The Authority may, as a term of its approval under subsection (1), require a worker to produce to it evidence that the worker has received adequate financial counselling.
…
(9) Payment of a lump sum to which liability in respect of any weekly payment of compensation has been wholly or partially commuted under this section or redeemed under section 15 of the former Act (as applied by Schedule 6 to this Act) is taken for the purposes of sections 15, 16, 22A, 122, 151Z and 273 of this Act and section 64 of the former Act (as so applied) to be payment of the compensation concerned in pursuance of the liability to pay the compensation concerned.”

5    On 9 December 1997 the Authority wrote to the respondent’s solicitors referring to the application for commutation on behalf of their client and stating:

“Following initial perusal of the application, I advise that WorkCover cannot consider the application in its current form. WorkCover is required to be satisfied that special circumstances exist before it can approve an application for commutation. Given the volume of applications received annually, WorkCover has developed guidelines to assist applicants to provide all information to enable prompt and fair consideration of applications. Mr Gerace’s application is being returned to you as it does not comply with the guidelines.
I have enclosed a copy of an information bulletin which outlines the Guidelines’ requirements. This bulletin is designed to assist you to provide the appropriate documentation. Your attention is drawn to the checklist at Appendix (2) of the Guideline. This checklist should be completed and all necessary documentation attached to your application.
I also advise that documentation addressing the information required under 3.4 (Rehabilitation and return to work) needs to be provided in the form of a current report from an appropriate provider.
As a commutation requires considerable information from the relevant insurer, the application should be prepared in conjunction with the insurer and provided directly by the insurer to WorkCover. Applications which are not complete, including information required from insurers, will be returned to you or to the insurer where appropriate, for completion before the application is considered.”

6    The material enclosed included a “Check Sheet for Commutation Applications” and a document headed “Information Bulletin - Commutations” which included the following:

“ WorkCover’s approach to considering applications for approval to commute
In general, WorkCover will only approve those applications which can demonstrate that the worker’s circumstances are exceptional or unusual. Each application will be considered individually, taking into account the worker’s particular circumstances and needs.
Applications are to be made by the insurer to WorkCover and must comply with the directions given in the Claims Manual. In order to give full consideration to the application, WorkCover will need to have comprehensive information about the claim, the worker’s circumstances and details about how the lump sum, if approved, would be utilised.
To assist insurers to provide this information, this Bulletin outlines what information WorkCover will usually need to make an assessment of each application. It may be that in some cases, further information may be sought, and in such cases the Claims Branch will request further information on a case by case basis. If a party believes that the information sought is not necessary in any particular case, the reason for not supplying the information should be provided so that consideration of the application is not delayed.
EVALUATION PROCESS
Insurer’s role
The insurer is the party making the application for commutation, on behalf of the employer who is seeking release of an on-going liability to pay weekly benefits. All applications are to be made by insurers with the consent of the worker. Insurers are responsible for preparing the application for commutation, including compiling the documents required to support the application.
Applications should not be made directly by workers or their legal representatives. All applications are to be forwarded through the relevant insurer.
In its claims manual, WorkCover requests insurers to undertake 5 activities before forwarding applications to WorkCover:
1. ensure that the Scheme has a liability to pay the claim (or in the case of a self insurer, that the insurer has a liability to pay);
2. reach an in-principle agreement with the worker on the sum to be paid;
3. identify separately, the amounts for weekly payments, and section 60 (medical expenses) section 66 (permanent loss) and section 67 (pain and suffering) payments;
4. check that all appropriate and/or recommended rehabilitation activity has been undertaken by the worker;
5. ensure that the commutation proposal is accompanied by the specified documents which will enable WorkCover to evaluate the proposal.
Details are provided below.”

7    On 26 March 1998 the respondent’s solicitors wrote to the appellant’s solicitors, so far as presently material, as follows:

“We refer to our telephone discussions in December 1997 with Mr Peter McCarthy and confirm that WorkCover has returned to us the Application for Commutation with a covering letter dated 9 December 1997 advising that is cannot consider the application in its current form because Mr Gerace’s Application does not comply with the guidelines. A photocopy of the letter dated 9 December 1997 received from WorkCover is enclosed herewith together with the Application for Commutation.
We enclose herewith a photocopy of Check Sheet for Commutation Applications for your attention.”

8    The letter then went on to deal with particular matters in the Check Sheet and gave details of the respondent’s background, the medical evidence and the reasons why the respondent wished to return to Italy. The letter concluded:

“Kindly prepare the Application for Commutation and advise when the documents can be uplifted from you in order that we can deliver them to the WorkCover Authority.
We advise that this matter is listed for mention again on Friday 3 April 1998. It is the applicant’s intention to cease to reside in Australia and to proceed with the Notice of Motion to have his Workers Compensation payments paid to him in Italy in accordance with Section 53(1) of the Workers’ Compensation Act 1987 (as amended). Do you require Dr Edwards to be available for cross-examination at the hearing of the Notice of Motion?”

9    The re-listing referred to in the last paragraph came before Justice Campbell on 3 April 1998. On that occasion, the following interchanges were recorded in the transcript:

“MS CARTER [who appeared for Art Coating Pty Limited, the appellant]: I am instructed to oppose the Application your Honour. On the last occasion this matter was listed for a Notice of Motion on 4 September 1997, the claim for weekly payments was resolved on the basis of Commutation. The Commutation Application has been prepared and has been submitted to WorkCover and is presently awaiting approval. In light of that fact we say that it is not appropriate that the Orders sought be granted.
HIS HONOUR: Mr Harrington, what is the position about this Commutation then?
MR HARRINGTON [who appeared for Mr Gerace]: As I understand it your Honour the applicant would like to return to Italy, these Commutations can take anything up to two years and, at the present time, are not being improved [sic]. The applicant would like the certification so he has the freedom to make that decision.
HIS HONOUR: Is he going or is he not?
MR HARRINGTON: He is going, as I understand it. Would your Honour excuse me while I obtain instructions. My instructions are he will go when he can go. In other words if he goes at the present time then he does not have the certification for the compensation you [sic] paid overseas.
HIS HONOUR: Can somebody tell me when this Commutation was lodged?
MS CARTER: Beginning of December last year. There’s been some correspondence between WorkCover and the respondent and also, I believe, the applicant as to the state of play with that Application. I understand from …..the manager of WorkCover, that it is being urgently attended to, on the basis that the applicant does wish to reside in Italy.”

10    The Judge then suggested that those representing the parties seek information from the Authority and there was an adjournment for that purpose. When the matter resumed Ms Carter said:

“We have endeavoured to find out the status, the present status of the Commutation Application but have been unable to speak to the appropriate person who is handling the matter, which is Mr …. I do not anticipate that we will be able to give your Honour a definite opinion today as to when the Commutation Application is likely to be approved.”

11 The Judge then determined, pursuant to s 53(1) of the Act, that the applicant’s incapacity for work resulting from the injury is likely to be of a permanent nature and ordered Art Coating Pty Limited to pay Mr Gerace’s costs of the motion.

12    On 14 April 1998 the appellant’s solicitors wrote to the respondent’s solicitors as follows:

“We refer to your letter dated 26 March 1998.
We are now in a position to confirm the following:
1. Our client, GIO Workers Compensation (NSW) Ltd confirms that there is consent between them and the worker to commute the claim in the sum of $130,000.00.
We trust that this now satisfies the requirement set down by WorkCover pursuant to the check list for Commutation Applications.
We note in your recent letter that you referred to a Commutation sum of $140,000.00 when in fact on our records the figure is $130,000.00.
We trust this is satisfactory.”

13    There, apparently, matters rested until 30 July 1998 when the appellant’s solicitors wrote as follows to the respondent’s solicitors:

“We refer to the above matter and confirm that, in light of the proposed Exit Provisions which are said to come in force on 1 August 1998, we have sought our client’s instructions in relation to whether we should refrain from sending the Application for Commutation to the WorkCover Authority for their further consideration and probable rejection.
We therefore propose to await our client’s instructions and will advise further upon receipt of same.”

14    This letter was a reference to amendments of the Act by the Workers Compensation Legislation Amendment Act 1998 whereby the need for approval by the Authority of a commutation under s51 was removed. Subsections (1), (3)(c), (4) and (7) of s51 were repealed. An additional paragraph (d) was added to subsection (2) and subsections (2A) and (2B) were inserted. The additions are not relevant to this appeal. Subsection (9) was amended to read as follows:

“Payment of a lump sum to which liability in respect of any weekly payment of compensation has been wholly or partially commuted under this section or redeemed under section 15 of the former Act (as applied by Schedule 6 to this Act) is taken for the purposes of this Act, the 1998 Act and the former Act (as applied by this Act) to be payment of the compensation concerned in pursuance of the liability to pay the compensation concerned.”

15    On 12 October 1998, the respondent’s solicitors wrote to the appellant’s solicitors referring to previous correspondence and an earlier telephone discussion and advising that their client was presently making arrangements to return to Italy to live permanently. The letter continued:

“We are instructed that our client and his wife are concerned about the cost of future treatment in relation to his psychiatric condition and his contact dermatitis. There is also concern that our client will not find any suitable work in Italy because of his medical condition.
Further as the agreement to accept $130,000.00 as a commutation settlement occurred in 1997 and our client was willing to accept that sum at that time if the WorkCover Authority approved the settlement, we are instructed to seek your client’s consent to the settlement sum of $130,000.00 being reviewed and increased to the sum of $160,000.00
We are instructed that our client is prepared to accept the sum of $160,000.00 in full and final settlement of his Workers’ Compensation rights on the basis that the settlement is approved immediately by his Honour Judge Campbell the Chief Judge of the Compensation Court of New South Wales pursuant to the exit provisions of the Workers’ Compensation Act 1987 (as amended).”

16    On 14 October 1998 the appellant’s solicitors acknowledged the letter:

“enclosing an offer resolve [sic] this matter by way of Exit Commutation in the sum of $160,000.00.
We confirm that we have now forwarded a copy of your letter to our client for their consideration and expect that all further correspondence in this regard will be directly between your firm and GIO Australia Workers Compensation (NSW) Limited.”

17    On 19 November 1998 the respondent applied for the commutation of the appellant’s liability under the Act for a lump sum of $130,000.00. The application came before Judge Hughes on 10 December 1998 when the respondent’s representative said that the appellant had “decided recently not to adhere to the agreement that took place back in September [1997]”. On the basis that the appellant did not consent to commutation, it was agreed that the matter be struck out though the Judge referred to a recent decision of Judge Burke in Tran v JR Manufacturing Industries Pty Limited (1998) 17 NSWCCR 225. On the following day, the respondent successfully applied to have Judge Hughes re-instate the matter.

18    On 24 February 1999 the respondent’s solicitors wrote to the appellant’s solicitors reciting the history of the proceedings and the correspondence on and after 4 September 1997. The respondent’s solicitors requested that the appellant’s solicitors consider the matter immediately and advise whether their client proposed to challenge the agreement dated 4 September 1997 or to allow the matter to proceed to commutation. The respondent’s solicitors wrote again on the same day saying they had received firm instructions to file a summons and supporting affidavit in the Supreme Court if the appellant’s solicitors did not advise them of their client’s instructions before noon on 25 February.

19    On 25 February 1999, the respondent began proceedings in the Equity Division of the Court claiming an order that the appellant proceed with the application for commutation and a declaration that there was a binding agreement contained in the “Heads of Agreement” of 4 September 1997. Master Macready heard these proceedings on 14 July 1999 and gave judgment on 20 August 1999. The Master made the following orders:

“1. Declare that there is a valid and enforceable agreement between the plaintiff and the defendant to commute to a lump sum the defendant’s liability to make weekly payments to the plaintiff pursuant to the Workers’ Compensation act 1987 in the form of the document entitled ‘Heads of Agreement’ and dated 4 September 1997 which is Annexure ‘B’ to the affidavit of Anthony Steven Margiotta sworn 25 February 1999.
2. Declare that the said agreement should be specifically performed and carried into execution.
3. Order that the defendant do whatever may be reasonably required of it to seek the commutation to a lump sum of the defendant’s said liability by the Compensation Court in the sum of $130,000.00.
4. Order that in the event the Compensation Court determines the lumpsum for the commutation in the amount of $130,000.00 that the defendant specifically perform the said agreement and pay such sum to the plaintiff less any lawful deductions.
5. Order that the defendant pay the plaintiff’s costs of the proceedings.”
APPEAL

20    The appellant appealed against the Master’s decision on a number of grounds the first of which was abandoned. When the hearing of the appeal began, the Court granted the appellant leave, which was not opposed, to add two further grounds, 1A and 1B.

THE MASTER’S REASONS FOR JUDGMENT

21    At first instance the appellant submitted that the failure to satisfy the condition requiring approval by the Authority automatically led to a termination of the contract. After examining a number of the authorities, the Master said (at para 34) that the consent ceased to be a requirement because of the change in legislation and there was nothing upon which cl 2 could operate provided the contract had not been abandoned by the parties before 1 August 1998. In the course of oral argument, Mr Hoeben SC, who appeared for the appellant, said that the appellant did not now argue that the failure to obtain approval avoided the contract.

22    The Master went on to say, referring to the hearing of the motion on 3 April 1998, that the appellant opposed the application being dealt with because the commutation application had still not been dealt with by the Authority. It was taking the position that the agreement was still in existence. The respondent’s case, as put to the Compensation Court on that day, was to give the respondent an option of returning to Italy as well as having the commutation in due course approved. The Master said:

“It was necessary for the applicant [ie the respondent in this appeal] to have the application approved if he was to return to Italy because otherwise he could not continue to receive the full compensation payments which he was then presently receiving.”

23    Referring to the letter of 12 October 1998, the Master said that the suggestion that the settlement sum of $130,000 be reviewed and increased to the sum of $160,000 was “not consistent with a denial of the existing agreement and importantly seeks a review from other side [sic]”. The letter was silent on whether, if the $160,000 was not agreed, the respondent would not accept $130,000. The Master said:

“Although the matter is not without difficulty it seems to me that the plaintiff has not abandoned the earlier agreement by making the request for review. After all, one of the factors that obviously is apparent from the letter is the fact that time has passed and circumstances have changed.”

24    The Master was not prepared to find that there had been an abandonment of the contract by both parties. He concluded that there was no lack of mutuality and any delay that had occurred had substantially been a result of the appellant’s failure to process the application for commutation. The Master referred to a question of whether or not the application before the Compensation Court which had been brought by the respondent was an appropriate one and referred to Trans v J R Manufacturing Industries Pty Limited. The Master said:

“However, in the present case on the form of the legislation both before and after 1 August 1998 it would be appropriate to imply a condition that each party would do all things necessary to make application to the court for the court to determine the lump sum. Both forms of section required application to the court for an order determining the lump sum.”


In these circumstances, it seemed to the Master that the agreement ought to be specifically performed.

THE APPEAL SHOULD BE DISMISSED

25    The appellant’s principal argument said to be raised by ground 2 in the notice of appeal was that in their letter of 12 October 1998 the respondent’s solicitors elected to abandon the contract. In my opinion, the letter cannot be so analysed. Assuming, as one must for the purpose of this argument, that there was a contract on foot evidenced by the Heads of Agreement, the fact that one party seeks to obtain the consent of the other to vary it to the benefit of the first party cannot be read as an abandonment of the contract but merely as an enquiry from that party to see if the other party would be prepared to change its terms. If the other party does not agree, the contract remains on foot. In my opinion, this ground of appeal must fail.

26    The appellant also argued that the contract was voidable at the election of the appellant. What emerged clearly from the evidence was that the Authority’s guidelines, whatever may be their force as a matter of law, required that applications to the Authority for the approval of a commutation lump sum be made by the insurer, in this case the appellant. The respondent’s solicitors, after some delay, wrote to the appellant’s solicitors on 26 March 1998 referring them to the guidelines and asking them to prepare the application for commutation and advise when the documents could be uplifted in order that they could deliver them to the Authority. I entirely agree with the Master that nothing that happened on 3 April 1998 can be read as any abandonment of the agreement by the respondent. The respondent was simply protecting itself by obtaining a portable order pending the outcome of the application for approval. There is nothing inconsistent with the existence of the agreement in this.

27    A reading of the transcript of 3 April shows quite plainly that the appellant’s representative told Justice Campbell that the commutation application was presently awaiting approval and that it was being urgently attended to on the basis that the respondent wished to reside in Italy. The letter of 30 July 1998 made it plain that the appellant’s solicitor accepted that the appellant was responsible for preparing the documentation necessary for approval. Instead, apparently, nothing was done until two days before the legislation was amended so that approval was no longer required. What Justice Campbell was told may well have been the result of a misunderstanding of the true situation but it was misleading and could quite naturally have led counsel for the respondent to believe that the application to the Authority was in order.

28    Once 1 August arrived, no approval was required. It seems to me that the reference in the Heads of Agreement to the need for approval was simply the parties’ recognition of an obstacle to commutation in the then state of the law. If the need for that approval disappeared by force of amendment of the legislation, then the requirement for approval disappeared with it. But even if it did not, the authorities to which the Master referred showed that the appellant could not terminate the contract unless the respondent was at fault, which quite clearly he was not. If the respondent had been less than expeditious between December 1997 and March 1998 to the point of breach of the contract, the appellant had taken no exception to this and had confirmed the contract thereafter in April.

29    On the other hand, the appellant had arguably misled the respondent, even if innocently, about the state of the application to the Authority when in fact it had done nothing about it in accordance with the requirements of the guidelines until 30 July 1998, by that time too late. In this situation, in my opinion, there is no basis whatever upon which the appellant could unilaterally terminate the agreement.

30    The only remaining point of appeal related to the orders. It is accepted, apparently, that a commutation order cannot be made except on the application of the employer and with the consent of the worker. This approach derives at least in part from the terms of s15(1) of the Workers Compensation Act 1926 which provided that the liability in respect of any weekly payment might, with the consent of the worker, be “redeemed” either in whole or in part by the payment of a lump sum, determined by the Court.

31    In Gosper v Christopherson (1986) 160 CLR 423 at 427-8 the High Court said:

“An employer is not obliged to make a lump sum payment by way of redemption in the amount determined by the court, though the court has a jurisdiction to determine with the worker’s consent an amount which, if paid, redeems the liability. In John While & Sons Pty Ltd v Changleng [1985] 2 NSWLR 163 at 166-167, Mahoney JA commented that on the true construction of s15(1):
‘….the provision contemplates the redemption of the liability in question ‘by the payment of a lump sum’, ie, it contemplates that the liability is redeemed and so extinguished by the act of the employer in paying to the worker, with the worker’s consent, a sum determined by the Commission. The function of the Commission in that process is, and is only, to determine the sum payment of which may cause the process of redemption to operate. On this view, the section does not authorize the Commission to order redemption and, consequently, to force an unwilling employer to redeem.’
We respectfully agree. Section 15(1) makes it clear that before the liability for compensation is redeemed, there must be both the consent of the worker and the actual making of the payment, the latter being at the option of the employer. Redemption can occur only with the concurrence of employer and employee and a determination by the court. As there is no liability to pay a lump sum determined pursuant to s15(1), that sum is not ‘compensation’ which is payable under the first paragraph of s7(4) of the Act.”

32    On this basis the appellant challenged only order 4 that the Master made. Reference was made to the judgment of Judge Burke in Tran, particularly at paras 13, 18, 20, 23, 28 and 32. In that case, his Honour was concerned with applications to the Compensation Court by two workers seeking orders that their respective employers implement arrangements for previously agreed disposal of the substantive matters but from which proposed disposal the employers had subsequently resiled. In the present case, the respondent seeks relief in equity from the Supreme Court. It was agreed that the problem could be avoided in the present case by substituting for order 4 made by the Master a declaration to the same effect. If this is done and the Compensation Court duly makes an order under s51(2) of the Act with which the appellant refuses to abide, then the respondent can exercise a liberty to apply to bring the matter back before the Court.

ORDERS

33    In my opinion, the following orders should be made:

1. Appeal allowed;
2. Set aside order 4 made by Master Macready on 23 August 1999 and in lieu thereof, substitute:
‘Declare that in the event the Compensation Court determines the application for commutation in the amount of $130,000 the defendant is bound by the Heads of Agreement of 4 September 1997 to pay that amount to the plaintiff less any lawful deductions’.
3. Add the following order:
‘4A. Liberty to apply.’
4. Otherwise confirm the Master’s orders;
5. The appellant to pay the respondent’s costs of the appeal.

34    FOSTER AJA: I agree with Sheller JA.

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