Codmah Pty Ltd v Rice
[2018] ACTSC 191
•29 June 2018
SUPREME COURT OF THE AUSTRALIAN CAPITAL TERRITORY
Case Title: | Codmah Pty Ltd v Rice |
Citation: | [2018] ACTSC 191 |
Hearing Date: | 15 February 2018 |
DecisionDate: | 29 June 2018 |
Before: | McWilliam AsJ |
Decision: | 1. The appeal is dismissed. 2. The appellant is to pay the respondent’s costs. |
Catchwords: | APPEAL – STATUTORY INTERPRETATION – Workers’ Compensation Act 1951 (ACT), s 35 – where principal contractor deemed liable to pay compensation for injury suffered in the course of employment because the subcontractor employer was not insured in the Australian Capital Territory – whether principal is also an ‘employer’ for the purposes of s 35 and thus had obligations to find the employee alternative employment – whether employee had obligation to notify principal before liability to find alternative employment arose – whether suitable alternative employment found |
Legislation Cited: | Legislation Act 2001 (ACT) s 151C Workers’ Compensation Act 1951 (ACT) ss 13 and 35 |
Cases Cited: | Bird v The Commonwealth (1988) 165 CLR 1 Nash v Sunshine Porcelain Potteries Ltd (1959) 101 CLR 353 Woden Valley Glass v Psaila (1993) 44 FCR 140 |
Parties: | Codmah Pty Ltd (First Appellant) Ydennek Pty Ltd (First Respondent) Leslie Rice (Second Respondent) |
Representation: | Counsel Mr L Morgan (Appellant) Mr A Muller (First Respondent) |
| Solicitors Gillis Delaney Lawyers (Appellant) Slater & Gordon (First Respondent) | |
File Number: | SCA 73 of 2017 |
Decision under appeal: | Court: Magistrates Court of the ACT Before: Chief Magistrate Walker Date of Decision: 21 July 2017 Case Title: Rice v Ydennek Pty Ltd & Ors Court File Number: WC 146 of 2015 |
Introduction
In March 2014, while unloading timber beams during the course of his employment as a labourer, Mr Rice stepped into a hole covered by long grass and injured his left knee and ankle. The present appeal is from a decision of the Chief Magistrate on 21 July 2017 (the orders being made on 10 August 2017). It involves a dispute over whether a principal contractor is responsible for the payment of workers’ compensation to Mr Rice arising from that injury, and the amount of that payment under the workers’ compensation scheme set up by the Workers Compensation Act 1951 (ACT) (the Act), which was calculated based on the periods Mr Rice was deemed to be totally incapacitated under s 35 of the Act.
The order giving rise to the appeal (Order 3 of the orders made on 10 August 2017) is in the following terms:
The injury is productive of partial incapacity which is deemed total incapacity pursuant to s35 of the Workers Compensation Act 1951 during the periods he has been unable to find suitable employment, that is periods during which he has been unemployed post injury.
The parties
The appellant is Codmah Pty Ltd (Codmah). It was the principal or head contractor on a construction site for the building of a gas pipeline in the Australian Capital Territory (the Territory).
The first respondent on the appeal is the injured employee.
The second respondent (Ydennek) was a subcontractor of Codmah. The name derives from Kennedy spelt backwards, the family name of the directors of the company. It did not have a compulsory insurance policy in force that applied to the employee working in the Territory. Ydennek had paid compensation to the employee through its New South Wales insurance policy up until 19 September 2014, when it terminated the employment of Mr Rice.
Ydennek is now in administration and did not take part in the proceedings below or on appeal.
Statutory framework
The Act establishes a no-fault scheme designed to provide compensation to injured workers and support an early and durable return to work. In usual circumstances, a worker injured in the course of employment with an uninsured employer will receive his or her compensation from the default insurance fund under Part 8.2 of the Act. That fund is a safety net established by the Act to ensure that no injured worker is left without access to compensation.
In the present case, the position of the default insurer was that it had no liability to make payments, on the basis that there is a third party with liability to pay workers compensation entitlements (being the appellant).
The key provisions for assessing whether Codmah did in fact have liability under the Act and, if so, the extent of that liability, are ss 13 and 35 of the Act. The material parts of s 13 of the Act are as follows:
13 Liability of principal for uninsured contractor’s injured worker
(1)This section applies if –
(a) a person carrying on a business (the principal) enters into a contract with another person (the contractor) to carry out work that is part of the principal’s business (the contracted work); and
(b) a worker employed by the contractor becomes an injured worker (the injured worker) while carrying out the contracted work; and
(c) the contractor is uninsured.
(2)The principal is liable to pay to the injured worker any compensation that the principal would have been liable to pay if the worker was employed by the principal.
(3)If this section is relied on to make a claim for compensation, or to bring any other proceeding, against a principal, then, in the application of this Act to the claim or proceeding –
(a) a reference in this Act to an employer is taken to be a reference to the principal; and
(b) any calculation of the earnings of the injured worker must be based on the earnings paid or payable to the worker by the contractor that employed the worker.
‘Uninsured’ is defined in s 13(6)(a) of the Act relevantly as follows:
(6) In this section:
uninsured, in relation to a principal or a contractor, means the principal or contractor –
(a) does not have a compulsory insurance policy in force that applies to an injured worker mentioned in subsection (1) in relation to the injury; or
…
Section 13(4) of the Act concerns indemnification of the principal. Section 13(5) of the Act permits a worker to claim compensation against a contractor instead of a principal. These sections are not material to the appeal.
Two things may be observed about s 13. First, the words “would have been liable to pay” and “if the worker was employed” deem the principal liable on a hypothetical basis. It requires the principal to step into the shoes of the employer and to pay compensation to an injured worker as if he or she had been employed by the principal. The intention of the legislation is clearly beneficial in favour of the employee. However, the words are not a straight substitution, in that they do not require the principal to actually take on the role of the employer. They require the principal to pay money as if it had been the employer.
Similarly, the words “a reference in this Act to an employer is taken to be a reference to the principal” in s 13(3)(a) apply “if the section is relied on to make a claim for compensation”. The principal is only deemed to have been the employer at the point a claim is made.
Second, s 13(3)(b) of the Act requires that the calculation of the earnings “must be based on the earnings…payable to the worker by the contractor that employed the worker”. This deeming provision recognises that the amount payable must be calculated by reference to the employee’s relationship with his (in this case) actual employer.
Earnings paid by the contractor that employed the worker may be affected by whether the employee is partially or totally incapacitated for work.
This discussion provides context to the issue that arose for consideration in the court below. It was unclear how the deeming provision operated in the context of s 35 of the Act, which determines when, and for how long, an employee who was “partially incapacitated” for work became “totally incapacitated” for work.
Section 35 is in the following terms:
(1)In this Act, a worker is taken to be totally incapacity for work if –
(a) a doctor certifies that the worker is partially incapacity for work; and
(b) the partial incapacity prevents the worker from performing the duties the worker performed before becoming incapacitated; and
(c) the employer cannot provide appropriate alternative employment; and
(d) the worker cannot find appropriate alternative employment.
(2)For subsection (1), the worker is taken to be totally incapacitated from the time when the worker becomes partially incapacitated until 1 of the following happens:
(a) the worker becomes totally incapacity;
(b) the employer provides the worker with appropriate alternative employment;
(c) the worker finds appropriate alternative employment.
[Emphasis added.]
Section 35 may be seen as a further deeming provision by the use of the words “taken to be”. If the criteria under s 35(1) of the Act are met, then the worker is totally incapacitated, which has consequences for the calculation of weekly compensation (which is governed by Pt 4.3 of the Act).
Findings of the court below
The Chief Magistrate delivered judgment on 5 April 2017, giving brief oral reasons immediately upon the conclusion of the hearing. The Chief Magistrate had previously found during the course of the hearing that Codmah was the “principal” pursuant to s 13 of the Act.
The Chief Magistrate found that, on the evidence before the court, Mr Rice had suffered a compensable injury which was ongoing and productive of partial incapacity. The Chief Magistrate then turned to consider whether Mr Rice may be deemed to be totally incapacitated pursuant to s 35 of the Act.
The Chief Magistrate found that the effect of s 13 did not limit the term “employer” in s 35 of the Act to the principal. The term was sufficiently broad to give a role to the actual employer, who might have been in a position to provide alternative employment. Her Honour formed the view that this construction of the section was necessary “to give the section operation”.
It was uncontroversial that Mr Rice was partially incapacitated for work and that this prevented him from performing the duties he performed before in the injury, satisfying s35(1)(a) and (b) of the Act.
By applying a broad construction of s 35, the Chief Magistrate found that the requirement that the “employer”, for the purposes of s 35(1)(c) of the Act, “could not provide appropriate alternative employment” was satisfied on the basis that Ydennek terminated the employment of Mr Rice in September 2014.
The Chief Magistrate accepted that Mr Rice had obtained intermittent alternative employment following the injury, but found that such alternative employment “had not been sustained”. Although in some instances, this was for reasons directly relating to the injury, largely it was because of the fact that the alternative employment was temporary work and only available for a short, fixed period.
The Chief Magistrate was satisfied that Mr Rice had made significant efforts to find alternative employment but nonetheless experienced significant periods of unemployment. On that basis, the Chief Magistrate found that Mr Rice satisfied s 35(1)(d) of the Act.
Accordingly, the Chief Magistrate found that ss 13 and 35 of the Act were enlivened and Codmah was liable to pay Mr Rice compensation to be calculated on the basis that Mr Rice was totally incapacitated for the periods when he had not been employed.
The issues on appeal
The appellant does not challenge any of the findings of fact made by the Chief Magistrate. The substance of the appeal is limited to questions of construction and, in particular, the construction of s 35 of the Act in the particular circumstances of Mr Rice’s case.
There was a preliminary issue dealt with during the hearing. While filed as of right, the appeal may have been filed out of time. I made an order by consent that the time for filing a notice of appeal from the orders of the Chief Magistrate on 10 August 2017 be extended to 7 September 2017, pursuant to s 151C of the Legislation Act 2001 (ACT). The delay in filing a notice of appeal occurred because of an administrative error on the part of the Magistrates Court, in failing to inform the parties that orders finalising the matter had, in fact, been entered on 21 July 2017. I was satisfied that it was appropriate to grant leave as there was no prejudice to the respondents, the explanation was reasonable, the delay was short and the appeal had arguable merit.
The appellant raises three complaints on appeal:
(a)Error in construing s 35 of the Act to include the actual employer, where a principal had been deemed to be the employer through the operation of s 13 of the Act (Ground 1).
(b)No evidence for finding that the s 35(1)(c) was satisfied; that is, where the appellant was to be regarded as the employer, no evidence for finding that the appellant could not provide appropriate alternative employment to the respondent (Ground 2).
(c)Having found that the respondent had obtained “appropriate alternative employment”, the Chief Magistrate erred in determining that the respondent had established a deemed total incapacity whenever he had not been so employed (Ground 3).
These are the issues for determination on the appeal.
Codmah seeks an order that the matter be remitted to the court below to determine entitlement to weekly compensation, and an order that the respondent pay the appellant’s costs.
Ground 1 – meaning of “the employer” in s 35
Codmah submits that the Chief Magistrate fell into error as, notwithstanding the finding that the appellant is deemed to be the employer of Mr Rice by operation of s 13 of the Act, the Chief Magistrate did not identify the appellant as “the employer” under s 35 of the Act. The appellant contended that s 13(3)(a) of the Act is in clear terms and unequivocally applies to any claim for compensation, including the present circumstances.
Codmah further submits that s 35 of the Act establishes mutual obligations on the part of the employer and the injured worker. It stated that this section operates in circumstances where an injured worker can show that he or she is ready, willing and able to work in alternative duties, has requested that type of work from the employer and unsuccessfully looked for it elsewhere.
Mr Rice contends that the effect of s 13(3)(a) of the Act is that each of the references to “employer” in the Act should be read as if each is a reference to the principal. This interpretation should not, however, be to the exclusion of the actual employer.
On this reading of s 13 of the Act, Mr Rice submits he may rely on s 35 and is taken to be totally incapacitated pursuant to that section because his employer, Ydennek, failed to provide him with suitable duties. He contends that a claim for compensation pursuant to s 35 of the Act is rightly made against Codmah as the principal.
The principles applicable to the proper construction of the statute are well established and provide that the Court is to have regard to the text, context and purpose of the Act. The Court’s task was discussed in detail in The Director of Public Prosecutions v Scheele [2016] ACTCA 23 (Scheele) at [27] (including the cases cited therein). It is unnecessary to set them out in detail again here.
As will be apparent from my consideration of the statutory framework above, and in accordance with the principles in Scheele, I accept the first respondent’s submissions and find that there was no error in the Chief Magistrate’s construction of the Act.
As explained above, the text of s 13 does not effect a straight substitution. The Act acknowledges that calculations of workers compensation payments will be undertaken by reference to the relationship between the employer and employee.
Codmah argues that this construction creates a degree of unfairness, in that it was unaware of any obligation on its part to provide suitable duties to a subcontractor’s employee and was never approached to provide those duties. It describes that loss of control as effectively a punishment, forcing it to pay weekly compensation at a higher rate.
The short answer to this submission is that Codmah did not have that obligation. That is not how s 13 of the Act operates. Ydennek continued to have the obligation as the employer of Mr Rice. Then, whatever steps Ydennek took, or did not take, to find suitable alternative duties are taken to be the steps of the principal.
As submitted by the first respondent, a principal wishing to avoid liability under the section has only to ensure that each of the subcontractors that it engages has appropriate workers compensation insurance in place for the job at hand. A principal that does not take such care with its contractual arrangements is exposed to claims such as the one brought by Mr Rice.
Such a construction is beneficial to the injured employee and thus consistent with the purpose of the legislation, which is intended to operate in such a way as to ensure that appropriate compensation benefits are available to injured workers: Nash v Sunshine Porcelain Potteries Ltd (1959) 101 CLR 353 at 361; Bird v The Commonwealth (1988) 165 CLR 1 at [5].
Accordingly, there was no error in the Chief Magistrate’s construction of s 35.
Ground 2 – No evidence that principal could not find alternative employment
The appellant contends that there was no evidence before the Chief Magistrate that Mr Rice had requested suitable duties from Codmah. Mr Rice was, therefore, not entitled to benefit from s 35 of the Act.
The appellant submits that, because of the operation of s 13 of the Act, s 35(1)(c) is only enlivened when the worker has made a request for alternative employment to the principal and it has failed to provide appropriate alternative employment. The appellant submits that this interpretation reflects the mutual obligations created by s 35 of the Act on the worker and the employer to seek out appropriate alternative employment.
However, this argument is misconceived for the reasons already given. The legislation does not operate to require the principal to take on the role of the employer in respect of an injured employee of a completely different entity. The employer continues to have those obligations. There is nothing in the text, context or evident purpose of the Act to suggest that s 35 ought to be read as requiring an injured employee to search through a chain of contractors and subcontractors until he finds one with applicable insurance and then attempt to negotiate suitable employment duties with that entity. The proper construction of the Act simply makes the principal responsible for footing the bill if the employer is not appropriately insured.
In addition, the words “from the time when the worker became partially incapacitated” (in s 35(2) above) make clear that an obligation under s 35(1) exists from the time the worker is found to be partially incapacitated for work by a medical practitioner and the partial incapacity prevents the worker from performing pre-injury duties. That is the trigger for obligations between the employer and employee to find appropriate alternate employment. It is not dependent on insurance arrangements.
Thus, the text, context and purpose of the Act all support the construction favoured by the first respondent, which was consistent with the construction of the Chief Magistrate. Ground 2 has not been sustained.
Ground 3 – Whether ‘total incapacity’ may be re-enlivened
Ground 3 concerns the Chief Magistrate’s finding with respect to s 35(1)(d) of the Act. Given the submissions made by the appellant, it is useful to set out the reasoning of the court below on this question, as follows:
I turn then to subsection (d), the requirement for a determination of total incapacity as to whether the worker cannot find appropriate alternative employment. Counsel for the second respondent urges upon me that Mr Rice has indeed been able to find appropriate, in fact in some senses preferable alternative employment, and clearly he has done so on a number of occasions.
However, that alternative employment has not been sustainable for reasons in some brief instances directly relating to the compensable injury, but largely because of the fact that it is work which has only been available for a fixed period of time. The worker, I am satisfied on his evidence, has made significant efforts to find alternative employment. It’s not been contradicted that he’s applied for 100 positions and not been successful in respect to a number of those and as a result has experienced significant periods of unemployment.
Having regard to all of the criteria then, I am satisfied that Mr Rice is totally incapacitated during his periods of unemployment for the purposes of section 35 of the Act. I have considered the operation of subsection (2) and whether the fact of being totally incapacitated ceases at the time a person finds in the first instance appropriate alternative employment. I am satisfied that this is relevant only to those periods of employment, not a bar once such appropriate employment has been found on a single occasion. This would not give a fair interpretation of the section, in my view.
[Emphasis added.]
Codmah submitted that the section operates so that the worker is taken to be partially incapacitated until he is taken to be totally incapacitated, the employer provides appropriate alternative duties, or the worker finds appropriate alternative employment. The section does not provide for ‘re-engagement’ every time the alternative employment ceases.
Mr Rice submitted that, while the term “appropriate alternative employment” is not defined in the Act, it can only mean employment of a type that brings to an end the entitlement to compensation in the form of incapacity payments for a work related injury. At no point from the commencement of the application of s 35 was there a time when he could be said to have found appropriate alternative employment in any durable sense.
Properly understood, that was the effect of the Chief Magistrate’s reasoning.
In Woden Valley Glass v Psaila (1993) 44 FCR 140 (Woden Valley Glass) at [13], Miles J, with whom Hill and Cooper JJ agreed, observed that whether incapacity for work is total or partial is a question of fact. Likewise, whether ‘appropriate’ alternative employment has been found is also a question of fact, and durability of the employment may well be relevant to the court’s assessment.
If the worker finds alternative employment and it appears to be appropriate, but that employment only lasts a day or a week, it is open to a court to find that such employment was not “appropriate” alternative employment under s 35(1)(d) of the Act. Further, if that situation occurs on a series of occasions, the court may make a finding that, taken as a whole, appropriate alternative employment had not yet been obtained. It will be a matter of fact and degree as to whether any one period of employment brought the operation of s 35 and the deemed total incapacity to an end.
In this regard, an analogy might be seen in Woden Valley Glass at [32], where Miles J referred to an injured worker who is left with some capacity to work nevertheless not being ‘able to earn in some suitable employment or business’, which were the words of the relevant provision there under consideration.
A fair reading of the reasons suggests that the court below undertook a similar approach to the facts here. I accept that the oral reasons are not as clearly expressed as they might have been, and that this has given rise to a perception that the Chief Magistrate construed the Act in a manner where the entitlement to be paid compensation on the basis of deemed total incapacity under s 35 could be ‘re-enlivened’. However, that is not how I would characterise the reasoning of the Chief Magistrate.
What her Honour was really saying is that, although Mr Rice did find instances of alternative employment, and while those occasions should be taken into account so that the principal is not liable to pay compensation when the employee was in fact working and earning, the lack of durability of those isolated instances meant that, taken as a whole, Mr Rice had not found “appropriate alternative employment” such as is required to bring the operation of s 35 of the Act and the deemed total incapacity to an end. That finding was open on the evidence. Accordingly, Ground 3 is not made out.
Conclusion
For the above reasons, the appeal will be dismissed. There is no reason to depart from the usual order that costs ought to follow the event. The orders of the Court are as follows:
(a)The appeal is dismissed.
(b)The appellant is to pay the first respondent’s costs.
| I certify that the preceding fifty-eight [58] numbered paragraphs are a true copy of the Reasons for Judgment of her Honour Associate Justice McWilliam. Associate: Date: 29 June 2018 |
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