Davison v Portside United Pty Ltd
[2002] VSC 50
•12 March 2002
| IN THE SUPREME COURT OF VICTORIA | Not Restricted |
AT MELBOURNE
COMMON LAW DIVISION
No. 7405 of 2001
| RAYMOND DAVISON | Appellant |
| v | |
| PORTSIDE UNITED PTY LTD | Respondent |
---
JUDGE: | Balmford J | |
WHERE HELD: | Melbourne | |
DATE OF HEARING: | 27 February 2002 | |
DATE OF JUDGMENT: | 12 March 2002 | |
CASE MAY BE CITED AS: | Davison v Portside United | |
MEDIUM NEUTRAL CITATION: | [2002] VSC 50 | |
---
APPEAL FROM MAGISTRATES’ COURT – appeal dismissed– Magistrate’s finding of fact not reviewable – assessment of pre-injury average weekly earning under section 5A(6)(f) of Accident Compensation Act 1983 – interpretation of “amount attributable to the supply of capital and material” – whether the deduction is limited to truck expenses and insurance
Accident Compensation Act 1985 – sections 5, 5A, 8
Income Tax Assessment Act 1997 – section 8-1
Interpretation of Legislation Act 1984 – section 35
Magistrates’ Court Act 1989 – section 109
Supreme Court (General Civil Procedure) Rules 1996 – rule 58.13
Buckman v Barnawatja Abattoirs (unreported, 14 July 1994)
DPP v Hinch (unreported, decided 5 August 1994)
Glazebrook v Accident Compensation Commission [1988] VR 454
J & H Timbers Pty Ltd v Nelson (1972) 126 CLR 625
Popovski v Ericsson Australia Pty Ltd [1998] VSC 61
Spurling v Development Underwriting Inc [1973] VR 1
Wilson v Wilson’s Tile Works Pty Ltd (1960) 104 CLR 328
---
APPEARANCES: | Counsel | Solicitors |
| For the Appellant | Mr J Kennan QC with Mr G Chancellor | Maurice Blackburn Cashman |
| For the Respondent | Mr R Gorton QC with Mr I Gourlay | Deacons |
HER HONOUR:
This is an appeal on a question of law under section 109 of the Magistrates’ Court Act 1989 from a final order made on 7 August 2001 by the Magistrates’ Court of Victoria at Melbourne constituted by Mr Jones, Magistrate, whereby that Court ordered that the amount of the pre-injury average weekly earnings of the appellant for the period from 21 June 2000 was the sum of $370.
On 4 September 2001 Master Wheeler found the following question of law to be shown by the appellant to be raised by the appeal:
In assessing the appellant’s pre-injury average weekly earnings pursuant to section 5A(6)(f) of the Accident Compensation Act 1985 (“the Act”) did the Magistrates’ Court err in law in its interpretation of the words “less any part of those amounts attributable to the supply of capital or materials” by deducting each and every item of expense in the appellant’s profit and loss statement rather than deducting only those amounts directly attributable to the supply of the prime mover to the respondent being truck expenses, truck insurance and Citylink tolls?
In my view, the question should more properly be read with the deletion of all words after “capital or materials”. The Magistrate’s interpretation, as a matter of law, of the expression in question is clear from his reasons for decision. The balance of the question, as drafted, relates to his application of that legal finding to the facts before him, and is not reviewable in this proceeding.
On other occasions judges of this Court have expressed the view and acted upon the principle that in a situation of that kind a judge is not authorised to amend an order made by the Master; but that Rule 58.13 of the Supreme Court (General Civil Procedure) Rules 1996 empowers the Court in the words of Mandie J in DPP v Hinch [1]:
to direct, in an appropriate case, that the appeal be decided upon the questions of law identified and canvassed in the arguments advanced, where this is necessary to achieve the effective, complete and economic determination of the appeal and is otherwise just and convenient.
See also, Buckman v Barnawatha Abattoirs [2], and Popovski v Ericsson Australia Pty Ltd [3]. I find this to be an appropriate case for such a direction, and on the basis of those authorities, I direct that the question be considered as though it read:
In assessing the appellant’s pre-injury average weekly earnings pursuant to section 5A(6)(f) of the Accident Compensation Act did the Magistrates’ Court err in law in its interpretation of the words “less any part of those amounts attributable to the supply of capital or materials” as “all of the expenditure incurred in putting the plaintiff in a position to earn his remuneration”?
[1]Unreported, decided on 5 August 1994
[2]Unreported decision of Smith J, decided on 14 July 1994
[3]1998 VSC 61 (Ashley J)
The relevant provisions of the Act are sections 5, 5A and 8, which read as follows, so far as relevant:
5.Definitions
(1)In this Act, unless inconsistent with the context or subject-matter¾
.. .
“worker” means¾
.. .
(b)a person who under this Act is deemed to be working under a contract of service;
5A.Pre-injury average weekly earnings
(1)In this Act, "the worker's pre-injury average weekly earnings" means -
(a)the average weekly earnings during the 12 months preceding the relevant injury if the worker has been continuously employed by the same employer for that period; or
(b)the average weekly earnings for the period less than 12 months preceding the relevant injury for which the worker has been continuously employed by the same employer -
calculated at the worker's ordinary time rate of pay for the worker's normal number of hours per week.
.. .
(6)For the purposes of sub-section (1) –
.. .
(f)if the worker is a person who -
(i)under section 6, 7 or 8 is deemed to be working under a contract of service; or
(ii)under section 9 is deemed to be a worker -
the worker's pre-injury average weekly earnings shall be calculated with reference to amounts payable to the worker and deemed to be remuneration under those sections less any part of those amounts attributable to the supply of capital or materials.
.. .
8.Contractors
(1)Notwithstanding anything in this Act or any other law, where any person (in this section referred to as "the principal") in the course of and for the purposes of a trade or business carried on by the person enters into a contract with any natural person or natural persons (in this section referred to as "the contractor")
(a)under or by which the contractor agrees to perform any work not being work incidental to a trade or business regularly carried on by the contractor in the name of the contractor or under a firm or business name; and
(b)in the performance of which the contractor does not either sublet the contract or employ workers or although employing workers actually performs some part of the work personally -
then for the purposes of this Act the contractor shall be deemed to be working under a contract of service with an employer and the principal shall be deemed to be that employer and the amount payable by the principal to the contractor in respect of the performance of work under the first-mentioned contract shall be deemed to be remuneration and shall be deemed to include any payment that would be a superannuation benefit if made
in relation to a person in the capacity of an employee.
The appellant owned a prime mover (“the truck”) which he operated solely as a permanent subcontractor to the respondent. He worked only for the respondent. He arranged and paid for the insurance, maintenance and parking of the truck as well as paying the Citylink tolls incurred by it and other expenses. He was remunerated by the respondent at a unit rate for each trip he made. The Magistrate found the appellant to be “an impressive witness” and accepted his statement that he regarded himself as an independent person running his own business. The profit and loss statement attached to his income tax return for the year ended 30 June 2000 showed a total income for the year of $107,772 received from the respondent. Items of expenditure totalling $88,502 were set out under 35 different heads, and being deducted gave a net profit of $19,270. I note that it was suggested before the Magistrate that the amount of $107,772 should be varied by reference to a suggested double counting relating to a mobile phone, but his finding was that the amount was $107,772 and I say no more about the suggested variation.
The appellant was injured on or about 21 June 2000 and was off work and receiving weekly payments under the Act until his return to work on 31 May 2001. The proceeding before the Magistrate was a claim by him for an increase in the amount of the weekly payments. The Magistrate found that by virtue of section 8(1), the appellant was for the purposes of the Act deemed to be working under a contract of service, so that the respondent was deemed to be his employer, and the payments he received from the respondent were deemed to be remuneration. Thus by virtue of the definition in section 5(1) of the Act he was a “worker” for the purposes of the Act. There is no challenge to that finding.
In those circumstances the appellant’s pre-injury average weekly earnings are to be calculated according to section 5A(6)(f) as the deemed remuneration “less any part of those amounts attributable to the supply of capital or materials”.
The issue in this case is the meaning to be attributed to that expression, which was introduced into the Act following the decision of the Full Court in Glazebrook v Accident Compensation Commission [4], although I was advised by counsel that there is no indication in the Second Reading Speech that the provision was enacted as a response to the decision. The facts in Glazebrook were generally similar to those of the present appeal. The Full Court there held that the expression “pre-injury average weekly earnings”, in the legislation as it then stood, meant the full sum for which the worker is engaged to work without deduction of any expenses incurred by him to put himself in a condition to derive earnings.
[4][1988] VR 454
The Magistrate adopted a passage from the judgment of Gibbs J in J & H Timbers Pty Ltd v Nelson [5], as to the meaning of “earning” in section 11(1)(a) of the New South Wales Worker’s Compensation Act 1926 as it stood at the relevant time. Section 11(1)(a) did not contain any expression similar to that in issue here, but read:
In the case of partial incapacity, the weekly payment shall in no case exceed the difference between the weekly amount which the worker would probably have been earning as a worker but for the injury and had he continued to be employed in the same or some comparable employment, and the average weekly amount he is earning, or is able to earn, in some suitable employment or business, after the injury, but shall bear such relation to the amount of that difference as under the circumstances of the case may appear proper.
His Honour said of that provision:
The word "earning" which is there twice used does not refer, in a case arising under s. 6(5)(a) [a provision corresponding to section 8(1) of the Act], to the gross amount which would probably have been received, or is received, by the person who is deemed to be a worker, and out of which payments would have to be made for wages, materials and the provision of plant, but to the net amount, which represents the remuneration for the labour of the person deemed to be a worker. It was said in Jones v. International Anthracite Collieries Ltd. (1918) 11 B.W.C.C. 274, at p. 283, that in ascertaining "average weekly earnings" for the purpose of a provision that corresponded to s. 11 (1) (a) in its original form, "what one has to arrive at is ... what was the man really receiving for remuneration. In other words, what was the reward for his labour". In determining the difference between the two amounts mentioned in the present section, the one hypothetical and the other factual (Australian Iron & Steel Pty. Ltd. v. Elliott (1966) 67 S.R. (N.S.W.), at p. 93,) one is in my opinion concerned with the net remuneration of the person deemed to be a worker, and not with his gross takings.
[5](1972) 126 CLR 625 at 651-2
After citing that passage the Magistrate continued:
In my opinion this is the approach envisaged by the Parliament in the enactment of s.5A(6)(f). I agree with [counsel for the respondent] that the intention of the Parliament was to restrict the meaning of “earnings” within the meaning of the section. When subsection (6)(f) is applied to “earnings” of the plaintiff, namely the sum of $107,772.00 he received from the company, that amount is deemed to be remuneration, but that is not what the plaintiff was really receiving as a reward for his labour. What he receives is the remuneration less those amounts attributable to the supply of capital or materials. Resulting in what Sir Harry Gibbs referred to as the net remuneration of the person deemed to be a worker. In arriving at that net remuneration, in my opinion all of the expenditure incurred in putting the plaintiff in a position to earn his remuneration should be deducted . . . The phrase “. . . any part of those amounts attributable to the supply of capital or materials” is to be given a broad construction, so as to allow the deduction of all items, not just selected items, of expenditure from the gross earnings, and deemed remuneration of the plaintiff.
In the case of the plaintiff this means that the amount set out in the profit and loss statement of the plaintiff’s 1999/2000 taxation return as his net income, becomes his net remuneration. [Counsel for the respondent] submitted that the appropriate way to treat the amount, namely $19,270 was to notionally divide it by 52, representing the number of weeks in the calendar year, which leaves an amount of $370 per week as the plaintiff’s PIAWE. I agree with this approach.
In my opinion the plaintiff has failed to show that he is entitled to an increase in the amount of weekly payments for the period claimed.
Mr Kennan, for the appellant, submitted that the effect of the expression “in the course of and for the purposes of a trade or business carried on by [the person who becomes the deemed employer]” in section 8(1) was that the section was concerned with the principal’s business, not the subcontractor’s business. Thus the phrase “the supply of capital or materials” could only refer to the supply of capital or materials to the principal’s business. The only items on the profit and loss statement which fell within that concept were truck expenses of $47,841 and insurance on the truck of $1,561. However, that does not appear to me to be the necessary import of the opening words of section 8(1), when set against the language of the expression under consideration. As Mr Gorton pointed out, however, those opening words would be relevant if the appellant’s business had included income-producing activities other than the provision of his truck for use in the business of the employer. In that case it would have been necessary to determine which of his business expenses were “attributable to the supply of capital or materials” to the business of the employer, as opposed to the other activities.
Mr Kennan submitted further that if Parliament had meant to provide for the deduction of, in the words of the Magistrate “all of the expenditure incurred in putting the plaintiff in a position to earn his remuneration” it could have done so. However, Mr Gorton submitted in reply, and I accept, that the use of the words “attributable to the supply of”, which Parliament had chosen to use, imported a wide general meaning to the expression, so that it was not limited merely to the direct costs of capital or materials.
Mr Gorton submitted that the insertion of section 5A(6)(f) in the Act was a response to the decision in Glazebrook. The truck could not be supplied to the business of the respondent without the appellant incurring expenses in his own business. The appellant was conducting his business for the benefit of the respondent, and it was intended that when he was injured he should be compensated only for the actual earnings which he received after deduction of his business expenses. The Magistrate had found that section 5A(6)(f) had been included in the Act in order to restrict the amount of pre-injury average weekly earnings in those circumstances, and, as required by section 35 of the Interpretation of Legislation Act 1984, a construction which would promote that purpose or object should be preferred.
As Fullagar J said in Wilson v Wilson’s Tile Works Pty Ltd[6] , “where two constructions of a Workers’ Compensation Act are possible, that which is favourable to the worker should be preferred”. However, I do not find sufficient ambiguity in section 5A(6)(f) to bring that principle into operation, and I accept the submission of Mr Gorton as to the purpose of the expression with which I am concerned.
[6](1960) 104 CLR 328 at 335
Mr Gorton also referred to section 6 of the Act, which is similar to section 8, but provides that a timber contractor, as described in that section, is deemed to be working under a contract of service in the circumstances there set out. Such a deemed worker is expressly included in the operation of section 5A(6)(f). A timber contractor as described in section 6, may be “employing workers”. Mr Gorton submitted that it would be extraordinary if an injured timber contractor received as his pre-injury average weekly earnings, not only the sums attributable to his own labour, but also the sums attributable to the labour of his employees. This would, in his submission, follow from the approach of the appellant.
The matter proceeded below on the tacit assumption that the profit and loss statement had been included with the plaintiff’s tax return, and that all of the 35 items shown under the heading “expenditure” on the profit and loss statement had been claimed by the appellant as deductions (omitting, of course, certain amounts there offset as relating to private use only). The tax return and profit and loss statement had been prepared by the appellant’s accountant, who presumably had formed the view, on the basis of instructions from the appellant, that each of the 35 items fell within section 8.1 of the Income Tax Assessment Act 1997, which by virtue of section 51AAA of the Income Tax Assessment Act 1936 applies to income tax assessments for the 1997-1998 year and thereafter, and which reads:
8-1.General deductions
(1)You can deduct from your assessable income any loss or outgoing to the extent that:
(a)it is incurred in gaining or producing your assessable income; or
(b)it is necessarily incurred in carrying on a business for the purpose of gaining or producing your assessable income.
(2)However, you cannot deduct a loss or outgoing under this section to the extent that:
(a)it is a loss or outgoing of capital, or of a capital nature; or
(b)it is a loss or outgoing of a private or domestic nature; or
(c)it is incurred in relation to gaining or producing your exempt income; or
(d)a provision of this Act prevents you from deducting it.
Evidence was given by the appellant and his wife before the Magistrate explaining the relevance of the claimed items of expenditure to the operation of the truck by which he earned his remuneration from the respondent. Mr Kennan submitted that a number of those items were not relevant to the operation of the truck. However, that submission implies that those items were not “necessarily incurred in carrying on a business for the purpose of gaining or producing . . . assessable income” and therefore had been improperly claimed as deductions from the appellant’s assessable income. In any case, the finding of the Magistrate that all of those items should be deducted from the deemed remuneration of the appellant is a finding of fact, arising from the application of the law as found by him to the evidence before him, and thus is not reviewable on this appeal.
As Stephen J said in Spurling v Development Underwriting Inc[7]:
In the case of decisions of magistrates the position in Victoria is well established by a line of decisions culminating in Taylor v Armour and Co. Pty Ltd, [1962] VR 346, in which the Full Court of this State held that in the case of any question of fact the Court should treat the matter as an appeal from the verdict of a jury and should not make up its own mind upon the evidence but rather confine itself to seeing whether there was evidence upon which the magistrate might, as a reasonable man, come to the conclusion to which he did come. In saying this the Full Court stated that it was following the view of Herring, CJ, in Young v Paddle Bros. Pty Ltd, [1956] VLR 38; [1956] ALR 301. The Chief Justice, in that case, adopted as the test whether "on any reasonable view of the evidence that decision can be supported"; a party aggrieved can thus only succeed if a decision contrary to the view of the magistrate is "the only possible decision that the evidence on any reasonable view can support" (see at VLR p. 41).
[7][1973] VR 1 at 11
Having considered the matter, I find that the Magistrate did not err in law in his interpretation of the expression “attributable to the supply of capital or materials”. The answer to the question in the revised Master’s order as appearing in [4] above is therefore No. The appeal will be dismissed. Counsel may wish to make submissions as to costs.
---
0