Franco v Franco's Smash Repairs Pty Ltd
[2025] NSWPIC 49
•17 February 2025
| CERTIFICATE OF DETERMINATION OF MEMBER | |
| CITATION: | Franco v Franco's Smash Repairs Pty Ltd [2025] NSWPIC 49 |
| APPLICANT: | Jose Manuel Franco |
| RESPONDENT: | Franco's Smash Repairs Pty Limited |
| MEMBER: | Catherine McDonald |
| DATE OF DECISION: | 17 February 2025 |
CATCHWORDS: | WORKERS COMPENSATION - Workers Compensation Act 1987; psychological injury suffered by working director; dispute as to capacity in which injury was suffered; worker had a contract of services as a manager confirmed by payslips and suffered injury in that role; Held – award for the applicant for weekly compensation; permanent impairment claim remitted for referral to a Medical Assessor. |
| DETERMINATIONS MADE: | The Commission determines: 1. The respondent is to pay the applicant weekly compensation: (a) pursuant to s 36 of the Workers Compensation Act 1987 (the 1987 Act) from (b) pursuant to s 37 of the 1987 Act from 4 July 2022 to 30 September 2024 at the rate of $1,080, as indexed. 2. I remit the matter to the President for referral to a Medical Assessor to assess the applicant’s permanent impairment: Date of injury: 4 April 2022. Body system: psychiatric and psychological injuries. Method of assessment: whole person impairment. 3. The documents to be sent to the Medical Assessor are: (a) the Application to Resolve a Dispute; (b) the Reply, and (c) the reports of Dr Pusic dated 17 January 2025 and Dr Kumagaya dated 16 December 2024 handed up at the conciliation conference and arbitration hearing by consent. A statement is attached setting out the Commission’s reasons for the determination. |
STATEMENT OF REASONS
BACKGROUND
Jose Franco was a working director employed by Franco’s Smash Repairs Pty Limited (Smash Repairs) from 1989. He claims compensation in respect of a psychological injury which he suffered due to excessive workload and business pressures as a panel beater and manager and said that his employment over 30 years was the main contributing factor to the injury.
Mr Franco claims weekly compensation from 4 April 2022. The second entitlement period expired on 30 September 2024 and the parties agree that I am concerned with compensation between 4 April 2022 and 30 September 2024. He also claims permanent impairment compensation.
The issue for determination is whether Mr Franco suffered injury in his capacity as a worker or whether he is precluded from recovering compensation because he suffered injury in his capacity as a director.
PROCEDURE BEFORE THE PERSONAL INJURY COMMISSION
The matter was listed for conciliation conference and arbitration hearing on 21 January 2025 when Mr Stockley of counsel, instructed by Mr Morson, appeared for Mr Franco and Mr Adhikary of counsel, instructed by Ms Cincotta, appeared for the company.
Some documents in the file raised questions about Mr Franco’s capacity to give instructions. Mr Stockley and Mr Morson are satisfied that he does have capacity and Mr Adhikary did not suggest otherwise.
Despite some references to Smash Repairs being under external administration, the parties agree that it is not and that no declaration under s 162 of the Workers Compensation Act 1987 (the 1987 Act) is necessary.
The parties agreed that Mr Franco’s pre-injury average weekly earnings (PIAWE) were $1,350.
Mr Franco sought leave to rely on reports from Dr Kumagaya dated 16 December 2024 and Dr Pusic dated 17 January 2025 and those reports were admitted by consent.
I am satisfied that the parties to the dispute understand the nature of the application and the legal implications of any assertion made in the information supplied. I used my best endeavours in attempting to bring the parties to the dispute to a settlement acceptable to all of them. I am satisfied that the parties have had sufficient opportunity to explore settlement and that they have been unable to reach an agreed resolution of the dispute.
EVIDENCE
The following documents were in evidence before the Personal Injury Commission (Commission) and considered in making this determination:
(a) Application to Resolve a Dispute (ARD) and attached documents;
(b) Reply, and
(c) reports of Dr Kumagaya dated 16 December 2024 and Dr Pusic dated 17 January 2025.
There was no oral evidence.
Mr Franco signed a statement on 8 April 2024. He said that he bought the business with his brother in October 1989, and it was a two man shop, he was panel beating and his brother painting. In 1991 they moved to new premises, and the business became busier. In January 1992 his brother left the business, and Mr Franco carried on by himself, employing a painter to replace his brother. In 2000 he bought the building across the road. He was still panel beating and he had employed workers so that there were about 10 people, including himself and his wife. He said:
“All those years I was not sleeping well and I had cold sweats every night. This whilst running the business. It had been going on since I moved into Wetherill Park or after my brother left the business in 1992 because I was on my own and had no one to help me. I had no one on the floor to make sure that the boys got the job right and I used to go out and quote cars because I worked for MMI and we would go to the centres and quote and bring the work in and rely on the staff to help me. It started after my brother left the business and I was going to see the doctor on a regular basis to keep me going. I see Dr Ramesh Dhanji at 50 Borrowdale Way, Cranebrook.
After my brother left I would see the doctor on a regular basis because I was not sleeping well and waking up through the night and over the years he had prescribed me some anxiety tablets. I can’t recall the name. He also prescribed me medication to relax me and make me sleep and then he said that I couldn’t take it for too long and that I needed to go for stress classes. I said what is stress as I didn't know what caused stress until I did 6 weeks one day a week at the local community centre. They had the stress classes and I went there and that is when I started to realise that I was trying to control what was called stress. I didn't know what stress meant but I was getting chest palpitations and it was all to do with the stress. The classes did help me. I was off the medication not as much to help me get through the day.
After I went into the building that I bought I kept on seeing the doctor to keep me going. I would see him once a month or so. Sometimes I would go and he would just talk to me as he is apparently a counsellor as well.
…
I had run the business for over thirty years and trying to look after ten people including myself and my wife and make sure there was enough work there all the time as when you have staff you have to keep the business going.”
Mr Franco’s son, Andy Franco, signed a statement on 16 April 2024. To avoid confusion, I have referred to him by his given name, with no disrespect intended.
Andy said:
“He has always said to me when all this happened he said that the stress happened since his brother left the business. They didn't have a falling out. His brother decided to move to the Central Coast and he opened up another smash repairs. They wanted to get out of Sydney. This is what I have heard from my dad because I was only little when all this happened.
Then my Dad's business just got bigger and bigger. It got bigger and he got more staff and he put on a very good facade for everyone to believe that he was in control. You think he was because he ran a business successfully for over thirty years. He went from renting a place to buying and building and getting more staff and he was always needing more help but he could never find the right help. Wages were a big thing and I am assuming he couldn't put people on to help because he couldn't afford it.
I remember when I was a kid he was always stressed. I was very little when he went to the stress classes. I remember him going to the classes at night because he would always take a pillow with him. I thought it was a bit weird when I was little. Then they explained to me that he was going to stress classes.
I used to go to the workshop every now and then and do things for him. He was always run ragged. He was up at 5am and he was home at 7.30pm and dinner was always at 8pm. He was always at work, Saturdays he was always at work. It was everything to him.”
Andy described the impact of COVID-19 shutdowns on the business to the point that there were no cars coming in. He said:
“The insurance companies for the smash repair work had a big part for the stress throughout the years as well because they dictated to him what they pay whereas they might pay him $40 an hour to repair a car but the panel beater might be $30 an hour in pay and then Dad had to make money out of $10 an hour with his overheads and everything.
Then during Covid he had to do rosters where some people worked on certain days because there wasn't enough work to keep them going. I remember him ringing me when I was at work one day saying it was hard and I remember him breaking down on the phone.”
Andy said that Mr Franco fell prey to the scam because he was depressed and desperate. He said:
“I showed up at the workshop one day and looked at the mailbox and it was overflowing with mail. I said what is with the mail. He said that he just doesn't open it. I got the keys and opened it and there was mail in there from four months before. It was all bills and creditors. I asked him what is left. He said there is nothing left. I then had to stop my work for a month and I had to go in because he just couldn't sack his workers.”
There is a series of financial documents in the ARD, including the tax returns of Smash Repairs for the 2020, 2021 and 2022 years and Mr Franco’s own tax returns. I was not taken to those documents in detail. Smash Repairs’ tax returns show a decline in income over those years. Mr Franco’s tax returns show receipt of wages and not directors fees.
Two of Mr Franco’s payslips being those for 24 to 30 June 2021 and his final payslip for 24 to 30 March 2022 are attached to the ARD. The payslips are issued by Smash Repairs. They set out Mr Franco’s employee number, his employee type as full-time and his job title of manager. The first shows his earnings for a 38 hour week plus some overtime. PAYG tax was deducted and superannuation contributions of 10% of the total were made on his behalf together with salary sacrifice contributions. Leave balances are set out. The final payslip also shows payments for annual leave and annual leave loading.
The insurer declined the claim in two notices under s 78 of the Workplace Injury Management and Workers Compensation Act 1998 issued on 12 August 2024. The substance of the notices was that Dr Injeti obtained the history that since the pandemic, Mr Franco reported having difficulty managing workflow, orders and maintaining staff, which resulted in him ceasing work in closing the business in April 2022. His diagnosis was an adjustment disorder with mixed mood symptoms as a result of the business closure due to the pandemic. The insurer said that the basis of that report, it did not agree that the injury resulted from Mr Franco’s employment as a panel beater, but rather from his duties as a director.
Medical evidence
Mr Franco has consulted Dr Dhanji for many years. On an undisclosed date, Dr Dhanji wrote to an insurer in respect of a total and permanent disablement claim and said:
“Mr Franco was a self employed businessman running his panel beating/spray painting business for more·than 15 years. In this process he was always concern [sic]about the day to management and financial aspects of his business causing him some worry, stress and anxiety.
…
On an ad hoc basis he received antianxiety medications from time to time together with advice on stress relieving techniques over the years.
…
In the past he has used Murelax 15mgs and Prothiaden 75 mgs for short periods as well as Ativan and Luvox.”
Dr Dhanji’s notes reveal that on 26 February 2001 he saw Mr Franco, diagnosed anxiety and depression and prescribed, among other things, Murelax. On 6 and 24 April 2001 Dr Dhanji diagnosed anxiety and depression and provided counselling. On 6 June 2006 he recorded anxiety attacks and, on 28 September 2007, multiple stresses.
On 7 December 2012 Dr Dhanji recorded a recent episode of palpitations and chest pains for which Mr Franco ended up in Nepean Hospital where a cardiac clearance was given. The discharge summary in Dr Franco’s notes[1] records that Mr Franco was “considered very low risk for cardiac event.”
[1] ARD p 243.
On 29 January 2013 Mr Franco attended the Nepean After Hours GP Clinic with chest pain, saying that he had anxiety attacks at times. Dr Khan diagnosed stress, saying that Mr Franco appears to be stressed with his own business and prescribed Valium.[2]
[2] ARD p 235.
On 13 February 2013 Mr Franco saw Dr Dhanji for multiple issues including chest pains and “anxiety – recent panic attacks.” Dr Dhanji prescribed Xanax. On 27 March Dr Dhanji saw Mr Franco for anxiety and discussed counselling/options before again prescribing Xanax.
On 2 February 2015, Mr Franco saw Dr Dhanji saying that he was “overwhelmed with multiple stressors/work ++” and “had emotional breakdown.” Dr Dhanji created a GP Mental Health Care Plan. Dr Dhanji provided counselling for anxiety and stress again on 14 April 2015 and prescribed Luvox. Dr Dhanji provided counselling and further prescriptions for Luvox on 10 June and 19 August 2015. He also prescribed Kalma which I understand to be a benzodiazepine.
Throughout 2016, 2017 and 2018 Dr Dhanji provided counselling for anxiety at several consultations and continued to prescribe Luvox. Similar notes appear in 2019, 2020 and 2021 until a consultation on 5 April 2022 when Mr Franco revealed to Dr Dhanji that he had “got into severe debts” and “delusions of grandeur”. Dr Dhanji diagnosed “mania” and referred Mr Franco to Dr Pusic, psychiatrist.
Dr Pusic wrote to Dr Dhanji on 31 August 2022 when Mr Franco was an inpatient at St John of God Hospital, noting that Mr Franco had lost his life savings over the last two years as a result of being the victim of an internet scam, when he responded to an email in late 2019 or early 2020. Dr Pusic summarised the impact on Mr Franco and said that by the end of 2020 he was increasingly frantic and depressed, was unable to pay his workers and borrowing money. In late 2021 he sold his business premises “with the unshakeable belief that he would very soon receive millions of dollars from an overseas account, and he would then be able to repay his debts and retire comfortably.” Dr Pusic said that Mr Franco was hospitalised and presented with passive depression associated with feelings of helplessness and hopelessness. He diagnosed “major depressive disorder, severe.”
Mr Franco was hospitalised between 18 July and 13 August 2022 and 29 August and 30 September 2022.
Dr Pusic prepared a report for the purpose of these proceedings dated 17 January 2025. He obtained a history that Mr Franco had increasing difficulties managing all aspects of the smash repair business after his brother left for which he sought treatment. Mr Franco was becoming clearly unwell and incapacitated by very late 2019 and early 2020. Dr Pusic diagnosed a major depressive episode since early 2020, which he attributed to the stress involved in managing the business as a panel beater and as a manager. He said:
“Mr Franco's psychological condition dates back to 1992 when his brother left the business and Mr Franco had to work for and manage the expanding panel beating shop on his own. The anxiety and depressive symptoms continued in pervasiveness and intensity to the point that in the ten years prior to his presentation to me he did require intervention from his general practitioner. Mr Franco is a panel beater by trade. He does not hold any other qualifications. I am not aware that he has any managerial or business qualifications. It is his work and experience as a panel beater which led him to own and manage a panel beating business, employing some 10 workers. He felt increasingly overwhelmed by all the duties required in managing a successful panel beating workshop including basic duties of an experienced panel beater including quoting, supervising and dictating the work that needed to be done as well as quality control. Mr Franco was displaying significant and increasing symptoms of anxiety and depression prior to the onset of the Covid pandemic. The restrictions introduced during the Covid pandemic led to further stress on Mr Franco leading to a catastrophic exacerbation of his anxiety and depressive symptoms. Mr Franco was the victim of an internet scam at a time when he was acutely depressed with feelings of helplessness and hopelessness. He engaged in uncharacteristic behaviour with poor judgement as a result of his feelings of helplessness and hopelessness. Mr Franco's involvement in the scam was a consequence of his Major Depressive Disorder.”
Medico-legal reports
Mr Franco’s solicitors retained Dr Kumagaya, psychiatrist. His first report is dated
21 June 2024. He described Mr Franco as a director and employee and said that he had a protracted history of challenges in those roles “characterised by an excessive workload, human resources, management, stressors, financial stressors during the COVID-19 pandemic, and incidents where he was scammed out of sizeable monetary sums.” Dr Kumagaya obtained a history of Mr Franco, feeling overworked and increasingly overwhelmed from attending to his aspects of the business from managing finances to dealing with customers and employees. He said that in the context of those workplace stressors Mr Franco experienced the onset of depressive and anxious symptoms in around 2010. Dr Kumagaya diagnosed persistent depressive disorder with anxious distress “as a result of the stressors inherent to his employment with Franco Smash Repairs.”Using the Psychiatric Impairment Rating Scale, Dr Kumagaya assessed 22% whole person impairment.
Dr Kumagaya confirmed his opinion that Mr Franco suffered injury in his role as a director and employee in a report dated 21 September 2024.
In his supplementary report dated 16 December 2024, Dr Kumagaya said that Mr Franco’s employment as a working director, was the substantial contributing factor to his psychological injury. He said that Mr Franco’s depressive and anxious symptoms emerged in around 2000 and the stresses inherent to COVID-19 and being the victim of a scam only serve to destabilise his already unstable, mental state.
Dr Injeti saw Mr Franco at the request of the company’s insurer and reported on 11 June 2024. He recorded that Mr Franco had a business for over 30 years, but that the injury was suffered in around April 2022, when COVID-19 occurred. In respect of the past medical history doctor, Dr Injeti said “He reports that in 2014 he had depression and anxiety , but he reports this was in the context of business.” Later in the report he said that “he reports that the psychological stress was over the years”. He accepted that Mr Franco suffered a diagnosable psychological condition. Despite that Dr Injeti said that the sudden loss of the business with the onset of the pandemic was the cause of significant psychological injury.
SUBMISSIONS
Mr Stockley said that Mr Franco’s injury fell within s 4(b)(i) of the Workers Compensation Act 1987 (the 1987 Act) and that there were references to the contraction of the disease in his general practitioner’s records as early as 2001. While the early notes did not disclose the nature of the stressors, there are references to work as the record unfolded.
Taking me to Andy’s statement, Mr Stockley said that it showed that the business grew substantially after Mr Franco’s brother left to move to the Central Coast and that the only inference I could draw is that the business was successful. The stress Mr Franco then experienced was not the financial disaster which later occurred but the challenges of the business.
Mr Franco’s role as an employee of the business was threefold – working as a panel beater, assessing and quoting for jobs and supervising employees. The absence of a trusted colleague in his brother and an increase in size of the business resulted in what Andy described as stress, as manifested in Dr Dhanji’s notes from 2001.
Mr Stockley noted that when Andy asked his father about the overflowing mailbox and became aware of the financial difficulties, Andy stopped work to help Mr Franco who felt unable to sack his workers. Mr Stockley acknowledged that there is a distinction to be made between the role of a director of a company and an employed manager. He said that Mr Franco was unable to fulfil one of the functions of his role as the manager of the company being to dismiss the staff because the company no longer had the means to pay their wages.
The reports of Drs Kumagaya and Pusic paint a picture of chronic condition dating back for many years. Mr Stockley said that the condition fulfilled the description of a disease of gradual process. He took me to Dr Dhanji’s records in 2015, describing an emotional breakdown long before the financial calamities of 2022. Mr Franco’s condition in 2022 had its antecedents as far back as 2001.
Mr Stockley said that Mr Franco had no residual work capacity and that I would make an award pursuant to ss 36 and 37. With respect to the lump sum compensation claim, Mr Stockley said there was no contradictor because Dr Injeti did not make an assessment. He argued that I should assess permanent impairment in accordance with Dr Kumagaya’s report.
Mr Adhikary began by responding to the latter submission, saying that only a Medical Assessor had the jurisdiction to determine whole person impairment referring to Shankar v Ceva Logistics (Australia) Pty Limited.[3]
[3] [2021] NSWPICPD 18.
Mr Adhikary said that if I found that Mr Franco suffered an injury, there is no dispute that he has had no current work capacity for the period claimed.
With respect to the substantive issue, Mr Adhikary said that Mr Franco bore the onus of establishing that the main contributing factor to his injury was related to his employment, not matters relating to his role as an owner and director of the company. I referred Mr Adhikary to the s 78 notice dated 12 August 2024 which denied compensation on the basis that the injury was suffered in Mr Franco’s role as a director without reference to ownership and Mr Adhikary limited his submissions accordingly. He said that Mr Franco had not proved that his employment was the main contributing factor to the injury and that there were clear references in the evidence of Dr Pusic and the medico-legal experts about the contribution of the management of the operations of the business which cannot be ignored.
Mr Adhikary referred to Lawrence-Plant v J &S Plant Pty Ltd t/as Bluey’s Hire (now deregistered)[4] (Lawrence-Plant) and said that Mr Franco was a director. He said there was no evidence that other managers were employed and that Mr Franco was employed as a panel beater only and not an employed manager. He said that Mr Franco was unable to prove that employment was the main contributing factor to the injury, referring to the report of injury lodgement form dated 25 March 2024 signed by Mr Franco, which said that the cause of the injury was “excessive management workload/business problems lead to depression/anxiety.” He took me through Mr Franco’s statement and that of Andy to argue that the evidence supported the contention that the cause of the injury was “running the business” and that the management tasks were directly relevant to Mr Franco’s role as a director.
[4] [2009] NSWWCCPD 64 at [39] and [41]-[47].
Mr Adhikary said that his primary argument was that any work undertaken by Mr Franco other than as a panel beater was in the role as a director. His secondary argument was that the issues on which Mr Franco relied were relevant to the operation of the business as a whole being keeping the business afloat, managing the growth of the business and managing the personnel which were squarely within the purview of a director.
Turning to the medical evidence, Mr Adhikary said that it also supported the conclusion that the cause of the injury was Mr Franco’s role as a director.
Mr Stockley drew my attention to Mr Franco’s payslips which describe him as a full time manager and which came into existence well before any question of hindsight could arise. Mr Stockley said that Mr Franco’s duties as a director as opposed to a manager would be those imposed by relevant legislation – such as making sure that the company does not trade while insolvent. He said that the company had not made submissions as to what those duties were.
FINDINGS AND REASONS
The test for determining whether employment was the main contributing factor to a disease injury was set out in AV v AW[5] where Snell DP said:
“Where the relevant aggravation involves both employment and non-employment factors, the evaluative process involves a consideration of the causative role of both. An evaluation that involved only employment factors would leave the provision with no work to do. This would be inconsistent with the context of the provision. It would also be inconsistent with the plain meaning of the words. There is a general presumption against surplusage in statutes.
It follows that the test of ‘main contributing factor’ involves consideration of whether there were competing causal factors (both work and non-work related) of the aggravation, and whether on a consideration of relevant causal factors the employment represented the main contributing factor.
The following may be taken from the above:
(a) The test of ‘main contributing factor’ in s 4(b)(ii) is more stringent than that in s 4(b)(ii) in its previous form, which applied in conjunction with the test in s 9A. There will be one ‘main contributing factor’ to an alleged aggravation injury.
(b) The test of ‘main contributing factor’ is one of causation. It involves consideration of the evidence overall, it is not purely a medical question. It involves an evaluative process, considering the causal factors to the aggravation, both work and non-work related. Medical evidence to address the ultimate question of whether the test of ‘main contributing factor’ is satisfied is both relevant and desirable. Its absence is not necessarily fatal, as satisfaction of the test is to be considered on the whole of the evidence.
(c) In a matter involving s 4(b)(ii) it is necessary that the employment be the main contributing factor to the aggravation, not to the underlying disease process as a whole.”
[5] [2020] NSWWCCPD 9 at [76]-[78].
The test is an evaluative process and does not turn on medical evidence alone.[6] Snell DP said:[7]
“In El-Achi Roche DP, considering the application of the test in s 4(b)(ii) in its current form, said:
‘That a doctor does not address the ultimate legal question to be decided is not fatal (Guthrie v Spence [2009] NSWCA 369;78 NSWLR 225 at [194] to [199] and [203]). In the Commission, an Arbitrator must determine, having regard to the whole of the evidence, the issue of injury, and whether employment is the main contributing factor to the injury. That involves an evaluative process.’ (emphasis added)
I agree with the above passage from El-Achi. The Deputy President in El-Achi also referred, in my view correctly, to the ‘main contributing factor’ test as ‘one of causation’ This is consistent with the discussion of s 9A of the 1987 Act by the Court of Appeal in Badawi v Nexon Asia Pacific Pty Limited. Their Honours referred to the ‘causative element’ of the test in s 9A. It is consistent with the discussion in State of New South Wales v Rattenbury in which Roche DP, dealing with s 4(b) after the 2012 amendments, discussed whether ‘main contributing factor’ was satisfied, by reference to whether there were competing causal factors to the relevant ‘disease’ injury.”
[6] State Transit Authority of New South Wales v El-Achi [2015] NSWWCCPD 71.
[7] AV v AW at [71]-[72].
Working directors
It is not uncommon in the Commission for a working director to make a successful claim for compensation against the company that employed him or her. Being a director does not of itself preclude employment by the company (see, for example, Lee v Lee’s Air Farming[8]). If a director is to recover compensation, it is necessary that there be a contract of service.
[8] (1961) AC 12.
In Cabra-Vale Ex-Active Servicemen’s Club Ltd v Thompson[9] Roche DP said:
“There are four essential features of a contract of employment (The Modern Contract of Employment, Ian Neil SC and David Chin, 2012, Lawbook Co, (Neil and Chin)). Those features are discussed in detail at pages 1–3 in Neil and Chin and may be summarised as follows:
(a) there can be no employment without a contract (Lister v Romford Ice & Cold Storage Co Ltd [1956] UKHL 6; [1957] AC 555 at 587);
(b) the contract must involve work done by a person in performance of a contractual obligation to a second person (Abdalla v Viewdaze (2003) 122 IR 215 at [23]). That is because the essence of a contract of service is the supply of the work and skill of the worker (Humberstone v Northern Timber Mills [1949] HCA 49; 79 CLR 389 at 404–405);
(c) there must be a wage or other remuneration, otherwise there will be no consideration (Ready Mixed Concrete (South East) Ltd v Minister of Pensions and National Insurance [1968] 2 QB 497 at 515), and
(d) there must be an obligation on one party to provide, and on the other party to undertake, work. The obligation required to constitute a contract of employment is that:
‘the putative employer be obliged to pay the putative employee in accordance with the terms of the contract for services reasonably demanded under it, and that the putative employee be obliged to perform such services. That is as much so where the service consists of standing and waiting as where it is active.’ (Forstaff Pty Ltd v Chief Commissioner of State Revenue [2004] NSWSC 573; (2004) 144 IR 1 at [91]; see also Wilton v Coal & Allied Operations Pty Ltd [2007] FCA 725; 161 FCR 300 at [162])”
[9] [2013] NSWWCCPD 49.
In that case a director of a club was found not to be a worker because there was no evidence that he undertook the duties of a pension officer for the club in return for payment and there was no work done by him in performance of a contractual obligation.
Mr Adhikary highlighted some paragraphs of the decision in Lawrence-Plant to support his argument that employment was not the main contributing factor to Mr Franco’s injury without taking me to the relevant facts. Mr Lawrence-Plant was a director of J & S Plant Pty Ltd and had been so since he and his wife purchased a business and established the company in 1993. Mr Lawrence-Plant claimed that he suffered a psychological injury as a result of the nature and conditions of his employment between 2001 and 2004. The principal cause of the condition was alleged to be mismanagement of the company’s financial affairs by an accountant. The evidence was that Mr Lawrence-Plant was a working director. Moore ADP said that it was necessary to show that he had a contract of employment with the company in order to recover compensation. There was no evidence that he had received any remuneration other than minimal director’s fees and his tax returns showed only those fees or no income. The respondent company’s records showed loans owed to the directors which were paid down to an extent during the relevant period.
It was in the context of that evidence that Moore ADP said that there was no evidence of a contract of service between Mr Lawrence-Plant and the company of which he was a director. Moore ADP upheld the arbitrator’s conclusion that the evidence did not support the assertion that his duties as a director and employee overlapped. The arbitrator said:
“All of the evidence points to the stress and anxiety arising from the financial situation of the company, which eventually lead him personally into bankruptcy and the loss of his home. Had Mr Plant been an employee, even as manager, he could have walked away from the Respondent and obtained alternative employment. As the owner of the business he could not do that. Any concern he could have had as an employee over the loss of his employment was very minor compared to the distress he suffered as the owner of the business. As an employee, he was not required to sign personal guarantees, which lead to the devastating personal financial loss he has suffered nor would he have been involved in litigation. It was these factors which, on his own and other evidence, has led to his understandably high levels of stress and his anxiety and depression.”
Moore ADP said that submissions on appeal that the injury was caused by running the business as a manager were “quite simply fanciful” in the context of that case. The decision does not support the argument that all managerial duties are those of a director.
In Dimond v Dimond Brothers Concrete Pumping Pty Limited[10] Member Strachan considered whether a worker who was also a director was in the course of his employment when he was injured in a motorcycle accident while travelling between a work site and the respondent company’s office (where he also lived) with the intention of performing administrative duties. There was no dispute that Mr Dimond had a contract of service with the company but it was argued that the administrative duties were not part of that contract. While Mr Dimond received a small amount each year as director’s fees, the majority of his income was paid as salary and income tax was withheld from those payments. The company provided the caravan which was also the office.
[10] [2024] NSWPIC 644.
Member Strachan referred to a decision of Mossop M (as he then was) in Fed Consulting Services Pty Ltd v Gelo,[11] an appeal from a magistrate in the Australian Capital Territory concerning the relevant Territory or State of connection of employment to determine whether the regular filling of a truck at a petrol station in Queanbeyan was sufficient to support a finding that a working director usually worked in New South Wales. The magistrate had said with respect to filling the truck:
“I infer that it was a work related activity. I do not accept that it was something carried out by him acting in his capacity as a director. In the absence of other evidence there is no reason to conclude that his duties as a director went beyond what would be required of him by the Corporations Law.”[12]
[11] [2014] ACTSC 185
[12] At [12].
Mossop M said that the filling of the truck “could not be characterised as a function which was undertaken in his director’s role as opposed to his accepted role as a ‘worker’.”[13]
[13] At [30].
Mr Franco’s payslips and tax returns are important because they are documents created by Smash Repairs which show that he had a contract of service with it to perform the role of manager. The documents clearly set out Mr Franco’s title as manager, not panel beater and support the inference that he was required to perform that role. They show the payment of wages for that role and the deduction of PAYG tax. They show that Smash Repairs made the superannuation contributions required for an employee and that Mr Franco was entitled to leave.
Smash Repairs’ own documents do not support its primary argument and I do not accept that Mr Franco’s contract of service was only as a panel beater. The fact that there is no evidence that other managers were employed is irrelevant. Mr Franco was employed as a manager which required him, among other things, to interact with clients, to hire and retain staff and to maintain the relationship with the insurers who provided work. Those tasks are commonly performed by managers and senior staff in a range of workplaces who are not necessarily business owners and many managers and staff have responsibilities for meeting budgets to ensure cashflow. In Mr Franco’s case, I do not accept that they were functions undertaken solely in his role as a director.
Injury
Dr Injeti’s opinion that the injury was suffered as a result of the impact of the pandemic does not take account of the history in Dr Dhanji’s notes, supported by Andy’s childhood observations of his father, and Mr Franco’s own statement. The tasks that Mr Franco implicated as causing stress and leading to his injury were the tasks of a manager, whether or not he was also a director – making sure the staff did the work properly, quoting on cars and managing the workload as the business grew. He said that he began to see his general practitioner after his brother left the business. I take his statement that he had no one to help him to mean that he had no one else who could assist in the supervision of staff and the management of the business.
Dr Dhanji’s notes support the conclusion that Mr Franco began to suffer a psychological injury as early as 2001, particularly when read with his undated report to the salary continuance insurer about the medications he prescribed over time. There are numerous consultations where anxiety was discussed and the medications set out in the undated letter were prescribed. The prescription of medication for the long duration evidenced in Dr Dhanji’s notes confirms the seriousness of the condition.
From 2012 the consultations and prescriptions became more frequent and at the end of 2012 and beginning of 2013 Mr Franco sought emergency care for chest pain for which there was no cardiac explanation.
While Dr Dhanji did not say on every occasion that the anxiety and depression were work related, he has personally been Mr Franco’s general practitioner for many years and Mr Franco was therefore well known to him. It is common that the notes of a general practitioner will not contain everything that is discussed. In Nominal Defendant v Clancy[14] Santow JA said:
“While clinical notes, …, may in common experience be the raw data on which diagnosis and opinions are based, it does not follow that they will be comprehensive … clinical notes are written in the course of a busy practice where the clinician is primarily there to observe and administer treatment. They should not be construed with the minute attention one might give a formal legal document. It is fair to say a report to another doctor [or a medico-legal report] is likely to have been written with more deliberate consideration than rough notes.”
[14] [2007] NSWCA 349 at [54]-[55].
The short undated report synthesises the discussions had over many years and I accept that the main contributing factor to the development of the psychological conditions for which Dr Dhanji treated Mr Franco was of his work managing the business. The condition became overwhelming and incapacitating in late 2019 and early 2020.
Dr Pusic accepted in his report dated 17 January 2025 that Mr Franco suffered an escalation of the condition that he had suffered for many years. I accept Dr Pusic’s opinion that the “pervasive depression, distress and feelings of helplessness” that Mr Franco suffered was the reason for the serious lack of judgement that led to falling victim to a scam and the catastrophic financial problems that followed. I am satisfied that his work as a manager was the main contributing factor to the development of a psychological injury which was entrenched before the onset of incapacity.
The case can be distinguished from Lawrence-Plant. There the cause of the injury was the worker’s reaction to financial problems caused by mismanagement by an accountant. Here the injury had developed as a result of Mr Franco’s work as a manager. While his role as a director may have had a role in the causation of the injury his work as a manager at Smash Repairs was the main contributing factor to it. His role as a director placed him in the position where a lack of judgement caused by the injury he had already suffered had severe financial consequences.
Orders
There is no dispute that Mr Franco has no current work capacity. He is entitled to an award of weekly compensation from 4 April 2022 to 30 September 2024. The parties agreed that PIAWE were $1,350 so that 95% of that amount is $1,282.50 and 80% is $1,080. They did not address on the impact of indexation.
I order Smash Repairs to pay weekly compensation pursuant to s 36 from 4 April 2022 to 3 July 2022 at the rate of $1,282.50 and from 4 July 2022 to 30 September 2024 at the rate of $1,080 subject to indexation.
There is no claim for s 60 expenses in the ARD.
The President held in Etherton v ISS Property Services Pty Limited[15] that the repeal of s 65(3) of the 1987 Act permits a Member of the Commission to determine permanent impairment. I do not consider that I am precluded from determining the degree of permanent impairment but I do not believe it is appropriate in this case. My factors relevant to that conclusion are the absence of an assessment of permanent impairment on behalf of Smash Repairs, because eight months have elapsed since Dr Kumagaya’s assessment and because the assessment is more than 20% and may have significant impact on Mr Franco’s entitlements. In those circumstances, the appropriate course is to remit the matter to the President for referral to a Medical Assessor to assess Mr Franco’s permanent impairment in respect of a psychological injury suffered on 4 April 2022.
[15] [2019] NSWWCCPD 53.
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