Freeman v T H Freeman Pty Ltd - [2010] NSWWCCPD 88

WORKERS COMPENSATION COMMISSION
DETERMINATION OF APPEAL AGAINST A DECISION OF THE COMMISSION CONSTITUTED BY AN ARBITRATOR
CITATION:		Freeman v T H Freeman Pty Ltd [2010] NSWWCCPD 88
APPELLANT:		Ronald Bruce Freeman
RESPONDENT:		T H Freeman Pty Ltd
INSURER:		GIO General Limited
FILE NUMBER:		A1-000050/10
ARBITRATOR:	Mr R O’Moore
DATE OF ARBITRATOR’S DECISION:		16 April 2010
DATE OF APPEAL DECISION:		16 August 2010
SUBJECT MATTER OF DECISION:		Section 55 of the Workers Compensation Act 1987; section 74 of the Workplace Injury Management and Workers Compensation Act 1998; application for increase in consent award of weekly compensation; failure by insurer to issue a notice disputing claim; failure by employer to file a wage schedule; failure by employer’s solicitor to address issues on appeal
PRESIDENTIAL MEMBER:		Deputy President Bill Roche
HEARING:		On the papers
REPRESENTATION:		Appellant:	Carroll & O’Dea
Respondent:		Sparke Helmore Lawyers
ORDERS MADE ON APPEAL:		The Arbitrator’s determination of 16 April 2010 is revoked and the matter is remitted to a different Arbitrator for redetermination. The respondent employer is to pay the appellant worker’s costs of the appeal, as assessed or agreed. The respondent employer is to pay the applicant worker’s cost of the first arbitration and of the second arbitration, regardless of the outcome. Whether the costs of the arbitrations should be the subject of an uplift for complexity is a matter for the Arbitrator, but any such uplift is not to apply to the respondent employer’s costs.

BACKGROUND

The appellant worker, Mr Freeman, is an electrician and musician. He was born in 1955 and is currently 55 years old.
The respondent employer is a family company that conducts an electrical contracting business. The business was initially controlled by Mr Freeman’s father and then, ultimately, by Mr Freeman.
On 13 April 1994, Mr Freeman injured his left ankle in the course of his employment with the respondent employer. At that time, he was an electrical mechanic grade 5. He also conducted his own business as a music teacher and was involved with the Rural Fire Service.
In 1996, Mr Freeman commenced proceedings in the former Compensation Court of New South Wales. He settled those proceedings on 17 November 1997 in the sum of $14,670.00 in respect of a 15 per cent permanent loss of use of his left leg at or above the knee, together with compensation for pain and suffering.
His left ankle deteriorated and, on 23 April 2003, the respondent employer agreed to pay $3,750.00 in respect of a further five per cent permanent loss of efficient use of the left leg at or above the knee. It also agreed to pay weekly compensation under section 40 of the Workers Compensation Act 1987 (‘the 1987 Act’) in the sum of $200.00 per week from 17 November 1999 to date and continuing.
Mr Freeman’s condition continued to deteriorate and he underwent surgery on his left ankle on 28 November 2005. As a result of that surgery, he was totally unfit from 20 November 2005 until 28 February 2006. The respondent employer’s insurer, GIO General Limited (‘GIO’) paid weekly compensation on the basis of total incapacity until 13 July 2006, when it reduced the payments to the previous consent award of $200.00 per week.
By letter dated 27 July 2006, Mr Freeman’s solicitors claimed weekly compensation at the maximum statutory rate for a worker with a dependent wife and child. GIO sought particulars of this claim in a letter dated 19 January 2007. Those particulars were provided on 6 March 2007.
At some stage in 2008, Mr Freeman’s solicitors made a claim for additional lump sum compensation. GIO disputed that claim in a letter dated 29 January 2009. That claim was the subject of an application in the Commission that was referred for assessment to an Approved Medical Specialist (Dr Rowe). As a result of Dr Rowe’s assessment, the Commission issued consent orders on 14 August 2009 stating that Mr Freeman had no further entitlement to lump sum compensation.
In an Application to Resolve a Dispute (‘the Application’) registered in the Commission on 6 January 2010, Mr Freeman sought weekly compensation in the sum of $1,500.00 from 13 July 2006 to date and continuing. He claimed a dependent wife and one dependent child. Though the Application did not make it clear, what Mr Freeman sought was a review under section 55 of the 1987 Act of the consent award of $200.00 per week. The Application included a schedule of wages in which “comparable/probable earnings” were said to be $1,500.00 per week and actual earnings were said to be $201.77 per week from 13 July 2006 to 30 June 2007, $270.58 per week from 1 July 2007 to 30 June 2008, and $486.38 per week from 1 July 2008 to date and continuing.
The respondent employer filed a Reply on or about 5 February 2010. The Reply stated that the issues between the parties were “essentially”:
“1.That the Applicant is not incapacitated at all or as alleged, or that the Applicant is in receipt of weekly benefits at an appropriate rate.
2.That any incapacity suffered by the Applicant is not related to any injury at work.
3. The Respondent disputes the rate of weekly compensation claimed by the Applicant.
4. That those named are not totally or mainly dependent upon the Applicant.
5. The insurer seeks credit for payments made to date.”
The Commission listed the matter for conciliation and arbitration on 30 March 2010. After hearing brief oral evidence from Mr Freeman, the Arbitrator heard submissions from both parties.
In a reserved decision delivered on 16 April 2010, the Arbitrator determined that there had been a change in “financial circumstances relative to 2003” (Statement of Reasons (‘Reasons’) at [74]). After analysing the financial records in evidence, the Arbitrator assessed Mr Freeman’s entitlement to compensation under section 40. The Commission issued the following Certificate of Determination on 16 April 2010:
“The Commission determines:
1.The Commissions award dated 23 April 2003 in respect of the Applicant’s weekly compensation is amended to provide:
$200.28 from 13 July 2006 to 30 June 2007, together with the statutory rate for a dependant son;
$222.15 from 1 July 2007 to 30 June 2008, together with the statutory rate for a dependant son;
$120.28 from 1 July 2008 to 30 June 2009, together with the statutory rate for a dependant son until 1 December 2008 and continuing in accordance with the Act,
2.The Respondent should be given credit for payments made.
3.The Respondent pay the Applicant’s costs as agreed or assessed.
An uplift of 15% for complexity is justified for both parties given the long history of the Matter back to 1994, the 2003 award, the factual and wage issues, and medical Evidence.”
In an appeal filed on 14 May 2010, Mr Freeman seeks leave to appeal the Arbitrator’s determination.

LEAVE TO APPEAL

Monetary threshold

Before proceeding to deal with an appeal, the Commission must determine whether the application meets the requirements of section 352 of the Workplace Injury Management and Workers Compensation Act 1998 (‘the 1998 Act’).

It is not disputed that the monetary thresholds in section 352(2) of the 1998 Act are satisfied.

Time

The appeal was lodged within 28 days of the Arbitrator’s decision in compliance with section 352(4) of the 1998 Act.

I grant leave to appeal.

ON THE PAPERS

Section 354(6) of the 1998 Act provides:

“(6) If the Commission is satisfied that sufficient information has been supplied to it in connection with proceedings, the Commission may exercise functions under this Act without holding any conference or formal hearing.”

Having regard to Practice Directions Numbers 1 and 6, the documents that are before me, and the submission by the parties that the appeal can proceed to be determined on the basis of these documents, I am satisfied that I have sufficient information to proceed ‘on the papers’, without holding any conference or formal hearing, and that this is the appropriate course in the circumstances.

ISSUES IN DISPUTE

The issues in dispute in the appeal are whether the Arbitrator erred in reducing the weekly compensation payable to Mr Freeman and in failing to properly assess Mr Freeman’s section 40 entitlements.

SUBMISSIONS, DISCUSSION AND FINDINGS

Mr Freeman has submitted that:
(a)     the only application before the Commission was his application for an increase in the weekly compensation from 13 July 2006. The respondent employer had filed no application for a decrease or reduction in weekly compensation;
(b) the respondent employer had never served a section 74 notice. The reply did not seek a reduction in the consent award of $200.00 per week;
(c)     in these circumstances, the Arbitrator erred in reducing the award to $120.28 per week;
(d) the Application alleged comparable earnings of $1,500.00 per week. The respondent employer did not dispute this amount in its Reply and, in particular, filed no competing wage schedule. Accordingly, it was not open to the respondent employer to challenge the worker’s wage schedule (Part 15 Rule 15.5 Workers Compensation Commission Rules 2006 (‘the Rules’));
(e)     the medical evidence was conclusive that, at all material times, as a result of his accident, Mr Freeman was unable to perform his usual duties as an electrical mechanic/electrician. Accordingly, consistent with Cage Developments Pty Ltd t/as Monaro Mix Specified Concrete v Schubert [1981] 2 NSWLR 227 (‘Schubert’), Mr Freeman was entitled to the cost of supplementing his reduced effort so as to produce for his business the services of one fully capable worker;
(f)   in the alternative, Mr Freeman was entitled to the award rate of a grade 10 worker under the Electrical, Electronic and Communications Contracting Industry (State) Award of $909.60 per week. However, that figure only represented work as an electrician and, by 2006, Mr Freeman had attained a secondary role as a manager of the respondent employer, and could have expected to earn in excess of that sum;
(g)     the Arbitrator did not allow for the fact that Mr Freeman conducted a concurrent business as a music teacher;
(h)     the Arbitrator erred in taking into account Mr Freeman’s activities with the Rural Fire Service;
(i)   the Arbitrator erred in taking into account, in assessing ability to earn, the work of an electrician as being an option available to Mr Freeman;
(j)   in stating that Mr Freeman’s taxable income in 2007 and 2008 did not reconcile with his earnings in his part-time employment with the respondent employer and in his business as a music teacher, the Arbitrator neglected to take into account the fact that Mr Freeman declared in his tax returns the $200.00 per week paid to him by GIO;
(k)     the Arbitrator wrongly criticised Mr Freeman for not working longer hours for the respondent employer, but failed to take into account Mr Freeman’s limited physical abilities and the restricted work available in a managerial/clerical role, and
(l)   the Arbitrator erred in assessing that Dr Rowe and Dr Maxwell found Mr Freeman to be fit for full-time light duties.

The respondent employer has conceded that the only application before the Commission was Mr Freeman’s application for an increase in weekly compensation. I infer that it is conceded that the Arbitrator erred in reducing the award as he did. Nevertheless, without dealing with the specific issues raised in Mr Freeman’s submissions, the respondent employer submitted that Mr Freeman has failed to establish that there should be any increase in the existing award. It submitted that Mr Freeman has failed to establish a change in circumstances since the award made on 23 April 2003. This submission seems to be based on Mr Freeman’s admission “to doctors” that he is “better now following recent surgery than he was prior to the operation”.
The respondent employer’s submission overlooks the fact that a change in circumstances sufficient to trigger a review under section 55 is not restricted to a change in the worker’s medical condition. The various circumstances in which a review may be triggered are listed at 481 in Workers Compensation (New South Wales) 2^nd Ed, Butterworths, 1979, by C P Mills. They include:
“(a)where a worker’s physical condition as a result of the injury has either improved or deteriorated (Manly MC v Dodds [1961] WCR 212);
(b)where there has been a change as to dependency (Edmunds v Hetton Bellbird Collieries Ltd [1959] WCR 206);
(c)where a worker’s earnings have changed (Englefield Collieries Ltd v Roberts (1932) 25 BWCC 558);
(d)where there has been a general rise in the level of wages prevailing in the community (Producers Meat Supply Co Pty Ltd v McKinley [1950] WCR 149), and
(e)any change in the criteria for entitlement to benefits under the legislation (Powell v Metropolitan Coal Co Ltd [1966] WCR 213).”
The Arbitrator relied upon a change in “financial circumstances relative to 2003” as establishing a change in circumstances sufficient to trigger a review under section 55. The evidence clearly established that wage rates had moved since 2003 and the Arbitrator was entitled to find a relevant change in circumstances. Given the state of the authorities, the respondent employer’s submissions were without foundation.
Without even attempting to address the merits of the submissions made by Mr Freeman, the respondent employer merely submitted that Mr Freeman’s application for an increase in weekly compensation was “no more than creative accountancy”. I have found that submission unhelpful.
Rather than dealing with the merits of the submission that the Arbitrator erred in his treatment of the evidence from Dr Rowe and Dr Maxwell, the respondent employer has merely submitted that the finding he made was “consistent with the medical evidence in the case”. I have found that submission unhelpful.
Of more significance, however, is that the respondent employer’s submissions have completely ignored the submission that there is no section 74 notice from the insurer and no wage schedule from the employer.
The Arbitrator stated (at [5] of his Reasons) that the parties agreed that the following issues remained in dispute:
“(a) whether there has been a change in circumstances.
(b)entitlement, if any, of the worker to weekly compensation under section 40 of the 1987 Act.
(c)calculation of entitlement under section 40 of the 1987 Act and the tests under Mitchell v Central West Area Health Service (1997) 14 NSWCCR 526 (‘Mitchell’).
(d)the Respondent/Insurer puts in issue Mr Freeman’s economic loss after the consent award in 2003 ($200.00 per week under section 40 of the 1987 Act), dependency of his wife and son (after December 2008).”
There is no record, either in the transcript, or in the Commission’s file, that the parties agreed that the above issues remained in dispute. Similarly, there is no record that the respondent employer sought leave under section 289A(4) of the 1998 Act to dispute the issues identified in the Reply.
On the other hand, the arbitration appears to have been conducted on the basis that the Arbitrator gave leave for the issues noted at [28] above to be disputed. It may well be that the parties reached agreement on the issues in dispute at the conciliation stage of the proceedings. If that was so, that agreement should have been recorded on the transcript.
The Commission has power to grant leave to allow previously unnotified matters to be dealt with where it is in the interests of justice to do so (section 289A(4) of the 1998 Act). However, the respondent employer has made no application under that section. Similarly, though a wage schedule that has not been challenged will be “deemed to be admitted” (Part 15.5(c) of the Rules), the Commission has power to “otherwise order”. However, the respondent employer has not addressed this issue and made no application for leave to dispute the worker’s wage schedule.
There are other unsatisfactory features about the respondent employer’s submissions. The respondent employer set out figures said to have been taken from the “raw data” that allegedly reveals a difference of $301.00 between probable earnings but for injury and ability to earn. It was then submitted that an adjustment should be made for the following discretionary factors: first, that Mr Freeman’s income from his music business was “probably greater than” shown in his tax return, and second, that Mr Freeman carried out activities with the Rural Fire Service for one day per week. These submissions are untenable. First, the respondent employer’s figures have incorrectly asserted that Mr Freeman made exactly the same from his music business as he has from his work as manager of the electrical business. Second, Mr Freeman’s income from his music business is directly relevant to determining his actual earnings in step two of the Mitchell analysis, not to the exercise of the discretion. Third, so far as Mr Freeman’s activities with the Rural Fire Service are concerned, there is no evidence that those activities reduced or impaired his ability to work either in his own businesses or on the open labour market and it is difficult to see why those activities would be relevant as a discretionary factor. He was a volunteer. He earned no income from that activity and, in any event, only performed sedentary duties.
The respondent employer’s submissions have also failed to have regard to the principles in Aitkin v Goodyear Tyre and Rubber Co (Australia) Ltd (1945) 46 SR (NSW) 20.
Given that the respondent employer has failed to address the critical issues in dispute, and given that the Arbitrator made a fundamental error in reducing the award in circumstances where there was no such application for reduction before him, the Arbitrator’s determination must be revoked. In view of the unsatisfactory submissions by the respondent employer on appeal, I am unable to redetermine the matter, and it must be remitted to another Arbitrator for that purpose.
The future conduct of the matter will be determined by the next Arbitrator. However, it would seem that the first matter that will require attention is for the respondent employer to seek leave under section 289A(4) of the 1998 Act to dispute previously unnotified matters. Assuming that the issues in dispute are those issues that the Arbitrator identified in his decision, it is difficult to see what prejudice Mr Freeman will suffer if leave is granted at this late stage, notwithstanding the unsatisfactory handling of the matter by the insurer and its solicitor to date. The respondent employer will also have to seek leave to file and serve a wage schedule, if it wishes to dispute the worker’s wage schedule. Given the complex situation concerning Mr Freeman’s earnings and his businesses, it would seem appropriate for the Commission to consider granting relief to the respondent employer for its non-compliance with Rule 15.5 (despite its tardy conduct in the preparation and presentation of this case) so that the case can be determined according to its substantial merits (section 354(3) of the 1998 Act). A further reason in favour of allowing the respondent employer raise the unnotified issues and to file a late wage schedule is that the appellant worker did not press either of these points at the arbitration.

DECISION

The Arbitrator’s determination of 16 April 2010 is revoked and the matter is remitted to a different Arbitrator for redetermination.

COSTS

The respondent employer is to pay the appellant worker’s costs of the appeal, as assessed or agreed. The respondent employer is to pay the applicant worker’s costs of the first arbitration and of the second arbitration, regardless of the outcome. Whether the costs of the arbitrations should be the subject of an uplift for complexity is a matter for the Arbitrator, but any such uplift is not to apply to the respondent employer’s costs.

Bill Roche
Deputy President

16 August 2010

I, MARGOT UNDERCLIFFE, CERTIFY THAT THIS IS A TRUE AND ACCURATE RECORD OF THE REASONS FOR DECISION OF BILL ROCHE, DEPUTY PRESIDENT OF THE WORKERS COMPENSATION COMMISSION.

ASSOCIATE