G H Michell and Sons (Australia) P/L (Appellant/Respondent) v Robert Arthur Bockman (Respondent/Appellant) No. SCGRG 93/1127 Judgment No. 4547 Number of Pages 6 Workers' Compensation
[1994] SASC 4547
•13 May 1994
COURT IN THE FULL COURT OF THE SUPREME COURT OF SOUTH AUSTRALIA KING CJ(1), BOLLEN(3) AND MULLIGHAN(2) JJ
CWDS
Workers' compensation - Workers Rehabilitation and Compensation Act 1986 - worker who was a senior employee totally incapacitated in consequence of work-related mental injury - sick leave benefits paid initially - salary package included provision of motor vehicle including for private use - annual assessment of performance of senior employees with salary increases for favourable assessment - income maintenance calculated by employer without annual increase for satisfactory performance as worker incapacitated and not working but with cash allowance in lieu of provision of motor vehicle - whilst working fringe benefits tax paid by employer with respect to the benefit of the motor vehicle - weekly payments of income maintenance taxable in worker's hands - appeal by employer against increase on account of annual assessment of performance - appeal by worker against refusal to increase weekly payments on account of the employer no longer paying fringe benefits tax and the worker having to pay income tax or cash equivalent of motor vehicle benefit - appeals dismissed - weekly payments must be equal to national weekly earnings calculated pursuant to 5.4 of the Act being the amount which the worker could reasonably be expected to have earned if not disabled - weekly payments depends upon weekly earninqs which may include other than a cash component but does not include the incidence of taxation liability to taxation arises independently of the Act. Workers Rehabilitation and Compensation Act 1986 ss.4 and 35(1) (a). Francese v Corporation of the City of Adelaide (1989) 51 SASR 522 at 526, applied.
HRNG ADELAIDE, 15 February 1994 #DATE 13:5:1994
Counsel for appellant Michell: Mr D H Greenwell
Solicitors for appellant Michell: Norman Waterhouse
Counsel for respondent Bockman: Mr T M Mcrae
Solicitors for respondent Bockman: Reilly Basheer Downs
and Humphries
ORDER
Appeals of both parties dismissed.
JUDGE1 KING CJ The appeals of both parties should be dismissed. I agree with the reasons of Mullighan J.
JUDGE2 MULLIGHAN J Both the appellant and the respondent appeal against decisions of the Worker's Compensation Appeal Tribunal made on 31st May 1993 regarding the amount of income maintenance to be paid by the appellant to the respondent pursuant to the Workers Rehabilitation and Compensation Act 1986.
2. The respondent had been employed by the appellant for nearly 40 years and had progressed to the position of Works Manager of a sheepskin tannery. He suffered a work-related mental injury due to stress which arose out of, and in the course of, his employment and ceased work on 16th February 1989. He has been incapacitated for work ever since and has not resumed his employment. He was paid sickness benefits in the amount of his salary until 24th January 1990 when those benefits were withdrawn by the appellant. The respondent had assumed that he was receiving these benefits pursuant to the Act having given a notice of his disability to the employer but upon the sickness benefits being withdrawn and having been advised that the notice was inadequate he then made a claim for benefits under the Act.
3. The appellant is an exempt employer. On 23rd March 1990 the appellant rejected the respondent's claim. On 30th March 1990 the respondent sought a review of that decision. The review came before a Review Officer in September and November 1990. The respondent did not seek any benefits by way of income maintenance for the period prior to 24th January 1990, presumably because he had been paid sick leave benefits by the appellant. The Review Officer gave his decision on 29th July 1991. He set aside the decision of the appellant rejecting the claim and substituted the decision that the respondent sustained a compensable injury occurring on 16th February 1989 which resulted in incapacity attracting weekly payments of income maintenance from 24th January 1990.
4. As at 16th February 1989 the respondent received a salary package comprised of $39,815 per annum, the provision of a motor vehicle, including for private use, and superannuation contributions. The value of the provision of the motor vehicle was assessed by the appellant at $8,693 per annum and has not, at any time, been disputed or challenged by the respondent. The provision of superannuation benefits is of no significance in these appeals. When the respondent was absent from work on sick leave, he retained the use of the motor vehicle until 2nd June 1989 when it was returned to the appellant.
5. Following the decision of the Review Officer, the appellant, on 17th October 1991, assessed the average weekly earnings of the respondent for the purpose of calculating weekly payments of income maintenance. The assessment included the cash component of the salary package and a monetary allowance in lieu of the provision of a motor vehicle based upon the value of that provision.
6. The respondent sought a review of this decision. He contended that no allowance had been made for the increases in the cash component of the salary package which the respondent would have received by reason of annual performance reviews had he not been incapacitated and that income taxation with respect to the component of income maintenance attributable to the motor vehicle should be paid by the appellant and not deducted from the benefits paid to him.
7. In about May or June each year the appellant assessed the performance of its non award senior employees with a view to determining whether each of them should receive an increase in salary for the following year. These increases, if any, were to be made on the appropriate bases of classification of performance and increase in the cash component of salary: good 11%, satisfactory-plus 9% and satisfactory 7%. If the assessment was unsatisfactory, minor or poor, no increase was awarded. Throughout the 1980's the respondent had been consistently assessed as satisfactory or better.
8. The appellant had not included any increase for and since the year 1989 in the cash component of the salary package for the purpose of assessing weekly payments by way of income maintenance because, it claimed, the respondent was away from work during that year and there could not be any assessment of his performance.
9. When the respondent was working and a motor vehicle was provided to him the appellant paid fringe benefits tax with respect to that benefit pursuant to the Fringe Benefits Tax Assessment Act 1986 (Cth). No income taxation was paid by the respondent with respect to that benefit. A consequence of the decision made by the appellant on 17th October 1991 is the respondent received a weekly payment based upon the cash component of the salary package and the monetary equivalent of the value of the motor vehicle component. Pursuant to the Income Tax Assessment Act 1936 (Cth) these benefits are taxable in his hands. The respondent claimed that the amount of his income maintenance should be increased for these reasons.
10. A Review Officer made his determination on 16th September 1992. He decided that the performance increases should not be included in the assessment of income maintenance. He also decided that the respondent was entitled to the monetary equivalent of the provision of the motor vehicle as from 24th January 1990 even though the appellant had already made a decision to that effect. It appears that the Review Officer did not resolve the respondent's contention that his level of income maintenance should be increased due to his obligation to pay income taxation with respect to the monetary equivalent of the provision of the motor vehicle, although he did say that a matter which he took into account in the assessment of that monetary value was that the respondent had to pay that taxation.
11. The respondent appealed to the Workers Compensation Appeal Tribunal against the determination that he was not entitled to the performance review increases and an increase in weekly payments to cover the extent of his income taxation payments with respect to the monetary equivalent of the provision of a motor vehicle. The appellant also appealed to the Tribunal against the inclusion of that monetary equivalent after 2nd June 1989, the day when the respondent returned the vehicle to the appellant. The Tribunal allowed the respondent's appeal in that it decided that, but for his incapacity, he would have received a performance review increase and his average weekly earnings and the cash component of the salary package should be increased by 7% as from the first pay period on or after 1st July 1989, thereby reflecting an assessment of performance at the satisfactory level which is the minimum justified by past reviews of his performance. The Tribunal confirmed that, in assessing the level of income maintenance, allowance should be made for the monetary value of the use of the motor vehicle which he would have had if his employment had continued. His contention that the level of income maintenance should be increased so that the appellant would, in effect, also pay the income taxation assessed on that benefit was rejected.
12. On this appeal the appellant challenges the decision of the Tribunal to increase the cash salary component by 7% on the ground that, but for his incapacity, the respondent would have received a satisfactory performance assessment in 1989. Pursuant to the Act, the respondent is entitled to income maintenance by way of weekly payments and as he is totally incapacitated for work, those payments must be equal to his notional weekly earnings (s.35(1)(a)) which are his average weekly earnings to be calculated pursuant to s.4, the relevant provisions of which are:
"4(1) Subject to this section, the average weekly earnings
of a disabled worker are the average amount that the worker
could reasonably be expected to have earned for a week's
work if the worker had not been disabled.
(2) (a) (not relevant)
(b) subject to subsection (3) -
(i) the actual weekly earnings of the worker over a period
of up to 12 months before the relevant date may be taken
into account;
and
(ii) if by reason of the shortness of time during which
the worker has been in employment, the terms of the
worker's employment or for any other reason, it is not
possible to arrive at a fair average, the worker's average
weekly earnings may be determined by reference to the
average weekly amount being earned by other persons in the
same employment who perform similar work at the same grade
as the worker or, if there is no person so employed, by
other persons in the same class of employment who perform
similar work at the same grade as the worker.
... (9) In this section -
(a) a reference to the relevant date is -
(i) a reference to the date of the commencement of the
period of the worker's incapacity for work or, where the
worker has been incapacitated for work as a result of the
same disability for a number of separate periods, a
reference to the date of the commencement of the last such
period of incapacity;
..."
13. Mr. Greenwell argued that the relevant date so far as the respondent is concerned is 24th January 1990 when the entitlement to sick leave was withdrawn and weekly payments of income maintenance commenced. He argued that, upon the application of s.4(2)(b), calculation of the respondent's average weekly earnings could not take account of an increase of 7% because he had not been working in 1989 and there had been no review of his performance during the previous twelve months. In the alternative, he argued that if the relevant date was 16th February 1989, as held by the Tribunal, the assessment of notional weekly earning could not take account of the 7% increase because there was insufficient evidence available at the time of determining his average weekly earnings to justify the inclusion of that amount.
14. The application of the provisions of s.4 requires the conclusion that the relevant date is 16th February 1989. That is the date upon which the period of his incapacity for work commenced: s.4(9)(a)(i) and the contention to the contrary must fail. Such a conclusion also accords with the scheme of the Act. In Francese v Corporation of the City of Adelaide (1989) 51 SASR 522 King CJ considered the concept of weekly payments pursuant to the Act. He said at p.526:
"It must be observed that the concept of average weekly
earnings which are the measure of the compensation which is
payable, is directed to the future and not to the past. It
is directed to 'the average amount which the worker could
reasonably be expected to have earned for a week's work if
the worker had not been disabled' - s.4(1). The average
weekly earnings during the previous 12 months are relevant
only as a factor which may be taken into account for the
purpose of determining what could be expected to be earned
during the period of disability - s.4(2). The underlying
notion appears to be that of 'income maintenance', as the
heading to Div IV, in which s 35 appears, suggests, that is
to say the maintenance during disability of the income which
the worker would reasonably have expected to earn during the
period of disability. The overtime excluded from average
weekly earnings other than 'overtime worked in accordance
with a regular and established pattern' is therefore
overtime which could reasoanbly be expected to have been
worked during the period of disability if there had been no
accident. Past overtime other than that worked in
accordance with a regular and established pattern would also
have to be excluded in the computation of past average
weekly earnings in so far as they are taken into account in
estimating future weekly earnings."
15. Whilst we are not concerned with overtime, the likely increase of the cash component by reason of the performance review stands on the same footing in that it is part of "the average amount that the worker could reasonably be expected to have earned for a week's work if (he) had not been disabled": s.4(1). The evidence before the Review Officer fully justified a finding that but for his disability the respondent would have continued working for the appellant and would have received a performance review of satisfactory as had consistently occurred in the past. There is no merit in the contention that the evidence did not justify the increase of 7%. However, even if it did, an appeal on that basis would be an appeal on a question of fact and would therefore be incompetent: s.100(3). Furthermore, the leave to appeal which was granted to the appeal was limited to grounds which raise questions of law. This ground of appeal must fail.
16. The appellant also attempted to challenge, on this appeal, the inclusion of the monetary allowance in lieu of the provision of a motor vehicle in the assessment of weekly earnings. That attempt must fail for the obvious reason that the appellant made the decision on 17th October 1991 to include that allowance. It may not appeal against its own decision. It appears that the appellant was permitted to raise this matter by way of cross appeal to the Tribunal and that the Tribunal resolved this matter in favour of the respondent by concluding that the allowance had correctly been included. As this aspect of the appeal is, in my view, incompetent, it is unnecessary to express any opinion except to say that nothing raised during argument suggested that either the appellant, in making the initial decision to include the benefit, or the Tribunal had made a wrong decision.
17. I now turn to the respondent's appeal against the decision of the Tribunal rejecting his contention with respect to income taxation which he now pays on that part of the weekly payments reflected by the monetary equivalent of the use of the motor vehicle. The Tribunal said:
"Finally, we are not persuaded that the Review Officer was
in error as the worker contended in his appeal in not making
an allowance for the fact that when he had the use of the
vehicle the employer met the tax imposition thereon. It
seems to us that the task is not to assess damages flowing
from the worker's compensable disability but his average
weekly earnings. As we see it once a money amount based on
the value of the vehicle was included in the remuneration
package in place of the use of the vehicle then the worker
must bear the consequence of that. In our view the
incidence of taxation on those earnings is not a matter for
this Tribunal."
18. In my view the decision of the Tribunal is correct in that it necessarily meant that the amount of compensation was not to be increased to allow for the amount of fringe benefits taxation paid by the appellant when the respondent was working. I would express the reasons for that conclusion in a different way. The respondent is entitled to income maintenance to be assessed in accordance with principles laid down in the Act. The amount of that benefit depends upon weekly earnings. Those earnings may include other than a cash component but they do not include the incidence of taxation upon those earnings. There is no reason to interpret the relevant provisions in the Act as to the method of assessment of income maintenance in that way. The obligation of the appellant is to pay income maintenance based upon earnings. If the taxation laws provide that the liability for taxation falls upon the employer in some respect, that does not affect the amount of the worker's earnings. Such is the case with the Fringe Benefits Tax Assessment Act. If there is a change in circumstances so that the liability for taxation falls upon the worker, that also does not affect his earnings. The liability for taxation arises independently of the Worker's Rehabilitation and Compensation Act and is irrelevant in the assessment of the level of income maintenance to which a disabled worker is entitled. The respondent is obliged to meet his taxation obligations, as is the case with all persons in the community with a taxable income, and the fact that the appellant was previously obliged to pay taxation with respect to a benefit which had formed part of the salary package of the respondent is of no significance in the assessment of the amount of income maintenance. The appeal of the respondent should also be dismissed.
JUDGE3 BOLLEN J I agree with the orders proposed by Mullighan J and with his reasons.
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