George Vlouhakis v WorkCover Corporation No. SCGRG 95/1192 Judgment No. 5538 Number of Pages 7 Workers' Compensation

[1996] SASC 5538

COURT IN THE FULL COURT OF THE SUPREME COURT OF SOUTH AUSTRALIA DOYLE CJ(1), MILLHOUSE(2) AND WILLIAMS(3) JJ

CWDS
Workers' compensation - assessment and amount of compensation - amount of compensation during incapacity - Workers Rehabilitation and Compensation Act1986 (SA), ss42,42A - Corporation assessed workers' loss of future earning capacity as a capital loss under s42A for purposes of an interim assessment, Corporation projected earnings over nominated portion of notional working life - worker argued that notional weekly earnings should have been projected over remainder of notional working life and then proportion of this amount awarded approach of Corporation was correct basis for recalculation after interim assessment- appeal dismissed. Workers Rehabilitation and Compensation Act, 1986(SA) ss42,42A, referred to.

HRNG ADELAIDE, 8 March 1996 #DATE 3:4:1996 #ADD 20:5:1996

Counsel for appellant:     Mr M Sales

Solicitors for appellant:    Palios Meegan and Nicholson

Counsel for respondent:     Mr S Walsh QC with Ms J Grundy

Solicitors for respondent: Thomsons

ORDER
Appeal dismissed.

JUDGE1 DOYLE CJ By section 100(3) of the Workers Rehabilitation and Compensation Act1986 ("the Act"), the appeal is limited to a question of law.

2. By its decision the Tribunal dismissed an appeal to it and confirmed a decision of a Review Officer. The relevant aspect of the decision of the Review Officer was a determination that the Corporation had correctly assessed a worker's loss of future earning capacity as a capital loss, the assessment having been made under section 42A of the Act.

3. At the relevant time section 42A provided as follows:
    42A. (1) Where a worker suffers a compensable disability
    that results in incapacity for work for a period exceeding
    two years, the Corporation may assess the worker's loss of
    future earning capacity as a capital loss.

(2) In making the assessment, the following principles will
    be applied:
    (a) the worker's notional weekly earnings (less an
    estimation of income tax) will be projected forward over the
    remainder of the worker's notional working life;
    (b) in the case of partial incapacity, the amount the worker
    could earn in suitable employment that the worker has a
    reasonable prospect of obtaining by way of average weekly
    earnings (less an estimation of income tax) will be
    projected forward over the remainder of the worker's
    notional working life and subtracted from the amount
    projected under paragraph (a);
    (c) the worker's capital loss will be taken to be 80 per
    cent of the present value of the loss indicated by the above
    projections (and in determining the present value of that
    loss a prescribed discount rate must be applied).

(3) For the purposes of subsection (2) -
    (a) the projections referred to in that subsection will be
    made on the basis of rates of earnings current at the date
    of the assessment and without regard to possible future
    changes in those rates; and
    (b) the worker's notional working life is the period over
    which the worker would have worked assuming that he or she
    had not been incapacitated and that period will be assessed
    having regard to the contingencies and vicissitudes of life
    that might in any event have prevented the worker from
    continuing in employment but the period will not, in any
    event, be taken to extend beyond the date on which weekly
    payments would (assuming no assessment of capital loss were
    made under this section) cease to be payable (see section
    35(5)); and
    (c) in assessing what a partially incapacitated worker could
    earn in suitable employment, the following factors must be
    considered, and given such weight as may be fair and
    reasonable:
     (i) the nature and extent of the worker's disability;
     (ii) the worker's age, level of education and skills;
     (iii) the worker's experience in employment;
     (iv) the worker's ability to adapt to new employment.

(4) The Corporation may make one or more interim assessments
    of loss as to nominated portions of the worker's notional
    working life before making a final assessment of loss under
    this section.

(5) An amount assessed under this section becomes due and
    payable from the date of the assessment but may be paid, at
    the discretion of the Corporation, in a single lump sum or
    in instalments that are actuarially equivalent to the lump
    sum (and in determining actuarial equivalence any
    principles, and any discount, decrement or inflation rates,
    prescribed by the regulations must be applied).

(6) Subject to subsection (7), where the Corporation pays or
    commences to pay compensation under this section, the worker
    ceases to be entitled to weekly payments under Division 4.

(7) The Corporation must give the worker at least 21 days
    notice of the cessation of payments under Division 4.

(8) The Corporation may establish principles to be applied
    in relation to -
    (a) the making of interim assessments under this section;
    (b) the payment of amounts assessed under this section in
    instalments (including the amounts and frequency of any such
    instalments);
    (c) any other matter relevant to the operation of this
    section.

(9) The following decisions of the Corporation are not
    reviewable -
    (a) a decision of the Corporation to make or not to make an
    assessment under this section (but an assessment is
    reviewable);
    (b) a decision of the Corporation as to whether to make a
    final assessment or one or more interim assessments;
    (c) a decision of the Corporation as to whether to pay an
    amount assessed under this section in a single lump sum or
    in instalments and, if the Corporation decides to pay in
    instalments, the Corporation's decision as to the frequency
    of those instalments."

4. The section has been amended since then. Subsection (3) has been amended by substitution of a new subparagraph (c) and the addition of a new subparagraph (d). Those subparagraphs relate to the approach to be taken to a partially incapacitated worker. The amendments were not in force when the Tribunal made its decision, and in any event are not relevant to the issues now before the Court, except in one respect and I will refer to that later.

5. Section 42 of the Act permits redemption of the liability to make weekly payments by the making of a capital payment to the worker. At first this could be done only upon application by the worker. By the time of the Tribunal's decision it could be done only by agreement between the Corporation and the worker. In contrast, section 42A does not involve the agreement of the worker.

6. In the present case the Corporation assessed the worker's loss of future earning capacity as a capital loss. It did so by making an interim assessment under subsection (4). The assessment was made on the basis that the worker was totally incapacitated or to be treated as totally incapacitated. The Corporation selected a period of 52 weeks as the nominated portion of the worker's notional working life. It calculated the worker's notional weekly earnings, deducted estimated tax, and then to the net weekly figure applied an actuarial multiplier to arrive at the capital loss.

7. Although the point was not canvassed at the hearing of the appeal, subsection (2) appears to envisage an initial calculation of weekly earnings for the whole of the selected period and then the calculation of the present value of that loss. However, I think that the result must be the same.

8. The worker complained that the Corporation had not done what the Act requires. The best way of understanding the complaint is to explain what the worker says should have been done. The worker says that the first step, when making an interim assessment, was to arrive at a capital loss in respect of the remainder of the worker's notional working life. In the present case the worker was 30 years of age. Therefore, the worker argued, the first step was to calculate the present value of the loss of the notional weekly earnings over the 35 years that would elapse between the time of the assessment and retirement age. Next, the worker argued, as the nominated portion was one year, the Corporation should have calculated one-35th of that capital loss and paid that amount to the worker. We were told by counsel for the Corporation that if that approach was taken the amount payable to the worker would have been $7,161 rather than the amount arrived at by the Corporation's method of $11,233.67. I am not in a position to check those calculations.

9. The worker further argued that, at the expiry of the nominated portion of one year, if the Corporation was to make a further interim payment there were two possible approaches to what was then to happen. The worker's primary contention was that no further calculation could then be made. The Corporation was obliged to pay to the worker the relevant proportion of the previously calculated capital sum. Accordingly, if the second interim assessment was in respect of a period of one year, the Corporation would again pay one-35th of the already calculated capital sum.

10. The worker's alternative argument, if this were rejected, was that if a new calculation could be done for the purposes of the second interim assessment, it was a calculation in which notional weekly earnings could be recalculated, the amount the worker could earn in suitable employment could be determined in the light of then current rates of earnings, but the Corporation's original decision as to the type of work the worker had a reasonable prospect of obtaining could not be revisited. This was so whether the worker's prospects for obtaining work had got better or worse, and so this was so whether it worked to the advantage or disadvantage of the worker.

11. While the present case does not involve the making of a second assessment, it seems to me to be necessary to consider the worker's submissions as a whole, because its submissions as to the instant case were put in the context of submissions as to the manner in which the section works as a whole.

12. The worker's submissions were these. An assessment of a capital loss under the section brings to an end the worker's right to weekly payments. That is correct: see subsection (6). The worker argued that this means that the worker is at the mercy of the Corporation, because a decision whether or not to make an assessment is not reviewable. It is correct that such a decision is not reviewable: see subsection (9). The worker then argued that the worker needs to know at the outset where he or she stands, and is not to be left at the risk of a series of interim assessments which might in various ways revisit the worker's entitlements. The notion advanced by the worker seems to be that even if an interim assessment is made, the Corporation is required to make what I might call a whole of life assessment, so that the worker then knows where he or she stands, subject only to later adjustments of that assessment in the light of changes in notional weekly earnings or earnings applicable to the work which the Corporation decides at the outset the worker has a reasonable prospect of obtaining. It was in that framework that the worker contended for an approach which meant that even when an interim assessment is made the Corporation is obliged to make a calculation indistinguishable from the calculation made when making a final assessment. I use the term "final assessment" as a convenient shorthand for the once and for all assessment envisaged by subsection (2).

13. As to those points, I make the following comments. First of all, the method by which any assessment is made is reviewable: see subsection (9)(a). If the Corporation makes an interim assessment, it is implicit in subsection
(4) that it must thereafter make a further interim assessment or proceed to a final assessment. In my opinion if it fails to do so the Court could, by the grant of a declaration or possibly by the issue of mandamus, compel the Corporation to follow through the statutory scheme. The worker is not, therefore, left at the mercy of the Corporation in either respect. There is also a curious aspect to the worker's submissions. They mean that when an interim assessment is made the worker will know, at the outset, with a reasonable degree of accuracy what the worker's later entitlements will be, because the adjustments to the capital sum could only be relatively minor. But this certainty is purchased at the cost of there being no ability when further interim assessments are made to take account of any improvement or worsening in the worker's condition. It might be thought that one of the prime reasons for making an interim assessment would be that there was the prospect of a significant change in the worker's condition.

14. To my mind it is appropriate to approach section 42A without any particular preconceptions or assumptions about how it should be interpreted or how it should work. I therefore do not approach the matter on the basis that one of its primary objectives is to ensure that from the outset the worker knows, with a reasonable degree of certainty, the amount which the worker will receive as a lump sum even when interim payments are made.

15. It is implicit in the worker's submissions that subsection (2) governs the method of making an interim assessment. During the course of the hearing the Corporation submitted that subsection (2) did not apply at all to an interim assessment, alternatively that there was an obligation in making an interim assessment to have regard to the principles established by subsection
(2) but not an obligation to apply them to the full, and in the further alternative that subsection (2) did apply to the making of an interim assessment. As I understood things the latter submission that was the Corporation's final submission. At first I was inclined to think that subsection (2) did not apply at all to an interim assessment, but on reflection I do not think that that could be correct. If it was correct it would leave the method of making an interim assessment at large, because I can see no basis for the intermediate position that the Corporation must have regard to subsection (2). If the method of making an interim assessment was at large, a worker would have very little protection if the Corporation's method were challenged, because as long as it could reasonably be regarded as a means of arriving at the loss the approach taken would have to be accepted. I do not think that Parliament could have intended this to be the case. The impact on a worker is too significant to leave it under the control of the Corporation. Nor do I think that Parliament could have envisaged that the method of making an interim assessment would be determined by principles established by the Corporation under subsection (8)(a). First of all, the Court was told that no such principles have been established. Secondly, on that approach it would be equally within the power of the Corporation to determine how an assessment should be made. For the same reason I do not think that subsection (8)(c) provides the answer.

16. For those reasons I proceed on the basis that subsection (2) was intended by Parliament to control the method of making an interim assessment. I mention there that the 1995 amendment to subsection (3)(d) is expressed in a manner which assumes that subsection (2) does apply to an interim assessment. I do not, however, place any reliance upon that.

17. Assuming that subsection (2) applies, how does it operate in relation to an interim assessment?

18. Can the Corporation, as it did here, project notional weekly earnings over a nominated portion of the notional working life or must it project notional weekly earnings over the remainder of the notional working life as the worker contended?

19. To my mind the notion of an interim assessment of loss as to a nominated portion of the worker's notional working life suggests that the focus is on the nominated portion. The approach the worker contended for involves a focus upon the remainder of the worker's notional working life, that being the basis of the calculation, and the only relevance of the nominated portion being to determine the proportion of the lump sum which is to be payable.

20. Admittedly, under the worker's approach, at the end of the nominated period the Corporation will have the opportunity to make a further calculation, but as my summary of the worker's approach indicates, the calculation is a limited one and can do no more than take account of changes in earning rates. I am, of course, referring here to the worker's alternative approach and not to the worker's primary approach.

21. I should say at this point that it is not necessary to decide in this case how a second interim assessment is made, but I must say that my inclination is against the worker's submissions on that point.

22. What the rival submissions show is that subsection (4) is unfortunately expressed, or that Parliament has failed to make its intention clear. The conclusion to which I have come is that the Corporation's approach is correct. I think that the Corporation's approach makes the better sense of subsection
(4), and it is consistent with the wording of subsection (4). To my mind the approach which the worker contended does not produce an assessment of loss as to nominated portions of the worker's notional working life. It produces only a means of paying a portion of the loss assessed in respect of the remainder of the worker's notional working life. And there seems to be no reason why Parliament would have so provided in subsection (4), because periodic payments are provided for in any event by subsection (5).

23. But does this approach give rise to difficulty when one comes to apply subsection (2)? The Corporation contends that in subsection (2)(a) the reference to "the remainder of the worker's notional working life" is to be read as including, by implication, a reference to the nominated portion of the worker's notional working life in the event that the assessment is an interim assessment. I have already outlined what the worker's approach is. I consider that the Corporation's approach is again correct. There is no doubt that to so hold is to strain the words of subparagraph (a), but it is the only way in which overall sense can be made of the provision. I think that what Parliament must have had in mind, although its intention has been imperfectly expressed, is that in the case of an interim assessment the nominated portion of the worker's notional working life is treated, for the purposes of the calculation, as if it were the remainder of the worker's notional working life.

24. In coming to the conclusion to which I have reached I have had to chose between alternatives, neither of which sit easily with the words of section 42A. The matter is one on which minds might differ. As I have already said, Parliament's intention should be made clearer by an appropriate amendment.

25. For those reasons it is my opinion that the appeal must be dismissed.

JUDGE2 MILLHOUSE J I agree and have nothing to add.

JUDGE3 WILLIAMS J I agree.