Ljubicic v Akora Holdings Pty Ltd

[2007] NSWWCCPD 160

WORKERS COMPENSATION COMMISSION
DETERMINATION OF APPEAL AGAINST A DECISION OF THE COMMISSION CONSTITUTED BY AN ARBITRATOR
STATUS: Decision confirmed on Appeal: Akora Holdings Pty Ltd v Ljubicic [2008] NSWCA 339
CITATION:		Ljubicic v Akora Holdings Pty Ltd [2007] NSWWCCPD 160
APPELLANT:		Franko Ljubicic
RESPONDENT:		Akora Holdings Pty Ltd
INSURER:		QBE Workers Compensation (NSW) Ltd
FILE NUMBER:		WCC16544-04
DATE OF ARBITRATOR’S DECISION:		12 February 2007
DATE OF APPEAL DECISION:		19 July 2007
SUBJECT MATTER OF DECISION:		Application for an extension of time for leave to appeal; sub-rule 16.2(11) of the Workers Compensation Commission Rules 2006; review of weekly payments; treatment of evidence; section 55 of the Workers Compensation Act 1987.
PRESIDENTIAL MEMBER:		Acting Deputy President Robin Handley
HEARING:		On the papers
REPRESENTATION:		Appellant:		Leitch Hasson Dent Solicitors
Respondent:		McCulloch & Buggy Solicitors
ORDERS MADE ON APPEAL:		Time to appeal is extended to 21 March 2007.
The decision of the Arbitrator, dated 12 February 2007, is revoked and the matter is remitted to another arbitrator for redetermination in accordance with these reasons.
The Respondent is to pay the Appellant, Mr Ljubicic’s costs of this appeal.

BACKGROUND TO THE APPEAL

1. On 21 March 2007, Franko Ljubicic sought leave in the Workers Compensation Commission (‘the Commission’) to bring an appeal against the decision of an arbitrator dated 12 February 2007. The Respondent to the appeal is Akora Holdings Pty Ltd (‘Akora’) whose workers compensation insurer is QBE Workers Compensation (NSW) Ltd (‘QBE’).

1. The background to this matter was set out by Acting Deputy President Tydd in the previous appeal in this matter (Ljubicic v Akora Holdings Pty Ltd [2006] NSWWCCPD 291), as follows:

“Prior proceedings and injuries

1. Mr Franko Ljubicic (‘Mr Ljubicic’) was born in Yugoslavia where he attended school and studied biology at university. In 1982 he came to Australia and worked as a chef. He was employed as a pastry chef by Akora Holdings Pty Limited (‘Akora’) between 1993 and 11 September 1997 when his employment ceased. On 9 September 1997 Mr Ljubicic sustained an injury to his back when he lifted a cartoon of cheese weighing approximately 25 kilograms.

2. On 15 February 2000 Mr Ljubicic commenced proceedings against Akora in the Compensation Court of NSW (‘the Court’) seeking weekly compensation payments from 5 September 1994 to date and continuing, medical and related expenses, and compensation for permanent impairment and pain and suffering in accordance with the Workers Compensation Act 1987 (‘the 1987 Act’). Mr Ljubicic claimed that his injuries arose as a result of the nature and conditions of his employment with Akora and the frank injury he sustained on 9 September 1997. Pursuant to section 66 of the 1987 Act Mr Ljubicic claimed the following: 9% permanent impairment of his neck; 10% permanent loss of efficient use of his right arm at or above the elbow; 20% permanent loss of efficient use of the left arm at or above the elbow; 22.5% permanent impairment of his back, and 10% permanent loss of efficient use of his right leg at or above the knee. Mr Ljubicic claimed $25,000.00 pursuant to section 67.

3. On 30 October 2001 the Court made an award in favour of Mr Ljubicic for medical and related expenses and costs together with the following awards pursuant to section 66 of the 1987 Act: $4,000.00 in respect of 10% permanent impairment of the neck; $7,500.00 in respect of 10% loss of use of the non-dominant left arm at or above the elbow; $10,800 in respect of 18% permanent impairment of the back (following a deduction of 2% pursuant to section 68A of the 1987 Act); $3,375.00 in respect of 4.5% loss of use of the left leg at or above the knee (following a deduction of 10% pursuant to section 68A); $3,375.00 in respect of 4.5% loss of use of the right leg at or above the knee (following a deduction of 10% pursuant to section 68A), and $16,667.00 pursuant to section 67. In respect of the claim for weekly compensation the Court found:

‘that as a result of the nature and conditions of his employment with the Respondent from 1 January 1996 to 11 September 1997 the Applicant suffered injuries to his neck, his left shoulder and both of his hands or wrists in the form of carpal tunnel syndrome. As a result of the injury on 9 September 1997 the Applicant suffered injury to his back and the applicant was from 9 September to 30 November 1997 totally incapacitated thereby and from 1 December 1997 to date partially incapacitated.....the probable earnings uninjured from 12 September 1997 to date, $680 per week... his ability to earn from 1 December 1997 to 27 April 2001 to be $300 a week and from 28 April 2001 to date, $400 per week.’

4. The Court found no basis to exercise its discretion to reduce the mathematical difference between the probable earnings and the ability to earn and therefore Mr Ljubicic was in receipt of $280.00 per week from 28 April 2001 pursuant to section 40 of the 1987 Act. Notwithstanding a Direction for Production of the Compensation Court’s file, exhibits, transcript and other documents the only record of proceedings before the Court is contained in the Court’s orders and a single page of the transcript of proceedings which sets out Her Honour Judge Quirk’s findings and ex tempore judgment. The findings do not refer to any of the evidence before the Court and the parties have not identified the medical evidence relied upon in proceedings before the Court.

Application to Resolve a Dispute

5. On 14 October 2004 Akora lodged an ‘Application to Resolve a Dispute’ in the Commission (matter number WCC 16544-04) seeking to vary the order of the Court in respect of Mr Ljubicic’s weekly compensation payments. Akora claimed that Mr Ljubicic was fit for his usual work as a chef.

6. In a Late Reply dated 10 May 2005 Mr Ljubicic disputed the claim on the basis that Akora had failed to provide sufficient evidence of change of circumstance and submitted that he continued to be fit for “only very light duties in accordance with the findings of Judge Quirk”.

Proceedings before the Arbitrator

7. On 13 December 2004 a teleconference was conducted before a Commission Arbitrator (‘the Arbitrator’) at which time the Late Reply was admitted and ‘Directions for Production’ were made. The matter was set down for conciliation/arbitration on 13 January 2005. On that day Mr Ljubicic was not represented and the matter was adjourned and referred to an Approved Medical Specialist (‘AMS’) as a general medical dispute. A conference was conducted on 14 June 2005 at which time Mr Ljubicic was legally represented and it was determined that the referral to the AMS should not proceed. Further Directions were made including that Mr Ljubicic “comply with the Direction that he produce copies of his financial and earnings records for the period 1999 to date, within 14 days.”

8. As a result of Mr Ljubicic’s failure to comply with the Direction of the Arbitrator made on 14 June 2005 Akora requested the issuing of Directions for Production upon Mr Ljubicic for all financial records on 23 August 2005. This request was refused by the Arbitrator on 30 August 2005. However at the hearing conducted on 15 September 2005 the Arbitrator directed Mr Ljubicic to produce all financial and earnings records, including pay slips, wage records, bank statements etc. for the period 1999 to date on or before 29 September 2005. Contrary to this direction Mr Ljubicic did not produce this evidence and it was on 6 October 2005 that he produced taxation returns and bank statements only. On 10 October 2005 Akora requested an adjournment of the hearing scheduled for 19 October 2005 and Directions for Production of all financial records as a result of Mr Ljubicic’s failure to produce in accordance with the Arbitrator’s direction. These requests were refused by the Arbitrator and the hearing proceeded. The Arbitrator delivered an ex tempore decision at the hearing and issued a ‘Statement of Reasons – Extempore Orders’ dated 21 October 2005.”

1. On 15 November 2005, Mr Ljubicic lodged an appeal against the ex tempore decision of the Arbitrator given at the conclusion of the arbitration hearing on 21 October 2005. On 3 November 2006, Acting Deputy President Tydd, having found the Arbitrator had failed to provide proper reasons for his decision, remitted the matter to a different arbitrator for redetermination in accordance with her reasons. The Acting Deputy President explained her reasons for the remittal as follows:

“62. On Mr Ljubicic’s own evidence and as demonstrated in the bank statements produced in the joint names of Mr and Mrs Ljubicic, Mr Ljubicic is engaged in an activity, being the joint business venture with his wife which is not an activity in which he was engaged at the time of the proceedings before the Court. In my view, this activity may be sufficient to demonstrate a change in circumstances justifying a review of the award.

63. However, in the present circumstances I am unable to determine on the evidence before me the precise activities undertaken by Mr Ljubicic in conducting this business venture in conjunction with his wife and assisted by his son to assist in my consideration of whether these activities demonstrate a change in circumstance justifying a review of the award. Likewise I am unable on the evidence before me to make a finding as to Mr Ljubicic’s current earnings which would further assist in my consideration of the change in circumstances. In the present circumstances I am satisfied that Mr Ljubicic’s late production of documents in relation to his earnings and financial situation since the prior award has restricted the proper ventilation and consideration of this issue.

64. Given that further and current evidence and additional submissions from the parties is required to address the issues raised it is appropriate that the matter be remitted to an Arbitrator for redetermination. As this redetermination necessitates consideration of the change of circumstance and if a change of circumstances is found whether the change in circumstance justifies a review of the award in my view the only course of action that is both fair and proper in the circumstances is to remit this matter to a different Arbitrator for determination in accordance with the findings contained in this decision (see discussion in Aretica Pty Ltd v Fradelakis[2006] NSWWCCPD 102).”

1. By letter filed on 15 November 2006, Mr Ljubicic’s solicitors sought a reconsideration of this decision under section 350 of the Workplace Injury Management and Workers Compensation Act 1998 (‘the 1998 Act’). On 2 March 2007, having received written submissions from both parties, the Acting Deputy President refused to exercise her discretion to reconsider her decision (Ljubicic v Akora Holdings Pty Ltd [2006] NSWWCCPD 291R).

1. On 18 January 2007, a different arbitrator conducted an arbitration hearing and, on 12 February 2007, determined the matter in the terms set out below. As stated above, on 21 March 2007, Mr Ljubicic appealed against this decision.

THE DECISION UNDER REVIEW

1. The ‘Certificate of Determination’, dated 12 February 2007, records the Arbitrator’s orders as follows:

“1. The award of Judge Quirk of 31 October 2001 is terminated from 6 October 2004.”

1. In the Statement of Reasons for his decision, the Arbitrator noted that the opinion of Dr Roderick McEwin, Physician, expressed in his report dated 3 May 2004, relied on by Akora, was inconsistent with the findings of Judge Quirk. The Arbitrator was not, therefore, satisfied that there had been a change of medical circumstances. With regard to Akora’s claim that there had also been a change of financial circumstances, the Arbitrator said in his Statement of Reasons:

“14. The evidence discloses that on or about 23 May 2002 Mr Ljubicic and his wife entered into a contract with Corporate Cleaning Utilities to purchase the cleaning rights for the Royal Association College of Physicians in Macquarie Street, Sydney. The contract required the Respondent Worker to undergo a training course in cleaning. The contract shows that the Respondent and his wife incorporated a company and commenced training [sic] as Corporate Cleaning NSW Pty Ltd on 1 October 2002.

15. The Respondent Worker has produced bank records commencing on 1 December 2003. Those records are in respect of a joint account held by the Respondent Worker and his wife. Those records disclose that each month a cheque in the sum of $3,872.00 is received from Corporate Cleaning. The bank statements also disclose a weekly receipt from Pierlite Ltd. I understand that the Respondent Worker’s wife is employed by Pierlite Pty Ltd on a full time basis. On the evidence before me I am satisfied that since 1 October 2002 the Respondent Worker has been in receipt of a monthly cheque for $3,872.00 from Corporate Cleaning and that that cheque is in respect of work carried out pursuant to the contract entered into on 23 May 2002.”

1. The Arbitrator discussed a written statement provided by Mr Ljubicic, dated 26 August 2005, and deduced from that evidence that “the Respondent Worker was attempting to suggest that he was totally unfit for work” (Statement of Reasons, paragraph 17). With regard to oral evidence given by Mr Ljubicic at the first arbitration hearing on 15 September 2005, the Arbitrator said, at paragraph 19: “Having carefully read the transcript I am satisfied that the Respondent Worker was given ample opportunity to disclose the cleaning work but deliberately chose not to.” The Arbitrator noted Mr Ljubicic’s claim that the contract “only required a couple of hours work from Monday to Friday” and that his wife and son helped him with the work; Mr Ljubicic also sought to identify various expenses incurred in running the business but had provided no documentary verification for this.

1. The Arbitrator acknowledged that the onus of establishing a change of circumstances rests with Akora and that to vary the award he must be positively satisfied that a change of circumstances exists. There was clear evidence that from 1 October 2002, Mr Ljubicic had been receiving a sum greater than his earnings but for the injury. The question was how much of that income was attributable to the sale of Mr Ljubicic’s labour. The Arbitrator said, at paragraph 21, that while Mr Ljubicic claimed that the income was divided between himself, his wife and his son,

“[i]t is clear that the Respondent Worker has not been truthful with the Commission. He sought to conceal evidence of the cleaning contract and only admitted to it when confronted with incontrovertible evidence. There is no evidence to corroborate the Respondent worker’s assertions.”

1. The Arbitrator noted that the cleaning contract was in both Mr Ljubicic’s and his wife’s names but that only Mr Ljubicic had been required under the contract to undergo training. Moreover, his wife worked full-time for Pierlite Pty Ltd, and (paragraph 22),

“is unlikely to work much in the way of additional hours if at all. Neither the wife nor the son gave evidence in support of the respondent and there is no explanation for this failure. I draw the inference that their evidence would not have advanced the respondent’s case.”

1. The Arbitrator said he did not accept Mr Ljubicic’s evidence that his wife and son also perform work under the cleaning contract, and concluded that “the money earned is all earned by the Respondent Worker” (paragraph 23). As this amount exceeded the agreed comparable earnings of $750 per week, Mr Ljubicic had ceased to be entitled to a payment pursuant to section 40 of the Workers Compensation Act 1987 (‘the 1987 Act’).

ISSUES IN DISPUTE

1. The grounds of appeal identified by Mr Ljubicic’s solicitors are that the Arbitrator (1) misdirected himself in drawing a Jones v Dunkel (1959) 101 CLR 298 inference against Mr Ljubicic for his failure to call evidence from his wife and son, (2) erred in making findings of fact concerning work performed under the contract, (3) erred in making findings of fact concerning income generated under the contract, (4) erred in drawing an inference that the income generated under the contract represented Mr Ljubicic’s earnings for the purposes of section 40(2)(b) of the 1987 Act, (5) failed to give adequate reasons for determining that the income generated under the contract was attributable to Mr Ljubicic for the purposes of section 40(2)(b), and (6) in the alternative to grounds 2, 3 and 4, misdirected himself as to the law with regard to his conclusion in relation to section 40(2)(b). The parties’ submissions are considered below.

ON THE PAPERS REVIEW

1. Section 354(6) of 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.”

1. Having regard to Practice Directions Numbers 1 and 6, the documents that are before me, and the submissions by the parties that the appeal can 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. 

1. Neither party sought to adduce fresh evidence.

LEAVE

1. Before proceeding to deal with an appeal, the Commission must determine whether the application meets the requirements of section 352 of the 1998 Act. First, with regard to section 352(2), Mr Ljubicic is seeking an order to set aside the decision of the Arbitrator terminating an award for the payment of weekly compensation of $280. I am satisfied that the amount of compensation at issue is at least $5,000 and comprises the whole of the amount in issue, thereby satisfying section 352(2).

1. With regard to section 352(4) – the requirement for an appeal to be made within 28 days after the making of the decision appealed against, Mr Ljubicic’s appeal, lodged on 21 March 2007, was not made within 28 days of the Arbitrator’s decision, which was made on 12 February 2007, the date on which the Certificate of Determination was issued by the Commission (rule 16.2(2) of the Workers Compensation Commission Rules 2006 (‘the Rules’)). However, I note that Mr Ljubicic’s solicitors lodged a first appeal on 9 March 2007, which was rejected by the Registrar by letter dated 12 March 2007 for failure to comply with the Rules for the lodging of an application. Mr Ljubicic’s solicitors lodged a second appeal on 15 March 2007, which again failed to comply with the relevant Rules, and was rejected by the Registrar by letter dated 19 March 2007.

1. In the appeal lodged on 21 March 2007, Mr Ljubicic’s solicitors said, with regard to the first appeal, that they were not previously aware of the need to file a certificate as to the reasonable prospects of success of their client’s case. No explanation is given for the second appeal failing to comply.

1. Mr Ljubicic’s solicitors submit that if an extension of time is not granted their client will suffer a “demonstrable and substantial injustice”. They contend that the Arbitrator’s decision “represents a serious miscarriage of justice”:

“The arbitrator drew an adverse Jones v Dunkel inference in circumstances not permissible at law. The arbitrator made findings of fact on certain issues not permissible at law. The arbitrator made a finding upon which the appellant’s award was terminated without evidence or, in the alternative, in circumstances where an inference could not have been drawn.”

1. Akora submits that leave to file the appeal out of time ought not to be granted. The matter has a lengthy history and has already been the subject of an appeal to a Presidential Member. It is not sufficient explanation to suggest that the proper forms were not filed because the procedures had changed and Mr Ljubicic’s solicitors were not aware of this.

1. Applications for extension of time for leave to appeal are dealt with in the Rules at subrules 16.2(11) and (12) as follows:

“(11) The Commission constituted by a Presidential member may, if a party satisfies the Presidential member, in exceptional circumstances, that to lose the right to seek leave to appeal would work demonstrable and substantial injustice, by order extend the time for making an appeal.

(12) A party who seeks an extension of time as referred to in subrule (11) must:

(a) as soon as practicable give notice to the other parties of the intention to seek the extension, and

(b) lodge and serve with the application for leave to appeal an application for the extension of time, including full details of the arguments to be put in favour of granting the extension.”

The wording of subrules 16.2(11) and (12) appears to be identical to that of the superseded subrules 77(8) and (9) of the Workers Compensation Commission Rules 2003.

1. The Rules do not set out the factors to be considered in the exercise of the discretion to extend the time for filing an appeal against the decision of an Arbitrator. However, this issue has often been the subject of judicial consideration. A leading case is Gallo v Dawson (1990) 93 ALR 479, where Justice McHugh set out a number of guiding principles. He emphasised that the discretion to extend time should only be exercised where strict compliance with the rules will lead to an injustice for the applicant. In so deciding, regard should be had to (i) the history of the proceedings, (ii) the conduct of the parties, (iii) the nature of the litigation, (iv) the consequences for the parties of the grant or refusal of the application for extension of time, (v) the prospects of the applicant succeeding if leave is granted, and (vi) the respondent’s right, after the expiry of the time for appealing, to rely upon the decision made. These principles have been applied in Commission proceedings: see, for example, Howell v Stringvale Pty Ltd [2004] NSWWCCPD 22, Alexandru v State Rail Authority of NSW [2004] NSW WCC PD 54, South Eastern Sydney Area Health Service v Berry [2006] NSWWCCPD 32.

1. I note the requirement of section 345 of the Legal Profession Act 2004 was incorporated into the 1998 Act by the addition of section 352(7A) of the 1998 Act, which took effect on 1 November 2006. Essentially, the parties’ legal representatives must certify that their client’s case has reasonable prospects of success. The requirement is referred to in the Commission’s Practice Direction No 6, effective from 1 November 2006, notice of which was given in the Commission’s E-Bulletin dated November 2006.

1. Thus, Mr Ljubicic’s solicitors must satisfy me, in exceptional circumstances, that loss of the right to appeal for their client would work demonstrable and substantial injustice. In making my decision, I will also have regard to the history, conduct and nature of the proceedings, and Mr Ljubicic’s prospects of success if leave is granted.

1. First, I note these proceedings have been on foot since Mr Ljubicic’s ‘Application to Resolve a Dispute’ was registered by the Commission on 14 October 2004.

1. Second, I note that the proceedings appear to have been delayed by Mr Ljubicic’s failure, on a number of occasions, to comply with directions for the production of financial records (see paragraph 2, above), and by his not supplying evidence, which should have been in his possession or under his control, to enable findings to be made “as to the precise activities undertaken by Mr Ljubicic in conducting this business venture in conjunction with his wife” (Acting Deputy President Tydd, at paragraph 3, above).

1. Acting Deputy President Tydd found, at paragraph 63 of her decision, that “Mr Ljubicic’s late production of documents in relation to his earnings and financial situation since the prior award has restricted the proper ventilation and consideration of this issue”. Despite these comments, in the proceedings before the Arbitrator, no further evidence was provided by Mr Ljubicic’s solicitors and a copy of the cleaning contract was only provided and admitted into evidence at the request of the Arbitrator at the arbitration hearing, there being no objection by either of the parties (transcript pages 28-29).

1. In terms of the merits of the appeal and the prospects of Mr Ljubicic succeeding if leave to appeal is granted, I note in particular, the Acting Deputy President’s comments about her inability to determine the precise activities undertaken by Mr Ljubicic in the joint business venture with his wife, or to make any findings as to his current earnings, because of the lack of evidence. It appears this was principally a consequence of Mr Ljubicic’s failure to provide the relevant evidence.

1. However, in matters involving an application by the employer under section 55(1) of the 1987 Act for the review of weekly payments of compensation made to a worker because of a change of circumstances, the onus is on the employer to establish that there has been a change of circumstances. If the employer is able to establish such a change of circumstances, it is then for the Commission, in default of agreement between the parties, to determine the amount of weekly payments, if any, to be paid to the worker (section 55(2)(b)).

Grounds of appeal

1. Turning to the grounds of appeal identified by Mr Ljubicic’s solicitors and his prospects of success if leave is granted, the first ground is that the Arbitrator (1) misdirected himself in drawing a Jones v Dunkel inference against Mr Ljubicic for his failure to call evidence from his wife and son. Mr Ljubicic’s solicitors state that “[a]t common law, an adverse inference may only be drawn from the failure of a party to call particular evidence, where such evidence could reasonably have been expected” (submissions paragraph 17). Akora submits that, having alleged that his wife and son were earning income from the business:

“It was for the Appellant to adduce evidence confirming same, particularly having regard to the credit issues which had been raised in relation to the Appellant’s evidence in the original Arbitration, earlier Appeal, and most recent Arbitration. The Respondent submits that it was open to the Appellant to call evidence corroborating his allegation but he chose not to do so. In those circumstances, the Arbitrator was correct in drawing a Jones v Dunkel inference on this issue.”

1. I note that the drawing of inferences in such circumstances was discussed by the NSW Court of Appeal in Atlas v Bulli Spinners Pty Ltd (1993) 9 NSWCCR 378, at 386, where Kirby P, with whom Mahoney and Clarke JJA agreed, stated:

“1. A failure on the part of a person to give evidence, where evidence would otherwise be expected, does not of itself constitute an evidentiary fact. It merely permits the tribunal of fact to draw more readily than it otherwise would have done any inference that is available from the facts proved. In other words, the absence of evidence does not positively add to the relevant evidence. It is simply a consideration in the process of reasoning from the evidence which is actually adduced. See Jones v Dunkel (1959) 101 CLR 298 at 317f;

2. A failure on the part of a party to give evidence does not warrant the alteration of the alignment of the burden of proof for which the law provides...”

1. In the present case, the Arbitrator referred to the fact that neither Mr Ljubicic’s wife nor his son gave evidence in support of Mr Ljubicic and that this failure was not explained, and drew an inference from this “that their evidence would not have advanced” Mr Ljubicic’s case. In my view, while the Arbitrator could infer from this that Mr Ljubicic was, possibly, the principal person performing work under the cleaning contract, the Arbitrator was not entitled to infer from this that the monthly cheque for $3,872.00 received pursuant to the contract was “all earned by the Respondent Worker” (paragraph 23, Statement of Reasons). Pursuant to the NSW Court of Appeal decision in Cage Developments Pty Ltd t/as Monaro Mix Specified Concrete v Schubert [1981] 2 NSWLR 227 (‘Cage’), at 230-231, the value of the earnings of a self-employed worker is ascertained by one of two methods:

“The first method is to determine the nett remuneration being received for his labour by examining the business accounts and making all proper allowances for overhead expenses, costs of materials and other labour, maintenance and depreciation of plant, return on capital invested and the like...

The second method is to calculate without reference to the business accounts the worth to the business of his labour. In assessing the worth of an unimpaired earning capacity, as with a deemed worker before injury, industry rates will provide a measure. But if the work capacity is impaired another choice in method of proof is available. A direct determination may be made of the cost to the business of employing someone to do the reduced work of which the applicant is capable. Alternatively, it may be determined by deducting from the cost of employing someone whose work capacity is unimpaired the cost of supplementing the reduced efforts of the applicant so as to produce for the business the services of one fully capable worker...”

1. The Arbitrator’s drawing of the above inference and failure to ascertain Mr Ljubicic’s earnings in accordance with one of the methods outlined in Cage was, in my view, an error of law, and I am satisfied that Mr Ljubicic’s solicitors have, therefore, made out their first ground of appeal.

1. However, I recognise the dilemma faced by the Arbitrator, and previously by Acting Deputy President Tydd, who were thwarted by Mr Ljubicic’s failure to provide specific evidence as to his wife’s and their son’s involvement in the cleaning business, their earnings from the business, and the costs and expenses of the business, all of which evidence, it is reasonable to assume, is in the possession or under the control of him and his wife. 

1. It should be noted that in performing its task, the Commission should avoid unwarranted speculation: Goktas v Goodyear Australia Pty Ltd [2007] NSWWCCPD 1 (‘Goktas’), at paragraph 49. In my view, an appropriate way forward for an arbitrator in circumstances where an employer has satisfied the arbitrator that a change of circumstances has occurred, but there is insufficient evidence for the arbitrator to determine the weekly payments payable, is to give specific directions to the parties for the production of evidence and the making of relevant submissions to enable the Commission to perform its task avoiding unwarranted speculation. For example, following the same approach as that adopted by Deputy President Roche in Goktas, the Commission, as a specialist tribunal, could inform itself on what appears to be the applicable award for cleaners and the relevant weekly rates of pay, and direct the parties to make submissions about the applicability and relevance of that award and those rates of pay to the determination of the average weekly amount Mr Ljubicic is earning or would be able to earn in some suitable employment from time to time post injury pursuant to section 40(2)(b) of the 1987 Act. In the event that the parties fail to comply with such directions, the Commission would then be in a position to make a determination of the amount of weekly payments, if any, payable to the worker (section 55(2)(b)) in accordance with Cage.

1. In the second and third grounds of appeal, Mr Ljubicic’s solicitors submit that the Arbitrator erred in making findings of fact as to the work performed under the cleaning contract and the income generated by it that are inconsistent with the findings of Acting Deputy President Tydd.

1. In the first sentence of paragraph 62 of her Statement of Reasons, the Acting Deputy President briefly recites Mr Ljubicic’s evidence and the evidence of his bank statements demonstrating that Mr Ljubicic is engaged in a business in conjunction with his wife. In the second sentence, she makes a finding – that the activity in which Mr Ljubicic was engaged “may be sufficient to demonstrate a change of circumstances justifying a review of the award”. In paragraph 63, the Acting Deputy President states that on the evidence before her, she was unable to determine Mr Ljubicic’s precise activities in the cleaning business conducted in conjunction with his wife and assisted by his son, or Mr Ljubicic’s current earnings from those activities. In my view, this is no more than a comment on the unsatisfactory nature of the evidence before her, which prevented her from making any definitive finding. It is not a specific finding as to the involvement of Mr Ljubicic’s wife and son in the business. I would therefore reject the second and third grounds of appeal.

1. In the fourth ground of appeal, Mr Ljubicic’s solicitors submit that the Arbitrator erred in drawing an inference that the income generated under the contract represented Mr Ljubicic’s earnings for the purposes of section 40(2)(b) of the 1987 Act. I note the Arbitrator weighed up the evidence concerning the cleaning contract: on the one hand, the cleaning contract was in both Mr Ljubicic’s and his wife’s names; on the other hand, only Mr Ljubicic was required to undergo training under that contract, his wife worked full-time for Pierlite Pty Ltd, neither she nor their son gave evidence and there was no explanation for this, none of them appear to have declared any income from the business for taxation purposes, and there was no evidence from Mr Ljubicic as to any expenses of the business or any corroborating evidence as to the involvement of his wife and son in the business. The agreed comparable earnings but for the injury were $750 per week; the monthly payment into Mr Ljubicic’s and his wife’s joint bank account from the cleaning contract was $3,872.00.

1. In my view, as stated above, the Arbitrator was not entitled to infer that the earnings of the business from the cleaning contract represented Mr Ljubicic’s earnings for the purposes of section 40(2)(b) of the 1987 Act, and he thereby made an error of law. The Arbitrator was required to ascertain Mr Ljubicic’s earnings in accordance with the approach set out in Cage. I am therefore satisfied that Mr Ljubicic’s solicitors have made out this ground of appeal. I note also that it seems likely that Mr Ljubicic suffers a partial incapacity for work as a result of his compensable injuries, given the findings of the Court and the award in favour of Mr Ljubicic for the payment of compensation for permanent impairment and pain and suffering pursuant to sections 66 and 67 of the 1987 Act. His partial incapacity may affect his post injury earning capacity.

1. The fifth ground of appeal is that the Arbitrator failed to give adequate reasons for determining that the income generated under the contract was attributable to Mr Ljubicic for the purposes of section 40(2)(b) of the 1987 Act. Apart from the evidence discussed by the Arbitrator in relation to the fourth ground of appeal, Akora also referred in its submissions to the Arbitrator’s comment at paragraph 21, where he said:

“It is clear the Respondent worker has not been truthful to the Commission. He sought to conceal the existence of the cleaning contract and only admitted to it when confronted with incontrovertible evidence. There is no evidence to corroborate the respondent worker’s assertions.”

1. Whilst, in my view, the Arbitrator adequately identified the evidence supporting his findings of fact and set out the process of his reasoning such that a person reading the decision would be able to understand the essential steps in the Arbitrator’s reasoning process, finding this is made redundant by my having found errors of law in relation to the first and fourth grounds of appeal.

1. In the sixth ground of appeal, Mr Ljubicic’s solicitors submit, in the alternative to grounds 2, 3 and 4, that the Arbitrator misdirected himself as to the law with regard to the question of fact he had to determine in relation to section 40(2)(b) of the 1987 Act. They contend it is clear from the Arbitrator’s decision that he equates the gross receipts of the joint venture with Mr Ljubicic’s average weekly earnings for the purposes of section 40(2)(b) and, as such, he has misdirected himself as to the correct legal test.

1. Akora submits that given Mr Ljubicic’s failure, through the course of the proceedings, to comply with numerous directions and orders to produce financial records in relation to the business, he should not now be permitted to distinguish earnings from income. It was open to Mr Ljubicic to provide evidence as to wages and expenses paid by the business, but he did not do so, and the Arbitrator therefore determined the matter on the basis of the evidence before him.

1. I have already stated that the Arbitrator made an error of law in determining Mr Ljubicic’s earnings for the purposes of section 40(2)(b) of the 1987 Act, and have suggested a possible approach to enable the Commission to make a determination under this provision.

Conclusion

1. Thus, in my view, Mr Ljubicic would succeed in his appeal if leave is granted. Despite his conduct in these proceedings, about which both Acting Deputy President Tydd and the Arbitrator have commented, I am satisfied that for Mr Ljubicic to lose his right of appeal would give rise to a demonstrable and substantial injustice. I therefore extend time to appeal to 21 March 2007 and grant leave to appeal.

1. Having found the Arbitrator made errors of law in his treatment of the evidence for the purpose of determining the average weekly amount Mr Ljubicic is earning or would be able to earn in some suitable employment from time to time after the injury (section 40(2)(b), the second step prescribed by the NSW Court of Appeal in Mitchell v Central West Health Service (1997) 14 NSWCCR 527, at 529-530), the decision must be revoked and the matter remitted to another arbitrator for redetermination in accordance with these reasons.

DECISION

1. The decision of the Arbitrator dated 12 February 2007 is revoked and the matter is remitted to another arbitrator for redetermination in accordance with these reasons.

COSTS

1. The Respondent is to pay the Appellant, Mr Ljubicic’s costs of this appeal.

Robin Handley

Acting Deputy President  

19 July 2007

I CERTIFY THAT THIS IS A TRUE AND ACCURATE RECORD OF THE REASONS FOR DECISION OF ROBIN HANDLEY, ACTING DEPUTY PRESIDENT OF THE WORKERS COMPENSATION COMMISSION.

ASSOCIATE