Nielsen v Taz-West Electrical Pty Ltd
[1999] TASSC 102
•6 October 1999
[1999] TASSC 102
CITATION: Nielsen v Taz-West Electrical Pty Ltd [1999] TASSC 102
PARTIES: NIELSEN, Wayne Michael
v
TAZ-WEST ELECTRICAL PTY LTD
TITLE OF COURT: SUPREME COURT OF TASMANIA
JURISDICTION: APPELLATE
FILE NO/S: LCA 17/1999
DELIVERED ON: 6 October 1999
DELIVERED AT: Hobart
HEARING DATES: 22 September 1999
JUDGMENT OF: Evans J
CATCHWORDS:
Workers Compensation - Assessment and amount of compensation - Weekly earnings - Tasmania - Total incapacity - Characterisation of portion of wages as "directors' fees" - Whether included in "normal weekly earnings" in the Workers Rehabilitation and Compensation Act 1988, s69(1)(a).
Workers Rehabilitation and Compensation Act1988 (Tas), s69(1)(a).
Workers Compensation Act 1926 (NSW), s11(1)(a).
Johns Perry Hayward Pty Ltd v Greaves (No 2) A13/1991; Brambles Holdings Ltd t/as Brambles Shipping v Pincott A30/1994, considered.
Aust Dig Workers Compensation [211]
REPRESENTATION:
Counsel:
Appellant: R J Phillips
Respondent: W T McMillan
Solicitors:
Appellant: Phillips Taglieri
Respondent: Ritchie & Parker Alfred Green & Co
Judgment Number: [1999] TASSC 102
Number of Paragraphs: 12
Serial No 102/1999
File No LCA 17/1999
WAYNE MICHAEL NIELSEN v TAZ-WEST ELECTRICAL PTY LTD
REASONS FOR JUDGMENT EVANS J
6 October 1999
On 27 February 1997, the appellant worker was injured in the course of his employment with the respondent employer and totally incapacitated for work. Whilst the appellant's entitlement to weekly compensation is not in dispute, the quantum of his entitlement is.
Pursuant to the Workers Rehabilitation and Compensation Act 1988 ("the Act"), s69(1)(a), the appellant is entitled to be paid:
"(a) … weekly rate payments equal to ¾
(i) the normal weekly earnings of the worker; or
(ii) the ordinary time rate of pay of the worker for the work in which, and for the hours during which, the worker was engaged immediately before the period of incapacity ¾
whichever is the greater;"
The appellant began his employment with the respondent on 11 October 1995. His agreed rate of pay was $25 per hour. The appellant was also a director of the respondent. At a meeting of the directors of the respondent on 7 January 1996, the following resolution was passed:
"directors remuneration: | Resolved that remuneration paid to Directors be reduced to $12.50 per hour effective from January 7th, 1996, except for Thompson, Leonard Maxwell who was paid $25 per hour for the month of January, 1996 until the date of his resignation. Further resolved that a bonus be payable periodically to the Directors equal to $12.50 per hour effective from January 1st, 1996. It was agreed that no bonus would be paid to Thompson, Leonard Maxwell, for the period until his resignation." |
The resolution was put into effect and, thereafter, for each hour the appellant worked as an employee of the respondent, he was paid:
(a) $12.50 characterised as wages; and
(b)$12.50 variously characterised as directors' fees, bonuses or remuneration. I will refer to this payment as "directors' fees".
At the time of the appellant's injury, he was being paid as above.
The apparent purpose of the resolution was to lower the amount of payments classified as wages which were paid by the respondent to the appellant and co-workers who were also directors. By reducing the total amount it paid as wages, the respondent was able to reduce its workers compensation insurance premiums.
The appellant contends that the calculation of his normal weekly earnings should take into account both of the payments he was entitled to receive for each hour that he worked as an employee of the respondent, ie, $12.50 characterised as wages and $12.50 characterised as directors' fees. This contention was rejected by the Workers Rehabilitation and Compensation Tribunal insofar as it excluded directors' fees from the calculation. The appellant has appealed against that rejection.
The Act does not define "earnings". In construing the words "earnings of the worker" in the Act, s69(1)(a), I am mindful of the following passage from the decision of Heerey J in Bortolazzo and Saffron v Comcare Australia [1997] 515 FCA (12 June 1997):
"… the Act is social legislation which ought to be construed, in the event of ambiguity, liberally in favour of injured employees: McDermot v Owners of SS Tintoretto [1911] AC 35, Wilson v Wilsons Tileworks (1960) 104 CLR 328 at 335. But a liberal interpretation is one thing, rewriting the statute is another.
… The underlying policy is that an injured employee should not be worse off during the period of incapacity as a result of work-related injury. However, it follows conversely that the injured employee should not be better off."
Whilst the above observation relates to the Safety, Rehabilitation and Compensation Act 1988 (Cth), I consider it to be equally apposite to the Act under consideration.
The amount a worker "is earning" is the subject of the Workers Compensation Act 1926 (NSW), s11(1)(a), which provision was dealt with by the High Court in J & H Timbers Proprietary Limited v Nelson (1972) 126 CLR 625 and Cage Developments Proprietary Limited v Schubert (1983) 151 CLR 584. These decisions are authority that a reference to the amount a worker is earning is a reference to the amount he is earning as a worker by his own physical and mental exertion. In Johns Perry Hayward Pty Ltd v Greaves (No 2) A13/1991, Wright J said of the term "earnings" in the Workers Compensation Act 1988, s69(1)(a): "In my opinion a man earns what he receives by way of recompense for the exercise of his labour or skill". That passage was quoted in Brambles Holdings Ltd t/as Brambles Shipping v Pincott A30/1994 by Underwood J, who, at 11, observed that the underlying rationale behind workers compensation legislation is the provision of compensation for physical incapacity to earn income. As to the calculation of "average weekly earnings", Underwood J said at 13:
"The task is to measure the fruits of the worker's labour and skills, and to exclude from that exercise any amount that profit derived from capital investment and any income attributable to the supply of materials."
Ascertaining the normal weekly earnings of a worker involves establishing the recompense the worker was entitled to receive from his or her employer in return for the labour and skills he or she provided to the employer as an employee. In the context of this matter, there is no difficulty about establishing the appellant's entitlement. For each hour he worked as an employee of the respondent, the appellant was entitled to receive $12.50 characterised as wages and $12.50 characterised as directors' fees. As to the component characterised as directors' fees, the learned Commissioner said in his reasons for decision:
"The fact that the second component was paid on a calculation per hour by reference to his work hours as a servant suggests the artificial nature of the payment but the quantum of this fee and the manner in which it is calculated are matters that fall purely within the internal management of the company and I believe cannot alter the nature of the actual payment.
Accordingly I am not satisfied that the worker during the relevant period of incapacity was entitled to a weekly payment calculated at the rate of $25 per hour but rather one calculated in relation to $12.50 per hour in respect of the wage or income received by him in respect of the exercise of his labour as a servant for the company."
With respect, I cannot agree with the learned Commissioner. That the quantum of fees such as directors' fees and the manner of their calculation are matters for the internal management of a company is not to the point. The question is, what was the appellant entitled to receive from the respondent for his labour as its employee? Had the respondent refused to pay the appellant for work he had performed, he could have successfully sued to recover $25 for each hour worked. It is of no consequence that the parties had agreed to characterise one payment to which the appellant was entitled as wages and another payment as directors' fees. What is of significance is that the appellant was entitled to payments totalling $25 for each hour that he worked as the respondent's employee.
For these reasons, I am persuaded that the learned Commissioner erred in failing to find that during the relevant period of the appellant's incapacity, he was entitled to a weekly payment calculated at the rate of $25 per hour. I allow the appeal and direct that the order of the Tribunal be set aside. I will hear counsel on the final disposition of the matter.
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