NSW Rugby League Ltd v Clapson
[2014] NSWWCCPD 30
•28 May 2014
| WORKERS COMPENSATION COMMISSION | |||
| DETERMINATION OF APPEAL AGAINST A DECISION OF THE COMMISSION CONSTITUTED BY AN ARBITRATOR | |||
| CITATION: | NSW Rugby League Ltd v Clapson [2014] NSWWCCPD 30 | ||
| APPELLANT: | NSW Rugby League | ||
| RESPONDENT: | Stephen James Clapson | ||
| INSURER: | Employers Mutual NSW Ltd | ||
| FILE NUMBER: | A1-13269/12 | ||
| ARBITRATOR: | Ms E Beilby | ||
| DATE OF ARBITRATOR’S DECISION: | 21 January 2014 | ||
| DATE OF APPEAL DECISION: | 28 May 2014 | ||
| SUBJECT MATTER OF DECISION: | Partial incapacity; assessment of weekly compensation under s 40 of the Workers Compensation Act 1987 (as it stood prior to the introduction of the amendments in the Workers Compensation Legislation Amendment Act 2012); concurrent employment; ability to earn; application of the principles in Cage Developments Pty Ltd v Schubert (1983) 151 CLR 584 and Aitkin v Goodyear Tyre & Rubber Co (Aust) Ltd (1945) 46 SR (NSW) 20; non-compliance with Practice Direction No 6 | ||
| PRESIDENTIAL MEMBER: | Deputy President Bill Roche | ||
| HEARING: | On the papers | ||
| REPRESENTATION: | Appellant: | Bartier Perry | |
| Respondent: | Stacks Goudkamp | ||
| ORDERS MADE ON APPEAL: | 1. The Arbitrator’s determination of 21 January 2014 is confirmed. 2. The appellant employer is to pay the respondent worker’s costs of the appeal, assessed at $2,530 plus GST. | ||
INTRODUCTION
This appeal concerns the assessment of weekly compensation for a partially incapacitated worker under ss 40 and 43 of the Workers Compensation Act 1987 (the 1987 Act), as it stood prior to the amendments introduced by the Workers Compensation Legislation Amendment Act 2012, in circumstances where, both before and after the injury, the worker was engaged in concurrent contracts of employment.
BACKGROUND
The respondent worker, Stephen Clapson, worked for the appellant employer, NSW Rugby League, as a referee or touch judge at professional rugby league matches. He started his refereeing career with the appellant in 1980, refereeing junior matches, and progressed to become a touch judge in reserve grade in 1999, which he continued until his injury in 2005.
Mr Clapson’s work with the appellant required him to attend games on Friday nights, and/or Saturdays or Sundays, plus two training sessions per week for which he was paid various amounts. In addition to his refereeing work, in 1995, Mr Clapson obtained full-time employment with Payless Shoes as a store manager, work the Arbitrator described as Mr Clapson’s Monday to Friday work.
On 28 May 2005, Mr Clapson injured his right knee while working as a touch judge for the appellant. As a result of that injury, for which he has had two operations, he has been and remains unfit to return to work as a referee or touch judge. However, he has, since 2007, continued to work intermittently for the appellant assessing and grading referees, though at a much lower rate of pay than he had previously received.
After his first knee operation, on 1 October 2008, Mr Clapson was unable to use ladders or squat and was only fit for his job with Payless Shoes for 20 hours per week. After his second operation, on 29 October 2009, which was required after an aggravation caused during a functional assessment arranged at the request of the appellant’s insurer, Payless Shoes told Mr Clapson not to return to work until he was fit for unmodified duties.
In late 2010, the insurer paid for Mr Clapson to receive two days’ training in retail management. As a result of that training, he received a Certificate IV in Training and Assessment. He also received a Certificate IV in Retail Management, though this was because of his work history and experience, not because of the training.
In March 2011, Mr Clapson’s employment with Payless Shoes ended, because he was unable to return to his pre-injury duties, and he started work under contract as a training consultant with an entity known as Franklyn Scholar. In this work, Mr Clapson was a contractor who trained people in retail management. Franklyn Scholar paid him for the work he performed, based on invoices submitted. As a contractor, he claimed tax deductions for expenses related to this work.
The insurer paid voluntary weekly compensation until, by notice issued on 15 July 2011, it advised that it would cease payments on 22 July 2011 because Mr Clapson had commenced his own business. Future payments would be calculated on receipt of his weekly income statement “and required documentation for make up pay”.
In a letter dated 22 September 2011, Mr Clapson’s solicitors disputed the amount of weekly compensation he had received between 2006 and 2010.
In February 2012, the insurer referred Mr Clapson to Nexus Solutions, a rehabilitation provider, to research suitable roles for him in the open labour market and comparable wages for a retail trainer. Nexus Solutions assessed that, on average, retail trainers earned $1,592 per week. This assessment formed the basis for the dispute that subsequently developed.
By notice dated 19 March 2012, the insurer reduced Mr Clapson’s weekly compensation to nil, effective from 19 April 2012. It based that assessment on pre-injury earnings but for the injury of $1,132.17 and Mr Clapson having an ability to earn of $1,592, as assessed by Nexus Solutions.
On 19 September 2012, Mr Clapson was promoted with Franklyn Scholar to be a full-time training consultant, a position he held at the time of the arbitration and, presumably, still holds. At this time, he became an employee of Franklyn Scholar, rather than a contractor.
Mr Clapson disputed the insurer’s assessment of his entitlement to weekly compensation and claimed compensation for the following periods:
(a) 28 May 2005 to 2 October 2007;
(b) 24 July 2011 to 24 April 2012, and
(c) 6 June 2012 to 31 December 2012.
Counsel for Mr Clapson, Mr McManamey, submitted that Mr Clapson’s claim was based on his lost earnings as a referee (T5.6; T16.17). That was because, he contended, “there was a continuity of employment with Payless [Shoes] that’s moved into another employment [with Franklyn Scholar] that pays the same as Payless [Shoes]” (T7.5) and the lost income was the loss from refereeing work.
Counsel for the appellant, Mr Flett, argued that Mr Clapson’s combined income from all sources showed no loss. Mr Flett submitted that, because tax deductions in Mr Clapson’s tax returns included expenses incurred in his work for Franklyn Scholar and in his work refereeing for the appellant, the tax returns did not provide a proper assessment of his income. It was therefore appropriate to look at his ability to earn as determined by Nexus Solutions.
If one took that approach, which Mr Flett said was required by Cage Developments Pty Ltd v Schubert (1983) 151 CLR 584 (Cage Developments) and Nohra v Sydney Plaster and Constructions Pty Ltd [2009] NSWWCCPD 48 (Nohra)), Mr Clapson’s ability to earn was $1,592. As that amount exceeded Mr Clapson’s probable earnings if uninjured (ultimately agreed at $1,155.54), he had no entitlement to weekly compensation from the time he started work with Franklyn Scholar.
At the conclusion of the arbitration, the Arbitrator called for further submissions and held a number of teleconferences. She also directed the parties to file additional wage schedules and, finally, on 23 October 2013, a joint wage schedule. The joint wage schedule set out Mr Clapson’s probable earnings, uninjured, with Payless Shoes and the appellant, his post-injury earnings with Franklyn Scholar, both before and after tax deductions, and his post injury earnings with the appellant.
In a decision delivered on 21 January 2014, the Arbitrator applied the five steps in Mitchell v Central West Health Service (1998) 14 NSWCCR 526 (Mitchell). Step one requires the determination of the worker’s probable weekly earnings but for injury. The Arbitrator accepted that, but for his injury, Mr Clapson would have continued working as a referee and for Payless Shoes. Probable earnings from those two sources were agreed. Though that amount fluctuated over time, the figure as at September 2012 was $1,155.54.
Step two requires the determination of what the worker is earning or would be able to earn in some suitable employment (s 40(2)(b)). The Arbitrator acknowledged that, when approaching this issue, where a worker is running a business the Commission has “broad powers to determine the effect of [tax] deductions” ([55]) (Office of the Director of Public Prosecutions v Olsen [2009] NSWWCCPD 26).
Consistent with Cage Developments, the Arbitrator noted (at [58]) that business profits represent a return on capital and labour and that profit from a business does not represent a worker’s earnings from his or her labour. In the present case, however, the Arbitrator said (at [59]) that “the actual earnings of the business are generally just a supply of [Mr Clapson’s] labour with no significant investment or capital”. Mr Clapson made no extra “profit”, and that put him “in a different type of situation such as if he had a business and that business generated a profit in its own way” ([60]).
The Arbitrator held that Mr Clapson’s income was “not representative of utilisation of extra capital” and she did not believe the evidence allowed her to conclude that the tax deductions gave him a “significant advantage” ([61]). She said that the amount claimed (by Mr Clapson as a tax deduction) was in the vicinity of $250 per week, which “seem[ed] reasonable”, given Mr Clapson’s requirement to use a car for his work with Franklyn Scholar. She was “not persuaded that there should be an allowance for business deductions in this assessment” ([62]). The Arbitrator then looked at the effect of six weeks holidays Mr Clapson took in August/September 2012 during which time he was not paid.
Step three in Mitchell requires the deduction of the step two figure from the step one figure. Before making this calculation, the Arbitrator noted (contrary to Mr McManamey’s approach to the case) that it was arguable that Mr Clapson was earning less with Franklyn Scholar than he had with Payless Shoes, but he had based his case only on his loss from his inability to work as a referee. This meant that either there was no loss from the Monday to Friday work (that is, Mr Clapson earned the same with Franklyn Scholar as he had with Payless Shoes), or, if there was a loss, it was not pursued.
Because of this concession by Mr McManamey, which has not been disputed on appeal, the Arbitrator ignored any loss that “potentially” arose from the “Monday to Friday employment” (the Franklyn Scholar work versus the Payless Shoes work) and she calculated Mr Clapson’s loss solely by reference to his loss of income because of his inability to work as a referee.
In calculating this loss, the Arbitrator compared Mr Clapson’s probable earnings, uninjured, as a referee, to his actual earnings doing intermittent assessing for the appellant. The Arbitrator calculated (at [74]) the loss represented by this approach in a table where Mr Scribberas is a comparable referee performing the work that Mr Clapson would be doing with the appellant but for his injury and the actual earnings are Mr Clapson’s earnings in the intermittent assessing work Mr Clapson has been able to perform since his injury. The table provides:
Date Mr Scribberas Actual earnings Difference 28.5.2005 to 31.12.2005 $260.42 $102.30 $158.12 1.1.2006 to 31.12.2006 $257.88 $0 $257.88 1.1.2007 to 2.10.2007 $260.00 $76.84 $183.16 24.7.2011 to 31.12.2011 $328.27 $60.57 $267.70 1.1.2012 to 23.4.2012 $268.84 $82.69 $186.15 6.6.2012 to 18.9.2012 $268.84 $82.69 $186.15 19.9.2012 to 31.12.2012 $268.84 $82.69 $186.15
Step four of Mitchell requires the exercise of the discretion to determine that the difference given by step three is proper in all the circumstances. Mr Flett submitted that there had to be an adjustment due to the retraining Mr Clapson received after his injury. Given that the Arbitrator disregarded the loss from Mr Clapson’s Monday to Friday employment, though mathematically there could have been a loss, any claim “for an offset by the [appellant] arising from their payment of further study [became] nugatory” ([76]).
Notwithstanding this statement, the Arbitrator noted that Mr Clapson’s training was a two-day course that resulted in him receiving a Certificate IV in Training and Assessment. She did not think the payment of a two-day course “engender[ed] a genesis of retraining to a huge extent” ([80]). She found it “difficult” to make a finding of fact that, because of the two-day course, Mr Clapson had been able to obtain employment that “he otherwise would not have been able to obtain in due course”.
The Arbitrator added (at [82]) that, apart from the evidence already noted, she had no evidence of the retraining. She noted that the WorkFocus Vocational Assessment Report dated 7 April 2010 indicated that Mr Clapson had already developed skills in adult training and assessment with Payless Shoes, that he had been required to train staff across Australia and wanted to formalise those skills with a view to identifying alternative vocational options.
The Arbitrator was therefore not convinced that the retraining increased Mr Clapson’s “ability to earn to any significant extent” ([83]) and she was not persuaded to exercise her discretion to take account of the payment by the appellant for the further study. The Arbitrator concluded that the easiest and fairest method of compensating Mr Clapson was to award him the value of the loss of his refereeing work.
The Commission issued a Certificate of Determination on 21 January 2014 in the following terms:
“The Commission determines:
1. The respondent is to pay the applicant the following compensation pursuant to section 40:
(a)28 May 2005 to 31 December 2005 at $158.12 per week;
(b)1 January 2006 to 31 December 2006 at $257.88 per week;
(c)1 January 2007 to 2 October 2007 at $183.16 per week;
(d)24 July 2011 to 31 December 2011 at $267.70 per week;
(e)1 January 2012 to 23 April 2012 at $186.15 per week;
(f)6 June 2012 to 18 September 2012 at $186.15 per week, and
(g)19 September 2012 to 31 December 2012 at $186.15 per week.
2. The respondent is to have credit for payments made to date.
3. The respondent is to pay the applicants [sic] costs as agreed or assessed. Such costs are certified as complex for both parties. It is determined that a 30 per cent uplift is appropriate in the circumstances.”
The appellant has challenged the whole of the Arbitrator’s award. For the reasons explained below, the appeal is unsuccessful.
ON THE PAPERS
Section 354(6) of the Workplace Injury Management and Workers Compensation Act 1998 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 Nos 1 and 6, the documents that are before me, and the submissions 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
In an amended appeal, filed pursuant to a direction made by me on 2 May 2014, the appellant has asserted that the Arbitrator erred in her application of s 40 and the test in Mitchell, in that she:
(a) accepted Mr Clapson’s tax returns as evidence of his ability to earn (Mr Clapson’s tax returns);
(b) failed to take into account evidence of the amount Mr Clapson was capable of earning (Mr Clapson’s ability to earn);
(c) as a result of (a) and (b), failed to correctly determine Mr Clapson’s current earnings in accordance with the authorities (Mr Clapson’s ability to earn), and
(d) failed to acknowledge improvement in Mr Clapson’s employment with Franklyn Scholar as a result of the injury (the improvement in Mr Clapson’s employment with Franklyn Scholar).
SUBMISSIONS
Appellant’s submissions
The appellant’s solicitor, Ms Edwards, initially prepared the submissions on appeal. As those submissions were largely incomprehensible, failed to properly identify any grounds of appeal and did not comply with Practice Direction No 6, I listed the matter for teleconference on 2 May 2014 and directed that the appellant was to file an amended appeal that complies with the Practice Direction. I made it clear that, in a dispute about wages, there should be some reference to the wages in the submissions (T5.16 – 2 May 2014). The direction made it clear that the appeal was to start anew, with no reference to the submissions previously filed.
In purported compliance with the direction issued on 2 May 2014, the appellant filed, on 9 May 2014, an amended appeal with submissions in support prepared by Mr Jarryd Malouf of counsel. While that document has identified alleged grounds of appeal, in breach of Practice Direction No 6, it has not provided submissions directed to those grounds. Instead, it has provided general submissions about the Arbitrator’s decision and the approach to s 40. That was unsatisfactory and unacceptable. However, as the appellant has now had two opportunities to comply with the Practice Direction, I intend to deal with the appeal on the basis of the document filed on 9 May 2014, the worker’s notice of opposition filed on 19 May 2014 and the submissions in reply filed on 23 May 2014.
Mr Malouf submitted that, taking into account all earnings, Mr Clapson suffered no loss as a result of his injury. He agreed that probable earnings but for the injury (step one) gave a figure of $1,155.54, which he said was the starting point for the purposes of s 40. He said that, “in essence”, the appeal “relates to the application of Step 2 of the Mitchell test”. Dealing with step two, he submitted that the Arbitrator ignored Mr Clapson’s earnings with Payless Shoes and Franklyn Scholar and that it was not appropriate to make a finding solely on the loss of earnings as a referee, or to use Mr Clapson’s current earnings as the amount to apply in step two.
Mr Malouf argued that Mr Clapson’s tax returns “were not sufficient to determine [his] net remuneration” and there was a “distinct lack of financial records and accounts to allow for proper findings for expense, depreciation, return on capital etc”. For example, he said there may have been deductions made for expenses related to Mr Clapson’s employment as a referee, which were not relevant for determining “true earnings from work with Franklyn Scholar”. Though he referred to Mr Flett’s submissions at T25, he did not identify the relevance of that reference.
As Mr Clapson was self-employed, Mr Malouf submitted that one of two approaches was available to determine post-injury earnings. The first required a determination of the worker’s net remuneration from the business, which was arrived at by examining the accounts and making all deductions for expenses. The second required a calculation of the value of the worker’s labour to the business “due to the questions left open by the tax returns”. He referred to pages 14 and 15 of the transcript but did not identify the relevance of those pages or quote any passages from them.
Mr Malouf contended that the Arbitrator should have applied one of the two approaches set out above. He argued that it was more appropriate, due to the questions left open by the tax returns, to calculate the value of Mr Clapson’s labour to the business. Accordingly, it was necessary to take into account the amount Mr Clapson was capable of earning in suitable employment.
Mr Malouf submitted that that amount was $1,592, as per the report from Nexus Solutions. In her calculation of Mr Clapson’s current earnings as a self-employed worker, Mr Malouf said that the Arbitrator failed to take into account this crucial evidence. Had she done so, Mr Clapson would have no entitlement to weekly compensation because he would be capable of earning over $400 per week more than he would have earned in his pre-injury employment.
Dealing with step four, Mr Malouf contended that Mr Clapson’s employment with Franklyn Scholar changed after the injury and, but for the injury, he would not have earned as much as he did with Franklyn Scholar, nor would he be capable of earning as much but for the re-training, which was paid for by the insurer. The Arbitrator erred in finding that the re-training did not improve Mr Clapson’s employability and earning capacity. It was not until after the re-training that Mr Clapson obtained employment with Franklyn Scholar as a retail trainer.
Additionally, Mr Malouf submitted that Mr Clapson’s “concurrent employment went up when his refereeing went down”.
Based on the above, Mr Malouf argued that the Arbitrator erred in not finding that Mr Clapson’s concurrent employment changed significantly as a result of the injury and that his concurrent employment “in fact benefited from the injury”.
Mr Clapson’s submissions
Mr McManamey (correctly) noted that Mr Malouf’s submissions did not address each ground of appeal but made a number of submissions that did not necessarily correlate to the grounds of appeal. That posed some difficulty for him, but he attempted to address what appeared to be the submissions that related to the relevant grounds.
Dealing with the complaint about Mr Clapson’s tax returns, Mr McManamey said that the Arbitrator determined (at [59]) that the earnings of the business were generally just to supply Mr Clapson’s labour with no significant investment of capital and the appellant had not challenged this finding. The tax returns disclosed the taxable income derived from that activity. They also disclosed tax deductions that, in the absence of any other evidence. should be accepted as being deductions properly made being expenses incurred to conduct the business, which was the supply of Mr Clapson’s labour.
Mr McManamey said that the Arbitrator addressed the question of tax deductions and accepted (at [61]) that the deductions represented expenditure incurred for the purposes of Mr Clapson’s employment with Franklyn Scholar and the appellant has not identified any error in that determination and has not suggested that the deductions were not properly made.
An examination of the tax returns shows that the deductions were overwhelmingly for car use. For example, in 2012 there was a deduction of $16,573 for car use supported by a logbook. This deduction equated to $318.71 per week, a figure greater than the tax deduction identified by the Arbitrator at [61] ($250) and considered to be a proper deduction. The tax returns identified the expenses that were claimed and the depreciation allowances that where claimed. The depreciation was limited to the motor vehicle and computers. Both were proper deductions. There are no items in the tax returns such as return on capital or other matters.
In the circumstances, Mr McManamey submitted that the appellant had not identified any error in the Arbitrator accepting Mr Clapson’s tax returns as evidence of his ability to earn.
Dealing with the second ground of appeal, Mr McManamey said that there was no evidence that Mr Clapson was deliberately underutilising his work capacity and, applying Aitkin v Goodyear Tyre & Rubber Co (Aust) Ltd (1945) 46 SR (NSW) 20 (Aitkin), the evidence disclosed what Mr Clapson was earning and the Arbitrator was not required to expressly consider the opinion in the Nexus Solutions report.
Mr McManamey submitted that ground three did not appear to be a separate ground of appeal, but was a submission about the consequences that would flow if either of the first two grounds were made out.
With respect to ground four, Mr McManamey said that, because of the retraining, Mr Clapson was able to seek employment as a retail trainer and he obtained employment with Franklyn Scholar as a retail trainer. Mr Clapson’s earnings as a retail trainer were no greater (and arguably less) than his earnings had he remained in his pre-injury employment at Payless Shoes. His entitlements were determined on the basis of his actual earnings as a retail trainer. Therefore, in the circumstances, the Arbitrator considered the effects of the retraining and properly concluded that the retraining had not resulted in any increase in ability to earn.
Appellant’s submissions in reply
In submissions in reply, prepared by Ms Edwards and not by Mr Malouf, it was contended that:
(a) Mr McManamey’s submissions had not addressed the application of s 43(1)(b) of the 1987 Act;
(b) a number of Mr Clapson’s tax deductions related to “the football aspect of [Mr Clapson’s] work as opposed to his collateral employment” and his car expenses not only related to his employment with Franklyn Scholar but to travel associated with his refereeing work. Ms Edwards referred to Mr Flett’s submissions at T25 of the arbitration and to Mr McManamey’s agreement with that submission at T26 19–22. Ms Edwards said that Mr McManamey had failed to address the “overlapping” in the expenses claimed by Mr Clapson in his tax returns and failed to address the first ground of appeal;
(c) with respect to ground three, Mr McManamey failed to address Mr Malouf’s submissions relating to this ground and had not commented on the Arbitrator’s application of Mitchell, and
(d) with respect to ground four, Mr Clapson’s earnings show an increase in his ability to earn.
DISCUSSION AND FINDINGS
Mr Clapson’s tax returns
I do not accept that the Arbitrator erred in accepting Mr Clapson’s tax returns as evidence of his ability to earn.
The Arbitrator noted (at [59]) that the earnings from (Mr Clapson’s) business were “generally just the supply” of his labour “with no significant investment or capital”. That finding was consistent with the evidence and was correct. In Mr Clapson’s “business”, he trained people in retail management. The “business” had no goodwill and involved no return on capital. There is no evidence of a business name or of business premises. The only return Mr Clapson received was for his labour. It was therefore appropriate for the Arbitrator to look to Mr Clapson’s tax returns, which Mr Flett did not challenge as being inaccurate, to determine his actual earnings.
The tax returns disclosed that Mr Clapson’s deductions were mainly for motor vehicle expenses and, in the absence of any evidence to the contrary, it was open to the Arbitrator to find, as she did, that those expenses were properly incurred in the conduct of his contract work for Franklyn Scholar, which was for the supply of his labour at different places in NSW.
The Arbitrator acknowledged (at [61]) that Mr Clapson’s income, as disclosed in his tax returns, did not represent a return on capital and she concluded that the tax deductions did not give him a “significant advantage”. She added that the deductions “seem[ed] reasonable”, given Mr Clapson’s requirement to use a car for his work with Franklyn Scholar. These findings were consistent with the evidence and disclosed no error.
Neither Mr Malouf nor Ms Edwards explained the relevance of Mr Clapson’s tax deductions for his work as a referee and it was not necessary for Mr McManamey to deal with them in more detail than he did. I note, however, that those deductions, as they appeared in Mr Clapson’s 2012 tax return, were separate and distinct from the Franklyn Scholar deductions and were not taken into account in determining his net (taxable) income from Franklyn Scholar.
Though Mr Malouf and Ms Edwards both referred to the submissions made by Mr Flett at T25 of arbitration, neither explained the relevance of those submissions to the appeal. Nothing in Mr Flett’s submissions at the arbitration advances the appellant’s position on appeal.
Mr Flett submitted (at T25.4) that there were tax deductions for “clothing, subscriptions, donations, travel to agents”. In fact, the deductions to which Mr Flett referred (at page 97 of the Application to Admit Late Documents dated 18 June 2013) were for laundry of uniforms ($150), sunglasses/sunscreen ($85), non-slip shoes ($250) and hats ($10). There was also an item for motor vehicle expense (separate from and in addition to the motor vehicle expenses for the work with Franklyn Scholar) of $2,954. In response to Mr Flett’s submission, Mr McManamey said (at T26.19) that “there is a valid point when one looks at some of the other things, laundry of uniforms, [which] very likely [relate to] football”.
However, as explained above (at [57]), those items were not deducted from Mr Clapson’s income with Franklyn Scholar. It follows that Mr McManamey’s concession, on which Ms Edwards has placed so much weight in her submissions in reply, is of no relevance to the overall assessment of the claim and certainly does not establish any error that advances the appellant’s position.
Mr Flett submitted that, in looking at the tax deductions, the Arbitrator had to “come to a view as to whether those figures represent a real net deduction” (T25.13). The Arbitrator did exactly that. She properly considered the deductions relating to the work with Franklyn Scholar and, for the reasons discussed above, determined that they were appropriate. That approach and conclusion disclosed no error.
The complaint by Ms Edwards that Mr McManamey did not deal with the application of s 43(1)(b) is without substance. That section applies to determine a worker’s average weekly earnings uninjured. The only reference Mr Malouf made to that section was in his introduction, when he said that the correct approach to step one was to determine Mr Clapson’s income from all sources to determine his probable earnings but for the injury. Taking that approach gave the figure of $1,155.54, which was the agreed figure for probable earnings.
Mr Clapson’s ability to earn
The submission that the Arbitrator erred by not using the figure of $1,592 as the figure for Mr Clapson’s ability to earn is incorrect and has ignored long established and binding authority on this issue.
As Mr Clapson was gainfully employed at all relevant times, his actual earnings were, prima facie, the measure of his ability to earn, unless it was established that they were not the proper test. Actual earnings may not be a proper test if a worker is, for some reason unconnected with the injury, deliberately taking lower paid work than could reasonably be expected, is idling or malingering (Aitkin), or for some other reason they do not reflect his true ability to earn (Pira Pty Ltd v Tucker [1996] NSWSC 569; 14 NSWCCR 26 at 31–32).
There is no evidence that Mr Clapson took lower paid work or that he has been idling or malingering. Therefore, the correct approach to step two in Mitchell was to consider Mr Clapson’s actual earnings. That is what the Arbitrator did. It follows that she did not have to consider or adopt the theoretical figure suggested by Nexus Solutions. Indeed, in the circumstances, she would have erred had she done so.
Dealing with the approach to calculating actual earnings, the authorities are clear that, in the case of a self-employed worker, there is “no single way” (Cage Developments at 587) in which actual earnings of such a worker must be determined. Each case will depend on its own facts. The High Court expressly stated (at 587) that it was “undesirable” to confine the Commission within the strict limits of artificial rules.
The High Court added that where, as in the present case, a business consists essentially of the provision of personal services by the worker, and no significant investment of capital is involved, the actual net earnings of the business might properly be seen as representing the actual “reward for [the] labour” of the worker (Cage Developments at 588, citing J & H Timbers Pty Ltd v Nelson (1972) 126 CLR 625 at 652).
Thus, in the present case, where the evidence is clear that Mr Clapson’s income from his contract work with Franklyn Scholar came solely from the provision of his personal services, it was appropriate to look to his net (taxable) income, as disclosed in his tax returns, which were the best evidence on the issue.
The submission that there was a lack of financial records is without substance. The relevant information was in Mr Clapson’s tax returns, the accuracy of which was not challenged. Moreover, the alleged lack of financial records was not a point argued by Mr Flett at the arbitration and it is not open to raise that point for the first time on appeal (University of Wollongong v Metwally (No 2) (1985) 59 ALJR 481 at 483).
The submission that Mr Clapson’s net earnings with Franklyn Scholar, while he was working under contract with that organisation, were not a proper measure of his ability to earn was based on the argument that the net income disclosed in his tax returns was not an accurate measure of his ability to earn. For the reasons explained above, I do not accept that submission.
The tax returns disclosed Mr Clapson’s gross income from Franklyn Scholar and the expenses incurred in earning that income. By far the single most significant expense was for his motor vehicle, which the Arbitrator found to be “reasonable” ([61]). As Mr Clapson was not challenged about any aspect of his expenses, and as it was conceded that he had to use his motor vehicle to earn his income with Franklyn Scholar, that finding was open and disclosed no error.
To determine Mr Clapson’s post-injury earnings, the Arbitrator applied the first of the two approaches urged by Mr Malouf (see [38] above) (I note that the authorities in fact refer to three possible approaches (see Nohra at [73])). She considered Mr Clapson’s earnings with Franklyn Scholar by reference to his net (taxable) remuneration after allowing for reasonable tax deductions. That approach was appropriate, consistent with the authorities and disclosed no error.
It was not appropriate for the Arbitrator to determine the value of Mr Clapson’s labour to the “business” because, as Mr McManamey submitted at the arbitration, the deductions were not by someone “running a … business” (T24.19), but were deductions that, for those performing certain types of employment (under contract), could be justified. That submission was correct. Mr Clapson merely did contract work for Franklyn Scholar and, as previously noted, he did not have a business name, an office, any goodwill, or any of the other trappings of a business.
Working from the joint wage schedule, the Arbitrator’s approach leads to the conclusion that, allowing for the Franklyn Scholar tax deductions, Mr Clapson has (arguably) suffered a loss greater than that found by the Arbitrator. The Arbitrator acknowledged as much at [69], where she said that it was “arguable” that Mr Clapson “now earns less in his Monday to Friday employment [with Franklyn Scholar] than he did whilst at Payless”. Indeed, based on the joint wage schedule, even if one did not allow for the tax deductions with Franklyn Scholar, his loss would (arguably) still be greater than that allowed by the Arbitrator for the period from 6 June 2012 until 31 December 2012.
It follows that, if the Arbitrator erred in her approach, the error appears to favour the appellant to the detriment of the worker. However, as Mr Clapson has not challenged the result, and as the appellant has not identified any relevant error, it is not open to me to recalculate the award.
The complaint that Mr McManamey failed to deal with Mr Malouf’s submissions in support of ground three is incorrect. Mr Malouf made no particular submissions in support of ground three. His submission was that “in essence” the appeal related to the application of step two in Mitchell. Mr McManamey dealt with that point by relying on Aitkin and his other submissions about the tax returns. Those matters have been dealt with above.
The improvement in Mr Clapson’s employment with Franklyn Scholar
The underlying assumption in this ground is that the correct measure of Mr Clapson’s ability to earn is $1,592 per week, as assessed by Nexus Solutions. For the reasons explained above, that is not the correct assessment of Mr Clapson’s ability to earn. It follows that the argument that Mr Clapson’s ability to earn has increased as a result of the re-training is based on a false premise and is incorrect.
Even if this conclusion were wrong, the Arbitrator said (at [82]) that she was “bereft of evidence in relation to the retraining” and, in the absence of evidence, was not satisfied that the retraining had increased Mr Clapson’s ability to earn to any significant extent. In other words, there was no evidence that Mr Clapson secured the job with Franklyn Scholar because of the retraining. Given the state of evidence on this issue, that finding was open and disclosed no error.
Moreover, if the retraining had resulted in a relevant increase in Mr Clapson’s earnings or earning capacity that would be reflected in step two of the analysis, not in the exercise of the discretion in step four. The circumstances in which the discretion may be relevant were discussed and summarised in Raghavadev v Moonlight Mushrooms Pty Ltd [2010] NSWWCCPD 120 at [35].
CONCLUSION
By rejecting the appellant’s contentions, and accepting the approach urged by the worker’s counsel, the Arbitrator effectively found that the pre-injury earnings with Payless Shoes and post-injury earnings with Franklyn Scholar cancelled each other out. That was not strictly correct. Adopting the approach the Arbitrator took to step two, which was correct, Mr Clapson’s earnings with Franklyn Scholar were (arguably) less than his earnings with Payless Shoes.
However, any potential detriment from the Arbitrator’s conclusion falls on Mr Clapson, not on the appellant. As he has not challenged the award and as the parties have made no submissions on the correct figure for step two, other than the appellant’s incorrect submission that it should be $1,592, the Arbitrator’s findings stand. It follows that the employer’s appeal must fail. It was completely misconceived and demonstrated a fundamental misunderstanding of the principles relating to the calculation of entitlements under s 40, as it stood prior to the amendments introduced in 2012.
DECISION
The Arbitrator’s determination of 21 January 2014 is confirmed.
COSTS
The appellant employer is to pay the respondent worker’s costs of the appeal, assessed at $2,530 plus GST.
Bill Roche
Deputy President
28 May 2014
I, JACQUELINE HAGGER, 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
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