O'Keefe v Sappho's Party Inc
[2009] SADC 50
•24 April 2009
DISTRICT COURT OF SOUTH AUSTRALIA
(Civil)
SHORE v PALIOS MEEGAN & NICHOLSON HOLDINGS P/L & PALIOS (No 2)
[2009] SADC 50
Judgment of His Honour Judge Tilmouth
13 May 2009
DAMAGES - MEASURE AND REMOTENESS OF DAMAGES IN ACTIONS FOR TORT - MEASURE OF DAMAGES
Approach to an assessment of damages flowing from negligent legal advice and the effect of the Workers Rehabilitation & Compensation Act on potential contingencies, discussed.
Workers Rehabilitation and Compensation Act 1986 (SA) s 43, s 35(1), s 35(2)(c), s 35(5), s 38, s 38(4), ; District Court Rules 1987; Marlec v J C Hutton Pty Ltd (1990) 169 CLR 638; Robbins v Harbord (1994) 62 SASR 229; March v Stramare Pty Ltd (1991) 171 CLR 506; Sharman v Evans (1977) 138 CLR 563; Workers Rehabilitation and Compensation Commision v Lu (1995) 83 LSJS 193; Nguyen v Department for Administrative and Information Services [2006] SAWCT 4; Nguyen v State of South Australia (In Right Of The Department for Administrative and Information Services) [2006] SAWCT 45; Commonwealth v Amann Aviation Pty Ltd (1991) 174 CLR 64; Port of Melbourne Authority v Anshun Pty Ltd (1981) 147 CLR 589; Coulton v Holcombe (1986) 162 CLR 1; Howe v South Australia (1992) 58 SASR 310; Workers Rehabilitation and Compensation (General) Regulations 1987 reg 16A; Mitchell v Workcover Corp v MMI Workers Comp (SA) Pty Ltd (T.W. Ingham and Sons Pty Ltd) [1998] SAWCT 60; Cambridge v Parador Pty Ltd [1998] SAWCT 41; McAvoy v BT and LR Churcher (Nzi Workers Comp (SA) Ltd v Workcover [1998] SAWCT 41, referred to.
Copping & Perball Pty Ltd v ANZ McCaughan Ltd (No 2) (1995) 181 LSJS 157; Mitsubishi Motors Australia Ltd v Sosa 11 April 1995 S5084 p11, applied.
Batchelor v Burke (1981) 148 CLR 448; Haines v Bendall (1991) 172 CLR 60; Hungerfords v Walker (1989) 171 CLR 125; Nugent v Workcover/NRMA (International Transport Services Pty Ltd) [2001] SAWCT 140, discussed.
SHORE v PALIOS MEEGAN & NICHOLSON HOLDINGS P/L & PALIOS (No 2)
[2009] SADC 50Preliminary
These reasons deal with issues consequent to the liability judgment delivered on the 23rd January 2009.[1] At that time the court indicated the parties would be further heard on the precise calculations so far as damages was concerned, consistent with the reasons then delivered, as to interest, costs and as against which defendant judgment should be entered.
[1] Shore v Palios Meegan & Nicholson Holdings P/L & Palios [2009] SADC 5
As the latter issues were not argued, these reasons are confined to damages. A multitude of issues were raised, opening a veritable Pandora’s Box, which it now becomes necessary for the court to resolve. These issues were argued on 16 February, 3 March and 1 April 2009. Several subsequent written submissions were filed by the parties, the latest of these being on 17 April 2009.
Central findings
In the principal judgment the court found the defendant solicitor liable in negligence on two bases. These were the failure to advise the plaintiff adequately in relation to the rights she had forgone by entering into an agreement to redeem her extant worker’s compensation entitlements in August 1998, and the failure to advise her adequately as to the consequence redemption might have in the event of subsequent workplace injury.[2]
[2] At [77-81]
When it came to the question of damages, the court made a number of findings. These proceeded so far as to predict the likely course of future events in accordance with the principles set out in Marlec v J C Hutton Pty Ltd.[3]The court found the probabilities were that the plaintiff’s outstanding claim for lump sum compensation for permanent disabilities under s 43 of the Workers Rehabilitation and Compensation Act 1986 (SA),[4] was destined for judicial determination in the Workers Compensation Tribunal.[5] In addition the court found Mrs Shore was likely to remain on worker’s compensation for as long as she could, so that consequently she would not have agreed to redeem at about the two-year mark following the work injury sustained on 3 July 1997.[6]
[3] (1990) 169 CLR 638 at 643 see Judgment para [97]
[4] Hereafter ‘the Act’
[5] At [97]
[6] At [98]
Finally as to the course of events upon a contested determination in the Workers Compensation Tribunal, the court considered the most likely approach of the Tribunal in resolving the s 43 dispute, would have been one based upon “the general medical consensus and the aggregate percentage allocation to each disability”.[7] I proceeded to set out what those were but did not go so far as to assess what this translated to in dollar terms, preferring to give the parties the opportunity to make further submissions on that topic. It will be necessary to return to these findings in some detail later.
[7] At [105]
A preliminary issue
The principal judgment observed that the claim for the damages as formulated was essentially one “founded on the aggregate loss over the years to age 65, less the redemption sum of $49,500”.[8] It further noted by way of narrative that this amounted to $27,129, whereas in fact the total sum claimed before interest was $88,017.[9] The figure of $27,129 was attributable to a reduction of 15% on account of adverse contingencies. The plaintiff continues to support its claim for damages on the same basis, although the dollar figures have since changed to take account of the passage of time elapsing between the delivery of the principal judgment and the entry of an award for damages.[10]
[8] At [89]
[9] T4.18, 16 February 2009
[10] Further and Better Revised Calculation of Plaintiff’s Loss p4
There is no need to revert to the “slip-rule” or r 84.12 of the District Court Rules 1987 in order to correct this oversight, since the error involved making no judgment or order, still less did it amount to a finding of fact. Insofar as that the defendants somewhat disingenuously purport to base their submissions on the premise that the “starting point” for the calculation of damages is $27,129,[11] it is without substance. As noted already the reference to $27,129 was mere narrative, nothing more.
[11] Defendant’s revised submissions 2 March 2009, paragraphs 20.5, 20.6, 26, 46.1
Defendants’ approach to damages
Counsel for the defendants maintained that the court should conduct the assessment of damages “on the basis of certain historical facts which are immutable”.[12] These included the determination of the plaintiff’s s 43 entitlement by MMI in October 1997 of $33,550.20, and the receipt of what it asserted and the court described as “an artificial” uplift or a premium of $33,442.47.[13] It is to be recalled that this figure was reached by taking from the total sum she was paid for redeeming her s 43 claim ($66,992.67), the $33,550.20 fixed by way of the original determination. Consequently it was submitted the court “is saved from the somewhat tortuous process of trying to hypothesise about what a hypothetical Tribunal might have done in 1998”.[14]
[12] T39.3, 3 March 2009
[13] At [92]
[14] T39.16 - .17, 3 March 2009
This line of attack takes the reverse course to that taken on their side during the liability trial. The defendant maintained then that because of the policy of WorkCover and the evidence of its practices, in the absence of an agreement to redeem, the s 43 dispute would inevitably have been driven to a contested judicial determination. Therefore it was submitted the amount the plaintiff received by way of redemption for her s 43 entitlements had to be brought into account, as did the “uplift” amount. These issues were determined in favour of the defendants in the principal judgment. [15]
[15] At [92-100]
During his submissions as to damages, Mr Liversey QC (who was not trial counsel) put a different proposition, one in accordance with that pressed by Mr Stanley QC at the trial. At all events both at trial and in the course of the damages submissions, the defendants made consistent submissions to the effect that, one way or another howsoever calculated, the plaintiff could not prove any loss. It now becomes necessary to consider these issues in some detail.
Defendant’s first submission – no loss proved
This stage in the defendant’s case was that as the plaintiff was paid $33,442.47 over and above the $33,550.20 received on account of the s 43 determination and that as this was more than the $27,129 claimed, there was no loss. This argument must be rejected for reasons already advanced insofar as it is based on a supposed finding of a loss of $27,129.
To the extent that the submission relies upon the foundation that the determination of the s43 entitlement of 31 October 1997 made by MMI Workers Compensation (SA) Ltd in its capacity as claims agent for WorkCover Corporation is “immutable”, it does not stand up to close scrutiny. Such determinations are made administratively, albeit “in pursuance of a statutory function”: Robbins v Harbord,[16] whereas the Tribunal makes judicial determinations.
[16] (1994) 62 SASR 229 at 236
The subject determination was based on just one medical report, that of Dr Wright of 4 August 1997. By the time the matter was likely to be reached in the Tribunal, there were a substantial number of reports as contained in Exhibit P33, so that it was clearly going to have to confront a variety of expert opinions. Furthermore, there was the additional question of the psychiatric component which had not been diagnosed when Dr Wright gave his opinion in August 1997. It follows that the original determination was consumed by subsequent events. Of course the determination in question remains available as a relevant historical event. Even so it cannot be elevated to some kind of bench mark as to what the true s 43 entitlement was, judicially assessed. One must compare like with like.
An alternative argument was that any loss ended with the second redemption agreement of 4 April 2008. It was here contended “the plaintiff redeemed any ongoing entitlements with respect to both the injury sustained on 3 July 1997 and the second injury of 6 July 2004”.[17] The redemption agreement contains a reference in the recitals to both injuries, but otherwise purports to resolve the “undischarged liabilities” referred to therein.[18] This could only have been referrable to the second injury, as by virtue of the first redemption agreements the WorkCover Corporation had discharged all its liabilities with respect to the first.[19] Such a conclusion is not to overlook the recitals; it is one simply giving effect to standard principles of construction relating to contracts.
[17] Defendant’s revised submissions 2 March 2009 paragraph 20.4
[18] Exhibit P13
[19] Exhibit P33 pp 288 and 295
Accordingly there was no subject matter pertaining to the first injury remaining undischarged as at the date of the second redemption agreement. That agreement, on its face specifically relates to a second work disability arising on 6 July 2007 at the Parklyn Senior Citizens Residence, in any case. Indeed recital 8 notes the Corporation “has not been able to consult Resthaven Inc out of whose employment the disability arose on 3 July 1997 as that employer had ceased trading”, so it could hardly be capable of redeeming once again the earlier entitlements. Furthermore, redemption was conclusively affected by statutory means under s 42 of the Act, so that any attempt to redeem again was simply nugatory. Accordingly these submissions must fail.
Defendants’ second submission – adjustment calculation
The premise lying behind the submission on this score commenced with the WorkCover determination of 31st October 1997 and to the consequent redemption payment of $33,550.20, which the plaintiff received by cheque shortly after 19 December 1997. Next the submission was that loss did not continue throughout until the present time, but ended with the second redemption agreement. That position is rejected for reasons just advanced.
From there the argument was advanced that the aggregated weekly payments as calculated by the plaintiff to the date of the damages trial of $115,320 with interest,[20] must be reduced by $83,442.47 on account of the $50,000 (in round figures) received by way of redemption, in addition to the sum attributable to artificial “up-lift” of $33,442.47. It is said that but for redemption, the plaintiff would not have otherwise received these sums. It was further submitted “there is no finding, nor any evidence that, the plaintiff was dissatisfied with the s 43 determination”,[21] citing in support her letter to Ms Palios confessing “I find the amount very acceptable”.[22]
[20] Further and Better Revised Calculation of Plaintiff’s Loss p4
[21] Defendant’s Revised Submissions 2 March 2009 paragraph 19.1
[22] Exhibit P3, p 21
The submission fails in the first place to appreciate the comprehensive nature of the findings in relation to causation and reliance in the original judgment. These were to the effect that “Mrs Shore habitually sought and relied upon the advice of the practitioner” and that she “consistently accepted such advice as was given”.[23] Those findings were based on Mrs Shore’s letters of 26 May, 20 June and 4 July 1998 and the messages she left at the office of Ms Palios, on 1, 19 and 24 June, the telephone calls of 21 July and 22 July 1998 and the plaintiff’s oral evidence.
[23] At [84]
These, in various ways, expressed concern, indecision and dependence on the solicitor (the letters of 15 January and 26 May) and reliance on the practitioner’s advice (the telephone messages of 24 June and 21 July, her letter of 4 July). The evidence coming from Mrs Shore and relied upon in reaching those conclusions, was that she left the decision making up to Ms Palios, and had she been correctly advised, would not have agreed to settle by way of redemption.[24] The submission also overlooks the findings that Mrs Shore instructed her solicitor to lodge the notice of dispute in respect to the s 43 determination for quite legitimate strategic reasons “with a view to increasing the determined sums”.[25] This aspect of the matter has therefore already been conclusively determined adversely to the defence.
[24] At [85] footnote 130, viz T116.16-117.12, 234.1-.15
[25] At [7], [93], [98], evidence of Ms Palios at T371.27-372.10
Questions of reliance are not readily divisible in the manner suggested. Rather, these must be considered in a common sense and practical way: March v Stramare Pty Ltd.[26]As King CJ observed in Copping & Perball Pty Ltd v ANZ McCaughan Ltd (No 2):[27]
[The plaintiff] did not say expressly that he relied upon the precise statement which was found to be negligent. It would be unreasonable to expect him to dissect what [the defendant] told him and to indicate which parts he relied upon. He said that he relied upon what [the defendant] told him. If that is so and if a material part of it was a negligent misstatement the reasonable inference is that he relied in part upon that misstatement.
[26] (1991) 171 CLR 506
[27] (1995) 181 LSJS 157 at 158
Defendants’ third submission – an accelerated benefit?
Next it was contended that the plaintiff had the benefit of the sum of $83,442.47 over a period of 10.5 years, whereas if redemption had not taken place she would have been in receipt of income replacement progressively over that period. To the extent that she received an accelerated lump-sum in advance of her due entitlements, the argument proceeded that in order to properly reflect the actual detriment suffered, a principled assessment must pay regard to the present day value of that sum, which when duly calculated, demonstrated no loss.
Defence counsel relied on Batchelor v Burke.[28] This decision is ordinarily cited for the proposition that interest should not be awarded in respect of the portion of the damages representing earnings lost before trial, but which were replaced by the payment of compensation. Counsel particularly fastened on this passage from the judgment of Gibbs CJ in this respect:[29]
In those circumstances, when the plaintiff who has lost earnings has received compensation instead, he has not been out of pocket by reason of the failure to pay him damages, even though the compensation is repayable when the damages have been received. The circumstance that the compensation was paid by a third person (the employer) obviously does not mean that the payment was irrelevant to the enquiry whether in fact the plaintiff has suffered a practical detriment by the loss of his wages, and it does not provide any reason in law for disregarding the fact that the plaintiff received the compensation in place of the wages.
[28] (1981) 148 CLR 448
[29] At 455
In accordance with the principle which has been accepted in this court and in the Privy Council it would therefore not be right to award interest in respect of that portion of the award which represents damages for earnings lost before trial but replaced by payment of worker’s compensation. It would not be consistent with that principle to award interest simply to discourage defendants from delaying the settlement of claims. The interest is awarded to compensate the plaintiff for the detriment that he has suffered by being kept out of his money and not to punish the defendant for having been dilatory in settling the plaintiff’s claim.
Based on this line of reasoning, it was argued that far from proving detriment, the plaintiff was advantaged by the settlement she did in fact receive. Applying a 6 per cent interest rate to $83,442.47 over 10.5 years,[30] yields a benefit over that time equivalent to a sum of between $133,993.98 and $136,011.23 as of August 1998, such that the plaintiff cannot demonstrate she is worse off. The defence also produced an actuary certificate to prove the dollar value of money paid over in November 1998 as of 3 March 2009.[31] Even if admissible, the line of argument itself should be rejected for the reasons to follow.
[30] Being $50,000 for redemption plus $33,442.47 for “the excessive” s 43 component: Defendant’s revised submissions paragraphs 29 & 33.1
[31] MFI D41
This is not a situation where the defendants have “been kept out of money … theoretically due to” them: Haines v Bendall.[32]The first and most obvious point to be made about this mode of calculation, is that it does not take any account of the monies the plaintiff would have progressively received by way of income maintenance, even assuming the methodology is correct. The second point is that Mrs Shore was inexorably going to become entitled to a significant Tribunal determined award for her s 43 claim in any event, probably within a year or so of August 1998, so the potential value of that would also have to be factored into the equation, which presently it is not.
[32] (1991) 172 CLR 60 at 66
Furthermore, a portion of the settlement sum involved an element of discount already to reflect present day values, at least according to the Morris tables,[33] so this “in-built” process is not factored into the defendants’ calculations either. And it must be remembered that the plaintiff devoted some of the settlement funds to the purchase of a special bed to accommodate her injuries, a minor consideration in the scheme of things, and that she had to pay legal fees of $6,073.30 or $6,805.65.[34] Putting these aspects aside, the simple fact of the matter is that this consideration is relevant, if at all, when it comes to questions of interest. This process does not sound as such in a reduced award, as a question of principle.
[33] Exhibit D40
[34] Exhibit P33, p p 253 and 306
To the extent that argument is based on Hungerfords v Walker,[35] it misconceives the decision. The principle developed in that case focuses on expenses incurred and opportunity costs sustained flowing from money paid away or withheld. There is nothing suggestive of an inverse principle in cases of monies said to be paid in advance. It related to the loss of use of money, as did Batchelor v Burke and Haines v Bendall. For the same reasons, reliance on the case of Sharman v Evans[36] is misplaced. In no sense do these cases stand for the proposition that an award of damages must in effect give credit for the notional use of compensatory money received in advance. For all these reasons the submission must fail.
[35] (1989) 171 CLR 125
[36] (1977) 138 CLR 563 at 580
The section 43 calculation
Based upon the principles outlined by the Full Court in Worker’s Rehabilitation and Compensation Commission v Lu,[37] as applied in the Workers Compensation Tribunal in such cases as Nguyen v Department for Administrative and Information Services[38] and Nguyen v State of South Australia (in right of the Department for Administrative and Information Services),[39] the defendant next submitted that the plaintiff’s entitlements under s 43 would never have exceeded $56,430.[40] Applying those principles to the medical evidence produced at trial, such as it was, the defendants contended damages more than likely fell to be assessed at between $29,124.24 and $42,480.13.[41]
[37] (1995) 83 LSJS 193
[38] [2006] SAWCT 4
[39] [2006] SAWCT 45
[40] Revised submissions para 35.7
[41] Annexures B, C, and D to Defendants’ Revised Submissions
It was complained in addition that the court had not considered all the relevant evidence in its analysis of the issue, as detailed in the table produced in the liability judgment,[42] and brought together in this way:[43]
It can be seen therefore, that in essence not much of a substantial difference in relation to the injuries suffered emerges from the various medical reports. On the other hand it would not be correct in principle to take the higher estimates in the later report of Dr Guirguis, as that would infringe the principles attributed in the Nguyen line of cases, cited above. In the result the general medical consensus and the aggregate percentage allocation to each disability is 15 percent to the lower lumber spine, 10 percent to the cervical spine, 20 percent to the upper right arm and 10 percent to the thoracic spine. No report was identified calling into question the opinions of Dr Craig on the psychiatric side.
The court highlighted the difficulty of assessing damages based solely on the medical reports,[44] but proceeded nevertheless as it was required to: Commonwealth v Amann Aviation Pty Ltd.[45]
[42] At [102] of the reasons
[43] Principle reasons para [105]
[44] At paragraph [106]
[45] (1991) 174 CLR 64 at 83
It is quite apparent from the passage just quoted, that the court found the Workers Compensation Tribunal was likely to approach the matter on the basis of “the general medical consensus and the aggregate percentage allocated to each disability”. This entails no simple question of aggregation. Rather the court was engaging in an exercise of judgment by attempting to identify the consensus to be found in the respective medical opinions.[46]
[46] See for example Cataldi v Central Northern Adelaide Health Service [2008] SAWCT 49 at [52]
The point was made that the medical reports were initially tendered for a very limited purpose, which is true enough. The transcript reflects tender on a mutually agreed basis of “historical significance in the context of the manner in which the claim was handled”.[47] However as the case developed, the defendants ultimately took the stance that the most likely contingency was (as the court ultimately found) a contested hearing in the Tribunal of the s 43 dispute.[48] As a matter of fact they positively elected to pursue that exercise solely on the written medical reports, at the same time maintaining that the court did not “need the oral evidence from the doctors” and it was “to assume that, if those doctors gave evidence, that’s the evidence they would give and that’s the evidence upon which the tribunal would make its determination”.[49] So whatever the initial basis of tender, the reality is that the trial was conducted for this purpose on the basis of those materials. As mentioned already, the court articulated to the reasons for so proceeding and the attitudes taken by the parties at the time.[50] Quite apart from those considerations, the defendants are simply bound by their conduct of the litigation: Port of Melbourne Authority v Anshun Pty Ltd (Anshun Case),[51] and Coulton v Holcombe.[52]
[47] T350.2-.14
[48] T651.12-652.6-.32
[49] T652.6-.32
[50] At paragraph [106]
[51] (1981) 147 CLR 589 at 598 and 603-604
[52] (1986) 162 CLR 1 at 11
The defendants purported to average the figures mentioned in the table. This is an erroneous approach for reasons already identified. This must be so once it is accepted that the court was endeavouring to complete a proper analysis according to principle. This was a typical example of judicial fact finding in the area of disputed medical evidence. Moreover the reports that were identified in the damages hearings support those conclusions rather than detract from them. Insofar as the court considered “no report was identified calling into question the opinions of Dr Craig”, that was literally true, for none was.[53]
[53] At paragraph [105]
At the damages hearing the defendants argued Dr Craig’s opinions were limited or qualified and that there was a subsequent report not considered by the court to the contrary effect. Of course in order to maintain a claim under s 43, the condition must be permanent: Howe v South Australia.[54]Dr Craig in his report of 26 December 1997 diagnosed an adjustment disorder with depressed mood. He recommended “psychodynamic psychotherapy on a monthly basis until her condition stabilises”. He went on to point out that he was not at that point in time in a position to say if the mental injury he diagnosed was permanent. He did note Mrs Shore was prescribed Doxepin, MS Contin and Kapanol.[55] There is no evidence that she ever returned to see him again.
[54] (1992) 58 SASR 310 at323
[55] Exhibit P33 at 33-34
There are two responses to the contentions of the defendants on this subject. The first is that although Dr Craig’s report of 26 December 1997 was qualified in the way mentioned, it is quite clear from the medication then being prescribed that there was an extant psychiatric condition. Dr Craig said nothing conclusive about the condition resolving within any time frame. The second is there is a subsequent report not previously alluded to, which expresses the view that the psychiatric condition was permanent. In his report to MMI of 4 June 1998, the consultant psychiatrist Dr Burvill mentioned the distinct opinion that the plaintiff suffered psychiatric illness, a major component of which was depression, from which he did “not expect Mrs Shore to make a full recovery … for many years”.[56] The factual basis of the submission therefore fails to materialise.
[56] Exhibit P33 at 50
Then it was complained that the court made no reference to a report of Dr Wright of 3 March 1998 in which he made a bald statement to the effect that the major depressive disorder was “now resolved”, even though Mrs Shore was taking Doxepin, Opioids and that he prescribed Kapanol. Dr Wright was an occupational physician professing no expertise in psychiatry. He gave no reasons for expressing that view point. The depressive disorder he appears to have been referring to was one diagnosed by a pain management unit “being to do with grief and loss” following her dismissal.[57] As such this was a different disorder to that diagnosed by Doctors Craig and Burvill. These were in any case made subsequently. Considered in this light, the opinion of Dr Wright was neither relevant nor of any weight in relation to this discrete issue.
[57] Dr Wright’s report 21 October 1997 Exhibit P33 p 27 at 28
In the end the only relevant omission for the table was a reference to the 10 per-cent disability attributable to the thoracic spine by Dr Wright.[58] This, as it happens, coincides with the assessment made by the court anyway, so that the omission was inconsequential. [59]
[58] Exhibit P33 at p 29
[59] At paragraph [105]
Based on this appraisal, the plaintiff propounded the sum of $78,381.27 as the measure of the s 43 entitlement, applying the formulas applicable to the respective disabilities as found by the court, supplied by the Regulation 16A Workers Rehabilitation and Compensation (General) Regulations 1987.[60] So far as the arithmetic went, the defendants did not dispute that.[61] The defence position was that the exercise was unnecessary, and that if undertaken had to conform with principle, being those outlined in the principal judgment and earlier in these reasons.[62]
[60] T7.33, 16 February 2009 and Plaintiff’s Calculation of s 43 Entitlement
[61] T2.11-.30, T29.8-.9, 1 April 2009,
[62] At [101]
Further reference was made to the notion that “an assessment of compensation pursuant to s 43 is not achieved by identifying what might be expected to be the typical extent of permanent disability and then adding to that percentage a further amount that reflects the intensification of symptoms caused by psychological factors”: Nguyen v Department for Administrative and Information Services[63] and Nguyen v The State of South Australia (In Right of the Department for Administrative and Information Services).[64]Applying these principles, the defendants brought forward the calculations contained in Annexures B, C, and D to their revised submission, based as they were on a misunderstanding of the import of the court’s findings.
[63] [2006] SAWCT 4 at [25], Deputy President Gilchrist
[64] [2006] SAWCT 45 at [12] Deputy Presidents Parsons, Hannon and McCouaig
Now, it was correct to point out that the calculations of the plaintiff as concerns the s 43 entitlement, compounds onto the physical injuries a 15 per cent disability ascribed to each by Dr Craig, at first sight potentially in breach of these now well established principles. But when one looks closer there was really no other option. In the first place Dr Craig appears to have coincidentally expressed his view in conformity with those principles. The material parts of his report came by way of response to a request from Ms Palios to assess in percentage terms, the extent to which any psychiatric condition increased the disabilities to the lower back and lumbar spine, the neck and cervical spine, the right arm and shoulder, and to the left arm and shoulder. His response was:[65]
In my opinion, Ms Shore’s psychiatric disability has increased the disability she suffers to the above body parts to the percentile function of 15%. Her psychiatric disability affects her overall functioning to this degree, and I cannot give a separate percentile function of disability to each of the above body parts, as this is not the way in which a psychiatric condition manifests itself.
[65] Exhibit P33 at 33
If a compensable disability can be characterised differently and can therefore be assessed under s 43 in more than one way, the worker is entitled to elect as to how it is to be assessed: Mitchell v Workcover Corp. v MMI Workers Comp. (SA) Pty Ltd (T.W. Ingham and Sons Pty Ltd).[66]
[66] [1998] SAWCT 60
In the second place, as mentioned earlier, the defence did not take issue with the arithmetic, only the premises. In that situation the best the court can do having rejected the substance of the defences’ other complaints, is to assess the likely s 43 component in accordance with the plaintiff’s calculation. On that footing the court holds the probabilities to be that the Workers Compensation Tribunal would have assessed Mrs Shore’s s 43 entitlement at $78,381.27 as of about mid 1999. This calculation is inclusive of a supplementary benefit, as the base sum assessed of $65,210.51[67] exceeds the prescribed sum for that purpose of $56,430.[68] In the result there was no artificial uplift or betterment, at all.
[67] Plaintiff’s calculation of the s43 entitlement
[68] Defendants’ revised submissions paragraph 35.7
Since the plaintiff effectively received $66,992.67 by way of a s 43 payment, this calculation means she was actually compensated at a level $11,388.60 less than she was entitled to be. There is therefore no reason to deduct any amount in order to de-compensate as it were, for the supposed uplift and there is no occasion either for thinking the earlier payments were in some way accelerated, as this would have come her way within about a year of the first redemption anyway.
Finally in relation to this aspect of the matter, the defendants suggested the sum of $2,500 estimated by the court for legal costs attendant on the s 43 assessment, should somehow be brought into account as a further benefit. It is simply not possible to view it that way because it was a sum to be deducted from her award. On the other hand as the plaintiff was under-compensated on the subsequent calculation by $11,388.60, her counsel suggested the $2,500 ought to be offset against that. This submission cannot be accepted either, because the s 43 exercise was designed to define what that entitlement would have been but for the negligent advice, and yet the plaintiff would have incurred those legal costs whatever the outcome.
Reduction or discontinuance of weekly payments revisited
The court analysed and then assessed the remaining relevant contingencies as posited by the parties at paragraphs [110-114] of the principal judgment. It is evident from these that the defendants did not address any particular adverse contingency going beyond two years post injury. Indeed as the court noted then “none in particular were identified by defence counsel”.[69]
[69] At paragraph [113]
The defendants made elaborate submissions during the damages phase of the proceedings in relation to future contingencies based upon the likely course of events, which they contended were bound to occur in subsequent years, under the compensation legislation. The submission commenced with a close examination of s 35 of the Act, and the notion that once the period of incapacity exceeded one year, the WorkCover Corporation or its agent faced a statutory obligation to invoke the provisions of s 35(1)(b)(ii). These obliged it to make a determination – at its option - of the entitlement to weekly payments, either by taking the difference between the worker’s notional weekly earnings and the weekly earnings the worker was actually earning, or alternatively what the worker could earn in suitable employment the worker has a reasonable prospect of obtaining. This was in contrast to the regime which applied over the first year of incapacity, which was far less stringent so far as the worker’s entitlements were concerned.
To appreciate the gravamen of the point it is necessary therefore to set out s 35(1) as it applied between May 1995 and June 2008:
DIVISION 4 – COMPENSATION BY WAY OF INCOME MAINTENANCE
Weekly payments
35. (1) Subject to this Act, where a worker suffers a compensable disability that results in incapacity for work, the worker is entitled to weekly payments in respect of that disability in accordance with the following principles:
(a) if the period of incapacity for work does not exceed one year –
(i) the worker is, if totally incapacitated for work, entitled for the period of incapacity to weekly payments equal to the worker’s notional weekly earnings;
(ii) the worker is, if partially incapacitated for work, entitled for the period of incapacity to weekly payments equal to the difference between the worker’s notional weekly earnings and the weekly earnings that the worker is earning or could earn in suitable employment;
(b) if the period of incapacity for work exceeds one year, the worker is entitled to weekly payments determined in accordance with paragraph (a) for the first year of the period of incapacity and thereafter –
(i)the worker is, if totally incapacitated for work, entitled for the period of incapacity to weekly payments equal to 80 per cent o the worker’s notional weekly earnings;
(ii)the worker is, if partially incapacitated for work, entitled for the period of incapacity to weekly payments equal to 80 per cent of the difference between the worker’s notional weekly earnings and the weekly earnings that the worker is earning or could earn in suitable employment that the worker has a reasonable prospect of obtaining.
Because of the effect of s 35(2)(c), which relates to the situation following those first two years of incapacity, it was argued that unless suitable employment was not in fact available to the worker, or the worker had established she was unemployable, then an assessment would necessarily take place of her continuing entitlements “on the basis that employment of the relevant kind is available to the worker”. Those entitlements were of course to weekly payments until retirement age of 65 years: (s 35(5)). Once again in order to appreciate the subtleties of the point, it is necessary to set out the provisions of s 35(2)(c):
(2) For the purposes of subsection (1)-
…
(c) after the end of the first two years of the period of incapacity, if-
(i)suitable employment is in fact not available to the worker; and
(ii)the worker establishes that the worker is, in effect, unemployable because employment of the relevant kind is not commonly available for a person in the worker's circumstances irrespective of the state of the labour market partial incapacity for work will also be treated as total incapacity, but otherwise an assessment of the weekly earnings the worker could earn in suitable employment after the end of the first two years of the period of incapacity must be made on the basis that employment of the relevant kind is available to the worker.
Hence it was submitted that once two years elapses, the weekly compensation regime is completely different than it was beforehand: the level of the payments was now 80%; an onus was effectively thrown on the worker to demonstrate continuing incapacity; and if there was to be a reduction, that could be done on the basis of either actual or assumed earnings at the election of the Corporation. According to defence counsel, the Corporation was required in this exercise to make the assumption that work was available to the injured worker.
Based on the statutory framework as so construed, it was submitted that a three-year and subsequent annual review was inevitable, because that course was one mandated by s 38 of the Act. This provided:
38—Review of weekly payments
(1) Subject to subsection (2), the Corporation may on its own initiative and shall if requested by a worker or an employer review the amount of the weekly payments made to a worker who has suffered a compensable disability.
(1a) If a period of incapacity continues for more than one year, the Corporation must conduct a review under this section in the second year of incapacity and in each subsequent year of the incapacity.
(1b) A request by a worker or employer must be made in a designated manner and a designated form.
(2) The Corporation is not required to comply with a request for a review under subsection (1) if the request is made within three months from the completion of an earlier review.
(3) Before the Corporation begins a review under this section, the Corporation must give the worker notice, in a designated form—
(a) informing the worker of the proposed review; and
(b)inviting the worker to make written representation to the Corporation on the subject of the review within a reasonable time specified in the notice.
(4) If the Corporation finds on a review under this section that the worker's entitlement to weekly payments has ceased, or has increased or decreased, the Corporation must adjust or discontinue the weekly payments to reflect that finding.
Example—
For example, if the Corporation finds on the review that there has been a change in the extent of the worker's incapacity with a consequent change in the amount the worker is earning or could earn in suitable employment, the Corporation must adjust the weekly payments to reflect the change in entitlement.
(5) For the purposes of a review under this section, the Corporation may, by notice in writing to a worker, who is receiving weekly payments—
(a)require the worker to submit to an examination by a recognised medical expert nominated by the Corporation; or
(b) require the worker to furnish evidence of the worker's earnings.
(6) If a worker fails to comply with a requirement under subsection (5) within the time allowed in the notice, the Corporation may suspend weekly payments to the worker.
(7) On completing the review, the Corporation must give notice, in a designated form, setting out the Corporation's decision on the review, and the rights of review that exist in respect of the decision, to—
(a) the worker; and
(b)the employer from whose employment the compensable disability arose.
To be sure, this aspect of the case creates considerable complexities. Nothing of this kind was put to the court earlier. On the other hand the court is bound to give effect to the statutory regime. As against that, virtually no evidence was led as to the practices of WorkCover in respect of the third and subsequent year reviews, or as to how they actually work and what the consequences may or may not have been. No evidence was adduced at all as to the circumstances in which an assessment was made on an assumed earnings basis. There was some reference to the annual review process, in general terms, during the evidence of Mr Vandapeer, whom it is to be recalled was employed by WorkCover from 1991 in long term claims and later outsourced claims management. From 1998 he joined MMI the claims agent in this particular case, as a legal services coordinator in redemption matters.
He told the court this much about that prospect:[70]
[70] At T 594.13-.25
QOrdinarily, what steps would be taken with respect to a worker who was on payments or had been on weekly payments in excess of two years in 1998.
AS.38 was in operation in 1998. S.38 was used predominantly to consider whether in fact the claims management agent agreed with the evidence being presented or whether in fact there was a case to consider that the worker could be put through a process to establish whether in fact they could be reviewed within the parameters of s.38 in their weekly payments produced on the basis that they were deemed in employment rather than cleared and returned to work in an actual job.
and later:[71]
[71] At T599.14-.19
QPrior to 1998 had you had any other role which gave you some involvement in two-year review processes.
ACertainly the role of compliance coordinator would have required checking files that had gone past two years to ensure that if appropriate the s.38 review had been undertaken.
and still later:[72]
[72] At T600.7-601.1
HIS HONOUR
QWhat about in 1998, did you have any involvement in that process then with MMI.
AYes, certainly based on the fact that once a s.38 process had been undertaken and there was a reduction notice issued to the worker there would be a dispute generated and I would have been involved in giving instructions on matters in dispute where s.38 was the section of the Act that had generated the notice.
QWhat was the position at that time though. after two years was up and the case didn't settle or redeem, was a two year review or s.38 review conducted as a matter of course in every case.
AIt was certainly undertaken as a matter of course, whether it would have happened within a short period of time after that redemption date remains to be seen but it certainly would have been reviewed under s.38 at some stage in the future.
HIS HONOUR
QWhat does that mean, somebody simply asked the question whether or not there should be a reduction on the part of partial incapacity or full incapacity or what did it involve.
AIt would have involved issuing a notice to the worker as per the Act indicating that a s.38 review is being undertaken. It would have indicated that they were required to attend one or many independent medical assessments. It would have involved asking them as part of their rehab program to undertake a vocational assessment. Depending on the result of gathering all of that information then within the provisions of a notice would have been issued indicating reduction was being proposed and giving the worker grounds and time to respond as to why that should not occur.
Apart from this evidence, contrasting positions were taken from either side of the bar table to suggest this process was unlikely or rare, or that it was inevitable, but such assertions do not assist. The plaintiff’s calculation proceeds effectively on a linear basis, subject only to the 15 percent general contingency. This would have been appropriate in a common law assessment of damages of future economic loss, but in this case that approach must be tempered by the requirements of the Act. This effectively imposes statutory contingencies, even though how they were implemented in practice was not ventilated to any significant degree, and certainly not as they applied in relation to the facts of this particular case.
Given the attitude of WorkCover to the question of redemption in general and to its persistent resolve to end all its outstanding liabilities to a particular worker at the one time, it seems most unlikely that it would have allowed Mrs Shore to continue on full worker’s compensation payments to the age of retirement, without attempting to either reduce or discontinue those payments at some stage. What is known is that Mrs Shore did return to work on 17 May 1999. Thereafter she continued in various capacities and with various restrictions, the hours of work increasing over time until the second injury. Her tax records indicate wages of $25,187 for the 1999/2000 financial year, $32,452 for the 2000/2001 financial year, $31,990 for the 2001/2002 financial year, $29,689 in the 2002/2003 financial year. Her income then fell to $17,390 in the following year, coinciding with the second injury.[73] It is reasonable to assume from these that she had recovered a significant degree of working capacity over these years.
[73] Exhibit P14
In that situation it is obvious that after 3 July 2002, Mrs Shore was partially incapacitated at best for her. Given the terms of s 35(1)(b)(ii), in conjunction with what might be described as a statutorily mandated requirement to hold “annual reviews”, it is impossible to think the Corporation would not have made any determination it was otherwise required to make by s 38(4). This must have resulted in a determination to adjust the weekly payments to reflect that finding. Such a review would have inevitably led to a conclusion driven by s 35(1)(b)(ii), that her entitlements were to be reduced because of the strong evidence of increased work capacity, one based on “the weekly earnings that [she] is earning”.
A subsidiary issue
The defendants submitted at one point that the Corporation was likely to have elected for a determination on the basis of the second limb of s 35(1)(b)(ii), thus opting to determine its continuing liability to make weekly payments on the theoretical basis of what Mrs Shore might be capable of earning, based on one example. As pointed out already, no evidence was adduced as to what the Corporation’s policy or practices were in this respect. Such a determination was made in Nugent v Workcover/NRMA (International Transport Services Pty Ltd),[74] and upheld by three judges of the Tribunal, on a construction that s 35(b)(ii) was to be read disjunctively and hence provided for alternative means ‘to be measured against the worker’s notional weekly earnings’.[75] This construction their Honours considered to be consistent with the objectives of the workers compensation scheme erected under the Act, especially when a worker was “found to be under utilising his residual earning capacity”.[76]
[74] [2001] SAWCT 140
[75] At [17]
[76] At [16]
This construction may be accepted for the present purpose and it may also be accepted that the two limbs of the section provide for an election at the discretion of the Corporation. But to extrapolate from one case that this would probably have occurred in this instance, is a rather flimsy basis upon which to draw that conclusion. It hardly forms the foundation for any fixed practice in that respect; one swallow does not make a summer. In any case there is no evidence relied upon to suppose that Mrs Shore was at any relevant time, under-utilising her working capacity, or to suggest the Corporation would make a conscious determination to act in that way, as opposed to working from actual weekly earnings.
Even then this theoretical possibility had to confront the not insubstantial procedural difficulties exposed by such cases as Cambridge v Parador Pty Ltd[77] and McAvoy v B.T. and L.R. Churcher (Nzi Workers Comp. (SA) Ltd v Workcover).[78]These are not difficult to accept given the comments of King CJ in Mitsubishi Motors Australia Ltd v Sosa:[79]
The construction of s35 advanced by the appellants carries with it the implication, in my opinion, that whenever the entitlement under s35 ceases or diminishes, the Corporation or exempt employer is entitled automatically to discontinue weekly payments. That is plainly contrary to the policy of the Act. The legislature in prescribing procedures for the discontinuance or reduction of weekly payments, has recognized that injured workers are dependent for livelihood upon the weekly payments. Arbitrary cessation or reduction could cause great hardship. Procedures are set in place to protect injured workers against arbitrary cessation or reduction of their means of livelihood. The procedures in s36, s37, s38, s39 and s41 are designed for that purpose. It is unthinkable that the legislature, having adopted those protective measures, would largely negate them by conferring in s35 a power on the Corporation or exempt employer to discontinue or reduce weekly payments unilaterally and without compliance with the protective procedures.
This potential contingency was no then more that unsubstantiated speculation.
[77] [1998] SAWCT 41
[78] [1998] SAWCT
[79] Unreported S5084 p11, 11 April 1995, 8 June 1995, Duggan and Nyland JJ concurring
Measuring the loss due to statutory contingencies
The defendants contended there was no proven loss, based on the multiple premises that Mrs Shore returned to work in May 1999, had demonstrated as and from 30 June 2001 the capacity to earn as much as $32,452 gross per annum and that her loss ended with the second redemption agreement of 1 April 2008. On those contingencies they calculate her damages at minus $27,593.44, or alternatively assuming she continued to receive weekly payments uninterrupted to the second redemption, the loss was just $11,533.13.[80] On either view there was no proven loss overall given the sums already in hand. In another calculation founded initially upon the plaintiff’s figures reduced in July 2002 by an “assumed” capacity to earn thereafter the $32,452 earned by her in that year, they formulate the measure of that loss to 31 October 2008 as being $67,910.74.[81]
[80] Defendants’ Revised Submissions paragraphs 58 and 62 respectively
[81] Annexure F, Defendants’ Revised Submissions
However a number of the underlying assumptions on which these calculations depend, cannot be sustained. First, the notion that losses were interrupted by the second redemption agreement has already been rejected, as has a reduction on account of the supposed ‘inflated’ s 43 component. More importantly the court has rejected as highly unlikely that subsequent annual review would be conducted on an “assumed” as opposed to an “actual” earnings basis.
Once it is accepted that the Corporation was required to make an annual determination of the entitlements to weekly payments, as it must be, the probabilities are overwhelming that it was likely to reduce the weekly payments to reflect the finding it was driven to make pursuant to s 38(4) of the Act. This was inevitable following the earnings for the 2001 financial year of $32,400 and of $31,990 during the 2002 financial year and in any case no later - as the defence contended - upon what would effectively have been a fourth year review around early July 2002.
In light of these combined considerations, the court finds that by June 2002 the WorkCover Corporation or its agent would have moved to invoke s 35. It would necessarily have to work on the footing that Mrs Shore was partially incapacitated and that she was actually in receipt of the stated earnings as disclosed by the taxation records. It would then be required to determine the difference between those earnings and 80% of her notional weekly earnings.
The defendants produced a calculation during the reply of Mr Stanley in order to accommodate this contingency, based on the Annexure F.[82] As defence counsel acknowledged during the course of his earlier submissions, when this exercise is to be carried out over the following years, ‘a drop of income at a subsequent year … would necessarily be followed by a favourable determination’.[83] This calculation accepts the yearly losses as claimed to mid 2001, but the exercise was then repeated for the subsequent years, using the same methodology as detailed in annexure F of the defendants’ Revised Submissions. In the result the weekly loss to the date of the second redemption on the defendants’ own figures to 1 October 2008, was $67,910.74.
[82] T43.11 and 44.37 and following, 1 April 2009
[83] T29.16-.17, 1 April 2009
In principle the court accepts this methodology, one modified to accord with the findings and conclusions reached above. Because the parties have not addressed the precise sums, judgment will not be entered until they have had the opportunity to correct any errors in the proposed draft calculations. Since damages have fallen for determination according to known contingencies or predictable events, there is no need to apply any further reduction on account of general contingencies.
This approach takes the base figures directly from the plaintiff’s calculations, based in turn on the figures contained in the WorkCover file in this case and otherwise employing the format for calculating the loss developed by the defendants. The following table takes as a starting point the adjusted notional weekly earnings accepted by both parties, then calculates the difference between those and the actual weekly earnings as also accepted by the parties, then reduced to 80%, less 20% the agreed tax rate, with the object of producing the annual entitlement to weekly payments in accordance with s 35(1)(b)(ii). This process tabulates as follows:
Period
Calculation
Annual Loss
1998/1999
Accepted loss of weekly payments
$16,227
1999/2000
Accepted loss of weekly payments
$ 6,351
2000/2001
Accepted loss of weekly payments
$ 2,398
2001/2002
ANWE ($714.91 x 52) = $37,175
Actual earnings $31,990
Difference between ANWE & AE = $5,185
80% = $4,148
Less 20% for tax = $3,318.40
$ 3,318.40
2002/2003
ANWE ($739.22 x 52) = $38,439
AE = $ 29,689
Differences between ANWE & AE = $8,750
80% = $7,000
Less 20% for tax = $5,600
$5,600
2003/2004
ANWE ($763.61 x 52) = $39,708
AE = $17,390
Difference between ANWE & AE = $22,318
80% = $17,854.40
Less 20% for tax = $14,283.52
$14,283.52
2004/2005
ANWE ($791.86 x 52) = $41,177
AE = $22,819
Difference between ANWE & AE = $18,358
80% = $14,686.40
Less 20% for tax = $11,749.12
$11,749.12
2005/2006
ANWE ($819.58 x 52) = $42,618
AE = $14,981
Difference between ANWE & AE = $27,637
80% = $22,109.60
Less 20% for tax = $17,687.68
$17,687.68
2006/2007
ANWE ($849.90 x 52) = $44,195
AE = $16,494
Difference between ANWE & AE = $27,701
80% = $22,160.80
Less 20% for tax = $17,728.64
$17,728.64
2007/2008
ANWE ($885.60 x 52) = $46,051
AE = $18,351
Difference between ANWE & AE = $27,700
80% = $22,160
Less 20% for tax = $17,728
$17,728
2008/3.3.09
ANWE ($903.30 x 52) = $46,972
At 34.5 weeks = $31,163
AE = $18,718.00
Difference between ANWE & AE = $12,446.85
80% = $9,956.68
Less 20% for tax = $7,965.34
$7,965.34
Aggregate Loss
$121,036.70
Conclusion and orders
The plaintiff has demonstrated she has sustained losses. The preponderance of probabilities are that the Corporation’s liability to her would have taken a certain turn by no later than mid 2002 by making annual determinations reducing her entitlements to weekly payments calculated pursuant to s 35(1)(b)(ii), according to her actual earnings. The parties should be heard on the calculations tabled above, before judgment in a specific amount is entered. The provisional measure of her damages to 3 March 2009 based on the above analysis devolves as follows:
Short-fall in s 43 entitlements $11,388.60
Loss of weekly payments $121,036.70 $132,425.30
Less original s 43 determination $33,550.20
Less Redemption lump sum $50,007.33
Less legal fees $ 2,500.00 $ 86,057.53
TOTAL LOSS: $ 46,367.77
The questions of interest and costs remain for consideration.
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