Re Brink; Ex Parte Commercial Banking Co of Sydney Ltd

[1980] FCA 78

IN THE FEDERAL COURT OF AUSTRALIA )

)

WESTERN AUSTRALIA DISTRICT REGISTRY	)	No. W.A.G.10 of 1979
1

DIVISION GENERAL )

IN THE MATTER of a reference to the

Commonwealth Employees' Compensatior

Tribunal by GORDON ERROL COLLIS

AND IN THE MATTER of an application

by the AUSTRALIAN TELECOMMUNICATIONS

COMMISSlON ('mEC0M") for reference

of questions of law arising in the

proceedings before the Tribmal to

the Federal Court (S .94A of the

Compensation (Commonwealth Governmer

Employees) Act 1971)

CORAM. Toohey J.

30 May 1980

REASONS FOR JUDGMENT

Counsel addressed in this matter on 20 May. In

the course of the hearing mention was made of a decision to be delivered in the Federal Court by Northrop J. n the

following day, expected to have some bearing	on issues
arising in this reference.

Accordingly, after hearing submissions, I adjourned

the hearing until the following afternoon by which time it

was hoped that Northrop J.'s reasons would be available.

They were and in one respect, at least, they proved directly

relevant. I gave counsel leave to supplement their oral

arguments with written submissions if they wished. They

did so and I now deliver my reasons.

This is a reference by a Compensation Tribunal

under s.94A of the Compensation (Commonwealth Government

Employees) Act 1971 ("the Compensation Act"). That section

2.

empowers a tribunal, of its own motion or at the request

of a party, to refer to the Federal Court for decision a

question of law arising in a proceeding before the tribunal

The reference recites events leading to a

determination by a delegate of the Commissioner for Employees'

Compensation on 29 November 1976. As a result of an accident

giving rise to a liability in the Conunonwealth to pay him

compensation under s.27 of the Compensation Act, Mr. Collis

was awarded damages for personal injuries of $5,324.90

against a negligent third party in the District Court of

Western Australia. The judgment was made up of $4,250

general damages and $1,074.90 special damages.

A sum of $883.60, part of the special damages,

was paid by the Motor Vehicle Insurance Trust as statutory reimbursement of compensation payments made to Mr. Collis and appropriate income tax deductions paid by Telecom to

insurer to Australian Telecommunications Commission ("Telecom";)

the Ccnmnissioner of Taxation pursuant to s.221C of the

Income Tax Assessment Act 1936. The remaining $273.25

was reimbursement of medical expenses paid by Telecom.

The balance of special damages was paid by the Trust to

medical creditors and general damages of	$4,250 were then
paid to Mr. Collis' solicitors.

On 29 November 1976 the delegate made a determination

in these terms:

"having regard to the damages amounting to

$5324.90 recovered by the said Gordon Errol

Collis and to the provisions of sub-section 99(2)

of the said Act, compensation is not payable to

the said Gordon Errol Collis from 5 October 1976

unless and until the amount of compensation which

has been paid to him under the said Act in respect

of the personal injury sustained on 23 November

1973, together with the amount of compensation

which (but for the operation of section 99)

otherwise would have been payable exceeds the

amount of damages he recovered".

Section 20(1) of the Act expresses the function

of the Commissioner to determine all matters and questions

arising under the Act and empowers the Comissioner to do

all things necessary for the carrying out of that function.

The effect of the determination was to abate

compensation until payments made and otherwise payable

exceeded the damages recovered by Mr. Collis.

Section 63 of the Act entitles a party to a

determination to request a reference of -

"all or any of the matters or questions

to which the determination relates to a

Compensation Tribunal for reconsideration".

Through his industrial organisation, Mr. Collis made such

a request. So far as I can see, it was simply that -

"the matter be referred to a Compensation Tribunal for reconsideration in accordance with section 76 of the Act".

No objection seems to have been taken by Telecom to a

reference in those terms.

A perusal of material relating to preliminary

hearings before the tribunal, in particular the tribunal's

directions of 11 June 1979 and its decision of 29 June	1979,
shows that several matters were canvassed. They are

summarised on p.4 of the decision. Most have no relevance

4 .

to this reference and I mention them only to provide the context in which the matter came before this Court. In the main they concerned the impact on compensation of an

award of general damages in which future l'oss of earnings

was not a component and the implications of a deduction

of solicitor and client costs from the amount of general

damages. However one question considered was -

"should the repayment of compensation to

Telecom have been a gross	sum before tax
or a net sum after tax".

In view of an objection to the jurisdiction of

the tribunal taken before this Court, it is important to

note that the matter of income tax (1 put it no more precisely

than that for the moment) was before the tribunal from the

outset. What was identified as "the tax matter" was severed

from the other issues before the tribunal and later became

the subject of a reference to this Court without the tribunal

having made a decision on it.

The reference seeks an answer to the question whether

the amount recovered from the damages awarded to Mr. Collis

should have been the net amount after deduction of income

tax rather than the gross amount of weekly compensation

payments made and whether compensation is not payable to

him from 5 October 1976 unless and until the net amount

of weekly compensation payments or the gross amount exceed

the damages recovered.

At the request of Telecom, the tribunal added

another question in these terms:

5.

"(1)

whether this Tribunal has jurisdiction

to consider whether the amount of weekly

compensation payments recovered by

Telecom out of the damages awarded to the

claimant should be the nett amount

received after deduction of income tax

under P.A.Y .S. (sic) rather than the

gross amount of weekly compensation

payments made to the claimant".

When this question was being formulated by the

tribuna 11, Telecom was strangely coy about the basis of its

objection, in effect seeking to reserve the formulation of

any precise objection until the matter was before this Court.

In my view, the tribunal would have been entirely justified

in refusing to add this question to the reference until it

was known with certainty what the point was. More than

that, I think the tribunal should have declined to add

the question until the point had been clarified.

The tribunal was forced to guess at what the point

might be, as appears from p.4 of the reference. It was a

reasonable guess, the one anyone would have made in the

circumstances, but as it turned out it was wrong.

What Telecom now says is that the tax point was

not properly before the tribunal because it was not referred

to in the Commissioner's determination. Having regard to

the range of matters canvassed before the tribunal with no

apparent objection from Telecom, this is a belated

submission. In the end Telecom did not press the objection

but since this is a reference not an appeal I should say

something about it. The function of the Commissioner is

to determine all matters and questions arising under the

Act. By reason of s.63, a party to a determination may

request the Commissioner to refer to a Compensation Tribunal

6.

for reconsideration -

"all or any of the matters or questions I f

to which the determination relates . . . .

The determination related to the damages recovered,

the provisions of s.99(2) of the Act and to the effect

on further payments of compensation already paid and

otherwise payable. But the reference to damages was

only for the purpose of determining their impact on future

payments of compensation.

The amount paid by the Insurance Trust was no

doubt pursuant to the obligation imposed by s.99(8) of

the Act. Whether or not the amount recovered by Telecom should have included the income tax component, that was not a question to which the determination related; hence

it was not a matter for the reconsideration of the tribunal.

And if in some way the delegate had purported

to decide the amount which the Insurance Trust was obliged

to pay from the damages, that determination would have

been beyond power. It would have been an attempt to assess

the liability of a third person to account to an employer.

For the reasons advanced by Northrop J. in Commonwealth of

Australia v. Goodfellow (21 May 1980). such a determination

is beyond the power of the delegate and in turn of the

tribunal.

Where a person is liable to pay an amount to the

Commonwealth under the Compensation Act -

I , . . . the amount concerned is recoverable by	the Commonwealth from the person as a debt
due to the Commonwealth by action in a court
of competent jurisdiction ' ( S . 119 (1)).

7 .

It is a matter forsuch a court to determine.

As it turns out, question (2). which asks

whether the amount recovered should have included income tax, is moot since Mr. Collis now makes no complaint of the amount paid by the Insurance Trust to Telecom.

As to compensation from 5 October 1976 (the

subject of question ( 3 ) ) , Telecom contends that none is

due until compensation paid and payable, including the

component already paid or payable to the Commissioner of

Taxation, exceeds damages recovered. The basis of this

submission is that when ss.99(2) and (3 ) of the Act speak

of compensation paid or payable, that must be taken to

include money paid or payable from that compensation under

a statutory obligation cast by the Income Tax Assessment Act

to deduct the appropriate amount of income tax and pay it

to the Conmissioner of Taxation.

Counsel for Mr. Collis did not dispute that this

was the proper basis, saying that it suited his client's

purposes to have the total amount deducted thereby enabling

him to return to compensation payments more quickly.

This aspect was considered by Northrop J. in

Cormnonwealth of Australia v. Goodfellow supra and I agree

with his Honour's reasons, summarised in the following

sentences from the judgment.

8.

"In making the deductions and paying

the amounts so deducted to the Comissioner

of Taxation, the Commonwealth discharged

its liability to pay 8.45 compensation to

the respondent. Clearly that liability was

thereby discharged and the compensation was

paid to the respondent."

In this regard, the determination in the present

reference related directly to compensation payable. It

did not purport to determine questions arising between the

Commonwealth or Telecom and a negligent third party or

the recoverability of money by the former from the latter.

Counsel for Telecom made some reference to Atlas

Tiles Ltd. v. Briers (1978) 5 2 A.L.J R. 707. To the extent

that the decision is concerned with the incidence of income

tax in the assessment of damages for l ss of earning capacity,

it was overrruled by the decision of the High Court in Cullen

v. Trappell (1 May 1980). The issues raised in those appeals

do not arise here. I simply draw attention to the judgment

of Aickin J. where reference is made to anomalies that may

arise if damages are assessed on the basis of after-tax

earnings and a worker is required to pay compensation

payments including tax deducted and paid to the	Comissioner
of Taxation.

I would answer the questions in this way

1. No.

2. Does not fall to be answered.

3 . As in para (b) .

The employer agreed to meet the employee's co ts

of this reference in any event. I therefore order that

Telecom pay Mr. Collis' costs	of this reference, to be
taxed.

f