Santa Sabina College Ltd v Agius - [2009] NSWWCCPD 10

WORKERS COMPENSATION COMMISSION
DETERMINATION OF APPEAL AGAINST A DECISION OF THE COMMISSION CONSTITUTED BY AN ARBITRATOR
CITATION:	Santa Sabina College Ltd v Agius [2009] NSWWCCPD 10
APPELLANT:	Santa Sabina College Ltd
RESPONDENT:	Mari-Luise Agius
INSURER:	Employers Mutual NSW Limited
FILE NUMBER:	A1-4703/08
DATE OF ARBITRATOR’S DECISION:	10 September 2008
DATE OF APPEAL DECISION:	30 January 2009
SUBJECT MATTER OF DECISION:	Change of circumstances; partial incapacity; sections 40 and 55 of the Workers Compensation Act 1987.
PRESIDENTIAL MEMBER:	Acting Deputy President Anthony Candy
HEARING:	On the papers.
REPRESENTATION:	Appellant:	Edwards Michael Lawyers
Respondent:	Creagh & Creagh, Solicitors
ORDERS MADE ON APPEAL:	The decision of the Arbitrator dated 10 September 2008 is confirmed.
The appellant employer is to pay the respondent worker’s costs of the appeal.

BACKGROUND TO THE APPEAL

Mari-Luise Agius (‘the worker’) was employed by Santa Sabina College Ltd (‘the employer’) as a physical education teacher and injured her left knee while undertaking camping and hiking activities with a group of students over a four day period in April 1997. A claim was made shortly afterwards which was referred to the employer’s workers compensation insurer, Employers Mutual NSW Limited (‘EMI’). This claim was accepted and compensation payments were made.
A complicating factor was that the worker had injured the same knee in 1987 while playing soccer and surgery to repair a torn anterior cruciate ligament had been performed after that injury.
Following the injury in 1997 the worker was referred to an orthopaedic surgeon, Dr David Wood, who performed an arthroscopy on 12 June 1997 in the course of which he found a medial meniscal tear which he repaired.
The worker continued as a teacher on selected duties for a time but she gave up that employment in 1998 to pursue retraining as a real estate agent. The worker took over a real estate franchise in Glebe in 2000, later forming a company, Agius Estates Pty Ltd, by which she was employed.
The employer declined liability to continue making payments of compensation beyond 31 October 2000 and accordingly the worker made a claim for weekly compensation from that date, together with lump sums under sections 66 and 67 of the Workers Compensation Act 1987 (‘the 1987 Act’) in respect of loss of use of her left leg at or above the knee. Proceedings were heard before Quirk J in the Compensation Court and on 20 July 2001 her Honour found in favour of the worker awarding weekly compensation of $140 under section 40 of the 1987 Act and a sum pursuant to section 66 which was reduced by 80% because of previous injury or pre-existing condition in accordance with the legislation then in force. It will be necessary to deal more fully with her Honour’s reasons and award in due course.
On 7 June 2004 the worker filed proceedings 8978 -04 in the Workers Compensation Commission (‘the Commission’) seeking an increase in the amount of weekly compensation but this application was subsequently discontinued. However, in proceedings 15101-04 filed on 23 September 2004, the employer sought to terminate the award of Quirk J. This application was refused but the worker sought and was granted leave to seek an increase in the amount of weekly payments pursuant to the discontinued proceedings. In a decision of 13 January 2005 the employer was ordered to pay weekly compensation of $300 from 29 April 2004. An appeal was brought against this decision in which the employer sought to rely on a report subsequently obtained from Dr Wood. Acting Deputy President Handley on 4 April 2006 refused leave to admit such evidence and confirmed the decision of the Arbitrator.
The present proceedings were brought by the employer to seek the termination or diminution in the amount of weekly compensation from 13 June 2005. The proceedings were referred to a different Arbitrator who on 15 September 2008 dismissed the application.
It is from this decision by the Arbitrator that the employer now seeks leave to appeal.

THE DECISION UNDER REVIEW

The ‘Certificate of Determination’, dated 15 September 2008 records the Arbitrator’s orders as follows:
“1. Award for the Respondent Worker.
2.Applicant Employer to pay the Respondent Worker’s costs as agreed or assessed.”

PREVIOUS DECISIONS

The award of the Compensation Court dated 20 July 2001 in matter 52575 of 2000 is as follows:
“1. That the respondent pay the applicant, on the basis of partial incapacity weekly compensation at the rate of $140 from 1^st November 2000, such weekly payment to continue in accordance with the provisions of the Act.
2. That the respondent pay the applicant, as lump sum compensation under section 66, $5,250 in respect of 7% loss of use of the applicant’s left leg at or above the knee (being in respect of 35% loss of use of the applicant’s left leg at or above the knee less the deductible proportion of 80% thereof).
3.That the respondent pay the applicant’s section 60 expenses.
4.That the respondent pay the applicant’s costs forthwith after they have been agreed or assessed.”
The Certificate of Determination dated 13 January 2005 in proceedings 15101-04 records the Arbitrator’s orders as follows:
“1.That pursuant to Rule 5 of the Workers Compensation Commission Rules 2003:
a.leave be granted to the respondent worker to file an application in the same form as that annexed to the Reply;
b.That such application be treated as fresh proceedings; and
c.That such application be determined concurrently with proceedings 15101 of 2004.
d.That such application be filed and served within 48 hours of the hearing on 14 December 2004.
2.That the Applicant employer’s application is dismissed.
3.That the Respondent pay the Applicant weekly compensation at the rate of $300.00 from 29 April 2004 to date under section 40 of the Workers Compensation Act 1987.
4.That such weekly payments continue in accordance with the provisions of the Act.
5.That the Applicant employer pay the Respondent worker’s costs of and incidental to both the application and cross-application as agreed or assessed.”

ISSUE IN DISPUTE

The issue in dispute in the appeal is whether a “change of circumstances” ought to have been found to have been established so as to require a review of the weekly payments pursuant to section 55 of the 1987 Act.

ON THE PAPERS REVIEW

Section 354(6) of the Workplace Injury Management and Workers Compensation Act 1998 (‘the 1998 Act’) provides:
“(6) If the Commission is satisfied that sufficient information has been supplied to it in connection with proceedings, the Commission may exercise functions under this Act without holding any conference or formal hearing.”
Having regard to Practice Directions Numbers 1 and 6, the documents that are before me, and the submission 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.

LEAVE

The employer asserts that the amount of compensation at issue is in excess of $45,000.00 and this does indeed appear to be the case. It is said that the whole of the compensation paid since 13 June 2005 is in dispute. The worker makes no submissions in relation to this.
The monetary thresholds specified in section 352(2) of the 1998 Act have been satisfied and the appeal was lodged within twenty-eight (28) days of the Arbitrator’s decision in compliance with section 352(4) of the 1998 Act. Leave to appeal is accordingly granted.

EVIDENCE

The Employer’s Evidence

The employer relied on a letter from EMI to the worker dated 11 June 2004 enclosing a notice under section 54 of the 1987 Act which stated that her entitlement to workers compensation was disputed but that payments of compensation would continue to be made until the determination of the Commission. A number of documents were enclosed with this notice including the reasons for decision of the first Arbitrator and the reasons given by Acting Deputy President Handley in the appeal against that decision.
There are reports from ARC Rehabilitation & Risk Management Services Pty Ltd dated 13 August 2004 and 23 August 2004. There are four reports of Dr David Wood, dated 15 February 2005, 18 March 2005, 14 May 2008 and 15 May 2008. These are relatively short and I will set them out in full. The letters from EMI which produced these reports were not in evidence.
Dr Wood’s first report is as follows:
“Thank you for your letter regarding Ms Mari-Luise Agius dated 10 February 1005 (sic).
I do not believe there was any specific point in time between April 1997 and the present that would have rendered Ms Agius directly unfit for the demands of work as a Physical Education Teacher. I have seen her on numerous occasions over that period and each time the knee was slowly deteriorating. She was working as a Real Estate Agent when I last saw her and was finding walking up and down stairs of houses difficult which is to be expected.
I cannot specify a point in time when the effects of the injury in 1997 would have overwhelmed anything that occurred in 1997. Her knee has been slowly deteriorating and the medial compartment osteoarthritis has been present for that time. There were no obvious precipitating absolute causes.”
It appears that there are a number of typographical errors in this report. I assume that the second reference to 1997 should be a reference to 1987.
On 18 March 2005 Dr Wood again wrote to EMI. This was the report sought to be relied on in the prior appeal and is as follows:
“Thank you for your letter regarding Ms Mari-Luise Agius dated 15 March 2005.
I do not consider that Ms Agius would have been able to continue working as a PE Teacher indefinitely even if she had not suffered the aggravation of April 1997.
I consider Ms Agius would have had the ability to continue working as a PE Teacher for at most five years after 1997.”
Dr Wood again wrote to EMI on 14 May 2008 in response to a letter of 11 April 2008. Dr Wood’s letter is as follows:
“May I suggest that Acting Deputy President Robin Handley make note of the questions asked of me on the letter from your colleague Kelly Ruhl dated 15 March 2005. The two relevant paragraphs I enclose –
‘However, we would be grateful for your advice in relation to whether, given that it must be accepted that 80% of Ms Agius’ impairment of the left knee was due to events prior to the bushwalking trip in April 1997, she would have been able to continue working as a PE teacher indefinitely even if she had not suffered the aggravation in April of 1997.
If your answer to the above is negative, we would appreciate your opinion in relation to approximately when, on the balance of probabilities, Ms Agius would have been forced to relinquish her employment as a PE teacher, and in this regard you are once again asked to assume that 80% of her left knee disability is due to factors pre-dating April 1997.’
These questions were so obtuse that I believe my simplified answer that Acting Deputy President Robin Handley regarded as obfuscatory, in fact provided a clarity that Employers Mutual NSW Limited had been incapable of producing.
When I saw Ms Agius in 1997 she had medial compartment osteoarthritis. The aggravation that she sustained whilst on camping duties of April 1997 had ceased. As I stated previously, I believe that she would not have been capable of working as a PE Teacher for more than five years from 1997.
If you feel it is possible to put an absolute date on when osteoarthritis would cause a PE teacher to stop training then I will leave it to your company to make that decision.”
Dr Wood provided a further report dated 15 May 2008 headed “To whom it may concern”. This is as follows:
“Ms Mari-Luise Agius was seen by me initially on 29 May 1997. She presented with pain and swelling involving her left knee. Subsequent investigations confirmed grade IV medial compartment osteoarthritis of the knee which was very slow to settle.
At that time I recommended a high tibial osteotomy but she has declined any surgical management since 1997 and has ceased work as a PE Teacher and now is working as a Real Estate Agent.
The degree of damage that Ms Agius had in her left knee would not have increased since 1997 as she already had medial compartment bone on bone changes. While she can get some slow wearing of the actual bone with increased deformity it is near enough to maximal incapacity once there are bone on bone changes.
This pain and swelling can be tolerated for some period of time but I suspect she would have been able to work as a PE teacher for a maximum of five years following 1997.”
The employer also relied on two reports of Dr Mark Ridhalgh, an orthopaedic surgeon, dated 27 February 2008 and 6 May 2008. In the earlier report he referred to an MRI of 16 May 1997 which was said to confirm degenerative changes in the medial compartment of the knee with evidence of previous menisectomy and injury to the anterior crucial (sic) ligament. In response to a letter from EMI which is not in evidence he said that he thought the worker’s ongoing symptoms were unrelated to the work injury of April 1997 and that she had established arthritic changes shown on the MRI before her operation in 1997. He noted on arthroscopy she was found to have gross arthritic changes which did not, he thought, develop between April and June 1997 but were evolving slowly over the preceding ten years following the sports injury and reconstruction. He said he agreed with Dr Wood’s report of 18 March 2005.
In Dr Ridhalgh’s report of 6 May 2008 he replied to a letter from the employer’s solicitors noting that the parties were bound by previous findings of the Compensation Court and the Commission. On that basis he said he believed the aggravation would have ceased at some point after 13 January 2005 with the most likely worst case being six months. He added that the worker had established degenerative disease in her knee with failed anterior cruciate ligament graft which had occurred when she injured her knee playing soccer. She had an exacerbation of her knee condition in April 1997 when her knee was swollen and painful following a day of walking and carrying a heavy backpack. This was the onset of symptoms for her degenerative condition. At surgery in June 1997 there was evidence of extensive degenerative changes with failure of the anterior cruciate ligament graft. It is noteworthy that to this letter Dr Ridhalgh attached an amended page 4 of his earlier report. It is unclear what the amendments were or whether the report before the Arbitrator was that containing the new page 4 or not.
The employer by letter dated 5 May 2008 advised the current gross rate of pay for a teacher employed by Santa Sabina College was $78,027.00 per annum.
There is an investigation report dated 19 February 2008 which deals with observations carried out on the worker’s activities by private inquiry agents for three days, namely 24, 26 and 27 January 2008. She was seen to drive a car and enter her real estate agency. She was observed at a restaurant during which she ate lunch and was seen to run across the road while going to the restaurant. She was also seen to enter a hotel where she spent some time.
Payroll advices of Agius Estates Pty Ltd from 26 May 2007 to 29 January 2008 in respect of the worker show a monthly payment of $2,990.00 or a yearly salary of $35,880.00 described as base salary.
A company tax return for Agius Estates Pty Ltd in respect of the year ended 30 June 2006 shows income of $488,021.00 with total expenses in the same amount. There is a Profit & Loss Statement for the same financial year which shows a profit of approximately $18,935.00 against which unappropriated losses were offset producing a loss of $1,032.00.
ARC Work Assessment Centre has provided a section 40 assessment as to the pay rates of real estate agents in 2008. The gross award rate in respect of an adult real estate agent was $559.10 per week with some agencies paying a commission of between 2% and 5.75% of sale price. A real estate agent contacted stated that take-home pay was in the vicinity of $800.00 per week. Inquiries were made as to the salaries of teachers which were said to be approximately $70,000.00 per annum. The rates of pay for training officers and sales representatives were also given.

The Worker’s Evidence

In the Reply filed on behalf of the worker no evidence was relied upon, however, subsequently a statement was obtained and forwarded to the Commission on 7 August 2008. I think this statement may be briefly summarised as follows. The worker said she continued to suffer from pain and restriction in her knee and she treated pain with medication on a daily basis. Some days the pain was more severe than others. She said she found Saturday work difficult. She was quite stiff and sore at the end of the day and this carried over to Sundays as well. She said that she underwent exercise to maintain muscle bulk and did activities such as rowing, swimming, cycling and stationary cycling. She had not been involved in any competitive vigorous activities since 1997. She commented on the surveillance report and said that she was anxious to get to the team lunch so as not to be late back at work and accordingly she “shuffled” across the road. Her condition had not improved since 2005 and she had given the employer her financial information on a regular basis. She thought that the difference between what she would have been earning in her pre-injury employment and what she is now earning exceeded the amount of $300.00 per week.
At the arbitration hearing on 19 August 2008 the employer’s counsel cross-examined the worker, by leave, in relation to her real estate business. She said that the only income she derived from the business was her salary which was shown on the payroll advices as $35,880.00 per annum. She said that she was seeking to increase the business and had taken on two extra sales persons. The running costs of the business were said to be $55,000.00 per month. She was asked about the salary she paid to other employees and said that the office manager was paid $50,000.00 as was the person who looked after the accounts of the business. A property manager was said to earn about $60,000.00 a year and other employees had smaller salaries. The worker admitted that she normally worked longer hours than her employees, working six days a week and until late into the night if necessary.
The worker relied on the report of Dr Wood following an examination of her by him on 14 July 2008. That report is dated 22 July 2008. It is as follows:
“I reviewed Ms Agius on 14 July 2008. I have not seen her since 13 September 2004.
Her knee remains essentially unchanged. She is restricting activities and is able to work as a real estate agent. She is not currently out to work as a physical education teacher because of her knee which was her employment at the time of the aggravation of her condition in 1997.
Ms Agius’ current condition is in part related to the incident in 1997. That situation has not changed since the matter was determined by the Court in 2001.”

THE ARBITRATOR’S REASONS

The Arbitrator set out the history of injury and the two prior awards in favour of the worker. He noted that the employer submitted that there had been changes of circumstances in relation to the worker’s physical condition and also the worker’s business. He noted that Dr Wood’s opinion was that the worker would not have been able to continue work as a physical education teacher beyond 2002 (that is five years after 1997 and before the previous arbitration which resulted in a finding in favour of the worker). The Arbitrator also considered the opinion of Dr Wood in the report relied on by the worker to which I have referred in the preceding paragraph. He summarised all of Dr Wood’s opinions contained in various reports as being that the worker suffered from progressive osteoarthritis in her knee which would have caused her to cease working as a physical education teacher in about 2002. That condition had been aggravated or accelerated and Dr Wood was of the view that the worker’s current condition, or at least part of it, resulted from the injury of 1997. This was unchanged from what had been previously accepted by Quirk J and the previous Arbitrator.

The Arbitrator then considered Dr Ridhalgh’s opinion. He noted that this doctor in his initial report did not consider the previous finding that the worker continued to suffer from work-related injury up until 2004 at least. In his subsequent report he did however refer to the findings of the Compensation Court and the Workers Compensation Commission and expressed the view that any aggravation would have ceased some time after 13 January 2005 (being the date of the earlier Certificate of Determination). The Arbitrator noted that the doctor did not provide any justification for his opinion and noted that the worker said that she continued to suffer pain and restriction in the knee. There was no improvement to the knee which might be thought to be evidence of the cessation of the aggravation of the 1987 injury. He referred to Dr Ridhalgh’s opinion as being not consistent with history and a mere “ipsa dixit” (sic). The onus was on the employer to show a change of circumstances and the medical evidence was not sufficient, he thought, to satisfy it.
The Arbitrator then turned to the alleged change in circumstances in respect to the worker’s business. The evidence was that the worker was carrying on the same business that she was carrying on in 2004. He did not think that the employing of two extra staff constituted a change in the circumstances. He noted, however, that there had been in an increase in the wage of teachers and the difference between the worker’s probable earnings and actual earnings had increased from $582.38 per week in 2004 to $820.00 (sic) per week in 2008 . He thought it was arguable that the worker was entitled to an increase however he noted there was no application made. The Arbitrator noted that submissions were made by the employer as to matters relevant to the exercise of discretion to reduce the weekly award. He thought these were the same as were taken into account by Quirk J and the previous Arbitrator. In his view there was no change in those factors and he thought it would be inappropriate to make a substantially greater discretionary deduction in order to find that the worker was entitled to less than she was currently receiving.
The addresses of counsel are contained in the transcript. Counsel for the employer submitted that the worker was not entitled to continuing weekly payments because “her compensable claim had been consumed by the degenerative condition”. In relation to the worker’s business it was submitted that it was she who determined what salary she paid herself and the Arbitrator was not restricted to the figure of $38,000.00 ( actually $35,880) per annum as representing the worker’s actual earnings or capacity to earn. He also submitted that Quirk J “sort of got it right” in exercising her discretion and said of the previous Arbitrator that “it’s questionable” and he only had regard to the wages paid to the worker. The Arbitrator was invited to exercise a discretion as to whether in fact there was a differential in terms of her actual earnings and earnings but for injury.

SUBMISSIONS ON APPEAL BY THE EMPLOYER

The employer broadly submits that the Arbitrator erred in determining that no change of circumstances had been established and that he erred in failing to terminate or reduce the award entered in the worker’s favour in accordance with submissions made by counsel at the hearing. Detailed and extensive submissions are made in relation to two separate matters, namely the medical issue and what is termed the earnings issue.
So far as the medical issue is concerned, reliance was placed on the opinions contained in the reports of Dr Wood which were not before Quirk J or the previous Arbitrator, particularly that the worker would not have been able to continue working as a PE Teacher indefinitely even without the aggravation of April 1997. The inconsistency in Dr Wood’s various opinions is relied on. It is submitted that there were three issues which affected the worker’s continuing right to weekly compensation and the question whether the award entered by the Arbitrator in the previous proceedings was “proper in the circumstances of the case” within the meaning of section 40(1) of the 1987 Act. The three issues are stated to be:
“(i)The aggravation had ceased in a medical sense;
(ii)That the incapacity no longer ‘results from’ the 1997 injury within the meaning of section 33 of the 1987 Act; and/or
(iii)That the s.40 discretion should be further exercised on the basis of the assumption required under s.40(2)(a) that the worker would have continued to be employed in the same or some comparable employment (i.e. as a P.E. teacher) was now established to be a false assumption.”
It is submitted that the finding made by the Arbitrator in the present proceedings that the worker would have been unable to continue in her pre-injury employment as a PE teacher by reason of her pre-existing and progressive osteoarthritis regardless of the 1997 injury was a new finding which had not been made before and constituted a “change of circumstances” from those which had previously been found by Quirk J and the previous Arbitrator. Further, the Arbitrator had regard only to the medical question whether aggravation had ceased rather than considering issues (ii) and (iii) referred to.
It is submitted that the opinions of Dr Wood were accepted by the previous Arbitrator and the Arbitrator in these proceedings and those opinions had changed in a material aspect. Once again a reference is made to a finding by the Arbitrator in these proceedings that a pre-existing osteoarthritis would, of its own accord, have caused the worker to cease working as a PE teacher thus negating the statutory presumption the worker would have continued in the same or some comparable employment (section 40(2)(a)) and this was a significant factor in the exercise of the section 40 discretion.
It is accepted that the worker’s probable earnings but for injury were $1,500.52 per week and actual earnings were $690.00 per week, a mathematical difference of $810.52. Reliance is placed on the fact that an employee was paid $60,000.00 per annum ($1,153.85 per week) despite the fact that the worker worked longer hours than that person or another who earned $50,000. It was suggested the worker was voluntarily accepting a reduction in her pay in order to “grow her business” and was in fact earning less than her ability to earn in suitable employment. The employer referred to what was said by Deputy President Fleming in Worthington v Alexander [2005] NSWWCCPD 12 (‘Worthington’) to which I will turn later. I am invited to make a section 40 assessment on the basis that the worker has the ability to earn $1,153.85 per week and the mathematical difference between probable earnings but for injury and that figure is $346.57 per week. In the alternative, it is said that the discrepancy between what the worker pays herself and what she pays others to do much the same work is a powerful basis on which to exercise the statutory discretion under section 40.

DISCUSSION AND FINDINGS

These proceedings were brought pursuant to section 55 of the 1987 Act. That section provides as follows:
“55(1) Any weekly payment of compensation may, because of a change of circumstances, be reviewed by the Commission at the request of the employer or the worker or of the Authority.
(2)   On any such review –
(a)the weekly payment may be ended, reduced or increased (but subject to the provisions of this Division relating to the amount of the weekly payment); and
(b)the amount of the weekly payment (if any) shall, in default of agreement, be determined by the Commission.
(2A) If on any such review a weekly payment of compensation is ended or reduced with effect from a day that is earlier than the date of the Commission’s order on the review, the Commission may order the worker to refund the amount of any payments made to the worker to which the worker is not entitled as a result of the order on the review.
(3)    On any such review, the amount of any weekly payment payable in respect of an injury may be increased to such amount as would have been awarded if the worker had, at the time of injury, been earning the wage or salary which the worker would probably have been earning, at the date of review, if the worker had remained uninjured and continued to be employed in the same or some comparable employment.
(4)    A review under the section may be given such priority as is reasonably practicable, and any necessary directions may be given to expedite the hearing of the matter.”
In Worthington the Deputy President said the following at [28]:
“In the absence of any authority on the precise meaning to be afforded to the phrase ‘change of circumstances’ it should, in my view, be given its ordinary meaning (Cody v J H Nelson Pty Ltd [1947] HCA 17; (1947) 74 CLR 629). Its ordinary meaning must be understood within the context of the 1987 Act. The ‘change of circumstances’ must have relevance to the worker’s entitlement to statutory weekly benefits. As Justice Sheller noted in Weston, [George Weston Foods Ltd t/as TipTop Bakeries v Goldsmith (1998) 17NSWCCR 253] the relevant ‘circumstances’ will be those that were before the decision-maker at the time of the award of weekly benefits and upon which findings in relation to a statutory entitlement were made. Some ‘change[s] of circumstances’ may be irrelevant to an entitlement to weekly benefits, for example, a change of residential address or, in some cases, a change of marital status.”
Sheller JA in Weston said the following at [11]:
“The review under s55 focuses entirely on weekly payments of compensation and does not enable any adjustment on an award made under s66. The Commissioner seems to have regarded estoppel as the bar to any investigation or review of Judge Davidson’s findings. While this is correct (see for example Jackson v Goldsmith (1950) 81 CLR 446 at 466 per Fullagar J) such an investigation or review was, in any event, outside the ambit of s55. Judge Davidson had made findings about the relevant circumstances at the time of his award and nothing in s55 allowed those findings to be questioned. The matter for the Commissioner was the straightforward one whether there had been any change in those circumstances and, if there had, whether that change justified a review of the weekly payments of compensation. No party was or could be estopped by Davidson J’s decision from asserting that there had or had not been a change of circumstances; i.e. that the current circumstances were different from those which Davidson J had found had previously existed.”
His Honour continued at [12] and [13]:
“12.The change of circumstances, on which the respondent relied, was that the respondent was no longer incapacitated. To some extent, Commissioner Turner addressed this but his approach was infected by a belief or concern that the evidence in some way undermined Judge Davidson’s decision. This led him to make a finding ‘that the worker had a greater ability to work and earn on the open labour market than he gave Judge Davidson to believe’. Implicitly the Commissioner was saying that the respondent had misled Judge Davidson about his work capacity. This was not a matter before him and such a finding was not open to him. It indicated error in his approach to the application under s55.
13.The starting point was an unqualified acceptance of Judge Davidson’s findings about the capacity of the respondent at the time he gave his decision, followed by a consideration of whether at the time the Commissioner was dealing with the matter the evidence showed that the circumstances, in this case the respondent’s incapacity, had changed. If the Commissioner was satisfied the incapacity had lessened or no longer existed, it was open to him to review the weekly payments of compensation. But the Commissioner, in my opinion wrongly, directed himself to other questions concerned with the merit of Judge Davidson’s findings.”
Deputy President Fleming summarised the authorities on section 55 in Sarkem Ltd v Marafioti [2006] NSWWCCPD 235:
“
·The onus of proving a ‘change of circumstances’ rests with the party that asserts it (Atlas) [Atlas v Bulli Spinners Pty Ltd (1993) 9 NSWCCR 378].
·A ‘change of circumstances’ is a necessary pre-condition for review pursuant to section 55 (George Weston).
·The starting point for a consideration of whether there has been a change of circumstances is the original decision and its relevant findings (George Weston).
·A ‘change of circumstances’ should it be given this ordinary meaning, it is not restricted to medical issues, but must have relevance to the worker’s entitlement to weekly benefits (Worthington).”
Acting Deputy President O’Grady provided a similar summary in NSW TAFE Commission – North Sydney Institute v Zuk [2006] NSWWCCPD 148 at [34]:
“A consideration of the authorities abovementioned lead me to conclude that the following represents a summary as to the manner of construction in an application of section 55 of the 1987 Act:
(i)A section 55 review is not a reconsideration of facts found in the earlier proceedings.
(ii)The review is an examination of circumstances which may have occurred since the original determination.
(iii)If such circumstances represent a change from those prevailing at the date of the original determination there may be grounds upon which a review is made.
(iv)In applying section 55 of the 1987 Act the starting point is an unqualified acceptance of the original decision maker’s findings.
(v)A review will occur only where it is established that circumstances that were before the original decision maker at the time that the award of weekly benefits and upon which the findings in relation to a statutory entitlement were made have changed.
(vi)Relevant ‘circumstances’ are not restricted to consideration of changes of medical condition or capacity for work.
(vii)The onus is upon the party seeking the review to satisfy the threshold issue of ‘change of circumstances’.”
It was incumbent upon the Arbitrator in this case to approach the application in accordance with the authorities referred to.

THE DECISION OF QUIRK J

The starting point is to consider what was found by Quirk J on 20 July 2001. Counsel for the employer had submitted that there were two issues: whether the worker’s employment was a substantial contributing factor to her left knee injury (section 9A of the 1987 Act) and whether there was any nexus between such injury and her subsequent left knee problem. Her Honour accepted that the bushwalking activity in April 1997 was likely to aggravate underlying changes in her knee and probably caused the tear in her medial meniscus. She accordingly found that that activity was a substantial contributing factor to her knee injury. There was no dispute that the worker’s probable earnings, but for injury, were $891.54 per week and her current earnings as a real estate agent were $500 per week. Her Honour went on to say there was no real evidence to suggest that the worker could not have continued earning what she was earning prior to injury if she had continued performing alternative duties provided by the employer. Her Honour noted that medical evidence was that a good deal of the worker’s incapacity to perform her pre-injury work was due to the earlier injury and although the effects of this were not causing her any problems prior to the work injury they would have caused problems in the future. Her Honour accordingly exercised her discretion pursuant to section 40 of the 1987 Act to reduce the amount to which the worker would otherwise be entitled, namely the maximum statutory rate which at 1 November 2000 was $284.60 per week, to $140.00 per week. The mathematical difference between what the worker would have been earning but for injury and her then current earnings was $391.54 per week. Arguably it is from this latter figure that a discretionary deduction ought to have been made rather than the statutory rate. However, this is not a matter for me nor was it a matter for either of the Arbitrators considering the section 55 applications. It appears to me that the reduction made by her Honour was approximately 64% if $391 is taken as the starting point rather than $284.60 in which case it would have been 50%.

THE DECISION OF THE FIRST ARBITRATOR

The decision of the first arbitrator contains the following summary of the effect of the award of Quirk J at [15]:
“Judge Quirk accepted that her probable earnings uninjured in her pre-injury occupation exceeded her current earnings as a real estate agent by well in excess of the then statutory rate. However, Judge Quirk did not make an award at the full statutory rate for a number of reasons –
a.There was no evidence that she could not have continued to earn at her pre-injury rate by performing alternative duties. That is, by teaching, but not as a physical education teacher.
b.Even though it was accepted she was unfit for her pre-injury duties as a physical education teacher, was no suggestion that she was forced to take up a new career.
c.Although the new career chosen was not an unreasonable choice, there was no evidence to suggest she was unable to continue with lighter duties even if she could not continue as a physical education teacher.
d.The evidence was unclear why she did not choose to either retrain or continue teaching, notwithstanding she had no formal training in some of the subjects she had been asked to teach.
e.The medical evidence suggests that a good deal of her incapacity to perform her pre-injury work was due to the 1987 injury playing soccer. The fairly significant osteoarthritic changes in her knee resulting from the 1987 injury, although not causing problems prior to the work injury, would probably have caused problems in the future.”
The Arbitrator noted that Dr Wilding, an orthopaedic surgeon who examined the worker for the employer, had given an opinion that any aggravation sustained in April 1997 had ceased and that the worker would have ceased work as a physical education teacher in 1999 or 2000.The events of April 1997 had hastened the onset of symptoms in her left knee by one to two years.
Dr Wood considered that the worker still had ongoing aggravation in her medial compartment, although the medial compartment osteoarthritis was pre-existing at the time of aggravation.
Dr Wilding was of opinion that any aggravation of the worker’s pre-existing condition would have ceased by 1999 or 2000 and this was contrary to what had been decided by Quirk J in 2001. The Arbitrator preferred the view of Dr Wood and found that there was no change of circumstances and the worker had an ongoing aggravation.
The worker however sought an increase in weekly payments based on evidence of what she would have been earning if uninjured, namely $1,213.38 per week, and what she was earning, namely $630.00 per week, a difference of $583.38 per week, so that there had been a change of circumstances. The Arbitrator then undertook the exercise of determining how the discretion in section 40 of the 1987 Act should be exercised. The Arbitrator noted that the worker in her evidence sought to answer what are described as inaccuracies in a report of ARC Rehabilitation and Risk Management Services, which I assume go to the reasons why the worker did not continue teaching. The worker pointed out that she had no formal training in teaching Geography or Science and she would have had to study for a further two to three years to bring her teaching levels to an acceptable full-time standard. The Arbitrator went on to find that the worker’s employment as a real estate agent was suitable employment within the meaning of section 43A of the 1987 Act. He thought that the findings which he had made disposed of the first four of the factors relied on by Quirk J in exercising her discretion under section 40. The Arbitrator then turned to what he thought was the remaining factor, namely the effects of the earlier injury. He found that the fairly significant arthritic changes in the knee resulting from the 1987 injury although not causing problems prior to the work injury would probably have done so in the future. This he thought justified a significant reduction in the difference found from $583 to $300 per week. As I have earlier noted, an appeal from this decision was unsuccessful. Some of the argument before the Arbitrator was in relation to the cost of surgery proposed by Dr Wood which surgery has not yet, it seems, been undertaken. The Arbitrator determined that he was not able to make any order as to this on the application before him.
DETERMINATION OF THE APPEAL

An appeal under section 352 of the 1998 Act is by way of review of the decision appealed against. The nature of that review has been considered by the Court of Appeal in a number of decisions which confirm that a Presidential member is not restricted in conducting such review to considering whether there has been an error of fact, law or discretion on the part of the Arbitrator concerned. As Allsop P said in Cook v Midpart Pty Ltd t/as McDonalds Forster & Anor [2008] NSWCA 151 at [10]:
“The decision of this Court in Duinker v St Vincent de Paul Society Aged and Special Services Limited (Lewisham Nursing Home) [2008] NSWCA 127 at [32] (Hodgson JA, with whom Beazley JA and McColl JA agreed), the discussion in State Transit Authority of New South Wales v Chemler [2007] NSWCA 249 at [22]-[29] (Spiegelman CJ, with whom Basten JA and Bryson AJA agreed) and [63]-[66] (Basten JA), and Jeffery v Lintipal Pty Limited [2008] NSWCA 138 at [11] (Basten JA, with whom Hodgson JA agreed) provide power support for the proposition that the appeal in s352 of the WIM Act that is to be ‘by way of review’ (s352(6)) is not limited to the identification and correction of error on the part of the Arbitrator. (That is not to say, however, that any demonstrated error would not be persuasive in any appeal.)”

The Medical Case:

I turn now to this appeal, firstly in relation to what might be termed the medical issue. Dr Wood’s evidence appears crucial to the case for a change of circumstances sought to be made out by the employer, although the opinion of Dr Ridhalgh is also to be considered. In relation to Dr Wood, typographical errors in his reports have rendered his opinions less clear than they might have been. Nor is the terminology used by the doctor, no doubt in response to letters from EMI, entirely helpful. Doing the best I can, it appears to me that in the report of 15 February 2005 Dr Wood says that he cannot point to a specific time when the worker would have been unfit to work as a physical education teacher. To speak of “any specific point in time between April 1997 and the present that would have rendered Ms Agius directly unfit for the demands of work as a Physical Education Teacher” is difficult to understand. Taking the final paragraph of the report of 15 February, I assume that what the doctor intended to say was that he could not specify a time at which the effects of the injury in 1987 would have overwhelmed anything that occurred in 1997. It is clear that Dr Wood’s opinion was that even without the aggravation of April 1997 the worker would not have been able to continue as a PE teacher for more than five years after 1997. Nevertheless the opinions obtained by the employer left open the question whether the incapacity which the worker has results in part from the injury of 1997. In the report obtained by the worker, Dr Wood expresses the opinion that it does. So far as Dr Ridhalgh’s opinion is concerned, I’ve noted that that doctor had prepared an amended page 4 of his earlier report. I think the doctor’s opinion can be summarised in one statement from his earlier report, namely that “I believe the worker’s ongoing symptoms are unrelated to the work injury of April 4, 1997.” He says this because she had established arthritic changes shown on MRI before her operation in 1997. In his report of 6 May 2008 he expressed the view that the effects of aggravation would have ceased at some point after 13 January 2005 with the most likely worst case six months.
In my view the conclusion reached by the Arbitrator that there was no medical evidence of a change of circumstances is correct. The finding by Quirk J in 2001 at [27] of her judgment that “…the earlier injury …would probably have caused problems in the future” has been borne out by later events. It is not, in my opinion, different from evidence now available that such problems have, in fact, occurred so that the worker would not have been able to continue in her previous employment. All the medical evidence, it seems to me, is open to the criticism that it is no more than mere ipse dixit, which I take to be opinions expressed without any reasons given to support them. Dr Ridalgh’s opinion in relation to the period of six months from 13 January 2005 is I think particularly subject to this criticism
The submissions to the Arbitrator appeared to have been made on the basis that because the worker could not have continued as a physical education teacher in any event, that is, had she not been injured in 1997, she was entitled to no payment of compensation. This is not what I understand is required by section 40 of the 1987 Act.
The relevant part of section 40 provides as follows:
“40(1) Entitlement. The weekly payment of compensation to an injured worker in respect of any period of partial incapacity for work is to be an amount not exceeding the reduction in the worker’s weekly earnings, but is to bear such relation to the amount of that reduction as may appear proper in the circumstances of the case.
(2) Calculation of reduction in earnings of worker – general. The reduction in the worker’s weekly earnings is (except as provided by this section) the difference between:
(a)the weekly amount which the worker would probably have been earning as a worker but for the injury and had the worker continued to be employed in the same or some comparable employment (but not exceeding $1,000); and
(b)the average weekly amount which the worker is earning, or would be able to earn in some suitable employment, from time to time after the injury (but not exceeding $1,000).”
The amount of $1,000 is a variable amount and has been substantially increased since section 40 was enacted. The weekly amounts involved do not exceed the sums applicable for any period.
The submission by the employer on this appeal that the assumption required by section 40(2)(a) may be proved to be a false presumption is I think to misstate the position. The authorities establish that it is necessary in applying the terms of section 40 to conclusively assume that the worker had continued to be employed in the same or some comparable employment (Australian Iron & Steel Pty Ltd v Elliott (1966) 67 SR (NSW) 87; Australian Wheat Board v Pantaleo [1984] 3 NSWLR 530; Singh v TAJ(Sydney)Pty Limited (2006) 4 DDCR 557).

The Earnings Case:

Although the Arbitrator found that there was no change of circumstances in relation to the worker’s business, the evidence was clear that there had been a change in relation to what the worker would have been earning but for injury and what she was actually earning since the previous determination of 13 January 2005. There was no dispute that as a physical education teacher the worker would have been earning $78,027.00 per annum and that her earnings from the real estate agency were $35,880.00. The weekly rates are respectively $1,500.00 and $690.00 giving a difference of $810.00. It was urged on behalf of the employer that the Arbitrator should have adopted a greater figure representing the worker’s ability to earn rather than taking the figure which she was in fact paid. The Arbitrator did not refer in his Reasons for Decision to the submissions made on behalf of the employer in this regard, but during addresses said the following at [T14.24]:
“Otherwise it’s a matter of what was said in Aitken (sic) v Good Year as well. You’ve got to see what she is actually earning. It’s prima facie her ability to earn unless there’s evidence otherwise.”
The Arbitrator considered that there was no reason why he should not adopt the actual wage paid to the worker as being the proper measure of her ability to earn.
The case referred to by the Arbitrator is Aitkin v Good Year Tyre & Rubber Co. (Aust) Ltd (1945) 46 SR (NSW) 20. This was a decision of Jordan CJ in which Halse Rogers J and Street J concurred. The passage which is often quoted from Sir Frederick Jordan’s judgment is as follows at 22:
“As to the phrase ‘is earning’, it has been held that if the partially incapacitated worker is earning something his actual earnings must prima facie be taken as the basis, and the rate of compensation provided for by section 9 reduced by a calculation based on the excess of his pre-injury average weekly earnings above what he is actually earning. If, however, it is proved that his actual earnings are not a proper test, because it is for some reason unconnected with his earning power which makes them lower than they should be, the other alternative, what he is ‘able to earn’, must be adopted. This is so where it is shown that he is deliberately taking lower paid work than he could get, or is idling and on this account receiving less than what he could reasonably be expected to obtain, or where his actual earnings have been compulsorily reduced by something unconnected with his injury or general earning power; but if the compulsory outside influence, instead of reducing, increases his actual earnings beyond what his injury would make him otherwise capable of earning, his actual earnings must be taken as the basis. If, however, he is not earning anything, or for some good reason, what he is earning cannot be treated as a proper basis, regard must be had to the alternative basis provided by the section – what he is ‘able to earn’.”
Beazley JA referred to this in Pira Pty Ltd t/as Langdon & Bartley v Tucker (1996) 14 NSWCCR 26 at 31 and 32 as follows:
“… In Aitkin, Jordan CJ held that the test to be applied in determining the rate of compensation to be awarded under section 11 for partial incapacity was, prima facie, the person’s actual earnings unless it is proved that the worker’s actual earnings are not a proper test, because there is some reason unconnected with the worker’s earning power which makes them lower than they should be.
Jordan CJ stated at 22 that this will occur where a worker is ‘deliberately taking lower paid work than he could reasonably be expected to get, or is idling…or if his actual earnings are compulsorily reduced by something unconnected with his injury or general earning power’. These are instances, or examples, only and do not represent an exhaustive list of the circumstances in which it will be inappropriate to apply the ‘prima facie’ test.
It is clear, not only from the statement of Jordan CJ but also from the manner in which this Court applied the test in Ludowici [JC Ludowici & Son Ltd v Cutri (1992) 26 NSWLR 580], that as a first step, one has to approach the matter on a prima facie basis and only move from that basis if the evidence establishes that the actual earnings are not, in the circumstances of the case, a proper test.”
In Ludowici Kirby P said the following at 593:
“(W)here the worker is earning, the average weekly amount produced thereby is normally to be taken as the paragraph (b) component of the equation. It is only otherwise where the decision maker concludes that the worker is able to earn more than that sum in some suitable employment. Then, but only then, is a notional sum taken into account.”
The Arbitrator did not in his reasons consider the arguments put on behalf of the employer that the stated earnings of the worker did not represent her real ability to earn, invoking Aitkin as obviating such inquiry. The worker said that $35,800.00 was the only income she derived from the business. There were four members of staff who were paid more than she, namely: the office manager ($50,000.00), the person who did the internal accounts ($50,000.00), the property manager ($60,000.00) and the sales administrator ($42,000.00). It is not clear from the worker’s evidence whether these were employed in the 2006 financial year about which she was cross examined or at the time of the hearing. The worker was not asked whether she would have been able to do the work of any of these people and she appears to have been employed as a sales person. Looking at the profit and loss statement and tax return for the worker’s company it is difficult to see how the worker could pay herself a greater salary than she was currently being paid.
In her evidence the worker refers to having sold ‘units’ to purchase the business and I note that in page 3 of the tax return for the company there is a reference to shareholders’ funds of $114,565.00. No doubt the worker would be entitled to some return on the capital which she has invested in the real estate business without that being considered as a measure of her ability to earn. There is not however any evidence that she has received any such income from the capital which she has put into the business.
In my opinion, the present case falls into the category of cases where one is permitted to look beyond what the worker is actually receiving by way of wages in order to determine her earning capacity. Where the worker herself determines how much she is paid it is appropriate to look at what she would be able to earn in employment otherwise than by her own company. As Barwick CJ said in J & H Timbers Pty Ltd v Nelson (1972) 126 CLR 625 at 631in a similar situation:
“The proper approach in my opinion to the determination of his earnings in the circumstances is to decide what his labour exercised in the business was worth; that is to say what it would have cost him to employ somebody to do in the business what he himself did or was doing. An alternative approach would be to determine what his work would have been worth in wages if he had been employed by another to do the work….”
See also Cage Developments Pty Ltd v Schubert (1983) 151 CLR 584.
There is no reason why the employer should bear a greater liability for weekly payments by reason of the worker’s preference for working in her own business rather than seeking better paid employment in the marketplace. I do not consider that anything said in Aitkin precludes an inquiry as to the value of the worker’s labour rather than what she is actually paid. Although it was open to the employer at earlier times to advance the argument that one should look beyond stated earnings it has not done so until these proceedings. Thus the question has not been determined.
The Arbitrator was required to inquire whether there had been a change of circumstances. There obviously had, if only in terms of the wages actually received and the probable earnings if uninjured. The decision of Quirk J is conclusive as to the facts or circumstances in 2001. The decision of the previous Arbitrator is similarly conclusive as to those in 2005. However the Arbitrator in 2008 was entitled to find that the facts were then different.
The findings of Quirk J and the two Arbitrators may be more easily understood in the following table:

Probable
Earnings Actual
Earnings
Difference
Weekly
Payment

Quirk J
20/07/2001
$ 891.00

$500.00

$391.00

$140.00

1^st Arbitration
13/01/2005
$1,213.00

$630.00

$583.00

$300.00

2^nd Arbitration
15/09/2008
$1,500.00

$690.00

$810.00

$300.00

I observe that while the worker’s probable earnings as a teacher have increased by 68% over seven years, her actual earnings have only increased by 38%.
Inquiries by ARC as to the earnings of real estate sales staff revealed that some have an income of $800 per week; otherwise there was an award rate in 2008 of $559.10 plus allowances and commission. One would expect that the amount earned would have a direct relationship to sales made. In her evidence the worker said that there was an award rate for estate agents of $28,000 plus a car allowance. This corresponds to the weekly rate ascertained by ARC.
The worker’s evidence was that a sales administrator who also worked as her assistant was paid $42,000. While there is no evidence that the worker could do the jobs of her more highly paid staff, I do not see why the worker could not do this work. If the amount which the worker was paid in 2001 is increased by the same percentage as that by which her probable earnings have increased, namely 68%, a figure of $840 is arrived at. This corresponds with the evidence otherwise available as to the earnings of real estate agents and the worker’s assistant. I consider that the worker would be able to earn that sum if she sought employment as a real estate agent and that is the measure of her ability to earn subject to what follows. To this must be added a modest sum in respect of her private use of the motor vehicle which was supplied to her. There is no real evidence as to this but I think I would be justified in increasing her weekly ability to earn, including the value of the private use of the motor vehicle, to $900.
The difference between her probable earnings uninjured and her ability to earn in suitable employment is $600 per week. A substantial reduction is required to be made from this pursuant to section 40(1) to take account of the circumstances of the case, particularly that the worker would not have been able to continue as a physical education teacher by reason of her pre-existing injury. I consider a reduction to $300 per week is appropriate, which is the sum the worker is currently being paid.
Thus I have come to the same conclusion as the Arbitrator, although by a different route, and I am of the opinion that the application by the employer for the termination or reduction of the weekly payments was correctly dismissed by him.

DECISION

The decision of the Arbitrator dated 10 September 2008 is confirmed.

COSTS

The appellant employer is to pay the respondent worker’s costs of the appeal.

Anthony Candy
Acting Deputy President
30 January 2009

I, TUYET WALLIS, CERTIFY THAT THIS IS A TRUE AND ACCURATE RECORD OF THE REASONS FOR DECISION OF ANTHONY CANDY, ACTING DEPUTY PRESIDENT OF THE WORKERS COMPENSATION COMMISSION.

ASSOCIATE

Probable Earnings	Actual Earnings	Difference	Weekly Payment
Quirk J 20/07/2001	$ 891.00	$500.00	$391.00	$140.00
1^st Arbitration 13/01/2005	$1,213.00	$630.00	$583.00	$300.00
2^nd Arbitration 15/09/2008	$1,500.00	$690.00	$810.00	$300.00