Sarkem Ltd v Marafioti
[2006] NSWWCCPD 235
•19 September 2006
WORKERS COMPENSATION COMMISSION
DETERMINATION OF APPEAL AGAINST A DECISION OF THE COMMISSION CONSTITUTED BY AN ARBITRATOR
CITATION:Sarkem Limited v Marafioti [2006] NSWWCCPD 235
APPELLANT: Sarkem Limited
RESPONDENT: Ross Marafioti
INSURER:QBE Workers Compensation (NSW) Limited
FILE NUMBER: WCC21058-04
DATE OF ARBITRATOR’S DECISION: 14 September 2005
DATE OF APPEAL DECISION: 19 September 2006
SUBJECT MATTER OF DECISION: Review of Weekly Payments; Section 40 of the Workers Compensation Act 1987; Approach to ‘change of circumstances’ application pursuant to Section 55 of the Workers Compensation Act 1987; weight of evidence; findings of credit; adequacy of reasons.
PRESIDENTIAL MEMBER: Dr Gabriel Fleming, Deputy President
HEARING:On the Papers
REPRESENTATION: Appellant: McCulloch & Buggy
Solicitors
Respondent: Carroll & O’Dea, Lawyers
ORDERS MADE ON APPEAL: 1. Leave to Appeal is granted
2.The decision of the Arbitrator, dated 14 September 2005, is revoked and the matter is remitted to a different Arbitrator for determination afresh.
3.No order as to the costs of the appeal.
INDEX
PAGE
BACKGROUND TO THE APPEAL 2
THE DECISION UNDER REVIEW 3
ISSUES IN DISPUTE 3
ON THE PAPERS REVIEW 4
LEAVE 4
CONSIDERATION OF THE ISSUES 5
Review of findings of Credit 5
Capacity to Work 7
Ability to Earn 9
Dependency 11
Conclusions on Review of Findings on Credit 12
Weight of Evidence/Medical Evidence 13
Application of Section 40 of the 1987 Act 13
Application of Section 55 of the 1987 Act 14
Adequacy of Reasons 16
Arbitrator’s Costs Order 17
Summary of Findings on Appeal 17
DECISION 18
COSTS 18
BACKGROUND TO APPEAL
On 11 October 2005 Sarkem Limited (‘Sarkem/the Appellant Employer’) sought leave to bring an ‘Appeal Against Decision of Arbitrator’ in the Workers Compensation Commission against a decision of a Commission Arbitrator, dated 14 September 2005. QBE Workers Compensation (NSW) Limited (‘the Insurer’) is the relevant workers compensation insurer. It appeared on behalf of Sarkem in the Commission proceedings.
The Respondent to the Appeal is Ross Marafioti (‘Mr Marafioti/the Respondent Worker’). Mr Marafioti suffered a number of injuries to his back, left leg and right thumb, when working for Sarkem as a ‘chemical plant operator’ from 1992 to 1993. His Honour, Judge Bishop of the Compensation Court of NSW found Mr Marafioti to be partially incapacitated and, on 14 March 1995, awarded him compensation for his injuries, including weekly benefits compensation. He has been in receipt of weekly benefits compensation at the statutory rate for a married man with a dependent spouse and two dependent children since 1 October 1994.
On 23 December 2005 the Insurer lodged an ‘Application to Resolve a Dispute’ in the Commission seeking a variation of the Compensation Court order of 14 March 1995 in so far as it related to the ongoing award of weekly compensation to Mr Marafioti. The Insurer claimed that there had been a ‘change of circumstances’ that should give rise to a review of the award (pursuant to section 55 of the Workers Compensation Act 1987 (‘the 1987 Act’)). The ‘change of circumstances’ is said to have arisen since the award made by Judge Bishop. The Insurer submits that Mr Marafioti’s weekly benefit should be terminated or at least reduced to reflect the ‘change of circumstances’. It also argues that the change occurred from at least 1998, and possibly earlier, and that Mr Marafioti has received a significant overpayment that should be refunded.
The dispute went before a Commission Arbitrator who made a determination on 14 September 2005. At issue was not only Mr Marafioti’s future entitlement to weekly benefits compensation, but whether or not he had been overpaid an entitlement on the basis of the claimed dependency of his wife.
There are now two appeals on foot in relation to the Arbitrator’s decision, which is set out below. In this appeal the Insurer challenges the Arbitrator’s finding that Mr Marafioti continues to be entitled to weekly benefits compensation. Mr Marafioti has also challenged the Arbitrator’s decision, on the basis that his entitlement should not be reduced in relation to the dependency of his spouse. Both appeals obviously have the same facts, however they raise separate grounds of appeal and different legal issues. Both matters involve a degree of legal complexity. Mr Marafioti’s appeal is considered separately in Marafioti v Sarkem Limited [2006] NSWWCCPD 236. Where evidence and submissions may be cross-referenced to avoid duplication that is indicated in the reasons. This statement of reasons concerns the challenge to the Arbitrator’s decision made by the Insurer.
THE DECISION UNDER REVIEW
The ‘Certificate of Determination’, dated 14 September 2005, records the Arbitrator’s orders as follows:
“The determination of the Commission in this matter is as follows:
1. The weekly compensation of the Respondent, Mr Marafioti, is reduced by the removal of any entitlement to compensation in respect of a dependent spouse, with effect from 1 July 1996.
2. The Respondent [Mr Marafioti] is to refund to the Insurer all amounts received in respect of the dependent spouse benefit from 1 July 1996, less amounts received in respect of his spouse when she was not working for a two-month period during 1998 and not working for a three-month period during 2001.
3. The parties’ legal representative are to confer directly with one another within seven days of the date of this decision to confirm the amount to be repaid under (2) above, and the terms on which it is to be repaid. Any disagreement in this regard may be referred back to the Commission for determination.
4. The Applicant is to pay the Respondent’s costs as agreed or assessed.”
The Insurer seeks to have the Arbitrator’s decision set aside. It submits that the Arbitrator should have terminated Mr Marafioti’s entitlement to weekly benefits compensation and awarded a further refund of amounts paid since July 1998.
ISSUES IN DISPUTE
The issues in dispute in the appeal as submitted by the Insurer (at [8] to [16] of the appeal application) are:
“Grounds of Appeal
1.That the Arbitrator failed to properly assess the Respondent Worker’s evidence given the credit issues raised and proved by the Appellant.
2. That the Arbitrator failed to make determinations in relation to the honesty and reliability of Respondent Worker’s evidence.
3.That, in spite of adverse findings being made about some of the Respondent Worker’s evidence, the Arbitrator accepted that evidence without independent or objective corroboration.
4That the Arbitrator failed to have regard to the weight of the evidence in support of terminating the Award.
5.That the Arbitrator erred in finding that there had not been a change in circumstances.
6.That the Arbitrator failed to give adequate reasons for his findings and decisions.
7.That the Arbitrator erred in his application of section 40 of the Workers Compensation Act 1987.
8.That the Arbitrator erred in his application of section 55 of the Workers Compensation Act 1987.
9.That the Arbitrator erred in ordering the Appellant to pay the Respondent Worker’s costs.”
Both parties made written submissions in relation to the issues in dispute.
ON THE PAPERS REVIEW
Section 354(6) of 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.”
I have before me all of the evidence and submissions that were before the Arbitrator and written submissions on appeal. There is no fresh evidence in the appeal. I note that there were four surveillance videotapes submitted in evidence to the Arbitrator. The Arbitrator’s decision refers to the surveillance videos as “inconclusive” and I therefore assume they were viewed. I note however that the videotapes are not listed in the “Information for the Record” which appears at the end of the Arbitrator’s decision. For reasons that should become obvious from this decision I have not found it necessary to view the videotapes. The matter is to be reheard afresh and the Arbitrator who has that task must decide the relevance and value of those tapes.
I have considered the parties submissions on this issue and 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
Before proceeding to deal with an appeal the Commission must determine whether the application meets the requirements of section 352 of the 1998 Act which provides:
“352 Appeal against decision of Commission constituted by Arbitrator
(1)A party to a dispute in connection with a claim for compensation may, with leave of the Commission constituted by a Presidential member, appeal to the Commission as so constituted against a decision in respect of the dispute by the Commission constituted by an Arbitrator.
(2)The Commission is not to grant leave to appeal unless the amount of compensation at issue on the appeal is both:
(a) at least $5,000 (or such other amount as may be prescribed by the regulations), and
(b) at least 20% of the amount awarded in the decision appealed against.
(3)If the Commission refuses to grant leave to appeal, the Commission must state reasons for the refusal in writing to the parties.
(4)An appeal can only be made within 28 days after the making of the decision appealed against.
(5)An appeal under this section is to be by way of review of the decision appealed against.
(6)Evidence that is fresh evidence or evidence in addition to or in substitution for the evidence received in relation to the decision appealed against may not be given on an appeal to the Commission except with the leave of the Commission.
(7)On appeal, the decision may be confirmed or may be revoked and a new decision made in its place. Alternatively, the matter may be remitted back to the Arbitrator concerned, or to another Arbitrator, for determination in accordance with any decision or directions of the Commission.
(8)In this section, decision includes an award, interim award, order, determination, ruling and direction.”
The appeal was lodged on 11 October 2005, which is within 28 days of the Arbitrator’s decision in compliance with section 352(4) of the 1998 Act.
The Insurer submits that the amount of the weekly payments in dispute is at least $241,040.80. Notwithstanding the Arbitrator’s order did not specify an exact monetary amount (Mawson v Fletchers International Exports Pty Ltd [2002] NSWWCCPD 5), the amount of compensation at issue in the appeal is greater than $5000 (Fletchers International Exports Pty Ltd v Regan [2004] NSWWCCPD 7).
Leave to appeal is granted.
CONSIDERATION OF THE ISSUES
Review of Findings of Credit
The Insurer’s first three grounds of appeal concern the Arbitrator’s findings in relation to Mr Marafioti’s credit as a witness in his own cause. The Insurer alleges:
·That the Arbitrator failed to properly assess the Respondent Worker’s evidence given the credit issues raised and proved by the Appellant.
·That the Arbitrator failed to make determinations in relation to the honesty and reliability of Respondent Worker’s evidence.
·That, in spite of adverse findings being made about some of the Respondent Worker’s evidence, the Arbitrator accepted that evidence without independent or objective corroboration.
The Insurer submits that “the central point of this appeal is based on findings related to [Mr Marafioti’s] credit and what the Arbitrator subsequently did once making those findings”. It argues that the Arbitrator, having found Mr Marafioti’s evidence to be unreliable in relation to some matters, was under a duty to treat the entirety of his evidence with caution and to seek out independent corroboration of claimed facts. The Insurer places significant reliance upon Malco Engineering Pty Limited v Feereira & Others (1994) 10 NSWCCR 117 (‘Malco’) to support this submission. The Respondent Worker distinguishes Malco on the basis that it concerned a witness who was found to have deliberately given false evidence under oath. Even if, on the facts of this matter, Mr Marafioti were found to have been untruthful in his evidence, “much of the case made out by the Worker was corroborated”.
In Malco Handley JA, said (at [118] that the trial judge had erred “by simply deciding to quarantine the worker’s proved lies and not use or ‘transpose’ them in order to carefully weigh other parts of his evidence which were neither corroborated nor shown to be false”.
Malco was considered, with approval, by the Court of Appeal in Divall v Mifsud [2005] NSWCA 447, where Campbell AJA said:
“41 In Malco Engineering Pty Ltd vFerreira (Supreme Court, March 1994, unreported) the trial judge expressly did not take into account untruthful evidence on material matters in assessing the worker’s credit on other issues. A new trial was ordered. Handley JA said:
‘This did not necessarily require the trial Judge to reject the whole of his evidence. Nor on the other hand was the trial judge entitled to simply accept the whole of his evidence except those parts that the respondents had established was false.’
In my opinion the perjury by the worker required the trial Judge to carefully assess the rest of his evidence in order to determine its honesty and reliability. Some of his evidence may have been acceptable because it was confirmed by other independent or objective evidence. However where the worker’s evidence was not independently supported it clearly had to be assessed with great care to determine whether it could properly be accepted as proof of any matter that was in issue in the proceedings.”
In contrast to Malco, this is not a case where Mr Marafioti was unequivocally found to have given untruthful evidence in the proceedings. There were however, serious inconsistencies in his evidence that, on any reasonable consideration, put his credibility as a witness in his own cause into question and required close attention to be given to the whole of the evidence in the process of concluding the facts.
In Makita (Australia) Pty Ltd v Sprowles [2001] NSWCA 305, Heydon JA (as he then was) considered Malco and said (at [35]):
“ . . . Handley JA did not say that where a party-witness has lied, the balance of the testimony can never be accepted without corroboration. All he said was that the balance of the testimony in that case called for careful assessment.”
It almost goes without saying that undue reliance upon findings of credit and demeanour is fraught, open to misunderstandings and, ultimately, may lead to substantial injustice (Goodrich Aerospace Pty Limited v Arsic [2006] NSWCA 187 (‘Goodrich’); CSR Limited v Della Maddalena (2006) 80 ALJR 458; Fox v Percy (2003) 214 CLR 118; SRA Earthline Constructions Pty Limited (In Liq) (1999) 73 ALJR 306). It is far better for a decision-maker to “reason their conclusions, as far as possible, on the basis of contemporary materials, objectively established facts and the apparent logic of events. This does not eliminate the established principles about witness credibility; but it tends to reduce the occasions where those principles are seen as critical” (Gleeson CJ, Gummow and Kirby JJ in Fox v Percy (2003) 214 CLR 118 at [31]).
The principles developed and applied by the Courts in relation to the review of findings of credit on appeal, are equally applicable to Presidential Members of the Commission engaged in the review of an Arbitrator’s decision for error of law, fact or discretion. An Arbitrator has usually had the benefit of seeing and hearing the witness give evidence, and then of reflection on the evidence prior to coming to a decision (Abalos v Australian Postal Commission (1990) 171 CLR 167). Presidential review must be alert to the advantage enjoyed by the Arbitrator and to the nature of the proceedings. In Department of Education & Training v Jeffrey Sinclair [2004] NSWWCCPD 90 the President of the Commission relevantly said (at paragraph 158):
“. . . Understandably, the Department rejects that credit finding [by the Arbitrator], but a Presidential Member of this Commission, reviewing an Arbitrator’s decision on appeal, should upset such a finding only if there is other “incontrovertible” evidence indicative of error, not adequately dealt by the Arbitrator at first instance. Fox v Percy (2003) 77 ALJR 989, c.f. Abalos v Australian Postal Commission (1990) 171 CLR 167. (See also the useful discussion in the judgments of the High Court in State Rail Authority of New South Wales v Earthline Constructions Pty Ltd (in liq) & Ors (1999) 160 ALR 588, especially that of Kirby J at 508ff, and the decision of Deputy President Fleming in Mayne Health Group v Sandford [2002] NSW WCC PD6, pars 35-41).”
The High Court in Maddalena and the NSW Court of Appeal in Goodrich make clear the law on the extent to which there should be deference to the original decision-maker’s findings on issues of credit and demeanour has shifted over recent years. On appeal, careful consideration must be given to the facts of each case in weighing whether the reliance on findings of credit is a proper exercise of the power of the original decision-maker, and as such “is permitted to trump appellate intervention” (Walden v Black [2006] NSWCA 170 at [83]).
In this matter the issue of Mr Marafioti’s credit involved a number of ‘issues’ and ‘sub-issues’ to which there was evidence in the form of objective facts. Whether or not the Arbitrator erred in his findings, including the findings in relation to Mr Marafioti’s credit, must be discerned from a consideration of his treatment of the whole of the evidence, and its relevance to the facts in issue. The Arbitrator identified “three sets of circumstances” which the Insurer argues were sufficient to justify a change in Mr Marafioti’s entitlement to weekly benefits (each are considered in turn below). These were:
1.Was there a change in Mr Marafioti’s health circumstances - a change to his physical capacity to work?
2.Was there a change in Mr Marafioti’s ability to earn or in his actual earnings?
3.Was there a change in the circumstances of his dependents?
Was there a change in Mr Marafioti’s health circumstances- a change to his physical capacity to work?
On appeal Mr Marafioti’s legal representative made lengthy submissions on the issue of ‘credit’. I note that those submissions rely largely on the fact that the Arbitrator did not expressly reject Mr Marafioti’s evidence, and therefore, by inference he accepted it.
The Arbitrator set out his findings on this issue at [16] to [37] of the reasons. He sets out the relevant evidence, including the evidence of Mr Marafioti himself, the medical evidence of Doctors Aroney, Elliot, Coffey, Buckland, Davies and Wallace. He also recites the evidence of Ms Flanagan, Occupational Therapist. There is also reference to ‘second hand’ evidence of Mrs Marafioti, via her comments to Dr Coffey and Ms Flanagan. In the course of this recitation of the evidence the Arbitrator makes a number of his own observations, including that:
·Mr Marafioti did not report to Dr Aroney of doing “formwork or working out on building sites” (at [19]). Dr Aroney was “somewhat sceptical about Mr Marafioti’s presentation at the examination” and later disbelieving of Mr Marafioti’s account of his capacities (at [20] to [22]).
·Mr Marafioti genuinely sought medical attention for his back and leg pain in March 2001 because of symptoms, not because he had noted that he was under surveillance (at [25] and [26]).
·The “medical histories . . . suggest a rather robust fitness for work before 21 April 2001” (at [27] and [28]).
·The history taken by Dr Buckley is “clearly lacking in precision” (at [30] and [31]).
·The surveillance videos and reports are “inconclusive” and “do not establish his capacity to do onerous work, including bending and lifting, over any sustained period” (at [34]).
The Arbitrator then concludes (at [36]):
“36.The evidential picture is a very mixed one. Despite indications that Mr Marafioti was able to engage in a range of building-related activities, my conclusion is that it has not been established that he had shaken off the ailments that led to the award with its particular terms back in 1995. The likelihood is that he continued to experience a tangible measure of back pain and restricted lumbar movement capacity until April 2001. Amidst the conflicting signals, I cannot find with confidence that there had been a clear improvement in his medical circumstances before his head injury, and by that token I am unable to declare that the 1995 finding that there was incapacity in regard to ‘prolonged use of the right hand or significant bending and heavy lifting’ had been displaced by subsequent developments before April 2001.”
These conclusions do not, unfortunately, refer to the evidence upon which they are based. There is no reference to the evidence that the Arbitrator found to be persuasive. There is no reference to the relative weight of the medical evidence, which clearly gave conflicting opinions as to Mr Marafioti’s incapacity. The Arbitrator has not reached any clear finding on the ‘sub-issue’ of the extent to which Mr Marafioti was working ‘full-time’ in his own business, or was in fact working full-time on a building site or whether he was, as a matter of fact, working in a capacity that did not involve limitations to his back and right hand.
The Arbitrator had noted the medical evidence suggested a ‘robust fitness for work’ before April 2001. What did the Arbitrator make of this medical evidence? Why did he not find it persuasive? What did the Arbitrator make of the fact that Mr Marafioti did not consult his doctor in relation to his injuries for six years, from 1995 to 2001? Did the Arbitrator reject Dr Aroney’s evidence, and if so, why? Did the Arbitrator reject Dr Coffey’s opinion or give it less weight because of the fact that it was obtained for the purpose of the Commission proceedings? What of Dr Buckley’s report and Ms Flanagan, the Occupational Therapist? If the reports of Dr Davies and Dr Wallace were found to be persuasive, did the Arbitrator accept that Mr Marafioti had given them a truthful account of his capacity for work and his employment over the relevant period?
When considering this first ‘circumstance’, namely ‘capacity to work’ the Arbitrator does not make any express findings of Mr Marafioti’s credibility in relation to the persuasiveness of his evidence. It is not clear from the reasons why the Arbitrator found that ‘the likelihood’ is that Mr Marafioti continued to experience back pain and restricted movement. The Arbitrator noted that Mr Marafioti did not mention his work on building sites and found this to be ‘significant’ (at [19]). He did not then make any conclusion on whether this apparently untruthful evidence affected Mr Marafioti’s credit as a witness, and his evidence on other issues. Nor did the Arbitrator, having found this apparent untruth to be significant, give closer attention to Mr Marafioti’s claim “that he struggled to average anything more that thirty hours of work per week and benefited from his ability to arrange his hours and days of work around his variable medical condition” (at [35]). Did the Arbitrator, for example, accept Mr Marafioti’s claim that he had family and friends who assisted him with heavy lifting at work? Did he accept other corroborating evidence of Mr Marafioti’s claims?
The Arbitrator has failed to make findings of fact on the ‘sub-issues’ that the evidence presented and has then failed to give his reasons for the conclusion he reached on the substantive issue of Mr Marafioti’s ongoing incapacity for work. His conclusion does not discuss the probative value of the medical and other evidence. I remain unsure of what evidence the Arbitrator accepted and found persuasive in coming to his conclusion that there had been no change in Mr Marafioti’s physical incapacity arising from the injuries for which the Compensation Court had awarded him weekly benefits.
The Insurer also argues that “in spite of adverse findings being made about some of the Respondent Worker’s evidence, the Arbitrator accepted that evidence without independent or objective corroboration”. On the issue of Mr Marafioti’s capacity to work this is clearly the case. The Arbitrator refers to Dr Coffey’s and Ms Flanagan’s reference to Mrs Marafioti’s evidence, but there was no direct evidence from Mrs Marafioti before him. The Arbitrator did not state his finding on the weight to be given to the second hand accounts from Mrs Marafioti, and in my view these references to her evidence were not persuasive.
As discussed above the reliance upon findings based only on a view of the ‘credit’ of the witness are notoriously unreliable and may lead to injustice. However, where the evidence is inconsistent or suggests that a witness has been untruthful, it is incumbent upon the Arbitrator to carefully weigh that evidence, to seek independent corroboration of its veracity and to give clear reasons for reliance upon that evidence in determining the ultimate issues in dispute. In relation to the first ‘circumstance’ identified by the Arbitrator, namely Mr Marafioti’s capacity for work, the Arbitrator did not do so.
Was there a change in Mr Marafioti’s ability to earn or in his actual earnings?
The second ‘circumstance’ considered by the Arbitrator was whether there was a change in Mr Marafioti’s ability to earn, but for the injury.
The Arbitrator set out the evidence of Mr Marafioti’s ‘probable earnings for 1998, 1999, and 2000 as set out in the wages schedule he submitted. Earnings in 2001 were obviously affected by his accident in April 2001. The Arbitrator considered the Insurer’s threefold challenge to Mr Marafioti’s evidence of earning capacity, namely:
(i)Contradictory evidence as to his earning capacity.
(ii)Non-disclosure of his income.
(iii)Mr Marafioti’s overall credit.
Mr Marafioti indicated in the wages schedule filed in the Commission proceedings, that his weekly earnings prior to his accident in April 2001 were “generally around the $300 mark”. However in proceedings in the Supreme Court, initiated as a result of his 2001 accident, he claimed earnings in excess of $700 per week, as “annual business income”. The particulars submitted to the Court claim Mr Marafioti’s “real economic loss” was at the hourly market rate for a formwork carpenter, of $35-$39 per hour, totalling over $1000 per week. On this basis the Insurer argued that Mr Marafioti had no entitlement to weekly benefits because he was earning in excess of what he would have been earning if he had, but for his work injury, continued to be employed. The Arbitrator rejected this submission.
The Arbitrator had before him voluminous evidence in the form of tax returns, for the financial years 1998/99 and 1999/2000 and two business returns. He states, obviously correctly, that the returns for the year 2001 are not of much assistance to the relevant calculation for an earlier period. The Arbitrator noted that Mr Marafioti told the Compensation Court he was earning around $25 per hour prior to his head injury. He noted Mr Marafioti’s evidence to him of the same rate. He then concluded that:
“50.In the light of what I believe was Mr Marafioti’s continuing back complaint at the relevant time, I think it likely that Mr Marafioti was not working more than 30 hours per week and that he was grossing income for his business at the rate of around $20 to $25 per hour”.
The Arbitrator noted the evidence that Mr Marafioti did not disclose his workers compensation income on his tax returns. He notes Mr Marafioti’s claim that his accountant “advised that it was not necessary”. The Arbitrator does not state whether he found this persuasive, nor was there any evidence from the accountant. The Arbitrator also notes that, at [52] and [53]:
“ . . .according to information attributed to Mr Marafioti’s wife, Mr Marafioti was never sent group certificates by the Insurer in respect of those payments.
53.While this revelation certainly does not stand to Mr Marafioti’s credit, I cannot use it to reach a firm conclusion that his statement on income in these proceedings should not be believed.”
As noted above Mrs Marafioti did not give evidence before the Arbitrator, although it is submitted that she was present at the arbitration and available for cross-examination. This is a curious submission as the transcript of the arbitration records Mr Marafioti’s legal representative advising the Arbitrator that, contrary to expectations, she would not be called to give oral evidence. As far as I am aware she was not directed to attend the Commission proceedings. Given that corroboration of the facts in dispute would have assisted the Arbitrator in determining the critical issues, his reliance upon “information attributed” to her as persuasive evidence was reliance upon poor evidence.
It is in relation to his discussion of the ‘circumstance’ of whether there was a change in Mr Marafioti’s ability to earn, that the Arbitrator makes a finding on “Mr Marafioti’s overall credit”. The Arbitrator finds, at [55] and [56]:
“55.Even while remaining sensitive to Mr Marafioti’s medical diagnosis and the actions of his representative, my conclusion is that Mr Marafioti was not a very satisfactory witness. When facing difficult or uncomfortable questions he came across as deliberately uncooperative and evasive.
56.For all of this however, I believe that the crux of the information that he gave about his capacity to work and his earnings capacity was probably true, or fairly close to the truth.”
The generality of this finding, when considered in relation to the specific issues that were before the Arbitrator for determination, gives no clue as to exactly what evidence of Mr Marafioti was ‘true’ or ‘close to the truth’ and how the Arbitrator weighed evidence that was contradictory. It is not clear to me why the Arbitrator could not take into account Mr Marafioti’s failure to disclose his workers compensation income on his tax return, when assessing the truthfulness of his evidence overall.
The Arbitrator expresses ‘reservations’ about the ‘business insurance policy’ taken out by Mr Marafioti, which gave an estimate of his ‘personal weekly earnings’ as $700 per week. The Arbitrator considered this figure, expressed as ‘personal weekly earnings’ did not account for the overheads of Mr Marafioti’s business. The evidence that he found persuasive on that conclusion is not apparent. Ultimately the Arbitrator considered that “there is insufficient information before me to make it [‘the propriety of the insurance policy’] count decisively” against Mr Marafioti. The Arbitrator does not state what the impact of his reservations about the insurance policy, has on his assessment of Mr Marafioti’s other evidence.
The Arbitrator refers to his ‘cumulative doubts’ about aspects of Mr Marafioti’s evidence. Given the Arbitrator’s doubts about Mr Marafioti’s evidence it was incumbent upon him to consider whether there was independent evidence to support his findings. If the evidence in the wages schedule submitted by Mr Marafioti persuaded him, then he should have said so, and should also have dealt with the evidence that contradicted this assertion.
The weight to be given to the evidence is a matter for the Arbitrator and it cannot be said that there was ‘no evidence’ to support this conclusion. In my view, having considered the evidence that was before the Arbitrator on Mr Marafioti’s capacity to earn post injury, the findings that the “business income” was an inaccurate measure of his probable earnings and that Mr Marafioti was earning between $20 and $25 per hour for 30 hours per week, were open to him on the evidence. The difficulty is that the Arbitrator, in coming to his conclusion on this issue (at [47 to [51] of the reasons) does not refer to any of the evidence of earning capacity to support his findings, other than the oral evidence of Mr Marafioti and the ‘Particulars for the Supreme Court proceedings’. While this is relevant evidence, the evidence to support the precise finding that Mr Marafioti was earning between $20 and $25 per hour for 30 hours per week is to be found in the wages schedule, tax returns, business returns and in Mrs Marafioti’s statement.
The Arbitrator does not explain why he was not persuaded by the challenge to Mr Marafioti’s credit in relation to the non-disclosure of income. The reference to Mrs Marafioti’s evidence is particularly problematic. A statement from Mrs Marafioti was before him, setting out relevant evidence in relation to her role in the business and the business income. This statement is not referred to in the reasons and the only reference to Mrs Marafioti’s evidence was to second-hand reports.
In my view the Arbitrator has made errors in the determination of the ‘circumstance’ he identified as “Mr Marafioti’s ability to earn or actual earnings”. The errors are the failure to make necessary findings as to the veracity of Mr Marafioti’s evidence, and the failure to give adequate reasons (the latter of which is discussed in more detail below).
Was there a change in the circumstances of his dependents?
This is the third ‘circumstance’ identified by the Arbitrator as requiring consideration.
The Insurer does not challenge the Arbitrator’s finding of dependency in this appeal, but argues that the Arbitrator’s finding, that Mr Marafioti did not disclose the changes in circumstances of dependency, reflect on Mr Marafioti’s credit. In the concurrent appeal lodged by Mr Marafioti, this finding is alleged to be in error. I deal with this issue in the reasons issued in that appeal (Marafioti v Sarkem Limited [2006] NSWWCCPD 236).
Conclusions on Review of Findings on Credit
The Arbitrator was required to treat Mr Marafioti’s evidence with careful scrutiny and in my view he did not do so. Nor is it evident from the reasons that he carefully weighed the whole of the evidence and came to a reasoned conclusion on the basis of its relative probative value. At different points in the reasons the Arbitrator referred to the unsatisfactory nature of Mr Marafioti’s evidence on critical matters. These references have been discussed in some detail above. However the Arbitrator has not sufficiently considered the effect of his finding that “Mr Marafioti was not a very satisfactory witness” on the veracity and weight to be given to Mr Marafioti’s evidence. The Arbitrator’s summation of the evidence was as follows:
“64.This has been a difficult case to decide, and one which the Applicant was fully justified in running. The burden in a section 55 application falls on the party seeking a review of the status quo. The evidence has raised many questions, and indeed has placed a question mark over the bona fides of the Respondent worker in some important respects. However, given the haze, the Respondent must be given the benefit of the doubt. Mr Marafioti has done just enough to ward off proof of a disqualifying change in either his medical condition or his earnings capacity. No other grounds (save one) for a successful review have been produced.”
The ‘summation’ of the evidence discloses error in the Arbitrator’s approach to section 55 of the 1987 Act and to the assessment of the evidence (the section 55 issue is discussed later in these reasons). The acceptance or rejection of evidence by the Arbitrator, must be decided according to the ‘balance of probabilities’, weighing the available evidence in view of the nature of the proceedings in the Commission, the nature of the dispute and the importance of the disputed facts to the issues to be decided (Briginshaw v. Briginshaw and Another (1938) 60 CLR 336; ASIC v Vines [2005] NSWSC 738). If the ‘summation’ above indicates an approach whereby the Insurer had the onus of proving ‘beyond reasonable doubt’ that Mr Marafioti’s circumstances had changed, and therefore, that he was not entitled to weekly benefits, then it is clearly incorrect. I am not sure this is what the Arbitrator intended, the express words are ambiguous.
The approach to resolving issues of fact, where credit, demeanor or inconsistencies in the evidence are alleged to be in issue, was described by Austin J in ASIC v Vines [2005] NSWSC 738 at [74], where he said:
“. . . In those circumstances the approach I have taken to resolving conflicts in the evidence is, bearing in mind the Briginshaw standard, to assess each matter upon which evidence was challenged in its own terms, in light of the context, other documentary and witness evidence bearing on the question, and the coherence and plausibility of the competing evidence. I have endeavoured not to approach the task of resolving conflicting evidence on any given issue with a predisposition in favour of or against the evidence of a particular witness. This is so even in respect of Mr Fox, whose evidence on many points I have rejected. As I shall explain, the result of my analysis of the evidence, question by question, is to put Mr Fox in an unfavourable light reflecting adversely on his credibility. But that is the result of my analysis rather than a step in the reasoning”.
The Arbitrator identified the inconsistencies in the evidence, and the obvious ‘credit’ issue. He also correctly identified the need for particular care in assessing Mr Marafioti’s evidence because of the nature of his serious head injury and the impact that could have on his ability to give evidence. However his ‘summation’ discloses the imperative of taking great care in assessing the evidence in this matter, in particular the evidence of Mr Marafioti. Ultimately the Arbitrator relied upon gross generality and the “haze” of the evidence rather than carefully analysing it and weighing its probative value to the ‘sub-issues’ and ultimate ‘issues’ to be decided.
While Mr Marafioti’s credit was a central issue in the dispute, entreaties to base findings on his, or other witnesses’ credit must be approached with caution. However the Arbitrator’s consideration of the inconsistencies in Mr Marafioti’s evidence does not proceed to clear findings, or state reasons for preferring Mr Marafioti’s evidence to the other probative and relatively persuasive evidence that was before him. It does not reveal the analytical task referred to by Austin J, above, and yet, at the same time, does not clearly reject an unfavourable view of Mr Marafioti’s credit as a ‘step in the reasoning’. In my view the cumulative effect of: the inconsistencies in the evidence, the lack of corroborative evidence on key issues, reliance upon poor evidence allegedly attributed to Mrs Marafioti, and the possibility that Mr Marafioti’s flawed account of his capacity could have infected the medical evidence he relied upon, were either not considered or were given insufficient weight by the Arbitrator.
The failure to properly examine and consider the evidence relevant to a material issue in dispute is an “error of fact finding” (Goodrich at [87]).
Weight of Evidence/Medical Evidence
The Insurer argues that the Arbitrator:
·failed to have regard to the weight of the evidence in support of terminating the Award.
·erred in finding that there had not been a change in circumstances.
As noted above, the weight to be given to the evidence is a matter for the discretion of the Arbitrator. It is only where there can be said to be no evidence to support the Arbitrator’s finding of fact that this ground of appeal will succeed. The Insurer argues that: the medical evidence of Dr Aroney and Dr Rawlings did not support Mr Marafioti’s claims; the reports of Dr Coffey and Dr Buckley were based on incorrect and inconsistent histories and the report of Dr Wallace was unreliable in that it did not refer to radiological evidence and that he did not view the surveillance material.
The Arbitrator should have expressed his view of the relative weight of the medical evidence, and given reasons for doing so. It is difficult to review the weight that he gave to the medical evidence because he has not done so.
There have been a number of errors made by the Arbitrator in this matter and I propose to refer it back to another Arbitrator to be reheard. Obviously issues of credit are involved. It is not appropriate for a Presidential Member, on review, to rehear the whole of the evidence again (Mayne Health Group t/as Nepean Private Hospital v Sarah Sandford [2002] NSWWCCPD 6). The substantive merit of the matter, and the weight to be given to the evidence, must be heard and determined afresh.
Section 40 of the 1987 Act
The Insurer argues the Arbitrator erred in his application of section 40 of the 1987 Act. Section 40 of the 1987 Act provides for the payment of weekly compensation during any period of a worker’s partial incapacity.
The Court of Appeal held in Mitchell v Central West Health Service (1997) 14 NSWCCR 527 (‘Mitchell’) that section 40 of the 1987 Act requires the finder of fact undertake a five-step process being:
1.Determination of the weekly amount the worker would probably have been earning if uninjured.
2.Determination of the amount that the worker is earning or would be able to earn subject to subsection 40(3) and section 43A.
3.Subtraction of the figure in 2 from the figure in 1.
4.Exercise of the discretion contained in subsection (1) of section 40 (being a discretion to reduce the amount otherwise payable, not increase it); and
5.Make an award in the amount arrived at by step 4.
The difficulty with the Insurer’s claim that the Arbitrator erred in his application of section 40 of the 1987 Act (upon which there are no expanding submissions) is that the Arbitrator, in his reasons, makes no reference to section 40 of the 1987 Act. This in itself, in my view, is an error. Mr Marafioti’s legal representative made written submissions on the application of section 40 to his entitlement. As discussed below, the Arbitrator should have proceeded to an assessment of Mr Marafioti’s entitlement to weekly benefits in accordance with section 40, once he had found a relevant ‘change of circumstances’ had been made out (section 55 of the 1987 Act).
Section 55 of the 1987 Act
The Insurer argues the Arbitrator erred in his application of section 55 of the 1987 Act. This section provides, in part, as follows:
“(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 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 in respect of an injury may be increased to such an amount as would have been awarded if the worker had , at the time of the injury, been earning the wage or salary which the worker would probably have been earning, at the date of the review, if the worker had remained uninjured and continued to be employed in the same or some comparable employment.”
It is critical to understand precisely the nature of the task required by section 55 of the 1987 Act. The parties and the Arbitrator refer to George Weston Foods Ltd t/as Tip Top Bakeries v Goldsmith (1998) 17 NSWCCR 253 (‘George Weston’) and Atlas v Bulli Spinners Pty Ltd (1993) 9 NSWCCR 378 (‘Atlas’). These authorities were considered in Worthington v Alexander [2005] NSWWCCPD 12 (‘Worthington’) and NSW TAFE Commission – North Sydney Institute v Zuk [2006] NSWWCCPD 148.
The authorities establish the following approach to section 55 of the 1987 Act:
· The onus of proving a ‘change of circumstances’ rests with the party that asserts it (Atlas).
· 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).
· ‘Change of circumstances’ should be given its ordinary meaning, it is not restricted to medical issues, but must have relevance to the workers entitlement to weekly benefits (Worthington).
It is evident from the approach taken in these cases that, once the relevant change of circumstances is established, the assessment of whether the workers entitlement should be ended, reduced or increased is made in accordance with the relevant provisions of the 1987 Act that govern entitlements. This much is evident from the words of section 55(2)(a) itself, which provides that the amount of any entitlement is to be determined “subject to the provisions of this Division”.
In Atlas the original award had been made pursuant to section 11(2) of the Workers Compensation Act 1926 (the approximate equivalent provision in the 1987 Act being section 38). Atlas concerned an appeal from O’Toole CCJ in respect of an application by an employer under section 55. Kirby P, as he then was, gave the leading judgment; Mahoney and Clarke JJA agreed. Justice Kirby outlined the correct approach to section 55 review as follows (at p384):
“Having, therefore, before her an application for review, which required proof of a change in circumstances, O’Toole CCJ should have taken the following steps. She should have determined first whether the requisite change of circumstances had been shown by the employer to warrant the exercise of the power of review. If, by reason of differing evidence about the extent of the worker’s incapacity she were convinced that an applicable “change of circumstances” was shown justifying review, her Honour would then be obliged to exercise the powers conferred upon the Compensation Court by section 55(2) of the 1987 Act (or section 60(1) of the 1926 Act). This empowers the Compensation Court, relevantly, to end or reduce the weekly payment. In determining whether to do so, the Judge would be obliged to apply section 11(2) of the 1926 Act.”
In the application of this reasoning to the facts in Atlas, the burden of proof remained with the Insurer/Applicant in relation to proof of entitlement under the particular terms of section 11(2) of the 1926 Act.
In George Weston Sheller JA, referred to the insufficiency of reasons, in the original decision under review, to support the reduction of weekly payments pursuant to section 40 of the 1987 Act. While the point was not at issue in that case, it is apparent that the assessment of ongoing entitlement to weekly benefits following a finding of change of circumstances was properly referable to section 40 of the 1987 Act.
The Arbitrator’s express findings on the three ‘sets of circumstances’ do not properly address the task that section 55 of the 1987 Act required of him. The Arbitrator’s task was not to “declare that the 1995 [Compensation Court] finding that there was incapacity . . . had been displaced by subsequent developments before April 2001” (at [36] of the Arbitrator’s reasons). Having found that there had been a change in circumstances that “open the s 55(1) gate to a review” (at [13]) the Arbitrator framed his further inquiry by asking the question: “has there been a change in circumstances of a character and magnitude that justifies the termination or reduction of Marafioti’s entitlement to weekly benefits?”. This repeats the inquiry already made and does not refer to the provisions of Division 2 of Part 3 of the 1987 Act, as expressly required by section 55(2)(a). Section 55 does not provide an alternative to the other provisions of Division 2 of Part 3 of the 1987 Act (sections 38-40) for the calculation of an entitlement to weekly benefits compensation. Section 55(3) provides that “probable earnings” – a concept integral to the application of section 40, should be calculated as at the date of the review.
The approach taken by the Arbitrator in this matter appears to determine one issue, i.e. ‘change of circumstances’, two times. In doing so the Arbitrator has not proceeded to end, reduce or increase Mr Marafioti’s weekly payment “subject to the provisions” of Division 2 of Part 3 of the 1987 Act. The Arbitrator uses the language of a section 40 assessment, but his approach is flawed in a fundamental way. The burden of proving an entitlement to weekly benefits pursuant to section 40 rests with the worker. The Insurer having met the burden of proving a change of circumstances, it was then for Mr Marafioti to demonstrate the amount of any entitlement pursuant to section 40 of the 1987 Act. The Arbitrator erred in concluding, as he did at [57] of the reasons, that:
“In all the circumstances, and not withstanding the cumulative doubts I have about aspects of Mr Marafioti’s evidence, I cannot conclude that the Applicant [the Insurer] has discharged the onus of establishing that the award should be altered on the basis of a change in Mr Marafioti’s financial position over the relevant period. I am not satisfied that his actual earnings had in fact improved.”
Once a ‘change of circumstances’ was proven by the Insurer, the task of making an assessment of any entitlement should have been made accordance with Part 3, Division 2 of the 1987 Act. As Mr Marafioti claimed partial incapacity for work, the ‘review’ should have addressed the evidence in accordance with an assessment of his entitlement to weekly benefits pursuant to section 40 of the 1987 Act. In making an assessment of Mr Marafioti’s entitlement to weekly benefits pursuant to section 40 of the 1987 Act the burden shifts to Mr Marafioti to establish his entitlement, if any. The Arbitrator should therefore have structured his ‘review’ of Mr Marafioti’s entitlement in accordance with the five steps of Mitchell.
Adequacy of Reasons
The Insurer submits that the Arbitrator failed to give adequate reasons for his decision. This ground of appeal has also been discussed briefly above. As discussed, whether the Arbitrator’s reliance upon findings of Mr Marafioti’s credit in coming to his decision were an error, can only be determined by a consideration of the reasons for the decision. Ipp JA in Goodrich said (at [28]-[29]):
“28 It is not appropriate for a trial judge merely to set out the evidence adduced by one side, then the evidence adduced by another, and then assert that having seen and heard the witnesses he or she prefers or believes the evidence of the one and not the other. If that were to be the law, many cases could be resolved at the end of the evidence simply by the judge saying: “I believe Mr X but not Mr Y and judgment follows accordingly”. That is not the way in which our legal system operates. . . . .
29 Often important issues of credibility involve sub-issues. Often, objective facts, or facts that are probable, are capable of having significant bearing on the sub-issues. In cases of this kind, it is incumbent upon trial judges to resolve the sub-issues and to explain, by reference to the relevant facts, the conclusions to which they have come. This having been done, they should then turn to the ultimate facts in issue and explain how their decisions on the sub-issues have assisted them in forming a conclusion on the ultimate issue. It is only when adequate reasons of this kind are given that an unsuccessful party will be able to understand why the judge has believed his or her successful opponent.”
The Arbitrator had a statutory duty to provide reasons for the decision (section 294 of the 1998 Act). Rule 74 of the Workers Compensation Commission Rules provides that the Arbitrator must include in the reasons the findings on material questions of fact, the applicable law and the “reasoning process” that led to the conclusions (see also Mayne Health Group t/as Nepean Private Hospital v Sandford [2002] NSWWCCPD 6 for a discussion of the duty of an Arbitrator to give reasons). The Arbitrator is not required to give lengthy reasons provided that these relevant matters are addressed (Roncevich v Repatriation Commission [2005] HCA 40; Minister for Multicultural Affairs v Yusuf (2001) 206 CLR 323).
I note that in Mr Marafioti’s appeal he also argues that the Arbitrator has failed to give adequate reasons for the decision, albeit on a different issue.
The Arbitrator has set out his reasons at some length and has identified what he considered the relevant issues. While I am of the view that the Arbitrator’s approach to section 55 of the 1987 Act was incorrect, it is nonetheless clear in the reasons what his approach was. However, as discussed above, the Arbitrator does not give sufficient reasons for rejecting the cumulative effect of the inconsistencies and apparent untruths in Mr Marafioti’s evidence. Given that he found there to be serious inconsistencies in that evidence, it was incumbent upon him to scrutinise it carefully and to weight it carefully and to make unequivocal findings on the inconsistencies. In this regard the reasons are inadequate.
Arbitrator’s Costs Order
The Insurer argues that the Arbitrator erred in ordering the Insurer to pay the Respondent Worker’s costs because it was “successful in establishing a change in circumstances and was successful in obtaining an order that the Respondent Worker pay back compensation payments associated with the misrepresented dependency of the Respondent’s wife”. This order is challenged in the appeal by Mr Marafioti and dealt with in a separate Statement of Reasons.
The Insurer has been successful on the appeal. The matter is to be reheard by a different Arbitrator. In my view the costs order should be set aside and the costs of the whole of the proceedings (Arbitration and Presidential review) should be considered afresh when the matter is re-determined.
Summary of Findings on Appeal
In summary I find that the Arbitrator erred in:
· Failing to make necessary findings of fact on the evidence.
· Giving inadequate reasons for the decision.
· Failing to apply section 40 of the 1987 Act.
· Failing to properly apply section 55 of the 1987 Act.
To proceed to review the evidence and substitute a decision is problematic, in particular because of the nature of the evidence. The decision must be set aside and the matter sent back to be heard afresh by a different Arbitrator.
DECISION
The decision of the Arbitrator, dated 14 September 2005, is revoked and the matter is remitted to a different Arbitrator for determination afresh.
COSTS
Both parties have appealed against the Arbitrator’s decision. In both proceedings the Insurer has been successful. The appropriate order in relation to the costs of the appeal, in both matters, is ‘No order as to the costs of the appeal’.
Dr Gabriel Fleming
Deputy President
19 September 2006
I CERTIFY THAT THIS IS A TRUE AND ACCURATE RECORD OF THE REASONS FOR DECISION OF DR GABRIEL FLEMING, DEPUTY PRESIDENT OF THE WORKERS COMPENSATION COMMISSION.
ASSOCIATE
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