Singh v TAJ (Sydney) Pty Limited - [2006] NSWCA 330

NEW SOUTH WALES COURT OF APPEAL

CITATION: Singh v TAJ (Sydney) Pty Limited [2006] NSWCA 330

FILE NUMBER(S):
40088/06

HEARING DATE(S): 31 August 2006

DECISION DATE: 27/11/2006

PARTIES:
Gurminder Singh (Appellant)
TAJ (Sydney) Pty Limited (Respondent)

JUDGMENT OF: Beazley JA Santow JA Tobias JA

LOWER COURT JURISDICTION: Workers Compensation Commission of New South Wales

LOWER COURT FILE NUMBER(S): WCC 6776-04

LOWER COURT JUDICIAL OFFICER: Acting Deputy President Moore

COUNSEL:
D Baran (Appellant)
G Watson SC; N Kabilafkis (Respondent)

SOLICITORS:
Buttar Caldwell & Co (Appellant)
Hicksons Lawyers (Respondent)

CATCHWORDS:
WORKERS COMPENSATION – work related injuries – visa change after injury disentitled appellant to work – compensation claim dismissed by arbitrator – whether presidential member of Workers Compensation Commission erred in confirming arbitrator’s dismissal – arbitrator erred in misconstruing Workers Compensation Act – determination of probable earnings but for injury in similar employment – visa status irrelevant for determining post-injury earning capacity

LEGISLATION CITED:
Migration Act 1958 (Cth) s 235
Workers Compensation Act 1926 (NSW) s 11(1)(a)
Workers Compensation Act 1987 (NSW) ss 24, 40, 43A, 66, 67
Workplace Injury Management and Workers Compensation Act 1998 (NSW) ss 353(1), 353(4)(c)

DECISION:
1. Appeal allowed
2. Set aside the decision of Acting Deputy President Moore of the Workers Compensation Commission
3. Set aside the award for the respondent made by the Arbitrator
4. Order that the matter be remitted to the Workers Compensation Commission for redetermination according to law
5. Order that the respondent pay the appellant's costs of the appeal and to have a certificate under the Suitors’ Fund Act (NSW) 1951.

JUDGMENT:

- 24 -

IN THE SUPREME COURT
OF NEW SOUTH WALES
COURT OF APPEAL

CA 40088/06
BEAZLEY JA
SANTOW JA
TOBIAS JA
27 November 2006

GURMINDER SINGH v TAJ (SYDNEY) PTY LIMITED

Headnote

Facts

The appellant sustained an injury in the course of his employment with the respondent, and the respondent paid him weekly compensation under s 40 of the Workers Compensation Act 1987 (NSW) (the Workers Compensation Act). In addition consent orders for awards of compensation for permanent impairment and pain and suffering were made under ss 66 and 67 of the Workers Compensation Act. Subsequently the appellant’s visa status was changed from a bridging visa Class A, which entitled him to work and was current as at the date of injury and the consent order, to a bridging visa Class E, which disentitled him to work. Therefore the respondent ceased payments of weekly compensation. The appellant thus brought a claim for an award for the payment of weekly compensation for partial incapacity pursuant to s 40 of the Workers Compensation Act.

The claim was dismissed by an Arbitrator. On appeal from the Arbitrator’s dismissal, a Presidential Member of the Workers Compensation Commission dismissed the appeal and confirmed the decision of the Arbitrator.

The appellant sought, and was granted, leave to appeal by this Court from the decision of the Commission on the grounds that the Presidential Member erred in confirming the Arbitrator’s dismissal, as the Arbitrator had erroneously construed s 40 of the Workers Compensation Act.

Held per Beazley JA (Santow JA agreeing subject to further comments; Tobias JA agreeing):

Section 40 of the Workers Compensation Act requires at least three steps to be taken before an award for incapacity payments may be made: the calculation of what the employee would have earned but for the injury assuming the same or comparable employment; the assessment of the employee’s post-injury earning capacity; and the exercise of a discretion.
Mitchell v Central West Health Service (1997) 14 NSWCCR 526 (followed); Australian Wire Industries Pty Limited v Nicholson (1985) 1 NSWCCR 50 (followed)
The process that engages the decision maker under ss 40(2)(a) and (b) of the Workers Compensation Act is a hypothetical one.
Viliami v National Springs (1993) 9 NSWCCR 453 (disapproved)
(a)Under s 40(2)(a), a determination has to be made as to the weekly amounts that the worker would probably have been earning but for the injury in the same or some similar employment; in this case, the appellant’s position with the respondent. The Arbitrator erred in finding that the appellant’s probable earnings were nil.
(b)Under s 40(2)(b), a determination has to be made as to what the worker would be able to earn in some suitable employment. The appellant’s visa status was not a relevant consideration in determining suitable employment, and the Arbitrator erred in so taking it into account.
The Arbitrator’s wrong construction of the Workers Compensation Act was an error in point of law; therefore the Presidential Member’s decision was also an error in point of law.
That the appellant had no entitlement to work does not foreclose an application for weekly payments for partial incapacity. The decision of this Court in Nonferral v Taufia, which allowed such payments in relation to a previous incarnation of the Workers Compensation Act, may recommend itself to the primary decision maker; or there may be other discretionary factors.
Nonferral (NSW) Pty Limited v Taufia (1998) 43 NSWLR 312; (1998) 16 NSWCCR 130 (discussed)
The further determination of this matter will depend upon the proper application of the law and upon such facts and discretionary considerations as are found to be relevant at the time of the rehearing.

Held per Santow JA:

The calculation of pre-injury future earnings (step one) and post-injury future earnings (step two) assume legality in the hypothetical employment. If that assumption is contrary to the fact, s 40 of the Workers Compensation Act mandates that fiction for both steps one and two.
If the weekly payment of compensation calculated using steps one and two does not bear a proper relation to the amount of the reduction in weekly earnings, an adjustment is made in the final discretionary step (step three). This is not to be treated as automatically requiring an adjustment downwards to take account of the illegality earlier excluded from consideration.
The compensation in this case does not depend on unlawful conduct; rather, it depends upon the statutory mandate provided by s 40 of the Workers Compensation Act.
Smith’s Newspapers Ltd v Becker (1932) 47 CLR 279 (distinguished); Nonferral (NSW) Pty Ltd v Taufia (1998) 43 NSWLR 312 (distinguished)
Assuming nothing further changes with respect to the appellant’s immigration status, and assuming the current legal constraint on his work under that changed visa status remains the same, this of itself would not have any weight as a relevant consideration. To conclude otherwise would work an outcome not in accordance with the statutory purpose evinced by the compensation regime.

IN THE SUPREME COURT
OF NEW SOUTH WALES
COURT OF APPEAL

CA 40088/06
BEAZLEY JA
SANTOW JA
TOBIAS JA
27 November 2006

GURMINDER SINGH v TAJ (SYDNEY) PTY LIMITED

Judgment

BEAZLEY JA: The appellant came to Australia in 1997 on a visitors’ visa valid for three months. Subsequently, he obtained a bridging visa Class A that entitled him to work in Australia. He obtained employment with the respondent as a general hand and truck driver. The appellant was injured on 19 April 2000 in the course of that employment. Shortly after the injury, he returned to work on light duties, but he was unable to continue and ceased employment on 18 May 2000. The respondent paid him weekly benefits of compensation from that date.
The nature of the appellant’s injuries was such that he was also entitled to compensation under ss 66 and 67 of the Workers Compensation Act 1987 (NSW) (the Workers Compensation Act) for permanent impairment and pain and suffering. A consent order for awards under those sections was made in his favour on 12 April 2002.
On 9 July 2003, the appellant’s visa status was changed and he was granted a bridging visa Class E, which disentitled him to work. The change in visa status was not related in any way to his work-caused injury. On 2 February 2004, the respondent ceased making the weekly payments of workers compensation to the appellant.
The appellant commenced proceedings in the Workers Compensation Commission (the Commission), seeking an award for the payment of weekly compensation for partial incapacity from 2 February 2004 and continuing, pursuant to the provisions of s 40 of the Workers Compensation Act. Those proceedings were defended.
The application was heard by an Arbitrator, who dismissed the claim.
The appellant appealed to the Commission. An appeal to the Commission from a decision of an Arbitrator is on a matter of law only. The appeal was heard ‘on the papers’ by Presidential Member, Acting Deputy President Deborah Moore, who dismissed the appeal and confirmed the decision of the Arbitrator.
The appellant seeks to appeal from the determination of Acting Deputy President Moore. An appeal from a decision of a Presidential Member is in point of law only: Workplace Injury Management and Workers Compensation Act 1998 (NSW) (the Workplace Injury Management Act): s 353(1).
As the appellant was unsure whether he required leave to bring the appeal, he commenced proceedings in this Court by way of Summons for Leave to Appeal. The matter has come before the Court on the basis of a concurrent hearing of the Summons for Leave to Appeal and the appeal.
Leave is required to appeal from a decision of a Presidential Member of the Commission where the amount in dispute is less than $20,000: Workplace Injury Management Act: s 353(4)(c). The appellant is 48 years of age. Until the cessation of payments on 2 February 2004, the appellant was being paid weekly compensation at the rate of approximately $400. If the appellant is entitled to an award pursuant to s 40 on an ongoing basis, the amount in dispute is greater than $20,000. In my opinion therefore, the appellant was entitled as of right to appeal from the decision of Deputy President Moore. I should indicate that if leave was necessary this would be an appropriate matter in which leave should be granted.
Issue on the appeal
The issue on the appeal, as it emerged in argument, is whether the Arbitrator erred in his application of s 40 of the Workers Compensation Act and in particular, whether he erred in determining that the appellant’s visa status meant that the appellant was thereby disentitled to an award. If the Arbitrator erred in the application of s 40, then the Deputy President’s decision in confirming the Arbitrator’s dismissal of the application was also erroneous in point of law.
Statutory Background
The issues raised on the appeal involve, in the first instance, a reference to s 235 of the Migration Act 1958 (Cth) (the Migration Act) and a consideration of the correct application of ss 40 and 43A of the Workers Compensation Act.
Section 235 of the Migration Act provides that a non-citizen who works in contravention of a condition restricting the work that the non-citizen may do in Australia commits an offence. The offence is one of strict liability, the maximum penalty for which is $10,000.
In this case, the appellant, at the time of injury, was not working in contravention of any condition of his visa. Nor was it suggested that he had ever done so. Rather, his visa status changed at a time when he was not working, due, it seems, to a change in Departmental policy. It was common ground that the workplace injury played no part in the change to the appellant’s visa status. As will become apparent, the relevance of the change in the visa status arises in connection with the exercise of discretion that arises under s 40 of the Workers Compensation Act.
Section 40 of the Workers Compensation Act
A person’s entitlement to weekly payments of compensation for partial incapacity is governed by the provisions of s 40 of the Workers Compensation Act. Relevantly, it provides:
“(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 that 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).
…
(3)          Ability to earn in suitable employment
The determination of the amount that an injured worker would be able to earn in some suitable employment is subject to the following:
(a)the determination is to be based on the worker’s ability to earn in the general labour market reasonably accessible to the worker,
(b)the determination is to be made having regard to suitable employment for the worker within the meaning of section 43A.”
Section 43A defines “suitable employment”. It provides:
“For the purposes of [s 40]:
suitable employment, in relation to a worker, means employment in work for which the worker is suited, having regard to the following:
(a)the nature of the worker’s incapacity and pre-injury employment,
(b)the worker’s age, education, skills and work experience,
(c) the worker’s place of residence,
(d)the details given in the medical certificate supplied by the worker,
(e)the provisions of any injury management plan for the worker,
(f)any suitable employment for which the worker has received rehabilitation training,
(g)the length of time the worker has been seeking suitable employment,
(h) any other relevant circumstances.”
(Emphasis added)
Appellant’s contention before the Arbitrator
Before the Arbitrator, the appellant had contended that under s 40, the Commission had a discretion in determining what a worker would be able to earn in an available labour market. He submitted that, although the condition of his visa precluded him from legally working in Australia, he would have proposed to continue to work if uninjured and believed he could have found work, perhaps in Queensland on banana plantations. He said he was aware of many people in his community who continued to work for cash notwithstanding that their visas did not entitle them to work in Australia. He had submitted that the beneficial aspects of the workers compensation legislation outweighed the public policy considerations of strict compliance with the migration regulations.
The same submissions were made before Acting Deputy President Moore.
Reasoning of the Arbitrator
The Arbitrator stated that the issue that had been defined for determination by him was the appellant’s:
"legal eligibility [for] an award of weekly compensation in his favour pursuant to section 40 of the Workers Compensation Act".
The Arbitrator referred to the appellant’s submissions which I have set out at [15] above. He also referred to the respondent’s submission that it was not open to him to have regard to a labour market as being available to the appellant in circumstances where it was a criminal offence for the appellant to engage in any labour market in Australia. (The respondent’s submission was not stated so fulsomely by the Arbitrator, but I believe I have correctly recorded the import of the submission.)
The Arbitrator next referred to the submission that under s 40, he had a discretion to determine what "the [appellant] is able to earn in the labour market that’s open to him". He referred to this Court's decision in Mitchell v Central West Health Service (1997) 14 NSWCCR 526 as to the proper approach to a determination under s 40, namely that:
“having determined the appropriate amounts that the [appellant] would have been earning but for the injury and is earning or would be able to earn in suitable employment”,
the decision maker then had a
“discretion to adjust that amount in the circumstances of the case".
Albeit somewhat abbreviated, this was basically a correct statement of the test to be applied, as I discuss more fully below.
The Arbitrator observed that there was virtually no evidence that a labour market existed such as was suggested by the appellant, namely in banana plantations in Queensland, where persons without a visa that entitled them to work, could obtain employment. He accepted the submission of the respondent that he should take into account the fact that obtaining work in such circumstances would constitute a breach of the MigrationAct: see Viliami v National Springs, A Division of Hendersons Federal Spring Works Pty Limited (1993) 9 NSWCCR 453. He said he believed he was "constrained to decide in a similar fashion". In Viliami, in a passage cited by the Arbitrator, Burke J said at 457:
“To value [the appellant’s] capacity in a reasonably accessible labour market, ignoring for the moment the illegality, is one thing. To value his capacity in a reasonably accessible labour market, when there is no labour market reasonably accessible to him by operation of law, seems to me to end up you can do the mathematics under section 40.” (Emphasis added)
I pause to note that the Arbitrator did not quote the entire passage from Viliami.
The Arbitrator added:
“… [by] ‘end up’ meaning that [the appellant] is simply unable to be assessed as earning income. And the operation of section 40 comes out at a normal result".
(This passage appears to have been mis-transcribed and I understand the reference to “normal result” to mean nil result).
The Arbitrator considered that the appellant’s situation was analogous to cases where an applicant was prevented from working or was unable to engage in paid employment for some reason unassociated with the workplace injury. He then said:
“I would decide this matter on that basis, that the [appellant], currently being prevented from legally engaging in employment, that I’m unable under section 40 to determine an amount that he would have been earning but for his injury. That amount, because of his immigration status, must be now zero.”
(Emphasis added)
The Arbitrator reiterated that he was required to determine the matter on the basis of s 40 as “interpreted” and having regard to the decision of Viliami. It followed on this reasoning that the appellant was not entitled to an award under s 40.
Reasoning of the Acting Deputy President
The Acting Deputy President identified the task of the Arbitrator as being to determine whether the circumstances of the appellant’s case "gave him a legal entitlement to weekly benefits". She considered that the decision in Viliami was very much on point. In particular, she endorsed Burke J’s statement that it was not the function of the Court to give “approbation to illegality” and added that it was similarly not the function of the Commission to:
“… [e]ndorse, condone or simply ignore a breach of section 235 of the Migration Act 1958”.
Acting Deputy President Moore then said that as the appellant was not in fact earning as at the date of the hearing of the application, the question whether he had a legal entitlement to weekly benefits had to be determined having regard to:
"… [w]hat was he able to earn? Legally, he was not entitled to earn anything, and was precluded by statute under a criminal sanction [sic]".
She then quoted the passage from Viliami set out above but quoted the passage in full. The additional portion not included in the Arbitrator's decision was as follows:
"[H]e would probably be earning nothing; for the same reason he is able to earn nothing in any work that he can do in this country now; therefore, the difference of nothing from nothing is nothing."

Acting Deputy President Moore also referred to the further comment of Burke J at 457-458 that:
“The man really has not lost anything because he is precluded from earning anything in any event injured or uninjured. For those reasons, I do not consider that he is entitled to a weekly payment."
and concluded:
“Nothing in the Arbitrator’s statements referred to above suggest that he made any error in either his ‘construction’ or ‘application’ of section 40 of the [Workers Compensation] Act. His decision was consistent with the evidence. The Arbitrator adopted the reasoning of Judge Burke in Viliami, and the adoption of such reasoning discloses no error of law or principle.”
Acting Deputy President Moore also referred to the decision of this Court in Nonferral (NSW) Pty Limited v Taufia (1998) 43 NSWLR 312; (1998) 16 NSWCCR 130 but distinguished it on the facts. Notwithstanding that the facts in Nonferral were different, in that the respondent in that case did not have the necessary permission to work in Australia at the time that he sustained his workplace injury, the principle stated in that case has some relevance to the issues in this case. However, for the reasons to which I will come, the Acting Deputy President’s failure to have regard to the relevance of that decision is not the central error in her reasoning. The central error was her finding that the Arbitrator had not erred in his construction or application of s 40 and that his adoption of the reasoning of the judgment in Viliami did not disclose error.
At this point it is necessary to return to the proper application of s 40.
Proper application of section 40
It is well accepted that s 40 of the Workers Compensation Act requires at least three steps to be taken before an award for incapacity payments may be made. The first step is to calculate what the employee would have earned but for the injury assuming the same or comparable employment. The second is to assess the employee’s post-injury earning capacity, that is, his capacity to work having regard to the nature and extent of his injury. That this is the determination to be made is apparent from Mitchell v Central West to which I refer more fully below. The third step involves the exercise of a discretion: Australian Wire Industries Pty Limited v Nicholson (1985) 1 NSWCCR 50. The nature of the discretion was described by McHugh JA in that case, at 54-55, as follows:
“The third step in the process requires the Compensation Court to look at the circumstances of the case. The weekly payment awarded must bear such relationship to the differential amount – which is the result of the exercise under the first and second steps – as under the circumstances of the case is proper. This third step therefore calls for the exercise of a judicial discretion of a kind with which courts have long been familiar.
It is at this stage that the Compensation Court can and must examine all the facts. The matters which can be examined include such matters as retirement, other supervening illnesses or injuries, the personal employment history of the worker and so on.”
(Australian Wire Industries v Nicholson involved the construction of s11(1)(a) of the Workers Compensation Act 1926 (NSW), which was the predecessor of s 40.)
In Mitchell v Central West this Court observed at 529-530:
“An award of weekly payment of compensation is not to exceed the ‘reduction in the worker’s weekly earnings’ (s 40). Section 40, like its predecessor s 11 of the Workers’ Compensation Act 1926, requires the judge making an award to follow a number of steps, although the precise number is a matter of some debate: cf JC Ludowici & Son Ltd v Cutri (1992) 26 NSWLR 580 at 582. The judicial process is discussed in Australian Wheat Board v Pantaleo [1984] 3 NSWLR 530. For present purposes, it is sufficient to observe that the Court is required:
1.To determine the weekly amount the worker would probably have been earning if uninjured (s40(2)(a)) …
2.To determine ‘the average weekly amount that the worker is earning or would be able to earn in some suitable employment from time to time after the injury’ (s40(2)(b)). Section 40(3) provides that the determination of this amount is subject to the following:
‘(a)the determination is to be based on the worker’s ability to earn in the general labour market reasonably accessible to the worker;
(b)the determination is to be made having regard to suitable employment for the worker within the meaning of section 43A.’ …
3.To subtract the figure derived from (2) from the figure derived from (1) (s40(2)).
4.To decide whether and to what extent the reduction calculated as above bears ‘such relation to the amount of that reduction as may appear proper in the circumstances of the case’ (s40(1)).”
The respondent submitted, and the appellant accepted, that the process that engages the decision maker under s 40(2)(a) and s 40(2)(b) is an hypothetical one. In making this submission, senior counsel for the respondent informed the Court that Viliami could not be considered good law. I accept that this is so. The approach taken in Viliami was to determine the applicant’s probable earnings by reference to his actual circumstances, including in the case of a worker not entitled by law to work. That meant, on his Honour’s findings, relating to Mr Viliami’s visa status whereby he was not entitled to work, that a nil amount was the appropriate calculation under both ss 40(2)(a) and (b). That approach is erroneous: see Australian Wire Industries v Nicholson; Mitchell v Central West.
The correct approach is as follows. Under s 40(2)(a) a determination has to be made as to the weekly amounts that the worker would probably have been earning but for the injury in the same or some similar employment. In this case, that would have required a determination of the appellant’s probable earnings in a position such as he had with the respondent. The Arbitrator determined however, following the approach in Viliami, that the appellant's probable earnings under s 40(2)(a) were nil, because he was not entitled to work. That was the first error made by the Arbitrator.

Under s 40(2)(b) a determination has to be made as to what the worker would be able to earn in some suitable employment. The respondent accepted that, for the purposes of determining some suitable employment, the appellant’s visa status was not a relevant consideration. However, it is apparent that the Arbitrator had taken the appellant’s visa status into account at this stage of his determination and accordingly assessed that amount for the purposes of s 40(2)(b) as also being nil. This was the undoubted purpose of the reference to Viliami at this point in his reasons. This was the second error of the Arbitrator.
Notwithstanding that earlier in his reasons the Arbitrator had referred to the discretionary exercise under s 40, given the approach he took under ss 40(2)(a) and (b) there was nothing upon which the discretion could be exercised as there was no “reduction” to be made. The Arbitrator had reached a “nil” amount by his approach under ss 40(2)(a) and (b). This result was the consequence of the two errors to which I have already referred.
The errors of the Arbitrator involved a wrong construction of the statute and thus constituted an error in point of law. The Acting Deputy President’s failure to find error in the Arbitrator’s decision thereby itself constitutes an error in point of law.
What flows from the error?
The appellant seeks an order that the matter be remitted to the Workers Compensation Commission for redetermination. The practical effect of such an order in this case is that the matter would be referred back to an Arbitrator for redetermination. Presumably, that would involve a rehearing. In that regard, the respondent would want the matter determined on the facts as they exist at the time of the rehearing, including the fact that the appellant is no longer in Australia, having voluntarily left in 2005 under threat of deportation.
The respondent contends that, in the circumstances, the Court ought not to remit the matter to the Commission but should dismiss the appeal, because the only possible result of the exercise of the discretion under s 40(1) is that no award for compensation would be made. It was submitted that this was so because the Court would not, as a matter of public policy, make an award for compensation in circumstances where to do so would acknowledge, endorse or sanction the commission of a crime, even if that sanction would be in respect of a hypothetical matter – hypothetical because the appellant was not in fact working in Australia. If it made any award, it would, so the respondent contended, have to be on the assumption that the appellant could in fact earn some moneys in Australia, whereas if he did so he would be committing a crime and any contract of employment entered into would thereby be illegal. It was submitted that the amendments to the Migration Act since the decision of this Court in Nonferral removed any doubt as to the illegality of a contract of employment entered into by a person who was disentitled to work in Australia under the terms of that person’s visa. I will need to return to this decision.
The respondent also submitted that the courts had exhibited a policy against the award of damages for economic loss in circumstances where the earnings of a person claiming damages had been or would be earned in circumstances involving unlawful conduct. Senior counsel for the respondent referred the court to two decisions, both involving common law claims for damages. He informed the court that his researches had not been able to find a case under the Workers Compensation legislation where this issue had been dealt with.
Central to the respondent’s submissions was that any contract of employment that the appellant might have in Australia would be illegal. The respondent relied on Smiths Newspapers Ltd v Becker (1932) 47 CLR 279 and Lee v McClennan (1995) 127 FLR 383.
In Smith's Newspapers Ltd v Becker, a German physician who had unlawfully held himself out to be entitled to practice in Australia was held not to be entitled to recover damages in a defamation claim. Dixon J, at 299, held that the unlawful conduct:
"operates positively to exclude compensation for loss, whether actual or conjectural, which depends upon the [physician's] unlawful conduct."
In Lee v McClellan, which involved a claim for damages for injuries sustained in a motor vehicle accident, Hulme J, after referring to Smith’s Newspapers Ltd v Becker, held at 386-388 that the damages that the party could recover did not include compensation for earnings received in breach of the Migration Act.
The respondent submitted that the existence of such an overriding policy, namely of not permitting the recovery of economic loss in circumstances where the exercise of an earning capacity would constitute a criminal offence, would mean that, upon the proper exercise of the discretion conferred by s 40(1), the appellant would have received no compensation.
The question whether as a matter of discretion, the appellant’s visa status would necessarily determine the outcome of the application for compensation brings me to a consideration of Nonferral v Taufia. In that case, the respondent entered Australia on a visitor's visa. Under the terms of his visa he was not entitled to work without the permission of the Secretary of the Department of Immigration. He undertook employment without having obtained the necessary permission and was injured during the course of that employment. The principal argument before the Court of Appeal was whether the contract of employment was illegal. Cole JA held that rights dependant upon a contract entered into in breach of statute are not unenforceable. Stein JA held that the contract of employment was not illegal and Sheppard AJA found that the contract was illegal but considered that in the exercise of the discretion under s 24 of the Workers Compensation Act, the matter should be dealt with as if the respondent had been working under a valid contract of service. Section 24 provided:
“If, in any proceedings for the recovery of compensation under this Act, it appears that the contract of service or training contract under which the injured person was engaged at the time when the injury happened was illegal, the matter may be dealt with as if the injured person had at that time been a worker under a valid contract of service or training contract.”
Mr Taufia had returned to Tonga by the time the trial judge had made an award for compensation. The trial judge, after having performed the calculations required of him by ss 40(2)(a) and (b), in the exercise of discretion under s 40(c), discounted the difference down to $25 per week by having regard to the respondent’s earnings in Tonga since his return. This Court accepted that that was an appropriate approach to take in the exercise of the discretion.
It follows therefore that although the appellant had no entitlement to work in Australia from the time that his visa status changed, it is not a foregone conclusion that his application for weekly payments for partial incapacity under s 40 must be dismissed. It may be that the approach endorsed by this Court in Nonferral vTaufia would recommend itself to the primary decision maker. It is also possible that there is an argument available to the respondent that that approach is either not available, or ought not be available given that the migration legislation has changed since that decision. There may be other discretionary factors of which this Court is not aware that may also be relevant. In those circumstances, I am of the opinion that the appellant, having established error in the determination of the Acting Deputy President, is entitled to an order that the matter be remitted for redetermination.
Subsequent to preparing these reasons I have had the opportunity to read in draft the comments of Santow JA. As is apparent from what I have said in the preceding paragraph, the further determination of this matter will depend not only upon the proper application of the law, but will also depend on such facts and discretionary considerations as are found to be relevant at the time of the rehearing. The consideration of the then current Migration legislation may be a relevant consideration. If there is any question of the illegality of the appellant’s employment that arises out of the terms of the legislation, the decision maker will have to determine the relevance and effect of any such illegality. In this regard, the principles governing illegal contracts may well require consideration. The principles were reviewed by this Court in Karl Suleman Enterprises Pty Limited (In Liq) v Babanour [2004] NSWCA 214.
Accordingly, I propose the following orders:
1. Appeal allowed;
2.Set aside the decision of Acting Deputy President Moore of the Workers Compensation Commission;
3. Set aside the award for the respondent made by the Arbitrator;
4.Order that the matter be remitted to the Workers Compensation Commission for redetermination according to law;
5.Order that the respondent pay the appellant's costs of the appeal and to have a certificate under the Suitors’ Fund Act (NSW) 1951.
SANTOW JA: I have had the advantage of reading Beazley JA’s judgment in draft. I concur in the result she adopts. I also agree in her conclusion and reasons as to the errors of law vitiating the arbitrator’s discretionary determination and that of the Deputy President in reviewing it.
However, I need to say something more as to the question which underlies the discretion now to be re-exercised. Accepting that there is a probability if not certainty that if Mr Singh were now to work in Australia he would breach the new conditions of his visa so contravening s235 of the Migration Act 1958 (Cth), what is the consequence of that illegality in calculating his proper compensation under the three-step process, particularly the last, mandated by s40 of the Workers Compensation Act (“the Act”)?
Illegality arose in the present case by reason of visa conditions imposed after the appellant’s injury preventing him from working in Australia, were he otherwise in the country and in a position to do so. Where in contrast such illegality pre-dates the work injury, s24 of the Act may be called in aid. It is to invoke a discretion, almost invariably exercised, to deem the worker’s contract of service though illegal to be a valid contract. Cases such as Viliami v National Springs (1993) 9 NSWCCR 453 deal with the case of illegality preceding the work injury. But in any event, as explained by Beazley JA, it should no longer be considered good law. Nonetheless the errors identified by Beazley JA in its reasoning have a present relevance when it comes to the first two steps of the assessment process for compensation under the Act.
Beazley JA at [31] describes the three steps required for the proper application of s40 of the Act. She characterises the first two steps (under s40(2)(a) and under s40(2)(b)) as a “hypothetical process” (at [32]). I gratefully adopt what she says:
“31It is well accepted that s 40 of the Workers Compensation Act requires at least three steps to be taken before an award for incapacity payments may be made. The first step is to calculate what the employee would have earned but for the injury assuming the same or comparable employment. The second is to assess the employee’s post-injury earning capacity, that is, his capacity to work having regard to the nature and extent of his injury. That this is the determination to be made is apparent from Mitchell v Central West to which I refer more fully below. The third step involves the exercise of a discretion: Australian Wire Industries Pty Limited v Nicholson (1985) 1 NSWCCR 50. The nature of the discretion was described by McHugh JA in that case, at 54-55, as follows:
‘The third step in the process requires the Compensation Court to look at the circumstances of the case. The weekly payment awarded must bear such relationship to the differential amount – which is the result of the exercise under the first and second steps – as under the circumstances of the case is proper. This third step therefore calls for the exercise of a judicial discretion of a kind with which courts have long been familiar.
It is at this stage that the Compensation Court can and must examine all the facts. The matters which can be examined include such matters as retirement, other supervening illnesses or injuries, the personal employment history of the worker and so on.’
(Australian Wire Industries v Nicholson involved the construction of s11(1)(a) of the Workers Compensation Act 1926 (NSW), which was the predecessor of s 40.)”
Because step 1 (s40(2)(a)) and step 2 (s40(2)(b)) comprise a hypothetical process of estimation, it necessarily follows that the calculation of pre-injury future earnings (step 1) and post-injury future earnings (step 2) assume legality in the hypothetical employment. The hypothetical character of the calculation is apparent from the fact that under both step 1 and step 2 the assumption of future earning does not depend on the worker being actually in employment, though step 2 would take into account actual earnings were he to have any. But even there, reference to “would be able to earn in some suitable employment” is available as a check and reference point. The calculation remains hypothetical in that respect and as to the future. If that assumption of legality in employment be contrary to the fact, the Act in s40 nonetheless mandates that fiction for both steps 1 and 2, as was accepted in argument.
This is clear enough for the calculation required for step 1. The same fiction must attend the calculation required for step 2 (s40(2)(b)). If contrary to that conclusion, illegality in future employment were to preclude giving any figure other than zero in calculating the post-injury future average weekly amount, there would then be no “reduction” from the step 1 figure. That absurd result, even if curable by the step 3 discretionary adjustment under s40(1), would not accord with the hypothetical language of s40(2)(b) “would be able to earn” projected into the future where legality of employment could not be predicted.

The step 3 adjustment mandated by s40(1) is in the following terms:
“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.” [emphasis added]
Section 40(1) simply asks, in relation to the weekly payment of compensation, does it bear a proper relation to the amount of the reduction in weekly earnings. If not, an adjustment is made. Steps 1 and 2 calculate that reduction. They disregard illegality, just as they disregard the fact that the worker may not be working at all. The fact that the worker here was injured in the course of working legally in New South Wales is to my mind a powerful consideration for concluding that a weekly payment of compensation at the level of the reduction, would bear a proper relation to that reduction, assuming there is no other countervailing factor.
That the Court cannot reward illegality by awarding damages for unlawful conduct (Smith’s Newspapers Ltd v Becker (1932) 47 CLR 279 at 299 per Dixon J) is to my mind not a controlling circumstance here as it was not in Nonferral (NSW) Pty Ltd v Taufia (1998) 43 NSWLR 312 (in relation to s24). It is the statute (s40(2)) that mandates the hypothetical calculation of steps 1 and 2 and which renders illegality outside that calculation. The compensation here does not depend on unlawful conduct to use the words of Dixon J in Smith’s Newspapers (supra). Rather it depends upon the statutory mandate for its calculation. The final discretionary question of what is “proper” in terms of the final step 3 discretion is not to be treated as automatically requiring an adjustment downwards to take account of the illegality earlier excluded from consideration by the hypothetical character of the calculation. The discretion is simply to be exercised having regard to those circumstances relevant to whether there would be a disproportionately high level of weekly compensation if the figure were left at the level of reduction in weekly earnings calculated in accordance with the earlier hypothetical process. Assuming nothing further changes with respect to the appellant’s immigration status, and, taking the position least favourable to the appellant, assuming also the current legal constraint on his work under that changed visa status remains the same, this of itself, would not, to my mind, have any weight as a relevant consideration, certainly where the original employment was legal in which the injury was suffered. To conclude otherwise would, to my mind, work an outcome not in accordance with the statutory purpose evinced by the compensation regime.
I should add that this case, in the way conducted, did not throw up the question of whether the appellant’s capacity to work outside Australia, post his injury, could be taken into account. Certainly, in terms of s9AA of the Act the compensation in question was payable in respect of employment that is connected with New South Wales, in that his injury occurred in the course of employment here. That would satisfy the statutory nexus with New South Wales.
TOBIAS JA: I agree with Beazley JA.
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LAST UPDATED: 27/11/2006