Tamworth Building Supplies Pty Ltd v Begovic
[2008] NSWWCCPD 77
•24 July 2008
| WORKERS COMPENSATION COMMISSION | ||||||
| DETERMINATION OF APPEAL AGAINST A DECISION OF THE COMMISSION CONSTITUTED BY AN ARBITRATOR | ||||||
| CITATION: | Tamworth Building Supplies Pty Ltd v Begovic [2008] NSWWCCPD 77 | |||||
| APPELLANT: | Tamworth Building Supplies Pty Ltd | |||||
| RESPONDENT: | John Begovic | |||||
| INSURER: | QBE Workers Compensation (NSW) Limited | |||||
| FILE NUMBER: | WCC8841-07 | |||||
| DATE OF ARBITRATOR’S DECISION: | 5 March 2008 | |||||
| DATE OF APPEAL DECISION: | 24 July 2008 | |||||
| SUBJECT MATTER OF DECISION: | Weekly payments; section 40 of the Workers Compensation Act 1987; weekly amount which the worker is earning or would be able to earn; onus of proof of earnings. | |||||
| PRESIDENTIAL MEMBER: | Acting Deputy President Anthony Candy | |||||
| HEARING: | On the papers. | |||||
| REPRESENTATION: | Appellant: | QBE In-House Legal | ||||
| Respondent: | Everingham Solomons, Solicitors | |||||
| ORDERS MADE ON APPEAL: | The decision of the Arbitrator dated 5 March 2008 is revoked and the matter is remitted to another Arbitrator for determination afresh in accordance with these reasons. Each party is to pay his or its own costs of the appeal. | |||||
BACKGROUND TO THE APPEAL
John Begovic (‘the worker’) was a truck driver employed by Tamworth Building Supplies Pty Ltd (‘the employer’) who injured his back and right shoulder in the course of his employment on 20 June 2002 while delivering material to a building site when he slipped on plastic sheeting. Although he reported the injury he continued working and did not seek medical attention until after his services had been terminated by the employer on an unspecified date in late 2002.
The worker lodged a claim for workers compensation on 16 January 2003 which was referred by the employer to QBE Workers Compensation (NSW) Limited (‘the insurer’). The claim was accepted and payments of compensation were made. The insurer also arranged for the worker to receive appropriate rehabilitation assistance.
Before his employment as a truck driver in early 2002, the worker had been self employed as a musician for ten years and had earlier been a member of the Royal Australian Navy for five years during which time he completed a Bachelor of Music degree at Melbourne University. He also had other employment for short periods outside the music industry.
The worker first sought medical attention on 17 December 2002 from Dr Diebold, a general practitioner of Tamworth. Dr Diebold considered the worker had a low back strain and was fit for suitable duties with restrictions on lifting. He continued to certify the worker as fit for suitable duties at regular intervals up to 18 January 2006 when he certified him fit for his pre-injury duties. The worker then saw another general practitioner in Tamworth, Dr Croaker, who certified the worker fit for suitable duties only and has continued to do so.
The insurer wrote to the Worker on 16 February 2006. In that letter it denied liability and gave the following reason:
“In our opinion your injury is no longer related to your employment and you no longer have an incapacity as a result.”
That opinion was said to be based on:
“ • A medical report issued by Dr Robert Smith dated 21/10/2005 stating that employment in [sic] not a substantial contributing factor to your injury and section 9A of the Workers’ Compensation Act 1987.
• A Workcover medical certificate issued by your nominated treating doctor stating that you are fit for pre injury duties.”
Payments of weekly compensation, it was said, were to be made to 30 March 2006 upon receipt of an appropriate medical certificate. However, the insurer said that since it was in receipt of a “final pre injury medical certificate” there was no entitlement to further benefits.
On 7 March 2006 the insurer again wrote to the worker in virtually identical terms to those of the letter of 16 February 2006, deleting any reference to there being no entitlement to benefits by reason of receipt of a “final pre injury medical certificate” and stating that payments of compensation would be made to 18 April 2006. I assume the certificate referred to is that of Dr Diebold of 18 January 2006.
The worker consulted his current solicitors and an Application for Interim Payment Direction was lodged with the Commission on 17 February 2006 (2320-2006). An agreement was reached at a teleconference on 8 March 2006 that the insurer would make payments up to 18 April 2006, however, it wrote to the worker’s solicitors on 20 March 2006 advising that payments would be made to 1 May 2006, being six weeks from the date of that correspondence. These proceedings were brought in the name of John George Lee by which name the worker has sometimes been known. In some medical certificates and reports his surname is given as Begovic-Lee.
The worker had earlier sought a lump sum payment pursuant to section 66 of the Workers Compensation Act 1987 (‘the 1987 Act’) and an Application for Registration of an Agreement under section 66A of that Act was signed by the worker on 6 April 2004 and lodged with the Workers Compensation Commission (‘the Commission’). The amount of such compensation was $7,500.00 representing 6% permanent impairment.
The proceedings, the subject of this appeal, were commenced by an Application to Resolve a Dispute of 21 November 2007. On 16 January 2008 there was a teleconference before a Commission Arbitrator and on 15 February 2008 there was an arbitration hearing before that Arbitrator which resulted in an award of continuing weekly compensation in favour of the worker. It is from that decision that the employer now seeks leave to appeal by application filed on 2 April 2008.
THE DECISION UNDER REVIEW
The ‘Certificate of Determination’, dated 5 March 2008 records the Arbitrator’s orders as follows:
“1.That the respondent pay the applicant weekly compensation at the rate of $116.48 from 1 May 2006 to date and continuing under s40 of the Workers Compensation Act 1987.
2. That the respondent pay the applicant’s costs as agreed or assessed.”
ISSUES IN DISPUTE
The issues in dispute in the appeal are whether the Arbitrator erred in:
·finding that there was sufficient evidence of the worker’s post-injury earnings or ability to earn;
·failing to give proper reasons for his findings as to the worker’s earnings in his sound recording studio business;
·failing to determine the worker’s actual earnings or ability to earn in accordance with section 40(2)(b) of the 1987 Act.
ON THE PAPERS REVIEW
Section 354(6) of the Workplace Injury Management and Workers Compensation Act 1998 (‘the 1998 Act’) provides:
“(6) If the Commission is satisfied that sufficient information has been supplied to it in connection with proceedings, the Commission may exercise functions under this Act without holding any conference or formal hearing.”
Having regard to Practice Directions Numbers 1 and 6, the documents that are before me, and the submission by the parties that the appeal can proceed to be determined on the basis of these documents, I am satisfied that I have sufficient information to proceed ‘on the papers’, without holding any conference or formal hearing, and that this is the appropriate course in the circumstances.
LEAVE
Before proceeding to deal with an appeal the Commission must determine whether the application meets the requirements of section 352 of the 1998 Act.
The Application to Appeal was lodged with the Commission on 2 April 2008, that is, within 28 days of the Arbitrator’s decision in compliance with section 352(4) of the 1998 Act. The worker’s solicitors, however, maintain that the appeal is out of time because an unsealed copy of the appeal was not received by them until 7 April 2008.
The Certificate of Service lodged by the employer on 15 April 2008 shows that a sealed Application to Appeal was served by means of lodgement at the Document Exchange on 11 April 2008. Thus, by rule 8.4(2) (c) of the Workers Compensation Commission Rules 2006 (‘the Rules’) service was deemed to have taken place on the following day.
The time for service of a sealed Application to Appeal is 14 days from the date on which the Registrar registers the Application to Appeal (rule 16.2(5) of the Rules). In this case this was done on 7 April 2008. So, it accordingly appears that the submission that the appeal is out of time is misconceived.
Section 352(2) of the 1998 Act provides:
“The Commission is not to grant leave to appeal unless the amount of compensation at issue on the appeal is both:
(a)at least $5,000.00 (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.”
In relation to this appeal, it is not disputed by the worker that the thresholds prescribed by section 352(2) are met. While this is not conclusive of the matter, it does appear to me that this is so since the employer contends that it is not liable to pay any further compensation at all and the arrears of compensation awarded are more than $5,000.
Leave to appeal is accordingly granted.
EVIDENCE
Two statements from the worker are in evidence. In the first dated 16 November 2007 he said that in 2005/2006 he set up a recording studio at home which cost approximately $75,000.00 and in which he recorded artists, choirs, orchestras and the like. He also did live shows around Tamworth on weekends, averaging one show every three weekends. He complained he had back pain which was more constant and went down his right leg. He said it was relieved if he had a shower or moved around but was aggravated if he did any bending or long distance driving. He then set out his work history which was that he had left school in 1984 at the age of 17 years and the following year joined the Royal Australian Navy as a musician going through the Navy Conservatorium as a trumpet player. In 1988 he had left the Navy and become a full-time musician around the Central Coast of New South Wales. He said he also toured playing guitar and singing on his own and with a band. He also worked on a cruise ship for nine months. He had worked outside the music industry for periods as a purchasing officer in a mine for seven months and for an electric wholesaler for 18 months. In 1998 he had moved to the Tamworth area and between 1998 and 2000 he had toured extensively through the Northern Territory, Queensland, South Australia and Western Australia. During 2002 he and his wife decided that he would only tour on weekends which meant working [as a musician] Thursday, Friday, Saturday and Sunday and having a regular job during the week driving a truck. He said he would have earned approximately $50,000.00 truck driving plus the money he would have been paid for working Thursday, Friday, Saturday and Sunday. Copies of tax returns for the financial years ended 30 June 2000, 2002, 2003, 2004, 2005 and 2006 were referred to and these were in evidence. The worker’s tax return for the financial year ended 2007 and five business activity statements were later relied on. I will deal with these and other documents relating to the worker’s income later.
The worker said that following his injury he reduced his weekend work to one in two weekends and then one in three weekends which he was doing at the time of his statement. He was paid approximately $300.00 to $500.00 for each show out of which he had to take his expenses, namely fuel, tax, accommodation and meals. He had set up a recording studio which he operated one to two days a week however, he said the studio was initially slow but was running at its maximum He was still only getting one or two days per week at $100.00 per day.
He had last seen his general practitioner, Dr Diebold, in mid 2005 after which the doctor had declined to see him because his bills had not been paid by the insurer. As a result of his back injuries he said he was unable to tour or drive a truck. While touring he was required to drive long distances and also to carry amplifiers, microphones, guitars, organs and a lot more equipment that needed to be set up and then dismantled every night. Often the venues were upstairs which made it all the more difficult.
In his second statement dated 31 January 2008 the worker clarified his earlier statement in relation to his earnings in the financial year ended June 2006. He said that in respect of the studio he had borrowed $75,000.00 by way of a loan to set it up. The total cost was $320,000.00 financed through a business loan, a redraw facility on his house, two credit cards, as well as moneys from the sale of other houses. He then set out how the money was spent, which is as follows:
· building - $90,000.00;
· equipment - $190,000.00;
· sound proofing - $30,000.00;
· landscaping - $9,000.00;
· tuition - $7,500.00
At the hearing on 15 February 2008 the worker was cross-examined as to a claim for compensation which he had made in relation to injury to his right leg received while he was in the Royal Australian Navy. He had taken some proceedings for compensation in the Administrative Appeals Tribunal in relation to that injury but had received no weekly compensation. In re-examination by his counsel, I think it may fairly be said that the worker made light of any periods of treatment and incapacity as a result of ulceration of his leg following cellulitis. This was said to be improving.
The Worker’s Medical Evidence
Dr Diebold in a report of 27 February 2003 said that he had first seen the worker on 17 December 2002 with a complaint that in approximately July of that year he had been carrying timber for his employer and had fallen and twisted his back. On another occasion he had been unloading heavy gyprock and further aggravated his back pain. A diagnosis of back strain was made and he was considered fit for suitable duties with no heavy lifting or repetitive bending. Dr Diebold hoped that the worker would improve with physiotherapy which he said was the case, as related to him by the worker, when reviewed on 25 February 2003. The doctor thought that the worker’s period of incapacity would be several months but he was not fit for his pre-injury duties at that time.
In a report of 17 December 2003 Dr Diebold referred to an MRI which had been performed on 29 October 2003 and thought that the worker’s injury was consistent with back strain and associated lumbosacral disc injury. The doctor thought he was fit for employment not involving lifting in excess of 10 kg or repetitive bending. He was otherwise fit for work. He thought that the worker may have reached maximum medical improvement.
Dr Croaker began to see the worker in 2006 after Dr Diebold, after being sent specialists’ reports by the insurer, certified the worker fit for work without restriction. The account of injury to that doctor was in accordance with the history obtained by Dr Diebold. Dr Croaker thought that the back injury had resulted in an inability to exercise, contributing to the worker’s weight gain which had further aggravated his sciatica. That doctor considered that laparoscopic banding of the stomach should be undertaken to remove pressure on the L5/S1 nerve root. He noted that the worker then weighed 135 kgs, was 180 cm in height and had a BMI [body mass index] of 41.67. He had seen the worker on a number of occasions in relation to his back trouble, weight and diabetes and considered that the worker was only fit for light duties two to three hours a day.
Dr John Stephen, an orthopaedic surgeon, examined the worker at the request of the insurer on or about 16 December 2003. The worker told that doctor that he was working in a band as a guitarist/singer and had been doing this part-time on weekends over the preceding few months but intended to go back full time to the activity in January. He said he had always been a musician, even when he was in the Navy. He said he had worked steadily in a band until January 2002 when he decided to take up truck driving because his wife had become pregnant and he could not tour. The worker complained of low back pain following the fall in question which was intermittent, however, his back was never really right after the fall. The worker said that after about four months he saw his general practitioner who arranged for physiotherapy which provided no lasting benefit. He also said that he attended a gym program which made his backache worse. Despite the fact that he was doing the same job as ever in December of the preceding year a new boss had stood him down. Dr Stephen reviewed an MRI scan of 29 October 2003 which was reported as showing dehydration of the lumbo-sacral disc with a small tear of the posterior annulus. Other levels however appeared normal. There was no evidence of nerve root compression at any level. Dr Stephen’s diagnosis was that the worker had non-specific mechanical low lumbar pain without evidence of nerve root compression. He considered that he would continue to have this, varying in intensity into the indefinite future. The worker would never be fit for heavier types of work, including the work he was involved in while truck driving for the employer. He thought however the worker should be able to continue his profession as a musician indefinitely. Dr Stephen also considered that the worker’s employment was a substantial contributing factor to his condition and would continue to be a substantial contributing factor into the indefinite future.
In a second report of the same date Dr Stephen expressed the view that the worker had a 6% permanent impairment.
An orthopaedic surgeon, Dr Hopcroft, saw the worker at the request of his solicitors on 19 March 2004. On examination that doctor found that the worker had a good range of movement and there was pre-ulcerous varicose pigmentation affecting a large area of the right anterior leg with a well-healed scar from the injury suffered in the Navy in 1984.
Dr Hopcroft saw an X-ray of 18 March 2003 as well as the MRI scan of 29 October 2003. Dr Hopcroft obtained a history that the worker had been hospitalised in respect of his right shin injury in 1998 and suffered a recurrence in 1999. The Worker had also developed diabetes mellitus in 1999 but was non-insulin dependent.
Dr Hopcroft’s opinion was that the worker had suffered some damage to his L5/S1 intervertebral disc in the fall in June 2002 which was the cause of his ongoing back pain and sciatic symptoms. He did not think that surgical intervention was indicated. The worker’s treatment should include weight reduction, together with hydrotherapy and abdominal and back bracing exercises. He should however avoid repetitive bending and lifting activities. Dr Hopcroft assessed permanent impairment of the back at 10% and loss of use of the right leg at or above the knee at 10% also. The whole person impairment was 6%.
Dr Hopcroft again saw the worker on 11 September 2007when he was told that the worker regularly played at “gigs” around the Tamworth district. On this occasion he expressed the view that the worker who weighed 137kg suffered from morbid obesity. The worker did however complain that all of his therapy programs, including gymnasium sessions, had been cancelled by the insurer and his weekly payments had been suspended also. The worker said that his current employment obliged him to use a transit van to transport his equipment to various venues and he was limited by back and leg symptoms to driving for three hours. He had established a recording studio at his home which he had been running since 2005. The doctor found that there was a small recently healed ulcer on the worker’s right shin and thought that the problem with his right leg was going to deteriorate rapidly unless his obesity was brought under control. Dr Hopcroft thought that the worker’s employment had contributed substantially to his ongoing pain and sciatica and his back and leg symptoms were restricting his capacity to work, especially to drive any significant distance to engage in professional music presentations.
The Employer’s Medical Evidence
The insurer had the worker seen by Dr Kafataris who is described as an injury management consultant. It is not clear when the worker was examined since the only report in evidence from that doctor, dated 1 August 2005, was said to be a supplementary report. Dr Kafataris comments on the MRI scan of 29 October 2003. He thought that this merely showed disc degeneration and did not represent an acute traumatic injury. Dr Kafataris contacted Dr Diebold as the treating doctor and was told that that doctor had not seen him for some time. Dr Kafataris expressed the view that there was no definable pathology that would preclude the worker from returning to pre-injury duties, at least on a trial basis. Dr Kafataris did not accept the worker had sustained a serious injury and noted that he had not reported it to the insurer for six months. He thought it was more likely that the worker had sustained a relatively minor injury and had made a full recovery from a functional point of view. Recurring backache was common he thought after mechanical spinal injury. He did not think that any further treatment was required. He reviewed the report of Dr David Walker (that report is not in evidence) and also the report of Dr John Stephen to which I have earlier referred. He reviewed the results of a functional capacity assessment which suggests that the worker was lifting up to 30 kg at home and expressed the view that the worker would be fit to return to pre-injury duties as a truck driver. However, lifting of weights of more than 30 kg should be avoided as was the case with able-bodied workers and assistance should be sought wherever possible. There was no reason why if the worker were able to be employed full-time in the music industry that he could not return to his pre-injury duties, even on a trial basis. He did not agree with the permanent restriction of 10 kg placed on the Worker by his treating doctor. He did say that the Worker was technically at an increased risk of exacerbation because of his obesity and history of previous work-related back pain. This would need to be borne in mind if any return to pre-injury duties were considered.
Dr Robert D. Smith, a consultant surgeon, examined the worker at the request of the insurer on 21 October 2005. He told that doctor that he had been put off work by the employer because of his injuries. He was told they had no work for him but he worked normally, he said, until Christmas 2002 at which time he was complaining of a sore back. The worker told the doctor that he had his own music business in Tamworth. Initially this was only a part-time occupation but he was then carrying on full duties working 20 to 30 hours a week with subcontractors in his music business known as Fatline Productions.
The worker said he had received no particular treatment apart from some physiotherapy over six or seven months. The worker complained of pain in the early morning at the L2 level with the pain pushing into the higher back region just below the shoulders. The symptoms would worsen in the afternoon and by evening they were worse still and the worker would then go to bed. Dr Smith noted that the worker had not been referred to a specialist by the worker’s general practitioner. On examination Dr Smith found that the worker’s hands were very dirty and quite calloused. He found no leg wasting. Dr Smith found inconsistencies on straight leg-raising and expressed the view that he could find nothing generally wrong with the worker. He did not consider the worker’s condition was in the least bit consistent with the history given. Dr Smith did not think that any employment factor had anything to do with the claimant’s condition and QBE had no liability in relation to the alleged event of April 2002 [sic].
Tax Returns and Other Financial Records
The tax returns in evidence are for the financial years ended 30 June 2000 to 30 June 2007 with the exception of the financial year 2001 in respect of which the worker has stated that a return was not done. I make the following comments concerning the tax returns. They all appear to have been prepared on or after 31 July 2007. I rely on two matters in saying this: firstly there appears to be no claim made for a deduction for tax accountants’ fees until the 2007 return in an amount of $2,725.00 and secondly the dates of preparation of the estimates of income tax for those years are 31 July 2007 or later. There are no statements of earnings, group certificates or notices of assessment in evidence. It is somewhat puzzling that for the financial year ended 30 June 2003, although payments by QBE are disclosed, there is no reference made to payment of wages by the employer for the first five or six months of that financial year during which time it appears the worker’s employment continued.
The Schedule of Wages which is contained in Part 5 of the Application to Resolve a Dispute alleges comparable earnings of $1,923.07 a week and the worker’s earnings as a loss of $38.00. The award for his pre-injury employment was said to be $800.00. The employer’s Schedule of Wages states that compensation was being paid to the worker at the rate of $567.30 per week prior to the cessation of payments. It is said that since the worker earned $92,572.73 in performance fees and studio income, then he had no claim for losses in 2006. Otherwise, the employer was unable to respond to the Wages Schedule relied on by the worker.
I set out a summary of the tax returns in the following table. I have separated the income derived from the recording studio from the income from musical performances as shown in the tax returns:
Year Ended
30th JuneEmployer
Gross
Expenses
Nett
Total
2000 Self $98,263 $73,887 $24,376 $ 24,376 2001 - - - - - 2002 1) Tamworth Building Supplies
2) Self
$36,935
$38,709Nil
$12,269$36,935
$26,440$ 63,375
2003 1) QBE
2) Self$13,420
$37,509Nil
$17,143$13,420
$20,366$ 33,786
2004 1) QBE
2) Self$48,168
$17,364Nil
$19,032$48,168
$(1,668)$ 46,500
2005 1) QBE
2) Self$28,915
$15,609Nil
$19,575$28,915
$(2,934) or
$(3,966)$ 25,981
2006 1) QBE
2) Studio
3) Self$23,792
$68,929
$23,644Nil
$32,831
$27,289$23,792
$36,098
$ (3,645)$ 56,245
2007 1) Studio
2) Self$38,933
$74,707$45,869
$44,652$ (6,936)
$30,055$ 23,119
Profit and loss accounts for the worker trading as Fatline Productions for the financial years ended 2002 to 2006 were in evidence. The figures contained in these are substantially in accordance with those set out in the tax returns.
SUBMISSIONS BEFORE THE ARBITRATOR
The Arbitrator has summarised these in his Statement of Reasons as follows:
“22.Mr Hickey for the applicant submitted that I should prefer the evidence of Dr Hopcroft and Dr Croaker as they both had the advantage of having seen Mr Begovic over a period of time and were able therefore, to comment on any changes in his condition.
23.Mr Hickey also submitted that I should not accept Dr Diebold’s evidence as expressed in his WorkCover Certificate as it could be inferred from Dr Diebold’s notes that he had not seen Mr Begovic since 18 April 2005. Mr Begovic claimed that Dr Diebold had not seen him for a long time before he issued the certificate.
24.In respect to the amount I should award if I accept his submissions relating to injury, Mr Hickey submitted I should look at the amount Mr Begovic was earning before his injury and ignore the income he earned as a musician since he did not earn that income as a ‘worker’.
25.He then submitted I should determine what he was capable of earning now to determine the difference and I must then exercise my discretion as to an appropriate deduction (if any) to determine the amount of weekly compensation. He conceded that there were a number of matters I should consider in determining how to exercise my discretion including the leg ulcers referred to in the evidence, the obesity and the diabetes. He submitted an order between $100 and $300 per week was appropriate.
26.Mr Batten submitted that I should prefer the evidence of Drs Smith and Kakataris [sic] to that of Drs Hopcroft and Croaker as they had seen Mr Begovic at a time closer to the date that compensation was terminated.
27.Mr Batten went on to submit that if I did not accept that submission the evidence on which I had to rely [to] make a determination as to weekly compensation was not probative and it would be impossible for me to make a decision based on the material provided. There is much in that submission. Mr Batten also submitted that I should look at the whole period of employment to calculate the income the applicant could have earned but for the injury.”
The Arbitrator’s Reasons:
It was noted that the issues to be determined were: for what period the worker was partially incapacitated after 1 May 2006; in respect of any period of partial incapacity, what was the weekly amount which the worker would probably have been earning but for injury had he continued to be employed in the same or some comparable employment; and what was the average weekly amount the worker was earning or would be able to earn in some suitable employment from time to time after the injury. The Arbitrator noted that for the first 23 weeks of his employment the worker’s average earnings were $1616.05 per week and following his injury he continued to work until 13 November 2002 and was paid to 14 December 2002, a period of 24 weeks. His earnings during this period were said to be $13,420.00 or $551.67 per week.
On the question of incapacity, the Arbitrator preferred the opinions of Drs Hopcroft and Croaker to those of Drs Kafataris and Smith. He also found that the worker’s employment was a substantial contributing factor to his incapacity as at 1 May 2006 [when payments ceased]. The Arbitrator set out the five steps prescribed in Mitchell v Central West Health Service (1997) 14 NSWCCR 527. The Arbitrator noted there was no explanation on the evidence of the difference in earnings prior to and after injury (or, more precisely, prior to or after 30 June 2002). He found on the evidence that the worker would have been earning an average of the two amounts referred to in [44], namely $1,087.60. The award rate was, he was told, $769.66. He noted that average earnings were considerably higher than the award and took the view that he should adopt the relevant award as indicating the amount the worker would be earning but for injury as he had no evidence to indicate that over-award rates would continue until 2006.
As to the amount the worker was capable of earning, the Arbitrator approached this on the basis of Dr Croaker’s view that the worker was able to work two to three hours a day or 10 to 15 hours per week with the hourly rate being $20.25. Accordingly, the Arbitrator thought that the worker could earn between $202.50 and $303.75 per week and he adopted the greater of those sums. The Arbitrator noted the earnings which the worker had from his recording studio business and said that he proposed to factor in the possibility of income from the studio in exercising his discretion. He excluded the income from performances because the worker was supplementing his income by performing while he was also working with the employer. The difference between $769.66 and $303.75 was $465.91 which was to be reduced by reason of the worker’s obesity, his tendency to leg ulcers, his diabetes, the absence of evidence the worker had sought suitable employment and the probability based on 2006 figures that the worker would earn significant income from the studio operation. Accordingly, he exercised his discretion by reducing the amount to be awarded by 75% with a net weekly award of $116.48 per week.
SUBMISSIONS ON APPEAL, DISCUSSION AND FINDINGS
There are three grounds of appeal. I will deal with these in order.
Ground 1:
It is said that the Arbitrator erred in failing to find that the evidence regarding the worker’s earnings or ability to earn was not probative when he had accepted a submission by the employer to this effect. The passage appears in paragraph 27 of the Arbitrator’s Statement of Reasons set out above at [43].
Reliance is also placed on what was said by the Arbitrator at paragraph 45, which is as follows:
“I accept Mr Batten’s submission that Mr Begovic has an onus to put probative evidence of his ability to earn before the Commission. In saying that, I hasten to add that after seeing Mr Begovic answer questions in a brief cross-examination I do not consider that the failure to do so is a deliberate attempt to hide his true financial position.”
For the worker it is submitted that in saying that there is much in a submission the Arbitrator is not to be understood as agreeing with that submission but rather saying that it has some weight. It is also submitted that the statement of the Arbitrator at paragraph 45 was merely an acknowledgment of where the onus lay rather than indicating there was an absence of probative evidence. The worker points to the submission of the tax returns and BAS statements [sic].
Section 40 of the 1987 Act provides relevantly:
“40(1) Entitlement. The weekly payment of compensation to an injured worker in respect of any period of partial incapacity for work is to be an amount not exceeding the reduction in the worker’s weekly earnings, but is to bear such relation to the amount of that reduction as may appear proper in the circumstances of the case.
(2) Calculation of reduction in earnings of worker – general. The reduction in the worker’s weekly earnings is (except as provided by this section) the difference between:
(a)the weekly amount which the worker would probably have been earning as a worker but for the injury and had the worker continued to be employed in the same or some comparable employment (but not exceeding $1,000.00); and
(b)the average weekly amount which the worker is earning, or would be able to earn in some suitable employment, from time to time after the injury (but not exceeding $1,000.00).
…”
The employer relies on rule 15.2 of the Rules which is as follows:
“15.2 When informing itself on any matter, the Commission is to bear in mind the following principles:
(a) evidence should be logical and probative,
(b) evidence should be relevant to the facts in issue and the issues in dispute,
(c)evidence based on speculation or unsubstantiated assumptions is unacceptable,
(d) unqualified opinions are unacceptable.”
The evidence regarding the worker’s actual earnings after injury is said to be no more than speculation in the absence of supportive evidence or material. The Arbitrator himself was said to have accepted the employer’s submission in this regard at paragraph 27. I agree with the worker’s submission that, in saying that there was much in the submission of the employer’s counsel, the Arbitrator was doing no more than acknowledging the difficulty in determining the worker’s entitlement to weekly compensation. I do however consider that the Arbitrator at paragraph 47 found that the worker had not put probative evidence of his ability to earn before the Commission.
There has been some confusion in this case between the worker’s actual earnings after 1 May 2006 and his ability to earn in suitable employment. Because of the difficulty in saying how much the worker had earned from his work as a musician and from his recording studio the Arbitrator looked only at his hypothetical earnings as a truck driver for three hours per day and based his award on such calculation. That the worker bears the onus of proving all matters relevant to his entitlement to benefits under section 40 of the 1987 Act cannot be doubted (see J & H Timbers Pty Ltd v Nelson (1972) 126 CLR 625 (‘Nelson’)). Whether that onus has been satisfied is another matter and the High Court was divided in that case as to where the onus lay. Barwick CJ and Windeyer J considered that the onus was on the employer while the majority, Menzies, Owen and Gibbs JJ considered that the onus was on the worker. That was a case of a person who carried on his own business of hauling logs and selling timber but who was deemed to be a “worker” employed by someone else. Both pre and post-injury earnings were unable to be calculated with precision and the trial judge had found a difference between the two amounts without finding what those amounts were. In doing so the High Court held that he had fallen into error. The Chief Justice at 632 in speaking of the worker’s entitlement to be compensated under section 11 of the Workers Compensation Act 1926, the forerunner of section 40 of the 1987 Act, said this:
“The difference of which s.11 speaks is not the difference between the net gains of the business before and after receipt of an injury but the difference in the appropriate remuneration for the physical labour of the worker in the business in the two periods of time.” (emphasis added)
At 633 the Chief Justice went on:
“Of necessity the question is rather by how much, whatever his labour would formerly command, it has been diminished in value by the continuing incapacity.”
Although, as I have indicated, the Chief Justice was in the minority with Windeyer J the statements which I have quoted above correctly set out in my respectful view the appropriate approach to be taken in assessing the earnings of a person in his own business.
Windeyer J said this at 643:
“The Act is concerned with compensation for total or partial incapacity of a worker – that is, the destruction or diminution of his earning capacity measured by his earnings ‘as a worker’. The question is not the same as is involved in assessing ‘economic loss’ in an action for damages for personal injury. The earning capacity of a man as a worker is measured by the remuneration that is the fruit of his labour, his wages or their equivalent. It is not to be measured by the profits he derives by embarking his capital in a business or by his usual capital equipment in earning money.”
This also, in my respectful view, represents a correct statement of the law in this regard.
Nelson has been followed by the High Court in Commonwealth v Muratore (1978) 141 CLR 296 and Cage Developments Pty Ltd v Schubert (1983) 151 CLR 584.
It does seem to me that there was sufficient evidence before the Arbitrator as to the worker’s hypothetical ability to earn in accordance with the opinion of Dr Croaker. This was the evidence on which the Arbitrator determined the matter. Whether this was the correct approach in assessing the worker’s entitlement to weekly payments under section 40 is another question which will be considered in due course. This ground of appeal fails.
Ground 2:
This ground relates to the finding which it is said the Arbitrator made in paragraph 42 of his Statement of Reasons regarding the earnings of the worker in his sound recording studio business. The passage relied on is as follows:
“42. Mr Begovic has, since 1 July 2005, established a recording studio business and the income from that business (exclusive of his performance business) in the year ended 30 June 2006 was net after cost, $37,580.64 or $722.70 per week. It made a loss in the year ended 30 June 2007 and the BAS return for September 2008 [sic] is of no assistance to me in attempting to calculate Mr Begovic’s current ability to earn from that business. I propose to factor in the possibility of income from the studio in exercising my discretion at step 4 in this process.”
This statement by the Arbitrator, which is difficult to characterise as a finding, is said to be contrary to the statement by the Arbitrator that the worker had failed to place probative evidence of his ability to earn before the Commission (paragraph 45 of the Arbitrator’s Reasons).
In my opinion this ground is simply disposed of. There was no finding made by the Arbitrator in connection with the earnings from the worker’s sound recording business: rather, the Arbitrator was reciting what was the evidence contained in the tax return for the appropriate year. This ground also fails.
Ground 3:
This ground relates to the Arbitrator’s alleged error in assessing the worker’s entitlement to compensation under section 40 by reference to his ability to earn as a truck driver rather than his actual earnings as a musician and recording studio operator.
In proceeding as he did, in my opinion, the Arbitrator fell into error no doubt as a result of the difficulty in ascertaining what the worker’s actual earnings were. Glass JA in Hill v Bryant [1974] 2 NSWLR 423 at 428 said the following in relation to section 11 of the 1926 Act:
“The inquiry to be undertaken in obedience to the section is designed to ascertain a weekly payment not to be exceeded, that maximum being the difference between two weekly amounts. The difference is obtained by subtracting from a sum hypothetically earned the larger of two other sums one actually received as earnings and the other hypothetically earned.”(emphasis added)
Obviously if the Arbitrator could not ascertain the worker’s actual earnings he could not say whether they exceeded the worker’s hypothetical earnings in suitable employment.
In J C Ludowici & Son Ltd v Cutri (1992) 8 NSWCCR 219 Kirby P said this regarding section 40 at 236:
“In my view, the preferable construction is that which has been repeatedly stated in the decisions of this Court. It is that where the worker is earning, the average weekly amount produced thereby is normally to be taken as the paragraph (b) component of the equation. It is only otherwise where the decision-maker concludes that the worker is able to earn more than that sum in suitable employment. Then, but then only, is a notional sum taken into account.”
The Arbitrator was referred to the decision of the Court of Appeal in Australian Wheat Board v Pantaleo [1984] 3 NSWLR 530 although no detailed submission was made to him regarding that case. Its relevance was in that case a person who had been a secretary after her injury became a self-employed beautician and the question was one of quantifying her entitlement to weekly compensation. Kirby P in that case said this at 541:
“9. The reference to ‘business’ in this ‘negative’ side of the formula recognises the fact that, although to secure entitlement a person must be a ‘worker’ within the meaning of the Act, after injury he may not return to employment but may set up in a suitable business of his own as self-employed. In a number of cases it has been made clear that, where a person, who otherwise qualifies by partial incapacity resulting from compensable injury, earns a weekly amount in a suitable business, it is necessary to bring into the calculation only that part of the average weekly amount he earns as is attributable to his labour. In such a case, the earnings are the worth of his work to the business. This may often, with convenience, be demonstrated by what it would have cost to employ someone else as a worker to do his work: see J & H Timbers Pty Ltd v Nelson (1972) 126 CLR 625; Hill v Bryant [1974] 2 NSWLR 423 at 425, 428.”
Although in my opinion the Arbitrator erred in his assessment of the worker’s entitlement to compensation by reference to his hypothetical ability to earn as a truck driver, I cannot say whether as a result of this error the worker was awarded too much compensation or too little. The evidence was not before the Arbitrator in order that he might make the necessary estimation of actual earnings which is basic to the section 40 calculation in the case of a worker who is actually earning income. The correct approach as I have indicated, in accordance with the authorities which I have cited above, is that where a person is working then his earning ought be taken into account as the section 40(2) (b) amount unless the amount being earned is less than he could earn in suitable employment. It is necessary, in my opinion, to give the worker an opportunity to adduce further evidence in order to quantify the sum in question. Without attempting to be comprehensive, the evidence should deal with the actual hours which the worker spends in both his music performances and also in the recording studio business. So far as the former is concerned, the expenses incurred in earning income as a musician ought be taken into account. So far as the recording studio business is concerned, it would be relevant to know what work precisely the worker does, for how long he does it and the cost of replacing the services which the worker renders in that business by some similarly qualified person or persons employed from the general labour force. The worker’s evidence in his statement of 16 November 2007 that his studio was running at its maximum but he was only getting one to two days per week at $100 per day is difficult to reconcile with the tax returns for 2006 and 2007 which show gross earnings from the recording studio of $68,929 and $38,933 respectively.
I note that the Arbitrator excluded from his calculations the earnings from the worker’s musical performances on the basis that he was performing these while he was still working as an employed truck driver. If I may say so, the worker’s evidence in this regard appears unsatisfactory. He said in his statement at paragraph 6 that he would tour only on weekends, namely Thursday, Friday, Saturday and Sunday and have a regular job during the week driving a truck. This appears to suggest that the worker was only working three days a week driving a truck. It is difficult to accept that the sorts of earnings which the worker appeared to have had in such employment would have been earned in the space of three days a week. I note in the worker’s claim form which was contained in the clinical notes of Dr Diebold that his normal working hours were said to be “Monday to Friday 7.30 a.m. to 5.30 p.m.”. The whole of Dr Diebold’s notes were put into evidence, however, no specific reference was made to this claim form. I have earlier referred to the discrepancy in the tax returns regarding the worker’s earnings and workers compensation for the financial years ended 30 June 2002 and 2003. This should be clarified if at all possible.
It is regrettable that in this matter it is necessary to have another hearing and for further evidence to be given. However, I think this is the only course open in the circumstances. I propose to refer the matter for hearing afresh before a different Arbitrator. That Arbitrator may give directions as to the production of documents and the lodging of further evidence.
DECISION
The decision of the Arbitrator dated 5 March 2008 is revoked and the matter is remitted to another Arbitrator for determination afresh in accordance with these reasons.
COSTS
Each party is to pay his or its own costs of the appeal.
Anthony Candy
Acting Deputy President
24 July 2008
I, MARIE JOHNS, CERTIFY THAT THIS IS A TRUE AND ACCURATE RECORD OF THE REASONS FOR DECISION OF ANTHONY CANDY, ACTING DEPUTY PRESIDENT OF THE WORKERS COMPENSATION COMMISSION.
ASSOCIATE
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