Teena Cook and Thales Australia Limited
[2013] AATA 67
•13 February 2013
[2013] AATA 67
Division GENERAL ADMINISTRATIVE DIVISION File Number(s)
2010/5091
Re
Teena Cook
APPLICANT
And
Thales Australia Limited
RESPONDENT
And Haydn Cook
JOINED PARTY
And Comcare
JOINED PARTY
DECISION
Tribunal Deputy President J W Constance
Date 13 February 2013 Place Melbourne 1.The decision under review, being the decision of Thales Australia Ltd made 20 September 2010, is set aside.
2.In substitution for the decision set aside it is decided that of the compensation payable by Thales Australia Ltd in accordance with subsection 17(3) of the Safety, Rehabilitation and Compensation Act 1988 (Cth), 87.5% shall be paid to Ms Cook and 12.5% shall be paid to Mr Haydn Cook.
........................[sgd]................................................
Deputy President J W Constance
CATCHWORDS
COMPENSATION – apportionment of sum payable under subsection 17(3) – decision-maker to have regard to losses suffered by dependants as a result of the cessation of the employee's earnings – loss may be of capital nature if as a result of the cessation of the employee’s earnings - likelihood of future events - decision under review set aside.
LEGISLATION
Safety, Rehabilitation and Compensation Act 1988 (Cth) ss 4, 17(3), 17(5), 17(8).
CASES
Chedzey v Collex Waste Management Pty Ltd & Others [1999] NSWCC 19, 56.
Fernance v Walker Bros (1966) 67 SR (NSW) 14.
Re Ranck and Australian and Overseas Telecommunications Corporation [1993] AATA 123; (1993) 17 AAR 299.
REASONS FOR DECISION
INTRODUCTION
Ms Cook’s late husband, Gary Cook, was employed as an electrician by Thales Australia Ltd, the respondent company, at the time of his death on 2 January 2009. He is survived by Ms Cook and his son, Mr Haydn Cook.
As the death of Mr Gary Cook was determined to be a result of an injury within the meaning of the Safety, Rehabilitation and Compensation Act1988 (Cth), on 20 September 2010 the company decided to pay compensation of $412,000.00 in respect of Mr Gary Cook’s death, the sum to be divided equally between Ms Cook and Mr Haydn Cook.
It is not in dispute that Ms Cook and Mr Haydn Cook were the only dependants of Mr Gary Cook at the time of his death. They are the only persons entitled to share in the distribution of the compensation.
LEGISLATION
Subsection 17(3) of the Act provides:
Subject to this section and to sections 16 and 18, if the employee dies leaving dependants some or all of whom were, at the date of the employee's death, wholly dependent on the employee, Comcare is liable to pay compensation in respect of the injury of $120,000 and that compensation is payable to, or in accordance with the directions of, Comcare for the benefit of all of those dependants.
The total amount payable is indexed and was $412,000.00 at the relevant time.
In accordance with subsection 4(5) of the Act, Ms Cook is taken to be a person who was wholly dependent on Mr Gary Cook at the time of his death.[1]
[1] Subsection 4(5) provides:
Subsection 17(8) provides:
Where an amount of compensation is payable under this section for the benefit of 2 or more dependants of the deceased employee, Comcare shall determine the shares of those dependants in that amount as Comcare thinks fit, having regard to any losses suffered by those dependants as a result of the cessation of the employee's earnings.
Under the Act the Company exercises the powers given to Comcare by the above provisions. In deciding this application the Tribunal exercises the powers of the decision –maker, in this case being the Company.
Subsection 17(5) provides:
If:
(a) a prescribed child was, at the date of the injury or at the date of the employee’s death, wholly or mainly dependent on the employee;
(b) a prescribed child, being a child of the employee, was born after the employee’s death; or
(c) a prescribed child would, if the employee had not died, have been wholly or mainly dependent on the employee;
Comcare is liable to pay compensation at the rate of $110 a week and that compensation is payable to, or in accordance with the directions of, Comcare for the benefit of that child from the date of the employee’s death or the date of the birth of the child, whichever is the later.
This sum is indexed.
Prescribed child is defined in subsection 4(1) to mean:
(a) a person under 16; or
(b) a person who:
(i) is 16 or more but under 25;
(ii) is receiving full-time education at a school, college, university or other educational institution; and
(iii) is not ordinarily in employment or engaged in work on his or her own account.
EVIDENCE AND FINDINGS OF FACT
Unless stated otherwise, the following findings of fact are based on the evidence of Ms Cook. I am satisfied of the facts found (including the facts stated in the Introduction) on the balance of probabilities.
Ms Cook was born in 1968. From 2001 until Mr Cook’s death in 2009 she and Mr Cook lived together in Yarrawonga in country Victoria. They married in 2004.
At the time their relationship commenced Ms Cook was in full-time employment in an administrative role, as she had been for many years. Mr Cook was employed as an electrician and continued to be so employed until his death.
In 2001 Ms Cook suffered an injury to her left knee and ankle. Complications arising from this injury caused her to be off work for an extended period during which she underwent a series of operations. Mr Cook supported her whilst she was unemployed.
Ms Cook's injuries were such that she and Mr Cook decided that she would be best able to earn an income by running her own business so that she would have greater flexibility in her working conditions. In October 2005 Ms Cook opened a women’s clothing store in Yarrawonga. She ran the business with some assistance from family members. Part of Mr Cook’s earnings as an electrician was used to establish the business and to build up its stock. During the first three years of its operation the business grew and provided some income. In the financial year ended 30 June 2007 the business returned a profit of $4,826.00 and $5,144.00 in the following financial year. Ms Cook's taxable income for those two years was $3,766.00 and $2,929.00 respectively. As the business was being developed the living expenses of both Mr and Ms Cook were met from Mr Cook's income.
As part of a ten year plan, Mr and Ms Cook opened a second store in Corowa in New South Wales in November 2008. It was intended that Ms Cook would supervise staff to run the Corowa store and continue to work in the Yarrawonga store.
The Corowa store operated in business premises purchased by Mr and Ms Cook in September 2008. The building was purchased for $210,000.00 and renovations cost $25,000.00. Mr Cook did the electrical work required. In order to finance this project their home loan of $70,000.00 was changed to a business loan of $310,000.00 which was secured by a second mortgage over their jointly-owned home. Mr Cook guaranteed the repayment of the loan. It was part of the business plan for the new store, which was agreed between Mr and Ms Cook, that part of Mr Cook's earnings would be used to help establish the new store.
The joint income and expenditure of Mr and Ms Cook for the financial year ended 30 June 2008 was as follows:
Income Year to date 2008 Mr Gary Cook $47,335.70 Ms Cook $2929.00 Total Income
$50,264.70
Expenditure Year to date 2008 Electricity $1786.05 Telephone $1290.58 Water $850.00 House Rates $1650.00 House Loan $13,000.00 Car Insurance $1450.00 House Insurance $1150.00 Car Payment $4000.00 Health Cover $2100.00 Car Rego x2 $990.00 Food $9000.00 Child Support $7150.00 Total
$44,416.63 Surplus Total
$5848.07
At the time of Mr Cook’s death, in addition to the business loan Mr and Ms Cook owed approximately $110,000.00 on the first mortgage on their house, an equity loan of $15,000.00 and a car loan of $35,000.00. In addition Ms Cook owed approximately $6,000.00 on a credit card.
For five months after Mr Cook’s death Ms Cook was unable to attend to the business and the store continued to operate by reason of assistance from family members. Mr Cook’s earnings were no longer available as a source of capital to assist in the development of the business. At the time of his death the new store had been open for only six weeks and Ms Cook was still in the process of building up its stock. She borrowed from family and friends to assist in making the repayments of the business loan and to keep the business operating. At this stage the business was not making a sufficient return to keep operating and to provide Ms Cook with an income to support herself.
As a result of the financial difficulties she was experiencing, Ms Cook closed the Corowa store in March 2009. The building was sold in June 2011 for less than the cost of the original purchase and renovations. After Ms Cook paid off as much of the business loan as she was able, $125,000.00 remained owing. In addition Ms Cook owed in excess of $60,000.00 to her parents and other family members, being money loaned by them to assist her in making repayments on the loan. In the financial year ended 30 June 2009 the business made a loss of $1,799.00 and in the year ended 30 June 2010 a loss of $22,736.00. The increase in the loss was partly as a result of the repayments of the business loan having increased substantially in the second year. This was an agreement entered into by the parties based on an expectation that Mr Cook would receive a pension from a super fund in that year; it was intended that Mr Cook would use these payments to meet the increased loan repayment.
In the financial year ended 30 June 2011 the business made a loss of $69,647.81.
The store in Yarrawonga closed on 30 September 2012. The lease of the premises was transferred to another lessee.
Ms Cook last gave evidence in this application on 17 December 2012. At that time she had debts totalling $300,000.00.
Mr Haydn Cook is the son of Mr Gary Cook and Ms Ward. He was born in 1994 and is now 18 years old.
Mr Haydn Cook lived with his parents in Yarrawonga until he was four years old, at which time his parents separated. From that time he has lived with his mother. They are now living in southern New South Wales.
From the time of the separation until his death, Mr Gary Cook paid child support to Ms Ward for Mr Haydn Cook. The amount was increased from time to time in accordance with agreements made between Mr Gary Cook and Ms Ward with the assistance of the Child Support Agency. At times Mr Gary Cook agreed to pay child support at a slightly higher rate than required by law.
For several years prior to 2009 Ms Cook took responsibility for making the payments of child support from the account into which Mr Gary Cook’s wages were paid. In the financial year ended 30 June 2008 Mr Gary Cook paid $7,150.00 in child support. At the time of his death he was continuing to pay support on a fortnightly basis.
The evidence of Mr Haydn Cook
Prior to his father’s death Mr Haydn Cook enjoyed a close relationship with his father. After the separation, when he was living nearby, Mr Cook visited his father at weekends. He and his mother moved to southern New South Wales when he was about 13 years old. From that time onwards Mr Cook spent time with his father and Ms Cook during every school holidays.
During these visits Mr Gary Cook provided accommodation, food and entertainment for his son. He also purchased some clothing for him and gave him pocket money. Mr Gary Cook held a trust account for his son into which he deposited funds from time to time. On 9 January 2009 there was a balance of $415.44 in that account. Mr Cook also received birthday, Easter and Christmas gifts from his father and Ms Cook and from other family members.
I accept the evidence of Mr Cook referred to in the preceding two paragraphs.
In his statement made 17 September 2012 Mr Cook stated that in about 2008 both his parents agreed to his request that he live with his father and Ms Cook from the beginning of 2011, when he commenced Year 11 at High School.[2] He did not discuss this proposal with Ms Cook. I accept this evidence.
[2] Exhibit OP3.
When this application was part heard in October 2011 Mr Cook was attending a school in New South Wales and was enrolled in Year 11. He gave evidence that he planned to gain his Higher School certificate and to enrol in a construction course at a University. He said that it was unlikely that such a course would be available at the local University Campus and that it was likely that he would have to live away from home to take part in this course of study. Mr Cook gave evidence as to some of the expenses he would incur if he was to live away from home to study.
In his statement made 17 September 2012 Mr Cook said that he had left High School at the end of Term 2, Year 12 as he wished to obtain an apprenticeship, if possible in the mining industry. At the time he was living with his brother and his brother’s partner and was attending a registered training organization and had attended various courses to assist him in obtaining an apprenticeship.[3]
[3] Exhibit OP3.
In September 2012 Mr Cook commenced full-time employment as an apprentice mechanic in central New South Wales.[4] In November 2012 he resigned from this position and returned to live with his mother.[5] At the time of the further hearing of this application on 17 December 2012 he was unemployed and receiving $180.00 per fortnight in Youth allowance. He had applied for an apprenticeship as a Boilermaker/ Fabricator with the local Shire Council.[6] Mr Cook became eligible for Newstart allowance in January 2013. He does not intend to seek enrolment in a University course.
[4] Exhibit OP4.
[5] Exhibit OP5.
[6] Exhibit OP5.
I accept the evidence of Mr Cook set out in the preceding two paragraphs.
ISSUE FOR DETERMINATION
The sole issue for determination in this application is how the sum payable under subsection 17(3) of the Act should be shared between Ms Cook and Mr Haydn Cook.
REASONING
The requirement of subsection 17(8) is that the shares of the eligible dependents be determined as the decision-maker thinks fit having regard to any losses suffered by those dependents as a result of the cessation of the employee’s earnings.
It is important to note that the losses to be considered are those as a result of the cessation of the earnings of the employee and not as a result of the death of the employee. Whilst the losses as result of a death may be greater than the losses resulting from the cessation of earnings, the gains which may be offset against the losses will be similarly restricted. This is consistent with the view of the Tribunal expressed in Re: Ranck and Australian and Overseas Telecommunications Corporation [7]when considering a similar provision in the Compensation (Commonwealth Government Employees) Act 1971 (Cth). Deputy President McMahon said, inter alia:
The draftsman in both the 1971 and the 1988 Act [sic] has retained the concept of losses resulting from a cessation of earnings. These are losses of a type which Walsh JA held in 1966 did not include an offset of “proprietary benefits which accrued to the dependants from the estate of the worker”.[8]
The reference to the decision of Walsh JA is a reference to Fernance v Walker Bros.[9]
[7] [1993] AATA 123; (1993) 17 AAR 299.
[8] [1993] AATA 123, 25.
[9] (1966) 67 SR (NSW) 14.
In my view subsection 17(8) does not restrict the losses which may be considered to losses of a revenue rather than a capital nature. In this regard I respectfully disagree with the contrary view expressed by Deputy President McMahon in Ranck.[10] There is nothing in the words of the subsection to justify such a restriction. The subsection requires that the losses being considered are “as a result of the cessation of the employee’s earnings”. In my view if a loss can be properly so described it matters not whether the loss itself is of a revenue or a capital nature. This distinction is important in determining the losses which Ms Cook has suffered by reason of the failure of her business. I will refer to these losses in detail later in these reasons.
[10] [1993] AATA 123, 19.
The exercise of the apportionment of compensation in the workers’ compensation jurisdiction has, of necessity, been one in which decisions are expressed in broad terms. Usually the evidence does not permit a precise calculation of the loss suffered by a dependent; in most, if not all, cases the exercise involves in part an assessment of the likelihood of certain events happening or not happening in the future.[11]
[11] See Chedzey v Collex Waste Management Pty Ltd & Others [1999] NSWCC 19, 56.
Losses suffered by Ms Cook
I am satisfied that at the time of Mr Gary Cook’s death he and Ms Cook were pooling their resources and sharing equally in the benefits which arose from those resources. I am satisfied that Mr Cook’s earnings as an electrician were used to meet the expenses of both parties as needed and, on occasions, to assist in the growth of the business being operated by Ms Cook. Although the business was in her name alone I am satisfied that it was regarded by each of them as being a joint enterprise to which they both contributed as required, both financially and by physical labour. Ms Cook managed the business and contributed her labour; from time to time Mr Cook contributed his labour and funds from his earnings. Both parties provided security for the business loan by way of a second mortgage over the jointly owned home and Mr Cook provided additional security by way of his personal guarantee. As the principal borrower Ms Cook provided the same.
I am satisfied that Mr and Ms Cook had a long term plan for the development of the business and that the probability is that they would have continued the arrangements between them which existed at the time of Mr Cook’s death. On the basis that it is likely that these arrangements would have continued had Mr Cook survived, Ms Cook has suffered the following losses.
The loss of an equal share of Mr Cook’s earnings
Mr Cook’s net earnings for the financial year ended 30 June 2008 were approximately $47,000.00, from which he paid approximately $7,000.00 in child support. This left a balance of $40,000.00 available to meet the joint needs of himself and Ms Cook. While it cannot be the subject of precise calculation it is reasonable to estimate that Ms Cook has lost the benefit of at least $20,000.00 per annum from Mr Cook’s earnings.
For the purposes of this application it is reasonable to assume that Mr Cook would have continued to earn at the same or a higher rate for a number of years had his death not intervened. It is reasonable also to assume that he would have continued to work for a further 7-12 years. He was 53 when he died.
For reasons I will set out below I have taken into account that it is likely that Mr Cook would have ceased to pay child support by the end of 2012. This would have provided additional earnings to be available for the benefit of both him and Ms Cook.
The loss of the business being operated by Ms Cook
At the time of Mr Cook’s death the ten year plan they had in place was being realized and I am satisfied on the balance of probabilities that Mr and Ms Cook would have continued with this plan, and that the business would have expanded and continued to make a profit. On the evidence before me I am unable to find the likely extent of this profit. However the business had returned a profit in each of the two financial years prior to 2009. By the end of 2008 Mr and Ms Cook had opened a store in Corowa as planned and had the resources to purchase the real estate from which the business operated the new store.
On the basis of the evidence of Ms Cook I am satisfied that rather than owning a successful business she now has a debt of at least $134,000.00 which arose from the failure of the business. It is not clear on the evidence as to how the various debts have been managed. I have determined the figure of $134,000.00 by deducting from her present total debt of $300,000.00 the debts owed on the first mortgage, the equity loan, the car loan and the credit card at the time Mr Cook died.[12]
[12] See paragraph 18 of these reasons.
It was argued on behalf of the company that the expenditure of Mr Cook showed that his income was not sufficient to allow him to make a significant contribution to the operation of the business. However I accept the evidence that funds were contributed from his earnings from time to time and that some of these contributions were repaid as the business had the funds to do so. Although the annual figures provided by Ms Cook indicate that there was limited ability to contribute, they do not show that funds could not have been made available from time to time on the basis that these funds were repaid when needed.
Losses suffered by Mr Haydn Cook
On the basis of the evidence of Ms Cook that Mr Gary Cook had paid child support for Mr Haydn Cook at an agreed rate for many years, I am satisfied that it is likely that he would have continued to pay such support until Mr Haydn Cook completed his secondary schooling and for a short period thereafter until he found employment.
Mr Gary Cook was earning a reasonable income and was contributing to the business. He was not a wealthy man. On the balance of probabilities I am satisfied that he would have continued to support his son for a short time after he left school but it is unlikely he would have continued to have done so once Mr Haydn Cook became eligible for the Newstart allowance in early 2013 or he obtained employment. Further I am satisfied that Mr Gary Cook would have provided his son some financial assistance after he received Newstart by way of gifts but I am not satisfied that these gifts would have been of significant amounts. On the limited evidence available I estimate that Mr Haydn Cook has lost economic support of approximately $10,000.00 per year for four years. I have taken into account the probability that Mr Gary Cook would have given his son limited financial assistance on occasions and may have assisted him with such matters as purchasing a car.
I have made this assessment on the basis that Mr Haydn Cook will not seek to undertake a University degree. I was not satisfied that it was likely that he would do so when he gave evidence to this effect in October 2011, at which time he was still at school. In December 2012 he gave evidence that he did not propose to undertake such a course. On the basis of his evidence I am satisfied that he will obtain employment as an apprentice and subsequent employment in a trade.
In assessing the loss suffered by Mr Haydn Cook it is appropriate to take into account that he has received a payment of $240.00 per fortnight from the Company in accordance with subsection 17(5). This payment commenced on the death of his father and ceased when he left school in 2012.
The payment under subsection 17(5) is to be contrasted with a benefit received by a dependent as a result of the death of an employee, such as a superannuation benefit. Such benefits are by way of the distribution of an asset and should not be taken into account in assessing loss as a result of the cessation of an employee’s earnings. However a payment under subsection 17(5) is expressed to be a payment of “compensation”. Clearly it is compensation for the cessation of the employee’s earnings referred to in the preceding subsection and is designed to directly offset that loss.
SUBMISSION BY COMCARE
Shortly before the final hearing in this matter Comcare was joined as a party in these proceedings. It was argued on behalf of Comcare that it is appropriate that I take into account the principles of a draft policy which Comcare is “presently developing.”[13] The draft document filed in these proceedings is dated 7 December 2012.
[13] Comcare’s submissions dated 7 December 2012.
I do not consider it is appropriate to take into account a document in such a draft form. However I note that the principles set out are largely consistent with the decision I have reached.
CONCLUSION
Having considered all of the evidence before me I have reached the conclusion that the loss suffered by Ms Cook is substantially greater than that suffered by Mr Haydn Cook. It is not possible to quantify precisely their respective losses. However I have determined that the annual loss suffered by Ms Cook is approximately $20,000.00. This is in addition to the loss of the business and having to meet the resultant debt. This is to be contrasted with an annual loss suffered by Mr Haydn Cook of approximately $10,000.00. I have determined that the loss of economic support suffered by Ms Cook will be likely to continue until the time Mr Gary Cook was likely to have retired. Mr Haydn Cook’s loss of support was likely to be for a much shorter period, in the vicinity of four years.
As has been recognized in the cases I have earlier referred to, it is acceptable to make a general assessment based on the evidence available. In this case it has been necessary to make a determination of likely future events in assessing the present losses.
Applying these principles I determine that 87.5% of the compensation payable under subsection 17(3) of the Act shall be paid to Ms Teena Cook and 12.5% of the compensation payable shall be paid to Mr Haydn Cook.
DECISION
The decision under review, being the decision of Thales Australia Ltd made 20 September 2010, will be set aside.
In substitution for the decision set aside it will be decided that of the compensation payable by Thales Australia Ltd in accordance with subsection 17(3) of the Safety, Rehabilitation and Compensation Act 1988 (Cth), 87.5% shall be paid to Ms Cook and 12.5% shall be paid to Mr Haydn Cook.
I certify that the preceding 60 (sixty) paragraphs are a true copy of the reasons for the decision herein of Deputy President J W Constance.
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Associate
Dated 13 February 2013
Date(s) of hearing 17 December 2012 Counsel for the Applicant Mark Carey Solicitors for the Applicant Jacinta Lewin, Maurice Blackburn Lawyers Counsel for the Respondent John Wallace Solicitors for the Respondent Natalie Fisher, Curwoods Lawyers Solicitors for the Other Party, Haydn Cook Mark Hagan, Kennedy & Cooke Lawyers Counsel for the Other Party,
ComcareRhonda Henderson Advocate for the Other Party, Comcare Chloe Eaton, Comcare
For the purposes of this Act, a person who, immediately before the date of an employee’s death, lived with the employee and was:
(a) the spouse of the employee; or
(b) a child of the employee, being a prescribed child;
shall be taken to be a person who was wholly dependent on the employee at that date.
Key Legal Topics
Areas of Law
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Civil Litigation & Procedure
Legal Concepts
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Compensatory Damages
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Apportionment
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Dependency
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