WDS (Mining) Pty Ltd v Piper - [2013] NSWWCCPD 19

WORKERS COMPENSATION COMMISSION
DETERMINATION OF APPEAL AGAINST A DECISION OF THE COMMISSION CONSTITUTED BY AN ARBITRATOR
CITATION:		WDS (Mining) Pty Ltd v Piper [2013] NSWWCCPD 19
APPELLANT:		WDS (Mining) Pty Ltd
RESPONDENT:		Mark Anthony Piper
INSURER:		CGU Workers Compensation (NSW) Ltd
FILE NUMBER:		A1-6344/12
ARBITRATOR:	Ms E Grotte
DATE OF ARBITRATOR’S DECISION:		22 November 2012
DATE OF APPEAL DECISION:		16 April 2013
SUBJECT MATTER OF DECISION:		Settlement of claim for lump sum compensation; effect of complying agreement made under s 66A of the Workers Compensation Act 1987; interpretation of contract; principles involved; difference between an “injury” and a consequential condition that has resulted from an injury
PRESIDENTIAL MEMBER:		Deputy President Bill Roche
HEARING:		On the papers
REPRESENTATION:		Appellant:	Rankin Nathan Lawyers
Respondent:	Carroll & O’Dea Lawyers
ORDERS MADE ON APPEAL:		1. Leave to appeal is granted. 2. The Senior Arbitrator’s determination of 22 November 2012 is confirmed. 3. The appellant employer is to pay the respondent worker’s costs of the appeal, as agreed or assessed.

INTRODUCTION

Section 66A of the Workers Compensation Act 1987 (the 1987 Act) provides for a worker who has received an injury, and an employer or insurer, to agree on the degree of permanent impairment that has resulted from the injury. An agreement made under this section is called a “complying agreement”.
The issue in the present appeal concerns the interpretation and effect of a complying agreement made between the worker and the insurer, which provided for the payment of lump sum compensation in respect of an eight per cent whole person impairment due to an injury to the worker’s right upper limb (right shoulder), and whether that agreement precludes the worker from claiming lump sum compensation for symptoms in his left shoulder said to have resulted from the accepted injury to the right shoulder.

BACKGROUND

The respondent worker, Mark Piper, injured his right shoulder in the course of his employment for the appellant employer, WDS (Mining) Pty Ltd, on or about 21 December 2006. That injury was aggravated in June 2007, but the aggravation is of no consequence to the current appeal. Liability has been accepted for the shoulder injury. As a result of the injury, Mr Piper alleges that he has overused his left shoulder and developed symptoms and restrictions in that shoulder.
Mr Piper also injured his back at work for the appellant. Though that injury is not relevant to the present appeal, I mention it because the letter of 26 May 2011 (see [13] below), and the Senior Arbitrator’s decision, refer to a claim for lump sum compensation for a back injury.
On 8 August 2010, Dr Alan Searle, orthopaedic surgeon, examined Mr Piper at the request of his solicitors. In his report of 5 September 2010, he took a history of the injury to the right shoulder (which he wrongly recorded as having occurred on 12 October 2010) and recorded that, because of symptoms in the right shoulder (continued aching), Mr Piper tended to suppress use of that shoulder and was “over-using his left arm”. About 12 months prior to the examination, Mr Piper became aware of pain in his left shoulder.
Mr Piper complained to Dr Searle of similar symptoms in each shoulder, the right worse than the left. Dr Searle said that Mr Piper had suffered a tear of the right supraspinatus and probably a labrum tear and small ganglion. There was clinical evidence of capsulitis in the left shoulder, which the doctor said was “indirectly a result of the injury in 2006”.
Dr Searle assessed Mr Piper to have a seven per cent whole person impairment as a result of the right shoulder injury and a four per cent whole person impairment as a result of the symptoms in the left shoulder.
On 21 September 2010, Mr Piper claimed lump sum compensation based on Dr Searle’s assessments.
In a s 74 notice dated 18 October 2010, the insurer for the employer, CGU Workers Compensation (NSW) Ltd (CGU), disputed liability for the left shoulder, stating that no offer for whole person impairment would be made for any impairment from the condition of that shoulder because Mr Piper “did not suffer an injury to his left shoulder arising out of or in the course of [his] employment and therefore employment can not [sic] be a substantial contributing factor to the injury”. The notice referred to the claim form, which stated that Mr Piper suffered a strain to his right shoulder and no specific incident to cause a left shoulder injury. (This notice failed to address the claim made. Mr Piper never alleged that he injured his left shoulder in the course of or arising out of his employment with the appellant. This issue is discussed further at [31] below.)
On 29 April 2011, Dr Paul Robinson, orthopaedic surgeon, examined Mr Piper for the insurer, CGU. He took a history of the right shoulder injury and that Mr Piper “developed some pain in his left shoulder with using this to compensate for pain in the right side”. He diagnosed Mr Piper to have a subacromial bursitis and a partial tear of the rotator cuff (presumably of the right shoulder), which was caused by his work activities in December 2006.
With respect to Mr Piper’s left shoulder, Dr Robinson said:
“There has been no investigation for his left shoulder and I do not believe the pain that he has in his left shoulder can be related to the problem occurring in his work approximately four years ago. He has only recently complained of pain in his left shoulder and I believe this is a constitutional problem and unrelated to his right shoulder condition.”
Dr Robinson assessed Mr Piper to have an eight per cent whole person impairment as a result of the condition of his right shoulder. He made no assessment of the whole person impairment due to the condition of the left shoulder, but said “[t]he impairment [Mr Piper] has in his left shoulder has only occurred in the past twelve months and is not work related”.
On 26 May 2011, CGU wrote to Mr Piper’s solicitors in the following terms (punctuation and capitalisation as per original):
“We refer to your client’s claim for permanent impairment for the Right Shoulder Injury under Section 66 of the Workers Compensation Act 1987.
We have reviewed the case and would like to offer your client the following entitlement in line with Section 66 and 67 of the Workers Compensation Act.
$10,000 for an 8% whole person impairment of the Right Shoulder
Nil for the Left Shoulder as per section 74 declinature letter dated 18/10/2010
Nilfor Back as section 66 for [the] back has been settled on claimant’s back injury claim
Nilfor pain and suffering.
Total: $10,000.00
The above offer is made based on the following reports:
Medical Report of Dr Paul Robinson dated 29/04/2011.
…
Please obtain your client’s instructions and contact me within twenty one days. If your
client wishes to accept our offer please complete the ‘Complying Agreement under S66A’.” (emphasis included in original)
By letter dated 16 June 2011 addressed to CGU, Mr Piper’s solicitors advised they were “instructed to accept your offer of $10,000 in respect of section 66 compensation, based on the assessment of Dr Paul Robinson of 8% whole person impairment” (emphasis included in original). The letter requested a complying agreement “in respect of same, in order that this matter may be resolved expediently”.
CGU prepared and forwarded a complying agreement to Mr Piper’s solicitors, which he signed on 1 July 2011. It provided for the payment of $10,000 for an eight per cent whole person impairment for the right shoulder injury on 21 December 2006.
On 22 June 2012, Mr Piper’s solicitors lodged with the Commission an Application to Resolve a Dispute (the Application) in which he claimed lump sum compensation of $17,050 (less the $10,000 previously paid) in respect of a 12 per cent whole person impairment (less eight per cent previously compensated) due to the condition of his right and left upper extremities (shoulders). (The figure of $17,050 is incorrect and the claim should have been for $15,000, less $10,000.)
So far as is relevant to the appeal, the appellant disputed liability on the ground that the claim for lump sum compensation for the left shoulder had been settled in the terms set out in the complying agreement and, because of that agreement, he had no entitlement to lump sum compensation for his left shoulder.

THE ARBITRATION

In an extempore decision delivered by Senior Arbitrator Grotte on 16 November 2012, the Senior Arbitrator identified the issue to be whether the complying agreement “included the claim for the left shoulder” (T3.34 – 16 November 2012). She noted the submission by counsel for the employer, Mr Flett, that the offer to settle for eight per cent (a figure higher than the seven per cent claimed by Mr Piper) would lead a reasonable person to infer that the left shoulder was included in the settlement by way of compromise.
The Senior Arbitrator said that she was required to consider not only the text of the complying agreement, but also the surrounding circumstances known to the parties (Warwar v Speedy Courier (Aust) Pty Ltd [2010] NSWWCCPD 92 (Warwar)). She concluded that the complying agreement stated the offer of settlement of eight per cent whole person impairment, based on Dr Robinson’s report, was in respect of the right shoulder, and the surrounding circumstances showed very clearly that no offer was ever contemplated or made by CGU in respect of the left shoulder.
She said that CGU specifically excluded the left shoulder, stating unambiguously it would make no offer for that part of the claim. The Senior Arbitrator added that, if CGU had wished to indicate that the left shoulder was included in the offer of eight per cent, it could have done so, but it did not. There was no indication, in any of the correspondence, that the offer of eight per cent whole person impairment was a compromise offer.
The Senior Arbitrator was fortified in this view by CGU’s conduct of the proceedings in which it “hived off the back” (T5.24 – 16 November 2012). A reasonable person in Mr Piper’s position could have assumed that CGU was “now separating out the left shoulder and the right shoulder as well” (T5.26 – 16 November 2012). She was therefore satisfied that the complying agreement executed on 1 July 2011 related to the right shoulder and Mr Piper was not precluded from making his claim for the left shoulder.
The arbitration continued on 15 February 2013, when the parties made submissions on whether the condition of Mr Piper’s left shoulder had resulted from the accepted injury to his right shoulder. The Senior Arbitrator delivered a short extempore decision in favour of Mr Piper and ordered that the assessment of any whole person impairment as a result of the condition of the left shoulder proceed to an Approved Medical Specialist (AMS) for assessment.
The appellant has challenged the Senior Arbitrator’s decision delivered on 16 November 2012 with respect to the scope and effect of the complying agreement, but has not challenged the decision delivered on 15 February 2013. However, if the 16 November decision is revoked, that will have the effect of revoking the later decision.

INTERLOCUTORY

As the Senior Arbitrator’s decisions were both interlocutory, because neither finally determined the parties’ rights, but merely decided that the matter could be referred to an AMS, the appellant requires leave to appeal. In circumstances where a successful appeal will determine the issue in dispute, and eliminate the need for an examination by an AMS, it is necessary for the proper and effective determination of the dispute that the Commission grant leave to appeal and I do so (s 352(3A) of the Workplace Injury Management and Workers Compensation Act 1998 (the 1998 Act); DP World Sydney Ltd (formerly known as Container Terminals Australia Pty Ltd) v Kelly [2011] NSWWCCPD 43 at [13]).

ON THE PAPERS

Section 354(6) of the 1998 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 Nos 1 and 6, the documents that are before me, and the submissions 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.

THE DECISION UNDER REVIEW

The Statement of Reasons – Extempore Orders dated 22 November 2012 records the Arbitrator’s orders with respect to the effect of the complying agreement as follows:
“The applicant is not precluded, by virtue of the section 66A agreement executed on 1 July 2011 in respect of the right upper extremity (right shoulder), from making a claim for lump sum compensation in respect of the left upper extremity (left shoulder) resulting from injury on or about 21 December 2006.”

ISSUES IN DISPUTE

The issues in dispute in the appeal are whether the Senior Arbitrator erred in:
(a)     failing to properly assess the history and correspondence between the parties;
(b)     applying the principles in Warwar, and
(c)     incorrectly deciding what each party, by words and conduct, would have led a reasonable person in the position of the other party to believe.

SUBMISSIONS

After setting out the relevant history, Mr Flett submitted:
(a)     it was clear that the appellant had regard to Mr Piper’s alleged left shoulder injury. It had received and read Dr Searle’s report and, despite the contents of that report, disputed liability for “that injury”;
(b)     the complying agreement was a final and binding agreement concerning the entitlement to lump sum compensation (CSR Ltd v Gonzales [2010] NSWWCCPD 118 (Gonzales)) and it ought to be interpreted according to the usual principles of contract law, taking into account the surrounding circumstances at the time it was entered and its text and structure (Warwar);
(c)     the surrounding circumstances are that, after receiving a copy of Dr Robinson’s report, CGU made an offer of eight per cent whole person impairment, despite Mr Piper’s best evidence indicating only seven per cent;
(d)     the “Nil” allowance for the left shoulder, indicated that the insurer was being more than generous in its provision of compensation for the right shoulder. A reasonable person in the position of Mr Piper and his legal representatives would have realised that, by offering the greater amount, CGU intended to resolve the claim for the left and (right) shoulders once and finally;
(e)     the s 74 notice of 18 October 2010 would not persuade a reasonable person to believe that the 26 May 2011 offer did not include a consideration of the left shoulder injury. Rather, the s 74 notice merely stated that no offer of whole person impairment would be made for the left shoulder injury. This was consistent with the May 2011 offer in that CGU offered nil for that injury. That does not mean that no attempt was made to include it in the offer. The intention was clear that the final offer would include a concession that there was no whole person impairment for the left shoulder injury;
(f)      Mr Piper accepted the offer without any specific reference to or questioning of the term “Nil” compensation for the left shoulder;
(g)     the offer was based on the report of Dr Robinson, which clearly noted that the left shoulder injury was not work-related. Mr Piper made no objection to this when accepting the offer, and
(h)     the Senior Arbitrator should have found that Mr Piper had in fact accepted the offer on the basis that, once and finally, there was no whole person impairment being conceded for the left shoulder and that the offer would resolve the matter on the understanding that there was nil permanent impairment of his left shoulder as a result of work.

DISCUSSION AND FINDINGS

I reject the above submissions.
Before dealing with the interpretation issue, it is important to note (yet again) that the reference in the appellant’s submissions, and in the s 74 notice, to Mr Piper having suffered an “injury” to his left shoulder was wrong. Mr Piper has never suffered (or alleged that he suffered) a s 4 injury to his left shoulder. His claim has always been that the condition of his left shoulder has resulted from the accepted injury to his right shoulder (Kooragang Cement Pty Ltd v Bates (1994) 35 NSWLR 452; 10 NSWCCR 796).
The Commission has considered and explained the difference between an “injury” and a condition that has resulted from an injury in several recent decisions (Moon v Conmah Pty Ltd [2009] NSWWCCPD 134 at [43], [45] and [50]; Superior Formwork Pty Ltd v Livaja [2009] NSWWCCPD 158 at [122]; Cadbury Schweppes Pty Ltd v Davis [2011] NSWWCCPD 4 at [28]–[32] and [39]–[42]; North Coast Area Health Service v Felstead [2011] NSWWCCPD 51 at [84]; Australian Traineeship System v Turner [2012] NSWWCCPD 4 at [28] and [29]; Kumar v Royal Comfort Bedding Pty Ltd [2012] NSWWCCPD 8 at [35]–[49] and [61]; Bouchmouni v Bakhos Matta t/as Western Red Services [2013] NSWWCCPD 4). It is more than a little surprising that the profession and the insurers still have no appreciation of the difference.
Turning to the effect of the complying agreement, I agree that it must be interpreted according to the usual principles of contract law. The High Court considered the principles relevant to the construction of a contract in Toll (FGCT) Pty Ltd v Alphapharm Pty Ltd [2004] HCA 52; 219 CLR 165, where it unanimously held (at [40]):
“This Court, in Pacific Carriers Ltd v BNP Paribas, has recently reaffirmed the principle of objectivity by which the rights and liabilities of the parties to a contract are determined. It is not the subjective beliefs or understandings of the parties about their rights and liabilities that govern their contractual relations. What matters is what each party by words and conduct would have led a reasonable person in the position of the other party to believe. References to the common intention of the parties to a contract are to be understood as referring to what a reasonable person would understand by the language in which the parties have expressed their agreement. The meaning of the terms of a contractual document is to be determined by what a reasonable person would have understood them to mean. That, normally, requires consideration not only of the text, but also of the surrounding circumstances known to the parties, and the purpose and object of the transaction.” (emphasis added)
This passage was quoted (at [43]) in Warwar and by the Senior Arbitrator in the present case when she referred to Warwar.
Since the above cases were decided, however, the High Court has stated that the “true rule” as to the admission of evidence of surrounding circumstances is that stated by Mason J in Codelfa Construction Pty Ltd v State Rail Authority (NSW) [1982] HCA 24; (1982) 149 CLR 337 (Codelfa) at 352 (see Western Export Services Inc v Jireh International Pty Ltd [2011] HCA 45). Regrettably, the exact meaning of Mason J’s decision in Codelfa is open to debate.
In the most recent statement on the topic from an intermediate Court of Appeal, Bathurst CJ (Macfarlan and Meagher JJA agreeing) said at [52] in Cordon Investments Pty Ltd v Lesdor Properties Pty Ltd [2012] NSWCA 184:
“A contract is to be construed by reference to what a reasonable person would understand by the language in which the parties have expressed their agreement having regard to the context in which the words appear and the purpose and object of the transaction: Pacific Carriers Ltd v BNP Paribas [2004] HCA 35; 218 CLR 451 at [22]; Toll (FGCT) Pty Limited v Alphafarm Pty Ltd [2004] HCA 52; 219 CLR 165 at [40]; International Air Transport Association v Ansett Australia Holdings Ltd [2008] HCA 3; 234 CLR 151 at [53]. At least in the case of ambiguity, resort can be had to the surrounding circumstances known to the parties in interpreting the particular provision: Codelfa Construction Pty Ltd v State Rail Authority (NSW) [1982] HCA 24; 149 CLR 337 at 352; Western Export Services Inc v Jireh International Pty Ltd [2011] HCA 45; 282 ALR 604.”

In view of the current uncertainty as to whether, in the absence of ambiguity, it is permissible to consider the surrounding circumstances known to the parties in interpreting a contract, I intend to consider both situations in the alternative.
Looking at the words of the complying agreement and interpreting those words objectively, it is clear that the settlement only applied to, and only resolved the claim for, lump sum compensation for whole person impairment as a result of the injury to Mr Piper’s right shoulder. This follows from the fact that the agreement only referred to the injury to the right shoulder and, under “Particulars of this agreement”, recorded the “percentage loss” as eight per cent. Under “the body part/system/process” the words “right shoulder” appear and under “amount payable”, the figure of $10,000 was entered. The complying agreement did not refer to any consequential condition, or to any other body part.
In my view, the terms of the complying agreement are clear and unambiguous. The parties settled Mr Piper’s claim for lump sum compensation for his right shoulder injury for $10,000, which figure represented an eight per cent whole person impairment. I do not see that the agreement is capable of any other interpretation. It simply did not deal with the claim for lump sum compensation for the left shoulder and it presents no barrier to the recovery of compensation for any whole person impairment that has resulted from that condition.
Therefore, consistent with Codelfa, it is not permissible to look to the surrounding circumstances to contradict the language of the agreement when it has a plain meaning. If this approach is wrong, and it is open to consider the surrounding circumstances, I do not consider that those circumstances lead to a different conclusion.
The submission that it is clear the appellant had regard to Mr Piper’s left shoulder condition (when making its offer) is of limited assistance and really begs the question: what part did the left shoulder condition play in the formulation of the offer on 26 May 2011 and was the offer intended to settle both claims? If the insurer decided to offer eight per cent for the right shoulder, instead of the seven per cent claimed, in return for Mr Piper abandoning his claim of four per cent for the left shoulder, there is no evidence to that effect.
The appellant invited the Senior Arbitrator to infer that the offer of eight per cent was intended to extinguish liability for both shoulders. There is no basis for concluding that a reasonable person in Mr Piper’s position would have settled the claim on that basis, but a cogent reason why he would not. By accepting eight per cent in full satisfaction of his claims for both shoulders, Mr Piper would be giving up the real possibility of obtaining not only compensation for a four per cent whole person impairment because of his left shoulder condition (worth $5,000), but also the chance to obtain compensation for pain and suffering (being an amount reasonably proportionate to the maximum of $50,000). That is because the combined compensation for both shoulders is above the 10 per cent threshold for compensation for pain and suffering, but the eight per cent payment for the right shoulder is not.
Viewing the matter objectively, it is completely illogical that a properly advised worker would give up his valuable rights to lump sum compensation for his left shoulder, and the possibility of obtaining compensation for pain and suffering, in return for an additional one per cent compensation for his right shoulder injury, worth only $1,250.
I do not accept that the insurer was being more than generous in allowing eight per cent for the right shoulder injury, when Mr Piper’s highest assessment was seven per cent. Nor do I accept that a reasonable person in the position of Mr Piper would have realised that, by offering that amount, CGU intended to resolve both claims. The insurer would have been well aware that, faced with assessments of eight per cent from Dr Robinson and seven per cent from Dr Searle, there was every possibility an AMS would find eight per cent. In these circumstances, it was appropriate to offer eight per cent for the right shoulder.
If CGU intended to resolve both claims, it could have included in the complying agreement a term, as was included in Gonzales, that the agreement represented the full extent of any entitlement Mr Piper had to lump sum compensation as a result of his injury. It did not do that. CGU said it was making an offer of $10,000 for the right shoulder and “Nil” for the left shoulder. That offer was consistent with the s 74 notice, where CGU disputed liability for the left shoulder condition. The offer did not state or imply that acceptance of the $10,000 was in full satisfaction of both claims. The letter accepting the offer accepted only the $10,000 for the right shoulder. It did not accept the offer of “Nil” for the left shoulder.
The submission that the intention was clear that the final offer would include a concession (by Mr Piper) that there was nil whole person impairment for the left shoulder condition is untenable. At best, that might have been CGU’s subjective intention, but it is certainly not the view a reasonable person, viewing the facts objectively, would have formed.
That Mr Piper accepted the offer without questioning the term “Nil” compensation for the left shoulder does not assist the appellant. As the terms of the offer were clear – $10,000 for the right shoulder and nil for the left shoulder – a reasonable person in Mr Piper’s position would assume that, in accepting only the offer of $10,000 for the right shoulder, the issue of lump sum compensation for the left shoulder was still in dispute.
That the offer was “based on” Dr Robinson’s report does not assist the appellant. Dr Robinson expressed his opinion on liability for the left shoulder condition on the incorrect assumption that it was claimed as a s 4 injury. So much is clear from his opinion that the left shoulder impairment had only occurred in the 12 months prior to his examination and was “not work related”. The question was not whether the left shoulder condition was “work related” but whether it resulted from the accepted right shoulder injury. CGU repeated the same error in the s 74 notice.
Moreover, that the offer was based on Dr Robinson’s report does not mean that the offer of eight per cent was conditional upon Mr Piper relinquishing his rights in respect of his left shoulder. Nothing in the surrounding circumstances suggests that that was the objective intention of the parties.
It follows that, looking at the surrounding circumstances, the Senior Arbitrator’s conclusion was open and discloses no error.

CONCLUSION

Applying Codelfa, the terms of the complying agreement are clear and unambiguous, and only involve a settlement of the claim for lump sum compensation for the right shoulder. In the alternative, the surrounding circumstances do not support the conclusion urged by the appellant. The claim for lump sum compensation for the left shoulder condition had always been disputed, although on the basis of an incorrect approach by Dr Robinson. The parties settled the claim for lump sum compensation for the right shoulder only and Mr Piper is not prevented from claiming lump sum compensation for his left shoulder condition.

DECISION

Leave to appeal is granted.
The Senior Arbitrator’s determination of 22 November 2012 is confirmed.

COSTS

The appellant employer is to pay the respondent worker’s costs of the appeal, as agreed or assessed.

Bill Roche

Deputy President
16 April 2013

I, KATHRYN CAMP, CERTIFY THAT THIS IS A TRUE AND ACCURATE RECORD OF THE REASONS FOR DECISION OF BILL ROCHE, DEPUTY PRESIDENT OF THE WORKERS COMPENSATION COMMISSION.

ASSOCIATE