Zhang v Mei Hu trading as Eden Furniture and the WorkCover Authority of NSW

[2006] NSWWCCPD 15

WORKERS COMPENSATION COMMISSION

DETERMINATION OF APPEAL AGAINST A DECISION OF THE COMMISSION CONSTITUTED BY AN ARBITRATOR

CITATION:Yong Fu Zhang v Mei Hu t/as Eden Furniture and the WorkCover Authority of NSW [2006] NSWWCC PD 15

APPELLANT:  Yong Fu Zhang

FIRST RESPONDENT:  Mei Hu t/as Eden Furniture

SECOND RESPONDENT  WorkCover Authority of NSW

FILE NUMBER:  WCC3345-05

DATE OF ARBITRATOR’S DECISION:          20 June 2005

DATE OF APPEAL DECISION:  3 February 2006

SUBJECT MATTER OF DECISION: Weight of Evidence; Validity of the Contract of Employment; section 24 of the Workers Compensation Act 1987;

PRESIDENTIAL MEMBER:  Dr Gabriel Fleming, Deputy President

HEARING:On the papers

REPRESENTATION:  Appellant:                  Buttar Caldwell & Co

First Respondent:     Carroll & O’Dea Lawyers

Second Respondent: WorkCover Authority

ORDERS MADE ON APPEAL:  The decision of the Arbitrator is confirmed.

The Appellant is to pay the costs of the appeal.

BACKGROUND TO THE APPEAL

1. Mr Yong Fu Zhang came to Australia from China as a tourist in February 2002.  His tourist visa, which did not permit him to work in Australia, expired (after extension) on 8 September 2003.   

1. On 10 February 2004 Mr Zhang was at a furniture factory at Auburn in Sydney, operated by Ms Mei Hu t/as Eden Furniture.  While there he seriously injured his right hand.  He was taken to hospital and his hand was operated on.  He was discharged from hospital the next day with the recommendation that he have physiotherapy to ensure ongoing functionality of his hand.  He continued to have problems with his hand.  Mr Zhang claims that he was working for Ms Hu.  Ms Hu claims that he was not.

1. Mr Zhang lodged a claim on Ms Hu for weekly benefits compensation, medical expenses and lump sum compensation for permanent impairment.  Ms Hu did not have mandatory workers compensation insurance at the time Mr Zhang injured his hand.  On 23 April 2004 Mr Zhang made a claim upon the Uninsured Liability and Indemnity Scheme, administered by the WorkCover Authority of NSW.  

1. Mr Zhang’s claim for compensation was disputed and, on 7 March 2005, he lodged an ‘Application to Resolve a Dispute’ in the Commission.  Ms Hu and the WorkCover Authority of NSW were named as Respondents to the application.

1. The dispute went before a Commission Arbitrator who, on 20 June 2005, made an award of weekly compensation to Mr Zhang for the period 10 February 2004 to 15 September 2004.  Written ‘Reasons for Decision’ were issued along with the ‘Certificate of Determination’.  At the time the dispute was heard and decided by the Arbitrator Mr Zhang was in immigration detention at the Villawood Detention Centre because of breaches of his visa conditions. 

1. Ms Mei Hu, t/as Eden Furniture, has filed this appeal against the Arbitrator’s decision.  She submits that an award should be made in her favour, with Mr Zhang to pay costs.

1. Leave to appeal is granted (pursuant to section 352 of the Workplace Injury Management and Workers Compensation Act 1998 (‘the 1998 Act’).

1. Ms Hu submits an oral hearing should be held in order to fully address the issues on appeal.  Both Ms Hu and Mr Zhang rely upon the evidence and submissions that were before the Arbitrator and have also filed submissions on the appeal issues.  The WorkCover Authority has not filed any submissions on the appeal.  There is no fresh evidence on the appeal.  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 (section 354(6) of the 1998 Act; Practice Directions Numbers 1 and 6).

ISSUES IN DISPUTE

1. The issues in dispute in the appeal may be summarised as follows:

   ·     Did the Arbitrator err in preferring the evidence of Mr Zhang?

   ·     Did the Arbitrator err in finding that a valid contract of employment existed?

   · Did the Arbitrator err in exercising his discretion under section 24 of the Workers Compensation Act 1987 (‘the 1987 Act’)?

ANALYSIS OF THE ISSUES

Did the Arbitrator err in preferring the evidence of Mr Zhang?

1. Ms Hu submits the Arbitrator erred in rejecting her evidence and preferring the evidence of Mr Zhang “when there was significant objective evidence before him [the Arbitrator] in written format which ought to have been accepted as discrediting” Mr Zhang.  This evidence was:

   ·     A claim form signed by Mr Zhang, with the assistance of an interpreter and witnessed by a solicitor, stating that he performed work as a painter “post injury”.  

   ·     Bank Statements for the period July 2004 to May 2005 showing substantial credits to Mr Zhang’s account post injury and not properly explained by Mr Zhang in oral evidence. 

   ·     Adverse inferences of Mr Zhang’s credit as a result of his breaches of immigration law and subsequent detention, and

   ·     Mr Zhang’s failure to provide evidence of the two other workers he claims were present when he sustained the injury.

2. The Arbitrator held a face-to-face conciliation/arbitration hearing and heard oral evidence from Mr Zhang.  He was assisted by an Interpreter in the Mandarin language.  All parties were legally represented.

1. The review of findings based on credit must be approached with caution, giving due regard to the fact that the Arbitrator has had the benefit of seeing and hearing the witness give evidence, and then of reflection on the evidence prior to coming to a decision (Abalos v Australian Postal Commission (1990) 171 CLR 167). An appellate body must be alert to the advantage enjoyed by the Arbitrator and to the nature of the proceedings. In Department of Education & Training v Jeffrey Sinclair [2004] NSW WCC PD 90 the President of the Commission relevantly said (at paragraph 158):

   “. . .  Understandably, the Department rejects that credit finding [by the Arbitrator], but a Presidential Member of this Commission, reviewing an Arbitrator’s decision on appeal, should upset such a finding only if there is other “incontrovertible” evidence indicative of error, not adequately dealt by the Arbitrator at first instance. Fox v Percy (2003) 77 ALJR 989, c.f. Abalos v Australian Postal Commission (1990) 171 CLR 167. (See also the useful discussion in the judgments of the High Court in State Rail Authority of New South Wales v Earthline Constructions Pty Ltd (in liq) & Ors (1999) 160 ALR 588, especially that of Kirby J at 508ff, and the decision of Deputy President Fleming in Mayne Health Group v Sandford [2002] NSW WCC PD6, pars 35-41).”

2. The Arbitrator in this matter had the considerable forensic advantage of hearing and observing Mr Zhang give evidence.  He observed the extent of the loss of functionality of Mr Zhang’s right hand.  The arbitration, as evidenced by the transcript, was relatively long and comprehensive.  On critical evidentiary issues Mr Zhang gave the following evidence:

   ·He denied working after the injury and said that the ‘claim’ form signed by him on 23 April 2004 was ‘blank’ at the time he signed it. 

   ·He asserted that he was unable to work after the injury because of the extent of damage to his hand. 

   ·He stated that the amounts appearing in his bank account were loans from friends, because he did not have any money.

1. The Arbitrator accepted that Mr Zhang’s command of the English language was limited and that this should be taken into account in regard to the matters on the claim form that he signed.  He accepted that Mr Zhang’s account of how he came to receive the money deposited in his account was necessarily vague at the date of the arbitration, because of the passage of time and the fact that Mr Zhang had, by then, been in immigration detention for some time.  Ultimately the Arbitrator was not persuaded, on the evidence before him that Mr Zhang had continued to work after his injury.

1. The Arbitrator, having considered the documentary evidence and heard Mr Zhang’s oral evidence, which was the subject of cross-examination, found Mr Zhang to be a witness of truth.  The fact that Mr Zhang was in immigration detention because of breaches of his visa condition does not, of itself, demonstrate that he is not a witness of truth in relation to his injury and claim for compensation under the Workers Compensation Acts.  The Arbitrator, in particular, accepted that Mr Zhang had been totally incapacitated since the injury and had not worked since he sustained it.  The Arbitrator reviewed the medical evidence and found support for Mr Zhang’s claim from Dr Walker, who stated that the injury to his hand resulted in a “severe loss of function”.  It is irrelevant whether I would have come to the same factual conclusions as the Arbitrator.  He heard the evidence first-hand.  His findings are supported by logical and probative evidence.  

1. The Arbitrator did not err in preferring the evidence of Mr Zhang.

Did the Arbitrator err in finding that a valid contract of employment existed?

1. Ms Hu submits the Arbitrator erred in finding that a valid contract of employment existed between herself and Mr Zhang.  She argues that the Queensland Court of Appeal decision in Australian Meat Holdings Pty Ltd v Kazi (2004) QCA 147 (‘Kazi’) is a binding authority on the Arbitrator for the proposition that the Migration Act 1958 (C’th) prohibited the making of a contract of employment with a person who was an ‘unlawful non-citizen’. Such a contract was therefore not valid or enforceable. The fact that is critical to this reasoning is that Mr Zhang’s visa did not give him permission to work in Australia.

1. The Arbitrator correctly identified the legal issues and the relevant law.  There are two superior court decisions that have considered the overlap between a prohibition on work imposed under the Migration Act 1958 (C’th) and the rights of a ‘worker’ to claim compensation under beneficial workers compensation legislation. They are Kazi and Nonferral v Taufia (1998) NSWLR 312 (‘Nonferral’). 

1. Ms Hu points to the differences between section 235 of the Migration Act 1958 (C’th), which governs ‘Offences in relation to work’ and its predecessor, section 83 of the Migration Act 1958 (C’th). Section 235 of the Migration Act 1958 (C’th) is applicable to Mr Zhang. The NSW Court of Appeal in Nonferral considered section 83. The Queensland Court of Appeal in Kazi (Davies and Williams JJA concurring and McMurdo J dissenting) expressly considered section 83 of the Migration Act 1958 (C’th) and the significance of the amendment that resulted in the insertion of section 235. The decision in Kazi turned on the interpretation of section 235.

1. The Arbitrator erred in purporting to follow the authority of the NSW Court of Appeal in Nonferral.   In that case the Court found that, as a matter of law, a contract of employment entered into by a person who did not have permission to work in Australia (pursuant to the Migration Act 1958 (C’th)) was not illegal and unenforceable (for that reason alone) in relation to a claim for compensation under the 1987 Act.

1. The decision in Kazi concerned the same statutory provisions of the Migration Act 1958 (C’th) as were applicable to Mr Zhang’s case. The Arbitrator might only speculate on whether the NSW Court of Appeal would come to the same conclusions as the Queensland Court of Appeal did in Kazi, had it been considering section 235, and not section 83, of the Migration Act 1958 (C’th). Kazi is a majority decision of a superior court, although outside of the NSW jurisdiction.  It should be considered by an Arbitrator of the Commission to be persuasive authority in a matter where identical statutory provisions must be construed.  The Court in Kazi carefully considered Nonferral and the implications of that decision together with the amendment to the Migration Act 1958 (C’th). The Arbitrator’s construction of the effect of section 235 of the Migration Act 1958 (C’th) directly contradicts the finding of the Queensland Court of Appeal in Kazi.  The NSW Court of Appeal would itself depart from a decision of the Queensland Court of Appeal, which concerned identical statutory provisions, only where the earlier decision was “clearly wrong or considerations of justice require the court to decline to apply the decision of the other court” (Fernando v Commissioner of Police (1995) 36 NSWLR 567). In my view this was not the situation here. The Arbitrator, had he followed the reasoning in Kazi would inevitably have found that the contract of employment between Ms Hu and Mr Zhang was illegal and unenforceable. 

1. The Arbitrator erred in finding that the contract of employment was valid.

1. Ultimately, however, as Cole JA stated in Nonferral “[I]n one sense it [the effect of the Migration Act 1958] matters not because, if the contract be illegal, s24 Workers Compensation Act (NSW) confers upon the Compensation Court a discretion to treat an illegal contract as legal”. This discretion is now conferred upon the Commission, and is exercisable by the Arbitrator. It was proper for the Arbitrator to also address section 24 of the 1987 Act, in the event that his primary findings were found to be wrong. The application of section 24 of the 1987 Act was a live issue in the dispute and was addressed by the parties’ submissions.

Did the Arbitrator err in exercising his discretion under section 24 of the Workers Compensation Act 1987?

1. Section 24 of the Workers Compensation Act 1987 provides as follows:

   Illegal Employment

   24If, in any proceedings for the recovery of compensation under this Act, it appears that the contract of service or training contract under which the injured person was engaged at the time when the injury happened was illegal, the matter may be dealt with as if the injured person had at that time been a worker under a valid contract of service or training contract.

2. Ms Hu argues that the Arbitrator erred in exercising his discretion to find that, if the contract between herself and Mr Zhang were found to be illegal, it should nonetheless be treated as a valid contract.

1. The Arbitrator refers to the application of ‘public policy’ and section 24 of the 1987 Act. The Commission is a statutory tribunal and does not have the ‘inherent’ powers that attach to a court. It is a creature of statute. It has only those powers conferred by the statute and incidental powers, implied by statute and necessary to carry exercise the jurisdiction conferred upon it. The Commission does not have the “general power, based upon public policy, to refuse to aid a guilty party”, referred to by McMurdo J in Kazi (at paragraph 70). However the Commission, in the exercise of the jurisdiction conferred upon it by the Workers Compensation Acts, is bound to give effect to their statutory objectives. This is not an exercise in the application of ‘public policy’, but the correct approach to statutory interpretation.

1. Section 24 provides the Arbitrator with a discretion to treat a contract that is otherwise “illegal” as a “valid contract”. As with any exercise of discretion by an administrative decision maker, this discretion must be exercised lawfully and fairly, taking into account the scope of the discretion and the objects of purpose for which it is conferred. It is only where the Arbitrator can be said to have failed to exercise his discretion fairly and according to law that his decision should be overturned. This occurs where the Arbitrator has: acted upon a wrong legal principle; allowed irrelevant considerations to influence the decision; made a material mistake as to the facts or failed to take into account relevant and material considerations (House v The King (1936) 55 CLR 499 at 504-505; Norbis v Norbis (1986) 161 CLR 513 at 520, National Roads and Motorists’ Association Ltd [2003] FCAFC 206 at [21] to [21]).

1. The Arbitrator correctly referred to the factors that may be relevant to the exercise of the discretion in section 24 of the 1987 Act, as set out in the judgement of Sheppard AJA in Nonferral.  Having considered the particular circumstances of Mr Zhang’s claim the Arbitrator concluded that he should exercise the discretion to treat the contract of employment between Mr Zhang and Ms Hu as legal.  In my view this was the correct approach and the Arbitrator has not erred. 

1. The Arbitrator did not err in the exercise of his discretion under section 24 of the 1987 Act.

DECISION

1. The decision of the Arbitrator is confirmed.

COSTS

1. The Appellant is to pay the costs of the appeal.

Dr Gabriel Fleming

Deputy President  

3 February 2006.

I CERTIFY THAT THIS IS A TRUE AND ACCURATE RECORD OF THE REASONS FOR DECISION OF DR GABRIEL FLEMING, DEPUTY PRESIDENT OF THE WORKERS COMPENSATION COMMISSION.

ASSOCIATE