eatanbeooe "718 IN THE FEDERAL COURT OF AUSTRALIA ) ) WESTERN AUSTRALIA DISTRICT REGISTRY ) No. W.A.G.10 of 1979 ) GENERAL DIVISION ) IN THE MATTER of a reference to the Commonwealth Employees' Compensatior Tribunal by GORDON ERROL COLLIS AND IN THE MATTER of an application by the AUSTRALIAN TELECOMMUNICATIONS COMMISSTON ("TELECOM") for reference of questions of law arising in the proceedings before the Tribunal to the Federal Court (s.94A of the Compensation (Commonwealth Governmer Employees) Act 1971) CORAM - Toohey J. 30 May 1980 REASONS FOR JUDGMENT Counsel addressed in this matter on 20 May. In the course of the hearing mention was made of a decision to be delivered in the Federal Court by Northrop J. on the following day, expected to have some bearing on issues arising in this reference. Accordingly, after hearing submissions, I adjourned the hearing until the following afternoon by which time it was hoped that Northrop J.'s reasons would be available. They were and in one respect, at least, they proved directly relevant. I gave counsel leave to supplement their oral arguments with written submissions if they wished. They did so and I now deliver my reasons. This is a reference by a Compensation Tribunal under s.94A of the Compensation (Commonwealth Government Employees) Act 1971 ("the Compensation Act"). That section 2. empowers a tribunal, of its own motion or at the request of a party, to refer to the Federal Court for decision a question of law arising in a proceeding before the tribunal. The reference recites events leading to a determination by a delegate of the Commissioner for Employees' Compensation on 29 November 1976. As a result of an accident giving rise to a liability in the Commonwealth to pay him compensation under s.27 of the Compensation Act, Mr. Collis was awarded damages for personal injuries of $5,324.90 against a negligent third party in the District Court of Western Australia. The judgment was made up of $4,250 general damages and $1,074.90 special damages. A sum of $883.60, part of the special damages, was paid by the Motor Vehicle Insurance Trust as statutory insurer to Australian Telecommunications Commission ("Telecom") Mr. Collis' employer. Of that sum, $610.35 represented reimbursement of compensation payments made to Mr. Collis and appropriate income tax deductions paid by Telecom to the Commissioner of Taxation pursuant to s.221C of the Income Tax Assessment Act 1936. The remaining $273.25 was reimbursement of medical expenses paid by Telecom. The balance of special damages was paid by the Trust to medical creditors and general damages of $4,250 were then paid to Mr. Collis' solicitors. On 29 November 1976 the delegate made a determination in these terms: 3. "having regard to the damages amounting to $5324.90 recovered by the said Gordon Errol Collis and to the provisions of sub-section 99(2) of the said Act, compensation is not payable to the said Gordon Errol Collis from 5 October 1976 unless and until the amount of compensation which has been paid to him under the said Act in respect of the personal injury sustained on 23 November 1973, together with the amount of compensation which (but for the operation of section 99) otherwise would have been payable exceeds the amount of damages he recovered". Section 20(1) of the Act expresses the function of the Commissioner to determine all matters and questions arising under the Act and empowers the Commissioner to do all things necessary for the carrying out of that function. The effect of the determination was to abate compensation until payments made and otherwise payable exceeded the damages recovered by Mr. Collis. Section 63 of the Act entitles a party to a determination to request a reference of - "all or any of the matters or questions to which the determination relates to a Compensation Tribunal for reconsideration". Through his industrial organisation, Mr. Collis made such a request. So far as I can see, it was simply that - "the matter be referred to a Compensation Tribunal for reconsideration in accordance with section 76 of the Act". No objection seems to have been taken by Telecom to a reference in those terms. A perusal of material relating to preliminary hearings before the tribunal, in particular the tribunal's directions of 11 June 1979 and its decision of 29 June 1979, shows that several matters were canvassed. They are summarised on p.4 of the decision. Most have no relevance 4. to this reference and I mention them only to provide the context in which the matter came before this Court. In the main they concerned the impact on compensation of an award of general damages in which future Toss of earnings was not a component and the implications of a deduction of solicitor and client costs from the amount of general damages. However one question considered was - "should the repayment of compensation to Telecom have been a gross sum before tax or a net sum after tax". In view of an objection to the jurisdiction of the tribunal taken before this Court, it is important to note that the matter of income tax (I put it no more precisely than that for the moment) was before the tribunal from the outset. What was identified as "the tax matter" was severed from the other issues before the tribunal and later became the subject of a reference to this Court without the tribunal having made a decision on it. The reference seeks an answer to the question whether the amount recovered from the damages awarded to Mr. Collis should have been the net amount after deduction of income tax rather than the gross amount of weekly compensation payments made and whether compensation is not payable to him from 5 October 1976 unless and until the net amount of weekly compensation payments or the gross amount exceed the damages recovered. At the request of Telecom, the tribunal added another question in these terms: 5. "(1) whether this Tribunal has jurisdiction to consider whether the amount of weekly compensation payments recovered by Telecom out of the damages awarded to the claimant should be the nett amount received after deduction of income tax under P.A.Y.S. (sic) rather than the gross amount of weekly compensation payments made to the claimant". When this question was being formulated by the tribunal, Telecom was strangely coy about the basis of its objection, in effect seeking to reserve the formulation of any precise objection until the matter was before this Court. In my view, the tribunal would have been entirely justified in refusing to add this question to the reference until it was known with certainty what the point was. More than that, I think the tribunal should have declined to add the question until the point had been clarified. The tribunal was forced to guess at what the point might be, as appears from p.4 of the reference. It was a reasonable guess, the one anyone would have made in the circumstances, but as it turned out it was wrong. What Telecom now says is that the tax point was not properly before the tribunal because it was not referred to in the Commissioner's determination. Having regard to the range of matters canvassed before the tribunal with no apparent objection from Telecom, this is a belated submission. In the end Telecom did not press the objection but since this is a reference not an appeal I should say something about it. The function of the Commissioner is to determine all matters and questions arising under the Act. By reason of s.63, a party to a determination may request the Commissioner to refer to a Compensation Tribunal for reconsideration - "all or any of the matters or questions to which the determination relates a, The determination related to the damages recovered, the provisions of s.99(2) of the Act and to the effect on further payments of compensation already paid and otherwise payable. But the reference to damages was only for the purpose of determining their impact on future payments of compensation. The amount paid by the Insurance Trust was no doubt pursuant to the obligation imposed by s.99(8) of the Act. Whether or not the amount recovered by Telecom should have included the income tax component, that was not a question to which the determination related; hence it was not a matter for the reconsideration of the tribunal. And if in some way the delegate had purported to decide the amount which the Insurance Trust was obliged to pay from the damages, that determination would have been beyond power. It would have been an attempt to assess the liability of a third person to account to an employer. For the reasons advanced by Northrop J. in Commonwealth of Australia v. Goodfellow (21 May 1980), such a determination is beyond the power of the delegate and in turn of the tribunal. Where a person is liable to pay an amount to the Commonwealth under the Compensation Act - ' .. the amount concerned is recoverable by the Commonwealth from the person as a debt due to the Commonwealth by action in a court of competent jurisdiction' (S.119(1)). 7. It is a matter forsuch a court to determine. As it turns out, question (2), which asks whether the amount recovered should have included income tax, is moot since Mr. Collis now makes no complaint of the amount paid by the Insurance Trust to Telecom. As to compensation from 5 October 1976 (the subject of question (3)), Telecom contends that none is due until compensation paid and payable, including the component already paid or payable to the Commissioner of Taxation, exceeds damages recovered. The basis of this submission is that when ss.99(2) and (3) of the Act speak of compensation paid or payable, that must be taken to include money paid or payable from that compensation under a statutory obligation cast by the Income Tax Assessment Act to deduct the appropriate amount of income tax and pay it to the Commissioner of Taxation. Counsel for Mr. Collis did not dispute that this was the proper basis, saying that it suited his client's purposes to have the total amount deducted thereby enabling him to return to compensation payments more quickly. This aspect was considered by Northrop J. in Commonwealth of Australia v. Goodfellow supra and I agree with his Honour's reasons, summarised in the following sentences from the judgment. 8. "In making the deductions and paying the amounts so deducted to the Commissioner of Taxation, the Commonwealth discharged its liability to pay s.45 compensation to the respondent. Clearly that liability was thereby discharged and the compensation was paid to the respondent." In this regard, the determination in the present reference related directly to compensation payable. It did not purport to determine questions arising between the Commonwealth or Telecom and a negligent third party or the recoverability of money by the former from the latter. Counsel for Telecom made some reference to Atlas Tiles Ltd. v. Briers (1978) 52 A.L.J R. 707. To the extent that the decision is concerned with the incidence of income tax in the assessment of damages for loss of earning capacity, it was overrruled by the decision of the High Court in Cullen v. Trappell (1 May 1980). The issues raised in those appeals do not arise here. I simply draw attention to the judgment of Aickin J. where reference is made to anomalies that may arise if damages are assessed on the basis of after-tax earnings and a worker is required to pay compensation payments including tax deducted and paid to the Commissioner of Taxation. I would answer the questions in this way 1. No. 2. Does not fall to be answered. 3. As in para (b). The employer agreed to meet the employee's costs of this reference in any event. 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