KIRAZ vy CLASSIC TILES PTY LTD SUPREME COURT OF NEW SOUTH WALES COURT OF APPEAL MAHONEY AP, CLARKE and SHELLER JJA 9 August 1995, 18 August 1995 [1995] NSWCA 243 WORKERS COMPENSATION — s40 Workers Compensation Act 1987 calculation of current weekly wage rate overtime payments disregarded. On 29 July 1993 Commissioner Cross awarded the appellant, Albert Kiraz, weekly compensation at the rate of $396.30 pursuant to s40 of the Workers Compensation Act 1987. The Commissioner found that: * the worker was partially incapacitated in the course of his employment with the respondent, Classic Tiles Pty Ltd; * the weekly amount he would have been earning but for the injury was $700; * his award rate of an ordinary weeks' work was $473 and; * the average weekly wage he was able to earn after the injury was $300. In an application to the Compensation Court for review of this decision, Judge Maguire QC held that the Commissioner had erred in law and substituted the rate of $173. His Honour treated $473 rather than $700 as the weekly amount that the worker would probably have been earning but for the injury. The difference between $473 and $700 was overtime which s42(6) of the Act required him to disregard. The appellant challenged this decision on the grounds that his Honour erred in substituting $473 for $700 as the weekly amount of his probable earnings. At the relevant time s40(1) of the Act provided that the weekly payment of compensation to a worker in respect of partial incapacity for work was not to exceed the difference between the amount the worker probably would have been earning but for the injury and the weekly amount the worker was earning or able to earn after the injury. $40(2) provided that where a calculation is to be made under subs(1) on the notional basis the amounts shall be determined by reference to the current weekly wage rate. S42(1)(a) provided that the reference to the current weekly wage of a worker who before being incapacitated was renumerated;under an award, was a reference to the rate of remuneration under that award. $42(6)(a) provided that in determining the current weekly wage rate, an amount payable for overtime should be disregarded. Held: (1) per Mahoney AP In calculating the "current weekly wage rate" and accordingly the weekly compensation payments, the earnings from overtime are to be excluded to the extent provided for in s42(6). The argument that Judge Maguire should have exercised the discretion under s40(1) and s40(2) to take into account earnings from overtime was rejected. Lovett Building Co Pty Ltd v Burns (1992) 29 NSWLR 475 cited. per Clarke and Sheller JJA In determining what the worker was able to earn under s40(1)(b) the current weekly wage rate is no more than a datum. However to the extent that the current weekly wage rate was to be taken into account pursuant to s40(2)(a), overtime and other payments to which s42(6) referred were to be disregarded. Judge Maguire was right to use the award rate disregarding overtime as the current weekly wage for the pre-injury employment and hence the weekly amount the worker would probably have been earning but for the injury. ORDERS 2 UNREPORTED JUDGMENTS 1. Appeal allowed; 2. Set aside Judge Maguire's order that the respondent to the review to pay the costs of the applicant; 3. Confirm Judge Maguire's order reviewing the Commissioner's award by substituting in paral thereof an award of $173 as adjusted in accordance with the Statute from time to time provided that the weekly amount does not exceed $400; 4. The appellant to pay one-half of the respondent's costs of the appeal. Mahoney AP The facts are detailed in the judgment of Sheller JA which I have had the advantage of reading. The only issue posed for decision in this appeal is whether his Honour Judge Maguire was correct in holding that Commissioner Cross erred in law in taking into account in the calculation of the weekly compensation payments to be made to him.the earnings of the worker from over-time. S42(6) of the Workers Compensation Act 1987 provides, in effect, that in the cases to which it applies, the term "current weekly wage rate" is to be determined upon the basis that, inter alia, over-time earnings are excluded. S42(6) is limited in its application to, inter alia, cases falling within s42(1)(a). It has been accepted for the purposes of this proceeding that the worker and his circumstances fall within s42(1)(a). S40(2), in the form in which it was at the relevant time, provides for the weekly compensation payments in the case of (as the present case is) a partially incapacitated worker to be determined by reference to the "current weekly wage rate" of the worker. Accordingly, it follows that in calculating that "current weekly wage rate" and accordingly the weekly compensation payments, the earnings from over-time are to be excluded to the extent provided in s42(6). Mr Sharpe, for the appellant, appeared to submit that, if this be so, the earnings from over-time should yet be taken into account as part of the exercise of the discretion to be exercised by the judge under s40(1) and s40(2). This Court has made clear the three steps involved in the calculation of weekly wage compensation for a partially incapacitated worker: see, for example, Lovett Building Company Pty Ltd v Burns (1992) 29 NSWLR 475. Mr Sharpe's submission was, I think, to the effect that the discretion to be exercised by the Court should be exercised so as to take into account the earnings from over-time. There are difficulties which face that submission. However, it is, I think, sufficient to say that the judge did not do so and, if it be open to this Court to determine how the discretion should be exercised, I would not, on a rehearing, exercise it in the way suggested by Mr Sharpe's submissions. I agree with the orders proposed by Sheller JA. Clarke JA I agree with the judgment of Sheller JA. Sheller JA COMMISSIONER'S AWARD On 29 July 1993 Commissioner Cross awarded the appellant, Albert Kiraz, weekly compensation pursuant to s40 of the Workers Compensation Act 1987 (the Act) from 27 March 1992 at the rate of $396.30, as adjusted in accordance with the Statute from time to time provided that the weekly amount did not exceed $400. The Commissioner found that * the appellant was partially incapacitated from 27 March 1992 to the date of the decision by an injury he suffered on 26 September 1991 in the course of his employment with the respondent, Classic Tiles Pty Ltd; * the weekly amount which the appellant would probably have been earning but for the injury was $700; and URJ KIRAZ v CLASSIC TILES PTY LTD (Sheller JA) 3 * the average weekly amount which he was able to earn in some suitable employment after the injury was $300. The Commissioner also ordered lump sum payments under s66, interest and s60 expenses but these parts of the award are not relevant to this appeal. In the course of his reasons Commissioner Cross said: "Referring to his pre-injury occupation as a labourer/tiler, his award rate for an ordinary weeks' work was $473 but his average weekly earnings were $700...." REVIEW The respondent applied to the Compensation Court for a review of Commissioner Cross' decision which Judge Maguire QC heard. His Honour took the view that the Commissioner erred in law in awarding the applicant $396.30 and reviewed the award by substituting the rate of $173. This amount appears to have been arrived at by treating $473 rather than $700 as the weekly arnount which the worker would probably have been earning as a worker but for the injury; s40(1)(a). His Honour held that the difference between $473 and $700 was overtime which s42(6) of the Act required him to disregard. His Honour ordered the worker to pay the employer's costs of the application for review. APPEAL The worker appeals from this decision on two grounds, first that his Honour erred in substituting $473 for $700 as the weekly amount of his probable earnings and second that his Honour erred in law in awarding costs against the appellant worker. The respondent concedes that it was not open to the judge to award costs against the worker and does not seek to maintain that part of the judgment. Accordingly I need not say anything further about it. The order for costs will be set aside. To understand the contentions for and against the conclusion that Judge Maguire reached it is necessary to examine the Act as in force before it was amended in 1994. S40(1) provided that, in respect of any period of any partial incapacity for work, the weekly payment of compensation to an injured worker should be an amount not exceeding 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 [the stipulated amount]); and (b) the average weekly amount which the worker is earning, or is able to earn in some suitable employment, from time to time after the injury (but not exceeding [the stipulated amount])," Para(a) required the Court to determine the weekly amount which the worker would probably have been earning but for the injury in the same or some comparable employment. Para(b) required the Court to determine what average weekly amount the worker was actually earning or the notional average weekly amount the worker was able to earn in some suitable employment. The Court had a remaining discretion to adjust the amount of that difference but not so as to exceed it. $40(2) provided that in any case where a calculation was made under subs(1) on the basis of the average weekly amount that a worker was able to earn in some suitable employment, that is to say on the notional basis, "(a) that amount shall, subject to the regulations, be determined by reference to the current weekly wage rate for some suitable employment (but not exceeding [the stipulated amount]); and 4 UNREPORTED JUDGMENTS (b) the amount which the worker would probably have been earning but for the injury shalL subject to the regulations, be determined by reference to the worker's current weekly wage rate for the pre-injury employment (but not exceeding [the stipulated amount])." No regulations affected the determination under these paragraphs. This subsection applied only in case where under s40(1)(b) the Court was required to determine not what the worker was earning but what the worker was able to earn in some suitable employment. S42(1)(a) provided that subject to the section, a reference in the Division to the current weekly wage rate of a worker who, immediately before being incapacitated was remunerated under an award, was a reference to the rate of remuneration under that award at that time for one week in respect of the work being performed by the worker immediately before being incapacitated. As Commissioner Cross found, that rate was $473. S42(6)(a) provided that in determining a worker's current weekly wage rate in accordance with subs(1)(a) an amount paid or payable to the worker in respect of overtime should be disregarded. The respondent's case on this appeal was simply that, in case where under s40 (1) the weekly payment of compensation was an amount not exceeding the difference between the weekly amount which the worker would probably have been earning but for the injury and the average weekly amount which the worker was able to earn in some suitable employment after the injury, subs(2) provided a code for the determination of those amounts. That code required reference to be made to the current weekly wage rates for pre-injury employment and for post-injury suitable employment. In both cases in arriving at that current weekly wage rate overtime was to be disregarded. Each part sought to draw comfort from the decision of this Court in The Smith Family v Dafinis (1991) 8 NSWCCR 9. In that case the applicant was partially incapacitated but, since she had ceased work before the hearing, her actual earnings were nil. At 12 Priestley JA observed that the worker fell into the latter of the two categories in s40(1)(b); that is, she was not a worker earning (in which case s40(2) would have no application) but a worker able to earn (in which case s40(2) did apply). The case required the Court to resolve alternative constructions of s40(2). The first was that once the appropriate current weekly wage rate had been found, that exact figure had to be used in calculating the difference necessary to be calculated for the purposes of s40(1). The second was that the words "be determined by reference to" in s40(2) did not mean "be determined by using" but "be determined by using as a reference figure in the process of arriving at a realistic amount" or some substantially similar meaning. In the words of Burke CCJ in Mangion v Visy Board Pty Ltd (unreported) 6 May 1991: "The current weekly rate is provided as a datum against which the reality can be determined and not as an artificial substitute." The Court adopted this second more flexible construction. At 17 Priestley JA said: "Burke J went on to point out that the construction was easier to see in regard to the words in s40(2)(a) than in regard to the same words in s40(2)(b). The difficulty he saw was that this latter figure would usually be the precise figure of the relevant weekly wage rate. Nevertheless, he thought the proper construction was as he had indicated in the passage I have set out. I also do not think the difficulty he saw is a consideration of governing importance in interpreting the meaning of 'by reference to'. The fact that in one of the two places where the words occur they will mostly in practice work as if they read 'using only' does URJ KIRAZ v CLASSIC TILES PTY LTD (Sheller JA) 5 not show that this is necessarily their meaning or that their meaning when used in the other place in the subsection would be affected. In my opinion the construction adopted by Burke J is the preferable construction and should be recognised as such in the present case. " For present purposes it is significant that Burke CCJ concluded that, where the Court must, in accordance with s40(1)(b), make a calculation on the basis of the average weekly amount that a worker was able to earn in some suitable employment so that s40(2) applied, the amount which the worker would probably have been earning but for the injury would usually be the precise figure of the relevant weekly wage rate. If, applying s42(1)(a),that amount is the award rate, s42(6) required that overtime be disregarded. Judge Maguire approached the matter in this way. The appellant submitted that such an approach was unheard of. Furthermore it discriminated against the worker who was not earning but able to earn. Had the appellant been working and earning $300 per week, Commissioner Cross' award would have been unassailable. The fact that the appellant was not working but able to earn $300 per week reduced the recoverable weekly payment by the amount of overtime lost. The appellant argued that s40(2)(b) contained the same expression "by reference to" as s40(2)(a). Accordingly the current weekly wage rate should be used as a datum and not as an artificial substitute. The legislature has by s40(2) provided a separate code for making a calculation under subs(1) in the case where the equation involved the average weekly amount that a worker was able to earn in some suitable employment. The amount was to be determined by reference to the worker's current weekly wage rate. Pursuant to s42(6) in determining that wage rate, not only any amount paid or payable to the worker in respect of overtime, but any amount paid or payable in respect of shift work or other penalty rates, under the terms of the worker's employment in excess of the ordinary rate fixed by any award for the work performed by the worker, or to cover special expenses incurred by the worker, because of the nature of the worker's employment, was to be disregarded. Where an injured worker was remunerated under an award and the calculation was to be made of the weekly payment of compensation under s40(1) on the basis of the average weekly amount that the worker was able to earn in some suitable employment the award rate, disregarding amounts described in s42(6), would usually be the weekly amount which the worker would probably have been earning but for the injury under s40(1)(a). As Burke CCJ said, it is easier to accept that in determining what the worker was able to earn under s40(1)(b) the current weekly wage rate is no more than a datum. However to the extent that the current weekly wage rate was to be taken into account pursuant to s40(2)(a), overtime and other payments to which s42(6) referred were to be disregarded. Thus the Court was comparing like with like. Judge Maguire was right to use the award rate disregarding overtime as the current weekly wage rate for the pre-injury employment and hence the weekly amount the worker would probably have been earning but for the injury and right to review Commissioner Cross' award and to substitute the award he did. ORDERS I propose the following orders: 1. Appeal allowed. 2. Set aside Judge Maguire's order that the respondent to the review pay the costs of the applicant. 6 UNREPORTED JUDGMENTS 3. Confirm Judge Maguire's order reviewing the Commissioner's award by substituting in paral thereof an award of $173 as adjusted in accordance with the statute from time to time provided that the weekly amount does not exceed $400. 4. The appellant to pay one-half of the respondent's costs of the appeal. 1. Appeal allowed; 2. Set aside Judge Maguire's order that the respondent to the review to pay the costs of the applicant; 3. Confirm Judge Maguire's order reviewing the Commissioner's award by 10 substituting in paral thereof an award of $173 as adjusted in accordance with the Statute from time to time provided that the weekly amount does not exceed $400; 4. The appellant to pay one-half of the respondent's costs of the appeal. 15 COUNSEL: Appellant: JL Sharpe Respondent: CRR Hoeben 20 SOLICITORS: Appellant: Taylor and Scott Respondent: AR Connolly and Co