WARILLA TIMBER AND HARDWARE PTY LTD v NEWTON [1995] NSWCA 493

WARILLA TIMBER AND HARDWARE PTY LTD v NEWTON

SUPREME COURT OF NEW SOUTH WALES COURT OF APPEAL

KIRBY ACJ, MAHONEY AP and CLARKE JA 11 July 1995, 11 July 1995

[1995] NSWCA 493

WORKERS COMPENSATION — death benefits calculation of mother's entitlement — net provision likely duration — held: Confined to financial injury — dependence for support — discretion of primary judge — non-mechanistic approach — award reduced.

PRACTICE AND PROCEDURE — Compensation Court — lump sum for death benefits — duty to provide reasoned statement of how sum is arrived at.

WORDS AND PHRASES — "injury" — "for support" — "reasonable and proportionate"

WORKERS' COMPENSATION — death claim — benefits to dependent mother — primary judge (Maguire CCJ) awards $95,000 — employer appeals on ground that such sum is excessive — held: (1) The "injury" to the dependants in s26(b) of the Workers Compensation Act 1987 is confined to financial injury and does not include provision for a solatium for grief etc. Young v Londonderry Colliery Ltd (1924) 27 BWCC 215 referred to; (2) The change from "dependent on earnings" to "dependent for support" in s26 of the Act incorporated wider concepts of dependence, such as for non-paid services rendered by the deceased worker to the dependants, for which allowance should be made; (3) The provision of a capital sum which would produce the net amount paid by the deceased worker to the dependants, without reduction of capital would not be "reasonable and proportionate to the injury"; (4) The calculation of the sum payable did not involve the mechanistic application of actuarial tables but could take into account facts particular to the case in hand; (5) An appellate court would disturb the amount provided by the primary judge only for appealable error; (6) But the sum of $95,000 awarded was excessive and the sum of $60,000 should be

PRACTICE AND PROCEDURE — workers' compensation — Compensation Court — award of death benefits — provision of lump sum — observations by Clarke JA on the need to provide a reasoned account of the way in which the lump sum is arrived at.

WORDS AND PHRASES — "dependent for support" — "injury" — "reasonable and proportionate"

substituted taking into account the financial provision by the deceased worker to the mother, her probably life expectancy and probable duration of the continuation of such financial support.

Workers' Compensation Act 1926, s8(2) Workers Compensation Act 1987, s26(c)

ORDERS

1. Appeal allowed;

2. Set aside the award of the Compensation Court insofar as it provided for a sum under s26 in favour of the applicant before that Court;

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3. In lieu of the sum there provided, substitute the sum of $60,000;

4. The respondent to pay the appellant's costs of the appeal;

5. The respondent to have, in respect of such costs, a certificate under the Suitors' Fund Act 1951.

Kirby ACJ I will ask Mahoney AP to give the first judgment.

Mahoney AP This is an appeal from a decision of Maguire J in the Compensation Court on 18 November 1994. The facts are summarised in his Honour's judgment and it is not necessary for me to repeat them.

The essential facts are as follows. The applicant, the mother of the deceased, was born on 20 October 1926. The deceased, her son Phillip, was born on 14 August 1962. The applicant and her former husband were divorced and he has not contributed to her support at any relevant time.

The son Phillip was employed by the appellant at the time of his death and he died in the course of his employment on 3 February 1994. At the time his mother, Mrs Newton, was renting a house and paying the sum of $123 a fortnight for rent. She was in receipt of a pension of $323 a fortnight. The son was paying her, as the evidence disclosed. $90 a week which she described as "board". He was paid his wages every Thursday and later in the day handed $90 to his mother who, on the following day "would do the substantial shopping for both of them'. His Honour found that in addition to this the deceased also gave his mother other moneys and he gave an instance or instances in his judgment. Moneys were given to her, for example, to purchase clothes. The son also made contributions of a relevant kind by way of looking after gardens and lawns and the maintenance of the fence around the house.

This was the state of the relationship between them in the relevant sense at the time of his death. His Honour assessed the total benefit that the applicant, the mother, received from the son at the time of his death as $90 per week approximately. He arrived at this in the manner to which he referred in his judgment. He said that he felt "it reasonable to infer that $45 a week from his regular contributions went to victualling the applicant herself". In addition to the other moneys to which he had regard he took into account the benefit of the work which the son had done in relation to the house and its surrounds and he arrived at an amount of $90 per week.

Upon that basis his Honour calculated the sum to be awarded to the mother pursuant to s26 of the Workers Compensation Act 1987 as 95,000. It is against that award that this appeal is brought.

Mr Deakin QC for the appellant has put his submissions in various ways. I shall deal with the substantial submissions that have been made. First, it is proper to note that the mother received superannuation in the sum of $46,000 upon the son's death. Mr Deakin has indicated that no complaint is taken in relation to that sum and, for the purposes of this appeal, having regard to that concession, that amount may be put aside.

Mr Deakin QC then submitted that his Honour had not properly calculated the benefit of $90 a week, to which I have referred. He submitted that there was no evidence from which the judge could infer, for example, that $45 per week went towards the victualling as he described it, of the applicant herself and that $45 per week was therefore used to support the needs as to food of the son. His submissions suggested or assumed there was no basis for calculating the value of his services around about the home and the evidence as to the amounts paid to the mother otherwise was such that not sufficient weight could be placed upon them for the purpose of arriving at the sum of $90 per week.

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If the calculation of benefits and of loss is approached conceptually, I think there is force in these submissions of Mr Deakin. However, the Court is familiar with the approach which conventionally has been adopted in relation to calculations of this kind in other related areas, for example, under the Compensation to Relatives Act 1897. On several occasions it has been pointed out that, as I would describe it, extrapolations can be made from the facts as they have been provided in relation to the dependence of applicants upon a deceased person. In relation to the Compensation to Relatives Act, for example, the High Court has held on more than one occasion that it is wrong to hold parties to mere mathematical calculations and that extrapolations may be made. In making such extrapolations and in making prognoses as to the future, a judgment is to be made from the deceased's circumstances, character, propensities and performance to the date of death. Such may vary considerably, but an examination of what was held open on the facts of such cases as Government Insurance Office of New South Wales v Cox (1976) 50 ALJR 559 shows the approach which is open to a trial judge.

In the present case one must have regard to the state of the evidence and to the nature of the evidence which it would be possible to produce. It may be that estimates of the kind given in evidence were the best evidence that could be given of what was spent on each of them. If, for example, a statement had been made by the applicant as to the precise amount of money spent for food for herself and for her late son for each and every week, or precise shopping bills had been presented, it might have been thought that the applicant was attempting to give a degree of certainty to the facts greater than common sense or experience would accept. I think one has to take into account the nature of the evidence which could be called in this regard and that essentially estimates would have to be made. I do not think that the estimates which were made in the present case go beyond what is acceptable for present purposes.

In the circumstances, therefore, I think it is proper for the Court to act upon the basis adopted by the judge, namely, that the benefit which the applicant was receiving from the deceased at the time of his death was "to the tune of" $90 per week.

It then becomes necessary to consider how the judge arrived at the figure of $95,000. Mr Deakin has produced to the Court calculations made upon the ordinary actuarial bases (as they are frequently misdescribed) of calculations used by the courts. The mother's life expectancy at the date of the death of the deceased was approximately seventeen years. That approach has been adopted for the purposes of testing the calculation made in the present case.

The tables provided for this purpose work alternatively on a three per cent and upon a five per cent basis. The three per cent tables produced by Mr Deakin indicate that $100 per week taken over a period of seventeen years would produce a sum of $69,730. It is said that $90 per week would produce $62,757. Taken on a five per cent basis the amount to be produced by $90 per week would come to the sum of $54,250.

The basis upon which the calculation of the sum to be awarded in applications of this kind has been the subject of discussion in argument. The provisions of s26 of the Workers Compensation Act 1987, as far as they are relevant, are as follows:

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"26. If death results from an injury and the worker does not leave any dependants wholly dependent upon the worker for support, but leaves dependants in part so dependent, the compensation payable by the employer under this Act shall be:

(c) in default of agreement as to the amount to be paid or in default of approval by the Compensation Court for payment of an agreed amount under para(b) - such amount (not exceeding the amount provided by para(a)) as is determined by the Compensation Court to be reasonable and proportionate to the injury to those dependants."

The operative words therefore for the purposes of the present case are: "as is determined by the Compensation Court to be reasonable and proportionate to the injury to those dependants".

It is not suggested that this Court cannot make its assessment notwithstanding that under the Act the determination is to be made by "the Compensation Court".

It is to be observed that the words of s26 relevant to a case such as the present are almost identical with those in s8(2) of the Workers Compensation Act 1926. There are slight differences but, in my opinion, those differences do not suggest that the legislature, when it repeated the relevant words which I have set out, intended a different interpretation to be given to them to that which was given to those words in the 1926 Act.

The basis of the approach to be adopted in this regard has been discussed in a number of cases. Mr Deakin QC has referred, for example to Simpson v Vukicevic (1962) 80 NSW WN 387. The relevant passage appears in the judgment of Sugerman J, at 391. If I may summarise the matter somewhat inaccurately, the approach to be adopted is similar although not identical in precise detail to that adopted under the Compensation to Relatives Act. The amount to be paid and the basis of calculation is referred to in the English cases, to which reference is made by Sugerman J. The basis is said to be compensation for the pecuniary loss sustained by reason of the loss or cessation of the workman's power of earning.

I think that is the approach which should be adopted in the present case. Nothing has been said in relation to the legislation which suggests that the legislature intended that there should be, for example, an allowance for the real grief which the applicant, the mother, must have suffered or losses of that kind. The compensation provisions appear to be essentially similar to those which have prevailed for many years in England and Australia.

I come now to the background facts to see what justification there can be for the award of $95,000. The learned judge has not in this judgment indicated the steps by which he arrived at the sum of $95,000. With respect to his Honour the basis upon which that amount was calculated does not appear from his judgment. Therefore, subject to one matter to which I shall refer, in the circumstances it is not apparent what the basis of the judgment was. It is therefore proper for this Court to speculate, to form the opinion: see Simpson v Vukicevic at 391; that it was "impossible to award the large amount which has been granted other than by reference to an incorrect principle".

Mr Deakin QC, with some ingenuity, suggested a method by which the sum of $95,000 could be accounted for, although of course not justified. He suggested that the learned judge, having formed the opinion that the applicant was dependent upon her son for thirty-seven per cent of her support, then took

URJ WARILLA TIMBER AND HARDWARE PTY LTD v NEWTON (Kirby ACJ) 5

approximately thirty-seven per cent of the maximum sum which could be awarded under s25 of the Workers' Compensation Act and, rounding the figure, arrived at a sum of $95,000.

He has submitted, and I agree, that that method of arriving at ie sum to be awarded as "reasonable and proportionate" to be awarded to the applicant is not an appropriate method. The provision of s25(1)(a) of a maximum amount is a provision by way of a cap. It is not a provision which operates as the basis for the calculation of a proportionate sum, such as is allowed under s66 and s67. It would not in my opinion be proper to adopt such a basis of approach as Mr Deakin QC has suggested. In dealing with the suggestion, I do not conclude that the judge necessarily adopted that approach but, if and in so far as he did, I do not think it is the correct approach.

The Court asked Mr Kevin Ryan for the respondent applicant what other bases there could be for the calculation of $95,000. Mr Ryan was, I think, not able to adduce any wholly satisfactory basis for it. He suggested, for example, that it was proper to take into account the elements of dependency and the like to which the Act refers. But, having regard to what has been said, I do not think there could be any other explanation of the $95,000 adopted by the judge other than that the judge employed some principle which does not appear in terms from the judgment and which, in the light of the proper principles, is not acceptable.

On this basis, in my opinion, the appeal should be upheld and the award of $95,000 be set aside.

It would be unfortunate if a matter such as this had to be returned to the Compensation Court for reassessment. Both parties are agreeable to the matter being assessed by this Court. In the circumstances, I think it is appropriate that an assessment be made by this Court.

In arriving at an appropriate figure, it is proper to take into account the degree of dependency and, as Mr Deakin QC has in his submissions emphasised, the period of dependency involved. In the present case this is a period of seventeen years. I think the Court should adopt the figure of $90 per week adopted by the learned judge. However, it would be wrong merely to do a mathematical present value calculation of $90 per week over the period of seventeen years. The figure must be reduced to a present day basis and allowance must be made for contingencies. In this case the contingencies are not great. I am conscious of the possibility that the son may have married. If he married it may be that his contribution to his mother would have been less. One does not know. That is a matter to be treated as a contingency. It may be he would have continued living with his mother, even if he had married. It may be he would not have married but would have continued with her until the end of her life.

There does not appear to have been any reason to suggest that the mother would not have lived to the end of her expectation of life, namely, seventeen years.

Having regard to these contingencies but I think not discounting the figure involved too greatly, I would be of the opinion that a proper sum to be awarded would be $60.000. I would therefore propose that the appeal be allowed, that the award made by the judge of $95,000 be set aside and for that sum there be substituted the sum of $60,000 as from the date of the judgment. It would appear to follow that the appellant should be entitled to the costs of the appeal and the respondent should have, if entitled, a certificate under the Suitors Fund Act.

Kirby ACJ Only four matters cause me to pause before agreeing, as I do, with the orders of the Court as proposed by Mahoney AP.

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The first was whether the expression "injury" in s26(b) of the Act, being the criterion for the award of compensation in a case such as this, embraces concepts larger than the financial injury to the dependants. The word itself would be large enough to embrace such concepts. There would have been no doubt that the "injury" to Mrs Newton, taken in the broad sense, caused by the death of her son would have been much more substantial than the financial loss which she suffered. It would have included the grief and pain occasioned by her son Phillip's death. However, the word "injury" in the section cannot be read in isolation from its history. The early history is set out in Young v Londonderry Colliery Ltd (1924) 17 BWCC 215. It was affected by the view which the common law had long taken as to the compensability of claims arising out of the death of a person. The word in the local workers' compensation law appears to have been derived from the Workman's Compensation Act 1906 (GB), Schedule 1(A)(2). For most of the period of this century it has been taken to be confined to financial injury. It was so taken when this matter was litigated in the Compensation Court.

No evidence was tendered of any other form of "injury". Accordingly, the basically financial purposes of the Act being remembered, it seems appropriate to continue that construction of the section and to confine the compensation which Mrs Newton may recover to the financial injury which she suffered consequent upon the death of her son and the loss of the financial dependence which was thereby occasioned.

Secondly, it was put for Mrs Newton that the change in s26 of the Act, when the 1987 Act was enacted, introduced a new concept and a wider one. Under the 1926 Act the provision for compensation of persons in part dependent upon workers killed in compensible circumstances entitled them to recover as s8(2) stated:

"8. (2) Where death results from the injury and the worker does not leave any dependants wholly dependent upon him for support, but leaves dependants in part so dependent, the compensation payable by the employer under this Act shall be:

(c) in default of agreement as to the amount to be paid or in default of approval by the court for payment of an agreed amount under para(b) - such amount not exceeding the amount provided by para(a), as is determined by the court to be reasonable and proportionate to the injury to those dependants.

The present section, set out in the reasons of Mahoney AP, shows a shift in the statutory language. It is from partial dependence upon the worker's earnings to partial dependency upon the "worker for support". In that context the present statute, by s26, provides that the Compensation Court may in such cases award compensation "as reasonable and proportionate to the injury of those dependants".

It was pointed out that this wider concept of "support" was now the criterion and not the narrower concept of "earnings". It was suggested that this was a deliberate change in the reference to dependence upon earnings which had stood for the sixty year life of the 1926 Act. Certainly, the change appears to be deliberate. Arguably, it incorporates a wider criterion of "support".

I would therefore be content, for the moment, to assume that that wider criterion is to be taken into account in calculating the reasonable and proportionate injury to the dependants. But so did Maguire CCJ when he arrived at the net loss of $90 per week. As his Honour's reasons show that sum incorporated a provision for the amounts which were to be attributed to the

URJ WARILLA TIMBER AND HARDWARE PTY LTD v NEWTON (Kirby ACJ) 7

worker's activities around the house. His death deprived his mother of that form of "support" although it was not part of his earnings with the appellant.

Therefore, it can be assumed that the argument is good. But it has no consequence for the amount which is reasonable and proportionate in this case such as would require a result different from that which Mahoney AP has proposed.

Thirdly, in a notice of contention filed today to support the award of Maguire CCJ on grounds different from those expressed in his Honour's reasons, it has been argued that the Court could sustain the award of $95,000 as reasonable and proportionate if a proper approach were to provide a capital sum to generate the loss of income provided to the respondent following the death of the deceased worker. I take this to mean a capital sum which, itself not diminishing, would provide an income of the order of $90 per week. That might be so. But such a sum would leave the respondent mother with an undisturbed capital sum at the end of her life. That would be to provide double compensation both of income and capital. I cannot accept that this would be an amount "reasonable and proportionate" to her "injury" as the statute provides for these purposes. It could be a capital windfall in excess of the actual financial injury predicated.

The fourth point relates to the second contention contained in the respondent's notice of contention. This referred to the exercise of discretion by the primary judge.

Iam very conscious of the broad criteria which are laid down by the Act. I am also conscious of the fact that this Court should not disturb an award, even if it may seem to be high, unless it is shown to be appealably wrong. Only then is this Court entitled to disturb it. In that regard, two factual points were argued.

First, it was said that the worker was thirty-one years of age at the time of his death. Although he had enjoyed some romantic attachments, he had resisted the blandishments of romantic assertions which may have led on to a relationship of dependency, married or otherwise which would have resulted in a withdrawal of all, or some, of his financial support for his mother. This factor must be taken into account in considering whether the amount allowed by Maguire CCJ is appealably excessive.

Secondly, it was pointed out that the mother might have lived beyond the seventeen years which the actuarial tables provide as the norm for an Australian woman of her age. As Mahoney AP has said, it would be quite wrong to approach the matter on a mechanistic basis as though the award sum could be determined by a mathematical formula. Mrs Newton gave evidence that her mother was still alive at the age of ninety-two. Some people are blessed with genetic qualities which provide for a longer than average life expectancy. It would have been open to the primary judge to have concluded that Mrs Newton was one such person.

These are considerations which are to be taken into account in testing, as we must, the unelaborated provision by Maguire CCJ. But even when full allowance is made for such considerations, I have regrettably come to the view that the amount of $95,000 allowed is excessive for the limited financial purposes provided by the Act.

I believe that the considerations last mentioned are reasons why the amount provided should be higher than secured by a pure mathematical computation: However, a limit is reached. In my opinion that limit is $60,000.

I therefore agree with the orders which Mahoney AP has proposed.

8 UNREPORTED JUDGMENTS

Clarke JA I agree with the orders proposed by Mahoney AP and with the general approach evident in his reasons. The main difficulty that has faced the Court in this case is that the trial judge awarded a lump sum without explaining how it was he arrived at that figure. In the context that the sum was so large as to appear completely indefensible the Court was bound to reach the conclusion that it was an erroneous determination of the sum which should be awarded in accordance with s26(c) of the Workers Compensation Act 1987.

I mention this matter to emphasise that it is in my view no longer acceptable that trial judges who are required to award compensation under such sections as s26 should award a sum which to all intents and purposes is simply plucked out of the air.

The judicial obligation to give appropriate reasons is well established and this case stands as an unfortunate example of the problems which arise when judges fail clearly to expose their reasoning process. I agree with the orders proposed by Mahoney AP.

Kirby ACJ: The orders of the Court are that the appeal is allowed. The award of the Compensation Court, insofar as it provides for a sum under s26 in favour of the applicant before the Compensation Court, is set aside. In lieu of the sum there provided there is substituted, by order of this Court, the sum of $60,000. The respondent is to pay the appellant's costs of the appeal. The respondent is to have, in respect of such costs, a certificate under the Suitors' Fund Act 1951.

1. Appeal allowed;

2. Set aside the award of the Compensation Court insofar as it provided for a sum under s26 in favour of the applicant before that Court;

3. In lieu of the sum there provided, substitute the sum of $60,000;

4. The respondent to pay the appellant's costs of the appeal;

5. The respondent to have, in respect of such costs, a certificate under the Suitors' Fund Act 1951.

COUNSEL:

Appellant: P Deakin QC/GJ Maddocks

Respondent: K Ryan

SOLICITORS:

Appellant: Edwards Johnstone and Sullivan Solicitors

Respondent: DM Roberts