Michaelis Hallenstein & Company Pty Ltd v Lewis [1944] HCA 3; (1944) 68 CLR 613 (10 March 1944)

Michaelis, Hallenstein & Company Proprietary Limited Respondent, Appellant; and Lewis Applicant, Respondent.

Appeal from the Full Court of the Supreme Court of Victoria from an order made upon a case stated by the Workers Compensation Board under the Workers' Compensation Act 1937 Vict., s. 9. The Court answered the questions submitted in the case in favour of Richard John Lewis, the respondent to this appeal, by stating that he was entitled to have an award of the Workers Compensation Board made in his favour, and that the Board had power to make either an award of a lump sum, or a declaratory award, as it should think proper on the facts. The employer of the worker appeals to this Court.

It is stated in the case that Lewis was employed by the appellant company at a wage of £5 1s. a week. He suffered personal injury by an accident arising out of and in the course of his employment and the company became liable to pay him compensation under the Workers' Compensation Acts Vict., s. 5. By reason of the accident he was totally incapacitated for 52 weeks and 3 days, and during that period he received weekly payments from the appellant company in performance of their obligations under the Act. He then returned to work. Owing to scarcity of labour due to war conditions, and to an increase made in rates of payment, he thereafter received a wage of £6 1s. 6d. per week—that is, a higher wage than he received before the happening of the accident. As long as he received such a wage, the employers were under no liability to make any payment to him, although it was found by the Board that he had suffered a permanent incapacity, about fifty per cent, and that, when the special conditions which at present enabled him to earn high wages ceased, he would be unable to find employment in his ordinary vocation, and also would be unable to work as a labourer, or to find employment as a labourer.

In these circumstances the employer made an agreement with the worker under which the worker agreed to accept £125 in full satisfaction of all compensation payable to him by the company. The Workers Compensation Board refused to accept the agreement (Workers' Compensation Act 1937, s. 10).

The worker then made an application to the Board wherein he claimed such lump sum as was just and reasonable in all the circumstances of the case. This application has been treated by all concerned as an application made under the Second Schedule, par. 16, of the Workers' Compensation Act 1928. That paragraph is in the following terms:—

The employer contended before the Board that the applicant was not subject to any incapacity, as he could earn full wages; that the employer was accordingly under no liability to make and was not making any weekly payments at the time when the application was made; and that, therefore, there was no liability for weekly payments which could be redeemed under par. 16. The employer conceded that the worker was entitled to a declaratory award which would protect the worker's rights if circumstances should so change that the employer again became bound to make weekly payments (King v. Port of London Authority[1]). A further argument that the agreement which the Board had refused to accept barred the worker's claim was not relied upon in this Court.

In its original form par. 16 referred only to redemption by or on behalf of the employer, but the Workers' Compensation Act 1936, s. 13 (h), enabled the worker also to apply for "redemption." In England it has been held that under a substantially identical provision (so far as the employer is concerned) the employer has a right to redeem (Elliott Ltd. v. Hobbs[2]). Similar reasoning leads to the conclusion that under the Victorian legislation the worker has also a right to redeem when the conditions of the clause are satisfied.

The clause becomes applicable when "any weekly payment has been continued for not less than six months." The weekly payment referred to is a payment in discharge of a liability under the Act. The words used are "any weekly payment has been continued." They are not "where weekly payments have been made." It is settled that the clause can apply only where a weekly payment at a constant rate has been continued for not less than six months (Davis v. Cambrian Wagon Works Ltd.[3]). The conception underlying the provision is that when regular payments have continued for as long as six months the worker shall be entitled, on his side, to obtain full compensation under the Act by the payment of a lump sum, and the employer, on his side, to be fully discharged from liability under the Act. This consequence is involved in the meaning of the word "redeem."

It was argued for the appellant that par. 16 applied only where a weekly payment had been continued for six months immediately before and up to the time of the application for redemption. The words of the paragraph do not support this contention. If a constant weekly payment has been made for any period of six months the condition prescribed by the initial words of the paragraph is satisfied.

The liability of the employer to make weekly payments under the Act is a liability which depends upon the continued incapacity for work of the worker. The provisions in the Second Schedule of the Act, clause 1 (b), show that weekly payments are required to be made only "during the incapacity," and incapacity means incapacity to earn full wages (Ball v. William Hunt & Sons Ltd.[4]; George Gibson & Co. v. Wishart[5]; Ocean Coal Co. Ltd. v. Davies[6]).

It is argued for the appellant that there is no liability under the Act which is capable of redemption if, as in the present case, there is no incapacity of the worker, so that the employer is not, at the time when the application for redemption is made, making any weekly payments. It is urged that the clause applies only where there is what is called a present liability, and that what could be called the risk of a liability arising in the future owing to change of circumstances is not a liability which can be redeemed under par. 16.

That which may be redeemed is described as "the liability therefor." The word "therefor" refers back to the words "where any weekly payment has been continued for not less than six months." A further argument for the appellant is that that which can be redeemed is a liability which is measured and ascertained by a weekly payment which has been made for six months.

The liability to be redeemed cannot be a liability in respect of weekly payments which have already been made. Those payments have discharged past liability. The words must refer to liability to make weekly payments in futuro. In all cases where a lump sum has not already been awarded under the Act the liability under the Act which can be redeemed is necessarily a liability to make payments in the future. It is true that actual payment is obligatory only during incapacity, but there is liability under the Act even though, for the time being, no weekly sums are payable to the worker: Edward Curran & Co. Ltd. v. Kays[7], where Lord Hanworth M.R. said: "In Wolseley Motors Ltd. v. Sharp5(1925) 18 B.W.C.C. 15. I said that the redemption could proceed if there was a liability for compensation, although that liability was cloaked by the payment of wages." The Master of the Rolls, after referring to another case, continued: "The effect ... is that there can be an application for redemption, even though at the moment a weekly payment in the true sense of the words is not being made but there is only a subsisting liability to make them".

Par. 15 of the Second Schedule provides that any weekly payment may be reviewed at the request of the employer or of the worker. It has been argued that where no weekly payment was actually being made at the time when an application for review was set on foot, there could be no review, but this contention was rejected in Vickers-Armstrongs Ltd. v. Regan[9]. In that case a declaration of liability of the employer had been made in the form settled in King v. Port of London Authority[10]. No weekly payment was being made, but it was nevertheless held that there could be a review of a weekly payment under par. 15, and that the amount of a weekly payment could be settled by the Board under that provision. If a strictly non-existent weekly payment can be "reviewed" under par. 15, it is not difficult to reach the conclusion that what is conceded to be at least a potential liability for weekly payments can be redeemed under par. 16.

In my opinion the right to redeem created by par. 16 of the Second Schedule does not depend upon the circumstance that a weekly payment is being made at the time when the application is made. It arises whenever a constant weekly payment has been made for not less than six months. There can then be an application by either party for a redemption of future liability. In the English Workmen's Compensation Act 1925, s. 13, liability for weekly payments in the case of permanent incapacity may be redeemed by the payment of a lump sum which is sufficient to purchase an annuity for the workman equal to seventy-five per cent of the annual value of the weekly payment. Where this provision applies, that which is redeemed must be a weekly sum which is being paid as representing full compensation and seventy-five per cent of the annual value of that sum is automatically taken for the purposes of redemption (Clawley v. Carlton Main Colliery Co. Ltd.[11]). There is no such special provision in the Victorian Act, and the line of cases in which it has been held in England that there cannot be redemption by the employer under this provision unless there is a weekly payment which he seeks to redeem which represents his full liability under the Act have no application in the case of the Victorian Act. In other cases than those of permanent incapacity s. 13 of the English Act provides that the amount of any lump sum to be paid by way of redemption of weekly payments may be settled by arbitration under the Act. In determining such a lump sum the tribunal will, in cases other than those of permanent incapacity in England, and in all cases in Victoria, take into account all the matters which affect the liability of the employer, and correspondingly the rights of the worker, under the Act. In reaching its determination the Board will be merely "putting in another form the compensation which the Act has already given him" (the worker). The Board will therefore consider "the amount of the weekly payments, their probable duration, the probability of their being diminished or raised in the future, and the probable extent of such variation, if any" (Calico Printers' Association Ltd. v. Higham[12]).

At the present time in the present case no weekly payments are being made because, owing to special circumstances, the worker is earning more than he earned before the accident happened. But if those circumstances should change, so that, by reason of the incapacity resulting from the accident, the employer again becomes bound to make payments, the liability under the Act again results in the obligation to make weekly payments. It is this liability, with all its chances of change, which may be redeemed under par. 16.

It is settled by King v. Port of London Authority[13] that, even where an employer is under no present liability to make payments, a declaration of liability may be made in order to establish the rights of the worker, so that if, by reason of change of circumstances, he should become entitled to weekly payments, an award for such payments can be made against the employer.

In my opinion, therefore, the decision of the Supreme Court was right and should be affirmed. The form of the questions asked, however, has caused some difficulty, because they are not limited to questions of law. The Board has jurisdiction to deal with the application for redemption: it may, as it thinks proper, make an order for redemption or it may make a declaration of liability. In my opinion the questions should be answered accordingly.

The question of law which arises for our consideration from the facts stated in the special case is, in effect, whether the Workers Compensation Board is entitled to hear and determine the application for compensation made by the respondent. This application is based upon clause 16 of the Second Schedule to the Workers' Compensation Act 1928 Vict.. During the period when the respondent was totally incapacitated as a result of the accident suffered by him weekly payments were made to him by the appellant company by way of compensation for total disability (par. 11 of the special case). These payments continued for over twelve months. At the end of this period the respondent was taken back into service with the appellant on the same job, but with higher wages, as before the accident. An attempt was made by means of an agreement between the parties for a lump sum to determine once and for all the appellant's liability for compensation. This agreement was submitted to the Board for approval, but was rejected as inadequate. Thereupon the respondent made the application now in question. In par. 10 of the special case it is stated that: "If and when conditions in industry become similar to those which obtained therein before the said war-time conditions arose the applicant will, because of his incapacity to perform the work of a stuff-cutter be unable to find employment as a stuff-cutter, and he will then, because of disability, be unable to work as a labourer or find employment as a labourer."

The right to compensation is given by the Act, the object of which is to compensate for the loss of the workman's earning capacity. The right to redemption or commutation conferred by the Victorian Act in clause 16 of the Second Schedule on both employer and worker is based on the condition precedent that "where any weekly payment has been continued for not less than six months, the liability therefor may, on application by or on behalf of the employer or the worker, be redeemed." Counsel for the appellant contended that as, in the circumstances of the case, there was no present liability on the part of the appellant to make any weekly payment, no present right to redeem existed. The difficulty in the construction of this clause arises upon the words "liability therefor"—grammatically it may be said that they refer to the redemption of that particular weekly payment, but I would adopt the construction placed upon the phrase by Sankey L.J., as he then was, that it means that the liability under the Act may be redeemed (Edward Curran & Co. Ltd. v. Kays[14]).

Accordingly I think that the respondent is entitled to ask for a redemption on the basis of the full compensation under the Act to which he would be entitled (Pick v. Paling[15]). The form of order is a matter for the discretion of the Board and may be either an order for redemption or a declaratory or suspensory award (King v. Port of London Authority[16]; Chandler v. Smith[17]).

Appeal from the judgment of the Supreme Court of Victoria upon a case stated by the Workers Compensation Board pursuant to the provisions of the Workers' Compensation Act 1937 Vict., s. 9 (3).

The respondent was employed by the appellant and had suffered personal injury by accident arising out of and in the course of his employment. The appellant was, subject to the provisions of the Act, liable to pay compensation to the respondent in accordance with the Second Schedule to the Act (Workers' Compensation Act 1928 Vict., s. 5).

By that schedule the amount of compensation payable in case of total and partial incapacity is prescribed. And s. 7 in its amended form provides that subject to the Act where a worker's total or partial incapacity for work results from the injury the compensation payable shall in default of agreement be in the discretion of the Board either a weekly payment during the period of incapacity or such lump sum as is just and reasonable in all the circumstances of the case but not exceeding £800.

The appellant recognized its liability under the Act and paid to the respondent, who accepted the same, weekly payments of compensation as for total incapacity. The respondent would have lost his employment with the appellant owing to his incapacity, but because of war-time conditions the appellant re-employed him at a greater wage than he had received before the accident. An agreement was subsequently made between the appellant and the respondent whereby he agreed to accept a lump sum of £125 in addition to the sum of £131 15s. already paid to him from the date of the accident on 20th June 1940 to 27th June 1941 in full satisfaction of all claims and demands of whatsoever kind against the appellant whether under the Workers' Compensation Act 1928 or otherwise. But the Workers Compensation Board refused to accept this agreement on the ground that it was inadequate (Workers' Compensation Act 1937, s. 4; Rules under Workers' Compensation Act, rule 32). The respondent then made an application to the Workers Compensation Board wherein he claimed such lump sum as was just and reasonable in all the circumstances of the case. But this application, though it seems to follow the words of s. 7 above mentioned, was based, or has been treated by the parties on the argument before this Court as being based, upon the provisions of clause 16 of the Second Schedule to the Workers' Compensation Act 1928 as amended, which is as follows:—

"Lump sum in redemption of weekly payment." "Where any weekly payment has been continued for not less than six months, the liability therefor may, on application by or on behalf of the employer or the worker, be redeemed by the payment of a lump sum of such an amount as may in default of agreement accepted by the Board be settled by the Board, and such ... sum may be ordered by the Board to be invested or otherwise applied for the benefit of the person entitled thereto."

The authorities establish that this provision confers upon the employer and worker a right to redeem subject to certain conditions as to time and otherwise, and not a mere discretionary authority upon the Board (Kendall & Gent Ltd. v. Pennington[18]; Elliott Ltd. v. Hobbs[19]; Calico Printers' Association Ltd. v. Higham[20]; Moreland & Sons v. Eley[21]). But the party seeking redemption must in the ordinary course of legal procedure lead evidence to establish his right. It was suggested during argument that the right to redeem depends upon the full weekly payment having been continued up to the date of the application for redemption. But the words of the rule do not, I think, preclude an application for redemption "even though at the moment a weekly payment, in the true sense of the words, is not being made, but there is only a subsisting liability to make them," or even though the full weekly payment prescribed by the Act has not been continued for six months. There is a right to redeem if a weekly payment has been continued for not less than six months. And it is to be observed that the redemption is not of a weekly payment of known amount but of the liability for payment under the Act (Edward Curran & Co. Ltd. v. Kays[22]). Davis v. Cambrian Wagon Works Ltd.[23] is not in conflict with this view, because under the English Act there in question the employer was only entitled to redeem a weekly payment of a known amount payment of which had continued for not less than six months.

Now that which is to be redeemed under clause 16 is the liability for the weekly payment (the full equivalent of the compensation) payable under the Act (Clawley v. Carlton Main Colliery Co. Ltd.[24]). And to ascertain that compensation various provisions of the Act must be regarded, e.g., Second Schedule, clause 1 (b) (i.), (ii.) and (iv.), clause 3, and clause 15. Some doubt was expressed during argument whether the total liability of the employer in this case was £700 (Second Schedule, clause 1 (b) (iv.)) or £800 (Act, s. 7). But s. 7 appears to operate only in default of agreement.

The facts stated in the case disclose that the respondent suffered personal injury by accident arising out of and in the course of his employment with the appellant: that a weekly payment has been made to him pursuant to the provisions of the Act for not less than six months: that by reason of the accident his ability as a workman is reduced about fifty per cent. Prima facie, therefore, I should think that the respondent had established a case for consideration under clause 16 of the Second Schedule.

The case, however, states that prior to the accident the respondent's wage was £5 1s. per week, whereas owing to war-time conditions he can command, and was at the date of his application for redemption, and still is, being paid by the appellant, the sum of £6 1s. 6d. per week pursuant to the provisions of an award of the Commonwealth Court of Conciliation and Arbitration. And the argument for the appellant is that the respondent is only entitled to a weekly payment during incapacity and that incapacity for this purpose is incapacity to work or the loss or diminution of wage-earning capacity (Ball v. William Hunt & Sons Ltd.[25]).

It was conceded that a declaration of liability under clause 16 might be made, modelled on the form of order in King v. Port of London Authority[26]. But it is contended that a lump sum cannot be ordered by way of redemption under clause 16 unless there exists some present liability to make weekly payments or at all events some subsisting and not some suspended obligation to make such payments. The fallacy of the argument resides in the assumption that the redemption is of some existing weekly payments, whereas the redemption is of the full measure of compensation payable under the Act.

The result is that the Board has jurisdiction and authority to hear and determine the respondent's application for a lump sum in redemption of his right to weekly payments during incapacity under the Act. And I would so answer the case stated, for the questions stated have not been carefully drawn and involve questions of fact which are not for the determination of the courts but of the Board.

Perhaps I may add in this case that the facts require careful consideration on the part of the Board before the payment of a lump sum is ordered. Apparently from the date of the accident to 27th June 1941 a sum of £131 15s. was paid by the appellant. Since that date other sums have been paid to the respondent and will apparently continue during the war, which is of uncertain duration.

A couple of years at six pounds per week would, with the payments already made, approach, if not exceed, the limits of compensation payable to the respondent. The ascertainment of the lump sum demands on the part of the Board serious consideration of many variable factors and it should not be assessed by the exercise of a kindly and generous discretion at the expense of the employer or its insurer.

The order of the Supreme Court should be varied in the manner already suggested, but in substance the appeal fails.

Appeal dismissed with costs. Order of Supreme Court varied by substituting the following for the answers to the questions—"The Board has jurisdiction to hear and determine the application for payment of a lump sum in redemption of the respondent's right to weekly payments under the Workers' Compensation Acts."

[1] (1920) A.C. 1.

[2] (1929) 22 B.W.C.C. 509.

[3] (1941) 1 K.B. 444.

[4] (1912) A.C. 496.

[5] (1915) A.C. 18.

[6] (1927) A.C. 271.

[7] (1928) 2 K.B., at p. 479.

[8] (1925) 18 B.W.C.C. 15.

[9] (1933) 1 K.B. 232.

[10] (1920) A.C. 1.

[11] (1918) A.C. 744.

[12] (1912) 1 K.B., at p. 103.

[13] (1920) A.C. 1.

[14] (1928) 2 K.B., at p. 481.

[15] (1936) 2 All E.R., at p. 1294.

[16] (1920) A.C. 1.

[17] (1899) 2 Q.B. 506.

[18] (1912) 106 L.T. 817; 5 B.W.C.C. 335.

[19] (1929) 22 B.W.C.C. 509.

[20] (1912) 1 K.B. 93.

[21] (1916) 1 K.B. 85.

[22] (1928) 2 K.B. 469, at pp. 471, 479, 482.

[23] (1941) 1 K.B. 444.

[24] (1918) A.C. 744.

[25] (1912) A.C. 496.

[26] (1920) A.C. 1.

High Court of Australia

Michaelis Hallenstein & Company Pty Ltd v Lewis [1944] HCA 3; (1944) 68 CLR 613 (10 March 1944)

HIGH COURT OF AUSTRALIA