Secretary, Department of Communities and Justice v Stewart

1. [1]

   LEEMING JA: “Pre-injury average weekly earnings” has long been a central element of the regime for workers compensation. Substantially the same notion may be seen in the significance of “average weekly earnings during the previous twelve months” in s 9(1)(a) of the Workers’ Compensation Act 1926 (NSW) and in earlier regimes such as cl 2(d) of para 1 of the Second Schedule of the Workmen’s Compensation Act 1910 (NSW). But there are many reasons why pre-injury average weekly earnings may be an inapt basis to calculate statutory payments: the worker may have been unemployed, or have changed jobs, or been promoted, or been on leave for some of the period throughout which the average is calculated. Hence for more than a century there have been mechanisms authorising adjustments to the calculation of the average. The current regime is found in regs 8A-8EA of the Workers Compensation Regulation 2016. The issue in this appeal turns on reg 8E, a precondition of which is whether the injured worker “took a period of unpaid leave” in the period over which the average would be taken. Did reg 8E apply to the calculation of “pre-injury average weekly earnings” in circumstances where for three months prior to the date of the respondent’s second injury, Mr Stewart was incapacitated and receiving weekly payments under the Act by reason of his first injury?

2. [2]

   The entirety of this litigation has been conducted on the basis that Mr Stewart’s physical and psychiatric injuries occurred at different times, and it is this which gives rise to the issue of construction. It was not suggested that the regime made relevant provision for the calculation of workers compensation where there were multiple injuries occurring at different times. Thus the difficulty which arises is how the regime is to be understood in light of a circumstance – namely, multiple injuries at different times – which it does not appear to address.

3. [3]

   Following receipt of Stern JA’s reasons in draft, I was persuaded by the conclusion she had reached, but following receipt of Griffiths AJA’s reasons in draft, I found it necessary to review the entirety of the appeal. I am most grateful to both of their Honours, because their divergent approaches have assisted me to identify which of the mass of arguments assembled in favour of each competing construction carry the greatest weight.

4. [4]

   Regulations 8B-8E of the Workers Compensation Regulation 2016 (NSW) are reproduced by Stern JA, as is the uncontroversial background. All those regulations operate by way of “adjustment” of the “relevant earning period” for the purposes of the calculation of “pre-injury average weekly earnings”, pursuant to Sch 3 cl 2(3) of the Act. There is no dispute that the regulation-making power in that subclause extended to the circumstance where, for the three months prior to the date of a second injury, the worker had been in receipt of workers compensation payments which are to be disregarded in accordance with cl 6(2)(c). The regulation-making power authorises the “adjustment” of the relevant earning period including, relevantly, “to take into account any period of unpaid leave or other change in earnings circumstances in the employment”.

5. [5]

   There are three easily overlooked aspects of the regulation-making power. The first is the word “any”. It applies distributively, so that the regulations may make adjustment whenever there is a “period of unpaid leave”, and also whenever there is a “change in earnings circumstances” which is not a period of unpaid leave. In this context, the evident intent is for there to be power by regulation to adjust the denominator of the fraction which determines “pre-injury average weekly earnings” so as produce something resembling the period unaffected by the change in earnings over some of the previous 52 weeks.

6. [6]

   The Secretary candidly conceded that little could be drawn from the verb “took” in reg 8E(1)(b). I agree. An employee may unilaterally take steps which result in his or her being paid no earnings, but this may also occur consensually with the employer, or unilaterally by the employer. “Took” is capable of applying in all those situations. The clause should not be construed so as to turn upon such considerations.

7. [7]

   The Secretary insisted, however, that “unpaid leave” in the regulation must bear the same meaning as in Sch 3 cl 2(3). The submission accords with the ordinary approach that the regulation be read harmoniously with the regulation-making power. This submission exposes the second and third easily overlooked aspects of the regulation-making power. Although the regulation-making power was expressed broadly, by reference to “unpaid leave or other change in earnings circumstances” – words which were broad enough to cover a very wide range of situations – the exercise of that power in reg 8E was confined to “unpaid leave” and therefore should prima facie not be regarded as extending to other circumstances which fell outside the scope of “unpaid leave”. That is to say, by confining its operation to “unpaid leave”, reg 8E falls short of taking up the full scope of the regulation-making power. What is more, the fact that the regulation-making power is expressed disjunctively in terms of (any) unpaid leave or (any) other change in earnings circumstances means that there is no occasion to stretch the meaning of “unpaid leave” to extend to every manner of circumstance which may affect a worker’s earnings in the preceding twelve months. That is because if “unpaid leave” is construed in its ordinary sense, then there will still be no want of regulation-making power, because “other change in earnings circumstances” is broad enough to apply.

8. [8]

   Contrary to the Secretary’s submission, I see little difficulty in “unpaid” leave extending to circumstances where by reason of the statutory entitlements under the Act, a worker is not in attendance at the workplace and is receiving workers compensation payments which, for the purposes of the regulation, must not be treated as income or earnings. The regime requires one to disregard the weekly payments of workers compensation which the worker in fact receives. In that counterfactual world, it is only a small step from the deemed absence of earnings or income to conclude that the worker throughout that period is “unpaid”.

9. [9]

   But is a worker who is wholly incapacitated and in receipt of weekly payments under the Act on “leave” for the purposes of reg 8E? That question is not answered by a priori assumptions, such as the proposition that a worker can never be on “leave” when absent through compensable injury, as was held by a majority of a Full Court of the Supreme Court of South Australia in Flinders Ports Pty Ltd v Woolford (2015) 121 SASR 485; [2015] SASCFC 6. As Kourakis CJ observed in dissent, the answer to the question whether a worker is on “leave” will depend on the particular context in which it is asked. The present context is quite artificial: an adjustment in order to produce a dollar amount of “pre-injury average weekly earnings” for the purposes of determining amounts payable under the Act.

10. [10]

    A worker will be on “leave” when a contract of employment or an industrial agreement authorises the worker’s absence. A worker will also be on “leave” when the worker and employer consensually agree to, say, a period of unpaid absence. But statutes also confer rights to take leave (and sometimes impose an obligation to take unpaid leave): see for example the Annual Holidays Act 1944 (NSW), ss 4A and 14A(6); a more familiar example is the Paid Parental Leave Act 2010 (Cth). There will be cases where the rights created by statute entitle the worker to be absent from work and nonetheless be paid. Such periods will not be “unpaid” leave for the purposes of reg 8E because the worker is not receiving payments under the Workers Compensation Act, but they indicate that “leave” is capable of extending to periods of statutory entitlement.

11. [11]

    I indicate those matters so as to explain the nuance in the question of construction which this appeal presents. Contrary to some of the Secretary’s submissions, the words “unpaid leave” are capable without undue strain of extending to the three months following Mr Stewart’s shoulder injury during which he was not at work and was receiving 95% weekly payments under the Act. It is for that reason that I doubt that the question in this appeal is greatly affected by what South Australian courts have said about the same words in a different statutory regime.

12. [12]

    The fact that the language of the regulation is capable of extending to Mr Stewart’s circumstances does not answer the question of construction; it merely confirms that the constructional choice is a difficult one. To my mind, it is resolved by three main considerations.

13. [13]

    The first is that the regulation which has been made falls short of a full exercise of the regulation-making power, because it is confined to “unpaid leave” and does not extend to any other change in earnings circumstances. I agree with the Secretary that “unpaid leave” in reg 8E bears the same meaning as the same words bear in the regulation-making power, and that in the latter, the words “unpaid leave” in a power conferred so as to take into account “any period of unpaid leave or other change in earnings circumstances” do not extend to Mr Stewart’s position. Mr Stewart’s earnings were altered when he was in receipt of weekly payments under the Act, not merely because they were calculated by reference to 95% of his earlier average earnings, but principally because payments under the Act had to be disregarded. There was power to make a regulation to address that circumstance. But that power existed not because Mr Stewart was for those 10 weeks on “unpaid leave”. The power existed because those 10 weeks were a “change in earnings circumstances”, but that aspect of the regulation-making power was not exercised. Because the 10 weeks were not “unpaid leave”, reg 8E was inapplicable.

14. [14]

    The second consideration is that the various regulations which make adjustments on no view accommodate a worker who suffers two injuries, the first of which is only partially incapacitating (such for example that the worker is in receipt of some wages from the employer but also some payments under the Act), and then suffers a further injury. That tends to confirm the limits on a court’s ability by way of construction to address what are perceived to be gaps in its operation, and the awkwardness of construing a period of unpaid leave to extend to a period when the worker was wholly incapacitated and in receipt of workers compensation payments.

15. [15]

    The third consideration is that the critical provisions do not have the appearance of a comprehensive scheme. Instead, they are a series of “adjustments”, all of which are intended to deal heuristically with the miscellany of factors which may alter the calculation of a worker’s “pre-injury average weekly earnings”. Examples include where, within the 52 weeks preceding the injury, the worker was not in continuous employment, or changed his or her position, or did not receive remuneration on a weekly basis, or was on unpaid leave for some of the period. None addresses the circumstance which gives rise to the present appeal, namely, where the worker suffers two incapacitating injuries at two different times. Although in general a construction which results in a coherent scheme should be preferred, it seems to me that the features of the regime outlined above tend to diminish the utility of notions of coherence, and disfavour straining the statutory language so as to accommodate circumstances which are not addressed explicitly.

16. [16]

    The regulation must in any event be remade in the near future, having regard to the operation of the Subordinate Legislation Act 1989 (NSW), and if the conclusion this Court has reached is regarded as incorrect, no doubt it will be amended. There may also be merit in explicitly addressing any adjustment which is to be made in cases where a worker suffers two injuries.

17. [17]

    I would dismiss the notice of contention, which is reproduced at [38] below, and which propounded a general discretion to alter the period throughout which pre-injury average weekly earnings were calculated. As Stern JA observes, that has no foundation in the text, and is inconsistent with provision being made for regulations to adjust the period. I agree with Griffiths AJA that there can be only one outcome to the appeal, and therefore this Court should make orders to achieve that result.

18. [18]

    For those reasons, I agree with the orders proposed by Griffiths AJA.

19. [19]

    STERN JA: The ostensibly simple question upon which this appeal turns is whether a period of absence from work due to incapacity from an injury for which a worker was paid workers compensation under the Workers Compensation Act 1987 (NSW) (the “Compensation Act”), constitutes a “period of unpaid leave” for the purposes of cl 2(3)(a) of Sch 3 to the Compensation Act and reg 8E of the Workers Compensation Regulation 2016 (NSW) (the “2016 Regulation”), it being common ground that the meaning of a “period of unpaid leave” in the 2016 Regulation must be the same as that in the Compensation Act. That is the primary issue to be determined in this appeal on a point of law from the decision of Deputy President Wood of the Personal Injury Commission, in which the Deputy President found that absence from work due to such incapacity was a period of unpaid leave in accordance with reg 8E of the 2016 Regulation: Secretary, Department of Communities and Justice v Stewart [2023] NSWPICPD 35.

20. [20]

    This question has considerable practical significance where, as occurred with the respondent, Mr Stewart, a worker suffers from two separate injuries, an “earlier” and a “later” injury, both entitling them to the payment of compensation under the Compensation Act. The amount of compensation to which the worker is entitled on account of the later injury depends upon the worker’s pre-injury average weekly earnings during the period of 52 weeks immediately preceding that injury (being the “relevant earning period” for the calculation of pre-injury average weekly earnings under cl 2(2) of Sch 3 to the Compensation Act). If, during that period of 52 weeks, the worker has been away from work and thus not earning, by reason of incapacity, the pre-injury average weekly earnings will necessarily be lower, potentially considerably lower, unless the period of incapacity from the earlier injury is a “period of unpaid leave”, and thus not taken into account when determining the period over which gross earnings are to be averaged to calculate the pre-injury average weekly earnings. This is necessarily so because, under cl 6(2)(c) of Sch 3 to the Compensation Act, any payment made to the worker under the Compensation Act is to be excluded from the worker’s gross earnings over the relevant earning period for the purpose of calculating the worker’s pre-injury average weekly earnings.

21. [21]

    The practical significance of the issue at the heart of this appeal is readily apparent if Mr Stewart’s circumstances are considered. If, as held by the Deputy President, the period of his incapacity on account of the earlier injury is a “period of unpaid leave” within the meaning of cl 2(3)(a) of Sch 3 to the Compensation Act and reg 8E of the 2016 Regulation, his pre-injury average weekly earnings will be $494.18 more than would be the case on the appellant’s construction. Thus, over a period of 130 weeks, Mr Stewart’s compensation will amount to some $52,358.37 more than would be the case on the appellant’s construction of the Compensation Act. The question is also of broader significance given the likelihood that there will be others, potentially many others, who will be similarly affected.

22. [22]

    By notice of contention, on which Mr Stewart was granted leave to rely during the hearing of the appeal, Mr Stewart contends that the decision of the Deputy President should be upheld on the basis that the “relevant period” for the purposes of calculating pre-injury average weekly earnings, should be construed as a maximum period of 52 weeks rather than, as the Deputy President held, a fixed period of 52 weeks subject to modification under the 2016 Regulation.

23. [23]

    For the reasons set out below, I would have dismissed both the appeal and the notice of contention.

Background

1. [24]

   Since 2007, Mr Stewart has been employed by the Secretary, Department of Communities and Justice (the “Secretary”), working within Corrective Services New South Wales. As at 1 February 2021, Mr Stewart was a Senior Prison Officer with a salary of $106,866.24 per annum.

2. [25]

   On 20 November 2020, Mr Stewart suffered a workplace injury to his shoulder sustained whilst working at Cooma Correctional Centre (the “earlier injury”). This caused him to be totally incapacitated for work from 20 November 2020 until 1 February 2021. Liability for this injury under the Compensation Act was accepted by the Secretary. Thus, for the period 20 November 2020 to 1 February 2021, Mr Stewart received weekly payments of compensation pursuant to s 33 of the Compensation Act. For the purposes of the earlier injury, his pre-injury average weekly earnings were calculated to be $4,119.72 gross per fortnight.

3. [26]

   On 1 February 2021, Mr Stewart lodged a claim for post-traumatic stress disorder resulting from the nature and conditions of his employment over a number of years (the “later injury”). Liability for the later injury was also accepted by the Secretary. Mr Stewart remained totally incapacitated for work on account of his later injury as at 8 February 2022, when he prepared his witness statement.

4. [27]

   By letter of 25 February 2021, Mr Stewart was notified by QBE, whom the Court was told was “contracted to perform the insurance function, administering and so on” under the Compensation Act, that his pre-injury average weekly earnings figure for the later injury, for the purpose of the Compensation Act, was $1,565.68. This was based upon gross earnings of $81,415.30 averaged over the 52 weeks from 3 February 2020 to 31 January 2021. The figure of $81,415.30 did not include any of the compensation payments made under the Compensation Act in respect of the earlier injury (consistent with cl 6(2)(c) of Sch 3 to the Compensation Act). However, whilst the amounts of compensation paid under the Compensation Act were ignored when calculating Mr Stewart’s pre-injury average weekly earnings, the period during which compensation was paid was taken into account in the averaging calculation. This meant that Mr Stewart’s earnings over a period of 41 weeks and 4 days (that is, 52 weeks, less the 10 weeks and 3 days when he was incapacitated from the earlier injury) were divided by 52 to reach the figure that was determined to be his pre-injury average weekly earnings for the purposes of determining compensation payable under the Compensation Act for the later injury.

5. [28]

   As Mr Stewart was then in the first entitlement period (being the first thirteen weeks post-injury pursuant to ss 32A and 36 of the Compensation Act), he was thus entitled to be paid $1,487.40 per week, being 95% of his pre-injury average weekly earnings of $1,565.68.

6. [29]

   Despite representations from Mr Stewart’s solicitor, including with support from an advice prepared by Mr Fraser Doak, a barrister, QBE maintained that Mr Stewart’s pre-injury average weekly earnings in respect of the later injury had been correctly calculated.

7. [30]

   In these circumstances, on 9 February 2022, Mr Stewart filed an application in the Personal Injury Commission. The claim came before Member Burge on 30 May 2022. Relying upon reg 8D of the 2016 Regulation (set out below at [48]), on 28 June 2022, Member Burge determined:

8. [31]

   Pursuant to s 352 of the Workplace Injury Management and Workers Compensation Act 1998 (NSW) (the “Management Act”), the Secretary filed an appeal against the decision of Member Burge on 26 July 2022.

The decision of the Deputy President

1. [32]

   On 23 June 2023 Deputy President Wood confirmed order 1 made by Member Burge but amended order 2 to read:

2. [33]

   The Deputy President found that Member Burge had erred in finding that reg 8D of the 2016 Regulation applied in the circumstances. Having found error, the Deputy President redetermined the matter pursuant to s 352(6A) of the Management Act. The Deputy President rejected contentions made on behalf of Mr Stewart that:

   1. (1)

      the period of 52 weeks in cl 2(2) of Sch 3 to the Compensation Act should be read as a maximum period, and not a prescriptive period, for the purpose of calculating pre-injury average weekly earnings: at [79]-[80]; and

   2. (2)

      because cl 6(2)(c) of Sch 3 to the Compensation Act excludes weekly compensation payments from being “earnings”, the clause should be read as also excluding the period during which such payments were made from the 52 week period used to calculate pre-injury average weekly earnings: at [85].

3. [34]

   The Deputy President found (at [96]), however, that during the period of incapacity from the earlier injury, Mr Stewart was on “unpaid leave” within the meaning of reg 8E of the 2016 Regulation (set out at [48] below). Thus, the relevant earning period should be amended effectively to exclude that period of incapacity. Neither party before the Deputy President relied upon reg 8E of the 2016 Regulation but both were given the opportunity to make submissions as to whether it applied.

4. [35]

   The Deputy President found (at [94]) that an unjust outcome would result if a narrow view were taken of the term “unpaid leave” in reg 8E of the 2016 Regulation. Such an outcome would be “contrary to the intention of legislation, which was clearly to apply fairness to the calculation of the pre-injury average weekly earnings.” Further, the Deputy President found (at [96]) that Mr Stewart’s absence from employment on account of the earlier injury fell within the ambit of “unpaid leave” in circumstances in which any payments of compensation were excluded from the calculation of “earnings”.

Notice of appeal

1. [36]

   Pursuant to s 353(1) of the Management Act, the Secretary appeals on a point of law from the whole of the decision of the Deputy President.

2. [37]

   The single ground of appeal pressed by the Secretary is that the Deputy President erred in law in construing a “period of unpaid leave” in reg 8E of the 2016 Regulation to include, or as capable of including, a period of absence from work by reason of incapacity due to an injury for which a worker is being paid workers compensation.

Notice of contention

1. [38]

   By a document styled as a notice of contention and dated 15 February 2024, which Mr Stewart was permitted to rely upon as a notice of contention, Mr Stewart contends that the decision of the Deputy President should be upheld on the following grounds:

The legislative scheme

1. [39]

   The relevant legislative scheme for the purposes of this appeal includes the Compensation Act, the Management Act and the 2016 Regulation. Under s 2A of the Compensation Act, the Compensation Act and the Management Act are to be construed together, with the Management Act prevailing in the event of any inconsistency.

2. [40]

   Section 3 of the Management Act provides:

3. [41]

   The payment of compensation to workers for injuries arising out of or in the course of their employment is provided for in s 9, read together with the definition of “injury” in s 4, of the Compensation Act. The circumstances in which an employer is liable to compensate a worker for injury are dealt with in Pt 2 of the Compensation Act.

4. [42]

   Part 3 of the Compensation Act sets out what benefits will be provided to workers in circumstances where an employer is liable to compensate them for injuries or death. Division 2 of Pt 3 of the Compensation Act was substantially amended by the Workers Compensation Legislation Amendment Act 2018 (NSW) (the “2018 Amendment Act”) with effect from 21 October 2019. Within Div 2 of Pt 3 of the Compensation Act, s 33 provides for the payment of weekly compensation during a period of total or partial incapacity. Section 36 of the Compensation Act, read together with the definitions in s 32A, provides that, subject to a weekly maximum, for the first thirteen weeks a worker who has no current work capacity is entitled to compensation at the rate of 95% of the worker’s pre-injury average weekly earnings.

5. [43]

   Thereafter, the relevant percentage diminishes to 80% up to 130 weeks: s 37 of the Compensation Act. It is only in limited circumstances that a worker is entitled to compensation after 130 weeks: s 38 of the Compensation Act. After 260 weeks, a worker’s entitlement to compensation ceases unless the injury has resulted in more than 20% permanent impairment: s 39 of the Compensation Act.

6. [44]

   As is immediately apparent, a worker’s “pre-injury average weekly earnings” are central to the amount of compensation payable to an incapacitated worker under the Compensation Act. The meaning of this term is set out in Sch 3 to the Compensation Act which was introduced by the 2018 Amendment Act. Clause 2 of Sch 3 to the Compensation Act relevantly provides:

7. [45]

   As regards “earnings”, cl 6(1)-(2) of Sch 3 to the Compensation Act provides:

8. [46]

   Whilst cl 6 of Sch 3 to the Compensation Act deals with what is or is not “income”, and thus “earnings”, it says nothing about how the period of time for which a worker was receiving payment under the Compensation Act should be treated for the purposes of the calculation of pre-injury average weekly earnings. Moreover, it presupposes that the income of a worker would, were it not for the exclusion, include sums paid in respect of loss of earnings, including under the Compensation Act.

9. [47]

   Division 2 of Pt 4 of the 2016 Regulation, introduced by the Workers Compensation Amendment (Pre-injury Average Weekly Earnings) Regulation 2019 (NSW) and which commenced on 21 October 2019 (the day when the relevant amendments to Sch 3 pursuant to the 2018 Amendment Act took effect), provides for the adjustment of the “relevant earning period” under cl 2(2) of Sch 3 to the Compensation Act in certain circumstances, including those in regs 8D and 8E of the 2016 Regulation.

10. [48]

    Regulations 8B-8E of the 2016 Regulation relevantly provide:

11. [49]

    Subdivision 4 of Div 2 of Pt 3 of the Compensation Act provides for the interaction between compensation payments under the Compensation Act and other payments that may be made to workers, including for sick leave. It includes:

12. [50]

    Section 174 of the Compensation Act requires an employer to keep records including of “all wages paid to workers employed by the employer”. Section 174(9) defines “wages” relevantly as follows:

13. [51]

    The term “unpaid leave” is not referred to in the Compensation Act other than in cl 2(3)(a) of Sch 3.

14. [52]

    The word “leave” otherwise appears in the Compensation Act in the terms “sick leave”, “long service leave” and “annual leave” in ss 50 and 174 as set out above. There is also a reference to “hours of leave approved by the employer” in s 40(2) of the Compensation Act, which provides that such hours are not included in “hours of work” for the purpose of determining whether a worker’s hours of work disentitle the worker from receiving weekly compensation payments.

15. [53]

    As the Secretary relies, in his written submissions, upon s 130 of the Fair Work Act 2009 (Cth), it is convenient to set this out here. It provides:

16. [54]

    “This Part” as referred to in s 130(1) above, is Part 2-2 of the Fair Work Act, which sets out the National Employment Standards. As regards leave, those standards set out a minimum entitlement of an employee to whom the Fair Work Act applies to parental leave (Div 5), paid and unpaid no safe job leave (ss 81A and 82A), annual leave (Div 6), various forms of personal leave (Div 7), community service leave (Div 8), long service leave (Div 9) and an entitlement to be absent from employment on public holidays (Div 10).

17. [55]

    The distinction between leave and absence in the Fair Work Act is also demonstrable in s 525, which relevantly provides:

18. [56]

    As originally passed, s 36(1) of the Compensation Act provided for weekly compensation of injured workers by reference to the worker’s “current weekly wage rate.” The worker’s “current weekly wage rate” was determined by reference to the worker’s weekly wage immediately before being incapacitated (if remunerated under an award, employed by the Crown or within a prescribed class of workers) or was otherwise a fixed weekly rate pursuant to s 42 of the Compensation Act (as passed).

19. [57]

    Section 35 of the Compensation Act (which was inserted from October 2012 by the Workers Compensation Legislation Amendment Act 2012 (NSW) and later repealed by the 2018 Amendment Act) provided that the amount to be paid by weekly payments was to be determined by a calculation which took into account the worker’s pre-injury average weekly earnings, non-pecuniary benefits provided to the worker by the employer, the worker’s earnings after the injury and the statutory maximum weekly compensation amount. “Pre-injury average weekly earnings” was, at that time, defined in s 44C (also inserted from October 2012 and later repealed by the 2018 Amendment Act):

20. [58]

    There was also reference to “paid leave” in s 44E(1)(a) of the Compensation Act (also inserted in October 2012 and later repealed by the 2018 Amendment Act) which provided that:

21. [59]

    Provision was also made in s 44H of the Compensation Act (again inserted in October 2012 and later repealed by the 2018 Amendment Act), in respect of a worker’s ordinary hours of work for the purpose of the calculation of pre-injury average weekly earnings, to exclude from the calculation periods when the worker “did not actually work and was not on paid leave”.

22. [60]

    The 2018 Amendment Act was introduced by the Workers Compensation Legislation Amendment Bill 2018 (NSW) (the “2018 Bill”). The Explanatory Note to the 2018 Bill, as introduced into Parliament, confirms that the object of the 2018 Bill was to make changes including “with respect to the calculation of the pre-injury average weekly earnings of a worker for the purpose of determining the worker’s entitlement to weekly payments of compensation”.

23. [61]

    As regards the proposed new Sch 3 to the Compensation Act, the Explanatory Note to the 2018 Bill identified that Sch 3 made:

24. [62]

    As is apparent, the “significant changes” set out do not include any reference as to whether periods of incapacity in respect of which payments are made under the Compensation Act are to be included for the purpose of calculating pre-injury average weekly earnings.

25. [63]

    To the extent that the second reading speeches in the New South Wales Legislative Council and Assembly cast light on the purpose behind the changes in the 2018 Amendment Act to the calculation of pre-injury average weekly earnings, these speeches suggest that the aim was to simplify the system for calculation of the relevant figure. Thus, in the Legislative Council, Mr MacDonald, who introduced the 2018 Bill, explained that the reforms therein were “designed to simplify the dispute resolution process for injured workers who are required to navigate the workers compensation scheme”, and that:

26. [64]

    There is nothing in the second reading speeches in the New South Wales Legislative Council or Assembly that deal in any way with the question of whether a period during which a worker was incapacitated from work and receiving compensation, rather than earnings, should be taken into account in calculating the worker’s pre-injury average weekly earnings.

27. [65]

    Nor is there anything to suggest any intention to change the relevant scheme such that periods away from work due to incapacity, for which compensation and not sick leave is paid, should be taken into account in calculating pre-injury average weekly earnings.

28. [66]

    Ultimately, the task of the Court in applying accepted principles of statutory construction is to discern what Parliament is taken to have intended: Project Blue Sky Inc v Australian Broadcasting Authority (1998) 194 CLR 355; [1998] HCA 28 at [70]. In Cooper Brookes (Wollongong) Pty Ltd v Commissioner of Taxation of the Commonwealth of Australia (1981) 147 CLR 297 at 320; [1981] HCA 26, Mason and Wilson JJ, partially quoting DC Pearce, stated that:

29. [67]

    It is now orthodox that context is to be considered in the first instance, not merely after ambiguity is identified: see eg K & S Lake City Freighters Pty Ltd v Gordon & Gotch Ltd (1985) 157 CLR 309 at 315; [1985] HCA 48; Project Blue Sky at [69]; CIC Insurance Ltd v Bankstown Football Club Ltd (1997) 187 CLR 384 at 408; [1997] HCA 2 (“CIC Insurance”). As the High Court confirmed in CIC Insurance (at 408), “if the apparently plain words of a provision are read in the light of the mischief which the statute was designed to overcome and of the objects of the legislation, they may wear a very different appearance.” Moreover, in CIC Insurance the High Court confirmed (at 408) that “context” is to be understood in its “widest sense to include such things as the existing state of the law and the mischief which, by legitimate means … one may discern the statute was intended to remedy.” Relevant context may include legislative history and extrinsic materials, albeit that such material cannot displace the meaning of the statutory text: Commissioner of Taxation of the Commonwealth of Australia v Consolidated Media Holdings Ltd (2012) 250 CLR 503; [2012] HCA 55 at [39] (French CJ, Hayne, Crennan, Bell and Gageler JJ).

30. [68]

    The purpose (or purposes, for there may be a number) of any particular statute may be expressly stated, may be discerned only by inference upon examination of the legislation as a whole, or may be revealed from the nature and context of a particular statute’s enactment: Saraswati v The Queen (1991) 172 CLR 1 at 21; [1991] HCA 21 (McHugh J). As Gageler J (as his Honour then was) explained in SAS Trustee Corporation v Miles (2018) 265 CLR 137; [2018] HCA 55 at [41]:

31. [69]

    In Uelese v Minister for Immigration and Border Protection (2015) 256 CLR 203; [2015] HCA 15 at [45], the majority (French CJ, Kiefel, Bell and Keane JJ) held:

32. [70]

    As to purpose, care must be taken where a statutory provision strikes a balance between two competing interests. In such a case, as set out by Gleeson CJ in Carr v Western Australia (2007) 232 CLR 138; [2007] HCA 47 at [5]:

33. [71]

    Whilst the Compensation Act can be described as remedial legislation, in Sydney Seaplanes Pty Ltd v Page (2021) 106 NSWLR 1; [2021] NSWCA 204 at [56] (Bell P, as his Honour then was, Leeming JA and Emmett AJA agreeing) and at [85] (Leeming JA, Bell P and Emmett AJA agreeing), it was held that characterisation of a statute as remedial “does not relieve the court from giving effect to an interpretation … that furthers what the court objectively determines to have been its purpose.”

34. [72]

    As regards the Compensation Act, having referred to the system objectives in s 3 of the Management Act, Payne JA (Gleeson JA and Sackville AJA agreeing) in Hunter Quarries Pty Ltd v Mexon (2018) 98 NSWLR 526; [2018] NSWCA 178, said:

35. [73]

    To similar effect, in WorkPac Pty Ltd v Thearle [2016] NSWCA 303 at [40], McColl JA (Ward JA and Adamson J, as their Honour’s then were, agreeing), held:

36. [74]

    The general principles of statutory interpretation apply to delegated legislation: Collector of Customs v Agfa-Gevaert Ltd (1996) 186 CLR 389 at 398; [1996] HCA 36 (Brennan CJ, Dawson, Toohey, Gaudron and McHugh JJ); see also ss 32 and 33 of the Interpretation Act 1987 (NSW). However, it must be recognised that subordinate legislation is not always drafted by parliamentary counsel, and may not adopt conventions regularly applied in drafting statutes: Environment Protection Authority v Orchard Holdings (NSW) Pty Ltd (in liq) (2014) 86 NSWLR 499; [2014] NSWCA 149 at [44]-[45] (Leeming JA, Bathurst CJ and McColl JA agreeing) and other authorities cited by Perry Herzfeld and Thomas Prince, Interpretation (2nd ed, 2020, Thomson Reuters) at [14.40].

The proper construction of “period of unpaid leave” in cl 2(3) of Sch 3

1. [75]

   Uncontroversially, the Secretary contends that, consistent with s 11 of the Interpretation Act, the expression “unpaid leave” in reg 8E of the 2016 Regulation should be given the same meaning as in cl 2(3)(a) of Sch 3 to the Compensation Act absent any “contrary intention”. So much may be accepted. No contrary intention is apparent.

2. [76]

   The Secretary’s first key contention on appeal is that neither the text nor purpose of cl 2(3)(a) of Sch 3 to the Compensation Act supports the construction adopted by the Deputy President. In this regard, the Secretary contends that “reasoning by reference to abstract notions of justice or fairness is unsound.” In any event, the Secretary contends that the Deputy President erred in reasoning by reference to abstract notions of justice and fairness as, in doing so, she relied upon purpose without considering the means and extent to which such purpose was pursued in the particular provisions under consideration. Moreover, the Secretary contends that reasoning by reference to notions of justice or fairness is unsound given that there are many ways in which levels of compensation under the Compensation Act may be impacted by an earlier injury and the construction adopted by the Deputy President focuses upon one, arising from the circumstances of Mr Stewart, without giving any regard to others. Thus, for example, the Secretary contends that the construction adopted by the Deputy President leaves open the prospect that a worker who suffered only from partial incapacity by reason of an earlier injury will still have that period of partial incapacity taken into account in determining pre-injury average weekly earnings. That, the Secretary submits, would result in its own unfairness if the position of that worker is compared with the position of a worker, such as Mr Stewart, who suffered from a period of total incapacity.

3. [77]

   Second, the Secretary contends that the terms of cl 6(2)(c) of Sch 3 to the Compensation Act, which excludes compensation payments made under the Compensation Act from the meaning of “earnings”, reflect a legislative choice to fashion payments of compensation under the Compensation Act by reference to the earning capacity of the worker as at the date of the relevant injury. If the worker’s earning capacity has been diminished by reason of an earlier injury, that diminution is to be reflected in payment of a lower level of compensation than would otherwise be the case.

4. [78]

   Third, the Secretary contends that Parliament made a choice, expressed in cl 2(3) of Sch 3 to the Compensation Act, that it would be through regulations that adjustments would be made to the relevant earning period used for the purpose of calculating a worker’s pre-injury average weekly earnings. Thus, the Secretary contends regulations could have been made to cover circumstances such as those of Mr Stewart, and there is no need to adopt a “strained” construction of “unpaid leave” in cl 2(3)(a) of Sch 3 to the Compensation Act to achieve what could have been achieved by regulations. The Secretary submits that, for this reason, the Deputy President erred in relying upon the purpose of the Compensation Act as being to apply fairness to the calculation of pre-injury average weekly earnings. Further, the Secretary contends that “errors” resulting from the adoption of an averaging system do not necessarily reflect a failure of the purposes of the Compensation Act.

5. [79]

   Fourth, as to text, the Secretary contends that “unpaid” means that the worker is not receiving payment, which would not cover someone who is in receipt of a compensation payment under the Compensation Act in the relevant earning period. Thus, the Secretary contends that the Deputy President erred in construing “unpaid” to mean “not paid any income”.

6. [80]

   As to the meaning of “leave”, consistent with what the Secretary contends is the “ordinary meaning of the term when used in an employment or industrial context”, the Secretary submits “leave” in cl 2(3)(a) of Sch 3 to the Compensation Act means “an entitlement or authorisation relieving a worker from the performance of their duties conferred by or under an employment contract, a statute or an industrial instrument.” The Secretary contends that absence by reason of incapacity due to compensable injury is not “leave” so understood. Whilst the Secretary contends that the reference in reg 8E of the 2016 Regulation to a worker who “took” a period of unpaid leave further supports this construction of cl 2(3)(a) of Sch 3 to the Compensation Act and reg 8E of the 2016 Regulation, Senior Counsel accepted during the hearing that the language of the regulation could not be used to construe the Compensation Act.

7. [81]

   The Secretary contends that this construction of “leave” is supported by ss 49 and 50 of the Compensation Act.

8. [82]

   The Secretary also relies, in support of his construction of “leave”, on Flinders Ports Pty Ltd v Woolford (2015) 121 SASR 485; [2015] SASCFC 6, a judgment of the Full Court of the Supreme Court of South Australia and Knight v South Australia (2022) 140 SASR 326; [2022] SASCA 14. Whilst the Secretary accepts that both of these cases concerned different legislation, he contended that their essential reasoning was both persuasive and applicable.

9. [83]

   One issue in Flinders v Woolford was as to the whether periods of absence from work by reason of a work-acquired injury for which the respondent was receiving weekly compensation payments should be ignored when calculating a worker’s average number of hours worked per week under s 3(2) of the Long Service Leave Act 1987 (SA) (“LSL Act”) for the purpose of determining the rate at which the respondent was entitled to be paid under s 8(4) of the LSL Act. Section 3(2) of the LSL Act relevantly provided:

10. [84]

    The difficulty for the respondent in Flinders v Woolford arose because for most of the relevant three year period provided under s 3(2)(b) of the LSL Act, he was incapacitated and did not work: at [101]. However, s 3(4) of the LSL Act provided:

11. [85]

    By way of aside, on 19 November 2015, shortly after Flinders v Woolford was decided, the South Australian Parliament amended s 3(4) of the LSL Act to provide that any week when a worker was “absent from work on account of a work injury (within the meaning of the Return to Work Act 2014 (SA)) for which the worker received weekly payments under that Act or, before 1 July 2015, under the Workers Rehabilitation and Compensation Act 1986 (SA) will be disregarded” for the purposes of calculating average weekly earnings.

12. [86]

    The respondent in that case contended that the period during which he was incapacitated should be excluded for the purpose of calculating his long service leave entitlement. Stanley J (Kelly J agreeing) rejected that contention. The crux of his Honour’s reasoning (at [105]) was that absence from work due to an inability to work is not absence “with the permission of the employer” and is thus not leave in any “commonly understood industrial sense” as leave is an “entitlement relieving the employee from the performance of work duties, which is conferred by the terms of the employment contract, an industrial instrument or Act of Parliament”. His Honour continued (at [105]) that the employer permitted the absence from work “only to the extent it took no action to terminate the contract of employment”. His Honour also found (at [105] and [107]) that the distinction between leave on the one hand, and absence due to compensable injury on the other, was supported by the terms of s 40 of the Workers Rehabilitation and Compensation Act and the decision in South Australia v Day (2000) 78 SASR 270; [2000] SASC 451. His Honour found (at [108]) that the language of the section was “intractable.”

13. [87]

    Kourakis CJ was in dissent on this issue. Having regard to the manifest purpose of s 3(4) of the LSL Act being to “strike a fair balance between employer and employee, and to minimise manipulation of the average” (at [17]) and the “capricious” result that would otherwise follow (at [19]), Kourakis CJ held (at [22]) that absence by reason of compensable injury was unpaid leave for the purpose of s 3(4) of the LSL Act. Having acknowledged that in many other industrial contexts such absence is not ordinarily regarded as leave, his Honour held (at [21]):

14. [88]

    Further, his Honour held (at [24]) that leave during a period of incapacity caused by a compensable injury is “unpaid” as workers compensation payments are not pay for work done.

15. [89]

    In Knight v State of South Australia, the Court held (at [6]) that weekly payments of compensation by way of top-up payments made to the appellant under the Return to Work Act, on account of an earlier compensable injury, were not earnings for the purpose of calculating average weekly earnings, pursuant to s 5(3) of the Return to Work Act which relevantly provided:

16. [90]

    Having found (at [60]) that “[r]easonable minds might differ” as to the question considered in Flinders v Woolford, the Court observed (at [62]) that the purpose of s 5(3) of the Return to Work Act was to ensure that the calculation of average weekly earnings reflected what the worker was in fact being paid by the employer under a contract of service. The Court found (at [63]-[64]) that “leave” did not “naturally embrace” what occurs when a worker is not working by reason of incapacity caused by work injury and in receipt of workers compensation and that the words “annual, sick or other leave” in s 5(3) of the Return to Work Act must be construed ejusdem generis and were confined to those species of payment made by an employer in connection with employment.

17. [91]

    Broadly, the respondent contended that the Deputy President’s conclusion as to construction was correct for the reasons that she gave.

18. [92]

    The Secretary’s contentions should be rejected for the following reasons.

19. [93]

    First, as the Secretary submits, in the 2018 Amendment Act, Parliament provided that adjustments to the relevant earning period for the purpose of calculating a worker’s pre-injury average weekly earnings were to be dealt with by regulations. However, in cl 2(3)(a) of Sch 3 to the Compensation Act, Parliament did not simply provide that regulations could adjust the relevant period for “any … other change in the earnings circumstances in the worker’s employment”, a phrase which would be broad enough to include “any period of unpaid leave”. Instead, Parliament expressly included in cl 2(3)(a) of Sch 3 that regulations may provide for such adjustment “to take into account any period of unpaid leave or other change in earnings circumstances of the employment” (emphasis added). In so providing, Parliament should be taken to have intended that the circumstance that a worker had had a period of unpaid leave within the 52 weeks before the relevant injury was a particular circumstance which could justify adjustment to the relevant earning period. That is apparent from the express inclusion of those words in cl 2(3)(a) of Sch 3 to the Compensation Act. In construing the words in cl 2(3)(a), and in reg 8E of the 2016 Regulation, the express inclusion of those words should be given significance.

20. [94]

    Parliament should thus be taken to have envisaged, as at least a reasonable likelihood, that regulations would be made under cl 2(3)(a) of Sch 3 to the Compensation Act to provide for adjustment of the relevant earning period to take into account any period of unpaid leave. This follows from the express inclusion of those words in cl 2(3)(a) understood in the context of the scheme of the Compensation Act, as is apparent from the second reading speech (set out above) and from the text of Sch 3 when compared with the form of the Compensation Act prior to the 2018 Amendment Act, which was to omit any adjustments from the legislation leaving such matters to be dealt with by regulations.

21. [95]

    Thus, notwithstanding that the scheme of cl 2(3) of Sch 3 to the Compensation Act is that adjustments were to be made by regulation, rather than by the terms of Sch 3 itself, the task of construction of cl 2(3)(a) of Sch 3 should be premised upon a parliamentary intention, subject of course to regulations being made, that periods of unpaid leave would merit an adjustment of the relevant earning period for the purpose of calculating pre-injury average weekly earnings.

22. [96]

    Second, as set out above, the purpose of statutory construction is to determine, having regard to text and context, the meaning of the words used by Parliament. That task must be carried out having regard to the terms of Sch 3 as a whole and on the assumption that Parliament intended to put in place a coherent scheme for determining a worker’s pre-injury average weekly earnings. In particular, it is necessary to construe cl 2(3)(a) of Sch 3 to the Compensation Act in light of the terms of cl 6(2)(c) which exclude payments “in respect of loss of earnings to which the workers compensation legislation relates” from being “income”, and thus “earnings” for the purpose of the calculation of pre-injury average weekly earnings. It is beyond doubt, in light of this provision, that Parliament turned its mind to a circumstance such as that suffered by Mr Stewart, namely that the calculation of pre-injury average weekly earnings is being made where, within the relevant 52 week period, the worker has been incapacitated by reason of an earlier injury for which compensation was paid. Further, unlike any of cl 6(2)(a)-(b) and (d), cl 6(2)(c) of Sch 3 has the effect that a worker who was incapacitated from working on account of an earlier injury and was in receipt of compensation for that injury would have nothing included by way of “earnings” for the period of incapacity for the purpose of calculating pre-injury average weekly earnings. That gives rise to a particular and stark incoherence in the scheme for performing that calculation upon the Secretary’s proposed construction.

23. [97]

    It is of course possible that, as submitted by the Secretary, Parliament intended payments made under workers compensation legislation to be excluded from a worker’s earnings for the purpose of calculating the worker’s pre-injury average weekly earnings, but for the period during which those payments were made to still be included in the “relevant earning period” for the purpose of the averaging calculation, unless the Governor made regulations adjusting that period on the basis that this was an “other change in earnings circumstances in the employment”. On balance, however, it is unlikely that Parliament so intended.

24. [98]

    More particularly, it is unlikely that Parliament intended Sch 3 to the Compensation Act (and regulations made thereunder) to have the consequence, subject to a vague and unparticularised regulation-making power to cater for “other” changes in earning circumstances, that those who have suffered from a period of incapacity for which compensation was paid under the Compensation Act during the 52 weeks prior to a later injury would necessarily receive compensation under the Compensation Act at a level that is lower than would have been the case if they had not suffered from that period of incapacity. That necessarily would disadvantage the very people for whose benefit the scheme of compensation under the Compensation Act benefits. Given that consequence, it is necessary to ascertain whether there is any rational basis, consistent with the object and purpose of the legislation, for Parliament having taken that course.

25. [99]

    The incoherence of the scheme is underscored having regard to the effect of s 15 of the Compensation Act. Section 15 provides that, for a disease which is contracted by a gradual process (such as will occur, I would add, with many mental health conditions), where death or incapacity results from the injury, the injury is deemed to have happened “at the time of the worker’s death or incapacity”. Incapacity, in this context, means incapacity which results in a loss of wages even if there had previously been incapacity not resulting in any loss of wages: Stone v Stannard Brothers Launch Services Pty. Ltd. [2004] NSWCA 277 at [37] (Hodgson JA, Mason P and Handley JA agreeing). As Senior Counsel for the Secretary explained during his oral submissions, the “working of the scheme” operates such that the date of injury for a second injury (if it is an injury contracted by a gradual process) will be the date upon which the worker ceases to be incapacitated on account of the first injury, even if the second injury in fact occurred before that date. On the Secretary’s construction, that aspect of the “working of the scheme” under the Compensation Act will have the consequence that those who suffer from an immediately incapacitating physical injury and a psychiatric injury of gradual onset will inevitably receive less compensation for the incapacitating effect of the psychiatric injury because that injury is “deemed to have happened” only after the incapacity for the physical injury ceases.

26. [100]

    Ultimately, the only rational bases for Parliament having so intended advanced in the Secretary’s submissions were:

    1. (1)

       That the level of compensation for the later injury was determined by the worker’s “earning capacity” as at the date of the later injury;

    2. (2)

       That in any event there may be some unfairness to those who suffer from a partial incapacity during the 52 week period; or

    3. (3)

       Parliament intended such matters to be dealt with by regulations which could be framed so as to avoid unfairness.

27. [101]

    None of these provides any convincing basis upon which Parliament could be found to have intended those who have suffered from incapacity, for which compensation was paid during the 52 weeks prior to a later injury, would necessarily receive compensation for that later injury at a level lower than an equivalent worker who had not suffered from such incapacity.

28. [102]

    The flaw in the first suggested rationale is that it does not correspond with the effect of cl 2(3)(a) of Sch 3 to the Compensation Act on the Secretary’s proposed construction. A worker may suffer from incapacity over a substantial period during the 52 week period but have returned to their pre-injury earning capacity by the time the second injury occurs. Yet such a worker would suffer the effects of cl 2(3)(a) of Sch 3 on the Secretary’s proposed construction, even though they had no diminished earning capacity as at the date of the later injury. Conversely, at the time of a later injury, a worker may be incapacitated by reason of an earlier injury or illness for which compensation is not payable under the Compensation Act, and be permitted on that account to be absent from work. That period of absence would, on the Secretary’s proposed construction, seemingly fall within the ambit of the term “period of unpaid leave” irrespective of whether the worker’s earning capacity was impaired at the time of the later injury.

29. [103]

    As to the Secretary’s second proposed rationale, the effect of cl 2(3)(a) of Sch 3 to the Compensation Act in a case of partial incapacity does not provide any material support for the Secretary’s contention in the present case. The operation of the Compensation Act in cases of partial incapacity from an earlier injury was not fully explored on this appeal. As those questions did not arise on appeal, it is unnecessary to reach any concluded view as to this. In any event, potential unfairness in the application of Sch 3 to the Compensation Act in cases of partial incapacity does not suggest any reason why Parliament should be taken to have intended those suffering from periods of incapacity, for which compensation was paid under the Compensation Act during the 52 weeks prior to a later injury, to have their pre-injury average weekly earnings set at a level lower than it would have been if they had not suffered from that incapacity.

30. [104]

    As to the Secretary’s third proposed rationale, as set out at [78] above, it is unlikely that Parliament intended to leave the question of whether periods during which a worker was incapacitated and in receipt of payments of compensation under the Compensation Act in the 52 week period preceding a later injury, were to be excluded from the “relevant earning period” for the purpose of calculating pre-injury average weekly earnings in respect of that later injury, to be dealt with by regulations only on the basis that this may fall within the phrase “or other change in earnings circumstances in the employment” in cl 2(3)(a) of Sch 3. I consider it far more likely that Parliament intended that circumstance to fall within the ambit of a “period of unpaid leave” in cl 2(3)(a) which was given specific articulation in Sch 3 to the Compensation Act.

31. [105]

    Third, the term a “period of unpaid leave” is, on its face, sufficiently broad to comprehend as “leave” a period during which a worker is expressly or implicitly permitted to be absent from work, whether that absence is by reason of sickness, incapacity, or some other matter. Such an absence is at least implicitly permitted by an employer who releases the worker from any obligation to be ready, willing and able to perform work as directed by the employer: as held by Kourakis CJ in dissent in Flinders v Woolford at [21]. In my judgment, it is artificial to limit the word “leave” to absences from work which are expressly authorised by legislation or contract. There is no rational basis upon which to suggest that a worker who is absent from work by reason of incapacity should be treated differently in this regard from a worker who is absent from work for personal or other reasons. Still less is there any reason to treat a worker who is absent from work by reason of incapacity and is receiving compensation under the Compensation Act differently in this regard from a worker who is absent from work by reason of incapacity and is on sick leave or, having exhausted their sick leave, remains on leave but without payment. They are all absent from work with the explicit or implicit permission of their employer, and there is no good reason why the characterisation of that absence from work as “leave” should turn upon whether or not compensation is payable in respect of the period of absence under the Compensation Act. In each case, whether expressly or implicitly, the worker is permitted to be absent from work.

32. [106]

    In this regard, the reasoning of Kourakis CJ, in dissent, in Flinders v Woolford is to be preferred to that of Stanley J (with whom Kelly J agreed). In particular, I agree that the word “leave” is sufficiently broad to comprehend a period of absence from work which is expressly or implicitly permitted by an employer. An employer permits a worker who asserts incapacity to be absent from work when they take no steps to compel attendance. That is so irrespective of the fact that there may be consequences under the Compensation Act if an employer dismisses a worker because they are not fit for employment: see eg ss 241 and 242 of the Compensation Act.

33. [107]

    Fourth, there is nothing in either the Compensation Act or the Management Act (noting that the two are to be construed together) to suggest that the word “leave” cannot include a period when a worker is implicitly permitted to be absent from work on account of incapacity. Contrary to the Secretary’s contention, ss 49 and 50 of the Compensation Act do not support a distinction being drawn between “leave” and a “period of incapacity for work”. Whilst s 49(1) of the Compensation Act (set out above at [49]) refers to the latter, that language is entirely explicable given that the scheme of the Compensation Act is for payments to be made for some periods of incapacity for work. The use of that language in s 49(1) of the Compensation Act says nothing about whether such a period could also be described as a period of leave. Moreover, s 50(1) of the Compensation Act expressly comprehends that “wages for sick leave” may be payable to a worker in respect of a “period of incapacity for work”. It is thus plain that under the Compensation Act, a period of incapacity for work can also be a period of “leave”.

34. [108]

    In my judgment, s 50 of the Compensation Act not only does not support the Secretary’s proposed construction, it stands against it. This is because, under s 50, a period of incapacity for work may be both sick leave, for which a worker either is or is entitled to be paid, and a period of incapacity in respect of which a worker is entitled to receive compensation under the Compensation Act. It is anomalous to suggest that the latter cannot fall within the ambit of the word “leave” in cl 2(3)(a) of Sch 3 to the Compensation Act when in both instances the worker is absent from work on account of (the same) incapacity, with the implicit permission of their employer.

35. [109]

    Moreover, the effect of s 50(2) of the Compensation Act is that an employer’s liability to pay wages for sick leave will be satisfied by any payment of compensation under the Compensation Act in respect of the same period. Having regard to the terms of cl 6(2)(c) of Sch 3, however, such payment of compensation will be disregarded for the purpose of calculating the pre-injury average weekly earnings of the worker if there is a later injury. Thus, the Secretary’s proposed construction would have the anomalous consequence that the payment of compensation under the Compensation Act would diminish the worker’s pre-injury average weekly earnings from what these earnings would have been if the worker had been paid the wages for sick leave to which they were entitled.

36. [110]

    The Secretary’s proposed construction would also lead to anomalies having regard to s 50(3) of the Compensation Act. That subsection provides that wages for sick leave paid by an employer in respect of a period of incapacity shall, to the extent of wages paid, satisfy the employer’s obligations to pay compensation in respect of the relevant period, where the employer subsequently is required to or agrees to pay compensation. Thus, on the Secretary’s proposed construction, in the event of a later injury, a worker’s pre-injury average weekly earnings will depend upon the happenstance of whether or not the employer paid the worker wages for sick leave for the period of incapacity before being liable to pay compensation in respect of that same period.

37. [111]

    This analysis is predicated upon wages for sick leave falling within the definition of “earnings” in cl 6(1) of Sch 3 to the Compensation Act. During the hearing of the appeal, Senior Counsel for the Secretary relevantly contended “generally payment while on sick leave is accepted to be earnings”. In any event, it is tolerably clear that such wages would be “earnings” for this purpose. First, the Compensation Act describes these payments as “wages” in both ss 50 and 174. Whilst cl 6 of Sch 3 to the Compensation Act does not use the language of “wages”, Parliament’s description of these payments as wages suggests that they are regarded as payments on account of work done by the worker and are thus “income” within the meaning of cl 6(1) of Sch 3 to the Compensation Act. Second, a payment of wages by an employer for sick leave is aptly described as a payment made in consideration for the work which the worker performs under the employment arrangement. It is thus within the ambit of “income”. In this regard, the better view is that under cl 6(1) of Sch 3 to the Compensation Act, a worker’s earnings in respect of a particular week includes an amount paid as income provided that it is paid as income during that week, irrespective of whether that payment is in respect of work actually performed during that particular week. There is some obscurity in the language of cl 6(1) of Sch 3 to the Compensation Act, in particular as to whether the words “during the week” qualify the receipt of income by the worker, or the performance of work in the employment. However, construing cl 6(1) of Sch 3 to the Compensation Act in the context of cl 6 of Sch 3 as a whole, it is clear that “income” will be “earnings”, provided it is received in the week in question (irrespective of when the work was actually performed). It would otherwise make no sense for Parliament to have provided, in cl 6(2)(c) of Sch 3, that “income” does not include “any payment in respect of loss of earnings under a scheme to which the workers compensation legislation relates or under any other insurance or compensation scheme”. Manifestly, as such payment is in respect of loss of earnings, it will not have been made in respect of work performed in that week. It would thus have been wholly unnecessary to exclude such a payment from the ambit of “income” if that term were limited to payments “for” work performed in the week in question.

38. [112]

    Fifth, a period of incapacity in respect of which a worker is paid compensation, but not wages, can fall within the language of “any period of unpaid leave” in cl 2(3)(a) of Sch 3 to the Compensation Act on its face. Whilst compensation is paid to the worker under the Compensation Act in respect of loss of earnings during that period, the permitted absence from the place of employment is not on the basis of payments being made under the employment arrangement (whether contractual or under an award). That suggests that it would not be characterised, from either the employer or the employee’s perspective, as a period of “paid leave”. Notwithstanding that they correspond to the same period of time, the payments do not themselves have the necessary nexus to the “leave”. Rather, they are payments made on account of the fact that the worker has sustained a loss of earnings over the period. In this regard, there is an obvious distinction between such payments, and payments made by the employer in respect of sick leave. Moreover, it would be somewhat unlikely for Parliament to have provided that payments are to be excluded from the ambit of “income” in respect of a period of incapacity, as it did in cl 6(2)(c) of Sch 3, but at the same time to have characterised that period of incapacity as being “paid” for the purpose of cl 2(3)(a) of Sch 3.

39. [113]

    Sixth, as to purpose, it is obviously correct, as recognised by Payne JA in Hunter Quarries v Mexon, that the Compensation Act does not pursue a single purpose: see above at [72]. However, where, as here, the construction advocated by the Secretary would lead to a result which appears, on its face, to be unjust and discriminatory against those who have had an earlier claim for compensation when compared with others as was accepted by the Secretary, consistent with the principles set out above, that may suggest that Parliament did not intend such an outcome. That is particularly so where no apparent purpose is served by so construing the legislation and the construction does not appear to further any of the identified statutory objectives.

40. [114]

    In this regard, whilst obviously anything that limits the quantum of claims for compensation will likely have some impact upon the expense of the system of compensation under the Compensation Act, it was not contended that the Deputy President’s construction would have a significant impact upon the affordability or financial viability of the workers compensation system established under the Compensation Act: cf the system objective at s 3(d) of the Management Act. Nor was it suggested that that construction would have any material impact upon the efficiency or effectiveness of that system: cf s 3(f) of the Management Act. Whilst the Secretary did submit that the system of averaging was “to ensure that the workers compensation scheme can be efficiently administered”, the construction adopted by the Deputy President did not, in any way, seek to undermine that system of averaging.

41. [115]

    As against that, however, it is beyond argument that the Secretary’s construction could lead to unfairness to those in the position of Mr Stewart, absent regulations being made, on the basis that such circumstances are under the rubric of there being an “other change in earning circumstances of the employment”.

42. [116]

    Finally, whilst my rejection of the Secretary’s construction does not depend upon this factor, the legislative history (which, whilst not relied upon by Mr Stewart in his submissions, was raised with Senior Counsel for the Secretary by the Court during the hearing of the appeal) provides some support for my preferred construction, notwithstanding that caution is necessary where legislation has been amended to reflect a different form of words. In particular, it is apparent that, prior to the 2018 Amendment Act, s 44C(1)(a) of the Compensation Act provided that for the purpose of determining pre-injury average weekly earnings, any week “during which the worker did not actually work and was not on paid leave” would be excluded from the averaging calculation. That period was also excluded for the purpose of determining a worker’s ordinary hours of work pursuant to s 44H(a)(ii) of the Compensation Act. Moreover, the terms of s 44D(2) of the Compensation Act make it clear that, prior to the 2018 Amendment Act, Parliament turned its mind specifically to the position of a worker who was absent from work by reason of an incapacity for which they were entitled to compensation under the Compensation Act:

43. [117]

    There is no suggestion, whatsoever, in any material before the Court that Parliament intended to do anything other than simplify the workers compensation legislative scheme through passage of the 2018 Amendment Act. The Explanatory Note to the 2018 Bill purports to identify the “significant changes” made by the new Sch 3 to the Compensation Act and is completely silent as to whether a previous period of incapacity is to be included in the relevant period for the purpose of calculating pre-injury average weekly earnings. Similarly, the second reading speech in the New South Wales Legislative Council, to which we were taken by Senior Counsel for the Secretary, says nothing to suggest any intention to change the pre-existing position in this regard. Rather, consistent with the stated aim of simplification, the text of both the previous and the amended provisions suggest that the change in language was intended to encapsulate and simplify the previous form of words.

44. [118]

    The position would be different if there were any hint, either in the language of the Compensation Act or in the extrinsic material to which we were referred, that Parliament intended to effect a change from the position under the former s 44C(1)(a) of the Compensation Act. However, the absence of any such suggestion provides some support for the construction adopted by the Deputy President.

45. [119]

    Having regard to the analysis set out above, the Secretary’s proposed construction should be rejected. I would have dismissed the single ground of appeal.

Notice of Contention

1. [120]

   Having regard to my conclusion as set out above, the notice of contention can be dealt with briefly. It is sufficient to observe that the proposed construction of cl 2(2) of Sch 3 to the Compensation Act advanced by Mr Stewart by way of notice of contention should be rejected as being both inconsistent with the text of that clause, and inconsistent with the apparent purpose of Sch 3 to the Compensation Act.

2. [121]

   As to the former, cl 2(2) of Sch 3 to the Compensation Act defines the “relevant earning period” as the period of 52 weeks ending immediately before the date of injury. There is nothing in the language of cl 2(2) of Sch 3 that contemplates that the “relevant earning period” is a “maximum” of 52 weeks. On that basis alone, Mr Stewart’s contention should be rejected.

3. [122]

   However, as set out above, it would be inconsistent with Sch 3 to the Compensation Act as a whole for the “relevant earning period” to have a flexible content, constrained only by it having to be less than 52 weeks. If that were the case, the provision in cl 2(3) of Sch 3 for regulations to extend or reduce that period would make no sense. Moreover, there would be unacceptable uncertainty plaguing the calculation of pre-injury average weekly earnings if there were no clarity as to what period was to be used for the purpose of calculating either the worker’s earnings, or the period over which those earnings should be averaged.

4. [123]

   It necessarily follows that in my judgment the notice of contention should be dismissed.

Conclusion

1. [124]

   During the hearing of the appeal the Court was informed that the parties had agreed that, whatever the outcome, there should be no order as to the costs of the appeal. In those circumstances, I would have made orders that the appeal and notice of contention be dismissed.

2. [125]

   GRIFFITHS AJA: I am grateful to Stern JA for summarising the factual background and setting out the relevant legislative provisions, which need not be repeated. I agree with her Honour’s reasons for rejecting the notice of contention. I respectfully disagree, however, that the appeal should be dismissed.

3. [126]

   Like many difficult questions of statutory interpretation, this case presents a constructional choice. Ultimately, however, the core issue is whether the Deputy President was correct to adopt what can appropriately be described as a strained interpretation of the expression “period of unpaid leave” in reg 8E so as to avoid an outcome which the Deputy President viewed as “plainly unfair”.

4. [127]

   Alternatively, applying well settled principles of interpretation, should that expression be given a different and narrower meaning? If that interpretation produces unfairness, power exists to make a regulation under cl 2(3) of Sch 3 of the Workers Compensation Act 1987 (NSW) (Compensation Act), which authorises the making of an appropriate adjustment so as to address unfairness.

5. [128]

   For the following reasons, I prefer the second of those approaches.

6. [129]

   First, cl 2(3)(a) of Sch 3 of the Compensation Act and reg 8E of the Workers Compensation Regulation 2016 (NSW) are the only provisions in the legislation containing the expression “a” or “any” “period of unpaid leave”. Subject to the manifestation of a contrary intention, they should be given the same meaning (no significance attaches to the fact that one of the two provisions is prefaced by the term “a”, while the other uses “any”). There being no contrary intention here, the proper construction of “period of unpaid leave” in reg 8E turns on the meaning of that expression in cl 2(3)(a).

7. [130]

   I see no reason why the expression “any period of unpaid leave” in cl 2(3)(a) should be given anything other than its ordinary meaning in this particular context. In my view, that ordinary meaning does not encompass a situation where a worker is unable to work because of incapacity and is receiving workers compensation. Such a worker is not on leave, nor is the person unpaid. I will now explain why that is so.

8. [131]

   As to the meaning of “leave”, I accept the appellant’s submission that, in this employment or industrial context, the Compensation Act uses “leave” in its ordinary meaning as having the sense of an entitlement or authorisation which relieves a worker of performance of their duties conferred by or under an employment contract, statute or industrial agreement. That is also the meaning given to the term by a majority of the Full Court in Flinders Ports Pty Ltd v Woolford (2015) 121 SASR 485; [2015] SASCFC 6 (which was subsequently approved by the Court of Appeal in Knight v State of South Australia (2022) 140 SASR 326; [2022] SASCA 14). Those cases were directed to workers legislation in South Australia, which naturally does not govern this Court’s interpretation of differently worded legislation in this State. But they do provide helpful guidance and I am not persuaded they are clearly wrong.

9. [132]

   In Woolford, the majority held that the “absence of the worker from employment due to compensable injury” is not a form of leave. Stanley J (with whom Kelly J agreed; Kourakis CJ dissenting) said at [105]:

10. [133]

    After referring to s 40 of the Workers Rehabilitation and Compensation Act 1986 (SA) (which was in broadly similar terms to ss 49 and 50 of the Compensation Act), Stanley J concluded at [106] and [108] that it was implicit in the provision that the absence of a worker from employment due to compensable injury is not a form of leave. Thus absence from work as a result of a work-related injury would not be characterised as unpaid leave for the purposes of s 3(4)(a) of the Long Service Leave Act 1987 (SA).

11. [134]

    In Knight, the issue was whether weekly payments of compensation under the Return to Work Act 2014 (SA) were earnings for the purpose of calculating average weekly earnings under s 5(3) of that Act (which provided that, for the purposes of that section, “any amount paid while a worker was on annual, sick or other leave will be taken to be earnings”). As Stern JA has noted, the Court of Appeal acknowledged in Knight that reasonable minds might differ as to the question which had been determined in Woolford. But the Court held at [63]-[64] that the receipt of workers compensation by a worker who was not working by reason of incapacity caused by a work injury did not fall within the phrase “other leave” in s 5(3) of that Act. The Court construed the words “annual, sick or other leave” as all relating to payment made by an employer in connection with employment. It noted at [58]-[59] that while the observations in Woolford at [105] were made in a different statutory context, there was no reason to doubt their accuracy or utility and the Court expressly rejected the claim that the statements about leave made in Woolford were wrong. I respectfully agree with those observations.

12. [135]

    It is notable that the majority in Woolford acknowledged that a construction of s 3(2) of the Long Service Leave Act which had the effect of disregarding weekly payments received by the worker under the Workers Rehabilitation and Compensation Act produced “an unfortunate result”, which deserved Parliament’s attention (see at [115]). In my view, there is a need for similar judicial restraint here. The term “leave” should be given its ordinary meaning and should not be strained. All the more so where there is available a power to make a regulation to address any unacceptable unfairness in that interpretation. (Incidentally, it was noted in Knight at [60] that the Long Service Leave Act was amended after Woolford so as to incorporate time spent away from work by reason of compensable work injuries when calculating an entitlement to long service leave).

13. [136]

    Interpreting “leave” in the context of the expression “period of unpaid leave”, as referring to an entitlement or authorisation which relieves a worker of the performance of their duties by or under an employment contract, statute or industrial agreement, is also consistent with other provisions in the Compensation Act which describe other types of “leave”. For example, s 49(1) provides that compensation is payable in respect of a period of incapacity for work even though the worker has or may receive any payment, allowance or benefit for “long service leave”. Similar provision is made in s 50(1) in respect of “sick leave”. Both those kinds of leave involve an entitlement or authorisation which excuses a worker from performing their duties of employment.

14. [137]

    It may be accepted that a worker may receive both weekly compensation under the Compensation Act as well as payment for sick leave under any Act, award or industrial agreement or contract of employment (see s 50(1)). But no anomaly is produced if the receipt of weekly compensation payments does not fall within the ambit of the term “leave” in cl 2(3)(a). That is because, in my respectful view, the term “leave” does not cover the situation where a worker is absent from employment due to compensable injury in the ordinary sense of that term.

15. [138]

    Returning now to the power to make a regulation so as to avoid an unfair or unjust outcome, cl 2(3)(a) empowers the making of regulations to provide for the adjustment of the relevant earning period for a worker in employment (including, for example, by extending or reducing the period) to “take into account any period of unpaid leave” or “other change in earnings circumstances in the employment”. It is necessarily implicit in the phrase “other change in earnings circumstances in the employment” that it goes beyond the concept of “any period of unpaid leave”, otherwise the phrase would be otiose. Assuming for the moment that the expression “period of unpaid leave” does not include a period during which a worker receives workers compensation payments, a regulation could be made under cl 2(3)(a) requiring an adjustment to be made of the relevant earning period for a worker in employment so as to include in that relevant period part or all of the time during which an injured worker received such compensation. That is because this would involve the making of a regulation adjusting the relevant earning period with reference to the period within which such compensation was being received, which falls within the expression of “other change in earnings circumstances in the employment”.

16. [139]

    According their ordinary meaning to the words in the relevant expression is consistent with other authority, including the High Court’s approval in Collector of Customs v Agfa-Gevaert Ltd (1996) 186 CLR 389 at 398; [1996] HCA 36 of the following observations of Lord Simon of Glaisdale in Maunsell v Olins [1975] AC 373 at 391:

17. [140]

    Secondly (and necessarily related to the first point because of the collocation “unpaid leave”), I do not consider that the receipt of workers compensation payment is unpaid leave within the meaning of either cl 2(3)(a) or reg 8E. The notion of such receipt constituting “unpaid leave” sits uncomfortably with the legislative scheme in Pt 2 of the Compensation Act imposing liability on an employer to pay compensation to an injured worker. The scheme involves the payment of compensation where such liability arises. Thus s 9(2) of the Compensation Act explicitly provides that compensation “is payable” where a worker has received an injury in circumstances which make the employer liable.

18. [141]

    Where a total or partial incapacity for work results from an injury, the “compensation payable” includes a weekly payment during the period of the incapacity (s 33). The concept of “weekly payments” also appears in ss 34-40. Assuming for the sake of argument (and contrary to the above) that a worker’s absence from work because of incapacity may properly be described as “leave”, that leave is more accurately described as “paid leave”, because of the receipt of weekly payments of workers compensation. It is artificial to describe a worker receiving workers compensation as being on “unpaid leave”.

19. [142]

    Thirdly, I do not consider that the text of cl 6(2)(c) has any particular significance in construing the meaning of the expression “period of unpaid leave” in cl 2(3)(a) or reg 8E. Clause 6(2)(c) excludes from the term “income” (which is an aspect of “earnings”) any prior payments made under workers compensation legislation. This provision applies to a worker who is totally or partially incapacitated for work. It therefore has a wider scope than reg 8E, which only operates where no earnings in the employment were paid or payable to the worker, thereby necessarily excluding a worker who has been partially incapacitated and continues to work and receive lower weekly earnings.

20. [143]

    In any event, it is significant that cl 6(2)(c) contains an explicit and unequivocal provision that states that the “income” of a worker does not include any payment in respect of loss of earnings under a scheme to which the workers compensation legislation relates. Self-evidently, Parliament turned its mind to this matter in the context of defining what are “earnings” in that provision. There is, however, no equivalent unequivocal provision regarding the relevance of receipt of workers compensation payments in calculating pre-injury average weekly earnings. It should be assumed that Parliament was content to leave it to the Executive to make an appropriate regulation on the subject if seen fit to do so.

21. [144]

    Fourthly, I do not consider that the proper construction of the expression “unpaid leave” in cl 2(3)(a) and reg 8E is assisted by reference to the terms of former s 44C(1) of the Compensation Act, the terms of which are set out at [57] above. That provision contained a definition of pre-injury average weekly earnings which operated from October 2012 until its repeal by the 2018 Amendment Act. The definition in s 44C(1) relevantly provided that pre-injury average weekly earnings in respect of a relevant period in relation to a worker meant the sum of various figures, which included “the average of the worker’s ordinary earnings during the relevant period (excluding any week during which the worker did not actually work and was not on paid leave) expressed as a weekly sum” (emphasis added). The text of that provision is in different terms to the expression “unpaid leave” in the current legislation. While it is true that the extrinsic material to the 2018 amendments does not indicate that the Parliament intended to effect a change from the position under s 44C(1)(a), I do not consider that the repeal of s 44C(1) and its replacement provides support for the Deputy President’s construction. That is because the text of the provisions is notably different.

22. [145]

    Further, the change begs the question whether the expression “was not on paid leave” covers the receipt of payments of workers compensation. In particular, do such payments represent “paid leave”? As I have emphasised, to the extent that the 2018 Amendment Act operates to produce unfair or unjust results, the regulation-making power is available to redress any perceived unfairness. The failure to date to make such a regulation in respect of circumstances such as those which have arisen here may simply reflect the fact that to date the executive considers that no regulation is warranted.

23. [146]

    Fifthly, I do not consider that the construction of cl 2(3)(a) of Sch 3 should be predicated upon a parliamentary intention (subject to any regulations being made) that periods of unpaid leave would merit an adjustment of the relevant earning period for the purpose of calculating pre-injury average weekly earnings. Again, this simply begs the question as to whether or not workers compensation payments constitute “unpaid leave”.

24. [147]

    Sixthly, although purpose is undoubtedly a relevant consideration in the task of construction, it has limited utility in a case such as this. That is because, although the legislation can accurately be described as “beneficial”, it also represents the outcome of a balancing of competing considerations in implementing that purpose. Moreover, it is important to appreciate that one part of the implementation of that purpose is the creation of the regulation-making power to address any anomalies or unfairness in the operation of the primary legislation. This has important ramifications for the Court’s role in legislative construction.

25. [148]

    For these reasons, I would allow the appeal. I accept the appellant’s submission that this is an appropriate case for this Court to determine the matter, rather than remit it.

Orders

1. [149]

   I would make the following orders:

   1. (1)

      The appeal is allowed.

   2. (2)

      Set aside the orders made by the Deputy President on 23 June 2023.

   3. (3)

      In lieu thereof:

   4. (4)

      Dismiss the notice of contention.

   5. (5)

      There be no order as to costs.