The Trustees of the Sisters of Nazareth v Simpson

1. [1]

   The Plaintiff seeks to quash a procedural review by a WorkCover Independent Review Officer conducted under s 44(1)(c) of the Workers Compensation Act 1987 (NSW).

Factual background

1. [2]

   The injured worker (the First Defendant) was a Carer and Assistant in Nursing at Nazareth House, a nursing home. She sustained injuries to her right shoulder in the course of her employment on 14 May 2007 when she attempted to stop a patient from falling. Catholic Church Insurance, the insurer of the Plaintiff, was notified of the claim on 21 July 2007.

2. [3]

   It is not necessary to set out the course of treatment and the worker’s incapacity during the following years. It is sufficient to note that the injured worker ceased work in February 2010. Subsequently she was assessed as suitable for certain duties but she was again assessed as unfit for work at the end of August 2011.

3. [4]

   On 15 December 2014 the insurer made a work capacity decision pursuant to s 38 of the Act. The insurer advised the worker that following a review it had been determined that she was currently capable of working 20 hours per week in suitable employment and earning up to $459.20 per week. It noted that she was currently in receipt of weekly payments of compensation at the rate of $780.40 and that as a result of the work capacity decision the worker would have no further entitlement to weekly compensation. It notified her that the reduction to the worker’s weekly payments would take effect from 22 March 2015.

4. [5]

   In the reasons for its decision the insurer noted that the worker had been paid more than 130 weeks of weekly benefits throughout the life of her claim, she had the capacity to work up to 20 hours per week in light employment, she was not currently employed for 15 or more hours earning more than $173 per week, her treating doctor had issued certificates of capacity indicating that she was capable of working for four hours per day five days per week with particular restrictions and that surveillance material indicated that she was freely able to use her right arm to conduct day to day activities.

5. [6]

   The worker applied for a merits review of the decision by WorkCover pursuant to s 44(1)(b) of the Act. The delegate of WorkCover found that the worker had a present inability arising from the injury such that she was not able to return to her pre-injury employment but she was able to return to work in suitable employment as a receptionist. In order to be entitled to weekly payments of compensation the worker had to meet all three of the requirements contained in s 38(3) of the Act. The worker was not currently working and did not satisfy the requirement in s 38(3)(b) to have returned to work for a period of not less than 15 hours per week and in receipt of a current weekly earnings of at least $173 per week. Accordingly, the delegate of WorkCover found that the worker was not entitled to weekly payments of compensation after the second entitlement period.

6. [7]

   The worker then applied for a procedural review of the work capacity decision under s 44(1)(c) of the Act. In her grounds for seeking a review the worker said this:

The Independent Review Officer’s review

1. [8]

   The delegate of the Independent Review Officer noted in paragraph 7 of her report that the worker’s submissions were reviewed and were limited to the way in which the insurer had managed the claim and the worker’s inability to obtain employment. The delegate said that the submissions were not relevant to procedural review. The delegate noted that the insurer did not make submissions in response to the application.

2. [9]

   The critical parts of the review are these:

3. [10]

   The Guidelines are made pursuant to ss 44(1)(a) and 376(1)(c) of the Act and thereby have the status of delegated legislation.

4. [11]

   Thereafter the delegate made these recommendations:

5. [12]

   The effect of those recommendations was to set aside the merit review made by WorkCover.

The appeal

1. [13]

   The Plaintiff sought review in this Court of that determination of the Independent Reviewer on three grounds. However, ground 2 in the Summons was abandoned. The remaining grounds are these:

The legislation

1. [14]

   The payment of weekly compensation representing loss of income is dealt with in Division 2 of Part 3 of the Act. Section 33 provides that if total or partial incapacity for work results from an injury the compensation payable by the employer under the Act to the injured worker will include a weekly payment during the incapacity. Sections 34 and 35 deal with the amount of the payment. There are then stipulated to be two periods during which payment may be made, called the first entitlement period and the second entitlement period. These terms are defined in s 32A. The first entitlement period means an aggregate period not exceeding 13 weeks, whether or not consecutive, in respect of which a weekly payment has been paid or is payable to the worker. The second entitlement period is defined in the same way but refers to an aggregate period of 117 weeks after the expiry of the first entitlement period.

2. [15]

   Section 36 sets out the formulae for the calculation of the weekly payment of compensation in the first entitlement period for workers who have no current work capacity and those who have a current work capacity. Section 37 provides the formulae in respect of the second entitlement period. The expression “current work capacity” (defined in s 32A) means:

3. [16]

   Section 38 then relevantly provides:

4. [17]

   Section 43 provides for the making of what are called work capacity decisions by insurers. Those decisions are enumerated in s 43(1) and are said to be final and binding on the parties and not subject to appeal or review except review under s 44 or judicial review by the Supreme Court.

5. [18]

   Section 44 relevantly provides:

6. [19]

   It can be seen that under s 44(1) three reviews are available to the injured worker. There is first an internal review conducted by the insurer. There is then a merit review by the Authority which at the relevant time was the WorkCover Authority of New South Wales. That merit review could not take place until there had been an internal review by the insurer except where under s 44(3)(b) the insurer has failed to conduct such a review and notify the worker within 30 days after the application for such review is made. That was in fact the position in the present case.

7. [20]

   Finally there is a review by the Independent Review Officer. There are two restrictions to this review. The first is that such a review cannot take place until there has been both an internal review by the insurer and a merit review by the Authority. There is no equivalent to subs(3)(b) in respect of a review under s 44(3)(c) (ie, a provision removing the need for an internal review) but all involved in this present matter acted on the basis that, although there was no internal review, a procedural review by the Independent Review Officer was permitted, despite the restriction in s 44(1)(c). Secondly, it is:

8. [21]

   Sub-section (3) enabled the making of recommendations by either the Authority or the Independent Review Officer. The recommendations made by the Authority are binding on the insurer and recommendations made by the Independent Review Officer are binding on the insurer and the Authority.

9. [22]

   It should first be remarked that the Scheme for review provided for in s 44 is unusual. After a work capacity decision referred to in s 43 is made the worker, if dissatisfied, may only refer the decision for an internal review by the insurer under s 44(1)(a). If still dissatisfied the worker may seek a merit review by the Authority.

10. [23]

    It is only after a merit review by the Authority that the worker may refer a work capacity decision for review to the Independent Review Officer under s 44(1)(c) and that is “as a review only of the insurer’s procedures in making the work capacity decision and not of any judgment or discretion exercised by the insurer in making the decision”.

11. [24]

    This has the odd result that although there has been a merit review by the Authority, the Independent Review Officer, who finds some defect in the insurer’s procedures, can make a recommendation which has the effect of overturning the merit review by the Authority although there was no error in that review.

12. [25]

    Further, one might reasonably expect that a review of the insurer’s procedures would take place before there was a merit review by the Authority of the insurer’s decision, and not afterwards, so that the insurer could correct its procedures and make a valid work capacity decision before there was a need for a merit review. An alternative possibility is that the legislation never intended that the procedural review could result in the setting aside of the insurer’s decision, particularly because it would either have been set aside or approved in the merit review. Rather, the Independent Reviewer was simply to make recommendations that must be followed in the future by both the insurer and, if relevant, the Authority. It is instructive in that regard to note that the reviewer is to make recommendations. There is nothing to suggest that the reviewer is to set aside or overturn or modify the insurer’s decision.

13. [26]

    The precise reason for the scheme of review in s 44(1) is not apparent. No assistance is provided in the explanatory memorandum to the 2012 Bill nor in the Second Reading Speeches which do not refer to the review provisions in any event.

14. [27]

    What the present proceedings raise for decision is the precise scope of the review under s 44(1)(c) and, in particular, whether the “insurer’s procedures” include the reasons given by the insurer for the work capacity decision.

Submissions

1. [28]

   The Plaintiff submitted that the words of s 44(1)(c) of the Act suggest that the review is confined to procedures followed which are preparatory to the making of the decision and not the reasons expressed for the decision, because the words of the section expressly preclude review of any judgment made or discretion exercised. That is reinforced by the fact that the procedural review occurs after the merit review. The procedural review is not concerned with the decision at all or the reasons expressed for the decision because any deficiency of that kind has already been the subject of the merit review.

2. [29]

   The Plaintiff submitted that either no deficiencies were identified or the deficiencies were not sufficiently material to justify setting the decision aside. The Plaintiff submitted that there was no breach of the Guidelines.

3. [30]

   The Plaintiff submitted that s 59A of the Act was set out and that the impact of the decision itself was explained succinctly within the decision. It was not necessary to explain the impact of a decision which could be made in the future as that was outside the scope of the requirement.

4. [31]

   The Plaintiff submitted that the manner in which the requirement is expressed indicates that it is those steps which are material or essential to the making of the decision which must be clearly explained. Section 38 suggests that the necessary and essential steps are the matters identified in s 38(3) and these were set out in the decision.

5. [32]

   The Plaintiff submitted that the amount the worker could have earned in suitable employment was not material to the decision, it need not have been calculated, and did not require any further elaboration in order for the worker to understand why the worker was not entitled to ongoing weekly payments.

6. [33]

   Unfortunately, all of the Defendants including the injured worker filed Submitting Appearances. Accordingly, there was no contradictor in respect of the submissions made by the Plaintiff. This was especially unfortunate because this appears to be the first time that the provisions governing a review such as that made by the Independent Reviewer have been reviewed in this Court.

Consideration

1. [34]

   Some guidance as to what are regarded as the insurer’s procedures appear in the Work Capacity Guidelines that relevantly came into effect on 11 October 2013. The following guidelines might be thought to deal with the procedures in making work capacity decisions:

2. [35]

   The position is perhaps summed up in a flow chart that is set out in the Guidelines as follows:

   1. (1)

      Identify the need for a work capacity decision (see section 5.1).

   2. (2)

      Identify the type of work capacity decision that needs to be made.

   3. (3)

      In light of the particular circumstances of the claim, consider the relevant and available information. Is there enough information to make a logical, rational and reasonable work capacity decision? [If no, go to (4). If yes, go to (5)]

   4. (4)

      Obtain additional information via consultation or third party assessments.

   5. (5)

      Assess all available and relevant information as a whole.

   6. (6)

      Make a preliminary decision and determine the likely impact of this decision on the worker. Is the preliminary decision an adverse decision? That is, will the outcome of this decision result in a reduction or discontinuation of the worker’s weekly payments? [If yes, go to (7). If no, go to (8)]

   7. (7)

      Advise the worker of the preliminary decision and the likely impact of this decision. Provide opportunity for the worker to submit additional information for consideration.

   8. (8)

      Make the work capacity decision based on all the information available, including any additional information that has been submitted by the worker.

   9. (9)

      Advise the worker of the decision and the impact of this decision. If this is an adverse decision, provide written advice of a work capacity decision and comply with the legislative notice requirements before reducing or discontinuing the worker’s weekly payments.

3. [36]

   A narrow reading of the “insurer’s procedures” would result in the enquiry being only concerned with procedural fairness. I do not think that is what the legislation means. If that was the focus of the enquiry I should have expected that s 44(1)(c) would refer to procedural fairness. However, the procedures certainly include procedural fairness.

4. [37]

   Other aspects of the procedures which ought to be followed are identified in the Guidelines reproduced above. Contrary to the Plaintiff’s submission, I do not think that the procedures are confined to matters which are preparatory to the making of the decision. The Guidelines suggest otherwise. For example, clause 5.3 requires notification to the worker of the outcome of a work capacity decision. A failure to notify would be a procedural failure which would necessarily post-date the decision.

5. [38]

   Nor do I think that, simply because something is contained within the reasons that are given or ought to be given, it can be considered to be outside the insurer’s procedures. Under the Guidelines the insurer is obliged to provide reasons for its decision. Clause 5.3.2. of the Guidelines sets out the approach the insurer should take to its reasons. A failure to do so seems to me to be a failure in the procedures adopted.

6. [39]

   Analogously, judicial review (which s 44 seems designed to minimise or eliminate as far as possible) enables the supervising court to quash a decision where no reasons or inadequate reasons are given. I accept that that analogy can only be carried so far because s 44(1)(c) expressly excludes from the review “any judgment or discretion exercised by the insurer in making the decision”. That may provide a limitation on an enquiry into the adequacy of reasons provided that reasons are provided. Such an approach would be consistent with the fact that a merit review must already have taken place. Any issue of inadequate reasons will either have been overcome by the reasons given by the Authority when it provides its review or will be dealt with by an application for judicial review as s 43(1) allows. In that way the process in s 44(1)(c) differs from judicial review where ordinarily there is no merit review at all.

7. [40]

   I do not think a broad principle can be laid down in relation to whether the procedural review can examine in any way the reasons provided by the insurer for its decision. Rather, I consider that an examination must be made of the Independent Reviewer’s criticisms of what the insurer has done in any particular case to decide if that matters complained of form part of any judgment or discretion exercised. However, the procedural review is not only concerned with matters which pre-date the decision, and it cannot be said that it does not extend to the reasons.

8. [41]

   Ground 1 fails.

9. [42]

   The two matters identified by the Independent Reviewer which were said to be non-compliance with the Guidelines were (1) a failure to explain how the figure of $459.20 was derived and calculated, and (2) a failure to inform the worker that she may again become entitled to medical and treatment expenses if she became entitled again to weekly payments.

10. [43]

    The relevant part of the insurer’s decision said this:

11. [44]

    It may be accepted that nowhere did the insurer explain how the figure of $459.20 was calculated. An examination of the report from Interact Injury Management does not identify how that figure was obtained.

12. [45]

    What the insurer was required to assess was whether the worker had current work capacity as defined in s 32A (a present inability to return to her pre-injury employment but an ability to work in suitable employment) and in accordance with the requirements of s 38(3). The amount that the worker could earn in suitable employment was irrelevant to the determination of current work capacity. All that had to be ascertained was whether she was able to work in suitable employment. The insurer provided sufficient and adequate reasons for determining that she was able to work in suitable employment.

13. [46]

    The reason the decision went against the worker was that she did not comply with s 38(3)(b), that is, the requirement that she had returned to work for a period of not less than 15 hours per week and be in receipt of current weekly earnings of at least $155 per week.

14. [47]

    It was not necessary for the insurer to calculate or estimate what she could earn in suitable employment. There was no obligation on the insurer, therefore, to provide any basis for its calculation or to say how it had derived that figure. It was irrelevant to the matters which needed to be determined. I note in that regard that the merit review by the Authority, although coming to the same substantive decision and despite finding on not identical grounds that the worker was able to return to work in suitable employment, did not specify what she might have earned in such employment.

15. [48]

    Since the amount the worker could earn in suitable employment was irrelevant to the determination of her current work capacity, there was no failure on the insurer’s part as asserted by the Independent Reviewer. Nothing in the Guidelines required it. By the reviewer’s regarding that matter as a failure by the insurer, the reviewer has made an error of law on the face of the record, and has taken into account an irrelevant consideration.

16. [49]

    In relation to s 59A, the reviewer noted that the insurer had reproduced s 59A and then observed that given the present uncertainty surrounding s 59A “it is unlikely the insurer could do any more in explaining s 59A(2) in the present case”. However, the reviewer then went on to note that the insurer had merely reproduced sub-s (3) without any attempt to explain to the worker that she may again become entitled to payment of medical and treatment expenses should she again be entitled to weekly payments. In that way the insurer was said to have failed properly to explain the legislation and failed to comply with the Guidelines.

17. [50]

    It is difficult to understand what the reviewer is suggesting the insurer has failed to do. Section 59A(3) provides:

18. [51]

    The insurer set that sub-section out along with the remainder of s 59A. The sub-section speaks for itself. It says that the worker will be entitled to compensation in respect of treatment, service or assistance if the worker becomes entitled to weekly payments of compensation at some future time. No further explanation was needed. The Guidelines do not require the insurer to explain the legislation. Rather, the Guidelines in cl 5.3.2 require the insurer to reference the relevant legislation. That was done.

19. [52]

    Further, the reviewer does not identify what part of the Guidelines the insurer has not complied with in that regard. Clause 5.3.2 relevantly only requires the insurer to:

20. [53]

    In asserting that the insurer had failed in that regard the reviewer has made an error of law on the face of the record and has taken into account an irrelevant consideration.

21. [54]

    Even if the reviewer had been correct in assessing that the insurer had failed to comply with the Guidelines in the reasons for its decision, an issue would arise about what effect such failure would have on the insurer’s decision, bearing in mind the merit review conducted by the Authority. Every failure to follow the Guidelines could not result in the setting aside of the insurer’s decision. Such a result would be legally unreasonable.

22. [55]

    Procedural error which amounts to procedural unfairness will amount to an error of law and would ordinarily justify the setting aside of a decision. However, other procedural breaches may not have the same effect. Some light is cast on the result of a breach of a procedural requirement in administrative law by what appears in Aronson & Groves, Judicial Review of Administrative Action (5th ed., (2013) Thomson Reuters) at [6.240]:

23. [56]

    In Project Blue Sky Inc v Australian Broadcasting Authority [1998] HCA 28; (1998) 194 CLR 355 at [93] the joint judgment of McHugh, Gummow, Kirby and Hayne JJ criticised the former distinction made between directory and mandatory requirements to determine whether a breach would result in invalidity. They said a better test for determining the issue of invalidity is to ask whether it was a purpose of the legislation that an act done in breach of the provision should be invalid.

24. [57]

    It is difficult to see how it could have been the purpose of the Workers Compensation Act and the Guidelines published under it that any breach of those Guidelines would necessarily result in the invalidity of the decision. That must be the more so where the present scheme in s 44 provides for a merit review before a procedural review. In one sense the reasons of the insurer, and failures to follow the Guidelines in that regard, have been superseded by the merit review which, for reasons that are far from clear, is not subject to the procedural review. It may be that it was thought inappropriate that anything other than a judicial review of the Authority’s merit review was appropriate.

25. [58]

    Provided that the insurer has asked itself the correct questions when reaching its work capacity decision and provided that it has provided the reasons for its decision in a way that explains the matters set out in the Guidelines, it is difficult to see why an incidental failure should result in the invalidity of the decision.

26. [59]

    Nothing in the legislation suggests that such should be the result. A conclusion that the decision should be set aside is irrational, illogical and is not supported here by findings or inferences supported by logical grounds: Re Minister for Immigration and Multicultural Affairs; Exp applicant S20/2002 [2003] HCA 30; (2003) 77 ALJR 1165 at [37] and [52]; Minister for Immigration and Multicultural Affairs v SGLB [2004] HCA 32 at [38].

27. [60]

    In the present case I have held that there was no breach by the insurer of the matters identified by the Independent Reviewer. If I am wrong in that conclusion, I am entirely satisfied that the breaches were so incidental to the insurer’s task and obligations under the Act and Guidelines that the decision of the reviewer to make recommendations that resulted in the setting aside of the insurer’s decision was entirely unreasonable.

28. [61]

    The only two matters identified by the Reviewer do not produce the result that the work capacity decision of the insurer should be set aside. Ordinarily that would mean that an order in the nature of certiorari would be sufficient. I was asked, however, to make an order in the nature of mandamus. If the worker had appeared at the hearing I would have sought submissions from the parties about whether mandamus was necessary in the circumstances. Out of fairness to the worker I will make an order in the nature of mandamus but the parties may wish to consider if any further procedural review would serve any purpose.

29. [62]

    Since the review by the Independent Reviewer was prepared the description of the Independent Review Officer has been altered to Workers Compensation Independent Review Officer. That will explain what otherwise appears to be a discrepancy between the orders I will make.

Conclusion

1. [63]

   I make the following orders:

   1. (1)

      1. An order in the nature of certiorari quashing the decision of the WorkCover Independent Review Officer made on 8 May 2015;

   2. (2)

      2. An order in the nature of mandamus remitting the application to the Workers Compensation Independent Review Officer for determination in accordance with this judgment.