July 2016

Section 33 Workers Compensation Act 1987 (NSW) - Work capacity or liability dispute?

The Court of Appeal determines Sabanayagam v St George Bank Limited, [2016] NSWCA 145, 27 June 2016.

The Court of Appeal has overturned the Presidential decision of the WCC and found that a purported liability dispute relying upon section 33 of the Workers Compensation Act 1987 (the Act) was not a work capacity decision.  An Arbitrator and the Deputy President were wrong to view the decision as work capacity, and to find that the Commission had no jurisdiction.  The outcome is that the dispute is to be remitted to an Arbitrator for determination.

Background

The worker suffered her injury in October 2006 and was a long-term, voluntary recipient of weekly benefits.  The insurer made two work capacity decisions in 2014.  In August the first WCD reduced payments to nil but upon an internal review in September the insurer determined that the worker had no current work capacity.

In March 2015 the insurer issued a section 74 Notice disputing liability on the basis that the injury had resolved (relying upon section 4 – no injury in the course of employment) and that there was no incapacity by reason of injury (section 33).

If it was common ground that the worker had received more than 130 weeks of weekly compensation, and was beyond the second entitlement period.

Both the Senior Arbitrator and the Deputy President found there was a dispute about work capacity which denied the Commission jurisdiction.  DP O’Grady found the insurer’s decision in March 2015 to discontinue payments was a work capacity decision and, accordingly, the Commission did not have jurisdiction.

The Presidential decision had practical implications on two fronts.  WorkCover directed insurers not to utilise section 33 to determine ongoing liability for weekly payments.  Section 33 had been widely used in dispute notices to decline ongoing liability.

The second ramification was notice by WIRO that it would not fund applications to dispute section 74 notices which relied upon section 33 on the basis that they were, in reality, work capacity decisions.  Workers were recommended to follow the review procedures as set out in section 44BB.

The worker took this matter to the Court of Appeal.

Court of Appeal decision

The Court of Appeal was unanimous in its view that the decision in question was not a work capacity decision.  Sackville AJA (with whom Beazley P agreed) found there was nothing to indicate that the insurer was exercising its powers to make a decision about the worker’s current work capacity.  It had not followed the Work Capacity Guidelines and had not conducted a work capacity assessment prior to making this decision in March 2015.  There was nothing in the dispute notice to indicate the insurer had directed its attention to the definition of suitable employment under section 32A, and it was not purporting to exercise the function and powers conferred by sections 38(2) and (3). 

The dispute notice had denied liability on the grounds that the worker was no longer suffering an injury arising out of or in the course of her employment, and was no longer totally or partially incapacitated within the meaning of section 33.

Whilst finding that the insurer had not made a work capacity decision, the Court also found the Act does not confer power on the insurer to decide that:

  • The worker no longer suffered injury arising out of or in the course of employment; and
  • The worker was no longer totally or partially incapacitated for work.

This followed from the fact that the worker was beyond the second entitlement period and, as a result, could only have her entitlement determined by a work capacity assessment undertaken by an insurer.  But the decision that the insurer made in this instance was not a work capacity decision.

Implications

It would seem to follow from the Court of Appeal decision that there is scope for insurers to utilise section 33 to make a liability dispute, but not beyond the second entitlement period.  Once a worker passes 130 weeks of compensation the only avenue open to an insurer is a work capacity decision following a work capacity assessment.  But the decision seems to leave open the possibility to utilise section 33 for a liability dispute within the first and/or second entitlement periods.

Since the decision WIRO has announced that funding will now be available to workers to challenge in the WCC decisions by insurers about total or partial incapacity, a clear reference to the application of section 33.  The position of icare is not known at this stage.

The dispute in Sabanayagam is still to be determined by an Arbitrator at the WCC in accordance with the orders of the Court of Appeal so the story is not yet complete.  In the circumstances, all is not yet clear and insurers would be recommended to seek advice before determining liability by means of section 33.  What is clear is that the drafting of any section 74 Notice needs to take care to avoid concepts of work capacity.

Author: Gary Forster