--- Magistrate B.R. Wright. Melbourne REASONS FOR DECISION ---

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1 IN THE MAGISTRATES COURT OF VICTORIA AT MELBOURNE C IAN DEANS Plaintiff v SOMERVILLE PLASTER PTY LTD Defendant --- MAGISTRATE: Magistrate B.R. Wright WHERE HELD: Melbourne DATE OF HEARING: 30 January 2014 DATE OF DECISION: 14 February 2014 CASE MAY BE CITED AS: Deans v. Somerville Plaster Catchwords: REASONS FOR DECISION --- Workers Compensation Weekly Payments Pre-Injury Average Weekly Earnings Worker in Partnership Ascertaining Amount Not Attributable To Labour Component Relevance of Other Partners to Total Remuneration Accident Compensation Act 1985 (Reprint No. 19) ss 5A(7), 5AA (1) & 8(4) Accident Compensation Regulations 2001 reg 13 & Schedule APPEARANCES: Counsel Solicitors For the Plaintiff Mr M Roche Ryan Carlisle Thomas For the Defendant Mr M Richards Herbert Geer i

2 HIS HONOUR: 1. Mr Deans suffered a work related injury to his right shoulder on 18 November 2011, while working as a plasterer for Somerville. It is agreed that he was a deemed worker at the time pursuant to the Accident Compensation Act performing services exclusively for Somerville and in partnership with his wife, then known as "IA & HJ Deans". 2. He challenges the quantification of his pre-injury average weekly earnings for the purposes of calculation of his weekly payments of compensation. The relevant provisions of s.5a and 8 came into effect pursuant to Act 80 of The authorised agent has assessed the PIAWE at $924 per week whereas Mr Deans claims it should be $1198 per week. 3. There was no dispute between the parties on the facts and financial figures in this case. The real issue in this is the application of Act 80 of 2010 provisions to these agreed facts and figures. 4. Mr Deans worked solely as a plasterer. His wife had separate full time employment. Mr Deans said that his accountant calculated the number of hours his wife would have worked on partnership business, mainly on administration. He then used that as a basis for a distribution of the partnership income. Mrs Deans only worked a nominal number of hours on partnership business. After deductions were made from gross income, slightly less than 5% was distributed to Mrs Deans and the balance to Mr Deans for the purposes of the tax year ending June The partnership income for tax year ending June 2012 was obviously affected by Mr Deans' work injury. He was off work completely for about three and a half months before returning initially on part time and then full time light duties. However, a similar distribution of 95/5 was made in that tax year as well. 1 DECISION

3 6. It was agreed between the parties that over the 52 weeks prior to the date of injury that a gross amount of $73,350 was paid by Somerville to the partnership, the hourly rate for Mr Deans' services being $36 per hour. It was further agreed that Mr Deans actually worked 49 weeks in that period. 7. Mr Deans gave evidence he used his own hand tools such as trowels and light scaffolding. Somerville provided larger scaffolding and all materials. Mr Deans would sometimes pick up materials in his car and used his own mobile for business purposes. 8. The authorised agent assessed Mr Deans' pre-injury average weekly earnings at $924. It looked at the total sum paid to the partnership by Somerville in the period up to June 2011 tax year referred to in the partnership tax return of $67,970. After deductions, the amount distributed to Mr Deans was $41,932. This figure is 61.7% of the total gross partnership income of $67,970 which it says reflected his actual net income for that financial year. 9. It then applied that figure of 61.7% to the gross financial partnership income figure for the 52 weeks prior to the date of injury, namely $73,350. That gives a figure of $45,257 which it says reflected Mr Deans actual income, net of business expenses, for those 52 weeks prior to the date of injury. As he only worked for 49 of those weeks, this gives an average pre-injury average weekly earnings figure of $ Counsel for Mr Deans puts his case simply. He referred to the prescribed amounts of remuneration as set out in Accident Compensation Regulations 2001 reg 3 and Schedule 3 which deems a percentage figure referrable to the provision of the contractor's provision of materials or equipment. For plasterers that figure is set at 20% in the Schedule. I will consider those 2 DECISION

4 provisions in more detail later. 11. He then applied the balance of 80% to the agreed gross payment over the previous 52 weeks of $73,350 to give a figure of $58,680 which he submits is the relevant actual income net of business expenses. Applying the 49 weeks figure, this gives a pre-injury average weekly earnings figure of $ The differences between the parties really boiled down to two issues. Firstly, how are the amounts attributed to the use of Mr Deans own equipment and materials taken into account? Secondly, should any and if so what apportionment be made to account for the fact that only one member of the partnership has been injured? These issues require a consideration of the post-act 80 of 2010 provisions relating to contractors. Neither counsel referred to any relevant reported or unreported decisions on the applicable provisions. 13. Both parties agreed that Somerville is the principal and that the IA & HJ Deans partnership is the contractor pursuant to s.8. There is no dispute that Mr Deans is entitled to benefits under the Act pursuant to s. 8(4) as the "worker". Pursuant to s.8(4)(c), the total amount paid by the principal is deemed to be remuneration for the purposes of the Act and the Accident Compensation (WorkCover Insurance) Act 1993, less the "applicable prescribed percentage". 14. The latter phrase refers to reg. 13 of the Accident Compensation Regulations 2001 which deems a certain percentage applicable to various trades, professions and occupations for the "provision of own materials and equipment". Schedule 3 of those regulations fixes 20% of the amount paid for plasterers. Regulation 13 states that part, i.e. 20% in this case, is not deemed to be remuneration pursuant to s.6(3) or s.8(4)(c)(i) of the Accident 3 DECISION

5 Compensation Act Remuneration is defined in s.5 of the Act as having "the same meaning as it has in s.3aa of the Accident Compensation (WorkCover Insurance) Act 1993". Such definition includes such payments as "wages, remuneration, salary" etc or an amount or payment that under the Accident Compensation Act is deemed remuneration. However, it does exclude the applicable prescribed percentage that I have already referred to. 16. Finally there is s.5a(7) which states "in relation to a worker to whom s.6 or s.8 applies, the worker's pre-injury average weekly earnings must be calculated with reference to the amounts payable to the contractor and deemed to be remuneration under the section expressed as a weekly sum" (emphasis added). 17. Both parties agree that pursuant to s.5a(1) and 5AA(1) the relevant prior period to calculate the pre-injury average weekly earnings is 52 weeks prior to the injury, and for a total of 49 weeks of that period actually worked. Counsel for Mr Deans submits that the total amount of remuneration to the partnership less the "applicable prescribed percentage" is the relevant gross figure, which is then divided by Counsel for Somerville submits that the applicable prescribed percentage is only relevant for the calculation of premium purposes and does not reflect the use of own equipment or materials in any case. He submits that reference should be made to the last actual full completed individual tax return to ascertain the actual earnings of Mr Deans for the labour component net of any amount for own materials and equipment. 19. In my view both Counsel are partially correct and partially incorrect in their 4 DECISION

6 submissions. I agree with both counsel that the total amount paid by Somerville to the partnership over the previous 52 weeks is the relevant first component to be considered. This is the "total amount paid" pursuant to s.8(4)(c) of the Accident Compensation Act. However, the applicable prescribed percentage must be deducted if there is such in any given case. 20. Schedule 3 of the Regulations sets out 18 separate trades, professions or occupations. If the relevant contractor does not fall within those 18 classifications then s.8(4)(c)(ii) directs a consideration of the "the part of the total amount not attributable to the provision of labour." Thus, if the contractor's trade, profession or occupation is within the Schedule 3, one must disregard the net or actual amount not attributable to the provision of labour. If not, the actual non-labour component must be considered and calculated. 21. Such a provision, that is in Schedule 3, gives some certainty and simplicity to the calculation of pre-injury average weekly earnings for the listed trades, professions or occupations. I do not agree that the applicable prescribed percentage is only relevant for the purposes of calculation of premium. The wording at the end of s.8(4) makes it clear that this net figure is deemed to be remuneration for the purposes of the Accident Compensation Act and the Accident Compensation (WorkCover Insurance) Act. 22. This is also made clear by s.5a(7). If s.8 is applicable to a worker, the pre-injury average weekly earnings must be calculated "with reference to the amounts payable to the contractor and deemed to be remuneration, under that section expressed as a weekly sum" (emphasis added) 23. Thus, the gross figure found to the partnership over the previous 52 weeks of $73,350 must be reduced by the applicable prescribed percentage of 20% to get the amount relating to the provision of labour which is $58,680. I 5 DECISION

7 agree with both Counsel that this figure must be divided by the 49 weeks actually worked in that period to give a weekly sum of $1198. However, this amount is payable to the partnership, and not in respect of Mr Deans' labour personally. 24. The next question is whether the full $1198 should be used as pre-injury average weekly earnings to calculate weekly payments payable to Mr Deans as an individual. Of course, all partnerships will involve more than one person. Some partnerships may involve a tradesman worker and a spouse partner contributing to the partnership by way of administration and/or bookkeeping type activities. Other partnerships may well involve a group of individuals performing similar work by way of trade, occupation or profession. Some partnerships may be a combination of those two examples. 25. In the present case only one of the partners has been injured. There appears to be no specific provision in the Act as to whether the whole partnership remuneration as defined should be used as pre-injury average weekly earnings or whether a lesser sum should be used to reflect the individual worker's contribution to the partnership. This would be particularly important in a case where an injured worker is one of a partnership of several tradesmen. 26. However, I believe that s.5a(7) does consider this situation. It makes reference to a worker and amounts payable to a contractor deemed to be remuneration. It also uses the phrase "with reference to". The worker's preinjury average weekly earnings "must be calculated with reference to the amount payable to the contractor and deemed to be remuneration under that section." 27. The individual worker's pre-injury average weekly earnings is not defined as 6 DECISION

8 specifically being the contractor's deemed remuneration. I therefore find that the use of the phrase "with reference to" allows the individual worker's percentage contribution to the partnership to be used in calculating his or her actual pre-injury average weekly earnings. 28. In this case there is no dispute that the 95% figure used in the partnership distribution was an appropriate apportionment. Thus, I find that 95% of the $1198 figure I have referred to above is his pre-injury average weekly earnings. I fix that amount at $ DECISION