Australia: Court Of Appeal Decides Employer´s Workers Compensation Liability For A Disease Of Gradual Onset With A Deemed Date Of Injury Of 12 July 2006 Extinguished By A Commutation Agreed On 30 March 2000

Last Updated: 27 August 2008
Article by Andrew Spearritt

Gales v Lovett, McCracken & Bray Pty Limited [2008] NSWCA171

Hodgson JA, Ipp JA and Hoeben J

In Brief

  • The New South Wales Court of Appeal has decided that a disease of gradual process resulting from the nature and conditions of employment, with a deemed date of injury being 12 July 2006, can be included as a type of injury for which an employer's liability has been extinguished, pursuant to a commutation agreement on 30 March 2000.
  • Further, it was decided that a commutation agreement which removes liability for "loss" pursuant to the now repealed Table of Maims can also remove liability for "permanent impairment" contained in the current legislation.


Previous Claim

  • Frank Gales ("the Worker"), the appellant in the Court of Appeal proceedings, was a merchant seaman employed by Lovett McCracken & Bray Pty Limited ("the Employer"), the respondent in the Court of Appeal proceedings, from about 1951. On 23 March 1999, the Worker filed an Application for Determination in the Compensation Court, seeking lump sum compensation for various injuries alleged to have occurred between 1985 and 1991.
  • At the time, the legislation allowed for claims to be commuted, whereby a worker was paid an estimate of his future compensation entitlements in one lump sum and the employer was released for any further compensation payments.
  • On 30 March 2000, the Worker agreed to commute his claims. He agreed that any current or future right to workers compensation payments would be extinguished once he agreed on the lump sum payment. This was said to include compensation for injuries such as "skin cancer . . . received by the [Worker] during the course of his/her employment with the [Employer] including injuries arising out of the nature and condition of that employment . . . ".
  • In 2001, the Workers Compensation Act 1987 was amended. The amendments included replacing the concept of "loss" with "permanent impairment" and repealing the option of commuting a workers compensation claim.
  • On 12 July 2006, the Worker made a claim for 12% whole person impairment resulting from a "skin cancer condition". Pursuant to s15 of the amended Workers Compensation Act 1987, the deemed date of injury for the skin cancer condition was the date notice of injury was given, being 12 July 2006. The Employer argued that it was not liable for the new claim based on the commutation agreement of 30 March 2000.
  • On 14 May 2007, a Workers Compensation Commission Arbitrator agreed with the Worker and decided that because the deemed date of injury was 12 July 2006, the commutation in March 2000 "could not have operated to extinguish a right in respect of an injury which did not occur until 2006".
  • On review, Acting Deputy President Handley found in favour of the Employer on 19 September 2007, in that the commutation was effective to remove liability for the injuries listed including skin cancer.

Court of Appeal Proceedings

Grounds of Appeal

  • The Worker appealed the decision and relied upon various grounds, including:

1. "The Acting Deputy President erred in law when he found that the commutation commuted the [worker's] entitlement to permanent impairment benefits when those benefits were deemed to have resulted from an injury that occurred after the commutation...

2. The Acting Deputy President erred in law when he considered that s15 of the Workers' Compensation Act 1987 (NSW) only applies to determine upon which employer liability to pay compensation falls".


  • The Worker submitted to the Court of Appeal that s15 of the amended 1987 Act deemed the injury to have occurred on 12 July 2006 and that accordingly, it could not be an injury to which the Worker could agree to commute liability in March 2000. It was further submitted that on 30 March 2000, the Compensation Court did not have the power to commute a liability in respect of an injury which did not occur until July 2006.
  • The Worker also submitted that as at March 2000, the Compensation Court's powers were limited to commuting liability to pay compensation in respect of losses according to the now repealed Table of Maims. It was argued that permanent impairment, found in the amended legislation, was "a different thing to a loss". Accordingly, it was argued liability could only be commuted for loss or loss of efficient use, not permanent impairment.
  • Finally, it was argued that the commutation only applied to injuries which occurred during the Worker's employment with the Employer up to July 1996. It was therefore argued that the terms of the commutation did not apply to any injury occurring after July 1996 and that because the deemed date of injury for skin cancer condition was in 2006, the injury could only be said to have occurred after July 1996.


  • The question for the Court of Appeal was whether the now repealed s51(3) of the 1987 Act, with respect to commutation agreements, had the effect of removing the Employer's liability for the compensation claimed by the Worker in July 2006.
  • It was decided that the commutation agreement provided that the payment of the lump sum to the Worker removed any liability of the Employer to which the agreement related. It was noted that the Worker had agreed that liability would be extinguished in respect of skin cancer and all or any injuries received by the Worker during the course of his employment.
  • Hodgson JA decided that the injury relevantly arose during the period of employment and that accordingly, it was an injury to which the commutation agreement referred. It was held that even if the Worker's skin cancer increased after the commutation agreement in March 2000, the injury would still fall within the category of injury for which liability was released in 2000.
  • Although it was acknowledged that "loss" was different from "permanent impairment", it was held that liability could still be removed for "permanent impairment" as it was the same general type of compensation referred to in the previous legislation. Further, it was held that it could not have been the intention of the Legislature to deprive commutation agreements of their effect in removing liability following the 2001 amendments.
  • It was decided by Hodgson JA that the Worker's appeal should be dismissed with costs. Both Ipp JA and Hoeben J agreed with Hodgson JA.


  • The significance of this decision is that for proceedings brought in relation to a disease of gradual process after a commutation agreement has been made in relation to the same period of employment and covering the same type of injury, an employer may be able to deny liability for further compensation.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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