D'orsogna Limited v Zhang [2019] WADC 73

The facts

On 28 May 2015, Zhang struck her right knee on a stainless steel tub (the incident) while working for D’Orsogna and subsequently made a workers’ compensation claim. On 16 June 2015, D’Orsogna’s insurer accepted liability and commenced weekly workers’ compensation payments. On 1 October 2015, Zhang underwent an MRI of her right knee which identified a meniscal tear which was not present on prior imaging. D’Orsogna then obtained medical evidence which indicated that not only was the meniscal tear not consistent with the incident, but also that Zhang had suffered from problems with her right knee before the incident which were not disclosed in her workers’ compensation claim forms or to the specialist medical practitioners who had reviewed her in respect of her claim.

The conciliation

On 23 December 2016, D’Orsogna made an application (Application No. A40355) pursuant to s60, s62 and s71 (seeking a refund for the compensation paid to Zhang).

The section 60 and 62 Applications were heard and determined on 31 May 2019 by Arbitrator Nunn. Arbitrator Nunn determined that there was a genuine dispute as to the liability and ceased Zhang’s payments.

The arbitration

On 25 October 2017, Zhang filed an Application for Arbitration pursuant to s58. On 28 June 2018, Zhang’s Application and D’Orsogna’s s71 Application were heard, Arbitrator Soh dismissed both Applications.

Arbitrator Soh found that Zhang withheld significant/critical information. Arbitrator Soh made specific adverse findings about Zhang’s credibility and found that she had no lawful entitlement to compensation.

Arbitrator Soh dismissed D’Orsogna s71 Application on numerous grounds including:

1. that there was little likelihood that the money could be recovered from Zhang; and
   
   
2. that if he were to exercise his discretion pursuant to section 71, this would place undue financial hardship on Zhang.
   
   

The appeal to the district court

D’Orsogna appealed Arbitrator Soh’s decision. The Appeal was heard by DCJ Davis on 29 March 2019. DCJ Davis delivered her decision on 7 June 2019.

Davis summarised, but did not limit, the factors to be considered when exercising s71 discretion to include:

• whether the worker obtained other paid employment whilst unlawfully receiving weekly payments;
  
  
• whether the evidence (such as surveillance footage) reveals that the worker engaged in such strenuous activities as to establish that the worker’s presentation to the certifying practitioners was fraudulent;
  
  
• whether the worker went out of his or her way to maximise the effect of his disability;
  
  
• whether there was malingering by the worker;
  
  
• the past or present physical condition of the worker;
  
  
• the past or present economic or financial condition or circumstances of the worker;
  
  
• compassionate grounds, such as hardship to the respondent and the scant chance of recovery, although compassionate considerations must be weighed against the fact that the worker received money for which there was no entitlement; and
  
  
• the employer’s own conduct.

DCJ Davis stated that while Zhang was not entitled to payments, this did not force the Arbitrator to exercise his discretion to order a refund of the workers’ compensation payments made to her. DCJ Davis stated that compassionate grounds and the total circumstances of the case should be taken into consideration when making a decision to exercise discretion
pursuant to s71.

DCJ Davis found that in dismissing D’Orsogna’s Application, Arbitrator Soh went into considerable detail about the respondent’s financial and social circumstances, including Zhang’s partner’s income, assets owned by Zhang and the fact that Zhang’s family expenses exceeded their income when making his decision.

This was despite Counsel for D’Orsogna arguing that Zhang was found to have been dishonest in acceptance of payments and that Arbitrator Nunn had made adverse finding about the respondent’s credibility. Counsel for D’Orsogna argued that this should have extended to Zhang’s statements regarding her family’s financial position and that Arbitrator Soh should not have accepted her statements about the family income and expenses. DCJ Davis found that it was within the Arbitrators ability to accept part of Zhang’s evidence and to reject or form no opinion on other parts.

DCJ Davis observed that Zhang’s “wrongdoing was still a factor to be taken into account in the exercise” of s71 discretion and that Arbitrator Soh had not erred in his finding. DCJ Davis went on to say that as it was within the Arbitrator’s power to make a decision on the likelihood of recovery, the weight given to the wrongdoing of the Respondent and to the amount of worker’s compensation paid. This was a matter for the Arbitrator to decide based on the facts of the case.

Overall, DCJ Davis found that Arbitrator Soh “correctly addressed the principles applicable to an Application made pursuant to section 71 of the Act” and had addressed all matters which were relevant to the exercise of his discretion. DCJ Davis added that Arbitrator Soh had taken “into account and weighted all relevant matters before exercising his discretion”.

Significance to insurers

This case appears to highlight that there is a very high threshold for an employer to be awarded a refund of compensation paid to a worker who has made a fraudulent claim pursuant to s71.

Zhang was found to have “deliberately withheld significant or critical information” about her past injury, and that there “was clearly wrongdoing on her part”. Her credibility was challenged and still the Arbitrator took her claims of financial hardship into account. It also appears that the level of financial hardship appears to have a very high threshold as Arbitrator Soh mentions at passage [171] that Zhang had the financial means to “purchase a new vehicle in 2016, namely the Ford Ranger” which is not an inexpensive car.

Ultimately, the appeal to the District Court was dismissed and CJ Davis found that Arbitrator Soh had taken all relevant information and given correct weight to the decisions when making a decision on exercising discretion pursuant to s71.