On 23 November 2018, the NSW Court of Appeal handed down its decision in Pacific National Pty Ltd v Baldacchino  NSWCA 281 (Baldacchino). The Court (per Macfarlan JA, Payne JA and Simpson AJA agreeing) dismissed the appeal against a decision of a Deputy President of the Workers Compensation Commission (WCC).
The Court of Appeal confirmed an Arbitrator’s determination that knee replacement surgery undertaken after expiration of the limitation period prescribed by s59A(1) and (2) of the Workers Compensation Act 1987 (1987 Act) was nevertheless compensable because it came within the scope of the ‘provision of… other artificial aids’ pursuant to s59(6)(a).
The worker suffered an injury to his left knee on 27 October 1999 during his employment with Pacific National Pty Ltd (Appellant) for which he received compensation for, inter alia, the cost of left knee surgery in December 1999. In 2016, the worker was referred for further surgery involving a total knee replacement by his orthopaedic surgeon. The worker sought compensation for this from the Appellant. The Appellant disputed liability.
The worker commenced proceedings in the WCC in relation to the disputed procedure. At first instance, the Arbitrator determined that the proposed total knee replacement surgery was reasonably necessary medical treatment as a result of the injury and that such surgery was not caught by the time limitations contained in s59A(1) and (2) of the 1987 Act. This was so as the surgery in question came within the statutory exemption in s59(6)(a). The decision was confirmed on appeal by a Deputy President of the WCC on 28 March 2018: Pacific National Pty Ltd v Baldacchino  NSWWCCPD 12. The Appellant appealed to the NSW Court of Appeal pursuant to s353 of the Workplace Injury Management and Workers Compensation Act 1998.
Section 59A of the 1987 Act relevantly reads:
’59A Limit on payment of compensation
(1) Compensation is not payable to an injured worker under this Division in respect of any treatment, service or assistance given or provided after the expiry of the compensation period in respect of the injured worker.’
Sub-section 59A(2) sets out the ‘compensation periods’.
Sub-section 59A(6) relevantly provides:
‘(6) This section does not apply to compensation in respect of any of the following kinds of medical or related treatment:
(a) the provision of crutches, artificial members, eyes or teeth and other artificial aids or spectacles (including hearing aids and hearing aid batteries)…
The Arbitrator and the Deputy President in the proceedings below referred to Thomas v Ferguson Transformers Pty Ltd  1 NSWLR 216 (Thomas) in which the NSW Court of Appeal considered whether modification of a motor vehicle were costs of the provision of ‘artificial aids’ pursuant to s10(2)(b) of the 1926 Act.
Macfarlan JA, citing the same authority, emphasised the following in the decision of the majority (at 220-221):
‘An artificial aid, in my opinion, is anything which has been specially constructed to enable the effects of the disability (the result of injury) to be overcome. … The essential quality of an artificial aid is that it is an aid specially tailored to the needs of a person, which flowed from the injury.’
The Appellant sought to challenge the determination of the Commission relying on three primary arguments before the Court of Appeal:
- A total knee replacement did not constitute an ‘artificial aid’;
- The decision in Thomas was not applicable given the changes in the NSW Worker’s Compensation Legislation following that decision and ought not to have been followed by the Arbitrator and Deputy President; and
- Principles of statutory interpretation meant the interpretation of the phrase given by the Arbitrator and Deputy President was incorrect.
The Appellant also argued, as a fallback, that if compensation was payable in respect of the cost of the materials used in the knee replacement operation, the cost of the surgery itself was not covered by the statutory exception.
Decision on appeal
The Court, in dismissing the appeal, considered a knee replacement met the definition of an artificial aid for the purposes of s59A(6)(a). At paragraph , Macfarlan JA said:
‘I accept that “artificial aids” must, as the appellant submits, work to ameliorate the effect of a person’s disability and may comprise a single object or a composite of objects operating together. However, a knee replacement has these characteristics. According to the parties’ agreement, during the surgery the ends of the femur and the tibia are replaced with an introduced material and a piece of plastic is inserted between the bones as reconstructed. Plainly these materials are designed to facilitate the movement and use of the knee after the operation, therefore easing the patient’s disability. Their “provision” (see s 59A(6)(a)) cannot occur without a surgical operation. The cost of the operation therefore falls within the statutory provision.’1
His Honour also disagreed with the Appellant’s contention that an artificial aid ‘must be “complete in itself”‘ and not internal to the body, considering there was no basis for such an assertion in any authority or the legislation.
In respect of the Appellant’s second argument, Macfarlan JA considered the decision in Thomas remained relevant authority and that it did not support the Appellant’s position. As to the third argument, Macfarlan JA did not consider that any principles of statutory interpretation assisted the Appellant.
Finally, with regard to the Appellant’s fallback argument, Macfarlan JA considered the cost of the surgery was a cost of the provision of a total knee replacement because it ‘requires surgery’. That said, he commented (at ):
‘I should not be taken to be adopting a general rule that the cost of surgery is always the cost of “[t]he provision of … artificial aids”, as there may be many cases where the insertion of material into a person’s body is only an incidental part of major surgery. Each case must be decided on its own facts.’
This case raises the following issues:
- The potential for other treatment to be determined ‘the provision of… artificial aids’ thereby avoiding the statutory limitation on liability imposed by s59A of the 1987 Act; and
- In what circumstance will the insertion of material into a person’s body be only an ‘incidental part of major surgery’?
While each case, as Macfarlan JA points out, will turn on its facts, the decision can arguably be viewed as an indication of the Court’s willingness to adopt a wide approach to determining what treatment may fall within the statutory exemption. In so doing, there is the potential for a blurring of the distinction between what has traditionally been considered ‘medical and related treatment’ as defined by s59 and those matters previously considered distinct and to which s59A(6) refers.
The decision also raises questions concerning the proper characterisation of surgery. In many circumstances it would probably not be considered that insertion of material during surgery is incidental. The position in regard to surgery involving temporary installation of materials or surgery where material is inserted but is not the primary purpose of the surgery is less clear.
The decision in Baldacchino highlights the need for there to be clarity in the medical evidence as to whether the primary purpose of surgery is the installation of an artificial aid or, rather, is an incidental purpose. There is certainly scope for disagreement between medical experts on this point. Insurers and employers will then need to ensure that the medical evidence obtained to assist in determining liability where necessary adequately addresses this issue in the context of ongoing technological advancement in treatment.
Insurers and employers should also be minded to pay close attention to the continuing effects of an injury. The decision in Baldacchino does not usurp the principle that the treatment in issue must be reasonably necessary and as a result of the injury thereby satisfying the requirements of s60 of the 1987 Act. The decision of the Court of Appeal does not interfere with the ability to periodically review ongoing liability for treatment, subject to the restrictions imposed by the legislation.
This article was written by Brad Quillan, Partner and John Fennel, Solicitor.
P: +61 2 9334 8866
1The ‘agreement’ to which Macfarlan JA referred was between the parties at first instance and in both appeals concerning what was, in fact, involved in the knee replacement surgery.