Background

12.1 The Act presently provides for interest on awards at 10 per cent per annum or at a rate prescribed, from the date of award.¹ The Amendment Bill increases the rate to 15.5 per cent per annum calculated at monthly rests and substitutes as the commencement date the time of incapacity for which compensation has not been paid.²

12.2 The intention is twofold. First, the rate of interest is to be increased. Secondly, interest is to be payable on all unpaid compensation which becomes the subject of an award from the time of the incapacity rather than from the date of the award, as is presently the case. However, one of the unintended consequences of the amendment is to remove the present entitlement to interest as from the date of the award on compensation other than for incapacity (for example, medical expenses or death benefits).

12.3 We observe that doubts have recently been raised as to whether section 62A of the Act applies to an order redeeming liability pursuant to section 15 of the Act. An opportunity is now presented to remove any such doubts.

Submissions

12.4 In its submission, the Legal Panel for the Labor Council of New South Wales³ pointed to the possible effect of high interest on claim entitlements in encouraging insurers to enter into early negotiations for settlement. The Insurance Council of Australia Ltd.,⁴ however, expressed concern at the proposed increase in the interest rate and suggested that it could result in a serious escalation in the cost of claims because of the compounding effect of the provision. The Council suggested that the provision be amended to bring it in line with the Supreme Court Act, 1970.

Issues Involved

12.5 We believe it appropriate that section 62A of the Act be repealed and a new provision enacted in its place to make it clear that it applies to redemption orders. For the purposes of interest from the date of the award, we are of the view that in the interests of uniformity, a provision should be inserted in the Court Bill analogous to the corresponding provisions relating to judgments in the Supreme Court and the District Court,⁵ where interest is payable on judgment debts at a prescribed rate. It may be appropriate to fix the rate applicable under the Court Bill by reference to that obtaining from time to time under the Supreme Court Act, 1970. Alternatively, the rate could be changed by amendment from time to time.

12.6 We also believe that it is appropriate for the court to have a power to award interest in respect of the period prior to the date of award. In the interests of uniformity, it would be appropriate for a provision to be inserted in the Court Bill analogous to that obtaining in the Supreme Court and the District Court, where there is a discretion to include interest as part of the judgment.⁶ The Chief Judge could fix, by practice direction, the rate of interest applicable to such awards in respect of various periods, as is done in the Supreme Court.⁷ The power to award interest prior to the dato of the making of the award should apply to all types of workers’ compensation.

12.7 In a recent Report,⁸ this Commission recommended an amendment to section 94 of the Supreme Court Act, 1970 and section 83A of the District Court Act, 1973 to remove certain procedural difficulties. It would be appropriate for those amendments to be included in the provision to be inserted in the Court Bill.

Summary

12.8 We support the proposal to award interest in respect of moneys payable under the Act prior to the making of an award. We recommend that the provisions be amended to ensure that:

• for the purposes of uniformity, the provisions are analogous to those obtaining in the Supreme Court and the District Court for the periods both before and after the making of an award under the Act; and
• the provisions apply to all types of compensation, including redemption of weekly payments.

FOOTNOTES

1. The Act, s.62A.

2. Amendment Bill, Schedule 9, Item (14).

3. Schedule: Item 22.

4. Schedule: Item 20.

5. Supreme Court Act, 1970, s.95; District Court Act, 1973,s.85.

6. Supreme Court Act, 1970, s.94; District Court Act, 1973, s.83A.

7. Practice Note No.25, issued by the Chief Justice on 16 December, 1982.

8. New South Wales Law Reform Commission, Community Law Reform Program, Second Report, Interest on Certain Debts, L.R.C.35 (1983).