WCRA: WorkCover’s right to indemnity ‘alive’ on worker’s proceedings being abandoned

WorkCover Queensland v Wallaby Grip (BAE) Pty Ltd (in liq) [2021] QSC 332

Section 207B has been the subject of interpretation in recent years in response to WorkCover Queensland seeking their statutory right of indemnity for compensation payments in claims involving asbestos manufacturers. Notable decisions are WorkCover Queensland v Amaca Pty Ltd (2010) 241 CLR 420 and State of Queensland v Seltsam Pty Ltd (2019) 2 QR 495.

Burns J

Section 207B WCRA:

Insurer’s charge on damages for compensation paid

(1)  This section applies to—

(a) an injury sustained by a worker in circumstances creating—

(I) an entitlement to compensation; and

(ii) a legal liability in the worker’s employer, or other person, to pay damages for the injury, independently of this Act; and

 (b) damages that an employer is not indemnified against under this Act.

(2) An amount paid as compensation to a person for an injury, to which there is an entitlement to payment of damages at a time or for a period before the person becomes entitled to payment of damages by an employer or another person, is a first charge on any amount of damages recovered by the person to the extent of the amount paid as compensation to the person.

(3)  Subsection (2) applies to compensation paid under chapter 4A only if the damages include treatment, care and support damages.

(4)  An employer or other person from whom the damages are recoverable must pay the insurer the amount of the first charge or, if the damages are not more than the amount of the first charge, the whole of the damages.

(5)  Payment to the insurer under subsection (4), to the extent of the payment, satisfies the liability of the employer or other person for payment of the damages.

(6)  A person can not settle, for a sum less than the amount that is a first charge on damages under subsection (2), a claim for damages had by the person independently of this Act for an injury to which there is an entitlement to payment of damages without the insurer’s written consent.

(7)  If, without the insurer’s consent, a settlement mentioned in subsection (6) is made, then to the extent that the damages recovered are insufficient to meet all payments due to the insurer under this section—

 (a) the insurer is entitled to be indemnified by the employer or other person who is required by the settlement to pay the damages; and

(b) to that end, the insurer is subrogated to the rights of the person who has sought the damages, as if the settlement had not been made.

(8) If a person who has received compensation has not recovered, or taken proceedings to recover, damages for the injury from another person, other than the worker’s employer—

(a) the insurer is entitled to be indemnified for the amount of the compensation by the other person to the extent of that person’s liability for the damages, so far as the amount of damages payable for the injury by that person extends; and

(b) to that end, the insurer is subrogated to the rights of the person for the injury.

 (9) Payment made as indemnity under subsection (8), to the extent of the payment, satisfies the person’s liability on a judgment for damages for the injury.

(10)  In addition to all rights of action had by the insurer to give effect to its right to indemnity under this section, all questions about the right and the amount of the indemnity may, in default of agreement, be decided by an industrial magistrate if all persons affected by the indemnity consent.

(11)  In this section —

damages includes damages under a legal liability existing independently of this Act, whether or not within the meaning of section 10.” Emphasis added

It was common ground that the worker who ultimately received the statutory benefits commenced a claim in the District Court, but never served the claim and it became stale. WorkCover sought pursuant to s.207B to recover the compensation benefits of $761,627.00 from the defendants.

The defendants denied the claim on the basis that the literal interpretation of s.207B(8) was not engaged because the worker had taken proceedings to recover damages. [16] Hence, there was no statutory right to indemnification.

His Honour emphasised what the literal interpretation would mean:

[29] The defendants’ construction of the provision[26] is entirely literal. It would mean, if correct, that the mere commencement of a proceeding is enough to forever defeat the right of indemnity and, if CSR’s further contention[27] is correct, it would mean that the mere commencement of a proceeding by the worker against any tortfeasor is enough to forever defeat the right of indemnity from every tortfeasor. It would also mean that the second limb of the chapeau – the actual recovery of damages – would have no work to do because, without more, the right to statutory indemnification would be lost once the recovery proceeding was filed. Whether that proceeding later resulted in recovery of damages would be irrelevant on the defendants’ construction of the provision although, oddly, a charge would still attach to any damages that were recovered.

His Honour reviewed the legislative history of such provisions and was not persuaded that a literal approach was intended and the purpose of the section and its history was contrary.

In determining that purposive approach was appropriate his Honour stated:

[32] Here, the mischief to which s 207B WCRA is directed and the purpose of the statute is not advanced by interpreting subsection (8) in such a way that the insurer’s rights are removed when the worker starts, but does not pursue, a recovery proceeding. Instead, the words in the chapeau, “has not recovered, or taken proceedings to recover, damages” constitute a temporal limitation on the insurer’s entitlement to indemnification with the effect that the insurer is required to stay its hand for so long as there exists a proceeding by the compensated worker in which the recovery of damages is in prospect and over which a charge could attach under s 207B(2) WCRA. Such a proceeding must necessarily be one that retains, as its active purpose, the exercise by the worker of his or her right to pursue damages against another person, other than his or her employer. Construed in this way, the rights of the insurer to indemnification will be suspended for so long as there is a proceeding on foot which retains that active purpose. Where, for example, the worker has commenced a proceeding but, by the time the indemnity is claimed, the proceeding has been abandoned, it could not be said that the worker has taken proceedings to recover damages in the sense required by the provision. Any such proceeding would by then be devoid of the purpose which the provision explicitly requires i.e., to recover damages.

Accordingly, his Honour rejected the defendants’ construction of the section.

It is noted the matter is on appeal.

David Cormack 

Brisbane Barrister and Mediator

 

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