WorkCover’s right to indemnity & proportionate liability

WorkCover Qld v AMACA P/L & Anor [2009] QCA 72

It is timely to review the above case having regard to the Special Leave application before the High Court to be heard on 12 March 2010.

The agreed facts

[2] Rex Noel Thomson contracted mesothelioma as the result of exposure to asbestos in the course of his employment in Queensland between 1947 and 1983. Mr Thomson was a “worker” for the purposes of the legislation applicable from time to time, which was the Workers’ Compensation Act 1916 (Qld), the Workers’ Compensation Act 1990 (Qld), the WorkCover Queensland Act 1996 (Qld), and the Workers’ Compensation and Rehabilitation Act 2003 (Qld). He applied to WorkCover Queensland for payment of compensation in respect of his injury.
[3] On 18 April 2006 WorkCover paid Mr Thomson the sum of $340,000, being the amount of compensation to which he was entitled under the statutory scheme. On 20 June 2006 Mr Thomson died in consequence of the mesothelioma. He had not commenced any proceeding in relation to any available cause of action concerning his injury and disability.

……………………………………………………….

In brief, WorkCover sought to be indemnified by the defendants for the compensation sum paid. The defendants contended because Mr Thomson predeceased the assessment of damages (judgment) and had not commenced proceedings, that such damages as for pain and suffering, bodily or mental harm or for the curtailment of expectation of life (“General Damages”) were lost and furthermore; the amount of their liability should be limited to the extent of their contribution and not for the whole amount.

The death of the worker after compensation was paid, but before recovery pursuant to the indemnity intersected the interpretation of s.207B(7) and s.66 of the Succession Act 1981 (Qld). The practical wrinkle for WorkCover being – if proceedings were commenced by the worker to preserve General Damages they could not be assigned to WorkCover for the purposes of s.207B(7).

The wording of the section prevented WorkCover commencing recovery proceedings, whilst the worker’s proceedings continued. Hence, given the nature of mesothelioma it was invariably the outcome that the worker commenced proceedings before compensation was paid and they predeceased the trial in recovery proceedings brought for indemnity pursuant to s207B(7) by WorkCover.

The Case Stated posed 4 questions apart from costs in respect of section 207B(7) (formerly 272(7)) of the Workers Compensation and Rehabilitation Act 2003 (Qld), namely:

Case Stated

“1. Whether, upon the proper construction of Section 272(7) of the Workers’ Compensation and Rehabilitation Act 2003 (“the Act”) the damages referred to in the expression “liability for damages” in Section 272(7)(a) refer to damages in an amount to be assessed at the date of trial of or judgment in the proceedings between the Plaintiff (the insurer) and the Defendants or at some (and if so what) other dates?

2. Whether, in the event that each Defendant is liable to the worker, upon the proper construction of Section 272(7) of the Act the indemnity (if any) to which the Plaintiff is entitled against each of the Defendants is limited to that proportion which that Defendant (if liable to the worker) would be required to contribute to an assessment of damages in favour of the worker after taking into account the contributions which would have been required to be made by all tortfeasors (and in particular the other defendant and the workers’ employer)?

3. Alternatively to 2, what is the proper construction of the expression “to the extent of that person’s liability of the damages, so far as the amount of damages payable for the injury by that person extends” in Section 272(7)(a) of the Act in relation to the indemnity (if any) to which the Plaintiff is entitled against the Defendants?

4. Is the quantum of the indemnity the Plaintiff is entitled to recover pursuant to Section 207B(7) (previously Section 272(7)) of the Workers’ Compensation and Rehabilitation Act 2003 (Qld) reduced by the operation of Section 66 of the Succession Act if the worker dies after compensation is paid and before the trial of the Plaintiff’s action to recover the indemnity?”

 

First Question

The answer to the first question was conceded to be the date of trial by the plaintiff:

[52] Mr Sofronoff QC, who appears with Mr Holyoak for the plaintiff, conceded at the commencement of the hearing that question 1 should be answered in the way set out above. That concession appears to have been rightly made and is consistent with a large body of authority: cf Johnson v Perez;[1] Turner v George Weston Foods Ltd[2] and Victorian WorkCover Authority v Kenman Kandy Pty Ltd.[3]

 

Fourth Question

Having answered the first question that damages are assessed as at the date of trial, the next question to answered is question 4 because questions 2 & 3 concern contribution.

The Chief Justice answered question 4 “yes” and provided reasoning. His Honour Muir JA concurred with the Chief Justice . Her Honour the President dissented on this point.

Dealing firstly the President’s reasons for dissent her Honour concluded:

[63] The terms of s 272(7) and s 66 do not seem to me to support the respondents’ contention in respect of question 4. It is true that s 66(1) Succession Act guarantees the survival of causes of action vested in a deceased person for the benefit of the estate. But in my view, a plaintiff insurer does not need to rely on s 66(1) to succeed in a claim under s 272(7) against an alleged third party tortfeasor defendant. The damages to which a plaintiff insurer is entitled under s 272(7) involve only a hypothetical assessment of the third party tortfeasor defendant’s liability for damages to the injured worker to be assessed at the date of judgment in the plaintiff insurer’s proceedings. The hypothetical nature of that assessment means that it is not dependent on the survival of a deceased worker’s cause of action under s 66(1). This approach seems generally consistent with that taken by the New South Wales Court of Appeal in J Blackwood & Son Ltd v Skilled Engineering Ltd.[25] In any case, s 66(2) in its terms specifically relates to a cause of action which survives under s 66(1) for the benefit of the estate of a deceased person. A plaintiff insurer’s claim under s 272(7) is not such a cause of action.
[64] If the defendants are correct in their contentions, then the application of s 66(2) to a claim brought under s 272(7) would have an incongruous result. Tortfeasors who are liable for so severely injuring a worker that death ensues before the worker has brought an action against them, could limit their liability to indemnify the worker’s insurer for compensation for those injuries. I would be reluctant to interpret s 272(7) and s 66(2) as having this unhappy effect unless it is either the clear legislative intention from the terms of the legislation or because of clearly binding legal authority. The full title and the scheme of the Succession Act suggest that s 66 is intended to have application to causes of action subsisting against or vested in a deceased person prior to the death. There is nothing in the Succession Act to suggest s 66 is intended to apply to hypothetical assessments of damages payable to a deceased person in an insurer’s claim against the tortfeasor who injured the deceased person. The objects and scheme of the Workers’ Compensation and Rehabilitation Act strongly favour the construction urged on behalf of the plaintiff. To limit the quantum of damages able to be recouped by an insurer who has paid compensation to a deceased worker from tortfeasors who wrongly caused that death in the way urged on this Court by the defendants would be to impose an unnecessary burden on employers and the community. Such an outcome has the potential to make Queensland industry less competitive by unfairly increasing insurance premium levels for employers. This would be directly contrary to the objectives of the legislation set out in s 4 and s 5 of the Act.

The Chief Justice came to the opposite conclusion based on the indemnity being limited to the law regulating the damages as between the injured worker and tortfeasor:

[28] The High Court considered the matter in Xpolitos v Sutton Tools Pty Ltd [1977] HCA 25; (1977) 136 CLR 418. As summarized in the head note, an employer paid compensation to the dependant of an employee killed in the course of his employment. The employer then sought to recover the amount paid from the persons negligently responsible for the death. The amount which the dependant would have recovered as damages against the tortfeasors would have been substantially less than the amount of compensation paid to him. It was held that the amount recoverable by the employer (under comparable legislation) was limited to that which the dependant would have recovered in proceedings commenced by him against the tortfeasors.
[29] Observations in that case confirm that the calculation of damages, for the purpose of determining recovery under the indemnity, proceeds in accordance with the law regulating the availability of damages as between injured worker and tortfeasor, or injured worker’s dependant and tortfeasor. As said by Barwick CJ (p 423):

“…[T]he indemnity…is only for the amount which the tortfeasor was legally liable to pay the injured worker or, in the case of death, his dependants.”

Gibbs J said (pp 432-433):

“There is no decision of this Court governing the present question. The balance of opinion, as expressed in dicta, favours the view that under a provision in the terms of s 62(1)(b) a tortfeasor is not to be required to pay more by way of indemnity than he would have been required to pay by way of damages if an action had been brought against him by the worker to whom the compensation was paid…I hold therefore that the respondent was not entitled to recover from the appellants an amount greater than that which the infant would have recovered from them by way of damages.”

[32] Further, the damages to be calculated are those recoverable by the worker, or his estate in the event of death, as at judgment in the indemnity proceeding. Naturally read, that calculation must be made in accordance with the law then obtaining, including s 66 of the Succession Act 1981 (Qld).

Whilst his Honour raised that the insurer could not be frustrated by the worker’s neglect in some way, including failure to sue; his Honour found it cannot changed the amount that would have been recovered if the worker had sued:

[35] One can readily accept that the independence of the indemnity from the worker’s cause of action must mean the indemnity cannot be frustrated by the worker’s failure to sue, or the worker’s cause of action being time barred. Indeed subsection (7) specifically contemplates that the worker will not have sued. But that feature cannot sever the calculation of the extent of the indemnity from the law which bears on calculating the amount the worker would have recovered had he or she sued. Again, the sub-section deals with the matter expressly, contemplating a calculation of the extent of the liability in damages to the worker (had he or she sued). That calculation would necessarily be subject to such provisions as s 66 of the Succession Act 1981 (Qld). Had the legislature intended that that legal framework not apply, it would have said so in so many words.

Mr Sofronoff SG QC argued the right to indemnity was independent of the worker’s rights and the applicability of s 66 of the Succession Act 1981 was confined to the estate:

[36] Mr Sofronoff sought to avoid that consequence by recourse to the independence of the right to the indemnity. But the calculation of the extent of the indemnity, notwithstanding that independence, is coterminous with the calculation of the damages to which the worker would have been entitled. The indemnity is tied to the latter calculation. Where, by law, the worker’s cause of action survives the worker’s death, but the recoverable damages are consequently limited, it is unduly subtle to ignore that consequence by concentrating on the independence of the right to be indemnified. That right has an independent existence, but as I have said a number of times, its extent falls to be calculated by reference to the worker’s right to damages assessed according to law.

[37] Mr Sofronoff would nevertheless ultimately challenge the applicability of s 66 of the Succession Act 1981 (Qld), on the basis that provision is not concerned with a proceeding brought by an injured worker, or by the dependant of a deceased worker, but is concerned only with the survival of the worker’s cause of action “for the benefit of the (worker’s) estate”.

The Chief Justice rejected this:

[38] But it is the survival of the worker’s cause of action which the legislation ensures. That cause of action is not by force of the legislation transformed into some other cause of action: it remains the worker’s cause of action, though available to be pursued by personal representatives. It is the assessment of damages under that cause of action which delineates the extent of the indemnity. That being so, the statutory limitations arising under s 66 of the Succession Act 1981 (Qld) necessarily bear upon the calculation envisaged by s 207B(7) of the Workers’ Compensation and Rehabilitation Act 2003 (Qld), in the same way as did the 2001 amendments considered in Blackwood.

His Honour Muir JA concurred with the Chief Justice and added:

[71] It is plain, and it was common ground between the parties, that WorkCover’s entitlement to be indemnified under s 207B(7) is a right which exists independently of a worker’s cause of action against a person who caused his injury. For convenience, I will refer to such a person as an indemnifier. But the fact that WorkCover’s right to an indemnity under s 207B(7) is independent of the worker’s cause of action does not resolve the issue for determination.
[72] Sub-section (7), as well as creating the right of indemnity, prescribes its extent. The indemnity is “to the extent of” the indemnifier’s “liability for the damages” suffered by the injured worker. Consequently, the damages which must be assessed are the damages which the indemnifier would be liable to pay for the injury were the injured worker to obtain judgment against the indemnifier. Those damages are to be assessed at the date of judgment in the proceeding between WorkCover and the indemnifier. That too is common ground.
[73] As a matter of general principle, a court, in assessing damages for personal injuries, must have regard to matters occurring between the date of the accident and the trial of the proceeding.[32] I am unable to discern in the language of sub-section (7) any qualification to the effect that, in assessing the “damages payable for the injury”, an event such as the death of the worker after the date of injury, must be disregarded.
[74] The conclusion that damages be assessed as if on a trial of a proceeding by the injured worker against the indemnifier is supported by the words “so far as the amount of damages payable for the injury by that person extends”. It is supported also by the provision that “the insurer is subrogated to the rights of the person for the injury.”[33] Those words, and in particular the reference to the right of subrogation, to my mind, are inconsistent with the notion that the “extent of [the indemnifier’s] liability for the damages” is to be determined by reference to some unspecified construct rather than in the conventional way as if on a proceeding in which the injured worker claims damages against the indemnifier.

[75] Support for this construction of sub-section (7) is to be found in sub-sections (5) and (6). Those sub-sections are capable also of operating after the death of an injured worker. If an injured worker’s estate settled a claim against an indemnifier without the insurer’s consent and recovered damages “insufficient to meet all payments due to the insurer” the insurer “would be entitled to be indemnified by the … person who is required by the settlement to pay the damages” (the indemnifier). The extent of the indemnity is determined by sub-section (6)(b). It provides that “the insurer is subrogated to the rights” of the injured worker or “person who has sought the damages, as if the settlement had not been made.” A settlement under sub-sections (5) or (6) can be effected by a deceased worker’s personal representatives. In the event of such a settlement, it would not seem likely that the “rights” referred to in sub-section (6)(b) are rights which must be determined on the basis that the injured worker remained alive or that the general law had no application. Obviously it would be an unorthodox process of construction which did not construe sub-sections (5), (6) and (7) consistently.

Questions 2 & 3

 These questions were answered unanimously “no” and “the extracted words refer to the respective respondent’s liability for the whole of the damages”, respectively.

Unlike question 4, there was consensus in the approach, with the Chief Justice stating the reasoning as follows:

[42] Had the legislature intended that a respondent’s liability could be assessed at less than 100 per cent of an injured party’s loss, or that the overall liability be apportioned between or among more than one respondent, then it could be expected to have said so clearly, including specifying the touchstone by which the extent of the liability would fall to be assessed.

The President added:

[53] I agree with the Chief Justice’s reasons for answering questions 2 and 3 in the way set out above.[4] I wish only to add the observation that, should the plaintiff be successful in its indemnity action against both defendants, s 272(7) does not permit the plaintiff to recover any more than the $340,000 paid by it as compensation to the deceased. Answering questions 2 and 3 in this way does not entitle the plaintiff to double compensation: cf Turner v George Weston Foods Ltd.[5]

By way of example where the legislature had intervened, the Chief Justice contrasted the “proportionate liability” in the Civil Liability Act 2003 (Qld):

 [43] A contrast may be drawn with the comprehensive “proportionate liability” provisions in Part 2 of Chapter 2 of the Civil Liability Act 2003 (Qld). The touchstone specified there (s 31(1)(a)) is the “proportion of the loss or damage claimed that the court considers just and equitable having regard to the extent of the defendant’s responsibility for the loss or damage”.
[44] Where the legislature contemplates an erosion of otherwise well-established rights, it may be expected to accomplish the change with clarity (cf. Shrimp v Landmark Operations Ltd [2007] FCA 1468 para 59).
[45] Mr Sofronoff referred to the right of contribution between tortfeasors under s 7 of the Law Reform Act 1995 (Qld). That is not this situation, but it is interesting to note that s 7 expresses a criterion similar to that under s 31 of the Civil Liability Act 2003 (Qld) for determining the basis for any contribution.

Brisbane Barrister – David Cormack

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