Delron Cleaning Pty Ltd v Public Transport Authority

[2008] WASCA 68

DELRON CLEANING PTY LTD -v- PUBLIC TRANSPORT AUTHORITY [2008] WASCA 68

Reported Decision:	(2008) 36 WAR 166
Jurisdiction:	SUPREME COURT OF WESTERN AUSTRALIA	Citation No:	[2008] WASCA 68
Court:	THE COURT OF APPEAL (WA)
Case No:	CACV:68/2007	Heard:	7 FEBRUARY 2008
Coram:	WHEELER JA BUSS JA EM HEENAN AJA	Delivered:	26/03/08
No of pages:	41	Judgment Part:	1 of 1
Result:	Appeal dismissed
Category:	A
PDF Version

Parties:	DELRON CLEANING PTY LTD PUBLIC TRANSPORT AUTHORITY
Catchwords:	Workers' compensation Employer's claim against tortfeasor for indemnity for compensation paid Tortfeasor deemed employer or principal pursuant to s 175 Contracting out Workers' Compensation and Injury Management Act 1981 (WA) s 301(181) Worker's claim for damages not above threshold limits under Pt IV Div 2 of Act Whether claim for indemnity lies against deemed employer Whether deemed employer would have been liable if sued Significance of contract between deemed employer and plaintiff containing contractual indemnity for respondent in respect of all claims
Legislation:	Workers' Compensation and Injury Management Act 1981 (WA), s 92, s 93, s 93B, s 93C, s 93D, s 93E, s 93F, s 175, s 301 (formerly s 181)
Case References:	Alexander v Perpetual Trustees WA Ltd [2004] HCA 7; (2004) 216 CLR 109 Burke v LFOT Pty Ltd [2002] HCA 17; (2002) 209 CLR 282 Dossett v TKJ Nominees Pty Ltd [2003] HCA 69; (2003) 78 ALJR 161 Eastern Extension Australasia and China Telegraph Co Ltd v Federal Commissioner of Taxation (1923) 33 CLR 426 Geraldton Building Co v Cramer [2001] WASCA 244 GIO (NSW) v McDonald (1991) 25 NSWLR 492 Hewitt v Benale Pty Ltd [2002] WASCA 163; (2002) 27 WAR 91 Jones v Wesfarmers Ltd [2003] WASCA 225 Klein v Minister for Education [2007] HCA 2; (2007) 81 ALJR 582 Loongana Lime Pty Ltd v Worth [2006] WASCA 183 Manners v Transfield Pty Ltd (1992) 8 WAR 111 Marsden v Unimin Australia Ltd [2004] WASCA 143 Merryweather v Nixan (1799) 8 TR 186; 101 ER 1337 QBE Workers Compensation (NSW) Ltd v Dolan [2004] NSWCA 458 Re Monger; ex parte TNT Australia Pty Ltd [2002] WASCA 223 Runcan v Svedala Australia Ltd [2007] WASCA 126 Tickle Industries Pty Ltd v Hann (1974) 130 CLR 321 Tooth & Co Ltd v Tillyer (1956) 95 CLR 605 Watson v Newcastle City Council (1962) 106 CLR 426 Western Metals Zinc NL v Wesfarmers Transport Ltd [2003] WASCA 152 Westralian Caterers Pty Ltd v Eastmet Ltd (1992) 8 WAR 139 Woodside Petroleum Development Pty Ltd v H & R - E & W Pty Ltd (1999) 20 WAR 380

JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA TITLE OF COURT : THE COURT OF APPEAL (WA) CITATION : DELRON CLEANING PTY LTD -v- PUBLIC TRANSPORT AUTHORITY [2008] WASCA 68 CORAM : WHEELER JA

BUSS JA
EM HEENAN AJA

HEARD : 7 FEBRUARY 2008 DELIVERED : 27 MARCH 2008 FILE NO/S : CACV 68 of 2007 BETWEEN : DELRON CLEANING PTY LTD

Appellant

AND

PUBLIC TRANSPORT AUTHORITY
Respondent

ON APPEAL FROM:

Jurisdiction : DISTRICT COURT OF WESTERN AUSTRALIA

Coram : SWEENEY DCJ

Citation : DELRON CLEANING PTY LTD v PUBLIC TRANSPORT AUTHORITY [2007] WADC 34

File No : CIV 1464 of 2005

(Page 2)

Catchwords:

Workers' compensation - Employer's claim against tortfeasor for indemnity for compensation paid - Tortfeasor deemed employer or principal pursuant to s 175 - Contracting out - Workers' Compensation and Injury Management Act 1981 (WA) s 301(181) - Worker's claim for damages not above threshold limits under Pt IV Div 2 of Act - Whether claim for indemnity lies against deemed employer - Whether deemed employer would have been liable if sued

Significance of contract between deemed employer and plaintiff containing contractual indemnity for respondent in respect of all claims

Legislation:

Workers' Compensation and Injury Management Act 1981 (WA), s 92, s 93, s 93B, s 93C, s 93D, s 93E, s 93F, s 175, s 301 (formerly s 181)

Result:

Appeal dismissed

Category: A

Representation:

Counsel:

Appellant : Mr C C Rimmer
Respondent : Mr M P Bruce

Solicitors:

Appellant : Jarman McKenna
Respondent : Lavan Legal

Case(s) referred to in judgment(s):

Alexander v Perpetual Trustees WA Ltd [2004] HCA 7; (2004) 216 CLR 109
Burke v LFOT Pty Ltd [2002] HCA 17; (2002) 209 CLR 282
Dossett v TKJ Nominees Pty Ltd [2003] HCA 69; (2003) 78 ALJR 161

(Page 3)

Eastern Extension Australasia and China Telegraph Co Ltd v Federal Commissioner of Taxation (1923) 33 CLR 426
Geraldton Building Co v Cramer [2001] WASCA 244
GIO (NSW) v McDonald (1991) 25 NSWLR 492
Hewitt v Benale Pty Ltd [2002] WASCA 163; (2002) 27 WAR 91
Jones v Wesfarmers Ltd [2003] WASCA 225
Klein v Minister for Education [2007] HCA 2; (2007) 81 ALJR 582
Loongana Lime Pty Ltd v Worth [2006] WASCA 183
Manners v Transfield Pty Ltd (1992) 8 WAR 111
Marsden v Unimin Australia Ltd [2004] WASCA 143
Merryweather v Nixan (1799) 8 TR 186; 101 ER 1337
QBE Workers Compensation (NSW) Ltd v Dolan [2004] NSWCA 458
Re Monger; ex parte TNT Australia Pty Ltd [2002] WASCA 223
Runcan v Svedala Australia Ltd [2007] WASCA 126
Tickle Industries Pty Ltd v Hann (1974) 130 CLR 321
Tooth & Co Ltd v Tillyer (1956) 95 CLR 605
Watson v Newcastle City Council (1962) 106 CLR 426
Western Metals Zinc NL v Wesfarmers Transport Ltd [2003] WASCA 152
Westralian Caterers Pty Ltd v Eastmet Ltd (1992) 8 WAR 139
Woodside Petroleum Development Pty Ltd v H & R - E & W Pty Ltd (1999) 20 WAR 380


(Page 4)

1 WHEELER JA: I agree with Buss JA.

2 BUSS JA: The background facts, the reasons of the learned trial judge, the grounds of appeal and the notice of contention are summarised in the reasons of E M Heenan AJA.

3 I would dismiss the appeal. My reasons are as follows.

The issues in the appeal

4 The issues in the appeal are these:

(a) First issue: can a common law employer, such as the appellant, maintain a claim for an indemnity, or a partial indemnity, under s 93 of the Workers' Compensation and Rehabilitation Act 1981 (WA) (now called the Workers' Compensation and Injury Management Act 1981 (WA)) (the Act), against a person who is a deemed employer (by virtue of s 175 of the Act), such as the respondent, in respect of workers' compensation payments made by the common law employer to an injured worker?

(b) Second issue: can a common law employer, such as the appellant, maintain a claim for an indemnity, or a partial indemnity, under s 93 of the Act, against a deemed employer, such as the respondent, when:


(i) any court is precluded from awarding common law damages to the worker in respect of loss arising from his or her injuries because it has not been agreed or determined that the worker's 'degree of disability', assessed in accordance with s 93D(1) of the Act, is not less than 30% or 16%, as the case may be (see s 93E(3) and (4)); or

(ii) any potential entitlement to such common law damages has been terminated by the worker's acceptance of a lump sum settlement under the Act and the registration of a memorandum of agreement, as contemplated by s 67(1)?


(c) Third issue: can a deemed employer, such as the respondent, resist a claim by a common law employer, such as the appellant, for an indemnity, or a partial indemnity, under s 93 of the Act, by relying upon a contractual indemnity of the kind embodied in cl 16 of the Prospector and AvonLink On-Train Services Agreement between the deemed employer (the respondent) and the common law employer (the appellant)?

(Page 5)

The first issue

5 The Act established a compulsory third party liability insurance scheme which covers the liability of an employer to its workers in respect of disabilities which are relevantly connected with their employment. At the material time, the term 'disability' was broadly defined in s 5(1) of the Act. The Act now uses the term 'injury' instead of 'disability'.

6 The purposes of the Act are set out in s 3. Those purposes included, at the material time, amongst other things, making provision for the compensation of workers who suffer a disability (s 3(a)(i)) and making provision for the hearing and determination by the dispute resolution bodies of disputes between parties involved in workers' compensation matters in a manner that is fair, just, economical, informal and quick (s 3(d)).

7 Part IV of the Act, which, at the material time, comprised ss 85 - 93G, bears the heading 'Civil proceedings in addition to or independent of this Act'. By s 86, except as expressly provided by the Act, nothing in the Act affects any liability that exists independently of the Act. Damages awarded in relation to a liability that exists independently of the Act, and compensation under the Act, are not both recoverable. Section 92 of the Act provides that when an action is brought by a worker for damages independently of the Act, the amount paid and payable under the Act is to be deducted from the amount of the judgment. See ss 92(b) and (c). If the action proceeds to judgment, the worker cannot commence or continue proceedings for compensation under the Act in respect of the same disability. See s 92(e). Generally see Western Metals Zinc NL v Wesfarmers Transport Ltd [2003] WASCA 152.

8 At the material time, s 175 of the Act provided:

(1) Where a person (in this section referred to as the principal) contracts with another person (in this section referred to as the contractor) for the execution of any work by or under the contractor and, in the execution of the work, a worker is employed by the contractor, both the principal and the contractor are, for the purposes of this Act, deemed to be employers of the worker so employed and are jointly and severally liable to pay any compensation which the contractor if he were the sole employer would be liable to pay under this Act.

(2) The principal is entitled to indemnity from the contractor for the principal's liability under this section.

(Page 6)

(3) The principal is not liable under this section unless the work on which the worker is employed at the time of the occurrence of the disability is directly a part or process in the trade or business of the principal.

(4) Where the principal and the contractor are jointly and severally liable under this section, a judgment obtained against one is not a bar to proceedings against the other except to the extent that the judgment has been satisfied.

(5) Where compensation is claimed from or proceedings are taken against the principal, in the application of this Act a reference to the employer shall be read as a reference to the principal except where, for the purpose of calculating the amount of compensation, a reference is made to the earnings of a worker, the reference shall be read as a reference to the earnings of the worker under the contractor.

(6) For the purposes of this section, where sub-contracts are made -


(a) 'principal' includes the original principal for whom the work is being done and each contractor who constitutes himself a principal with respect to a sub-contractor by contracting with him for the execution by him of the whole or any part of the work;

(b) 'contractor' includes the original contractor and each sub-contractor; and

(c) a principal's right to indemnity is a right against each contractor standing between the principal and the worker.


(7) Where the disability does not occur in respect of premises on which the principal has undertaken to execute the work or which are otherwise under his control or management, subsections (1) to (6) inclusive do not apply.

9 Section 175 is within Pt X of the Act, which is entitled 'Insurance'. In particular, the provision is within Div 2 of Pt X, which bears the heading 'Insurance by principals, contractors, and sub-contractors'. Section 175 formed part of the Act when it was enacted in 1981. Precursors to s 175 have appeared in the workers' compensation legislation of this State since 1912. See, for example, s 9 of the Workers Compensation Act 1912 (WA).

10 Section 175(1) confers a benefit on a worker in circumstances where a person (the 'principal' or deemed employer) contracts with another person (the 'contractor' or common law employer) for the execution of any work by or under the contractor and, in the execution of the work, the

(Page 7)

worker is employed by the contractor. In those circumstances and subject to the work on which the worker was employed at the time of the occurrence of the disability being directly 'a part or process in the trade or business of the principal' (s 175(3)), the worker has a claim against each of the principal and the contractor for any compensation which the contractor, if he were the sole employer, would be liable to pay under the Act. The principal and the contractor are jointly and severally liable to the worker for the payment of the compensation. The benefit conferred on the worker is the right to recover compensation not only from his or her common law employer, but also from the deemed employer.

11 Section 175(2) confers on the principal or deemed employer a right to an indemnity from the contractor or common law employer for the deemed employer's liability to the worker under s 175(1). Section 175 does not confer on the common law employer any right of indemnity, or even a right of contribution, against the deemed employer in respect of the common law employer's liability.

12 It is apparent, therefore, that s 175 imposes the ultimate liability for the payment of compensation on the common law employer as distinct from the deemed employer. Section 175 embodies a 'no fault' entitlement in relation to the payment of compensation as between the worker on the one hand and the common law employer and the deemed employer on the other, and also a 'no fault' entitlement in relation to the indemnity as between the common law employer on the one hand and the deemed employer on the other.

13 Neither s 175 nor any other provision of Pt X is concerned with or refers to any cause of action which an injured worker may have, at common law, against his or her common law employer or the deemed employer (or anyone else), arising from or in connection with his or her disability, or any claim which the common law employer of the injured worker may have against the deemed employer (or anyone else) arising from or in connection with any such cause of action.

14 In 1993, the Parliament enacted Pt IV Div 2 of the Act, which, at the material time, comprised sections 93A - 93G. Division 2 has a heading which reads 'Constraints on awards of common law damages'.

15 The Parliament introduced the constraints on awards of common law damages for the purpose of reducing pressures on workers' compensation insurance premiums payable by employers.

(Page 8)

16 Section 93C provides that if Div 2 applies, a court is not to award damages to a person contrary to Div 2. The term 'damages' is defined in s 93A. Also see s 93B.

17 Section 93E imposes the restrictions on the awarding of damages. By s 93E(3) and (4), damages can only be awarded if:

(a) it is agreed or determined that the worker's 'degree of disability' is not less than 30%; or

(b) it is agreed or determined that the worker's 'degree of disability' is not less than 16%, and the worker elects to retain the right to seek damages.

Also see s 93F which is concerned with, amongst other things, restrictions on the awarding of damages if the worker's 'degree of disability' is less than 30%.

18 In Hewitt v Benale Pty Ltd [2002] WASCA 163; (2002) 27 WAR 91, the Full Court of the Supreme Court of Western Australia held that Div 2 of Pt IV of the Act applies to an action for common law damages against a deemed employer, within s 175(1), and not merely to an action for common law damages against a common law employer.

19 In Hewitt, Scott J held that it was 'clear' from the provisions of Div 2 of Pt IV that a deemed employer was intended to come within the limitation of damages provisions contained in that Division 'for the purposes of the relevant provisions of s 93B' [37]. His Honour also expressed the view that it was unnecessary to determine whether a deemed employer under s 175(1) was 'a deemed employer for all purposes of the Act' [48]. It was sufficient to conclude that a deemed employer under s 175 was an 'employer' for the purposes of Div 2 of Pt IV, so that the provisions which limit the liability of an employer under that Division apply equally to the deemed employer [48].

20 In Hewitt, Hasluck J construed s 175, as follows:

Section 175(1) of the Act provides that both the principal and the contractor are 'for the purposes of this Act' deemed to be employers of the worker. The purposes of the Act are set out in s 3 of the Act. It is true that there is no express reference in the purposes listed in that provision to any limitation of liability in respect of common law claims. However, the purposes of the Act include, pursuant to s 3(a), the making of provision for the compensation of workers who suffer a disability. To my mind, this must be taken to mean the provision of compensation in the manner provided for by the Act.

(Page 9)

I have already noted that a central feature of the scheme is that employers, by s 160, are required to obtain insurance cover in respect of liability for compensation under the Act, although this requirement does not appear as one of the listed purposes of the Act. To my mind, this suggests that when one seeks to understand what is meant by the purpose of making 'provision for the compensation of workers' (being one of the purposes mentioned in s 3 of the Act), it is permissible to look at the various constituents of the scheme reflected in the Act with a view to ascertaining what falls within the purpose. Those constituents, as the Act stood when the present proceedings were commenced, included certain constraints upon the award of damages at common law. It therefore seems to me that upon its proper interpretation, the deeming provision reflected in s 175(1) is applicable for all purposes of the Act. This means that Div 2 of Pt IV, and s 93D(4) in particular, applies to the respondent's claim. The respondent was obliged to obtain leave pursuant to s 93D(4) before commencing proceedings for damages. If s 175(1) is interpreted in that manner, then the anomaly described in earlier discussion falls away.

I consider that the view I have just expressed gives effect to the purpose of the Act. It is quite clear from a consideration of the Act as a whole that the legislation is not designed to provide compensation to an injured worker without any limitation. It emerges from the scheme of the Act that a worker is only entitled to recover compensation in respect of injuries incurred in the course of his employment or in similar circumstances. There are various other checks and balances which reveal that the amounts recoverable as compensation will have to conform to certain prescribed limits. The Act guards against double recovery of both compensation and damages. It is consistent with the scheme of the Act that there should be certain constraints upon the recovery of damages at common law, although, no doubt, there will be adjustments to what is thought to be the appropriate balance from time to time.

I also find some support for the view I have expressed in s 175(3) of the Act. The effect of that provision is that the principal is not liable under the deeming provision unless the work on which the worker is employed at the time of the occurrence of the disability is directly a part or process in the trade or business of the principal. This suggests that the deeming provision is only to apply in circumstances where the work being performed approximates to the worker's usual course of employment. It seems to me that this restriction removes any element of unfairness that might arise if the party contracting out its labour were to be unexpectedly exposed to a liability for damages at common law which arose from work not usually being performed by the actual employer. To my mind, this provision is consistent with the notion that the deemed employer mechanism is applicable for all purposes of the Act including the constraints on award of damages at common law [74] - [77]. (emphasis added)

21 In Hewitt, E M Heenan J observed:
(Page 10)

Examination has already been undertaken of the role of ss 92 and 93, both before and after 1993, in establishing a regime in which a worker who succeeds in a claim for damages at common law will be obliged to give credit for worker's compensation benefits received under the Act in order to avoid a situation of partial double compensation. This is achieved, in the case of an action against the worker's employer, by subsections 92(b), (c) and (e) and, where the worker's claim is against a stranger, by subsections 93(1)(b) and (4) and (5). As a deemed employer, under s 175, will be concurrently liable with the common law employer to pay worker's compensation benefits under the Act, there will be many instances in which the worker may bring an action against that deemed employer and succeed in recovering a judgment for common law damages. In every such situation, the principle enshrined in s 92 of avoiding double recovery of both damages and compensation, will apply. Section 92 will require the successful plaintiff worker to give credit for worker's compensation benefits which may previously have been paid by the deemed employer defendant. That is expressly what ss 175(5) achieves. I can see no escape from this conclusion, consistent with the manifest policy of the Act, because of the object of avoiding double recovery. In the event of a successful common law action, the avoidance of double recovery cannot be supposed to depend on whether the defendant is the common law employer or a deemed employer.

The conclusion means that the extended definition of employer within s 175 of the Act applies, and was always intended to apply, to s 92. The question then becomes, whether there is anything to differentiate Div 2 of Pt IV from all other provisions in the Act including Div 1. I can see no basis for making any such distinction. Indeed, I am of the view that Div 2 is an enlargement of the general subject matter addressed by Div 1 of Pt IV, namely, the consequences for a worker, who is entitled to worker's compensation benefits under the legislation, also being eligible, in certain circumstances, to damages at common law. Once that continuity of purpose in the whole of Pt IV is recognized, the conclusion naturally follows that ss 93B, 93C and 93E use the term 'employer' in a manner which includes the extended definition given to it by s 175 [122] - [123].

Later, his Honour recorded his view that the extended definition of 'employer', established by s 175, 'applies throughout the entire Act including in Pt IV, Div 2' [126].

22 It is apparent, from my examination of Hewitt, that Hasluck and E M Heenan JJ held that the deeming provision in s 175(1) is applicable for all purposes of the Act and applies throughout the Act including in Div 2 of Pt IV. By contrast, Scott J held that it was unnecessary to determine whether a deemed employer under s 175(1) was a deemed employer for all purposes of the Act, and that it was sufficient to decide that a deemed employer under s 175(1) was an 'employer' for the purposes of Div 2 of Pt IV. In my opinion, the observations of Hasluck and
(Page 11)

E M Heenan JJ that the deeming provision in s 175(1) is applicable for all purposes of the Act and applies throughout the entire Act was not essential to the decision in Hewitt. The ratio decidendi of that case is, relevantly, that a deemed employer under s 175 is an 'employer' for the purposes of Div 2 of Pt IV and, in consequence, the provisions which limit the liability of an employer under that Division apply to a deemed employer as well as a common law employer.

23 Subsequently, in 2004, the Parliament amended the Act by introducing s 93B(5), pursuant to which, with prospective effect from November 2004, Div 2 of Pt IV does not apply to the awarding of common law damages against a person who is the worker's employer only because of, relevantly, s 175. Section 93B(5) provides:

In the context of a cause of action arising on or after the day on which section 79 of the Workers' Compensation Reform Act 2004 comes into operation, a reference in the other subsections of this section to the worker's employer does not include a reference to a person who is the worker's employer only because of section 175 or 175AA.

Significantly, the Parliament did not amend the Act to provide that a deemed employer under s 175(1) is not an employer for any other purposes of the Act or that the deeming provision does not apply to any other provisions of the Act. In other words, the amendment was confined to enacting, in effect, that a deemed employer is not an employer for the purposes of Div 2 of Pt IV.

24 In Runcan v Svedala Australia Ltd [2007] WASCA 126, this court considered a submission that Hewitt was wrongly decided. It was held that no basis had been shown for this court to depart from the decision in Hewitt. In a joint judgment (Steytler P, Wheeler, McLure, Pullin and Buss JJA), it was said:

we have mentioned that the effect of the relevant ratio in Hewitt has been done away with by the legislature through the enactment of s 93B(5) of the Act. However, Hewitt has repeatedly been applied in cases preceding, or not affected by, the enactment of that section. Apart from Marsden [Marsden v Unimin Australia Ltd [2004] WASCA 143], it has been applied in Jones v Wesfarmers Ltd [2003] WASCA 225 at [22] per Malcolm CJ (Parker and McKechnie JJ agreeing); Royal v Alcoa of Australia Ltd [2004] WASCA 269 at [3] per McLure J; and Transfield Pty Ltd v Rawstron [2005] WASCA 78 at [27]. The assumption that Hewitt was correctly decided underpinned the decisions of this Court in Minister for Education v Klein [2005] WASCA 185 and Foster v Chief Executive Officer of the Department of Agriculture (2006) 153 IR 168.

(Page 12)

Hewitt has also been considered by the High Court. The judgment of the Full Court in an appeal decided together with Hewitt (and under the same citation), Koljibabic v WMC Resources Ltd, was made the subject of an application for special leave to appeal: Koljibabic v WMC Resources Ltd [2003] HCATrans 427. In the course of refusing special leave, McHugh JA (speaking also for Kirby and Heydon JJ) said:

The language of section 175(1) of the Workers' Compensation and Rehabilitation Act 1981 is intractable. The duty of courts is to give effect to the purpose of Parliament derived from the language of the statute. It is true that the construction favoured in the Full Court can lead to potential injustice to a deemed employee in certain circumstances. However, the contrary construction urged by the applicant results in consequences that are also unlikely. In these circumstances, the purpose must be derived from the statutory text. The applicant's construction would, it seems to us, require major surgery on the legislative language.

There is no reasonable prospect that an appeal would succeed.

An application for special leave was also refused by the High Court in Marsden: Marsden v Unimin Australia Ltd [2005] HCATrans 569. In the course of refusing leave, Hayne J (speaking also for Callinan J) said that the construction of the Act adopted in the Courts below was open. His Honour added that, 'given that the legislation has since been amended it would not be in the interests of justice, in either the particular cases or more generally, to grant special leave to agitate … [the] questions of construction'.

Hewitt was recently discussed by the High Court in Klein v Minister for Education (2007) 81 ALJR 582. The issue in dispute in that case arose only if Hewitt was correctly decided. The correctness of that decision had not been challenged. During the course of the hearing, the appellant applied for leave to amend his grounds so as to put in issue the correctness of Hewitt. He was denied leave to do so. The Court then revoked the grant of special leave. In his judgment, Gleeson CJ said (at [2]) that he felt no difficulty about deciding the question of construction that arose in Klein upon the assumption that Hewitt was correctly decided. He went on to say (at [2]):

The Justices who refused special leave to appeal in that case regarded the statutory language, upon which the decision was based, as intractable. At the least, the construction adopted in Hewitt was fairly open, the decision has been followed in later cases, and its correctness has been assumed and acted upon by the Parliament of Western Australia. There is no occasion to re-open the issue it decided.

In the same case Gummow, Hayne and Heydon JJ said (at [15]) that the Western Australian legislature's evident reliance on the correctness of the

(Page 13)

decision in Hewitt, coupled with the closing of the class of cases in which issues of the kind that arose in that case might arise, made it inappropriate for the High Court to consider whether to disturb the state of the law as stated in Hewitt. Kirby J (at [49] and following) considered that the decision in Hewitt was "apparently correct".

Against this background, it was, to say the least, optimistic to anticipate that this Court might now be persuaded to depart from Hewitt. The arguments that were brought on behalf of the appellant in support of the proposition that Hewitt was wrongly decided are largely the same as those that were agitated in the case itself. Counsel for the appellant told us that the only new contention is that the construction of the Act preferred in Hewitt creates results that are absurd and inconvenient and which could not have been intended by the legislature. He said that, on ordinary canons of statutory interpretation, that construction should have given way to one that does not have these consequences. It is unnecessary to go into the detail of that contention. That is because, as Kirby J said in Klein (at [52]):

All of these [canons of interpretation], and other principles of construction, were carefully considered in the courts below before the favoured interpretation was adopted. In the end, however, as E M Heenan J pointed out in Hewitt … the duty of a court is to uphold the purpose of Parliament as expressed in the language of the legislation. The pull of particular canons of construction 'must ... be restrained within the confines of 'the actual language employed' and what is 'fairly open' on the words used' (Khoury v Government Insurance Office (NSW) (1984) 165 CLR 622 at 638; 58 ALJR 502. See also Re Bolton; Ex parte Beane (1987) 162 CLR 514 at 518; 61 ALJR 190.)

These comments were, of course, made against the background mentioned above, being that the judges hearing the special leave application in Koljibabic, while acknowledging that the construction favoured in the Full Court could lead to potential injustice in certain circumstances, considered the language of s 175(1) to be intractable.

In these circumstances, and having regard for the enactment of s 93B(5) of the Act, no basis has been shown for this court now to depart from the decision in Hewitt: see also, in this respect, Traegar v Pires de Albuquerque (1997) 18 WAR 432 at 446 - 447 and Re Calder; Ex parte Cable Sands(WA) Pty Ltd (1998) 20 WAR 343 at 354 [12] - [17].

25 At the material time, s 93 of the Act provided:

(1) Where the disability for which compensation is payable under this Act was caused under circumstances creating a legal liability in some person other than the employer to pay damages in respect thereof but neither the employer nor any person for whose negligence the employer is legally responsible was negligent -

(Page 14)

(a) the worker may take proceedings both against that person to recover damages and against any person liable to pay compensation under this Act for such compensation, but shall not be entitled to recover both damages and compensation and shall bring to account in reduction of his entitlement to compensation the amount recovered by way of damages;

(b) the employer is entitled to be indemnified by the person whose negligence caused the disability to the worker (in this section called 'the defendant') to the full extent of the employer's liability to pay compensation under this Act, whether or not the defendant has discharged his liability to pay damages to the worker by judgment or by settlement or otherwise.

(2) If there were -

(a) negligence by the employer or by some person for whose negligence the employer is legally responsible which caused or contributed to the worker's disability, the extent of the indemnity of the employer by the defendant is reduced by the proportion that the employer's negligence and that of any person for whose negligence the employer is responsible bears to 100%; or

(b) negligence by the worker which caused or contributed to the worker's disability, the extent of the indemnity of the employer by the defendant is reduced by the proportion that the worker's negligence bears to 100%.


(3) All questions as to the right or amount of any such indemnity may, in default of agreement between the employer and the defendant, at the instance of the employer, be determined by the Directorate in any action brought by the worker before the Directorate.

(4) If the defendant has paid the whole or any part of the damages to the worker in respect of the disability caused or contributed to by the defendant and the defendant is required to and has indemnified the employer for the payment of any compensation paid to the worker in respect of the same disability, the defendant may sue and recover from the worker the amount so paid to the employer not exceeding the amount of damages paid to the worker by the defendant.

(5) If the worker has been successful in proceedings to recover damages against the defendant and does not recover the full amount of such damages and any portion of the compensation under this Act paid by the employer to the worker has not been refunded to the employer out of the damages, then the employer may, at his

(Page 15)

own expense and in the name of the worker and upon giving the worker an indemnity against all costs and expenses, sue and recover from the defendant the amount of any balance of such damages then remaining unpaid, but any damages so recovered from the defendant in excess of the amount of compensation paid to the worker under this Act shall be payable to and received by the worker.

26 Section 93 appears in Pt IV Div 1 of the Act, which, at the material time, comprised ss 85 - 93. Division 1 has a heading which reads 'General'. Section 93 formed part of the Act when it was enacted in 1981. Precursors to s 93 have appeared in the workers' compensation legislation of this State since 1912. See, for example, s 11 of the Workers' Compensation Act 1912 (WA).

27 The right of indemnity which s 93 confers on an 'employer' is a cause of action created by statute. See Tickle Industries Pty Ltd v Hann (1974) 130 CLR 321, 327 - 328 (Barwick CJ, McTiernan J agreeing); Westralian Caterers Pty Ltd v Eastmet Ltd (1992) 8 WAR 139, 146 (Malcolm CJ, Franklyn and Murray JJ agreeing). In Manners v Transfield Pty Ltd (1992) 8 WAR 111, the nature of that right of indemnity was examined.

28 By s 93(1), relevantly, the employer's right of indemnity will not arise unless:

(a) the worker has suffered a 'disability for which compensation is payable under this Act'; and

(b) the disability in question 'was caused under circumstances creating a legal liability in some person other than the employer to pay damages in respect thereof'.

If both of those conditions are satisfied, and neither the employer, nor any person for whose negligence the employer is legally responsible, was negligent, then the employer is entitled to be indemnified by the person whose negligence caused the disability to the worker ('the defendant') to the full extent of the employer's liability to pay compensation under the Act, whether or not the defendant has discharged his or her liability to pay damages to the worker by judgment or by settlement or otherwise. If both of the relevant conditions are satisfied, but:

(a) negligence by the employer, or by some person for whose negligence the employer is legally responsible, caused or contributed to the worker's disability, the extent of the employer's right of indemnity against the defendant is reduced by the proportion that the employer's negligence, and that of any person

(Page 16)

for whose negligence the employer is responsible, bears to 100%; or

(b) negligence by the worker caused or contributed to the worker's disability, the extent of the employer's right of indemnity against the defendant is reduced by the proportion that the worker's negligence bears to 100%.

29 The first issue in this appeal raises two questions as to the proper construction of s 93:

(a) Is a person who is a deemed employer (by virtue of s 175) capable of being an 'employer' for the purposes of s 93?

(b) Is a deemed employer capable of being 'some person other than the employer' or 'the person whose negligence caused the disability to the worker' (that is, 'the defendant'), within s 93?

30 As to the first question, I am of the opinion that a person who is a deemed employer (by virtue of s 175) is capable of being an 'employer' for the purposes of s 93. I am of that opinion for these reasons. First, s 175(1) provides, relevantly and in effect, that where a person is a principal or deemed employer 'both the principal and the contractor are, for the purposes of this Act, deemed to be employers of the worker' (emphasis added). Secondly, s 175(5) provides, relevantly, that in the application of the Act a reference to the 'employer' shall be read as a reference to the 'principal', where 'compensation is claimed from or proceedings are taken against the principal'. Where an injured worker claims compensation from a principal or deemed employer pursuant to s 175(1), one of the alternative conditions for the operation of s 175(5) will have been satisfied (that is, the condition which stipulates 'Where compensation is claimed from … the principal'). In my opinion, the Act is then to be applied, in relation to any claims or proceedings as between the injured worker and the principal, and also in relation to any derivative claims or proceedings, on the basis that a reference to the 'employer' must be read as a reference to the 'principal' (subject to the exception specified in the concluding words of s 175(5)). Claims or proceedings which derive from claims or proceedings as between the injured worker and the principal will include, relevantly, a claim by the principal under s 93 for indemnity by the person whose negligence caused the disability to the worker. Thirdly, construing the term 'employer' in s 93 to include a deemed employer is not inconsistent with s 175 or the apparent purpose of s 93 or the scheme of the Act generally. By s 175(2), the common law employer must indemnify the deemed employer for its liability under s 175. As I have mentioned, s 175 embodies a 'no fault' entitlement in
(Page 17)

relation to that indemnity. Section 93, on the other hand, is concerned, relevantly, with the ultimate liability for the payment of compensation where the injured worker's disability was caused under circumstances creating a legal liability in some person other than the employer to pay damages in respect of that disability. Section 93 confers on the common law employer, and also on the deemed employer, a right of indemnity against 'the defendant' in respect of their liability to pay compensation. Fourthly, the decision in Hewitt has been applied repeatedly in this State, at least in relation to cases concerning Div 2 of Pt IV. See Runcan [12]. Consistently with that approach, the reasoning of Hasluck and E M Heenan JJ to the effect that the deeming provision in s 175(1) is applicable for all purposes of the Act and applies throughout the entire Act should, unless that reasoning is plainly wrong in relation to a particular purpose or provision of the Act, be followed. I am not satisfied that the application of their Honours' reasoning to s 93 would be plainly wrong. Fifthly, as I have mentioned, in 2004, when the Parliament amended the Act by introducing s 93B(5) to abrogate the effect of the ratio decidendi in Hewitt, it confined the amendment to enacting that a reference in subs (1) - (4) of s 93B does not include a reference to a person who is the worker's employer only because of s 175 or s 175AA. The amendment did not affect the construction or application of the term 'employer' in any other provisions of the Act.

31 As to the second question, I am of the opinion that a deemed employer is capable of being 'some person other than the employer' or 'the person whose negligence caused the disability to the worker' (that is, 'the defendant'), within s 93. My reasons for that opinion are as follows. First, on my construction of s 93, the term 'employer' includes a deemed employer. Plainly, in any case, whether the common law employer or the deemed employer or both of them have a claim to indemnity under s 93 will depend on the particular circumstances of the case. Secondly, as I have mentioned, s 175 is based on 'no fault' principles and, as between the common law employer and the deemed employer, imposes ultimate liability for the payment of compensation on the common law employer. Section 93, however, is not based on 'no fault' principles. It applies where the disability for which compensation is payable under the Act was caused under circumstances creating a legal liability in some person other than the employer to pay damages in respect of that disability. In those circumstances, as between the common law employer, the deemed employer and any other person, s 93 imposes the ultimate liability for the payment of compensation on the person who is under the legal liability to pay damages in respect of the worker's disability. The indemnity to which

(Page 18)

a deemed employer is entitled under s 175(2) is subject to the operation of s 93. Thirdly, if a worker's disability was caused under circumstances creating a legal liability in the deemed employer to pay damages in respect of that disability, as between the common law employer and the deemed employer, the deemed employer will be 'the defendant' within s 93. The common law employer will be entitled to an indemnity or a partial indemnity, as the case may be, from the deemed employer under s 93 in respect of the common law employer's liability to pay compensation.

32 My opinion in relation to the second issue in the appeal is relevant in determining whether, in any case, a deemed employer will be obliged to indemnify or partly indemnify a common law employer under s 93.

The second issue

33 As I have mentioned, s 93 formed part of the Act when it was enacted in 1981. Section 93 was therefore in existence before the introduction of Pt IV Div 2.

34 By s 93(1), at the material time:

Where the disability for which compensation is payable under this Act was caused under circumstances creating a legal liability in some person other than the employer to pay damages in respect thereof but neither the employer nor any person for whose negligence the employer is legally responsible was negligent -

(a) the worker may take proceedings both against that person to recover damages and against any person liable to pay compensation under this Act for such compensation, but shall not be entitled to recover both damages and compensation and shall bring to account in reduction of his entitlement to compensation the amount recovered by way of damages;

…

35 Section 93(1)(a) confers on the worker the right to take proceedings both against the person who caused his or her disability under circumstances creating a legal liability in that person to pay damages in respect of the relevant disability, and against any person liable to pay compensation under the Act for such compensation.

36 In other words, s 93(1)(a) describes the circumstances in which a worker may commence two sets of proceedings; that is, 'fault based' proceedings against the defendant for common law damages and

(Page 19)

'non-fault based' proceedings against his or her employer for compensation under the Act.

37 A worker may commence proceedings against the defendant if he or she has suffered a 'disability' for which compensation is payable under the Act. It is unnecessary for the worker to establish, before commencing proceedings against the defendant, that his or her disability was caused under circumstances creating a legal liability in the defendant to pay damages in respect of that disability. Those elements of the worker's cause of action must, however, be proved before judgment. So, for example, a worker may commence proceedings against the defendant to recover common law damages (and against any person liable to pay compensation under the Act for compensation) if the worker has suffered a disability for which compensation is payable under the Act and if the worker alleges in his common law proceedings (in good faith and without any abuse of process) that the disability was caused by the defendant's breach of a duty of care or a statutory duty owed to the worker.

38 My construction of s 93(1)(a) is consistent with the decision of the Full Court in Western Metals. In that case, Wheeler, Hasluck and McLure JJ rejected a submission that the effect of s 93C (which provides that if Div 2 of Pt IV applies a court is not to award damages to a person contrary to the Division) precludes the bringing of an action by a worker in circumstances where the Act does not permit the award of damages. Their Honours said:

We do not think that s 93C can be read so widely. The institution of proceedings has been forbidden or restricted in clear terms in other legislation; eg the Crown Suits Act s 6. The former s 93D(4) of the Compensation Act (inserted by Act No 48 of 1993) provided:

Proceedings in which damages are sought are not to be commenced without the leave of the District Court.

Given that the Compensation Act has been amended to remove the express prohibition on commencing an action, it must be assumed that Parliament has now deliberately chosen not to prevent the bringing of an action. There may be good reasons of policy for directing the prohibition to the stage of the award of damages, rather than that of institution of the action. For example, as Nisbet DCJ pointed out in Thomas v Arimco Mining Pty Ltd (2000) 24 SR (WA) 142, it may be that a limitation period might be about to expire and a worker might need to institute proceedings at a time at which it was not clear whether or not the worker had a relevant level of disability. In this context, it should be noted that where the degree of disability is between 16 and 29 per cent, the statutory scheme is that an election by the worker must be made at an early stage, but that there is not

(Page 20)

such a time limit in relation to a degree of disability of not less than 30 per cent.

Of course, it would plainly be vexatious to institute proceedings where there was no possibility that it could ever be established that a relevant degree of disability existed, and in an appropriate case such a proceeding might be struck out. Further, it would generally be oppressive to require a defendant to incur expense in defending proceedings where it was not clear whether or not damages could be awarded, and one would usually expect the court to order a stay of proceedings until the provisions of s 93E(3) had been complied with [29] - [31].

39 Where the introductory words to s 93(1) are satisfied, s 93(1)(b) confers on the employer a right to be indemnified by the defendant to the full extent of the employer's liability to pay compensation under the Act, whether or not the defendant has discharged his or her liability to pay damages to the worker by judgment or by settlement or otherwise. Section 93(2) confers a right to a partial indemnity in the circumstances referred to in that subsection.

40 In my opinion, the employer's right to an indemnity under s 93(1)(b) or a partial indemnity under s 93(2), which provisions must be read together, arises only upon the whole of the introductory words to s 93(1) being satisfied. In other words, the right to an indemnity or a partial indemnity is conditional upon the employer establishing that:

(a) the worker has suffered a disability for which compensation is payable under the Act; and

(b) the disability in question was caused under circumstances creating a legal liability in the defendant to pay damages in respect of that disability.

41 Ordinarily, those conditions will not be established unless and until the worker obtains an award of damages from a court against the defendant in proceedings to which the employer is a party or an amount in compromise of the worker's cause of action against the defendant under a settlement agreement to which the employer is a party. However, the employer may assert its right to an indemnity or a partial indemnity in proceedings as between the employer and the defendant even though:

(a) the worker has not made a claim or commenced proceedings against the defendant;

(b) the worker has accepted a lump sum settlement under the Act and a memorandum of agreement has been registered, as contemplated by s 67(1);

(Page 21)

(c) the worker has abandoned his or her claim against the defendant; or

(d) the defendant has discharged its liability to pay damages to the worker by judgment or by settlement or otherwise.

42 The employer may, in its own proceedings against the defendant, establish each of the matters referred to at [40] above. I note s 93(3) which, at the material time, provided:

All questions as to the right or amount of any such indemnity may, in default of agreement between the employer and the defendant, at the instance of the employer, be determined by the Directorate in any action brought by the worker before the Directorate.

Section 93(3) is not, however, an exhaustive statement of the manner in which a dispute between the employer and the defendant in relation to the right to an indemnity or a partial indemnity or the amount of any such indemnity or partial indemnity may be litigated.

43 In my opinion, as at the material time, where a deemed employer was the defendant, for the purposes of s 93, the common law employer's right to an indemnity or a partial indemnity against the deemed employer did not arise, however, unless the worker's 'degree of disability', assessed in accordance with s 93D(1), was not less than 30% or 16%, as the case may be (see s 93E(3) and (4)). The deemed employer was not under a legal liability to pay damages in respect of the worker's disability unless the constraints on the awarding of common law damages imposed by Div 2 of Pt IV did not, in the particular case, preclude an award of damages. At the material time, proof of the satisfaction of the threshold requirements was an essential element of the worker's cause of action against the deemed employer for common law damages and, also, an essential element of the common law employer's right to an indemnity or a partial indemnity from the deemed employer.

The third issue

44 At the material time, s 181 of the Act provided:

Except as provided by this Act, its provisions apply notwithstanding any contract to the contrary.

45 This provision is now to be found in s 301. Section 181 manifests a Parliamentary intention that, relevantly, to the extent the respective rights and liabilities of a common law employer and a deemed employer in relation to particular subject matters are regulated or provided for under

(Page 22)

the Act, those rights and liabilities are as set out in the Act, notwithstanding any express or implied provision to the contrary in any contract between them. In other words, the provisions of the Act are paramount and override any inconsistent contractual arrangements between a common law employer and a deemed employer. The parties may not, by contract, exclude, restrict or modify a provision of the Act.

The disposition of the appeal

46 The appellant has not established, as against the respondent, that Mrs Jokich, the injured worker, had a 'degree of disability' which satisfied the threshold requirements in Div 2 of Pt IV of the Act. Accordingly, the appellant has not proved that the respondent was ever under a legal liability, for the purposes of s 93(1), to pay damages in respect of the disability which Mrs Jokich suffered in the course of her employment. The appeal should therefore be dismissed.

47 EM HEENAN AJA: On 27 January 2000, Mrs Eleanor Isabel Jokich suffered personal injury by accident, arising out of or in the course of her employment with the appellant, giving rise to an entitlement to payment of workers' compensation and other benefits under the Workers' Compensation and Rehabilitation Act 1981 (WA) (now called the Workers' Compensation and Injury Management Act 1981 (WA) (the Act). From the date of the accident until the signing and later recording of a memorandum of agreement under s 67(1), s 67(2) and s 76 of the Act on or about 20 July 2004, the appellant paid to, or to the use of, Mrs Jokich a total of $215,000.60, being workers' compensation, various statutory benefits and a redemption payment under the provisions of the Act.

48 In proceedings in the District Court of Western Australia, the appellant claimed a partial indemnity from the respondent for the workers' compensation and other benefits so paid - to the extent of 45%, that is, $96,750.27. Sweeney DCJ dismissed the claim after a trial and ordered the appellant to pay the respondent's costs of the action. From that decision, the appellant appeals by right to this court.

49 At the material time, Mrs Jokich was employed by the appellant as a passenger services host. This involved her performing a variety of duties for the care of passengers and other incidental tasks on trains run by the respondent's predecessor from Perth to Northam, via Toodyay, and return. It was while performing these duties that she suffered her compensable injury at Toodyay on 27 January 2000. Although Mrs Jokich was employed by the appellant, she was to a significant extent, under the control of the respondent's predecessor - the Western Australian

(Page 23)

Government Railways (WAGR) - all of whose rights and liabilities have since been assigned to the respondent. This arrangement came about because the respondent's predecessor had engaged the appellant to provide personnel to perform passenger/host services on the Perth/Northam railway service under the terms of an agreement dated 11 July 1997, known as 'Prospector and Avon Link On-train Services Agreement' (Contract No 100518). Under this contract the appellant agreed to provide a variety of services, including passenger services, as defined in the contract, on the Prospector and Avon Link train services. Sweeney DCJ found (at [85]) that under the terms of this contract, having regard to the degree of control exercised over Mrs Jokich by the respondent's predecessor, that this rendered the WAGR her 'deemed employer' within s 175 of the Act. It is accepted, for the purposes of this litigation, that the respondent, by reason of the assignment to it of the rights and liabilities of the former WAGR, is to be treated as Mrs Jokich's deemed employer for present purposes.

50 As well as giving rise to an entitlement to workers' compensation and associated benefits for Mrs Jokich, her accident on 27 January 2000 occurred in circumstances where it is also accepted that negligence contributed to a material degree to her injuries and to her consequent loss and disability. It is also agreed between the parties that their negligence contributed to the accident but, because Mrs Jokich was contributorily negligent, any damages which she might be entitled to recover should be reduced by 10%. As between the appellant and the respondent, that is the employer and the deemed employer, it has been agreed that each was equally negligent and that they should be equally liable for any damages which Mrs Jokich might possibly recover. In other words, the agreed apportionment of liability for negligence was 45% for the appellant, 45% for the respondent and 10% for contributory negligence by Mrs Jokich.

51 Despite this agreement that both the appellant and the respondent were tortfeasors whose negligence caused or contributed to Mrs Jokich's injuries and loss, no claim for damages at common law has ever been commenced by Mrs Jokich against either of them (or any other person) and, since the redemption of her entitlement to workers' compensation by the memorandum of agreement of 5 July 2004, Mrs Jokich is now permanently precluded from ever bringing or maintaining such an action for damages. The reason why no claim for such damages was ever commenced by Mrs Jokich is that her degree of disability, assessed in accordance with s 93D(2) of the Act was not severe enough to satisfy the threshold provisions contained in s 93E(3), so that by virtue of s 93C, any court is directed not to award damages to her.

(Page 24)

52 Accordingly, on the basis of the agreement that negligence by the respondent had caused or contributed to the injury resulting in the payment of workers' compensation benefits to Mrs Jokich, the appellant sought to recover from the respondent 45% of the total compensation which it had paid in reliance upon the statutory cause of action for an indemnity granted by s 93(1) reduced by 55%, having regard to the employer's own negligence of 45% and the contributory negligence of the worker - in accordance with s 93(2)(a) and (b). It was common ground between the parties at the trial, and on the appeal, that if the appellant was entitled to maintain the statutory claim for partial indemnity that the extent of the recovery should be 45% or $96,750.27, as claimed.

53 At trial the parties were in issue as to whether or not the respondent was a 'deemed employer' of Mrs Jokich within the meaning of s 175 of the Act - the appellant contending that she was not and the respondent contending that she was. As already noted, the learned trial judge found that, under the terms of the contract and having regard to all the circumstances, Mrs Jokich was a deemed employee of the respondent.

54 For this appeal, the issues upon which the parties remain divided are:

1. Can a common law employer, such as the appellant, maintain a claim for indemnity, or partial indemnity, under s 93, for workers' compensation payments which it has made against a third person who is a deemed employer of the same worker by virtue of s 175 and, if so, can the common law employer maintain that claim for an indemnity or partial indemnity in the light of s 175(2) of the Act?

2. Can the appellant, as the common law employer, maintain the s 93 claim for indemnity against the deemed employer (or, for that matter, not though the issue directly arose, against any other tortfeasor whose negligence or breach of duty caused or contributed to the accident giving rise to the liability to pay workers' compensation) when:


(i) any court is precluded from awarding the injured worker damages at law in respect of the loss arising from the accidental injury in the course of employment because the ensuing degree of disability did not fulfil the threshold requirement of s 93E(3); or

(ii) any potential entitlement to damages arising from the negligently incurred injury and consequent loss and damage was later terminated by the acceptance by the

(Page 25)

worker of a lump sum settlement under the Act and the entry into a memorandum of agreement under s 67(1) and s 67(2)?

3. Whether, if an action for the recovery of an indemnity or partial indemnity by the appellant against the respondent pursuant to s 93 of the Act is otherwise available, it can be defended, or perhaps more properly be fully met with a counterclaim and set off, which, to avoid circuity of action, should result in the proceedings being stayed or dismissed, because of the existence of the contractual indemnity between the deemed employer (respondent) and the appellant as contained in the Prospector and Avon Link On-train Services Agreement, cl 16 in the present case?

55 In relation to the doctrine of avoidance of circuity of action see: Eastern Extension Australasia and China Telegraph Co Ltd v Federal Commissioner of Taxation (1923) 33 CLR 426 (per Isaacs and Rich JJ at 441) and Woodside Petroleum Development Pty Ltd v H & R - E & W Pty Ltd (1999) 20 WAR 380, 402 (Ipp J).

56 With regard to these issues the learned trial judge held, first, that a claim for indemnity, or partial indemnity, pursuant to s 93(1) could be maintained by a common law employer against a tortfeasor who was a deemed employer of the same worker under the provisions of s 175 of the Act and that such a statutory right of action existed notwithstanding the terms of s 175(2). Secondly, her Honour held that the termination of Mrs Jokich's entitlement to claim damages at common law against either the appellant or the respondent, brought about by her entry into a memorandum of agreement under s 67(1) and s 67(2) of the Act, did not prevent a claim for an indemnity or partial indemnity by the appellant against the defendant because there was, at least for some time (subject to factors yet to be mentioned), a potential liability for damages at common law. Thirdly, importantly and vitally, her Honour held that because Mrs Jokich's degree of disability was not severe enough to allow a court to award damages to her, pursuant to Part IV Division 2 of the Act there were not, and had not ever been, 'circumstances creating a legal liability in some person other than the employer to pay damages in respect thereof' - within the meaning of s 93(1). This latter conclusion was sufficient to result in the dismissal of the appellant's claim for partial indemnity.

57 Nevertheless, her Honour went on to examine and resolve the third issue, namely, whether or not the existence of an apparent complete contractual indemnity within the terms of the contract between the appellant and the respondent (cl 16) meant that the statutory claim for

(Page 26)

indemnity or partial indemnity could be defended or otherwise successfully opposed. After engaging in a detailed examination of submissions advanced by the parties concerning the proper construction and extent of the indemnities contained in cl 16 of the Prospector and Avon Link On-train Services Agreement, her Honour concluded that the breadth of the indemnity so granted was sufficient to answer the appellant's claim and that this was also another sufficient answer to the appellant's claim for indemnity.

Issues arising on appeal

58 Delron Cleaning Pty Ltd (Delron) (as the common law employer and appellant) advances two grounds of appeal, namely:

1. The learned Judge erred in law in holding that, for the purposes of s 93 of the Workers' Compensation and Injury Management Act 1981, the injured worker's disability was not caused under circumstances creating a legal liability in the respondent to pay damages to the injured worker.

2. The learned Judge erred in law in holding that the appellant was, by cl 16.4 of the contract between the appellant and the respondent, liable to indemnify the respondent against the appellant's claim.

59 In the course of the hearing of the appeal, and in response to observations from the court, the appellant enlarged the second ground of appeal to include a contention that, by reason of s 181 of the Act, as it was at the date of this accidental injury, (s 301 of the Act at present), the provisions of the Act apply notwithstanding any contract to the contrary, so that reliance might not be placed by the respondent on the contractual right of indemnity contained in the agreement of 11 July 1997.

60 Counsel for the respondent did not oppose the enlargement of the second ground of appeal to this extent but sought, and was granted, leave to file later written submissions addressed to that point. The court has since received and been assisted by the submissions so filed.

61 In addition, the respondent has filed a notice of contention seeking to support the judgment entered after trial but on additional different grounds, namely:

The respondent contends that the learned trial Judge erred in concluding that a 'deemed employer' as defined by s 175 of the Workers' Compensation and Injury Management Act 1981 is 'some person other than the employer' within the meaning of s 93(1) of the Act.

(Page 27)

However, as developed in the written and oral submissions, it became apparent that the position of the respondent in relation to the notice of contention is that s 93(1) should not be read in a way which would permit a common law employer to maintain a claim for indemnity against a deemed employer because, by virtue of the decision in Hewitt v Benale Pty Ltd [2002] WASCA 163; (2002) 27 WAR 91, the condition in the section, 'some person other than the employer', cannot be satisfied if the target of the claimed indemnity is the deemed employer because the deemed employer is to be treated as an employer 'for the purposes of the Act' by s 175(1).

General considerations

62 Before turning to the details of the submissions made, respectively, on behalf of the appellant and the respondent, or with the reasons for decision given by the learned trial judge on the issues remaining in contention, it is useful to dwell for a moment on the broad positions of the parties in the situation which had arisen. Certain points of significance are that, on the facts as agreed, or found:

(a) Both the appellant and the respondent were, for the purposes of the Act, jointly and severally liable to pay to Mrs Jokich the workers' compensation and associated benefits which had been paid to her solely by the appellant - s 175(1).

(b) Had the respondent paid all or any of that compensation to Mrs Jokich (then subject to the true scope of s 93) it would have been entitled to a full indemnity from the appellant in respect of that liability - s 175(2).

(c) In the events which had happened both the appellant and the respondent were joint and several or concurrent tortfeasors potentially liable for any damages which Mrs Jokich might recover at law and, in the event that such damages were recoverable by her, liable, as between themselves, to contribute equally to that liability and in the event that one had discharged more than half the liability, to indemnify the other to the extent to which the other had discharged more than half the liability.

(d) Notwithstanding this potential liability to contribute equally to any damages awarded in favour of Mrs Jokich, the statutory right of contribution conferred by s 5 of the Law Reform (Contributory Negligence and Tortfeasors' Contribution) Act 1947 (WA) (the Contribution Act), applies only to liability to pay damages, but in certain circumstances there is a right of indemnity to recover

(Page 28)

workers' compensation (s 6(2) of the Contribution Act). This qualified right of indemnity for the recovery of workers' compensation payments paid by an employer against a third party conferred by s 6(2) of the Contribution Act may allow a common law employer to be indemnified wholly or in part for compensation paid to the worker by any third party tortfeasor, regardless of whether that third party tortfeasor was also a deemed employer of the worker by reason of s 175.

This right of indemnity for workers' compensation payments paid by an employer against a person liable to pay damages to the worker granted by s 6(2) of the Contribution Act, was not the subject of any express attention at the trial of this action or on the appeal. It is, therefore, unnecessary to examine it now except, perhaps, to observe that, in substance, it appears to have an application and effect very similar to s 93 of the Workers' Compensation Act.

(e) In the particular circumstances of this case, because Mrs Jokich's degree of disability did not exceed the thresholds prescribed by Part IV Division 2 of the Act, the provisions of s 93F(4) mean that the employer (and applying Hewitt v Benale Pty Ltd - the deemed employer) is not liable to make any contribution under the Contribution Act in respect of damages awarded against another person in relation to the injury – but this immunity does not in terms extend to any immunity to indemnify for payments of workers' compensation under s 6(2) of the Contribution Act as distinct from damages.

63 At the trial it appears to have been common ground between the parties that the respondent could not be made liable to make any contribution under the Contribution Act - a submission which the learned trial judge evidently accepted [142]. But this concession and its acceptance does not seem to have specifically addressed s 6(2) of the Contribution Act. The justification for that conclusion seems to depend upon whether or not Mrs Jokich would have had a right independently of the Act to recover damages against the respondent - which is very similar to the issue which arises under s 93(1)(b) of the Act.

64 Each of the appellant and the respondent being jointly and severally liable to Mrs Jokich for compensation arising out of her disability means that each shared in co-ordinate liabilities, or in a common obligation to make good the one loss or in respect of a liability 'of the same nature and to the same extent', such as would give rise to the principle of equitable contribution which applies both at common law and in equity: Burke v

(Page 29)

LFOT Pty Ltd [2002] HCA 17; (2002) 209 CLR 282 [14] - [16] (Gaudron ACJ and Hayne J), [38] - [39] (McHugh J), [87] - [94] (Kirby J) and [136] - [139] (Callinan J). See also Alexander v Perpetual Trustees WA Ltd [2004] HCA 7; (2004) 216 CLR 109. The application of this doctrine, however, remains subject to any relevant statutory provision which may be inconsistent with, or exclusive of, it. In this respect, the potential significance of an obligation in equity to contribute to a common obligation arises from the joint and several liability of the parties to pay Mrs Jokich the workers' compensation. The fact that they were coincidentally joint tortfeasors and that the equitable entitlement to contribution (that is, outside the scope of the Contribution Act) does not apply as between joint tortfeasors, does not affect the position in relation to joint obligations for a statutory liability which is not a tort based liability. Nevertheless, as Burke v LFOT Pty Ltd demonstrates, there may still be circumstances which exclude, or render it inequitable to order, such contribution which, like all equitable remedies, is always discretionary.

65 No endeavour was made at trial or on the hearing of this appeal to invoke any general right to contribution at law or in equity, independent of the Act. Nevertheless, this doctrine, as a potential source of a right of contribution, should nevertheless be recognised in order to establish the background which provides the context in which the rights and remedies conferred by the Act need to be interpreted. As will be seen, the provisions of s 175(2) and of s 93F(4) take on added significance when it is recognised, that, subject to those provisions, a right to contribution in equity might be available in the background.

66 The effect of s 175(2) in providing only for an indemnity in favour of the deemed employer against the common law employer for the former's liability to pay workers' compensation to a worker, already referred to as a right of indemnity operating in one direction only, has a further significance. Earlier I made reference to the principle of equitable contribution applying both at common law and in equity: Burke v LFOT Pty Ltd which, subject to other considerations, applies where parties are jointly and severally liable for coordinate liabilities or under a common obligation to make good the one loss. In doing so I alluded to the course of authority dating from Merryweather v Nixan (1799) 8 TR 186; 101 ER 1337 which held that there was no right at law or in equity to contribution as between joint tortfeasors so that any such rights depended entirely on statute - of which the Contribution Act is a stereotype. See generally Meagher, Gummow and Lehane, Equity: Doctrines and Remedies (4th ed, 2002) [10-005]. But the exclusion of any right at law or in equity to

(Page 30)

contribution between tortfeasors does not extend to an exclusion of the common law or equitable right of contribution as between parties under coordinate liabilities for a different species of obligation - in the present case the statutory obligation to pay workers' compensation benefits to a disabled worker.

67 Accordingly the question arises as to whether the right of contribution at law or equity which Burke v LFOT Pty Ltd describes can apply in the present instance. If it did there would seem to be no reason for the existence of s 175(2) of the Act because such a right of indemnity would exist under the old doctrine, but so would a right of indemnity by the common law employer against the deemed employer. The effect of s 175(2) in establishing an indemnity in favour of only one of the co-obligors must, in my view, be regarded as excluding the common law and equitable doctrine providing for a right of contribution in favour of the other co-obligor, the common law employer. I conclude, therefore, that s 175(2) excludes in this sphere the common law and equitable doctrine of contribution and replaces it with a full statutory right of indemnity solely in favour of the deemed employer.

Statutory provisions for indemnity or contribution

68 The foregoing analysis allows the scheme for indemnities under the Act, other legislation and the general law, whether partial or total, to be seen in perspective. Section 92 deals with occasions where a worker brings an action for damages against either the employer or a third person and, by addressing the various combinations of possibilities, establishes a regime where there cannot be recovery or retention of both compensation and damages. It achieves this objective by providing that compensation payments should be credited towards the payment of damages, where the person liable is the defendant who has paid the compensation (subject to adjustment in cases of contributory negligence) or if a defendant, other than an employer, is liable to pay damages, by providing that the amount of the compensation received by the plaintiff shall be credited to the award of damages, but deducted from the payment by the defendant, and refunded to the employer who has paid the compensation - again, subject to adjustment for contributory negligence.

69 Section 92 deals with all cases where the worker/employee's action proceeds to a judgment for damages, whether after trial or by acceptance of an offer to consent to judgment or by acceptance of money paid into court. Settlements of actions for damages otherwise than by a judgment, whether by agreement or acceptance of money paid into court, or of an

(Page 31)

offer to consent to judgment are dealt with by s 92(f) in which case there is no provision for the deduction or repayment of workers' compensation benefits from the proceeds of the settlement, or apportionment of them. It leaves open recourse to such other remedies which may be available in that situation.

70 Section 93 deals with any occasion where 'some person other than the employer', may be under a legal liability to pay damages and, subject to the section, confers on the employer an indemnity (reducible in the case of contributory negligence by the worker or partial negligence by the employer) for the employer's liability to pay compensation under the Act regardless of whether that third person has discharged his liability to pay damages to the worker by judgment or by settlement or otherwise - s 93(1)(b). In other words, s 92 and s 93 both create qualified rights of indemnity for the recovery of workers' compensation payments made by an employer in the event that some person other than the employer is liable to pay damages at common law.

71 While also dealing with a right of indemnity for workers' compensation paid, s 175 is materially different. The statutory right of indemnity which is provided by s 175(2) is for a total indemnity of any workers' compensation paid by the deemed employer. The right to indemnify is not reducible in the case of negligence by that deemed employer which may have contributed to the accident producing the liability to pay workers' compensation, nor is it reducible for contributory negligence, if any, by the worker. Obviously enough, this is because the s 175 indemnity is confined to the relationship between the deemed employer (the principal) and the common law employer (the contractor) and does not address at all liability for damages at law or the associated doctrines of apportionment for contributory negligence or contribution between parties jointly, severally or concurrently liable at law for the loss or damage suffered by the worker.

72 Section 175 deals with the interrelationship of two employers (one being the 'deemed employer') and confers a right of indemnity against the actual employer in favour of the deemed employer to the full extent of its liability to pay workers' compensation. The right of indemnity exists only in one direction because the common law employer (contractor) has no right under this section for an indemnity for compensation paid by him or it, against the deemed employer (principal).

73 The practical effect of s 175 is that, as between deemed employers and actual employers, the worker may have recourse to either, for the

(Page 32)

recovery of workers' compensation upon suffering a disability arising out of or in the course of his employment with his common law employer which is also deemed to be in the employment of the other. From whichever source the compensation may actually be paid in any given case, once the indemnity has been invoked and, if necessary enforced, by the deemed employer it will be the actual employer who ultimately is fixed with the obligation to meet the compensation payments, whether directly to the worker, or by indemnifying the deemed employer for them.

74 The practical and commercial reason for leaving the ultimate financial responsibility for such workers' compensation with the common law employer appears to be that it will be that employer who will have been obliged to pay the insurance premiums arising from his engagement of the worker who is injured, rather than the deemed employer, so that with the right that that employer has (unless self-insured) to an insurance indemnity for the liability, it is logical that that employer should have the ultimate responsibility for meeting the financial obligation associated with the discharge of his or its employee's workers' compensation entitlement. The deemed employer who, not having this employee on his or its payroll but, nevertheless, being liable to meet his entitlement to workers' compensation, will have paid a lower insurance premium and its insurer, while still 'on risk' will not have calculated the insurance premium by express reference to this payroll - although it is to be expected that its premiums will have been set with such a contingency in view. Be that as it may, the essential point is that the s 175 indemnity operates only in one direction and is not dependent upon the presence of an actual or potential liability by the original employer for damages at common law.

Submissions on the appeal

75 Counsel for the appellant placed reliance upon passages in the reasons for decision in Loongana Lime Pty Ltd v Worth [2006] WASCA 183. The decision of the majority in that case (Steytler P and Pullin JA), supports the proposition that when a worker who has suffered a disability for which workers' compensation benefits have been received, brings proceedings against some other person to recover damages (not necessarily for negligence), he must bring to account in reduction of his entitlement to damages the compensation received, so that the other person liable may reduce the damages payable to the worker by the amount of compensation which the worker received. The apparent contrast between the majority and Wheeler JA in dissent was that Wheeler JA took the view that such a reduction of the liability of the other person to pay damages, on account of compensation already received by

(Page 33)

the claimant, would not occur unless the person liable to pay the damages was liable in negligence or breach of duty - which was not the case in Loongana Lime Pty Ltd v Worth where the worker was entitled to the damages under a non-fault scheme of compensation applying under the Civil Aviation (Carriers' Liability) Act 1961 (WA) adopting, and applying, the statutory scheme established by the Civil Aviation (Carriers' Liability) Act 1959 (Cth). Steytler P and Pullin JA both accepted, although this was not essential to their Honours' decision, that in the situation which had arisen in Loongana Lime Pty Ltd v Worth the obligation of the worker/claimant to bring to account in reduction of his entitlement to compensation, the amount recovered by way of damages, was not in any way dependent upon the co-existence, in the particular circumstances, of an employer's right to indemnity under s 93(1)(b).

76 As Wheeler JA explained in Loongana Lime Pty Ltd v Worth, there are many independent and partially overlapping provisions in s 92 and s 93 of the Act which have arisen over the years which are not all always consistent with any single discernible policy in relation to this part of the legislation, although there are many observations from the highest authority to the effect that:

Compensation should not, as a benefit for the worker, or a burden for the tortfeasor, be cumulative on damages, that damages should, if recovered by the worker, as far as they can, be the fund out of which compensation is paid, and that, as between the employer and the alleged tortfeasor, the burden of compensation recovered from the employer should be finally cast upon the tortfeasor, but should not be a burden ultra the damages for which the worker has obtained judgment against the tortfeasor.

(Watson v Newcastle City Council (1962) 106 CLR 426, 432 (McTiernan J).

77 As Wheeler JA also explained, Owen J had previously pointed out some absences of symmetry in the Western Australian legislation in Geraldton Building Co v Cramer [2001] WASCA 244 [20]. Nevertheless, it can be safely said, relying upon the decision in Loongana Lime Pty Ltd v Worth, that the legal liability of some person other than the employer to pay damages, upon which the s 93(1) indemnity is posited, is not confined to a legal liability to pay damages for negligence, or for that matter to some other fault-based liability to pay damages.

78 The appellant submitted that the legal liability in some person other than the employer to pay damages, upon which s 93(1) depends, rests on the existence, for however brief a time, of a true liability by that third person to pay damages and is not lost, diminished or terminated if that

(Page 34)

third party and the worker resolve proceedings between themselves without a judgment for damages or any establishment or admission of a liability to pay damages: GIO (NSW) v McDonald (1991) 25 NSWLR 492; QBE Workers Compensation (NSW) Ltd v Dolan [2004] NSWCA 458, because, among other reasons, there is no privity of interest or derivative cause of action as between the employer and the worker in respect of the statutory right of indemnity of the former: Tooth & Co Ltd v Tillyer (1956) 95 CLR 605; Tickle Industries Pty Ltd v Hann (1974) 130 CLR 321; and Manners v Transfield Pty Ltd (1992) 110 ALR 70.

79 The appellant placed importance on this last doctrine for the proposition that the employer's right of indemnity could not be defeated by action or inaction by the employee when dealing with the third person under a legal liability to pay damages. For example, it has been held that the employer's right of indemnity will not be lost if the worker chooses not to sue the third person who is under a legal liability to pay damages or, if he or she should sue that person, if the worker has allowed a limitation period to expire or consented to the action being dismissed or resolved without establishing, as between the worker and the third person, the legal liability to pay damages - see Tickle Industries Pty Ltd v Hann.

80 One of the agreed facts between the appellant and the respondent at the trial was:

32. Prior to 'redeeming' her workers' compensation claim Ms Jokich did not satisfy, and did not take any steps in an attempt to satisfy, the degree of disability threshold requirements contained in Part IV Division 2 of the Act (AB 53).

This clearly meant that Mrs Jokich herself, on the facts as postulated, would not have been able to obtain an award for damages against the respondent because, not having demonstrated a degree of disability required by Part IV Division 2, a court would be prohibited from awarding her damages by reason of s 93C. This meant, so the learned trial judge held:

Ms Jokich never having crossed the threshold provisions contained within s 93E(3) and s 93E(4), she cannot now do so by virtue of the agreement reached. By virtue of those constraints upon seeking damages against an employer, which includes a deemed employer by virtue of the decision in Hewitt v Benale (2002) 27 WAR 91; [2002] WASCA 163, it follows that, although the defendant was negligent, it was not liable to pay damages to Ms Jokich unless and until she crossed the threshold provisions, which she did not [137].

And, later, at [141], her Honour said:

(Page 35)

In my view the submission is answered by the express terms of s 93(1) of the Act. In both the first paragraph and in subpar (b) of that section the emphasis is on the defendant's liability 'to pay damages'. What is contemplated, then, is proceedings which will culminate in an order that the defendant part with money, rather than the pyrrhic victory and an order for judgment with no attendant order for damages [141].

In other words, the learned trial judge was assuming, because Mrs Jokich had never proved that her disability satisfied the threshold provisions of Part IV Division 2 of the Act, that the appellant could not succeed.

81 I have no doubt that that assumption was well justified on the facts assumed by the parties before her Honour and in the manner upon which the proceedings were conducted. The agreed statement of facts and the relevant background appears to have been treated as establishing, as an objective fact, that Mrs Jokich's disability was, from any point of view, less than the threshold requirements which would permit an order for damages to be made by a court. Obviously, Mrs Jokich and her representatives accepted that because of the redemption agreement which was entered into.

82 However, I consider that the appellant's submissions are correct insofar as they contend that if, objectively, the appellant could establish that Mrs Jokich's degree of disability was greater than the applicable thresholds, then the appellant would not be precluded from pursuing the claim for indemnity under s 93(1) of the Act merely because Mrs Jokich herself had failed to establish that her case was one of a disability greater than the threshold requirements or had agreed, expressly or implicitly, that it was not. In other words, it would have been open to the present appellant to attempt to prove that, notwithstanding the conduct of Mrs Jokich and her redemption of her claim for workers' compensation payments, she did in fact have a disability greater than the threshold requirements and so, as a plaintiff in a claim for a statutory indemnity under s 93(1), the appellant could prove, if the facts supported the finding, that Mrs Jokich's disability was above the threshold and that, consequently, there was no impediment to any court finding, as between the appellant and the respondent, that the respondent had, up until the point of the redemption of the worker's claim for compensation, been under a legal liability to pay damages in respect of the circumstances which caused Mrs Jokich's injury and loss.

83 That means, in other words, that the right of indemnity of the employer under s 93(1) is not necessarily lost if the worker fails to demonstrate satisfaction of the threshold requirements for disability or

(Page 36)

conducts himself, or herself, on such a basis as to give rise to an admission or an acknowledgement that the disability is less than the threshold, so long as, in the indemnity proceedings, the employer is able to prove that, in fact, the disabilities satisfied those requirements. However, this was never attempted in the present proceedings and, the appellant never proved that Mrs Jokich's disability satisfied the threshold requirements.

84 For present purposes, therefore, I consider that one must accept that, although Mrs Jokich's disability was caused, to a material degree, by the negligence of the respondent, there was never any prospect of the respondent being adjudged liable to pay damages because of s 93C.

85 To my mind the fact that at the time of Mrs Jokich's injury, and indeed until the passage of the 2004 amendments to the Act, there was a controversy over whether or not the effect of s 93C was merely to bar the remedy to recover damages, that is that it was procedural: Dossett v TKJ Nominees Pty Ltd [2003] HCA 69; (2003) 78 ALJR 161, [21], [80], or whether it was substantive: Re Monger; ex parte TNT Australia Pty Ltd [2002] WASCA 223, does not affect the position at all. This is because one of the ingredients of the cause of action for damages at common law, modified as it is by Part IV Division 2, is proof that the alleged disability satisfied the threshold provisions.

86 In the absence of proof of that fact, any plaintiff will fail to establish the cause of action and there would be no 'legal liability' on the tortfeasor to pay damages in that particular instance, notwithstanding that the tortfeasor had in fact been negligent. The controversies about the procedural/substantive distinction may go to the validity of proceedings commenced at a former time without complying with the statutory requirements, or whether or not the statutory requirement could be waived or be the subject of an estoppel against a defendant, or whether time could be extended after the expiration of a relevant period. On the facts assumed in this case, one ingredient in the modified statutory cause of action was missing and in its absence the respondent could never have been found liable to pay damages by any court. To my mind, and with respect, this is the one single factor which is determinative of the present appeal and which means that it must be dismissed.

87 There are other indications in the Act which appear to be consistent with the conclusion that a third person tortfeasor should not be obliged to indemnify an employer who is seeking to rely on s 93(1) if the tortfeasor's acts or omissions did not cause the worker a disability which satisfied the

(Page 37)

thresholds. The provisions, already noticed in s 93F(4), that an employer is not liable to make any contribution under the Contribution Act to some other joint or several tortfeasor or concurrent tortfeasor (who is not an employer or a person for whom the employer is liable) reflects a similar policy that sub-threshold disabilities, even if caused by negligence or breach of duty, should not give rise to any common law liability to pay damages or to contribute to the payment of damages and, in such instances, the liability for statutory compensation will rest, ultimately (in view of s 175), solely upon the common law employer.

88 In the light of these conclusions, it is not essential that I should resolve the remaining two issues, which are: whether the s 93(1) indemnity can be maintained against a deemed employer, within the meaning of s 175 of the Act; and, further, whether the indemnity in cl 16 in the contract between the appellant and the defendant provides a defence to the appellant's claim. Nevertheless, these were fully argued and it is desirable that I should deal with them.

89 The decision in Hewitt v Benale that a principal contractor, as defined in s 175, is deemed together with the common law employer to be an employer of the worker for the purposes of this Act has been affirmed and applied since that case was decided - significantly, in Klein v Minister for Education [2007] HCA 2; (2007) 81 ALJR 582. It has been acted upon by Parliament - see Workers' Compensation Reform Act 2004 which introduced the new subs 93B(5). It has been accepted in Marsden v Unimin Australia Ltd [2004] WASCA 143 and Jones v Wesfarmers Ltd [2003] WASCA 225 [70] - [71].

90 The respondent submits that, by virtue of the provisions in s 175, both the appellant and the respondent are deemed to have been employers of Mrs Jokich at the material time and that, therefore, the right of indemnity conferred by s 93(1) cannot be maintained by one against the other, or if it matters, by the common law employer against the deemed employer. I agree, with respect, that s 93, when using the term 'employer' should be taken as applying to both the common law employer and to the deemed employer, but not in a manner which excludes the right of indemnity available to the employer (whether the common law employer or the deemed employer) against each other. The structure of s 93 entails a recognition that some person other than an employer (whether the common law employer or deemed employer) may be liable at law to pay damages for the injury to the worker which produced the employer's liability to pay compensation. It proceeds to create an indemnity in favour

(Page 38)

of the employer against that third person, outside the scope of the real or deemed employment relationship.

91 There seems to me to be no reason why the deemed employer, if he, she or it has paid the workers' compensation, should not be entitled to the statutory indemnity against the external third person liable to pay damages to the worker in order to recoup the workers' compensation which that employer paid. The liability of the third party wrongdoer to indemnify an employer for workers' compensation runs with that third person's liability to pay damages, and this is consistent with the policy and objectives of this and comparable legislation examined by Wheeler JA in Loongana Lime Pty Ltd v Worth.

92 If that third party liable to pay damages to the worker should happen to be a deemed employer, or to include a deemed employer, there seems to be no reason in principle, nor in the language of s 93, to exclude that person from the scope of the indemnity but, rather, every reason to regard the deemed employer as being within the scope of the indemnity. Take an example where a worker (A), lent, by his or her common law employer, to a deemed employer (B), is injured and suffers a disability as a result of the negligence of the deemed employer and of three other tortfeasors, C, D and E, who with the deemed employer are all found to be jointly and severally, or concurrently, liable to pay damages to the worker. As between the four tortfeasors, B, C, D and E, they are each regarded as being liable for the whole of the damages but obliged to contribute in such a way that as between themselves each must meet 25% of the liability. In that case, the deemed employer (B) would be obliged to contribute to the plaintiff's damages (which, by hypothesis, would include the workers' compensation payments received (see s 92) as would the other co-defendants. That being so, there seems to be no reason why the common law employer should not be entitled to maintain his claim for indemnity under s 93(1) against the deemed employer, and the three other co-defendants nor, if he does, why he should recover an indemnity only from C, D and E without the deemed employer being required to contribute to the others.

93 Accordingly, and with respect, I consider that the learned trial judge was correct in concluding as she did at [101] that in reading s 93(1) and (2) as a whole:

There is a legislative intent that the employer is entitled to be indemnified against his liability to make compensation payments under the Act to the extent to which another party, not the worker, has been responsible through negligence for causing the disability [101].

(Page 39)

Therefore, I also reject the submissions advanced by the respondent in support of its notice of contention in this respect.

94 Associated with this last issue, but in my view separate and distinct from it, is the question of whether or not the provisions of s 175(2) are inconsistent with or otherwise negate her Honour's finding that the statutory right of indemnity for an employer under s 93(1) is available against a deemed employer. Earlier I pointed out that the indemnity under s 175(2) can operate only in favour of the deemed employer and that the effect of this would be to leave the common law employer ultimately to meet alone the whole of the workers' compensation liabilities which each of the common law employer and the deemed employer may have to the disabled worker by virtue of s 175(1). However, an acknowledgement of the availability of the s 93(1) indemnity to a common law employer against a deemed employer will not detract from this effect or the policy evident in s 175. Section 175 is speaking only of the statutory liability to pay compensation under the Act and makes no reference to liability for damages in tort or otherwise. The setting in which s 175 operates is entirely that of the non-fault based liability to pay compensation which the Act generally creates.

95 Looked at exclusively from the viewpoint of that liability, there are reasons of policy, practicality and commercial significance, why the common law employer should ultimately be left to meet that liability and, in the process, to indemnify the deemed employer for any component of the liability which the latter has discharged. However, none of those factors of practicality, policy or commercial significance seems to suggest that a deemed employer, who is liable at law to pay damages to the injured worker, should not have to indemnify the common law employer for the workers' compensation payments which the latter has met, adjusted if necessary, to take account of negligence, if any, by the common law employer and any contributory negligence by the worker. The overall policy of adjusting liabilities for compensation when there are concurrent liabilities to pay damages at law does not stop at the doors of a deemed employer.

Contractual indemnity

96 The learned trial judge considered in detail the terms of the Prospector and Avon Link On-train Services Agreement dated 11 July 1997 made between the appellant and the respondent's predecessor and assignor. Her Honour concluded, having regard to the terms of cl 16 of that contract and the events which had happened, that the clause was intended to provide, and did provide, a complete indemnity to the

(Page 40)

respondent whenever a claim arises from an injury to one of the appellant's employees where the injury had been caused by or arisen from an act of the appellant, or where the appellant had contributed to the cause of the injury, even if it be the case that the respondent had also contributed to the injury [154]. For those reasons, which I need not repeat, her Honour concluded that any liability which, contrary to her earlier findings, the respondent might have had to the appellant to indemnify the latter for compensation pursuant to s 93(1) of the Act was completely met by this countervailing contractual indemnity which, in the circumstances, provided a defence to the claim for a statutory indemnity.

97 However, neither of the parties raised before the learned trial judge the effect of s 301 of the Act (at the time s 181) which provides:

301 Prohibition of contracting out

Except as provided by this Act, its provisions apply notwithstanding any contract to the contrary.

98 Prohibitions against contracting out have a long history in workmen's compensation legislation from its earliest times. Frequently the prohibition is framed in terms which prevents a worker or a dependant from contracting out of the benefits of the legislation but other common examples are provisions which prescribe that the Act applies notwithstanding any provision to the contrary. An historical review readily reveals that the purpose of these provisions was to protect workers and their families and to ensure that, if a disability occurred creating a liability to pay compensation, any ultimate contract for the redemption or extinguishment of that entitlement would be subject to supervision and review to avoid any possibility of exploitation. Nevertheless, the scope of the prohibition is comprehensive and it applies alike to workers and employers, including deemed employers, insurers and third persons whose conduct or liability is made subject to the statutory scheme. Accordingly, a contractual indemnity, such as contained in cl 16 of the contract between the appellant and the defendant which has the effect of abrogating the statutory rights of indemnity or partial indemnity contemplated by s 93 is, in my view, a term which is contrary to the provisions of the Act. By virtue of s 181 (now s 301) the statutory provisions apply, notwithstanding cl 16, and it follows that the contractual indemnity is incapable of providing any defence by the respondent to the appellant's claim. I would, therefore, uphold the appellant's second ground of appeal.

99 Nevertheless, the fact that the appellant has not established, against the respondent, that Mrs Jokich had a disability which satisfied the

(Page 41)

threshold requirements of Part IV Division 2 of the Act, means that the respondent was not shown ever to have had a legal liability to pay damages arising from that injury arising by accident in the course of Mrs Jokich's employment so, therefore, the appeal must be dismissed.