Franco v Workers Compensation Nominal Insurer (No 3)

[2021] NSWSC 503

Supreme Court

New South Wales

Medium Neutral Citation:

Franco v Workers Compensation Nominal Insurer (No 3) [2021] NSWSC 503

Hearing dates:

3, 4 August 2020

Decision date:

10 May 2021

Jurisdiction:

Common Law

Before:

Rothman J

Decision:

(1)   Order 5 issued by the Court in these proceedings on 22 February 2021 is vacated;

(2) Pursuant to the provisions of s 100 of the Civil Procedure Act 2005 (NSW) and s 151M of the Workers Compensation Act 1997 (NSW), the defendant shall pay interest on the damages awarded on 22 February 2021 in the amount of $245,372.92.

Catchwords:

JUDGMENT and ORDERS – pre-judgment interest - Workers Compensation Act 1987 (NSW), s 151M – statutory pre-conditions – no reasonable offer in writing – pre-judgment interest ordered

Legislation Cited:

Civil Procedure Act 2005 (NSW), ss 100, 101

Workers Compensation Act 1987 (NSW), ss 151D, 151M

Workplace Injury Management and Workers

Compensation Act 1998 (NSW), ss 281, 282

Cases Cited:

Australian Winch and Haulage Company Pty Ltd v Collins [2013] NSWCA 327

Franco v Workers Compensation Nominal Insurer (No 2) [2021] NSWSC 129

Category:

Costs

Parties:

Marina Franco (Plaintiff)
Workers Compensation Nominal Insurer (Defendant)

Representation:

Counsel:
R de Meyrick & J Mrsic (Plaintiff)
S Kettle (Defendant)

Solicitors:
Grieve Watson Kelly Lawyers (Plaintiff)
Hicksons Lawyers (Defendant)

File Number(s):

2019/210260

Judgment

1. HIS HONOUR: On 22 February 2021, the Court, as presently constituted, issued reasons for judgment and orders in the substantive proceedings in this matter. [1] The Court ordered judgment for the plaintiff and ordered damages under the principles of common law as qualified by the provisions of the Workers Compensation Act 1987 (NSW) (hereinafter “the 1987 Act”) and the Workplace Injury Management and Workers Compensation Act 1998 (NSW) (hereinafter “the 1998 Act”).

   1. Franco v Workers Compensation Nominal Insurer (No 2) [2021] NSWSC 129.

2. The Court granted leave to the parties to apply in relation to costs, interest and a number of other aspects. The plaintiff, pursuant to the leave granted, seeks an order for pre-judgment interest, which claim is governed by the terms of s 151M of the 1987 Act.

Legislation

3. It is necessary to recite the terms of s 151M of the 1987 Act, which is in the following terms:

“151M    Payment of interest

1. Limited statutory entitlement A plaintiff has only such right to interest on damages as is conferred by this section.

(2), (3) (Repealed)

(4)

(a)    Interest is not payable (and a court cannot order the payment of interest) on damages unless—

(i)    information that would enable a proper assessment of the plaintiff’s claim has been given to the defendant and the defendant has had a reasonable opportunity to make an offer of settlement (where it would be appropriate to do so) in respect of the plaintiff’s full entitlement to all damages of any kind but has not made such an offer, or

(ii)     the defendant has had a reasonable opportunity to make a revised offer of settlement (where it would be appropriate to do so) in the light of further information given by the plaintiff that would enable a proper assessment of the plaintiff’s full entitlement to all damages of any kind but has not made such an offer, or

(iii)    the defendant has made an offer of settlement, the amount of all damages of any kind awarded by the court (without the addition of any interest) is more than 20% higher than the highest amount offered by the defendant and the highest amount is unreasonable having regard to the information available to the defendant when the offer was made.

(b)    The highest amount offered by the defendant is not unreasonable if, when the offer was made, the defendant was not able to make a reasonable assessment of the plaintiff’s full entitlement to all damages of any kind.

(c)    For the purposes of this subsection, an offer of settlement must be in writing.

1. Calculation of interest If a court is satisfied that interest is payable under subsection (4) on damages—

   (a)    the amount of interest is to be calculated for the period from the date of the death of or injury to the worker until the date on which the court determines the damages, and

   (b)    the amount of interest is to be calculated in accordance with the principles ordinarily applied by the court for that purpose, subject to this section.

2. Rate of interest The rate of interest to be used in any such calculation is three-quarters of the rate prescribed for the purposes of section 101 of the Civil Procedure Act 2005 for the period concerned.

3. Judgment debts Nothing in this section affects the payment of interest on a debt under a judgment or order of a court.”

   4. As can be seen from the terms of the provision, recited above, the plaintiff’s ordinary rights to interest on damages under the general discretion of the Court and the provisions of ss 100 and 101 of the Civil Procedure Act 2005 (NSW) have been qualified and the plaintiff’s rights to interest are governed by the foregoing provisions. The plaintiff’s right to interest may be awarded only under the foregoing provisions of the 1987 Act.

   5. As can be seen, interest is not payable except in one of three circumstances prescribed by s 151M(4)(a) of the 1987 Act. Further, if there is an entitlement under s 151M(4), then interest is calculated as prescribed by s 151M(5).

   6. The rate of interest is the rate prescribed in s 101 of the Civil Procedure Act. All of the foregoing relates to pre-judgment interest, as nothing in the terms of s 151M affects the payment of interest on a judgment, once it becomes a judgment debt and the existing orders already grant interest for the period after judgment.

Plaintiff’s submissions

7. The plaintiff relies upon the Affidavit of Grant Watson, affirmed 24 February 2021. The Affidavit attests to the fact that information that would have enabled a proper assessment of the plaintiff’s claim was provided to the defendant no later than 12 October 2018. That information was provided in the particulars provided under s 282 of the 1998 Act.

8. Mr Watson annexed to his Affidavit a letter dated 12 October 2018 which claims work injury damages and provides the further relevant particulars pursuant to ss 281 and 292 of the 1998 Act. The particulars were 373 pages in length and were supplied with statements of the plaintiff detailing her work history; hours and pay; injury; treatment; and resultant condition. It also enclosed extensive medical records and documents from the ATO.

9. That information was provided again on 21 December 2018 at the time that the plaintiff’s pre-filing statement was filed. The parties attended a mediation and the certificate recording that the mediation failed is also annexed to the Affidavit.

10. The mediation certificate certifies that the final offer on behalf of the plaintiff was $550,000, clear of workers compensation payments, plus costs and the final offer from the defendant was $45,000, clear of workers compensation payments, plus costs.

11. The judgment amount awarded by the Court was for $1,138,449.60, but that amount does not exclude amounts that would be required to be repaid or deducted as a result of workers compensation payments. Comparing like with like would need to take account of the repayment of the workers compensation payments, which amount to $390,500.48.

12. The Affidavit of Mr Watson also recounts the serving of evidentiary statements in these proceedings, which to a large extent repeated information previously set out in earlier statements and to which the Court has just referred. Those statements were dated 22 November 2019 and 26 February 2020.

13. The Affidavit also recounts some of the history: the application for leave pursuant to s 151D of the 1987 Act on 10 June 2020; the grant of leave on 17 July 2020; the service of the defendant’s evidence, being a statement of a director of the plaintiffs’ former employer after the hearing of the extension of time, but before its determination.

14. Lastly, and relevantly for some purposes under s 151M of the 1987 Act, the defendant made no further offers of settlement in writing, beyond that which was offered during the course of the mediation. A letter, also annexed to the Affidavit, was written by the plaintiff to the defendant’s solicitor on 23 February 2021, which set out the plaintiff’s claim for interest pursuant to s 151M.

15. The defendant replied to the letter of 23 February 2021 on the same date and referred to an offer in the amount of $400,000 clear of compensation payments but inclusive of costs. This, according to the affidavit of Mr Watson, was an offer between counsel and not made in writing.

16. On the basis of the foregoing circumstances, the plaintiff submits that the provisions of s 151M(4) have been engaged and the Court is in the position of being able to order interest.

17. Further, the plaintiff submits that, as a result of the operation of s 151M(4)(c), the offer between counsel cannot be used by the defendant to avoid the payment of interest calculated on the basis of earlier offers and, taking into account the offer that was made in writing by the defendant, the judgment of the Court is significantly more than 20% higher than the highest amount offered, comparing like with like. The plaintiff has calculated the interest on that basis and seeks an award in those terms.

The Defendant’s submissions

18. The defendant opposes the claim for interest. The defendant relies upon an exchange of correspondence of 16 April 2020 and 16 June 2020 and submits that the effect of that correspondence is that there was a written offer in the sum of $300,000, inclusive of costs, but clear of compensation already paid, and that amount was not unreasonable having regard to the information available to the defendant.

19. The defendant in correspondence of 16 June 2020 enclosed the evidentiary statement made by Mr George Angelidis, dated 15 June 2020, and informed the plaintiff that it was seeking instructions as to whether the final offer made at the settlement conference was still open for acceptance. The email exchange of 16 April 2020 referred to the mediation conference and attached a schedule of damages.

20. The aforesaid schedule of damages calculated total damage, clear of compensation, at $292,693. As already stated, the compensation payments were $390,500.48.

21. As a consequence, if there were an offer of $292,693, clear of compensation, it would equate, compared to the judgment of the Court to an amount of $683,193.48 compared to the award by the Court of $1,138,449.60. A figure 20% higher than $292,693, if one included compensation to be repaid, would be $819,832.18. The judgment for damages is approximately 40% higher than the amount necessary to allow for the awarding of interest under s 151M(4)(a)(iii) of the 1987 Act.

22. Alternatively, if the damages award is reduced by the amount to be repaid in workers compensation payments, being an amount of $390,500.48, the damages award, clear of repayment of workers compensation, would be the equivalent of $747,949.12 or over two and a half times or 250% times the offer of $292,693.

23. The two questions that arise are: does the correspondence amount to an offer; and if so was the amount of $292,693 unreasonable having regard to the information then available to the defendant.

24. Essentially, the defendant submits that there are a number of circumstances that render the offer made, if it were an offer, of $292,693 not unreasonable. Even if it were not an offer, the previous offer at mediation, equivalent to $435,500.48, was not unreasonable; in the circumstances as they were known to the defendant at the time.

25. Those circumstances included: the extended delay; the deregistration of the employer; the limited availability of witnesses and documents; and, bearing in mind the terms of the schedule of damages, the information available to it as to past earnings and/or earning capacity. Over and above the foregoing, the plaintiff required an extension of time under s 151D of the 1987 Act.

26. Further, the defendant submits that at the time either one or each of the offers was made, the defendant was not able to make a reasonable assessment of the plaintiff’s full entitlement to all damages of any kind and, therefore, pursuant to the terms of s 151M(4)(b) that which was offered cannot be unreasonable.

27. The defendant also relies upon the Court’s discretion not to order interest, apart from submitting that the plaintiff has not satisfied the statutory preconditions to the awarding of interest. As to this last matter, the plaintiff submits that there is no residual discretion reposed in the Court. The plaintiff submits that the proper interpretation of s 151M of the 1987 Act results in a right to interest or an entitlement to interest and no residual discretion can be exercised.

Consideration

28. The Court first deals with the submission of the plaintiff, in reply, that there is no residual discretion on the awarding of interest. The jurisdiction of the Court to award interest is inherent in a superior court of record of general jurisdiction, including equity, and has existed in the Court, at least since 1824. Interest is compensatory; not punitive. Whatever be the inherent jurisdiction, the current jurisdiction to award interest is contained in ss 100 and 101 of the Civil Procedure Act 2005 (NSW).

29. Relevantly, the submissions of the parties deal with pre-judgment interest. As a consequence of that circumstance, the relevant provision of the Civil Procedure Act is s 100. The terms of s 100(1) are in the following terms:

“100    Interest up to judgment (cf Act No 52 1970, section 94; Act No 9 1973, section 83A; Act No 11 1970, section 39A)

1. In proceedings for the recovery of money (including any debt or damages or the value of any goods), the court may include interest in the amount for which judgment is given, the interest to be calculated at such rate as the court thinks fit—

   (a)    on the whole or any part of the money, and

   (b)    for the whole or any part of the period from the time the cause of action arose until the time the judgment takes effect.”

   30. The foregoing provision applies to all courts to which the Civil Procedure Act applies and, relevantly, would apply to both this Court and the District Court of New South Wales. As a consequence, any claim for damages, as distinct from compensation, under either the 1987 Act or the 1998 Act, would be resolved in a court to which the provisions of s 100 of the Civil Procedure Act applied. Thus, the jurisdiction to award pre-judgment interest is granted by the provisions of s 100 of the Civil Procedure Act.

   31. The terms of s 151M of the 1987 Act do not grant the Court, or the District Court, jurisdiction to award interest. Rather, the provisions of s 151M qualify the right to interest that might otherwise exist and the capacity of a court to order the payment of interest otherwise than once the statutory preconditions in s 151M(4) of the 1987 Act are satisfied. Further, the provisions of s 151M of the 1987 Act prescribe the rate at which the interest will be calculated.

   32. The effect of the foregoing analysis is that the Court is incapable of ordering pre-judgment interest in the absence of one of the three statutory preconditions in s 151M(4). However, if the statutory conditions are met, the Court is entitled to exercise the discretion that is reposed in it under s 100 of the Civil Procedure Act.

   33. The foregoing does not apply to the interest rate, which is prescribed by s 151M(6) of the 1987 Act. On the foregoing basis, the Court is of the view that there is a residual discretion not to order pre-judgment interest.

   34. Having made that comment, it is important to understand that the promulgation of s 151M of the 1987 Act was intended to achieve a purpose, which has been described by the courts. The achievement of that purpose must be a consideration in the exercise of any discretion and the achievement of that purpose may override any other consideration. Nevertheless, there is a residual discretion.

   35. I turn then to the status of the purported offer of $292,693. That amount derives from the defendant’s evidence as to earnings at the time of injury and is a schedule of damages attached to an email which refers to the Informal Settlement Conference (“ISC”) that was to occur later that day. It was a schedule of damages and was not described by the defendant or its solicitors as an offer.

   36. The offer at mediation which, was, at its highest, $45,000, exclusive of compensation repayment, was made orally. That oral offer at mediation is, as earlier stated in these reasons, equivalent to $435,500.48, as distinct from approximately $690,000. Further, the offer made during the course of mediation and/or the ISC was made orally. There is no evidence of any other offer.

   37. The Court of Appeal has discussed the operation of s 151M and has said:

“[154] Ports made no offer to settle the proceedings at any stage of the proceedings. I do not construe s 151M(4)(a)(i) of the WC Act (set out at [45] above) to mean that interest is unavailable to a plaintiff who amends his or her particulars of damage with the leave of the court, even if the amendment is made at a relatively late stage of the proceedings. The question posed by s 151M(4)(a)(i) is whether a defendant has been given information to enable a proper assessment of the plaintiff’s claim and has had a reasonable opportunity to make an offer of settlement, where appropriate, in respect of the plaintiff’s full entitlement to damages but has not done so. The words ‘in respect of the plaintiff’s full entitlement to damages’ refer, in my opinion, to the offer to be made by the defendant.

1. A plaintiff will be unable to rely on s 151M(4)(a)(i) to claim interest unless:

   information that would enable a proper assessment of the plaintiff’s claim has been given to the defendant;

   the defendant has had a reasonable opportunity to make an offer of settlement (where appropriate to do so);

   the opportunity is to make an offer in respect of the plaintiff’s full entitlement to all damages; and

   the defendant makes no such offer.

2. The information that s 151M(4)(a)(i) requires to be provided to a defendant is that which would enable the defendant to make a proper assessment of the plaintiff’s damages claim as then formulated. The defendant can preclude the plaintiff from relying on s 151M(4)(a)(i) to claim interest by making an offer of settlement in respect of the plaintiff’s full entitlement to damages in accordance with the claim advanced by the plaintiff at the time. If the defendant makes no such offer, the plaintiff can rely on s 151M(4)(a)(i) to exempt him or her from the prohibition in s 151M(4)(a) on the court awarding interest. This is consistent with the evident purpose of s 151M(4), namely to impose restrictions on the plaintiff’s entitlement to interest as a mechanism to encourage the parties, especially defendants, to make reasonable offers of settlement.

3. Section 151M(4) of the WC Act itself contemplates that the nature and extent of the plaintiff’s claim to damages might vary during the course of the proceedings. Section 151M(4)(b) states that an offer by a defendant is not unreasonable for the purposes of s 151M(4)(a)(iii) if at the time the offer was made the defendant was not able to make a reasonable assessment of the plaintiff’s full entitlement to damages. One reason why a defendant might not have been able to make a reasonable assessment of the plaintiff’s ‘full entitlement to damages’ is that at the time the offer was made the plaintiff had not particularised a particular head of damages that he or she has subsequently claimed. For example, if Ports had made an offer to settle Mr Collins’ damages claim at a time when he did not seek the cost of funds management, Ports’ offer could not be regarded as unreasonable merely because it failed to take account of a head of damages that Mr Collins had not claimed. This supports a construction of s 151M(4)(a)(i) that relates the reasonable opportunity for a defendant to make an offer of settlement to the plaintiff’s claim to damages as formulated at the time the opportunity is said to have been available to the defendant.

1. Ports had a reasonable opportunity to make an offer of settlement of the kind identified in s 151M(4)(a)(i), but it did not do so. Ports’ first argument must be rejected.”[2] (Emphasis in the original)

   2. Australian Winch and Haulage Company Pty Ltd v Collins [2013] NSWCA 327 at [154]-[158] (Sackville AJA, Leeming JA agreeing and, relevantly, Emmett JA agreeing in separate reasons).

   38. If, as has been submitted, the information provided to the defendant in relation to past earnings did not show the plaintiff had capacity to earn, or did in fact earn, amounts of the kind ultimately found by the Court, that does not mean that there was not information upon which an offer could have been made. The offer would have been lower, if the ATO material was used to calculate past earnings. Yet the defendant made no offer in writing.

   39. If the extension of time were a basis upon which no reasonable offer could have been made, such a reason ceased when the extension was granted, namely on 17 July 2020. No offer was made at that point.

   40. Over and above the foregoing, the plaintiff’s claim was always based upon the claim that the plaintiff would have and did, but for the accident, work full-time, apart from a period of personal anguish, the circumstances of which are described in the substantive judgment. Further, much of the evidence and calculations of the past economic loss referred to that which was payable under the applicable Award or industrial instrument.

   41. As a consequence, information was available beyond the tax returns and other information on past earnings. In the circumstances outlined in these reasons, based on the evidence before the Court on this supplementary aspect, at least as at July 2020, the defendant had information that would have enabled a proper assessment of the plaintiff’s claim and had, at that point in time until the hearing, a reasonable opportunity to make an offer of settlement in respect of the plaintiff’s full entitlement to all damages.

   42. Further, without determining that a defendant can make a revised offer of settlement in circumstances where no first offer of settlement has been made, the defendant had a reasonable opportunity to make an offer of settlement at least in terms of that indicated at the informal settlement conference or based upon the schedule of damages that the defendant calculated. No such offer in writing was made.

   43. Further again, to the extent that any offer was made, even orally, that offer was such that the precondition in s 151M(4)(a)(iii) has been satisfied. While the three sub-paragraphs of preconditions prescribed by s 151M(4) of the 1987 Act are in the alternative, save to the extent that there may not be able to be a revised offer if no offer has been made, each of them has been satisfied and the Court is entitled to order the payment of interest.

   44. The provisions of s 151M(5) require that interest, if the Court is satisfied it is payable, is to be calculated for the period from the date of the injury of the worker, relevantly, until the date on which the Court determines the damages and in accordance with the principles ordinarily applicable for that purpose, subject, in the last aspect, to the provisions of s 151M itself. Over and above the provisions of s 151M(5), the provisions of s 151M(6) require that the interest be calculated at three quarters of the rate prescribed for the purpose of s 101 of the Civil Procedure Act.

   45. The defendant submits that the interest should be calculated at the rate prescribed for pre-judgment interest under s 100 of the Civil Procedure Act. The purpose of the provisions on interest, once the statutory preconditions have been satisfied, are plainly intended to encourage defendants to make reasonable offers. This is one of the purposes of both the 1987 Act and the 1998 Act more generally.

   46. While the ordinary principles applicable to the ordering of interest and its calculation apply, they apply subject to the provisions of s 151M of the 1987 Act. As a consequence, even if the ordinary principles were such that the rate of interest was that prescribed for the purposes of s 100 of the Civil Procedure Act, the provisions of s 151M(6) of the 1987 Act render three quarters of the rate prescribed for the purposes of s 101 of the Civil Procedure Act as the applicable rate, and not any other rate. As a consequence, it is that calculation that will be used for the purpose of calculating interest.

   47. The foregoing conclusion that no offer and no reasonable offer were made depends, necessarily, in part, on the requirement in s 151M of the 1987 Act that the offer, at least for the purposes of s 151M, must be in writing. [3] This provision is intended to ensure that there can be no ambiguity about the nature of the offer that is made and its terms. It is possible for an offer of settlement to be in writing and sent by email or text. It is even possible for an offer to be in writing in circumstances where it is necessary to combine two documents.

       3. Workers Compensation Act 1987 s 151M(4)(c).

   48. Thus, if the schedule of damages were in writing, which it was, and a subsequent letter made clear that the defendant was offering that which was calculated on its schedule of damages, that would amount to an offer of settlement in writing.

   49. The evidence before the Court, being the letter of 16 June 2020 over the signature of the solicitors for the defendant, was that the defendant was seeking instructions “as to whether the final offer made by our client at the recent settlement conference is still open for acceptance”. Thus, it cannot be said that the offer, made orally at the ISC, was an offer ever made in writing.

   50. For the foregoing reasons, the Court exercises its discretion, having been satisfied of the statutory conditions for the awarding of interest under s 151M of the 1987 Act, to order interest calculated from the date of injury until the date of the judgment.

   51. The calculation of the plaintiff is challenged, but the challenge is confined to that which is stated as the median rate for the interest rates between the date of injury and the date of judgment. The date of judgment was 22 February 2021. The date of injury was 28 December 2003.

   52. As a consequence of the objection, the Court has calculated for itself the median interest rate from 1 January 2004 until 31 December 2020. During that period there were 34 six-monthly periods. The sum of all of the interest rates for each of the periods, applicable under s 101 of the Civil Procedure Act, is 316.5 and the average interest rate is, therefore, 9.308%. Three quarters of 9.308% is 6.98%.

   53. Otherwise, the calculation by the plaintiff is not challenged. The Court calculates interest on the basis of a sum of $413,573.11 over 17 years at 6.98%, which is an amount of $490,745.85. In accordance with the usual practice, half of that amount will be awarded, bringing the amount of interest to $245,372.92. The last calculation is for the purpose of averaging the interest on the damages over the period.

   54. The Court makes the following orders:

   1. Order 5 issued by the Court in these proceedings on 22 February 2021 is vacated;

   2. Pursuant to the provisions of s 100 of the Civil Procedure Act 2005 (NSW) and s 151M of the Workers Compensation Act 1997 (NSW), the defendant shall pay interest on the damages awarded on 22 February 2021 in the amount of $245,372.92.

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Endnotes

Decision last updated: 10 May 2021