Gadiry & Anor v South Eastern Sydney Area Health Service

[2003] HCATrans 652

IN THE HIGH COURT OF AUSTRALIA

Office of the Registry
  Sydney  No S235 of 2002

B e t w e e n -

TAMIEM GADIRY & ISABELLA PELLE

Applicants

and

SOUTH EASTERN SYDNEY AREA HEALTH SERVICE

Respondent

Application for special leave to appeal

GUMMOW J
CALLINAN J
HEYDON J

TRANSCRIPT OF PROCEEDINGS

AT SYDNEY ON FRIDAY, 11 APRIL 2003, AT 12.05 PM

Copyright in the High Court of Australia

MR J.D. HISLOP, QC:   May it please the Court, I appear with my learned friend, MR S.J. HARBEN, for the applicants.  (instructed by Thomas Laycock)

MR R.R. BARTLETT, SC:   May it please the Court, I appear with MR S.G. CAMPBELL, SC and MS C.T. PINKERTON, for the respondent.  (instructed by Hunt & Hunt)

GUMMOW J:   Yes, Mr Hislop.

MR HISLOP: Your Honours, the principle for which we contend is that there is a single cause of action for indemnity under section 151Z(1)(d) of the Workers Compensation Act 1987 (NSW) or, perhaps to put it another way, there is a single right of indemnity conferred by that section. That cause of action arises when the compensation for the injury is first paid. If that proposition is correct, then the action brought here is statute barred by the application of section 14(1)(d) of the Limitation Act (NSW).

Perhaps a starting point for our approach is to be found at page 6 of the application book by reference to the approach which was taken in these matters by the Court of Appeal of New South Wales.  At that page at about line 10 there is material extracted from the decision of the New South Wales Court of Appeal in Grant v The Royal Rehabilitation Centre.  It points out at line 15 that the first matter to be determined on an application under the section is:

the quantum of common law damages which would have been recoverable had they been sued for.

Then other matters are to be determined.  The court, in that part of the judgment, mentions:

under the indemnity at a later point in time up to the limit of the sum determined as the amount of damages which the injured worker would have recovered at common law.

But it is under the indemnity.  It was added, as one sees at line 25:

it is incumbent upon the court hearing the first claim for indemnity pursuant to the section to determine the amount of “those damages”’.

So that in order to succeed in the action to recover the first payment one must establish the defendant was a tortfeasor, the injury was compensable, the amount of damages properly payable in respect of the injury and there has been a payment of compensation.

Now, once those matters are established, which they must be in order for the first claim to be successfully made, one is in the position that there has been established the existence of the indemnity and its parameters.  The determination of those proceedings thus establishes an entitlement to reimbursement for any payment of workers compensation thereafter properly made in respect of the injury.  We submit that the construction for which we contend is in accordance and consistent with the wording of the section. 

If I could take the Court then to section 151Z, which is in the second of the documents in the bundle of the applicants.  I will take the Court to that in preference to others because it contains a fuller version than other documents.  The Court will see there in subsection (1):

If the injury for which compensation is payable under this Act was caused under circumstances creating a liability in some person other than the worker’s employer to pay damages in respect of the injury, the following provisions have effect: 

. . . 

(d)  if the worker has recovered compensation under this Act ‑

so that commences the entitlement ‑

the person by whom the compensation was paid ‑

so that identifies the person who can make the claim ‑ ‑ ‑

GUMMOW J:   More than that.

MR HISLOP:   Well, in our submission what it does is identify that person and ‑ ‑ ‑

GUMMOW J:   It also identifies, it is said against you, the temporal element, namely when it is that there is the entitlement, and it is that notion of that entitlement which is the cause of action spoken of in 14(1)(d) of the Limitation Act.

MR HISLOP:   In our submission, the cause of action first accrues, to pick up the words in 14(1)(d), at the time when there is a payment of compensation.  As one sees from 151Z(1)(d), it commences with:

if the worker has recovered compensation under this Act ‑

So that is what commences it and, in our submission, that it is a single indemnity that has been spoken of is indicated by the use of the word “an” before “indemnity” in the words in parenthesis, and also in the following subsections where reference is consistently made to “the indemnity”.  So, in our submission, there is only the one indemnity contemplated by the subsection.

Now, the alternative approach which was favoured by the Court of Appeal leads, in our submission, to a construction which is quite unjust because it effectively removes the entitlement to have the benefit of any statute of limitations if the person seeking indemnity chooses not to bring that claim until a late stage when, for example, witnesses have been lost and things of that nature.  So that such matters as the existence and parameters of the indemnity are not in fact subject to any limitation period.

CALLINAN J:   Do the extension of time provisions operate in relation to this?

MR HISLOP:   Not in relation to the indemnity provision itself, your Honour.  There could be an extension of time in relation to a plaintiff’s claim for damages, as your Honour knows, but that is a three‑year limitation as opposed to the six‑year limitation under 14(1)(d) and, furthermore, that extension would not be granted in situations where there would be prejudice or a fair hearing could not be obtained.  So we would submit that that does not really impact upon this question of construction for which we contend the particular approach.

The unjust results we have pointed out, particularly in page 38 of the application book.  It is the person who seeks indemnity who is in a position to commence the proceedings at such time as he chooses.  It is purely upon his determination as to when it will commence.  As we point out in paragraph 19 of the ‑ ‑ ‑

GUMMOW J:   Now, indemnity against what, against this fluctuating, shifting notion of payment?

MR HISLOP:   No, your Honour.  What we submit is achieved on the application of Grant’s Case is a determination, firstly, that there is a tortfeasor; secondly, that compensation is payable; thirdly, that there is an entitlement to indemnity ‑ ‑ ‑

GUMMOW J:   It is payable but the quantum upon which the indemnity would operate is not identified.  It cannot be identified, can it?

MR HISLOP:   Except to this extent, that its parameters are mapped in that first application.

GUMMOW J:   Yes.  It is an odd action on indemnity though.

MR HISLOP:   Well, it is a statutory indemnity, your Honour, and we would submit that it has be considered as such, and that being so considered one then has to have regard to various matters of construction, in particular that the construction which was favoured by the Court of Appeal leads to unjust results.  Can I illustrate that also in this way, that under section 151Z one is really dealing with two concepts, or one concept that then breaks into two. 

The first concept is that one is dealing with a situation where an injured worked is entitled to compensation and also entitled to common law damages against the tortfeasor.  The first part of 151Z provides for the situation where the worker brings an action against the tortfeasor for damages.  In that situation, the tortfeasor has the benefit of a limitation statute which is for three years and which must be complied with pursuant to section 18A subject to any extension.

The alternative situation which arises out of exactly the same fact situation is that a claim for indemnity is made by the workers compensation insurer, which claim can be made at any time, it would seem, dependent upon the intention of the person paying the compensation.  So that one is left in a situation that so far as the matter is concerned it is left to purely chance events.  The first chance event is whether the plaintiff decides to bring an action for common law damages.  The second chance event is when does the person paying the compensation choose to bring the action.

Now, both of those situations, in our submission, are unjust.  They are contrary to the general position in relation to actions for damages, for example, which, while this is not quite an action for damages, the general principles are applicable and are stated in Jobbins v Capel Court:

where the incurring of damage is an essential element of a cause of action, the suffering of some damage (the other elements of the cause of action having already occurred) will, in general, start time running even although the damage continues to grow.  The running of time ‑ ‑ ‑

GUMMOW J:   But this is an indemnity in respect of liquidated sums.

MR HISLOP:   We submit it is an indemnity up to a certain amount, and it is that which is determined by the court.  Once that is determined, the rest falls in.  It is protection against the delayed determination of that issue that we say is lost if the approach of the Court of Appeal is upheld.  It is contrary to the approach in Port of Melbourne v Anshun that issues be determined at once and it is contrary to the primary purpose of limitation periods, which is to protect the defendant from the injustice of having to face a stale claim.

GUMMOW J:   New South Wales limitation periods, to people from outside New South Wales, would seem to operate with very mixed effects.

MR HISLOP:   In any event, the effect of the Court of Appeal’s construction is to leave the defendant tortfeasor open to the injustice of having to face stale claims, and bear in mind that the tortfeasor may well be an individual and not someone who has the benefit of insurance.  In our submission, the principle stated by Chief Justice Barwick in Tickle v Hann is appropriate:

It is, in my opinion, a sound rule of statutory construction that a meaning of the language employed by the legislature which would produce an unjust or capricious result is to be avoided.  Unless the statutory language is intractable, an intention to produce by its legislation an unjust or capricious result should not be attributed to the legislature.

GUMMOW J:   Well, what do you say the phrase “was paid” means?

MR HISLOP:   The phrase what, your Honour, sorry?

GUMMOW J:   “Was paid”, “is entitled”.

MR HISLOP:   We submit that the function there is for that to identify the person ‑ ‑ ‑

GUMMOW J:   It is not the person by whom the compensation was ordered to be paid.

MR HISLOP:   It was paid, because as one sees from the line above, the application of the provision is predicated upon the worker having recovered compensation under the Act.  Now, he recovers compensation when one payment is made.  So that is where the claim arises, that is where the right arises, and what the second line does is to indicate the person who may make the claim or the indemnity.  It is, as the words in parenthesis indicate, “an indemnity”, that is one indemnity, which is the subject to a cap.  So that one looks at it in the first claim and determines all of the necessary ingredients to found the claim for indemnity, including the parameters of the indemnity.

Now, none of the cases which were referred to in the judgment decide the issue which is raised here, and that was so stated by the court.  The decision is based largely on the English Court of Appeal decision in Attorney‑ General v Arthur Ryan, the relevant extract of which is at page 23 of the application book.  The situation so far as the English Act, which was being dealt with there, is concerned is that, firstly, it had different language; secondly, the words in parenthesis in the New South Wales Act were not present, and the problem in that case had nothing to do with a question of limitation.  Ultimately, the only reason which really emerges from the judgments extracted at page 23 is that at about line 25:

The more reasonable, and I think proper, view as I say is that each time there is a payment, there arises a liability to pay indemnity, if the conditions are satisfied.

CALLINAN J:   If you look at what Lord Justice Slesser said in the middle of that paragraph, he says:

it is quite impossible for an employer paying compensation to predict and to assess what sum will be required under the Act from him in the future.

But on the other hand the person liable to provide the indemnity does not even know, or may not know for years on that basis, whether he is going to have to provide indemnity or not.

MR HISLOP:   Exactly, your Honour.

CALLINAN J:   It is only looking at one side of the coin to look at the employer’s position.

MR HISLOP:   Precisely, your Honour.

CALLINAN J:   Indeed, the other person is in an even worse position in a way.

MR HISLOP:   Yes, and that is the very injustice that we say ‑ ‑ ‑

CALLINAN J:   Lord Justice Slesser does not mention anything about that.  Do any of the other members of the Court of Appeal say anything about the position of the other person?

MR HISLOP:   No, your Honour.  They had even fewer reasons than Lord Justice Slesser.  So we say that the whole authority basis is really lacking in substance.  The cases in New South Wales which are relied upon, Howard Rotavator and Kwanchi and the like, were really interest cases.  They were concerned with the payment of interest and when it should commence to run. 

Now, that situation is no different than if you have out‑of‑pocket expenses in an ordinary damages action.  Once the out‑of‑pocket is paid, then an entitlement to interest under the procedural Acts of the State come into play.  So there was really no need for the court in those cases, in our submission, to investigate this question.  In any event, as we submit, they have nothing to do with the situation in this case and they depend upon an acceptance of Attorney‑General v Arthur Ryan which, we submit, is not an authority which would bind this Court or, indeed, be suggested to be a proper approach in the matter.

This Court in the Workcover v ESSO briefly commented – the extract is at page 26 of the application book.  That too was an interest case.  The court was not concerned with a limitation problem and they accepted for the purposes of the argument in that case that, as it says:

It may be taken, for present purposes, that s 138 is such a provision. 

That was under the Victorian Act which is in somewhat different terms.  So that in our submission there is absolutely nothing in authority contrary to the proposition which we put, that the proposition which we put would lead to a just result whereas the alternative does not and, in our submission, for those reasons it is an appropriate case for the grant of leave.  We set out in the application book at page 39 in more detail the reasons why we submit it is an appropriate case for a grant of leave.  Thank you, your Honours.

GUMMOW J:   Yes, thank you, Mr Hislop.  Yes, Mr Bartlett.

MR BARTLETT:   Your Honour, although the Court of Appeal did not go to various examples with respect to the question of justice or injustice, as acknowledged by the Court of Appeal in respect of that extract of Lord Justice Slesser’s judgment, an interpretation consistent with that submitted by the applicant would lead to a situation whereby if there was only one cause of action that there would be no determination as to the ultimate liability of the workers compensation insurer until judgment was given.  Now, if that be the case, all that the workers compensation insurer would obtain is such payments made as up to the date of judgment, even though it has an ongoing obligation to make payments.

CALLINAN J:   I was going to ask you about that.  Is there any provision in the legislation for a lump sum payment in satisfaction or in lieu of periodic payments of compensation?

MR BARTLETT:   There is, but not compulsory.

CALLINAN J:   No.

MR BARTLETT:   So that the workers compensation insurer cannot enforce a determination of its liability, so that at the time of judgment its liability would then be extinguished.

CALLINAN J:   There is no cut‑off provision in the Act at all to say that after three or four years it is commuted in some way – nothing like that?

MR BARTLETT:   No, it only gets to a certain age, but you also have ongoing obligations in relation to payments of medicals, rehabilitation and the such like.

CALLINAN J:   In practice most of them would be pretty well settled within six years though, would they not?  Perhaps there is no evidence of that.  I should not speculate.

MR BARTLETT:   There is no evidence as such, but it is commonly known that you can have work accidents where you have very minor injury, or what appears to be a minor injury, and early payments shortly thereafter, but that condition then deteriorates, down the track and outside the limitation period, where there are substantial payments made by the workers compensation insurer who then does not have an entitlement to be indemnified as to those payments made.

CALLINAN J:   There would not be many manifestations after six years though, would there?

MR BARTLETT:   Coal mine cases with backs, necks, ongoing pathology, it has been known.  Even further, if it be contended by my friend injustice – the insurer of a tortfeasor to limit its liability would merely only have to make voluntary payments of indemnity back to the workers compensation insurer during the limitation period so that at the expiration of the limitation period it does not have any statutory right to indemnity, then it is statute barred in respect of any future payments as to the future.  The legislation is one which is consistent ‑ ‑ ‑

CALLINAN J:   It is inconvenient no matter which way you construe it.  It is just a question of, on the proper construction of it, who is going to bear the inconvenience.

MR BARTLETT:   That is correct, and the legislation under 151Z is consistent with the 1926 legislation, which was 64(1), it is consistent with the English legislation which was the precursor, and is not inconsistent with the Victorian legislation which was the subject of this Court’s determination in Workcover v ESSO Australia.  So on a construction point as such, which this is, the judgment of the Court of Appeal is consistent with the approach

that has been adopted in all cases that the indemnity entitlement, which is a statutory indemnity, relates to each payment paid.

Now, even though there may be some procedure to enable the ceiling of future payments, which is that part in parenthesis, it does not entitle the workers compensation insurer to judgment as to that sum.  All it is entitled to is indemnity as to payments paid up to the time of judgment.  Now, if it then loses its cause of action, if there be only one cause of action, it has no right of recovery as to payments made after that time.  My friend says we know what the ceiling is in relation to future payments, but what happens if there is a dispute, which often is the case, whether payments have been made, or whether those payments are proper payments under the Workers Compensation Act?  Then there is no means of redress available to the workers compensation insurer and it has lost its statutory right of indemnity where clearly the legislation intends it to have such.

Now, if there had been such injustice or problems in respect of this matter, it was available for the legislation to alter same over the years but it has not.  It has reproduced in effect the same legislation.  These are all matters that were taken into consideration by the Court of Appeal.  The judgment of the Court of Appeal is consistent with all known decisions.  It is consistent with the approach adopted by this Court in Workcover v ESSO Australia, particularly in paragraphs 12 to 20.  My friend says that most of these cases are just interest cases, but in order to find an entitlement as to interest there had to be a finding of determination of entitlement being in respect of past payments, so that in order to be entitled to interest there had to be an interpretation which was consistent with the fact that each payment of compensation gave rise to a separate cause of action.

We submit that there are no cases which contend to the contrary on an interpretation point as contended by my friend and that this is a simple State legislation consistent with previous State legislation and English legislation, and that the judgment of the Court of Appeal is consistent.

GUMMOW J:   Thank you, Mr Bartlett.  Yes, Mr Hislop.

MR HISLOP:   Your Honour, we would stress that there has been no case which has considered these issues.  Section 64 of the New South Wales Act, the precursor of the 151Z, did not contain the words in parenthesis.  In our submission, there is undoubtedly an injustice which is occasioned if the construction found by the Court of Appeal is adhered to, and that construction is based upon an approach which never gave any consideration to the position of the tortfeasor in this regard, and it must be borne in mind that the tortfeasor may be a person who is uninsured.  That is very much of importance that a party, even if insured, is denied the opportunity to

investigate a claim and to anticipate it, even more so if that tortfeasor is a person who is uninsured.  If it please the Court.

GUMMOW J:   The Court is of the view, having heard the useful submissions from both sides, that there is an insufficient prospect of success with a grant of leave.  Accordingly, special leave is refused and refused with costs.

We will take a short adjournment.

AT 12.34 PM THE MATTER WAS CONCLUDED