Geraldton Building Co v Cramer - [2001] WASCA 244

JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA

TITLE OF COURT : THE FULL COURT (WA)

CITATION: GERALDTON BUILDING CO -v- CRAMER [2001] WASCA 244

CORAM: MALCOLM CJ
WALLWORK J
OWEN J

HEARD: 23 NOVEMBER 2000 & 18 JULY 2001

DELIVERED : 17 AUGUST 2001

FILE NO/S: FUL 93 of 2000

BETWEEN: GERALDTON BUILDING CO
Appellant
AND
MAX CRAMER
Respondent

Catchwords:

Workers' compensation - Alternative rights against third parties - Employer claiming contribution from a former employer - Employee contracted mesothelioma - Nature of evidentiary onus and legal onus to show employee obtained damages at common law

Legislation:

Workers' Compensation and Rehabilitation Act 1981 WA, s 41, s 41(4), s 92

Result:

Appeal allowed

Category: A

Representation:

Counsel:

Appellant: Mr J R Ludlow (23/11/00) &
Mr R G Walton (18/7/01)

Respondent: Mr M L Williams

Solicitors:

Appellant: McAuliffe Schwikkard
Respondent: Phillips Fox

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

Cassell & Co Ltd v Broome [1972] AC 1027
EMS Holdings Pty Ltd v International Shipyards Pty Ltd, unreported; FCt SCt of WA; Library No 980655; 12 November 1998

Case(s) also cited:

Abrath v North Eastern Railway Co [1883] QBD 440
Akermanis v Melbourne & Metropolitan Tramways Board [1959] VR 114
Bitumen & Oil Refineries (Australia) Ltd v Commissioner for Government Transport (1955) 92 CLR 200
Brambles Constructions Pty Ltd v Helmers (1966) 114 CLR 213
Currie v Dempsey [1967] 2 NSWR 532
Eydmann v Premier Accumulator Co Ltd [1916] 85 LJKB 1037
Hall v Motor Vehicle Insurance Trust [1984] WAR 111
Hayward v Westleigh Colliery Co [1915] AC 540
James Hardie & Co Pty Ltd v Seltsam Pty Ltd (1998) 196 CLR 53
Jayasena v R [1970] AC 618
Mole v Forests Commission of Victoria [1957] VR 583
Perkins v Abel & Moore Road Machinery WA Pty Ltd [1962] WAR 80
Posner v Roberts [1986] WAR 1
Smith v The Kalgoorlie & Boulder Firewood Co Ltd (1917) WALR 69
Stephens v Motor Vehicle Insurance Trust [1978] WAR 232

MALCOLM CJ: In my opinion, this appeal should be allowed on the ground that the Compensation Magistrate wrongly found that s 92(c) of the Workers' Compensation and Rehabilitation Act 1981 was not relevant to the respondent's application for contribution under s 41(4) of the Act. I have reached this conclusion for the reasons to be published by Owen J with which I am in entire agreement.
WALLWORK J: I agree with the reasons for judgment of Owen J and with the orders proposed by his Honour. There is nothing I wish to add.
OWEN J: This is an appeal against the decision of a Compensation Magistrate dismissing an appeal to him from the decision of a review officer. At an earlier hearing the review officer had ordered the appellant to reimburse the respondent portion of the workers compensation payments that the respondent had previously paid to a worker. The appeal to this Court is brought by way of leave granted on 24 May 2000.

Background

Rex Starr was a carpenter. Over the years he had a number of different employers. For about six years he was employed by Geraldton Building Company, the present appellant ("GBC"). Following his employment with GBC, for about one year he was employed by a Mr Lionel Cream, now deceased ("Cream"). After leaving Cream, he was employed by Mr Max Cramer, the present respondent "("Cramer"), for about two years. At some stage during that period of approximately nine years, Starr contracted mesothelioma.
In 1998 Starr lodged an application for workers compensation against Cramer on the basis that he had contracted mesothelioma while in Cramer's employ. On 19 October 1998, a review officer made an order that Cramer pay $99,529.70 in workers compensation benefits to Starr.
Division 3 of Part III of the Workers' Compensation and Rehabilitation Act 1981 contains provisions that apply to specified industrial diseases, including mesothelioma. The Division recognises that mesothelioma can develop over a long period of time and that the disease may be caused by exposure to asbestos during employment with more than one employer. Section 41 of the Act provides that where a worker becomes entitled to workers compensation as a result of having contracted, in this case, mesothelioma, the last employer is liable to pay the benefits but may join other employers in the proceedings or may seek

contribution from them. Of particular relevance to this appeal is s 41, which provides, relevantly:
"(1)Subject to [subsection (4)], the compensation is recoverable from the employer who, … in the case of … mesothelioma …, … last employed the worker, in the employment to the nature of which the disease is, or was, due.
(4)If the disease is of such a nature as to be contracted by a gradual process, any other employer who … employed the worker in employment to the nature of which the disease was due shall be liable to make to the employer from whom compensation is recoverable such contributions as, in default of agreement, may be determined in proceedings under this Act for settling the amount of the compensation."

On 20 October 1998, Cramer filed an application seeking a contribution from GBC under s 41(4). At some stage, it is not clear when, Starr sought damages at common law against James Hardie Ltd ("Hardie"). On 19 January 1999, Cramer's application for contribution from GBC came before the review officer. During that hearing, Cramer gave this evidence:
"Mr Starr, you've pursued a common law claim for damages in respect of your injury as well, haven't you?‑‑‑Mm.
Have you settled the common law claim?‑‑‑Yeah.
Did you receive damages for that claim?‑‑‑Yeah.
So you've received damages in respect of your claim for mesothelioma?‑‑‑Against, against Hardies, yeah.
And has that claim now been resolved?‑‑‑Well, up to a point. There's still some outstanding moneys for you blokes, I think, your costs."
There is no other information in the materials as to the form the claim against Hardie took or as to the amount or the manner of any payment by Hardie to Starr.
On 18 November 1999 the contribution proceedings were completed. The review officer ordered that GBC should pay to Cramer three‑quarters of all workers compensation payments paid by Cramer to Starr. As I understand it, the figure of three‑quarters was arrived at as a rough estimate of the time during which Starr has been employed by GBC and Cream as compared to the length of his employment with Cramer. GBC appealed against that decision to the Compensation Magistrate but, on 28 March 2000, the appeal was dismissed.
This is an appeal against the decision of the Compensation Magistrate upholding the decision of the review officer.

The Relevance of Section 92(c) of the Act

The first ground of appeal is that the Compensation Magistrate wrongly found that s 92(c) of the Act was not relevant to Cramer's application for contribution under s 41(4). I think it is necessary to look at the whole of s 92, not just to subsection (c), and for that reason I will set it out in full.
"92. Both damages and compensation not recoverable
Where in respect of a disability an action is brought by a worker for damages independently of this Act against his employer or against some other person (referred to in this section as "the defendant" or against both of them —
(a)if the court decides the action should succeed, then after damages have been ascertained but before judgment is entered for the worker in the action, the worker shall be given a reasonable opportunity to elect whether to have judgment or to discontinue the action;
(b)if the action proceeds to judgment, including the acceptance of an offer to consent to judgment, against the employer only or against the employer and the defendant, there shall be deducted from the amount of the judgment and be paid to the employer a sum representing the amount (after apportionment in respect of any contributory negligence of the worker) actually recoverable by the worker by way of weekly or lump sum compensation, medical and other expenses paid pursuant to this Act, but where liability is apportioned between the employer and the defendant the defendant’s liability to pay to the worker shall be reduced accordingly;
(c)if the action proceeds to judgment, including the acceptance of an offer to consent to judgment, against the defendant only or is settled by the acceptance of money paid into court by the defendant, the payments and expenses referred to in paragraph (b) shall be a first charge on the judgment or the amount of money paid into court and the defendant shall be bound to pay the amount of the compensation, and medical and other expenses to the employer and the judgment shall be pro tanto discharged by such payment, or the amount due under the charge shall be paid out of court to the employer or his authorized agent, as the case may be;
(d)if the action is discontinued the worker shall pay the costs of the employer or of the defendant or of each of them or such part of those costs as the court thinks fit;
(e)if the action proceeds to judgment, including the acceptance of an offer to consent to judgment, against the employer or the defendant or both or is settled by the acceptance of money paid into court by the employer or the defendant or by both of them, the worker shall not commence or continue proceedings for, or in relation to, compensation under this Act in respect of the same disability;
(f)if a worker’s claim for damages against the employer or the defendant is settled by agreement otherwise than by a judgment, an acceptance of an offer to consent to judgment, or an acceptance of money paid into court —
(i)the employer or the defendant shall file a memorandum of the terms of the settlement with the Directorate within 3 months of the date of its execution by the worker;
(ii)the worker shall not commence or continue a claim for compensation under this Act in respect of the same disability unless the Director disapproves of the settlement within 6 weeks of the agreement for settlement being filed with the Directorate;
(iii)the Director shall not disapprove of the agreement unless he is satisfied the agreement was induced by fraud or misrepresentation or that it would clearly be for the worker’s benefit to disapprove of it;
(iv)the Director if he disapproves of the settlement shall serve notice in writing of his disapproval on each of the parties to the settlement of his decision and of the reasons for his disapproval by pre‑paid post to the address of the party set out in the settlement or the last known address of a party, within 14 days of the making of his decision;
(g)where a claim for compensation is commenced or continued after the Director disapproves of a settlement referred to in paragraph (f), the amount recovered or recoverable under such settlement shall be brought into account in reduction of the worker’s entitlement to compensation;
…. ."
The review officer had concluded that s 41(4) was not subject to s 92(c) and in any event it had not been established on the evidence that s 92(c) applied to the settlement between Starr and Hardie. The Compensation Magistrate decided the appeal on the first limb. Had he proceeded to the second limb it seems that the Compensation Magistrate may have allowed the appeal. This is the subject of Cramer's notice of contention. In par 35 of his reasons, the Compensation Magistrate said:
"Section 41 (4) is not expressed to be subject to s 92. Should s41(4) be interpreted as subject to s 92? I do not believe so for the following reasons:
1.The legislature has not seen fit to expressly state that the ability to make an application under s41(4) is, in any way, subject to s 92.
2.Although each section is capable of affecting the outcome under the other, the operation of neither is necessarily dependent on the other. For example, if an applicant employer under s 41(4) has been fully reimbursed under s 92, that employer would not be an employer from whom "compensation is recoverable" under s 41(1) and (4) because any entitlement of the worker would already have been satisfied by the proceedings under s 92. Therefore an application under s 41(4), although not barred, would necessarily be unsuccessful. Further, if an applicant employer under s41 (4) was entitled to be reimbursed under s 92 but, before being reimbursed, received a contribution from another employer under s41 (4), the amount which the applicant employer would be entitled to under s 92 would be the amount paid pursuant to the Act which would be the original amount less the contribution from the other employer. The other employer, having paid an amount pursuant to the Act (being a contribution to the applicant employer) would then be entitled to reimbursement of that sum under s 92."
In the proceedings below, GBC also contended that the review officer erred in not finding that Cramer should have sought recovery from Hardie, not from it. In rejecting that argument the Compensation Magistrate also made comments that reflect on the construction of s 41(4) and s 92. They are to be found in pars 39 and 40 of his reasons:
"The appellant submits that the respondent should have pursued James Hardie instead of it because it is a policy of the Act that an employer can recover compensation payable under the Act from a tortfeasor responsible for causing the disability which gave rise to the liability to pay compensation; that any loss should be ultimately borne by that tortfeasor.
While I accept that the Act does provide for employers to recover payments made under the Act from a tortfeasor, I do not accept that an employer is prevented from proceeding under s.41(4) where that employer might otherwise recover against a tortfeasor. I am of that view because, as submitted by the respondent, s.41(4) is not expressed to be subject to a third party not being tortiously liable for the worker's disability. That is not surprising given that an application under s.41(4) might be made and resolved well before a common law claim is concluded. Why then should an applicant employer under s.41(4) be required to wait for common law proceedings to be concluded (which might result in no reimbursement if liability is not established or a reduced reimbursement if the common law damages are less than the compensation paid under the Act) before it can seek recovery under s.41(4) particularly given that, as submitted by the respondent, an employer found liable to make a contribution under s.41(4) would, in any event, be entitled to recover against a tortfeasor who would otherwise be liable to the applicant employer."
In his written outline of submissions on appeal the respondent (Cramer) appears to concede that the Compensation Magistrate was in error in deciding that s 41(4) was not subject to s 92(c). This is the way I read pars 4 and 6 of the respondent's outline. This concession was confirmed in oral submissions. Counsel said: "We concede that [the Compensation Magistrate and the review officer] erred in finding that s 41(4) was not subject to payment under s 92C [sic] because to conclude to the contrary would be contrary to the principles of unjust enrichment".
I think the concession is properly made. The mere fact that s 41(4) is not expressed to be subject to s 92 is not, of course, determinative. I will have something to say a little later about the scope and reach of s 92 but, generally speaking, its object is to prevent a worker from receiving compensation in two forms (that is, under the Act and at common law) from different employers or for, that matter, from the same employer. With that in mind it would be surprising if a claim under s 41(4) were to be held to be outside the scope of s 92. The fact, as the Compensation Magistrate has pointed out, that there may be timing difficulties in making claims in the statutory jurisdiction and at common law is (yet another) problem of construction rather than a reason why one section should have no application whatsoever to a claim under the other.
On this basis the situation is, it seems to me, as follows. Section 92(c) operates as a statutory charge on the moneys payable by the defendant to the worker in an amount equal to the total of the workers compensation benefits (and medical expenses) paid to or on behalf of the worker by an employer (other than the defendant) under the Act. It also creates a statutory obligation on the defendant to pay the amount so calculated to the employer. This must mean that the payments of benefits under the Act have been made before the common law claim is finalised. If this were not the case it is difficult to see how the statutory obligation to pay could arise.
Section 92(c) only applies where the common law claim is finalised in one of two ways. First, by a formal court judgment, including acceptance of an offer to consent to judgment. Secondly, by the worker accepting moneys paid into court. I will refer to these two possibilities as "extended judgment". Sections 92(d) and (e) are consequential provisions that support the regime in s 92(c).
Of course, a claim for damages can be finalised in ways that are not contemplated by s 92(c). For example, whether or not a writ has been issued the parties might settle the claim by an exchange of letters or a deed of settlement that is not supported by a formal court judgment, and may perhaps not involve the court at all. In my view, s 92 would have no application at all to a settlement reached before a writ had been issued. This is because the preamble in s 92 refers to an "action" that is brought by a worker for damages independently of the Act. Although the word "action" is not defined in the Act (or for that matter the Supreme Court Act 1935, the Rules of the Supreme Court or the Interpretation Act 1984) it must bear its ordinary meaning as a formal court proceeding. If the settlement arises in an action but does not involve an extended judgment, the section deals with the situation in an entirely different way. Under s 92(f) if the worker's action for damages against the defendant is settled by agreement otherwise than by an extended judgment the only obligation is to advise the Directorate of the terms of settlement. There is no obligation on the defendant to pay any part of the judgment sum to any other employer and there is no mention of a charge. The only consequence is that, unless the Director disapproves of the settlement, the worker cannot commence or continue with a claim for compensation under this Act in respect of the same disability. If the Director does disapprove and the worker commences or continues with a claim under the Act, s 92(g) provides that the amount which the worker may recover under the Act is to be reduced by the moneys paid or payable under the settlement. It is to be noted that a disapproval does not avoid the settlement and the accounting, referred to in s 92(g), speaks as between the employer and the worker, not as between the employer and the defendant.
As I have already said, the legislative intent behind s 92 is to defeat a double recovery by a worker from an employer arising from the same injury. In other words, a worker who is injured in a work related accident may recover workers compensation or common law damages but not both: EMS Holdings Pty Ltd v International Shipyards Pty Ltd, unreported; FCt SCt of WA; Library No 980655; 12 November 1998 per Kennedy J at 8 ‑ 9. It will be apparent from what I have said that I am not at all sure that the section achieves this objective. The plain ordinary meaning of the words that the legislature has employed cannot be ignored. There are situations that fall outside the words used.
The are several scenarios that might be relevant as between the various persons or entities who were, from time to time, involved in this matter. In setting out these possibilities, I am assuming that the s41(4) is subject to s 92 generally.

1. If Starr had first been paid benefits under the Act by Cramer and had then settled his damages claim with Hardie, s92(c) would only apply if the settlement had been effected by way of an extended judgment. In that event Hardie would have a statutory obligation to reimburse Cramer for the amount of the benefits and the judgment sum would be impressed with a statutory charge to that effect.
2. If the settlement with Hardie preceded the payment of benefits under the Act (in practice an unlikely occurrence) s 92(c) would have no application.
3. If Starr had first been paid benefits under the Act by Cramer and had then settled his damages claim with Hardie, but without a writ having been issued, s 92 would not apply at all and there would be no obligation on Hardie to pay any moneys to Cramer.
4. If Starr had first been paid benefits under the Act by Cramer and had then settled his damages claim with Hardie after the issue of a writ but by means other than an extended judgment, s92(c) would not apply and the only consequence of s 92(f) would be to prevent Starr from re‑agitating the claim without first having the Director disapprove the settlement. There is no suggestion that Starr did so and this scenario can be ignored.

The Evidentiary Onus and the Legal Burden

The next question is where the onus lay in Cramer's claim against GBC for a contribution and the nature of that onus.
Put at its simplest, GBC's case is that Cramer would have no right to contribution if he had been fully reimbursed by Hardie under s 92(c). If s 92(c) applies to a claim under s 41(4) then the workers compensation benefits paid by Cramer are a first charge on the settlement moneys "and would have been repaid to [Cramer by Hardie]". Accordingly, Cramer would have recovered the payments made by him to Starr and would therefore have no right of recovery against any other party, such as GBC. Counsel for GBC submitted that the appellant had "an evidentiary burden of proof in relation to the s 92(c) issue" but that it had discharged the burden by leading the evidence from Starr which I have described. Having discharged that burden, counsel submitted, Cramer had the legal burden of proving that he had not been fully reimbursed under s 92(c) following settlement of Starr's common law claim.
In his written submissions, Cramer appears to have accepted that there was such an evidentiary onus on GBC and that, if the evidentiary onus was satisfied, the legal burden fell on him (Cramer) to disprove that Hardie had paid him under s 92(c) an amount equal to the compensation he had paid to Starr.
Where the parties part company is as to the nature and extent of the evidentiary burden. Cramer says that GBC adduced evidence only that Starr had made a claim for common law damages, the claim had been settled and he had received damages for that claim. This, counsel for Cramer submitted, was not sufficient to discharge the evidentiary onus. The evidence adduced did not, either directly or by way of proper inference, go to the issue whether the claim had been settled by an extended judgment. Accordingly, there was no sufficient evidence to raise the question whether s 92(c) applied and Cramer was not obliged to call evidence to disprove that Hardie had paid him an amount equal to the workers compensation benefits paid to Starr.
What is the nature and extent of the evidentiary onus which lay on GBC? The terminology used in this area of the law is apt to be misleading and confusing. I have never seen a definition of "evidentiary onus" with which I have felt particularly comfortable. However, I think it is appropriate to refer to what the author of Cross on Evidence, sixth ed has to say on the issue. In par 7015 the author says:
"The evidential burden is the obligation to show, if called upon to do so, that there is sufficient evidence to raise an issue as to the existence or non‑existence of a fact in issue, due regard being had to the standard of proof demanded of the party under such obligation."
In par 7210 (to be read with par 1600) the author goes on to say that to discharge the evidential burden the party must adduce evidence that is "prima facie", that is, evidence that is sufficiently weighty to entitle a reasonable person to decide the issue in favour of that party, although it is not obligatory to do so.
In effect, the submissions of counsel for Cramer were to the effect that for GBC to discharge the evidentiary onus it had to lead evidence of that character and degree of cogency in relation to these factual issues:
(a)Starr had made a claim for damages at common law against a third party;
(b)the claim had been the subject of an action, that is, that court proceedings had been commenced;
(c)the action had been settled in such a way as to entitle Starr to receive a money sum by way of damages;
(d)the settlement had taken the form of, been reduced to, an extended judgment;
(e)the third party had paid to Cramer part or all of the settlement moneys by way of reimbursement for the workers compensation benefits that Cramer had paid to Starr and which were the subject of the contribution application under s 41(4).
I have no doubt that items (a) and (c) were satisfied by Starr's evidence. Items (b) and (d) are not without difficulty. The witness was not asked, and nor did he say, that an action had been commenced or an extended judgment obtained. For GBC to succeed on that point it would be necessary to draw an inference from the word "damages" that was used in the evidence. In Mayne and McGregor on Damages, 14th ed, 1980 at p 3, the author says:
"Damages are the pecuniary compensation, obtainable by success in an action, for a wrong which is either a tort or a breach of contract, … ." [my emphasis]
The same proposition put in an earlier edition of that text was approved in Cassell & Co Ltd v Broome [1972] AC 1027 per Lord Hailsham LC at 1070. The question is whether the use of the word "damages" in the examination of a lay witness before a review officer in the rather informal setting of the workers compensation jurisdiction is a sufficient basis from which to draw the inferences that proceedings were commenced and they were settled by an extended judgment. If the term "damages" is to be understood in the sense outlined in the definition from Mayne and McGregor, it would satisfy item (b) but not necessarily item (d). The New Shorter Oxford Dictionary defines "damages" (in a legal context) as: "a sum of money claimed or awarded in compensation for loss or injury" [my emphasis]. I think the words "or awarded" are significant. They tend to suggest a considered act of an entity separate from the immediate parties to the loss. In my view this is a sufficient basis from which to conclude that the plain ordinary meaning of the word "damages" could be interpreted as meaning moneys payable under an extended judgment in an action. Bearing in mind that all that is needed is something to "raise an issue as to the existence or non‑existence of a fact in issue", I believe this is a sufficient basis from which to say that the evidentiary burden has been satisfied.
Item (e) also raises difficulties. There is implicit in some of the submissions made by counsel for GBC (see, for example, pars 3.7, 5.7 and 5.10 of the written outline of submissions) a contention that the effect of s 92(c) is to deem a payment by the third party defendant to the employer of the amount of the workers compensation benefits. I take this from the phrases "will have been a first charge" and "will have been repaid" which are used in the submissions. That is not what the section says and nor do I think it has that effect. If, for example, a third party were to pay to the worker the whole of the judgment sum without regard to the statutory obligation to reimburse the employer for the amount of the workers compensation benefits previously paid there would be a breach of the statutory charge and the employer might have recourse to the third party for damages arising from the breach. But this is a different issue. I do not think it can be said, solely from the existence of the section and from a fact situation that comes within it, that the employer actually did receive the requisite payments.
Perhaps all counsel meant was that, given the point in issue here is an evidentiary burden only (not the legal burden of proof in a final sense), parties can be assumed to have acted in accordance with a statutory obligation and not in breach of a statutory charge. It would then fall to a party arguing the contrary position to establish it. I think this is correct. This would be a sufficient basis from which to draw the inference (in order to satisfy the evidentiary burden but no more) that Hardie had paid Cramer certain moneys from the damages that it had been ordered to pay (or had agreed to pay) Starr.
For these reasons, the first ground of appeal has been made out. Had the Compensation Magistrate found that s 41(4) was subject to s 92, I think he would have found that the evidentiary burden had been satisfied. In my view that would have been the appropriate finding. In that case the legal burden would have fallen to Cramer to disprove the receipt of moneys from Hardie under an extended judgment.

Conclusion

It was common ground that the second ground of appeal would only arise for consideration if this Court were to reject the first ground.
In my view the appeal must succeed on the first ground. However, it should go back to the review officer so that the true position concerning Starr's common law claim against Hardie can be ascertained.