Golden Eagle International Trading Pty Ltd & Anor v Zhang & Ors
[2006] HCATrans 715
[2006] HCATrans 715
IN THE HIGH COURT OF AUSTRALIA
Office of the Registry
Sydney No S355 of 2006
B e t w e e n -
GOLDEN EAGLE INTERNATIONAL TRADING PTY LTD
First Appellant
CHEN GUANG
Second Appellant
and
YU ZHANG (BY HIS TUTOR THE PROTECTIVE COMMISSIONER)
First Respondent
RUI MANUEL SOUSA MENONGA AND JOSE ALCIVO DE FREITAS T/AS D M P AUTOMOTIVE REPAIRS
Second Respondent
GUMMOW J
KIRBY J
HAYNE J
CALLINAN J
CRENNAN J
TRANSCRIPT OF PROCEEDINGS
AT CANBERRA ON FRIDAY, 15 DECEMBER 2006, AT 10.04 AM
Copyright in the High Court of Australia
__________________
MR K.P. REWELL, SC: If the Court pleases, I appear with my learned friend, MR E.G. ROMANIUK, for the appellants. (instructed by Sparke Helmore)
MR A.S. MORRISON, SC: May it please the Court, I appear with my learned friend, MR E.G.H. COX, for the respondent. (instructed by Graham Jones Lawyers)
GUMMOW J: The Court has a submitting appearance from the second respondent. Yes, Mr Rewell.
MR REWELL: Your Honours, I do not propose to weary the Court by repeating the matters that we have covered in our written submissions and our submissions in reply.
KIRBY J: How could we be wearied by such a fascinating subject ‑ ‑ ‑
MR REWELL: Well, your Honour, I will do my best to ‑ ‑ ‑
KIRBY J: ‑ ‑ ‑ on the last day of the term?
MR REWELL: I will do my best to ensure that the excitement continues, at least for a short period, your Honour. As to the question of the construction of section 45 of the Motor Accidents Act and its contemporary equivalent, section 83 of the Motor Accidents Compensation Act, with the Court’s indulgence I propose to take the Court to what we perceive to be key shortcomings in the decision of the New South Wales Court of Appeal, and by adopting that approach to cast further light on the submissions that we have already made in writing. Having done that, I will make a few further remarks as to the issue of life expectancy. Could I ask your Honours first to turn to section 45 which is set out conveniently in the appeal book at page 456.
GUMMOW J: I have Reprint No 7 of the Motor Accidents Act 1998 which includes amendments up to 16 October 2001. Would that be adequate?
MR REWELL: Yes, it would be, your Honour, but the appeal book sets out what we need and because this issue ‑ ‑ ‑
GUMMOW J: What you say we need.
MR REWELL: I will actually add some material as time goes on but, fortunately, the findings of the Court of Appeal on this issue are contained within a relatively few pages of the appeal book. Section 45, as it was at the time of the respondent’s accident, as the Court can see, required a compulsory third party insurer to make payments of medical and rehabilitation expenses once liability was admitted wholly or in part.
KIRBY J: Now, you said at the time of the respondent’s accident there was some discussion in the special leave application concerning a possible amendment. There has been no supervening amendment?
MR REWELL: No, there has not. In fact the Motor Accidents Act was repealed in 1999 and replaced by the Motor Accidents Compensation Act, but the Motor Accidents Compensation Act contains provisions which are for these purposes identical.
GUMMOW J: What is the relevant section in the 1999 Act?
MR REWELL: Section 83 and, in particular, section 83(5) is relevantly identical to section 45(4) on which I am about to spend the most time. But I will limit what I say to section 45 for convenience rather than repeating section 83.
GUMMOW J: What did 45(4) replace, which might be some indication?
MR REWELL: It is and it is going to be part of this debate. Conveniently, the Court of Appeal set out the predecessor to the relevant section 45(4) in paragraph 92 of its judgment, which is page 461 of the appeal book at about line 33.
Indeed, the Court of Appeal attached significance to the difference between what I will call the old section 45(4) and what I will call the new section 45(4) which operated at the time of Mr Zhang’s accident. We will contend that the Court of Appeal was erroneous in attaching the significance it did to the difference. The old section 45(4) ‑ ‑ ‑
HAYNE J: Just looking at the old form of 45(4) as in paragraph 92, that provision would marry with the provision about contributory negligence, would it not?
MR REWELL: We will contend not, your Honour, and I will come to that if I may in an order, but I certainly will address your Honour’s point – I have anticipated it and will address it. But, no, we do not accept that it does marry with section 74 which deals with contributory negligence and seatbelts. Again, I will hope to persuade the Court in due course that in fact the Court of Appeal ‑ ‑ ‑
HAYNE J: No, it is not a question of marrying with seatbelts. It is a question of marrying with 74(3), is it not? “The damages recoverable in respect of the motor accident shall be reduced” ‑ ‑ ‑
MR REWELL: Yes.
HAYNE J: ‑ ‑ ‑ and 95(4) when it speaks in its old form of payments taken to form part of any damages payable would have meant that there was apportionment under 74(3) of the amount paid, would it not?
MR REWELL: The question is whether the word “payable” had any significance, added anything, in fact, to the word “damages” and, indeed, under section 74(3) whether the word “recoverable” added anything to the word “damages”. I will certainly come to your Honour’s point.
The second issue that I propose to address is paragraph 92 of the judgment because I accept that it has some superficial attraction, but I hope to go beyond the superficial attraction and analyse it in more depth to demonstrate that, in fact, comparing the new section 45(4) does not assist us in the task that we have.
Could I turn first to the second reading speech, the relevant part of which is brief and is set out in the judgment on page 460 of the appeal book as part of paragraph 89 of the Court of Appeal’s judgment? Now, can I say in advance, as your Honours take a moment to read the short passage which was all there was in the second reading speech dealing with the amendments which introduced the new section 45(4), can I say that the New South Wales Court of Appeal found little assistance in the second reading speech other than in the reference to the Workers Compensation Act.
It will be our contention shortly that the Court of Appeal ought to have obtained more assistance than it did, in various respects, from the second reading speech. Insofar as it took the view that the reference to the Workers Compensation Act favoured Mr Zhang; that was in error. Your Honours, what I would like to do is to pose four questions in connection with the second reading speech, a consideration of which, we say, will assist in casting light on the whole issue of the construction of section 45(4). Could I hand up the questions which I have had typed?
GUMMOW J: Yes.
MR REWELL: It will provide some order to the consideration of the second reading speech. The first question that I have posed is: what may be discerned from the second reading speech as to the intention of the legislature in reformulating section 45(4) as it did?
Now, this was dealt with largely in paragraph 90 of the Court of Appeal’s judgment in a way which indicates that the court found little in the second reading speech from which any legislative intention could be discerned. The key sentence in the second reading speech was the sentence:
To avoid the incurring of unnecessary legal costs in determining damages, the bill provides for a statutory defence in respect of amounts already paid under section 45.
The Court will be aware that before the section 45 payments were made a defence, the insurer recovered the benefit of those payments from the damages by being given a credit against the damages. It was the invariable practice of the courts that after announcing the judgment in favour of the accident victim, the court would order that the defendant have a credit for the whole amount of payments made under section 45 of the Act. Now, that was changed by section 45(4) in its new form. Well, can we discern anything from the Attorney‑General’s reference to “unnecessary legal costs in determining damages”?
GUMMOW J: Which page is this in the Hansard?
MR REWELL: In Hansard it is – I am sorry, your Honour, I ‑ ‑ ‑
HAYNE J: Page 3323, column 2 at the foot of the page, last paragraph of column 2.
MR REWELL: I am grateful to your Honour. The Court may ask itself, what was the Attorney‑General referring to when he made a reference to “unnecessary legal costs in determining damages”. As the Court of Appeal noted, what was suggested in the appeal was in some circumstances this would avoid the obligation of an insurer to demonstrate that the payments made were reasonable and necessary.
HAYNE J: Well, is it beyond imagining that the Attorney might be making a political rather than a legal point?
MR REWELL: Your Honour, I would never rise to that conclusion, but I can actually formulate an example which indicates that perhaps the Attorney was making a practical point in terms of the application of the Act. There was no argument before the new section 45(4) was introduced that the whole of any payments made by the insurer would ordinarily be included in the damages awarded to an accident victim. They would be the subject of apportionment in the event of contributory negligence.
It follows that in effect the accident victim would recover only a part of the payments made by the insurer, but then a credit would be allowed to the insurer for the whole of the payments. So in cases such as this one where there were substantial payments and significant contributory negligence, there would be a shortfall so far as the accident victim was concerned.
In that event, it was open to an accident victim to say not all of the payments that were made by the insurer were reasonable or necessary and the insurer ought not have the benefit of a credit for the whole of the amount paid. The insurer should only have a credit for the amount of expenses that were reasonable and necessary and if there was a squabble of that type, the court would have to sort the squabble out before ordering a credit for a particular amount of the expenses paid.
It could happen and did happen. For example, an injured person following an accident might be sitting at home of the view that the person was no longer capable of work. The insurer may require the injured person to undertake rehabilitation at the insurer’s expense. That expense would then form part of the section 45 payments. The injured person might say to the insurer, “Look, there is no point sending a rehabilitation provider because I cannot work”. The insurer would respond, “You are required to co‑operate with the rehabilitation provider by section 48 of the Act and if you do not co‑operate by undertaking rehabilitation, regardless of your own view, then it will be held against you”.
HAYNE J: But all of this was qualified by 45(2A).
MR REWELL: That the payments had to be “reasonable and necessary”, yes. But what I am illustrating is circumstances in which there might be a squabble about whether payments were reasonable and necessary. In the example I have given, if the injured person was then unable to return to work the injured person might say in court, “Well, look, those rehabilitation expenses were wholly unnecessary. I told the insurer I could not work. I was forced to go to a rehabilitation provider. I did not obtain work. The whole thing was futile and now the insurer wants repayment of the amount it paid”.
HAYNE J: Why does 45(4) in its new form avoid that problem?
MR REWELL: Because 45(4) excludes the argument. It makes the payments a defence so that there cannot be any argument about it.
HAYNE J: How does it do that when it is prefaced by the words “A payment made under this section”? Why does it not leave open the question whether the payment which has, in fact, been made is properly to be characterised as a payment under the section, in particular, a payment that would qualify under 45(2A)?
MR REWELL: Well, your Honour, I must admit I had not heard nor addressed that argument because the section in its term simply says “A payment made under this section”.
GUMMOW J: Yes, it does not say a payment purported to be made under this section.
MR REWELL: That is correct, but a payment made under the section might include a payment that in the end was demonstrated not to be reasonable or necessary.
HAYNE J: That is a rather large proposition.
MR REWELL: Well, what I am trying to do is to simply explain a circumstance in which the Attorney‑General’s approach may have been a legal not a political one, namely, that it was an attempt, whether a successful or unsuccessful attempt, to avoid squabbles about the expenses paid by the insurer. Once they were paid they were a defence and the Attorney‑General, it appears, hoped that that would avoid the incurrence of legal expenses squabbling about them. So we say that so far as it goes, there is some assistance to be drawn from the second reading speeches to the intention of the reformulation of section 45(4). I will submit shortly that there is also some assistance to be drawn from what was not said in referring to its intention.
Coming to question two that I have posed, the question is, what, if anything, may be discerned from the second reading speech as to the characterisation of payments made under section 45? Now, I raised this question because, as your Honours will have seen in my learned friend’s submission, my learned friend contends that payments made under section 45 were not part of the claim made by the injured person, nor part of the damages that the injured person could or would recover, much less part of the damages recoverable, the issue raised by section 74.
Do we obtain any assistance from the second reading speech as to whether the payments are part of the claim and part of the damages? Our contention is that we do because of the use by the Attorney‑General of the words “interim or advanced”. The Attorney-General said:
This may involve the insurer making payments on an interim or advanced basis.
The word “interim” was repeated in the note which was inserted after section 45 following the amendments proposed by the Attorney‑General. That is reproduced on page 459 of the appeal book. The first part of that note ‑ ‑ ‑
GUMMOW J: What is the status of these notes in New South Wales legislation?
MR REWELL: The Court of Appeal found that the status of the note was that it was an aid to interpretation of the Act, paragraph 88 of the Court of Appeal’s judgment.
GUMMOW J: Is there anything in the New South Wales interpretation legislation about notes?
MR REWELL: Yes. The Interpretation Act 1987, section 35(2)(c) and (5). The Court of Appeal refers to that at the conclusion of paragraph 88 on page 460. The very first part of the note to section 45 says:
“Note Section 45 places obligations on insurers to act as expeditiously as possible, and to make certain payments of an interim nature once liability has been admitted or determined.
It picked up the word “interim” which the Attorney-General used in the second reading speech. Our contention is that the use of the words “interim or advanced” assist to characterise the payments as part of the damages which will be ultimately awarded to the injured person, bearing in mind that these payments are made once liability is admitted. The words “interim or advanced” would be inappropriate if, as my learned friend contends, these payments are not part of the claim much less the damages.
GUMMOW J: This phrase, “a defence to proceedings”, is ambiguous, is it not? It is not a statutory release, is it, in any way ‑ ‑ ‑
MR REWELL: No, it was ‑ ‑ ‑
GUMMOW J: ‑ ‑ ‑ to the cause of action itself?
MR REWELL: Yes, and the ambiguity arose because of when the defence applied. The Court of Appeal ‑ ‑ ‑
GUMMOW J: A defence to what?
MR REWELL: A defence to a claim for damages.
GUMMOW J: No. That would be a defence to liability.
MR REWELL: As we will see as this argument progresses ‑ ‑ ‑
GUMMOW J: There has to be some sort of statutory allowance or set‑off in the computation of damages, does there not?
MR REWELL: Your Honour, as we will see, this was not the first time the New South Wales Parliament had used the word “defence” in connection with the defence to damages. Exactly the same word had been used in a previous workers compensation scheme which the Court of Appeal noted and I will come to.
GUMMOW J: I am not saying it cannot mean that, but is that what it has to mean to make sense?
MR REWELL: It has to mean a matter, an amount, by which the damages are reduced.
GUMMOW J: Yes.
MR REWELL: The question and the ambiguity in this case was when are the damages reduced. Are they reduced before the apportionment for contributory negligence, or after? That was the ambiguity with which we were concerned both at the trial and at the Court of Appeal.
HAYNE J: At assessment or at verdict is the question.
GUMMOW J: Exactly.
MR REWELL: That was the question that caused us difficulty. When looking at the characterisation of section 45 payments there is a powerful matter to be considered which the trial judge found to be decisive but the Court of Appeal did not. The trial judge said if Dr Morrison’s argument is correct ‑ ‑ ‑
GUMMOW J: Just going back to what Justice Hayne put to you, you say which of the two possibilities: verdict or assessment?
MR REWELL: We say it is verdict. So, in other words, we say the whole of the damages, including section 45 payments, are apportioned for contributory negligence, and only then are the whole of the section 45 payments deducted from the balance to reach judgment. The effect of that, of course, is that, to put it loosely, the injured person loses the benefit of the section 45 payments to the extent of his or her contributory negligence. Dr Morrison’s argument is that the section 45 payments come off on assessment and then there is an apportionment for contributory negligence. The effect of that is to make the section 45 payments immune from contributory negligence or, in effect, no fault.
KIRBY J: What is the history of this? Contributory negligence is not a common law notion. It is a statutory notion. When it came in, what happened at that stage? Without any specific enactment dealing with the problem, how did courts deal with the matter?
MR REWELL: Under the old section 45(4) there was no argument about it.
KIRBY J: Forget this. This is all very modern stuff. I am talking about when contributory negligence originally came in in the Law Reform (Contributory Negligence) Act, I think it was, in 1965 or maybe 1940.
MR REWELL: I think it was the Law Reform (Miscellaneous Provisions) Act and the Law Reform (Miscellaneous Provisions) Act itself seized on this problem in the context of workers compensation and I will come to this because it is important in this case.
KIRBY J: But there was contributory negligence in motor car cases as well.
MR REWELL: Yes, but the ‑ ‑ ‑
KIRBY J: How was it dealt with in the old days?
MR REWELL: You see, your Honour, the concept of payments of medical expenses before judgment only came in 1988 in motor accident law in New South Wales.
GUMMOW J: Yes, and that presented a new problem.
MR REWELL: And it presented a new problem because before that time a compulsory third party insurer paid nothing until there was a judgment against it.
KIRBY J: That is a fair point, but before that time, in employers’ liability cases workers compensation insurers, who were also their liability insurers, paid the damages and the medical expenses up front.
MR REWELL: Yes, and section 10 of the Law Reform (Miscellaneous Provisions) Act, separate from the Workers Compensation Act – and this will prove very significant in today’s argument – declared that the workers compensation payback would be reduced by the amount of the contributory negligence.
KIRBY J: So there was a specific provision?
MR REWELL: Yes.
KIRBY J: Their retreat from the specific provision suggests a change of direction. One might almost call it a fork in the road.
MR REWELL: Indeed there was a retreat in 1987 from the workers compensation position, peculiarly enough, so that from 1987 onwards, injured workers lost the protection given to them in this respect by section 10 of the Law Reform (Miscellaneous Provisions) Act. I am going to come to this shortly because you will see that ‑ ‑ ‑
GUMMOW J: I think we have said it before about this New South Wales legislation. It is not designed to assist the rights of plaintiffs.
MR REWELL: I will come in a minute to the workers compensation legislation history because it is very important in this case ‑ ‑ ‑
GUMMOW J: This 1988 statute in New South Wales and thereafter.
MR REWELL: Yes, 1988 was the Motor Accidents Act, 1987 the Workers Compensation Act. They were part of the same bundle. In fact, both were enacted in 1989 because there was a short period of administrative dealing with motor accidents and work accidents which proved to be disastrous and was replaced on 1 July 1989 by these two Acts. I will come to that because I am going to try to make sense of the Attorney‑General’s reference to the Workers Compensation Act which takes a little bit of analysis, but that is the next question and it will answer Justice Kirby’s ‑ ‑ ‑
KIRBY J: Just keep in the back of your mind that our duty is to interpret the words of Parliament, not the words that a public servant has put into the language of the Minister.
MR REWELL: Yes. What we hope we will show is that the Minister spoke accurately when it came to the effect of the Workers Compensation Act which was not how it appeared at first blush. At first blush it appeared that the Attorney‑General had said something which was either in error or without meaning, but I will hope to clarify that in a moment.
Just coming back for a moment to this question of what is the proper characterisation of the section 45 payments, my learned friend, as I say, says they should be characterised as external to the claim and external to damages. The difficulty which troubled the trial judge about that was that the out‑of‑pocket expenses in a particular motor accident case may have a number of components, and that was the fact here. Mr Zhang not only had the benefit of compulsory third party insurance, but he also had the benefit of workers compensation insurance, having been injured on a journey. A part of Mr Zhang’s very substantial out‑of‑pocket expenses was paid by the CTP insurer. A part was paid by the workers comp insurer. Both of those parts were very significant. A third part was paid by Mr Zhang and a fourth part was not paid at the date of trial.
The trial judge said, “How can I construe section 45(4) so that the payments under section 45 are immune from contributory negligence but the other three types of out-of-pocket expenses are not immune?” That was our argument before the trial judge which her Honour accepted. A different view was taken by the Court of Appeal. The point to make here ‑ ‑ ‑
KIRBY J: Yes, but the words of the statute are “payments made”, so the statute adopts a discrimen as to where the payments have been made and where the payments have not been made. It may seem illogical but if that is what Parliament has said ‑ ‑ ‑
CALLINAN J: Also, when the payments are being made, they are made under subsection (2A) and if other people are making payments, then presumably it certainly would not be necessary to duplicate them, so I do not see why you look outside what may or may not have been paid by way of workers compensation advance or by some other insurer. We just have to accept that whatever has been paid was reasonable and necessary.
MR REWELL: Yes, and is a defence. The question is in construing the word “defence” for these purposes, we ought look at whether the construction for which Dr Morrison contends would produce a completely fortuitous as well as illogical outcome.
CALLINAN J: Why would it when all that has been paid is what is both reasonable and necessary?
MR REWELL: But as the trial judge pointed out, the payments by the workers compensation insurer may also be reasonable and necessary.
CALLINAN J: Well, surely it is a matter for the insurer to work that out with the workers compensation insurer.
MR REWELL: But it may not be. You see ‑ ‑ ‑
CALLINAN J: Well, then there is a basis for saying surely there would not be duplication.
MR REWELL: No, but who pays expenses may be completely fortuitous. Let me explain why. Under the New South Wales schemes, a workers compensation insurer’s obligation to make payments of medical expenses and other expenses to an injured worker arises immediately that the accident occurs and, generally speaking, the accident is promptly reported and payments commenced forthwith.
On the other hand, a compulsory third party insurer will not normally know of an accident until a notice of claim is completed by or on behalf of the accident victim. The compulsory third party insurer then has the opportunity to consider liability which is not relevant to the workers compensation insurer, and only when liability has been assessed do any payments commence to be made by the compulsory third party insurer. Now, by that time, as in this case, the workers compensation insurer may already have made substantial payments and what it has paid is fortuitous. It depends on when the claim is delivered to the CTP insurer.
CALLINAN J: But let that be accepted; there is still not going to be doubling up. They are separate.
MR REWELL: No, but what may happen and did happen here is that even after the compulsory third party insurer started to make payments, the workers compensation insurer was making payments too, because some medical providers sent their bills to the workers compensation insurer, some sent their bills to the third party insurer, so ‑ ‑ ‑
CALLINAN J: We are not concerned with what other people may have paid. We are only concerned with what this insurer paid.
MR REWELL: True it is.
CALLINAN J: And we must approach it on the basis that this insurer paid only what was reasonable and necessary, and did not double up, so that that would be – what it paid was in addition to special damages probably – special damages in addition to any other special damages that somebody else may have paid.
MR REWELL: But the point I am seeking to make is that what was paid by this insurer as distinct from what was paid by someone else was in a sense by chance. It was fortuitous. Different amounts were paid by different insurers depending on who was ‑ ‑ ‑
CALLINAN J: But it was still reasonable and necessary.
MR REWELL: Yes, it was.
CALLINAN J: So what does it matter whether it is fortuitous or not?
MR REWELL: What it matters is this, that it would be illogical, we respectfully submit, for Parliament to pass an amendment such as this which had the effect of treating payments differently depending on who paid them, when who paid them was a matter of chance.
CALLINAN J: It is not a matter of chance, because these are only paid when they are reasonable and necessary. There is no element of chance in that.
MR REWELL: No, but they are also only paid ‑ ‑ ‑
CALLINAN J: They are not going to pay something that has already been paid.
MR REWELL: But they are only paid by the CTP insurer when they are claimed from the CTP insurer, which they will not be if they are already paid by the workers compensation insurer.
CRENNAN J: Your point is you would expect them all to be subject to the contributory negligence discounting mechanism?
MR REWELL: All or none.
CRENNAN J: All or none.
MR REWELL: When who pays them can be completely fortuitous. It is illogical that ‑ ‑ ‑
KIRBY J: Well, I can see that point, but then one would have expected the language of the statute to be clearer, as earlier it was, but then something was changed and there was this sort of political slogan that it is desirable that everything be paid quickly and so it fits into a new scheme, the object of which at least arguably in its language is to put these payments in a particular category and to deal with them first and quickly, and then to provide them as a defence, so that they are taken out of what they ordinarily would be as just part of the damages.
MR REWELL: To jump to question 4 for a moment, nothing in the second reading speech or in the new section 45(4) indicated that the payments had suddenly become no fault payments. Nothing. Now, one would have thought if one is to pursue the political aspect that if the New South Wales Parliament was making payments of medical expenses by an insurer no fault, that would have been trumpeted, but the words “no fault, no liability” do not appear anywhere, either in the second reading speech, the note to section 45 or section 45(4) itself. That is the outcome for which my learned friend contends.
GUMMOW J: Just going back to the Act as it stood before this change, how did 45(4) work in terms of the distinction between verdict and assessment?
MR REWELL: What happened was that damages were assessed in total including all out‑of‑pocket expenses, including section 45 payments. A reduction was then made for contributory negligence where appropriate, and judgment was entered. The court then added an order that the insurer in meeting the judgment would be entitled to a credit for the whole of the payments made under section 45 of the Act, unless there was a squabble about whether all of those payments were reasonable and necessary. But that was the convention.
GUMMOW J: So what do you say is to be discerned as the purpose for the change?
MR REWELL: As far as we can deduce it from the second reading speech, the primary purpose was to avoid squabbles about the reasonableness of payments made by an insurer, in effect, to say, look, the payments are a defence, they are going, and therefore there will not be what the Attorney‑General referred to as unnecessary legal costs in determining the damages.
GUMMOW J: What is the distinction in operation of language between the old 45(4) and the new 45(4)? It said payments under this section are taken to form part of any damages.
MR REWELL: Yes, but we say that in the end there is no difference except that the payments are deducted at verdict before judgment instead of being a credit after judgment.
KIRBY J: But there is a difference because that talks of them as being pro tanto part of the damages whereas now they are a defence to the proceedings. So that suggests that a deliberate change has been adopted.
MR REWELL: But it does not suggest that they are no longer part of the damages. What it suggests is a difference in the timing of their deduction. In other words, they are deducted before judgment not after judgment. In fact, the previous section 45, curiously enough, did not actually provide for the insurer to have a credit. It was invariably done, but, curiously enough, the Act did not provide that it should be done. What was invariably done is that the defendant would plead in the following terms; the defendant has made payments under section 45 of the Motor Accidents Act and seeks a credit in respect of those payments, full stop, and the court would make an order in those terms.
KIRBY J: Yes, but that is understandable. That is if it is a credit to the damages, but that is what it used to say and then they changed that. One normally infers that such a change is deliberate and for reason of principle or policy, that it appealed to the government and the Parliament of the day.
MR REWELL: And what appears to have appealed to the Attorney‑General is the avoidance of incurring unnecessary legal costs in squabbling about the damages. That is all we can deduce in terms of intent from what the Attorney‑General said. But as I point out in question 4 or will point out in answer in question 4, if the Attorney‑General had intended to make these payments no fault, that would have been a significant matter legally and politically.
KIRBY J: But your problem is the choice of the phrase “defence to proceedings” and defences to proceedings normally cut in at an earlier stage than the calculation of the damages.
MR REWELL: I can best answer your Honour’s question by going to question 3. The Attorney‑General said, after referring to avoiding unnecessary legal costs, his next statement was a similar provision currently operates under the Workers Compensation Act. Now, that, in a way, was a curious statement because as at 1995 the relevant provision of the Workers Compensation Act was section 151B of the Workers Compensation Act 1987.
KIRBY J: Where do we find that?
MR REWELL: I will hand up extra copies, your Honour, for convenience. Could I hand up copies of section 151B which, on the face of it, does not seem similar at all and that is the curious thing. My learned friend suggests and it is a suggestion we have considered that, in fact, the Attorney‑General was lost in time and was referring to the 1926 Act when he referred to the current provision.
KIRBY J: The 1926 Act, so well beloved and remembered so endearingly.
MR REWELL: I know it brings a tear to your Honour’s eye and so as not to disappoint your Honour I am going to discuss it in a moment in some detail.
KIRBY J: I hope so, I cannot wait.
GUMMOW J: I could.
MR REWELL: But one hopes that the Attorney‑General was aware that the 1926 Act had been repealed for eight years by the time he used the word “current”.
Now, section 151B(1)(b) is not similar in its words to the new section 45(4) at all. It does not use the word “defence” and, as Justice Kirby knows, its predecessor did.
KIRBY J: Is this English: “the amount of any compensation already paid in re injury”? Is that ‑ ‑ ‑
MR REWELL: No, I think the photocopy has been cut off, your Honour, I am sorry.
GUMMOW J: It has been cut off, has it not? It is “in respect of the injury concerned”, is it not?
MR REWELL: Yes, it is, and I am going shortly to hand a judgment up to your Honours which annexes all of the relevant provisions and that may assist.
KIRBY J: We have to have the proper provisions of the Act.
MR REWELL: Your Honour will. I undertake that your Honour will. The first point I make though is that, curiously, the current provision of the Workers Compensation Act, contrary to what the Attorney‑General says, does not seem to be similar to section 45(4). So that either the Attorney‑General was caught in a time warp or he had something else in mind when he used the word “similar”, and I will come to that.
KIRBY J: It is hard enough for us to construe legislation without having to get into the mind of the Minister via the words and pen of the head of his department or some underling.
GUMMOW J: Exactly.
MR REWELL: Nevertheless though, the workers compensation legislation helps a great deal in construing section 45(4). May I hand up the relevant provision, I hope fully, of the 1926 Act.
GUMMOW J: All of it hopefully this time.
MR REWELL: Yes. Section 63(5) is the relevant provision. This is similar in words to the new section 45(4). Just how it worked may be the key to this debate. Really, section 63(5) stands independently. It simply says:
Where any payment by way of compensation under this Act has been made, the payment shall, to the extent of its amount, be a defence to proceedings ‑ ‑ ‑
GUMMOW J: Were there ever any cases construing the old section 63(5)?
MR REWELL: Not on this issue, but much more importantly there is a case construing 151B which I will come to in a moment which defines the point, unless the Court of Appeal was wrong in the particular case. So section 63(5) does use the word “defence”. Now, if the construction proposed by Dr Morrison of section 45(4) and, in particular, the word “defence” was correct, section 63(5) standing alone would protect a worker against the circumstance where there was contributory negligence, the payments were included in the damages and then there was a reduction for contributory negligence and the worker lost out. But, in fact, the Parliament had to supplement section 63(5) to achieve exactly that effect and it did so in section 10 of the Law Reform (Miscellaneous Provisions) Act in terms. I will hand copies of that section up.
GUMMOW J: This is the 1944 Act or 1946 Act?
MR REWELL: This is the 1965 Act, Law Reform (Miscellaneous Provisions) Act 1965.
GUMMOW J: This in New South Wales was the first apportionment provision, was it not, with contributory negligence? It used to be a complete defence.
MR REWELL: Yes, but it had a particular provision, section 10, to deal with the workers compensation problem which, if Dr Morrison was correct, never arose. Yet section 10 rectifies what may otherwise be perceived as an unjust outcome that a worker was required to pay back the full amount of the workers compensation benefits and out‑of‑pocket expenses paid by the workers compensation insurer even though he only recovered part of them in his damages because of a finding of contributory negligence. So Parliament, appreciating that problem, stepped in, in section 10(1), and fixed it in terms.
KIRBY J: But that is against you because that indicates that where Parliament wanted to provide in the way that you are now suggesting it did so in relatively clear terms. I mean, section 10(1) of the 1965 Act is pretty clear.
MR REWELL: But section 10(1) of the 1965 Act achieves the result that Dr Morrison contends is achieved without it. Under Dr Morrison’s construction of the word “defence” section 10(1) was never necessary, but it was necessary and that is why Parliament enacted it.
CALLINAN J: The setting was somewhat different though, was it not, because people had an automatic entitlement to workers compensation and this is novel to other motor vehicles insurance ‑ ‑ ‑
MR REWELL: But, as they say on television, there is more. The next stage of the workers compensation legislation is very surprising indeed, as I will come to in a moment, but, yes, I agree with your Honour Justice Callinan that one would have expected a worker to be given this type of protection in a scheme where the payment of out‑of‑pocket expenses by the workers compensation insurer was no fault. It was explicitly no fault and, therefore, it was plainly, you would have thought, unjust that the worker should lose part of the benefit of the out‑of‑pocket expenses because he commenced common law proceedings against his employer.
The point I seek to make here strongly is that section 10(1) was necessary because the word “defence” in section 63(5) did not have the effect for which my learned friend contends. It did not in itself protect the worker from this outcome. Section 10(1) had to be put in place to bring about the desired effect.
Now, the curious thing about all of this is that when the Workers Compensation Act 1926 was repealed and replaced by the Workers Compensation Act 1987, the worker lost that protection for reasons about which we could only speculate. For whatever reason, the protection that Justice Callinan observed might have been thought to be appropriate was lost and was lost at the time the Attorney‑General got to his feet in 1995. That was because section 10 of the Law Reform (Miscellaneous Provisions) Act was never amended to refer to section 151B of the 1987 Workers Compensation Act and has never been amended.
GUMMOW J: Is that agreed?
MR MORRISON: Yes, your Honour.
MR REWELL: This matter came before the Court of Appeal in New South Wales when a judge of the District Court disregarded the fact that section 151B was not referred to in section 10 and reduced the workers compensation payback anyway. The case was Tabvena v Oag. The judgment was delivered by Justice Meagher and it is a concise judgment but one that makes the point with complete clarity. The judgment is also very helpful because his Honour annexed to the judgment the legislative history that led to the conclusion at which he arrived with comments. I am going to hand up another piece of paper to go with this case, because the Court of Appeal did not do the maths, which makes the whole thing clear as to how it was arrived at.
Can I preface my remarks in this way. Tabvena v Oag concerned a worker who had proved negligence on the part of his employer but had been found by a District Court judge to have been guilty of contributory negligence to the extent of 40 per cent. Damages were assessed which included the out‑of‑pocket expenses paid by the workers compensation insurer. Both parties appealed against the finding of contributory negligence to the extent of 40 per cent. The worker said it should have been less, the employer said it should have been more, and Justice Meagher, with whom the other justices agreed, dealt in short shrift with that issue and said that the finding was plainly right, it was the same as his Honour would have made himself, and rejected both appeals on that basis.
The second part of the appeal was by the employer because the District Court judge had reduced the workers compensation payments deduction by 40 per cent to match the contributory negligence, seeking to avoid what he perceived to be the evil that the worker would be short changed by having to pay back the whole lot.
The employer said that was not authorised because section 151B of the Workers Compensation Act requires in its terms the whole lot to be paid back. So that I can substitute and apologise for the incomplete photocopy previously, if the Court turns to the page referred to as page 8 of 13 in the judgment, the Court will have a complete copy of section 151B(1) which is the relevant part. It simply says:
If a person recovers damages in respect of an injury from the employer liable to pay compensation . . .
(b) the amount of any compensation already paid in respect of the injury concerned is to be deducted from the damages -
One might put before the words “the amount of any compensation” the words “the whole amount of any compensation”. This was what Justice Meagher was called upon to wrestle with. On the face of it there may be seen to be some difficulty in taking away the whole of the workers compensation payments when in effect the worker only recovered 60 per cent of them but Justice Meagher could not understand what the difficulty was. He said the words of the Act are completely plain. At the end of paragraph 9 of his Honour’s judgment on page 5, last sentence, his Honour said:
Whatever injustices may flow from that provision –
that is section 151B –
the provisions of the Act are starkly unambiguous: the entire sum must be deducted from a plaintiff’s verdict.
Can I hand up a sheet on which I have done the maths to illustrate that this was, as the Attorney‑General said, not only similar but exactly the same as the effect of section 45(4) for which we contend and which originally found favour with the trial judge. Tabvena v Oag is more difficult to understand without the full maths.
What happened in the case was that the trial judge awarded total damages in the figure at the top of the page, $629,000‑odd. That included out‑of‑pocket expenses, most or all of which were paid by the workers compensation insurer. The trial judge took 40 per cent from the whole assessment to arrive at the figure of $377,597 but then the trial judge deducted only 60 per cent of the workers compensation payback, that is the amount of the payments made by the insurer, and reached a judgment of $276,000. It was the reduction of the workers compensation payback to 60 per cent that provoked an appeal by the employer.
The Court of Appeal reassessed the damages. The first stage of the calculation was the same down to the figure 377,597 but then the Court of Appeal took off 100 per cent of the workers compensation payback and as a result there was a lower judgment in favour of the plaintiff. That is exactly what the trial judge did in this case. The Court of Appeal in effect went back to the trial judge’s approach in Tabvena v Oag which was disapproved of in that context.
Back to the Attorney‑General, it seems he was not caught in a time warp at all but that while the words of section 151B may not be similar to section 45(4), the effect, if construed in the way for which we contend, is identical.
So the exercise of exploring the Workers Compensation Act reference we submit is actually a very productive one when it comes to understanding how this legislation works. But I emphasise again, when the word “defence” was used in section 63(5), it was necessary to supplement that section by section 10 of the Law Reform (Miscellaneous Provisions) Act. Now, there is no reference in section 10 of the Law Reform (Miscellaneous Provisions) Act to the Motor Accidents Act or Motor Accidents Compensation Act, nor is there any equivalent to section 10 in the motor accidents legislation itself. So the word “defence” is left bare, as it was left bare in section 63(5). But the injured person is not rescued by a section 10, because there is none.
That deals with what I wanted to say about the second reading speech, but the submissions we respectfully make are that it is actually a lot more informative than it was given credit for by the New South Wales Court of Appeal, and insofar as the Court of Appeal did consider the reference to the Workers Compensation Act in paragraph 93 of its judgment, pages 461 to 462, the conclusion reached by the Court of Appeal was wrong. The last sentence of paragraph 93 on page 462 is:
However, to the extent that the reference –
to the Workers Compensation Act –
gives any assistance in the present case, it assists the Appellant’s contention –
that is, it assists Mr Zhang’s contention –
that payments under s 45 were to be treated as made regardless of fault, by analogy with the Workers Compensation legislation.
Well, that is completely converse to the actual fact. Can I now turn to the paragraph of the judgment that troubled Justice Hayne and troubled us, of course, too, namely paragraph 92 on page 461. The Court of Appeal by this point had already referred to the words “damages recoverable” in section 74(3). It noted in paragraph 91 the trial judge’s approach, which was that there was no discernable intention to alter the treatment of section 45 payments in the context of contributory negligence, and the Court of Appeal disagreed, referred to the old section 45(4) and said the old section 45(4):
renders inevitable the inclusion of such amounts in the “damages recoverable”, identified in section 74(3), which are to be reduced on account of contributory negligence. However, the fact that the provision in those terms was removed and the new sub‑s (4) inserted, is entirely consistent with the result proposed above -
that is, my learned friend’s contention –
namely a variation in the effect of s 74(3).
in other words, to apply contributory negligence only to the net damages after deduction of the payments under section 45. Section 74(3) was regarded by the Court of Appeal as a significant matter in construing section 45, and perhaps even a decisive matter. If one goes to paragraph 83 of the court’s judgment on page 458, the court sets out 74(3), notes the use of the word “recoverable” and says the section says:
The damages recoverable in respect of the motor accident shall be reduced by such percentage as the court thinks just and equitable -
It is interesting, in answer to Justice Hayne’s earlier point, that the word “recoverable” was used, not “payable”, which was the word following “damages” in section 45(4) as it previously existed. The court reasoned that because ‑ ‑ ‑
HAYNE J: What follows from that difference?
MR REWELL: That neither of them add anything to the word “damages”, although they both may add something to the readability of the particular sections. But what follows is that neither “payable” nor “recoverable” adds anything to the meaning of the word “damages”, at least not in this context.
The Court of Appeal reasoned that where an amount is not recoverable because the payment constitutes a defence, then it cannot form part of the damages recoverable. Can we make a number of submissions about that approach. Firstly, we submit that section 74(3) has no contextual relationship with section 45(4) at all and that the Court of Appeal erred in trying to use section 74(3) as an aid to construction of 45(4). They have nothing, we submit, to do with each other. What we submit is that section 74(3) is simply a typical mechanism of apportionment in cases involving contributory negligence. The nub of section 74(3) is to tell the court how to reduce damages in the event of contributory negligence, namely, reduce them by what is just and equitable in the circumstances.
Now, absent section 74(3), there would be no legislative guidance to how the court went about making the adjustment and the court knows that in certain legislative provisions these days the Parliament imposes minimum deductions for contributory negligence and says, if you are affected by alcohol that is 25 per cent minimum off, for example. The mechanism here, when one fails to wear a seatbelt, is the just and equitable mechanism. So the court is entitled to determine whether that had no effect on the person’s injuries or a severe effect.
GUMMOW J: Now, section 74(1) has to be read with the 1965 Act, does it not? It says, “The common law and enacted law” and the enacted law is the 1965 Act I guess, is it not?
MR REWELL: Well, it may be, but, as I said, the 1965 Law Reform (Miscellaneous Provisions) Act does not refer to the motor accidents law at all and never has for some reason.
GUMMOW J: I know, but the common law is now changed by section 9, is it not, of the 1965 Act?
MR REWELL: Yes.
GUMMOW J: That is the starting base from which the rest of 74 follows and you then read subsection (3).
MR REWELL: Yes, but subsection (3) is no more than a mechanism. That is the point that we are making. There is nothing in section 74 or 74(3) in particular to indicate that the word “recoverable” has any particular significance.
HAYNE J: Does it not mean the amount otherwise assessed as the amount to be allowed by way of damages? Is not the amount described as “damages recoverable” the assessment?
MR REWELL: Well, if that is what it means, then it has some difficulties because that approach, in practice, is fallacious. Before a person actually recovers their damages, or to put it in other words, is paid their damages, there are, in fact, a number of statutory deductions made, not just the 45(4) reduction, but there are Centrelink payments recovered, Medicare payments recovered as a matter of statute. So that if “damages recoverable” meant only what the person receives in their hands and only that amount is to be apportioned from contributory negligence, then it is not only section 45(4) payments that need to be disregarded.
GUMMOW J: But wait a minute, this phrase “damages recoverable” in 74(3) of the 1988 Act feeds back to section 9(1)(b) of the 1965 Act. It says:
If a person (the claimant) suffers damage as the result partly of the claimant’s failure to take reasonable care (contributory negligence) and partly of the wrong of any other person . . .
(b)the damages recoverable in respect of the wrong are to be reduced –
That is where that phrase comes from.
MR REWELL: It may be.
GUMMOW J: It is because you have to read 74(1). That is what they are talking about. Section 74(1) is linked back to the common law and enacted law. Now, what is the significance of treating that phrase “damages recoverable” in 74(3) as having the meaning it does in 9(1)(b) of the 1965 Act?
MR REWELL: As we see it, “damages recoverable” simply reflects the fact that the assessment of damages are not the damages for which judgment is entered. That is not inconsistent with what we say, but is consistent with what we say.
GUMMOW J: You may be right, but I just want to get to the bottom of it. Now, are there any decisions construing 9(1)(b) which have a history outside New South Wales, I think?
MR REWELL: Not relevant to this issue of which we are aware.
GUMMOW J: What this expression “damages recoverable” means in 9(1)(b) of the contributory negligence legislation?
MR REWELL: Not that I am aware of, your Honour.
KIRBY J: Is not the result of your interpretation that although the plaintiff has the reduction of his damages for contributory negligence, you get the lot back?
MR REWELL: Yes.
KIRBY J: That is a rather unjust result. Why would one struggle to find that outcome? You have to show error in the part of the Court of Appeal. So if there is an ambiguity – and you conceded at the opening of your submissions there was an ambiguity – why would one adopt a construction which is so unjust?
MR REWELL: Because it is not unjust because the motor accident scheme in New South Wales is a fault‑based scheme. There is nothing in the scheme to indicate that any part of the payments or damages are no fault.
KIRBY J: Yes, but if the plaintiff has his damages reduced, why should he have to pay back an unreduced amount to the insurer?
MR REWELL: Because he is partly at fault. So he loses part of the benefit of the out‑of‑pocket expenses, no matter who they are paid by, in the same way as he loses part of the benefit of all other heads of damages assessed in his favour, because it is a fault‑based scheme. Now, in fact, one of the curiosities of the case is that the plaintiff also lost the benefit of part of the out‑of‑pocket expenses paid by the workers compensation insurer, or should have, because of Tabvena v Oag. So it is the same under both motor accidents and workers compensation schemes but in the motor accidents scheme it is unqualified fault‑based scheme.
Now, what we say is there is no ambiguity about that. Where you are guilty of contributory negligence, you lose the relevant proportion of every head of damage and every part of every head of damage because you are, to that extent, at fault and it is fault based. So the injustice that ‑ ‑ ‑
KIRBY J: It is just that that is not the way Parliament expressed it. They say it is a defence to the proceedings and, therefore, you have not at that stage arrived at the damages.
MR REWELL: With respect, your Honour, I do not know that one can arrive at that as even a prima facie meaning of section 45(4) and the Court of Appeal did not. The Court of Appeal said here is the question and the language does not assist us much. Now, where do we go from there to work out when the section 45(4) deduction is made, at assessment or at verdict?
CALLINAN J: I suppose in your favour is the fact that damages are reduced to the action, so you do not have a complete cause of action until you have damages.
MR REWELL: That is right. The whole of the action or proceedings is affected by the concept of fault, without doubt, in the motor accidents scheme. We also are unable to see why the word “recoverable” cannot include damages which, in effect, have already been recovered by the plaintiff. The plaintiff has had his medical and rehabilitation expenses paid by the CTP insurer. Why cannot those amounts be included in the word “recoverable” just because they are recoverable in advance? I go back again to what the Attorney-General said about interim and advanced payments. In effect, they have been recovered. So you cannot say they are not recoverable just because they have already been recovered.
HAYNE J: I am sure there is a lot of law since Espagne. It is National Insurance Co of New Zealand Ltd v Espagne 105 CLR 569, which concerned social security pensions. There has been a lot of law, I know, since Espagne. If you go back to the roots – and I have in mind what Chief Justice Dixon said at 573, where his Honour referred to the fact that:
There are certain special services, aids, benefits, subventions and the like which in most communities are available to injured people. Simple examples are hospital and pharmaceutical benefits which lighten the monetary burden of illness. If the injured plaintiff has availed himself of these, he cannot establish or calculate his damages on the footing that he did not do so. On the other hand there may be advantages which accrue . . . which have an additional characteristic.
His Honour went on to consider cases of benevolence where the local community puts together the fund to look after the injured person. It is a long way of coming round at this point. Leave aside the old 45(4) in which a lot may have to have turned on the distinction between payable and recoverable. Query whether past practice was consistent with that distinction. Let us ignore 45(4) for the moment. The damages recoverable which are caught by the Law Reform (Miscellaneous Provisions) Act and then dealt with further by 74(3) are, in effect, the losses, the outgoings, the pain and suffering as well, that the person has suffered as a result of the accident. When 45(4) in its current form speaks of the payments being “a defence to proceedings”, is it saying that the amounts outlaid by the CTP insurer under 45 form no part of the damage that is recoverable?
MR REWELL: We say reading section 45 as a whole one reaches the contrary conclusion. Whereas, as I submitted, section 74(3) was no more nor less than an apportionment mechanism, the nub of section 45 is to enable and, indeed, require a compulsory third party insurer to make interim or advance payments of damages which ‑ ‑ ‑
HAYNE J: I understand the weight you put on the second reading speech. Just humour me a little and put it aside as being rather in the nature of a political rather than a legal document, which is a curious Victorian approach to such documents, I understand, Mr Rewell. If we put that aside, this notion of “a defence to proceedings”, what do you say it means?
MR REWELL: It is a mechanism by which payments made by the insurer are taken into account – no more, no less.
GUMMOW J: Yes, but when is the accounting?
MR REWELL: Section 45 brought about a change in the common law because for the first time there was a mechanism by which insurers could, and indeed were required, to make payments in advance of judgment, the first time so far as motor accidents law was concerned. The mechanism was in section 45. The initial section 45 curiously did not provide any basis by which the payments would be repaid other than by saying they formed part of the damages and it was ‑ ‑ ‑
HAYNE J: Part of the damages payable.
MR REWELL: Yes, and it was then left to the courts to make an order for a credit. A new section 45(4) provides a mechanism by which the payments are taken into account – no more or less. There is nothing about section 45(4) which announces yet another major departure from the motor accident scheme, namely a no‑fault element – nothing, nothing anywhere. Forget the second reading speech. There is nothing anywhere in the Act which could possibly be interpreted as introducing one no‑fault element into the scheme. So all the new section 45(4) does when properly understood is to introduce a mechanism by which account is taken of the payments the insurer has made which it would not have made at common law. We say that is the basis on which this should be understood.
CALLINAN J: Have you finished replying to Justice Hayne?
MR REWELL: Yes, I have, thank you, your Honour.
CALLINAN J: Could I ask you about the objects of the Act, section 2A(1)(b):
to re-instate a common law based scheme under which damages can only be awarded after a finding of negligence –
Perhaps what is intended there is “upon” or “by reason of” but it does say “after a finding of negligence”. Section 2B actually compels regard to the objects in case of doubt, and then of course you have section 6, restoration of common law rights. All of that of course is subject to any express provision but it is common ground that section 45 is not clear. If you have to find negligence before you assess damages, presumably you make your finding of 70:30 before you assess the damages.
MR REWELL: What your Honour has read – and I will explain the history in a minute that led to this – makes clear ‑ ‑ ‑
CALLINAN J: I do not need to know the history; I am just interested in your construction.
MR REWELL: It makes clear that contributory negligence is an apportionment made at the time of assessment, I think to use Justice Hayne’s words, not at the time of verdict. That is what it makes clear.
CALLINAN J: Before assessment?
MR REWELL: At assessment. There is nothing to apportion until you have made an assessment, so it has to be at the point of assessment.
CALLINAN J: No, (b) says you make a finding in negligence first.
MR REWELL: Yes. Can I just say one thing about that. I know your Honour is not necessarily interested in the history any more than we, but the words “to re‑instate a common law based scheme under which damages can only be awarded after a finding of negligence” are relevant to this debate. Before this Act was introduced, there was a two‑year hiatus in which there was a no‑fault scheme in New South Wales called TransCover. The common law was replaced by a no‑fault bureaucratic scheme which proved, as was expected, to be a disaster but it existed for two years. It was replaced. So the common law was not replaced; TransCover was replaced by the Motor Accidents Act. As your Honour rightly said, 2A(1)(b) emphasises that the purpose was to reinstate a fault‑based scheme.
GUMMOW J: Yes, but it was speaking with a forked tongue really. Section 2A(1)(b) is the good news for plaintiffs; 2A(1)(c) is the bad news.
MR REWELL: Yes, it was common law with limits on damages.
GUMMOW J: Exactly.
MR REWELL: Yes, but fault ‑ ‑ ‑
GUMMOW J: Anyhow, we have looked at this in various cases.
MR REWELL: Yes, but fault‑based is the point I am making.
GUMMOW J: No, but we have looked at section 2A of the 1988 Act in various cases in this Court.
MR REWELL: Yes, but the relevance at the moment is ‑ ‑ ‑
GUMMOW J: Well, someone might help us with the references to it.
MR REWELL: The relevance at the moment is only limited to fault based, and I do not need to say any more about it than that. It emphasises that it is fault based. Can I return very briefly, and I think finally, on this topic to the old section 45(4), paragraph 92 of the judgment, and I have been wrestling with paragraph 92 of the judgment in the last part of these submissions. There the words that appear are “damages payable”.
Now, I said at the outset in answer to Justice Hayne, I think, that the word “payable” adds nothing to damages. Can I illustrate that by saying this? In fact the payments made under section 45 were never payable to the claimant. They were paid and once judgment was entered they were deducted from the judgment. So to attach any significance to the word “payable” again leads us to a situation of confusion. Payments are taken to form part of damages payable. Well, they were certainly not payable. In fact, they were the contrary. They were not paid. They were deducted ‑ ‑ ‑
KIRBY J: Well, that is a form of legal fiction really. It is saying that even though they are not in fact payable to the claimant for the purpose of calculating the plaintiff’s damages, they are taken to be payable.
MR REWELL: We submit that the word “payable” there has no greater meaning than the word “recoverable” in section 74. They are not words that are of decisive importance in construing these sections.
GUMMOW J: Now, you have almost squeezed 45 dry?
MR REWELL: Yes, I have, your Honour. All we say is this, that the new section 45(4) did one thing, and one thing only – it affected the time or the timing with which account was taken of section 45 payments. Up to 1995, account was taken of the section 45 payments after judgment. There was a credit awarded. After 1995 account was taken before judgment, and that was it. That was the effect of section 45(4).
May I put some brief propositions on the issue of life expectancy? We have made our points I think I hope reasonably succinctly and clearly in the written submissions.
GUMMOW J: What do you say about your opponent’s reliance upon the situation in the United Kingdom?
MR REWELL: That it is not persuasive when we are subjected to a statutory scheme. If there was no statutory scheme in place, it might be a little more persuasive, but even then it would be no more than a matter to be taken into account. Better is to follow the admonition of this Court in Todorovic v Waller.
The point we make is that projected data, however you describe it and however it is based, is necessarily speculative data in the same way predicting the life expectancy of any individual is necessarily speculative. The only thing we can be sure of is that the individual will not live for exactly the period predicted.
Now, of course, the issue of life expectancy itself is only relevant to the assessment of damages for future losses and the assessment of damages for future losses themselves necessarily have an element of prediction, projection and speculation involved in them. What we say about the use of the projected data is that it imposes one more unnecessary layer of speculation on the already speculative process of compensating for future loss.
KIRBY J: Where is the provision in the statutory scheme that is indicative of the correctness of your interpretation?
MR REWELL: Directly there is not one. The only parts of the scheme to which we have referred are the objects of the scheme in which affordability is emphasised because, of course, the change in the law currently brought about by the Court of Appeal increases the cost of the scheme.
KIRBY J: It may be, but it seems to be more conformable to a scheme which is declared to be common law based where you look on the footing of evidence to what the evidence suggests will be the life expectancy of this particular plaintiff.
MR REWELL: True it is that it is common law based, but as was pointed out by Justice Gummow, it is common law based with a sting, that is, that damages will be limited compared to what would be available at common law and the affordability of the scheme must be taken into account in construing its terms.
KIRBY J: That is slogans. That does not solve the particular problem, unless you can get something more precise. Normally, if you are looking to what is the likely life expectancy of this plaintiff and has it been affected by an accident, you just do that on evidence and the point made against you is that you are uttering all these submissions to appellate judges when you were not game to call some witness.
MR REWELL: But there was nothing to call a witness about. No one doubts that the projected data published by the ABS is, on the assumptions the ABS makes, their best prediction as to mortality.
CALLINAN J: There is nothing in the Act that excludes the best evidence rule, is that not right?
MR REWELL: Absolutely.
CALLINAN J: Why is not the more up‑to‑date material the better evidence of the competing evidence that was called?
MR REWELL: Well, it is not up‑to‑date evidence, it is projected. It is beyond up to date.
CALLINAN J: It relies upon later experience indicating that people are living longer.
MR REWELL: Yes.
CALLINAN J: Well, it is more up to date. It is current.
MR REWELL: Well, it makes an extra assumption. It assumes that recent trends will continue.
CALLINAN J: I remember in Parker v Commonwealth Justice Windeyer said that far too often the vicissitudes that courts are invited to take into account are the downside vicissitudes as it were, the disadvantageous ones, and that that should not be so. You take into account the possibility of happy events occurring.
MR REWELL: That is the law. A court in a particular case is entitled to take into account happy events.
CALLINAN J: Why does this not satisfy that? Did you call evidence to show that there was going to be a 1918 type of outbreak of Asian flu or something of that kind?
MR REWELL: No, we did not, for the obvious reason that no such evidence could exist. But may I simply complete what we wish to say by saying that if one was considering the issue of life expectancy in isolation, then I would have little difficulty agreeing with what your Honour is saying. But the point to be made is that life expectancy is an uncertainty layered onto damages which are themselves the subjects of various predictions and assumptions and it is the addition of one more layer of speculation which
we say called for the observance of convention as it has existed in New South Wales for some time.
KIRBY J: Lore, not evidence.
MR REWELL: But may I remind your Honour of the gentle admonition of this Court courtesy of Chief Justice Gibbs and Justice Wilson in Todorovic v Waller at page 413, a paragraph in the middle of the page, in which their Honours said:
The difficulty inherent in the assessment of damages –
referring specifically to future damages –
provides no reason for the courts to shirk the task of arriving at the estimate most likely to provide fair and reasonable compensation.
No argument with that. Their Honours said:
But it may provide a reason for approaching with some caution a proposal to overturn an established method of assessment, in an attempt to achieve an accuracy which it is not humanly possible to attain.
Your Honour, we leave you with those words on the issue of life expectancy and I can say no more and no better. If the Court pleases.
GUMMOW J: Yes, Mr Morrison.
MR MORRISON: Your Honours, may we deal very briefly with life expectancy and just say a few words about it because most of what we wish to say we put in writing ‑ ‑ ‑
GUMMOW J: The House of Lords case does not quite say what you would hope it says, does it?
MR MORRISON: It does not. What it does do is simply adopt the Ogden tables and the Ogden tables ‑ ‑ ‑
GUMMOW J: Which includes this approach.
MR MORRISON: Which includes this approach. The Ogden tables expressly are prospective life expectancy, not historic life expectancy tables.
KIRBY J: But why should we not wield a big axe like in Todorovic and just say, “Well, we are going to do it this way and that is it. Stop complaining. It is going to save a lot of money in calling evidence in every individual case and going off to Mr Ogden”. I mean, that is what the Court did in Todorovic.
MR MORRISON: And so too the House of Lords in Wells. They adopted three per cent. Since then, of course, the Lord Chancellor has reduced the rate to two and a half per cent in England, an approach which has not commended itself in Australian jurisdictions. It is simply a question of what was the evidence before the Court in this case. That evidence clearly indicated that the ABS had given, and that appears – I will just give your Honours the references; page 69 of the appeal book and at 108 - the likely future scenarios and the more likely possibilities according to the ABS which, in the view of the actuary that we qualified, avoided under compensating litigants.
He also points out at 228 in the interesting article, which was published in the Torts Law Review, that the assumptions made by the ABS upon which reliance is had are quite conservative. My learned friend said a number of times that it was continuing the present trend. That is actually not what the ABS did. The ABS says in its paper – and I will not trouble your Honours with the detail – they said they assume a reducing improvement in mortality but a continuing improvement. But they do not assume that the improvement of the last 20 years, which has been reasonably strong, will continue at that rate into the future. Rather, they assume some tailing off. So they have taken a very conservative approach and the ABS points out itself that their approach is more conservative than a series of international agencies which have estimated Australia’s continuing improvement in life expectancy and have produced higher figures.
KIRBY J: They are a tremendously respected body, the ABS.
MR MORRISON: They are, your Honour, and indeed respected by the Evidence Act. Section 159 gives ABS statistics some particular force under the Evidence Act. Might I hand up copies of section 159.
KIRBY J: You use this on an ejusdem generis basis, do you, that where Parliament intends you to use ABS figures they provide for it expressly and otherwise you are in the realm of evidence?
MR MORRISON: They permit the figures to be tendered without further proof if they purport to come from the ABS. But they say it is not just evidence that the ABS produce the figures but they were compiled and analysed by the ABS. So it gives them some greater status than ordinary public records.
KIRBY J: That is just a machinery provision that you have taken us to that just allows the proof of what they have done, does it not?
MR MORRISON: It is.
KIRBY J: It does not give any extra authority to what they conclude.
MR MORRISON: Where we stand in this case is to say the raw ABS data was tendered, the opinion of an actuary was tendered that this data was better evidence as to the mortality in the future and why should, for example, someone who was born today have their life expectancy determined by tables which include those who lived during the Great Depression or pre-penicillin or were born in the reign of Queen Victoria. The fact of the matter is the historic tables are no more than a collection of dates at death and an averaging of those dates.
CALLINAN J: On the opposite approach, if a cure for cancer were discovered tomorrow, a universal cure for cancer, we would still be looking at the historical data.
MR MORRISON: Indeed.
CALLINAN J: By the converse, if there were some great epidemic, the Black Death reappeared, you would have to ‑ ‑ ‑
MR MORRISON: My learned friend’s reliance on the statutory scheme ignores the fact that the decision of the Court of Appeal in Zhang in this case has had application in New South Wales, not just to motor accident cases but to all cases. In other words, it was in effect a common law decision and the effect on motor vehicle cases was only one part of it. So that, for example, the published tables now in New South Wales are the tables which arise from the decision in Zhang in the Court of Appeal. They are now in widespread use in all cases.
KIRBY J: Do you say that as a tactical matter all that happens is that instead of using ABS, courts and lawyers will use the Ogden tables?
MR MORRISON: It is not the Ogden table. The Ogden table is British life expectancy which is different ‑ ‑ ‑
KIRBY J: What will our lawyers – surely they do not have to call specific evidence in every case.
MR MORRISON: There is no need to. The prospective tables are published annually by the ABS. They are published and they appear in all sorts of documents.
KIRBY J: You never go to bed without it.
MR MORRISON: Indeed. The reality is that they are readily available in widespread use in a variety of publications. They are on the ABS website and every year they are updated by the ABS. So that the projected tables that we were talking about in Zhang have been replaced by a more recent set, but the variation is so minor that it is relatively inconsequential. Your Honours need not be worried about creating work for the courts or difficulty. If it is the projected tables, the projected tables are widely available, they do not require further proof no more than did the old tables. They are as available as the old tables were and much less susceptible to the risk which actually occurred in this case of the judge using out‑of‑date life tables which had to be corrected. That is out‑of‑date historical tables, quite a common problem.
But the prospective tables pose no evidentiary problems for general use they are so widely available now in New South Wales and published by a number of sources. Your Honours, can I turn from life expectancy ‑ ‑ ‑
KIRBY J: You might leave that on the Bar table when you leave. I will check what it says about a male aged 67.
MR MORRISON: Better than it used to be, and I will leave it there accordingly, your Honour. Can I turn then to section 45 and the interesting propositions that arise from it? Reference was made to section 2A, the objects section of the Motor Accidents Act, and 2A(1)(b) certainly says:
to re‑instate a common law based scheme under which damages can only be awarded after a finding of negligence –
The issue under section 45 is whether the payments ever reach the stage of damages, and conceptually how could they? For two reasons: one is the Espagne reason that your Honour Justice Hayne has referred to, because save for issues of charity and insurance, which were accepted by the High Court in Espagne, if otherwise the tortfeasor has mitigated the loss, where are the damages to be claimed?
KIRBY J: Yes, but you have to answer three things: first, that this is a fault scheme, which rather implies that you do deduct; secondly, that this was not a scheme that is friendly to plaintiffs, this is a scheme which spoke with forked tongues; and thirdly, that the actual contrast with the workers compensation rather suggests that the appellants’ scheme is the one that was the intention, especially when you read the Attorney‑General’s speech.
MR MORRISON: Can I answer those three issues in reverse order? First of all, in respect of the workers compensation scheme, if I can take your Honours back to that decision of Tabvena that my learned friend took the Court to and paragraph 9 of Justice Meagher’s judgment, we are dealing here of course with the 1987 Act, not the 1926 Act, but the 1987 Act says under (1)(b):
the amount of any compensation already paid –
so the payments are given the status of compensation –
in respect of the injury concerned is to be deducted from the damages (awarded or otherwise paid as a lump sum) ‑ ‑ ‑
CALLINAN J: Where are you reading from?
MR MORRISON: In paragraph 9 the judgment helpfully quotes from the section about halfway down.
CALLINAN J: Thank you.
MR MORRISON: What I am suggesting is that that scheme bears, not identical, but close similarity to the Motor Accidents Act as it was prior to the 1995 amendment which took effect on 1 January 1986. In other words, it contemplated the moneys going into the judgment and coming out, whereas the difficulty about what was done in New South Wales was that there are two bars to that occurring. One is, if you have not suffered a loss, how can you claim it as part of your damages? Secondly, even if you did, if the section gives the insurer an absolute defence, how can the judge award it? We say the plain words are the most effective answer.
There is a marked difference between that 1987 provision and the Act under the Motor Accidents Act scheme as amended in 1995. That, we say, is worth noting. As to the other two matters that your Honour raised, true it is ‑ ‑ ‑
KIRBY J: It is also Justice Callinan’s point that in the theory of the law damage is a part of the cause of action, you know, an action for negligence, so that your theory that you bifurcate and just find so‑called liability and then damages separately is not the way the law strictly looks at most damages actions which are negligence actions.
MR MORRISON: It is certainly true that damage is an element of the cause of action in tort and without damage, fault of itself is nothing, but in this case the question is, what are the damages recoverable? They have to be damages. They cannot be damages if you have not suffered loss. There may be other elements which are recoverable. If there were no damages of any sort, then there would be no action, that is true, but we assume for the purposes of this argument that there are other heads or other elements of damage which are going to be established.
KIRBY J: It does lead to a curious result that if the money is not paid or paid by your client personally that it is subject to the deduction but not otherwise.
MR MORRISON: It is not as curious as all that when one considers the way in which the scheme was set up and certain elements of it. Your Honours will recall that the Attorney‑General in his second reading speech referred to the desirability of early payment and the rehabilitation purpose of the scheme. The scheme was built particularly under sections 37, 38 and thereabouts with a heavy emphasis on rehabilitation. There is an advantage, not just to plaintiffs, but to insurers, in early payment, because those early payments affect the rehabilitative purpose of the scheme. They render an ultimate claim less likely. Indeed, there may be no claim ultimately. Bear in mind that many section 45 payments are made even though no claim is ultimately pursued. They never form part of damages.
CALLINAN J: The case has really been conducted on the basis, has it not, that the advances, whatever they are, would all be recoverable special damages?
MR MORRISON: These are not advances in the same way ‑ ‑ ‑
CALLINAN J: Call it what you like. The money that is paid for rehabilitation, medical treatment and the like, the underlying assumption is – and it is probably reasonable because the payments are to be made only if they are reasonable and necessary – that they are in fact identical with special damages. They would be recoverable as special damages.
MR MORRISON: They are identical in a sense that workers compensation payments are not because the method of calculation is different.
CALLINAN J: But we are not concerned with them.
MR MORRISON: No, but they are not identical in the sense that it follows that an action will be brought to recover damages.
CALLINAN J: No, but if it were brought, they would be special damages.
MR MORRISON: They would have been special damages if they had not already been paid. That is the point we make. Once they have been paid, how can you claim a loss which does not exist to the extent that they mitigate the loss and there is nothing to recover?
CALLINAN J: I was not suggesting that. I was suggesting the question of identity, that is all.
MR MORRISON: Certainly. Even supposing that a plaintiff did claim them, we say there is a second stage at which the appellant fails as well because even if claimed, section 45(4) as it was amended prevents the court from awarding those damages. Unless they can be elevated to a status which does not seem to have been contemplated by making the payments a defence, then how do you put them in artificially, take out contributory negligence and then pay back a larger sum than was awarded to the plaintiff?
If it sounds like a strange scheme and if it sounds like it may do some injustice to insurers, bear in mind these matters. Insurers obtain significant benefits from the changes that were made in 1995 in two respects. First of all, by not having the out‑of‑pocket damages in respect of which section 45 payments had been made included in the judgments, the overall judgment was lower.
That affected significant thresholds in regard to such things as the entitlement to costs in the Supreme Court of New South Wales, the $450,000 limit and the $250,000 limit below which no costs can be awarded. It affected the position in regard to Calderbank offers and offers of compromise in favour of insurers because the damages ultimately awarded had under the 1995 amendments to be lower. They obtained a significant advantage in that respect.
The other advantage is the one that my learned friend referred to which is that it was intended, whether successfully or not, to avoid disputes as to whether or not the payments actually did reduce the plaintiff’s loss. It is not unknown for payments to have been made by insurers by way of provision of a motor vehicle which proved unsuitable for modification for a quadriplegic or, as my learned friend and I would remember from a very recent case, for a tetraplegic an environmental system upon which hundreds of thousands of dollars was spent by an insurer, which was the wrong purchase, which never was suitable and which ultimately had to be replaced at enormous expense. If my learned friend’s contention ‑ ‑ ‑
CALLINAN J: That would not fall within what was reasonable and necessary then, would it?
MR MORRISON: Well, that is why I reserved the issue a little earlier as to whether or not what was done in 1995 was actually successful because the argument has yet to be run as to whether or not such payments, if not reasonable and necessary, are in truth section 45 payments and, therefore, whether the insurers actually obtain the benefit of the 1995 amendments. That issue has not been argued, but the fact of the matter is that the intention was to benefit insurers by avoiding them having to prove the reasonableness of the payments they make.
Do not forget that when they make these payments, when they send carers along to look after a quadriplegic, they send a person of their choice, they impose a regime which might be significantly more expensive than that which the plaintiff might wish. They expect to get the whole of the amount back and yet they also want, despite that level of control, despite the fact that the plaintiff might, knowing that contributory negligence was likely to be levied, have adopted a much cheaper regime of care, they still are going to want their more expensive scheme and they are going to want the whole to be recoverable even though the damages would be at a lesser level.
CALLINAN J: They may be in breach of the Act. They may then be in breach of 45(2A) for doing something that is not reasonable and necessary.
MR MORRISON: But that is going to be of very little comfort to the quadriplegic plaintiff faced with that dilemma.
CALLINAN J: Well, no, it may be of great comfort because if they are not doing what is reasonable and necessary, not of payment, it arguably is not a payment within 45(4).
MR MORRISON: I entirely accept what your Honour has said.
CALLINAN J: Therefore, it does not fall to be deducted in any way at all.
MR MORRISON: That is not an argument which, as yet, has commended itself to any insurers in New South Wales, but it is an argument which remains alive for some future occasion. But the reality is these changes were meant to benefit insurers in the way in which I have suggested. It may, as your Honour, Justice Callinan suggests, not have had the effect that was intended for the very reason that has just been mentioned, but the purpose certainly was not to benefit plaintiffs.
If the incidental result was that it never forms part of the damages, then this Court, we would ask, should give effect to the plain words of the New South Wales Parliament which, in making the payments a defence, which, as section 2 seems to say, precludes these payments being part of the damages, simply suggests that what our learned friends are contending for is a legal fiction. You pretend that these payments are part of the damages, even though the plaintiff is entitled to them, even though the plaintiff does not claim them. You put them in, you artificially apply contributory negligence to them and you take them out.
We just say that is not what the Parliament has said. The second reading speech is effectively silent on this issue. The change that was effected from a clearly different scheme under 45(4) as it was prior to 1995 we say is very significant. They could have made it a defence and left the previous 45(4) in place. They did not and that surely is, we would say, a complete answer to what is suggested. We say, to use my learned friend’s words, that starkly unambiguous is the way in which we would describe section 45 as amended. We do not need to go to the second reading speech, but if we do, we say it is not unhelpful to us in any event. Thank you, your Honours.
GUMMOW J: Thank you, Mr Morrison. Any reply?
MR REWELL: Very briefly, your Honours. In answer to a question from Justice Callinan to my learned friend as to the basis on which the case was conducted, in fact, the pleadings specifically claimed as out‑of‑pocket expenses the payments made by the insurer. The appeal book at page 12 demonstrates that to be the fact in terms.
In discussing the second reading speech, my learned friend said that when the Attorney‑General referred to the similarity with the workers compensation scheme he may have been referring to the old section 45(4), but of course he was introducing the new section 45(4), and that was where the similarity lay. The only other matter is the answer to Justice Kirby’s first question to my learned friend is 18.71 years, I am sorry, your Honour.
KIRBY J: I am so relieved.
CALLINAN J: There is just one matter. I suppose we should have the possibilities in figures. Say either party was to win on one point and not win on the other, what would the judgment be for? Do we not need agreement about the possible results in money?
MR REWELL: Yes, your Honour does, for example, if we succeed on the section 45 point and my learned friend on life expectancy.
GUMMOW J: We do. Yes, we need assistance in that respect.
MR REWELL: And we will do it.
CALLINAN J: You should agree, should you not?
GUMMOW J: Can you put in an agreed minute by the opening of term, which is Monday, 29 January?
MR REWELL: We can probably do it today, your Honours.
GUMMOW J: But if not today, at least by 29 January.
MR REWELL: Yes, your Honours.
MR MORRISON: Your Honours, could I just give one reference at supplementary appeal book at 16, line 57 in relation to how the plaintiff put it at first instance in relation to the out of pockets?
GUMMOW J: Yes, thank you. Is there anything else, gentlemen?
MR MORRISON: No, thank you.
GUMMOW J: The Court will reserve its decision in this matter and we will now adjourn to Monday, 29 January 2007 at 3.30 pm
AT 11.59 AM THE MATTER WAS ADJOURNED
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