Hickson v Goodman Fielder Limited

[2008] HCATrans 345

[2008] HCATrans 345

IN THE HIGH COURT OF AUSTRALIA

Office of the Registry
  Sydney  No S202 of 2008

B e t w e e n -

GLENN ANDREW JOSEPH HICKSON

Applicant

and

GOODMAN FIELDER LIMITED

Respondent

FRENCH CJ
GUMMOW J
CRENNAN J

TRANSCRIPT OF PROCEEDINGS

AT SYDNEY ON TUESDAY, 30 SEPTEMBER 2008, AT 11.23 AM

Copyright in the High Court of Australia

MR A.S. BELL, SC:   If the Court pleases, I appear with my learned friend, MR D.J. HOOKE, for the applicant.  (instructed by Beilby Poulden Costello)

MR L. KING, SC:   May it please the Court, I appear with my learned friend, MR S. LAWRANCE, for the respondent.  (instructed by Eakin McCaffery Cox)

FRENCH CJ:   Yes, Dr Bell.

MR BELL:   Your Honours, the Law Reform (Miscellaneous Provisions) Act 1965 (NSW) manifests an unequivocal intention that where a worker receives common law damages by reference to his or her contributory negligence, his or her obligation to repay previously received workers compensation payments is reduced to the extent of any reduction in the common law verdict for contributory negligence. Your Honours see that in section 10(2) of the Act, which is conveniently reproduced in the application book at page 7. That provision, and section 9, is at the heart of the statutory construction questions raised by this appeal.

Now, section 10(2) reflects the clear legislative policy that to the extent that an injured worker cannot recover by reason of his or her own fault, payments received under the no fault workers compensation scheme are to be retained, no windfall either to a worker or an employer.

The important question in this appeal, and in practice it is an extremely important question which extends, as I will seek to demonstrate, not only in New South Wales but in the context of Victorian legislation as well – the important question in the present case is whether the same statute dictates, one, a different result and, two, a less favourable result for the worker in circumstances where he or she settles the common law claim in the context of allegations of contributory negligence as opposed to litigating it through to a verdict, having findings of contributory negligence and consequential reduction.

By majority the New South Wales Court of Appeal, Justices Giles and Hislop, so held that it did, or on its proper interpretation, the Act should produce or does produce that different result, and that was a decision reached over the dissent of Justice Hodgson and in the face of what, in our submission, is a very clear and a very strong decision of the primary judge, Judge Kearns.

As a result of the decision, on the facts of the present case – and I go to the facts just simply to illustrate the practical consequences – Mr Hickson, my client, who is a paraplegic, injured on his way home from work when his bicycle was struck by a car, will be obliged to repay the entirety of just over $600,000 in payments received by way of workers compensation.

Had he not settled the common law claim by the acceptance of an offer of compromise, which was a settlement reached against extensive allegations of contributory negligence – and your Honours can see the extensive allegations in the supplementary materials we have provided the Court at page 13, which is the notice of grounds of defence in the common law proceedings which were settled, beginning at paragraph 4, but had Mr Hickson not settled this common law claim through the acceptance of an offer but litigated through to finality and his degree of contributory negligence had been held to be, say, 20 per cent of a notional verdict of $3.5 million, the settlement sum being $2.8 million, on one view he would not have been obliged to repay any of the $600,000 and, on another view, he would only have been obliged to repay 80 per cent of the $600,000 – $480,000 – and entitled to retain $120,000.

There are three essential points which are at the heart of our argument and the heart of our criticism of this decision.  First, it produces an asymmetrical result which in itself is surprising – that is to say, asymmetrical depending upon whether or not the common law claim is litigated through to a verdict or settled.  It would be an unlikely statutory criterion or an unlikely intended statutory criterion as to whether or not an injured worker needs to repay or not a proportion or some of the workers compensation benefits received that the criterion would be whether he or she chose to litigate or settle.  That is the first point, the asymmetrical result.

Secondly, your Honours, the majority decision leads to an obviously inferior financial result where the injured worker does settle the common law claim and contributory negligence is in play.  Now, this is doubly surprising when the policy of the law, including the policy of the same legislature, through the Civil Procedure Act, and the Rules of Court, positively encourages settlement of claims.  In other words, a worker, an injured worker, is penalised for settling.  That is the second odd consequence of the construction made more odd and more awkward, in our submission, in circumstances where, firstly, it is notorious that most of these common law claims settle and, secondly, the workers compensation statute, 151Z(5), which is reproduced in the application book at page 39, recognises settlements and treats settlements as the recovery of damages.  One sees that at page 39 between lines 30 and 40.

The third oddity or problem with the majority decision is that – and the reason why the interpretation is trebly surprising – it is made in the context of beneficial legislation.  Both the Workers Compensation Act and these provisions of the Law Reform (Miscellaneous Provisions) Act, which your Honours will recall, eliminated the defence of contributory negligence but also in section 10(2) made provision for the retention of amounts which would otherwise need to be paid back in circumstances of contributory negligence, the “no fault” benefits able to be retained.

It is a surprising result we say, we submit with respect, in the context of the beneficial nature of both pieces of legislation, and one really needs to treat the pieces of legislation as a suite because section 10 of the Law Reform (Miscellaneous Provisions) Act refers back to and picks up the obligation of repayment under section 151Z of the Workers Compensation Act. That is referred to in terms in section 10(2), so one is dealing in a sense with the suite of legislation.

One practical consequence of this decision is that it generates in a most unintended fashion, in our submission, for a worker, Hobson’s choice – this is classic Hobson’s choice.  That is illustrated in the reasons of the primary judge at pages 14 and 15 of the application book in paragraph 25, beginning at the foot of page 14.  His Honour first makes the point that it would be an odd result that the amount of payback – that is to say, the statutory obligation to pay back - was not determined by the extent of the contributory negligence but by the form, whether he ran or settled his case.  Then:

(a)a plaintiff, faced with a good settlement from a defendant, might be forced to run his case, not because the defendant’s offer is not right, but because he –  

knows, on the majority’s interpretation, unless he runs the case he will lose all or a proportion of his workers compensation benefits.  But Hobson’s choice arises under subparagraph (b).  The tortfeasor, or the tortfeasor’s insurer, makes an offer for settlement of the common law claim and does so under the rules and gains the benefit of powerful costs protection in the event that the offer is not accepted.  But the tortfeasor does better in the trial, a real risk for an injured worker, and these cases – this is a paraplegic case, it was going to run, by way of example, for two weeks, so that is a lot of money, potentially, coming off any ultimate verdict.

But the Hobson’s choice is you either accept that and lose your workers compensation or you run the risk of being hit with costs if you continue through to get a verdict.

CRENNAN J:   What about quite a different point, and I think it is a point raised against you, which is that a compromise will often involve a lot of considerations other than a consideration of contributory negligence.  On one view, it would be very difficult to establish what the discount would have been had a trial been conducted and you might get into the arena where you have to conduct a trial within a trial, as it were, in order to establish that in circumstances where I would expect that the settlement discussions would be the subject of a joint, without prejudice, privilege.

MR BELL:   There are two answers to that, your Honour.  The legislation contemplates notional relitigation, so that when the worker does not take proceedings the employer can bring his own proceedings against the tortfeasor.  So there can be that sort of litigation.

CRENNAN J:   But I am talking about the difficulties of establishing contributory negligence discounts in the circumstances of a settlement.

MR BELL:   Your Honour, take the facts of this case.  This man was on a bicycle going home from work and was hit by a car.  That is all admitted on the pleadings.  The only question, in our submission, that was in issue in the settlement here was the extent of the contributory negligence.  As to what your Honour raises about settlement discussions, et cetera, our submission is that the proper approach is not looking into the interstices of settlement discussions but that the court, the second court, that is to say, dealing with the payback question and working out whether there should be a reduction in the amount to be repaid – and the onus lie on my client to establish that – will look at the matter by reference to the statutory criterion, the just and equitable level of the reduction.  It will not look at it by reference to the settlement discussions.  That was a straw man, in a sense, which both Justice Giles threw up and our friends throw up, in our submission, here.

FRENCH CJ:   I suppose the problem raised here might be overcome in a case where there is an allowance in the settlement for contributory negligence by seeking a consent declaration which makes that clear, supported, I suppose, by affidavit because the court would have to be satisfied that it was within power and appropriate and not merely collusive.

MR BELL:   That may be a way of doing it.  Query whether judges would be content to make a consent declaration of that kind, not having looked at the evidence and, secondly, such a declaration would not bind the employer – that is to say, the party seeking the repayment of the workers compensation.

Your Honours, our case is this.  Because of the asymmetrical and unsatisfactory results, which seem to be contrary to the policy of the law in terms of the encouragement of settlements and the beneficial and purposive nature of the legislation, if there is an interpretation open on the statute which allows the contrary position to be reached – and we submit there is, and I can take your Honours to that, it is a very short point – then that is the interpretation the Court should take, because it advances the purposes of the legislation and it does not create the odd, to put it at its lowest, results which are produced by the other approach.

The argument, in terms of the legislation at AB 7, section 10(2), is that where in section 10(2) there is reference to the amount of compensation so repayable to be reduced to the same extent as damages recovered by the claimant are reduced under section 9, that is a reference to the measure (a), that which is just and equitable. It does not require or presuppose a determination by a court. It is simply a reference to the measure by which they are to be reduced. If it is necessary in the second piece of litigation to litigate that question – and it is a single issue - if it is necessary to litigate it, so be it. But all the reference in section 10(2) is doing is to the measure, the words “to the extent” pick up the measure in section 9.

That is the alternate construction argument and it is a construction argument which not only have two judges favoured – Justice Hodgson and the primary judge – but in the Court of Appeal Justice Hislop accepted the force of that contention.  Your Honours will see that in his Honour’s judgment at page 58 in the final paragraph.  His Honour Justice Hislop set out the competing contentions, says there is force in both and says he prefers Justice Giles’.

GUMMOW J:   Does this case have anything other than a purely New South Wales dimension?

MR BELL:   Yes, your Honour.

GUMMOW J:   Having in mind section 151Z, which they do not have in other States, do they?

MR BELL:   Your Honour, in Victoria, yes.  Can I explain how – if your Honour has the supplementary materials.  The relevant Acts in Victoria are the Wrongs Act 1958 and the Workers Compensation Act 1958. Your Honour, at page 16 of the materials one has, in section 26 of the Wrongs Act the equivalent of section 9 of the New South Wales Act, the ability to reduce by reference to contributory negligence. One has in section 26(2) the equivalent to section 11 of the Law Reform Act and in section 26(6) the equivalent of section 15 of the New South Wales Act.

Then, your Honour, one goes to page 19 and your Honours will see that section 66(1), “Subject to section 70 where a judgment or order for damages” is retained, but then dropping down:

but where the amount of the judgment or order in favour of the worker is not so reduced, the employer shall be entitled to be indemnified for the payments so made by the third party reduced to the same extent (if any) as the damages in favour of the worker are reduced by virtue of section 26(1) of the Wrongs Act 1958 –

Obviously the Victorian legislation breaks up – not all the provisions that one finds in sections 9 and 10 of the Law Reform Act are in the same Act, but functionally there is the same result.

The Tasmanian legislation, which was also annexed, is slightly different, but it is consistent with the approach we contend for, namely, that it strives for symmetry of result and simply contemplates that where the issue arises, which not otherwise are to be resolved between the employer and the worker as to the level of contributory negligence or an appropriate reduction for contributory negligence, then the court simply determines that by reference to notions of what is just and equitable.  That is the construction we urge on the Court.

So it is a matter of practical importance.  This was not an unusual fact situation at all.  Secondly, it is not at all unusual that matters settle.  Thirdly, it is the policy of the law to encourage settlement.  There are odd results, in our submission, which are produced by this decision.  There are ramifications for the position in Victoria and, as the judges below recognised, the arguments are finely balanced.  It is a short point of statutory construction of immense practical significance.  I have explained the monetary significance on the facts of this case but, of course, it applies in every case. 

We do make the point – our friends say against us, “Well, there can be tripartite agreements”, but this decision creates no incentive and a positive disincentive in a case where contributory negligence is in play for the employer to participate in a tripartite agreement - much better off staying out because if he stays out and there has in fact been a realistic recognition in the settlement that the sum struck should take account of contributory negligence, the employer gets all the workers compensation back, whereas, if he had participated, he would be bound and, by definition, having participated in the agreement, gained that result.  So there is no incentive for the employer and, secondly, for the tortfeasor or the tortfeasor’s insurance, there is absolutely no incentive to increase any offer to reflect the fact that the worker is going to lose some workers compensation.  That is not the tortfeasor’s or the tortfeasor’s insurer’s responsibility.

CRENNAN J:   Is this the first time in the life in section 10(2) that this argument has been raised?

MR BELL:   Yes.  There is a 1971 decision, a District Court decision we were able to find – Judge Henchman – but, apart from that, no.

CRENNAN J:   That is Beecroft and nothing since.

MR BELL:   Yes.  Now, our friends say that says there is nothing wrong, but equally, your Honour, it is quite possible the parties have been proceeding on the basis that, just as common law claims settle, these reduction claims settle, and people have been proceeding.  It is equally consistent with the fact that there has not been litigation, this point has not been taken, that insurers have been proceeding in line with our interpretation and Judge Kearns’ interpretation of the way this legislation operates, that there would be a reduction available.

Our friends take that point.  But whether or not it has been an issue in the past, it could be an issue now because no properly advised workers compensation insurer in a case of contributory negligence has any incentive to participate in settlement discussions, and so the Hobson’s choice for the worker is there, the perverse result whereby litigation is encouraged and settlement is discouraged is reinforced by this decision.  Your Honours, as I say, we would characterise this as a short point of statutory construction, but one of great general importance.

FRENCH CJ:   Thank you, Dr Bell.  Yes, Mr King.

MR KING:   Your Honours, I will deal first, if I may, with the suggestion that this case reaches beyond New South Wales, but before I launch into that can I shortly answer the two last points I apprehended my learned friend to make.  He says that what we say about 30‑odd years of settled practice is not necessarily right and that the sort of thing that happened in this case might have been going on for a long time.  If that was so, your Honours would have in the material handed up by my learned friend a selection of cases of this kind.  There is nothing to indicate this is not the first time it has reared its head.

Secondly, he said repeatedly that there is no incentive to settlement in this sort of situation because, in effect – he did not put it but this lay behind what he was saying – employers and their insurers will act contrary to their own interests, they will not see that they are in the same boat as the worker and that if they do not reduce the payback when the case appears to be a proper one, the worker will not do something which will impact adversely on the employer’s interests, like discontinue his claim and sit on his rights to workers compensation.

It is not correct to say, with respect, that it depends on whether the case is run or settled as to whether there is a reduction in payback.  What the statute ordains is that it depends on whether there is a finding of contributory negligence.  The decision for a plaintiff who is a worker in this context is the same as for any plaintiff faced with difficulties in his case.  You have to make up your mind that you would do better to run or whether you settle.

Your Honours, in relation to the suggestion that this applies beyond New South Wales, my learned friend took you to certain pieces of Victorian legislation, but we saw this morning that he did not put to the Court section 69 of the Workers Compensation Act (Vic).  Could I hand that up because it would appear, your Honours, when you read it, that what happens in Victoria is what the New South Wales Court of Appeal has held happens here in this State where there is a settlement without a finding of contributory negligence.  That is the result.

Your Honours, in relation to the other legislation that my learned friend put before the Court from Western Australia and Tasmania, if one goes to the Workers Compensation and Injury Management Act 1981 (WA), section 93, which is page 25 of the material put before the Court, if you look at 93(4), 93(4) seems to align itself very much with section 69 of the Victorian legislation. Then when one goes to the Tasmanian legislation, the last page from my learned friend’s – the Workers Rehabilitation and Compensation Act 1988 of that State, section 134, subsection (3) seems to align itself with the Western Australian provision and with section 69 of the Victorian legislation.

Your Honours, what is striking about those provisions, the Western Australian provision and the Tasmanian provision, in the event of a dispute the parties lining up to fight each other take their natural stance. The defendant and the employer contend for more or less contributory negligence because it is exactly the same as the situation under section 10 of this legislation whereby when an injured worker runs his or her case he is concerned to minimise contributory negligence. The defendant is concerned to maximise it. The employer’s interests are championed by the worker and the employer is bound, under this legislation, by that result.

Your Honours, perhaps I could say two final things.  In relation to Justice Hodgson’s dissent, we have said a number of things about it in writing, but what I put to the Court is this.  If one goes to the application book at page 54, one sees in Justice Hislop’s reasons the legislation picked up – and it is easy to read, section 8:

court, in relation to any claim, means the court by or before which the claim falls to be determined.

Section 9 tells us who the claimant is; 9(b):

the damages recoverable in respect of the wrong are to be reduced to such extent as the court thinks just and equitable –

Your Honours, that is plainly enough the court hearing the injured worker’s claim.  It carries on down through 11 and 15 where the court records the damages before reduction and after reduction, showing it is the court making the reduction in the worker’s claim.

With all respect to Justice Hodgson, he seems to say that you can get out of this provision application of it to an entirely different claim, such as the claim that was before Judge Kearns.  The claim before Judge Kearns was not a claim by an injured worker; it was a claim against an injured worker by an employer.  On page 50 of the application book, at paragraph 40 of Justice Hodgson’s reasons, two things are pointed up.  The more important of them, in my submission, is found in the very last sentence on page 50 of the application book and coming to a head at the top of page 51 where his Honour says:

in my opinion, the court hearing the s 151Z dispute has to come to its own view as to what a court hearing the case –

Your Honours, what the statute speaks of is what the court which actually heard the case did.  That is the fallacy of the hypothetical which Justice Giles exposes.  Finally, your Honours, back on page 50, at about line 50, your Honours see that Justice Hodgson says:

At one stage in my consideration of this matter, I had thought that this question was concerned with the factors influencing the settlement; but that would be so only if –

et cetera.  He goes on, however, at page 51 of the book to say, in paragraph 42, as regards question 1(b), that there would be some scope for evidence as to what went on at the time of the settlement by way of admissions, hearsay and so forth.  That points up the fact that not only in the sort of case that Justice Hodgson contemplates does the worker change his position completely but there are difficulties about what went on at the time.

My learned friend seems to have had an equivocal position about this.  If your Honours go to page 88 of the book, 2(a), you see that they talk about proof of the fact that contributory negligence was applied by the parties at the time of the settlement.  Your Honours, that must hark back to what his Honour Judge Kearns said, which appears at page 18 of the book between lines 40 and 50.  You see his Honour said:

Let it be assumed for present purposes that it can be established, by appropriate evidence, that –

there was a particular reduction.  That plainly, if what my learned friends are getting at at 2(a) on page 88 of the book, says that they adopt the view that you prove what actually happened.  Then if you move to page 89 of the book to (d), they seem to embrace the idea that Justice Hodgson said was the proper way of going about it, subject to matters of admission and hearsay, that you put yourself in the same position as the court would have been in.  You cannot do that and comply with sections 9 and 10 of the Act.

Your Honours, the scheme of the Law Reform (Miscellaneous Provisions) Act clearly shows that the interests of the employer were in mind in the thinking of the legislature and the employer is bound, as the worker and the defendant are, by the decision of the court.  Otherwise, if you are in a position of the worker, you have to go to the employer.  Contrary to what my learned friend says, it happens every day of the week that workers compensation insurers are asked to reduce paybacks for all sorts of reasons, as Justice Giles said, and as Justice Crennan has mentioned.

I repeat, as I sit down, the fallacy the lies at the heart of my learned friend’s entire argument is that employers will not act sensibly in their own interests and co‑operate when it is proper to do so.  It is just, with respect, not the case.  If the Court needs to see that that was squarely picked up in the majority reasons of the Court of Appeal, Justice Giles did squarely say that one would not want to make too much of the question of settlement.  That is paragraph 27 of his reasons on page 46 of the application book.  His Honour squarely deals with it by pointing out the matters which have been mentioned.  Your Honours, that is our position.

FRENCH CJ:   Thank you, Mr King.  Dr Bell.

MR BELL:   Your Honours, my friend has asserted that it would be contrary to the worker’s, or the employer’s interests not to participate in a tripartite agreement, but at least in circumstances where primary liability is not in issue it is very hard to understand that submission.  By participating the employer is agreeing to a reduction in an amount which by reference to this decision of the Court of Appeal it would be entitled to in its entirety; absolutely contrary to its financial interests to participate in the tripartite agreement.

Secondly, my friend began by saying the same considerations apply in any case where you have to look at whether you settle or not, but our point is, no, there are additional considerations, the Hobson’s choice style considerations, generated by the interpretation of the statute given by the Court of Appeal which do not apply in the ordinary case, and it is passing strange that that could have been the intention of the legislature both to disadvantage the worker in that way and to discourage settlement of litigation in that way in circumstances where the legislature is concerned with the efficient use of scarce judicial resources.  That answer, or that argument, has not been addressed by my friend.

As to the practical consequences of relitigation, and what my friend said are some of the difficulties, that is a matter we have addressed in our submissions in reply at page 88, subparagraphs (b) and (c). We point to the fact that in section 151Z(1)(d) cases injured workers will generally be, need to be, a witness for the employer, even though there may be hostility there, but that again is something the Act contemplates.

Insofar as my friends attempt to distinguish the Victorian legislation, in our submission, section 69 upon which he relies is not a section which is addressed to the question of contributory negligence or any qualification on the payback. Section 69 is functionally equivalent really to section 151Z(1) of the Workers Compensation Act (NSW). It creates the primary obligation to repay, but that obligation in New South Wales is qualified by section 10(2), and I pointed out section 10(2) expressly picks up 151Z, and part of 151Z is 151Z(5) which refers to settlements as a matter of statutory construction.

All of this, including our fact situation, is bound up by the legislative contemplation. The equivalent to section 10(2) in the Victorian scheme, in our submission, is section 66 of the Workers Compensation Act 1958 (Vic) so we refute our learned friend’s argument in that respect. There is, as I put in‑chief and as I will put by way of summary, an open, available interpretation that section 10(2) by referring back to section 9 is referring not to the procedural or mechanical aspect of section 9, the determination by a court of a claim, but by reference to the substance of it, that is to say, the measure of reduction.

The words “to the same extent” in section 10(2) pick up the measure of reduction in section 9, namely, “just and equitable” and on that construction there is no inhibition whatsoever and no requirement for a worker to be placed in (a) the invidious situation a worker is placed in on this construction, and (b) the disadvantageous position either way he or she jumps.

It can be real disadvantage in the context of a badly injured worker where he may be exposed to the operation of an offer of compromise or a Calderbank offer under common law principles because he or she has refused to accept a strategically placed offer by the tortfeasor’s insurer because they have been legitimately concerned about not losing past workers compensation benefits.  That will in turn cut into the level of compensation able to be taken home, and devalue and undermine the

amount of common law compensation, thereby increasing the burden of that badly injured worker on society at the end of the day.

FRENCH CJ:   Thank you, Dr Bell.  Now, the Court is of the view that this is a case in which special leave should be granted.  A time estimate for the appeal?

MR BELL:   Your Honour, I think it took under two hours, just under two hours, in the Court of Appeal.  It certainly would not, I expect, take longer, but if one was to put a general estimate, two hours would be my estimate.

FRENCH CJ:   Mr King?

MR KING:   I do not disagree with that, half a day.

FRENCH CJ:   All right.  Thank you.

AT 12.03 PM THE MATTER WAS CONCLUDED