Jennings Constructions Pty Ltd v Workers Rehabilitation and Compensation Corporation No. Scgrg-97-339 Judgment No. 6748 Number of Pages 29 Workers' Compensation
[1998] SASC 6748
•3 July 1998
IN THE FULL COURT OF THE SUPREME COURT OF SOUTH AUSTRALIA
DOYLE CJ, PRIOR, OLSSON, NYLAND AND WILLIAMS JJ
CATCHWORDS
Workers' compensation - proceedings to obtain compensation - determination of claims - review of determination -- claim for declaratory relief - plaintiff entered into subcontract with Ceilfix to install ceilings in shopping centre redevelopment - Ceilfix entered into contract with scaffolding contract - employee ("Valkonen") of Ceilfix seriously injured in work accident and claimed damages from the plaintiff - plaintiff sought contribution from scaffolding contractor and from Ceilfix by third party claim and also alleged contributory negligence against Valkonen - damages assessed at $6 million - third party claim and contributory negligence allegation dismissed. - Plaintiff appealed to Full Court against these dismissals - Full Court apportioned contribution between the plaintiff, Ceilfix and scaffolding contractor at 10%, 30% and 60% respectively - Valkonen guilty of contributory negligence to extent of 10% and entitled to only 90% of damages.
Subcontract between plaintiff and Ceilfix contained a clause interpreted by Full Court as meaning Ceilfix was solely liable for and bound to indemnify plaintiff in respect of any liability caused by negligence of plaintiff's own employees. - Plaintiff sought declaration to the effect that WorkCover is obliged to indemnify Ceilfix against the whole of its liability to the plaintiff - further declaration sought as to quantum of WorkCover's liability - whether WorkCover is obliged to indemnify Ceilfix against the whole of its liability to the plaintiff - whether WorkCover is obliged to indemnify Ceilfix against its liability for legal costs payable to plaintiff in connection with the plaintiff's claim against Ceilfix for contribution - consideration of s105 of the Workers Rehabilitation and Compensation Act 1986. Workers Rehabilitation and Compensation Act 1986ss46,54,64,66, and 105; Wrongs Act 1936 ; Acts Interpretation Act 1915s22, referred to. The Workers Rehabilitation & Compensation Corporation v J R Engineering Service Pty Ltd and Western Mining Corporation (Olympic Dam Operations) Pty Ltd and Ball
(1995) 180 LSJS 276; Findlay v Westfield Development Corporation Ltd [1972] 1 NSWLR 422; Employers' Mutual Indemnity Association Ltd v K B Hutcherson Pty Ltd [1976] 1 NSWLR 103; Mahony v J Kruschich (1985) 156 CLR 527; Unsworth v Commissioner for Railways (1958) 101 CLR 73, applied.
ADELAIDE, 13 May 1998 (hearing), 3 July 1998 (decision)
#DATE 3:7:1998
APPEARANCES
Plaintiff:
Counsel: Mr D M Quick QC with Mr B Beazley
Solicitors: Lawson Downs
Defendants:
Counsel: Mr R White QC with Mr T Forrest
Solicitors: Rowell Forrest & Co
Order:
DOYLE CJ
The Issues
The facts upon which the issues arise are stated by Olsson J. I gratefully adopt his summary. I will use the same shorthand expressions as those used by Olsson J.
The relevant legislative provisions from the Workers Rehabilitation and Compensation Act 1986 ("the Act") are also set out in his judgment.
The first issue is whether the s105, as it now stands, is wide enough to entitle Ceilfix to be indemnified by WorkCover against Ceilfix's contractual liability to indemnify Jennings in respect of Jennings' liability to Valkonen. If it is, the question then arises of whether s105 as it now stands is applicable to the present case.
The second issue is this. When Valkonen was injured, Ceilfix was potentially liable to Valkonen only for damages for non-economic loss: s54(1)(b) of the Act. It has been agreed between the parties that such damages would have been assessed at $250,000. At that time, Ceilfix could not have been liable to Valkonen for an amount greater than that provided for by s54(4), and it is agreed that at the relevant time that amount was $101,360. The second issue raises the amount that Jennings is entitled to recover from Ceilfix under its right of contribution. Is that amount 30% of the amount that Jennings pays to Valkonen under the judgment, or 30% of $250,000 or 30% of $101,360 or some other amount?
Putting the matter that way conceals another issue. The real issue, as I apprehend it, is the amount in respect of which Ceilfix is entitled to be indemnified by WorkCover under s105 of the Act. There is, therefore, another issue. That is whether the liability of Ceilfix under the Wrongs Act to contribute to the liability of Jennings to Valkonen is a liability in respect of which Ceilfix is insured under s105 of the Act.
The Indemnity Claim
As originally enacted, and as it stood when Valkonen was injured, the insurance provided under s105 of the Act was limited to insurance against liability for non-economic loss and solatium. It is not suggested that that provision extends to Ceilfix's contractual liability to indemnify Jennings.
Accordingly, the issue is whether s105 as amended is applicable to the present case, and if it is, whether Jennings' contractual claim against Ceilfix comes within the liability insured under s105 of the Act.
It is convenient to begin with the second of these issues.
The starting point must be the natural and ordinary meaning of the words used in s105. For that purpose, s105 is to be considered in its context in the Act considered as a whole.
If s105 is "... reasonably open to more than one construction ...", then "... a construction that would promote the purpose or object of the Act ..." is to be preferred: s22Acts Interpretation Act 1915.
I will deal briefly with the statutory context.
Under the Act, WorkCover is liable to pay compensation to which a worker is entitled under the Act: s46(1). There are some exceptions to that proposition, but they can be put to one side, as can the position of an exempt employer. WorkCover maintains a fund: s54. Compensation payments are made from that fund: s64(3)(a). Employers pay levies to WorkCover, based upon the remuneration paid by them to workers, and these levies are paid into the fund: s66 and s64(2)(a).
Put simply, WorkCover is the body liable to pay compensation under the Act, and employers contribute to the fund from which the compensation is paid. Employers, other than exempt employers, are not liable to pay compensation.
The Act strictly limits the ability of a worker to claim damages for negligence from an employer. That was done by s54(1) of the Act. The limited ability to claim damages, which that provision allowed to continue, was extinguished in 1992.
Nevertheless, there was the possibility of an employer being found liable in some way not contemplated by s54(1).
Under the Act as first enacted, WorkCover was a statutory insurer in respect of the category of damages that the Act, by s54(1)(b) allowed to be claimed. That was the only insurance that it provided. WorkCover was not a provider of insurance to employers in respect of any liability at all that might arise apart from the Act.
Perhaps Parliament considered that it had extinguished any possibility of an employer being found liable. In any event, the insurance cover provided by the Act in 1986 was narrow in its scope.
By 1988 it must have become clear to Parliament that an employer might be liable for damages other than those contemplated by s54(1). It amended the Act that year. By s54(4b) Parliament moved to block the right of a person other than an employer to claim contribution from the employer to any damages for which that other person was liable in respect of a compensable disability suffered by a worker. That is the very right that Jennings and Scaffold Connection were able to exercise in the present case. By the same amending Act, Parliament also enacted provisions intended to prevent an award of damages, by a court outside South Australia exceeding the amount that would be awarded by a court sitting in South Australia. To that end it enacted ss(7a), (7b) and (7c) of s54.
It was by the same amending Act that Parliament recast s105 into its present form.
As s105 originally stood, it is clear that the Corporation was intended to provide insurance only against the liability for damages that the Act specifically contemplated. The events of 1988 disclose that Parliament realised that the employer might become liable to pay or contribute to damages in certain other ways. Whether it envisaged liabilities other than those adverted to is unknown. It was in that context that Parliament apparently broadened the coverage of the insurance provided by s105, despite the attempts that it made in the same piece of legislation to limit the liability of an employer.
I have given careful consideration to these events, but am able to draw no particular conclusion from them that assists me in dealing with the matter now under consideration. It is evident that Parliament intended to widen the scope of the insurance provided under s105, but the events to which I have referred give me no indication of the extent to which Parliament intended to go.
I therefore turn to the words used in s105. The words used are wide reaching, as was recognised by the Full Court in The Workers Rehabilitation and Compensation Corporation v J R Engineering Service Pty Ltd and Western Mining Corporation (Olympic Dam Operations) Pty Ltd and Ball (1995) 180 LSJS
276 (" J R Engineering ").
In that connection I refer in particular to the fact that the insurance is against any liability "in respect of a compensable disability". I refer to the remarks of Olsson J and Debelle J about the width of that expression.
In my opinion the words used are capable of including a liability other than a liability at the suit of a worker. For example, I consider that s105 provides insurance against a liability to contribute under the Wrongs Act to the liability incurred by another tortfeasor to pay damages to a worker who has suffered a compensable disability. The 1988 amendments brought to an end the possibility of such contribution being claimed, but I do not have any difficulty in bringing such a claim within the reach of s105. Support for that conclusion can be found in the approach taken by the Court of Appeal in Findlay v Westfield Development Corporation Ltd [1972] 1 NSWLR 422. I consider it likely that Parliament intended to provide insurance against claims of that type that had already arisen. I so conclude from the fact that in the one amendment Parliament excluded that liability for the future, but widened the scope of the statutory insurance. The purpose must have included giving protection against such claims to contribution that had already arisen.
I therefore respectfully disagree with what I consider to be a rather narrow view of the words used taken by Olsson J in J R Engineering . The relevant passage is set out in the judgment of Olsson J in the present case.
I also consider that the contractual liability to indemnify Jennings in respect of its liability to Valkonen is a "liability ... in respect of a compensable disability". The liability, while contractual, arises because of the occurrence of a compensable disability for which Jennings is liable in damages. In that respect, I respectfully disagree with the reasoning of Debelle J in J R Engineering . I do not consider the nexus between the liability and the compensable disability to be too remote for one to describe the liability as one in respect of a compensable disability.
It follows that in my opinion the words used are, in their ordinary and natural meaning, capable of applying to the present case.
Is there a basis for limiting the reach of the words used? I can draw no guidance from the objects of the Act as a whole. There is nothing about the statutory objects that enables me to discriminate, for the purposes of s105, between a contractual liability of the type to which Ceilfix is subject in the present case, and other relevant types of liability.
However, when s105 is considered in the context in which it and the Act operate, I consider that there is a good reason to restrict its scope to exclude liabilities voluntarily assumed by an employer by contract, or at least such liabilities of the type involved here.
Employers have long been liable to their workers for a failure to take proper care for their safety. A duty to take care is imposed by the law through the medium of a duty of care, and by a term implied by law into the contract of employment. The right to damages that thus arose has long been described as the worker's common law right to damages. Statutory schemes for the payment of workers' compensation have dealt in various ways with the relationship between the common law right to damages and the statutory right to workers' compensation.
It has been common for legislation to require a worker to elect between those rights or to eliminate the right to common law damages.
The Act in 1986 severely limited the damages recoverable in exercise of the common law right, and in 1992 eliminated the right of a worker to common law damages, as far as lay within the power of the Parliament of this State.
In that respect, the focus of the Act has been upon the liability of an employer (and the entitlement of a worker) to damages at common law (in the sense explained). It is generally understood that the Act has provided statutory rights in substitution for the common law rights to damages.
That being so, there is every reason to think that s54 and s105 deal with liabilities of the same type. I say "of the same type", because s105 is not, in my opinion, limited to the liability of an employer at the suit of a worker. But, in my opinion, it is restricted to a liability that is a liability at common law (in the sense explained), although that liability may be enforced by the worker or, as here, by a concurrent tortfeasor. In my opinion, there is no reason to think that when Parliament used the word "liability" in s105 it has in mind a liability of a quite different type, namely, one voluntarily assumed by an employer under a contract for the provision of services. Such a liability is not the sort of liability that the Act dealt with in s54, and there is no reason to think that it is the sort of liability dealt with by s105. While s105 is not in any sense a mirror provision to s54, I consider that it is intended to deal with a liability of the same sort as that dealt with by s54. This approach was taken by Yeldham J in Employers' Mutual Indemnity Association Ltd v K B Hutcherson Pty Ltd [1976] 1 NSWLR 103 at 106.
I acknowledge that the reference to "any liability" in s105 is capable of being read more widely than that. But I consider that the narrower reading promotes the purpose or object of this aspect of the Act - the removal or limitation of an employer's common law liability, the conferral of statutory rights to compensation, and the establishment of WorkCover as the source of statutory payments and as the insurer of employers against common law liabilities.
There are two other matters that provide some support, albeit not great, for my conclusion.
I consider that the reference in s105 to "any liability that may arise" suggests that the drafter had in mind a liability imposed by the law, and not a liability voluntarily assumed by contract. In my opinion a contractual liability, or at least a liability under an express term of a contract, would not usually or readily be described as a liability arising.
As well, it would be surprising if Parliament intended to expose the fund to liabilities voluntarily assumed by employers. These are liabilities over which WorkCover would have little control. The power that s105 gives to impose "terms and conditions" could be used to provide some protection, but I doubt whether that provision could be used to exclude liability for voluntarily assumed liabilities. There is also a doubt about the ability of WorkCover to use the statutory levy to impose an appropriate charge in respect of such liabilities.
For that reason, in my opinion, s105 should be interpreted as not applying to a claim for indemnity pursuant to a voluntarily assumed contractual obligation. Although I have not applied the reasoning used by Olsson J and Debelle J in J R Engineering , I agree with their general approach to s105.
It is not necessary to decide just what is embraced by the expression "any liability" in s105. It needs to be recognised that there is some remaining uncertainty about the meaning of that expression. Absent some clarification by Parliament, employers need to consider their need for insurance against liabilities to which they might be exposed.
In case I am wrong on that, and because of its relevance to the claim to contribution, I turn to the issue of whether s105 as amended can apply to the present case. When s105 was amended, Valkonen had already suffered his injury. However, his claim for damages had not been instituted, and the judgment against Jennings, and the judgment obtained by Jennings against Ceilfix were both obtained after s105 was amended. Can it be said that the liability of Ceilfix had already arisen when s105 was amended, and that therefore s105 does not apply to the liability? Alternatively, is it the case that the liability of Ceilfix did not arise until the judgment was entered against it, and that accordingly the liability arose after the amendment was enacted?
I express the issue that way because, applying the ordinary principles of statutory construction, one would not expect s105 as amended to apply to liabilities that had already arisen when it was enacted.
I agree with Olsson J that s105 as amended should not be read as restricted to a liability in respect of a compensable disability that is suffered after the enactment of the amendment. I consider that the events of 1988 suggest that Parliament recognised that an employer might be liable for damages other than those contemplated by s54(1), moved to protect an employer as best it could from that liability, in the future, but recognised that its attempt might not succeed, and accordingly broadened the scope of the statutory insurance. Parliament must have had in mind existing and future liabilities of the kind with which it dealt. Employers were at risk in both respects. I think it likely that Parliament intended to provide insurance for an employer against a liability in respect of a compensable disability that had already occurred, as well as in respect of a compensable disability yet to occur. I think that Parliament identified a gap in the legislative scheme of limited liability in damages, and statutory insurance against that liability, and that the 1988 amendment was an attempt to close the "liability gap" for the future while at the same time extending the statutory insurance to cover the "liability gap" for the past and for the future.
Having so concluded, it is necessary to consider whether s105 as amended applies to a liability that arose before it was enacted, or merely to a liability that arose after it was enacted. I have just explained why I consider it likely that Parliament intended to provide that the statutory insurance would be in respect of a compensable disability that had already occurred and in respect of a compensable disability yet to occur.
It is a small step from there to conclude that s105 applies to a liability on the part of a employer that had arisen when s105 was amended, in the sense that the facts had already occurred upon which the relevant liability of the employer would be determined.
While the application of the presumption against giving retrospective operation to a legislative provision would suggest that s105 did not provide insurance in respect of a liability that had already arisen, in the particular context in which s105 was enacted I consider that that presumption is rebutted. I say that because I consider that the context is one in which Parliament had identified means of making employers liable in damages for which it had not provided by s54(1), had moved to close off those means or some of them, and had at the same time expanded the scope of the insurance provided. If, in doing so, Parliament provided protection to an employer only in respect of a liability to arise in the future, there would be a number of employers left exposed and uninsured in respect of liabilities that had already arisen. I consider it unlikely that that is what Parliament intended. I consider that the presumption against giving a retrospective operation to s105 is, in this respect, rebutted.
Accordingly, it is not necessary for me to express a final view upon the submission by counsel for Jennings to the effect that the liability of WorkCover to indemnify Ceilfix did not arise until after the enactment of s105. Olsson J has referred in his judgment to that submission. I consider that the submission may well be correct. But, as I have already said, I do not need to express a final view upon it.
For the reasons that I have indicated I would declare that Ceilfix is not entitled to be indemnified by WorkCover in respect of Jennings' claim to indemnity under the contract between Ceilfix and Jennings.
The contribution claim
It follows from what I have already said that Ceilfix's liability to contribute to the damages payable by Jennings to Valkonen is a liability to which s105 applies.
The next issue that arises is the amount payable by Ceilfix to Jennings.
It was not disputed before us that there is a problem with the order made by the previous Full Court. As Ceilfix was a third party, the position of Ceilfix could not be dealt with as if it were a defendant liable to contribute in respect of the liability of another defendant to the plaintiff. Moreover, the Full Court order appears to pay no attention to the limit that the Act places on Ceilfix's potential liability. The parties, including counsel for Ceilfix, who appeared briefly when the appeal was called on for hearing, were agreed that it would be necessary to apply to have the order of the previous Full Court varied in some way to deal with the amount of the contribution payable by Ceilfix. For present purposes I will assume that that can be done and will be done.
Nevertheless, the parties invited us to deal with the issue of the amount that Ceilfix might be required to pay to Jennings pursuant to an order made under s25 of the Wrongs Act .
When Valkonen was injured, Ceilfix was, under the Act as it then stood, able to be held liable in damages for injury to Valkonen, but only in respect of damages for non-economic loss. The maximum amount for which Ceilfix could have been found liable was $101,360: see s54(4) as it then stood.
Jennings was entitled to contribution from Ceilfix, even though Ceilfix could be found liable only for non-economic loss caused to Valkonen, whereas Jennings was liable for all foreseeable consequences (sounding in damages) of the injury caused to Valkonen. That is so because each of them is liable for the same damage (the injury caused to Valkonen), despite the fact that their liability in damages differs because Ceilfix is liable for some only of the damages for which Jennings is liable: see Mahony v J Kruschich (1985) 156 CLR
522 at 527.
The next issue is the effect, upon the claim to contribution, of the limit imposed on Ceilfix's liability by s54(4) as it originally stood.
In Unsworth v Commissioner for Railways (1958) 101 CLR 73, the High Court dealt with the liability of tortfeasor to contribute to damages payable by another tortfeasor, when the amount of damages that the first mentioned tortfeasor might have been liable to pay to the plaintiff was the subject of a statutory limit. The effect of the High Court's decision was that the contributing tortfeasor could not be made liable to contribute an amount greater than the amount of the statutory limit upon that tortfeasor's liability to the plaintiff: see Fullagar J at 87, Taylor J at 93. That authority, of course, binds this Court.
The reasoning of the majority was based upon the effect of a statutory provision that is relevantly indistinguishable from s25 and s26 of the Wrongs Act .
It follows, in my opinion, that Ceilfix cannot be made liable to contribute to Jennings an amount greater than $101,360, being the maximum amount of damages for which Ceilfix might have been liable to Valkonen.
The next issue is the amount which is to be taken as the amount to which is applied the percentage of the damages that Ceilfix must contribute. For present purposes I will treat the percentage as being 30%. I have already noted that the percentage may ultimately be a different percentage.
In my opinion the relevant percentage is to be applied to the damages payable by Jennings for non-economic loss. Ceilfix was potentially liable for that same amount, subject to the operation of the statutory maximum. If Valkonen had sued Ceilfix, his damages would have been assessed in the usual way, and any deduction for contributory negligence would then have been made, and only then would the statutory maximum have operated. In my opinion Ceilfix is liable to contribute 30% (or such other percentage as may later be fixed) of $225,000 (the amount payable for non-economic loss after allowance for contributory negligence). That amount is $67,500.
As the amount of $67,500 is less than the statutory maximum, that amount is recoverable by Jennings.
Ceilfix claims that any amount that it is liable to contribute to the damages payable by Jennings to Valkonen should be reduced by the amount of the lump sum paid by WorkCover to Valkonen pursuant to s43 of the Act. That lump sum was $70,100. Ceilfix makes this claim relying upon s54(3) of the Act.
I consider that the short answer to that submission is that WorkCover is entitled to recover the amount of compensation paid by it from the damages payable to Valkonen. WorkCover may recover that amount from Jennings or from Valkonen: s54(7). Accordingly, even if s54(3) applies to the situation before the Court, the making of "due allowance" for the payment made does not require any deduction, because WorkCover is entitled to recoup the payment made from another source.
The order for costs
By a supplementary written submission Jennings has sought from this Court a determination of the liability of WorkCover to indemnify Ceilfix in respect of its liability to Jennings for costs pursuant to the order of the Full Court.
I agree with Williams J that the insurance provided by s105 extends to a liability for legal costs insured in connection with a claim against Ceilfix for a payment in respect of which it is insured under s105. It follows that Ceilfix is entitled to be indemnified in respect of the costs payable to Jennings in connection with the claim by Jennings for contribution under the Wrongs Act .
I would declare accordingly. Beyond that the Court cannot go, because it is not in a position to determine the amount of those costs.
Conclusions
The claim by Jennings for a declaration that WorkCover is obliged to indemnify Ceilfix against the whole of its liability to Jennings should be rejected.
A declaration should be made that WorkCover is obliged to indemnify Ceilfix against its liability for legal costs payable to Jennings in connection with Jennings' claim against Ceilfix for contribution.
A declaration should be made that WorkCover is obliged to indemnify Ceilfix against its liability to contribute to the damages payable by Jennings to Valkonen, and that the amount of that indemnity cannot exceed $101,360. It is not appropriate to declare that the amount payable by Ceilfix to Jennings is $67,500, because to do so would be in conflict with the Full Court order as it presently stands.
PRIOR J
I agree with the Chief Justice that s105 should be interpreted as not applying to a claim for indemnity pursuant to a voluntarily assumed contractual obligation for the reasons he has given.
I also agree with him that s105, as amended, applies to the present case and that the section is not restricted to a liability in respect of a compensable disability suffered after the enactment of the amendment. The section applies to a liability on the part of an employer that had arisen when s105 was amended, in the sense that the facts had already occurred upon which the relevant liability of the employer would be determined. The presumption against giving retrospective operation to s105 is rebutted for the reasons given by the Chief Justice.
Ceilfix is not entitled to be indemnified by WorkCover in respect of Jenning's claim to indemnity under the contract between Ceilfix and Jennings.
As for the amount payable by Ceilfix to Jennings, I agree with the declaration proposed by the Chief Justice for the reasons he gives. I also agree that there should be a declaration that WorkCover must indemnify Ceilfix against its liability for legal costs payable to Jennings in connection with Jenning's claim against Ceilfix for contribution. I agree with what Williams J says about that. This Court is not able to determine the amount of those costs.
OLSSON J
By order dated 26 June 1997 all issues raised on the pleadings in these proceedings have been referred to the Full Court for hearing and determination. This is because no relevant issue arises as to the facts and the sole remedy claimed is for declaratory relief arising on those facts. In essence the plaintiff seeks a reconsideration, by this specially constituted Full Court, of the decision of a previous Full Court in The Workers Rehabilitation and Compensation Corporation v J R Engineering Services Pty Ltd and Western Mining Corporation (Olympic Dam Operations) Pty Ltd and Ball
(1995) 180 LSJS 276 (" J R Engineering ").
In addressing the issues debated before this Court it is convenient to refer to various persons or entities by means of the shorthand expressions employed by the parties in the pleadings. Accordingly, I will refer to the plaintiff as "Jennings", the defendant as "WorkCover", a company J A Ceilfix Pty Ltd as "Ceilfix", a worker named Aki Valkonen as "Valkonen", and a company The Scaffold Connection Pty Ltd as "Scaffold Connection".
The relevant facts are of simple compass.
On or about 27 April 1988 Ceilfix employed Valkonen, who was a working director of it, as a ceiling installer. As at that date WorkCover was the insurer of Ceilfix in terms of section 105 of the Workers Rehabilitation and Compensation Act, 1986 ("the Act").
On 1 July 1987 Ceilfix entered into a sub contract with Jennings, pursuant to which it agreed to supply and install ceilings, metal steel partitions and plasterboard in connection with construction work being carried out by the latter at the Burnside Village Shopping Centre re-development.
For the purposes of the sub contract it was necessary for scaffolding to be erected on site, so that Ceilfix employees could be raised from the ground to the correct height for installing a suspended ceiling in a newly constructed building. In April 1988, Ceilfix entered into a contract with Scaffold Connection for the supply and erection of portable scaffolding at the worksite.
The requisite scaffolding was thereafter provided by Scaffold Connection on site.
At about 3.00pm on 27 April 1988, Valkonen, together with others, was working on a platform mounted on the scaffolding, reaching up to install the ceiling of the building under construction. A guard rail around the platform (which was an integral portion of the scaffolding) was not properly secured to the uprights holding it. In the course of his work activity Valkonen stumbled, slipped or leant against the guard rail. It gave way. He fell to the ground and was seriously injured.
In action 681 of 1991 in this court, commenced on 22 March 1991, Valkonen and his wife claimed damages in respect of his injuries and loss arising from them from Jennings and Scaffold Connection. In the course of that action Jennings sought contribution and indemnity from Ceilfix, by a third party claim. Jennings and Scaffold Connection sought contribution from each other.
At trial both Jennings and Scaffold Connection were held liable to pay the plaintiffs' damages, which were later assessed in a sum in excess of $6 million. Contribution was apportioned between them. The third party claim against Ceilfix was dismissed, as was an allegation of contributory negligence against Valkonen.
Jennings appealed to the Full Court against that dismissal and also as to the issue of contributory negligence.
On 29 November 1995 the Full Court held that:-
. Ceilfix had been negligent in relation to its employee Valkonen;
. By reason of the terms of the sub contract between Jennings and Ceilfix, Ceilfix was required to indemnify Jennings in respect of its liability to the Valkonens for damages and costs;
. Jennings, Scaffold Connection and Ceilfix -
- were each negligent in relation to Valkonen's injuries,
- were liable to contribute as between themselves, pursuant to the Wrongs Act, 1936 to the damages payable to the Valkonens in the following proportions:-
Jennings 10%
Ceilfix 30%
Scaffold Connections 60%
It is to be noted that, in terms, the order of the Full Court seems to have treated all three as joint tort feasor defendants. As already appears Ceilfix was not a defendant but a third party. It may well be that the form of the order as sealed and entered requires some further alteration as to its form, to recognise that situation.
- Valkonen was guilty of contributory negligence to the extent of 10% and was thus entitled to recover from Jennings and Scaffold Connections only 90% of his damages to be assessed.
An order was also made requiring Ceilfix to bear a proportion of the costs of trial and Jennings' costs of appeal.
It is to be noted that the foregoing litigation went forward against the background that the sub contract entered into between Jennings and Ceilfix contained a Clause 8, which read as follows:-
"INSURANCE:
(a) Workers' Compensation - The Sub-Contractor shall insure against any liability, loss, claim or proceeding, to or by or in respect of any person employed or engaged by the Sub-Contractor in connection with the Sub-Contract works or for whom the Sub-Contractor can be held in any way liable or responsible whether arising under any Act relating to Workers' Compensation or Employers' Liability or at Common Law.
(b) Public Liability - The Sub-Contractor shall be solely liable for and shall indemnify the Builder in respect of and shall insure against any liability, loss, claim or proceedings whatsoever arising under any statute (other than as provided in (a)) or at Common Law in respect of or in connection with the death of or injury to any person, or any loss of or damage to any property arising out of or in any way connected with or caused by the execution of the Sub-Contract works. Such insurance shall be for the amount (if any) specified in the Head Contract or if no amount is specified then for such amount as may be requested by the Builder.
(c) Contractors All Risks - The Sub-Contractor shall insure against all other risks in respect of which the Builder is obliged to insure under the Head Contract and in particular he shall take out a Contractors All Risks policy which shall cover (inter alia) the whole of the Sub-Contract works and any extensions there to to the extent of their full value.
(d) Proof that such Insurances have been effected shall be furnished to the Builder prior to the commencement of the Sub-Contract works and the Sub-Contractor shall not be entitled to receive the first progress payment until such proof has been furnished."
The Full Court interpreted that clause as meaning that Ceilfix was solely liable for and bound to indemnify Jennings, inter alia, in respect of any liability caused by the negligence of Jennings' own employees.
In light of the foregoing situation Jennings now seeks a declaration to the effect that, on a proper construction of section 105 of the Act, WorkCover is bound to insure and indemnify Ceilfix against the whole of its liability to Jennings, as determined by the Full Court. It further seeks a declaration as to the actual quantum of WorkCover's liability to indemnify Ceilfix in relation to the degree of contribution ordered against it.
Those declarations are sought against the background that it is pleaded that:-
(a) WorkCover is said to have admitted liability to indemnify Ceilfix up to a capped limit in respect of its liability as a joint tort feasor pursuant to the Wrongs Act to the extent of 30% of 90% of the damages awarded to Valkonen for non economic loss, but has denied liability:-
. further to indemnify Ceilfix for its liability as a joint tort feasor; and
. in respect of the contractual liability of Ceilfix to indemnify Jennings; and
(b) Ceilfix cannot discharge its liability to Jennings without recourse to the asserted indemnity arising under section 105.
By its defence filed in these proceedings WorkCover contends that its statutory liability to indemnify Ceilfix does not extend beyond damages for non economic loss within section 54(1)(b) of the Act, subject to the provisions of subsections (3) and (4) of that section. It takes the position that the contractual liability of Ceilfix to indemnify Jennings is not a liability in respect of the relevant compensable disability suffered by Valkonen for the purposes of section 105 of the Act; and that the insurance cover provided under section 105 does not indemnify Ceilfix against its contractual liability to Jennings.
It follows that there is a potential need to revisit the issues already decided in J R Engineering . In that case the Full Court unanimously held that the section 105 insurance cover does not extend to a liability flowing from contractual relationships entered into between an employer and a third party, albeit that the triggering mechanism for that liability may have been a claim against the third party arising from a disability which happened to be compensable under the Act, because it occurred in the course of relevant employment.
As at the time of Valkonen's accident (namely 27 April 1988), section 105 of the Act was expressed as under:-
"105. A registered employer (not being an exempt employer) is insured by the Corporation, subject to terms and conditions prescribed by regulation, against any liability that may arise apart from this Act for non-economic loss or solatium in respect of compensable disabilities arising from employment (being employment to which this Act applies) by the registered employer."
At that date the relevant provisions of section 54 provided as follows:-
54. (1) Subject to subsection (2), no liability attaches to an employer in respect of a compensable disability arising from employment by that employer except--
(a) a liability under this Act;
or
(b) a liability at common law for non-economic loss or solatium.
(2) Subsection (1) does not affect a liability arising out of the use of a motor vehicle, being a liability against which the employer was or ought to have been insured under the law of compulsory third-party motor vehicle insurance.
(3) A court before which an action is brought against an employer for non-economic loss arising from a compensable disability shall make due allowance for any lump sum paid or payable under Division V or VI to the person by or on whose behalf the action is brought.
(4) Where an action is brought at common law against an employer for damages for non-economic loss arising from a compensable disability (not being a disability that arises out of the use of a motor vehicle and gives rise to a liability of a kind referred to in subsection (2)), the damages awarded in respect of that loss must not exceed 1.4 times the prescribed sum.
(5) Where--
(a) compensation is paid or payable under this Act in respect of a compensable disability;
(b) a right of action exists against a person other than the employer for damages in respect of the disability,
the person by whom the compensation is paid or payable is entitled to recover from that other person the amount of the compensation in accordance with subsection (7).
(6) ...
(7) Where--
(a) compensation is paid or payable to a person ("the injured party") under this Act;
(b) the injured party has received, or is entitled to, damages from another person ("the wrongdoer") in pursuance of rights arising from the same trauma as gave rise to the rights to compensation under this Act;
(c) the person by whom the compensation is paid or payable under this Act ("the claimant") is entitled to recover the amount of the compensation by virtue of subsection (5) or (6),
then the following provisions apply:
(d) the claimant is entitled to recover the amount of compensation paid or payable under this Act from the wrongdoer or the injured party but subject to the following qualifications:
(i) no amount may be recovered from the wrongdoer in excess of the wrongdoer's unsatisfied liability to the injured party;
(ii) the claimant must exhaust its rights against the wrongdoer before recovering against the injured party;
and
(iii) no amount may be recovered from the injured party in excess of the amount of the damages received by the injured party;
(e) the claimant shall, on giving notice to a wrongdoer of an entitlement to recover compensation under this section, have a first charge, to the extent of the entitlement, on damages payable by the wrongdoer to the injured party;
(f) any amount recovered by the claimant against a wrongdoer under this subsection shall be deemed to be an amount paid in or towards satisfaction of the wrongdoer's liability to the injured party;
(g) an action for the recovery of compensation under this subsection--
(i) may be heard and determined by the Industrial Court;
and
(ii) must be commenced within 3 years after the date of the trauma referred to in paragraph (b).
(8) In this section--
'damages' includes any form of compensation payable apart from this Act in respect of a compensable disability:
'employer' includes--
(a) any person for whose torts an employer is vicariously liable;
(b) any person who is vicariously liable for the torts of an employer:
'the law of compulsory third-party motor vehicle insurance' means--
(a) Part IV of the Motor Vehicles Act, 1959 (including a policy of insurance under that Part);
or
(b) the law of another State or a Territory of the Commonwealth that corresponds to Part IV of the Motor Vehicles Act, 1959 (including a policy of insurance under such a law):
'prescribed sum' means the amount that, at the time of the occurrence of the disability that gave rise to a liability at common law for non-economic loss, was the prescribed sum for the purposes of Division V. "
It is to be noted that both of those sections were amended with effect from 17 October 1988, i.e. subsequent to Valkonen's accident.
Thereafter section 105 stipulated that:-
""Insurance of registered employers against other liabilities"
105. An employer who is registered under this act (not being an exempt employer), and any employer who is not required to be registered because of an exemption under the regulations, is insured by the Corporation, subject to terms and conditions prescribed by regulation, against any liability that may arise apart from this Act in respect of a compensable disability arising from employment (being employment to which this Act applies) by the employer."
Various amendments were also made to section 54. Inter alia, this operated to bar rights of action against co-workers. It also stipulated that:-
"(4b) Where--
(a) a worker suffers a compensable disability (not being a disability that arises out of the use of a motor vehicle and gives rise to a liability of a kind referred to in subsection (2));
and
(b) action is taken against a person other than the employer for damages in respect of the disability,
the other person has no right to recover contribution from the employer."
It will be seen that the two amending provisions operated, on the one hand, to remove any liability of an employer to contribute to liability of a third party to a worker in respect of compensable disability and, on the other hand, extended the statutory insurance cover of an employer to any liability arising in respect of that disability.
For the purposes of the present proceedings it is agreed between the parties that:-
(1) the "prescribed sum" referred to in section 54(4) of the Act with respect to injuries occurring on 27 April 1988 was $72,400. (The application of the factor of 1.4 to that sum produces a figure of $101,360); and
(2) the sum of $250,000 was agreed by the parties, at time of final settlement of the claim by Valkonen as the amount that Valkonen would, before deduction for contributory negligence, have received by way of damages for non-economic loss, had his assessment of damages proceeded to trial.
Before I turn to the issues in this matter I pause to note, for the sake of completeness, that, in 1992, section 54(1) was further amended by deleting sub paragraph (b). The situation thereafter remained that it was no longer possible to pursue any claim for common law damages against an employer in relation to a disability of an employee which was compensable under the Act.
It is also to be noted that there have not, at any material time, been any relevant terms and conditions prescribed by regulation, which arise for consideration in relation to section 105.
J R Engineering focused on a compensable disability situation which arose on 24 April 1990. That is to say, it was concerned with the legislation as it stood following the 1988 amendment, i.e. the insurance cover then extended to any liability in respect of a relevant compensable disability: and not merely for non-economic loss or solatium.
However, in each instance, the loss in question was that " in respect of " the compensable disability under consideration.
In J R Engineering I expressed the view that:-
"As was stressed by Mann CJ in The Trustees Executors & Agency Co Ltd v Reilly [1941] VLR 110 at 111, the phrase 'in respect of' has a very wide connotation, which necessarily conveys some connection or relation between two subject matters.
That approach is consistent with what fell from the High Court in Technical Products Pty Ltd v State Government Insurance Office (Queensland) (1989) 167 CLR 45 at 47, where it was pointed out that the phrase 'in respect of' has a very wide meaning and possesses a chameleon-like quality, in that it commonly reflects the context in which it appears. It is not, it was said, susceptible of precise definition, but it implies a nexus in the sense of some discernible and rational link between the two subject matters in question. (See also Fraser v The South East Queensland Electricity Board [1992] 1 Qd R 508.) in McDowell v Baker (1979) 144 CLR 413 at 419 it was also commented that such a phrase has "the widest possible meaning of any expression intended to convey some connection or relation between two subject-matters to which the words refer". As was pointed out in Allingham v Redlands Returned Services Leagues Services Club [1988] 2 Qd R 593 at 596 it does not import any closer or causal connection than that where the phrase appears in the context 'in respect of such injury'.
However, at the end of the day, the exact width of the expression will very much depend on the precise context in which it appears and a consideration of the purpose or object underlying the relevant legislation (Butler v Johnston, Guild and Somes (1984) 55 ALR 265 at 268).
There must, then, be a discernible or rational link, for the purposes of section 54, between a relevant disability and the liability said to attach to it. In the instant case what is in issue is a commercial contractual liability between two parties - other than the party actually sustaining a compensable disability - which is in fact "in respect of" loss or damage sustained by WMC as a consequence of personal injury to Ball. Moreover, if the Corporation is liable, by virtue of section 105 of the Compensation Act, as an insurer, to indemnify JRE in respect of sums which it is contractually bound to pay WMC, then, as Mr White so forcefully put it, such liability is a consequence of the statute operating according to its own terms; and not from any modification or restriction of the operation of it. The Corporation is, in the circumstances, merely being called upon to honour its statutory obligation as an insurer.
"..."
For reasons which I have already expressed, section 105 clearly spans a width of potential damages wider than that for which an employer is bound to pay compensation, as delineated by section 54. The touchstone is that the liability for damages must arise "in respect of" a relevant compensable disability - that is to say, there must be a discernible and rational link between the disability and the liability.
The problem which arises in that regard, in the instant case, is that section 105 is, in my view, concerning itself with a liability directly incurred by an employer in relation to an injured employee who has sustained a compensable disability, whereas what is here in issue is a liability flowing from contractual relationships entered into between the employer and a third party, albeit that the "triggering" mechanism for that liability was a claim against the third party - which arose from a disability which happened to be compensable under the Compensation Act, because it occurred in the course of Ball's employment. In my opinion, when section 105 spoke of "liability ... in respect of a compensable disability arising from the employment" it was not directing attention to such a tenuous link - so far as the operation of that section was concerned."
In the course of his reasons expressed in the same case, Debelle J commented:-
"... The words "in respect of" have the widest possible meaning of any expression intended to convey some connection or relation between the two subject matters to which the words refer: Trustees Executors & Agency Co Ltd v Reilly [1941] VR 110, 111; McDowell v Baker (1979) 144 CLR 413, 419. Other decisions which point to the very wide import of the phrase include Genders v GIO of NSW (1959) 102 CLR 363, 387, Thiess Bros Pty Ltd v NZ Insurance Co Ltd (1965) 13 FLR 3, 6; and Club Motor Insurance Agency Pty Ltd v Sargent (1969) 118 CLR 658. But there must nevertheless be a connection or relationship between the two matters to which the words refer; they do not extend to any relationship, however tenuous: Technical Products Pty Ltd v State Government Insurance Office (Q) (1989) 167 CLR 45, 47, 51. The width with which s105 is expressed may have unintended consequences. These need not be examined now. It is sufficient for the purpose of this appeal to consider whether the contractual indemnity falls within its terms. The liability of JRE to indemnify did not arise in respect of a compensable disability but under the agreement to indemnify. Although the liability to indemnify under the agreement may be triggered by the fact that a worker has suffered a compensable disability, it is not the compensable disability which gives rise to the liability of JRE but the agreement to indemnify. The nexus between the liability to indemnity and a compensable desirability is too indirect to qualify as a liability "in respect of a compensable disability". JRE is not, therefore, entitled to be indemnified by the Corporation in respect of its liability to WMC."
In the context of that case (which also focused on a provision for indemnity in a sub contracting agreement), both he and I concluded that section 105 was inapplicable, because the relevant liability to indemnify did not arise " in respect of " a compensable disability, but under the sub contracting agreement between the employer and its principal. We were both of opinion that, although the liability to indemnify may have been triggered by the occurrence of a compensable disability, it was not the causation of the compensable disability, per se, which gave rise to the liability, but the agreement to indemnify - the nexus between the liability to indemnify and the compensable disability - was simply too tenuous and indirect to attract categorisation as a liability " in respect of " a compensable disability. To express the situation in another way, it was the unanimous view of the members of the Full Court in J R Engineering that section 105 focused on any liability imposed by law but did not extend, in its operation, to liability voluntarily assumed by the relevant party on a contractual basis.
Jennings sought to challenge the validity of that process of reasoning. It asserted that the 1988 version of section 105 was applicable in the instant circumstances and that the phrase "any liability" employed in it, literally, meant exactly what it said.
However, before examining the issues raised by Jennings, it is first necessary to identify which version of section 105 is applicable to this case. Prima facie, one commences with the assumption that section 105, in the form in which it stood as at 27 April 1988, is that which was applicable. However, Mr Quick QC, of senior counsel for Jennings, contended that this was not so.
He argued that, even although the 1988 amendment of that section wrought changes to the substantive law, nevertheless it was intended to operate retrospectively. He asserted that this was so, notwithstanding the absence of any transitional clause to that effect.
That contention was based on the proposition that, manifestly, the section could not operate in relation to future liabilities, because the 1988 amendment to the Act varied the provisions of section 54 so as to exclude all possible liability of an employer to contribute in relation to claims by the injured worker against third parties - the employer's only liability was that adverted to in subsections (1) and (4) of section 54. He submitted that the new version of section 105 was obviously intended to operate retrospectively, because it would otherwise have little or no work to do. It was, he argued, specifically intended to target the many areas of contractual liability which existed in various industries, in relation to which no insurance existed unless a special cover was taken out in each instance. He was driven to contend that, on his argument, the amended section necessarily operated in relation to situations extending back to the commencement of the principal Act in 1986 - specifically claims for contribution and under policies arising in the 1986-8 period.
In my view this contention cannot be accepted.
The general rule is that an amending enactment is, prima facie, to be construed as having a prospective operation only. That is to say, it is, prima facie, to be construed as not attaching new legal consequences to facts and events which occurred before its commencement. ( Fisher v Hebburn Ltd (1960) 105 CLR 188 at 194, Geraldton Building Co Pty Ltd v May (1977) 13 ALR 17.)
As Mr White QC, of senior counsel for WorkCover, pointed out, it is simply not accurate to say that, absent an intention that it operate retrospectively, the amended section 105 would have no work to do. As he demonstrated, there were, in fact, situations of concern at the time which the scheme of amendments made in 1988 clearly attempted to address; and to which the amended section 105 had prospective application. The amending legislation certainly constituted an attempt to provide indemnity to employers in relation to two classes of potential liability which it could not, constitutionally, prohibit; and which had actually surfaced at about that time. These were liabilities of employers to workers arising from extra territorial judicial decisions and also possible liabilities stemming from then current attempts to utilise section 52 of the Trade Practices Act , 1974 (Cth) to found an alternative cause of action available to injured workers. As Mr White QC stressed, it is not without significance that the Wrongs Act was amended at the same time as sections 54 and 105, specifically in relation to liabilities generated by extra territorial decisions.
The reason propounded by Mr Quick QC is not attractive because, inevitably, it leads to a most unlikely conclusion that, although the 1988 amendments to sections 54 and 105 were part of an integrated legislative package, they actually, or potentially, had differing foci in terms of prospective or retrospective operation. Such a conclusion could only, logically, be founded on the clearest legislative expression of such an intention, which is nowhere to be perceived in the statute.
I am, therefore, unable to conclude that the 1988 version of section 105 had other than a prospective operation. There is simply no clear indication in the legislation to the contrary. This means that the fundamental basis of Jennings' case based on retrospective operation falls to the ground. The insurance cover upon which he relies simply does not exist on that basis. Under the pre-existing format of section 105 Ceilfix was simply insured against " any liability that may arise apart from ... [the Act] ... for, non-economic loss or solatium in respect of compensable disabilities " arising from the relevant employment. That cover is, of course, limited as to quantum by virtue of the operation of subsections (1), (3) and (4) of section 54, as they then stood.
I understood Mr Quick QC to advance an alternative argument that, if section 105 was prospective in operation, nevertheless it still applied to a situation such as that now before this Court.
He first drew attention to the well established principle of insurance law that, although a person who is in breach of a duty to another recognised by law becomes liable as soon as the cause of action arises, the liability which must be indemnified by an insurer comes into existence only when it is established by a judgment of the court, award of an arbitrator or agreement by way of compromise. It does not, for example, arise when a claim is made, simply by virtue of the making of the claim. ( Commercial Union Assurance Co of Australia Ltd v Insurance Commission [1980] VR 443.)
I took him to reason that, in the instant case, because the liability of Ceilfix was a direct contractual liability to Jennings which did not crystallise in money terms until judgment was given by the Full Court in 1995, then no issue of liability either of it or the WorkCover as statutory insurer arose until that time, when the amendment to section 105 was operative. That section was therefore relevant to the situation.
His argument rests on the proposition that the liability said to have crystallised under the sub contract documentation is to be equated with the liability of WorkCover as statutory insurer under the amended section 105 for the purposes of attracting operation of section 105.
It must be borne in mind that:-
(1) Valkonen originally sued Jennings and Scaffold Connection.
(2) Jennings initiated third party proceedings against Ceilfix seeking both contribution under the Wrongs Act and indemnity under the sub contract.
(3) The Full Court eventually upheld both bases of claim against Ceilfix.
It is to be noted that all of the rights and liabilities of those parties, inter se, arose directly from the accident of 27 April 1988 and were fixed as of that date. The contractual arrangement between Jennings and Ceilfix, in terms, saddled the latter, at all times, with "sole liability in respect of or in connection with the death of or injury to any person forthwith upon the occurrence of such an event " - it was not dependent on any subsequent adjudication of a court in that regard.
By virtue of section 105 of the Act, as it stood at date of injury, the insurance cover conferred on Ceilfix was against any liability which might arise apart from the Act for non-economic loss or solatium in respect of a compensable disability to which that section applied, i.e. a compensable disability which occurred during the operation of the section.
The argument against Mr Quick's contention must be that a prospective operation of the amended section 105 of the Act mandates that the liability in question must be one which not only achieves quantification post 17 October 1988, but which also derives from a compensable disability which occurred after that date, i.e. that the whole focus of the statute is on liability stemming from a compensable disability and it is not to be supposed that the new section was intended to extend back in its operation to the sequelae of past disabilities whenever they may have occurred. That would be to confer on it a form of retrospective operation which is not warranted on a proper construction of the amendment - one which could give rise to a massive, unknown contingent liability never envisaged or funded.
On the other hand, if Mr Quick's contention is not to prevail, then a very significant lacuna would arise in relation to liabilities which did not crystallise until after the amendment of section 105, but which arose from injuries sustained at a much earlier point in time. This could operate to bar claims on a basis which could operate very unfairly. As the liability did not crystallise until the order of the Full Court made after the 1988 amendment then any s105 insurance liability arose at that time.
It seems to me that, although either approach has problems attendant upon it, that for which Mr Quick QC contends better seems to accord with the scheme and spirit of the legislation.
If I am correct in the foregoing conclusion then the issue dealt with in J R Engineering necessarily arises for re-consideration.
In addressing it there is a need to give due weight, not only to the overall, integrated scheme of the legislation, but also to the precise language used in the amended section. An overarching requirement is, of course, to give due cognizance to the principle expressed in Bull v Attorney-General for New South Wales (1913) 17 CLR 370 at 384. The statute, being a remedial Act, should be construed so as to give the fullest relief which the fair meaning of its language will allow.
So it was, Mr Quick QC said, that the phrase " any liability " means exactly what it says.
However, this appears to me to be very much an over simplistic approach.
The key verbiage of the section is to the effect that an employer is insured "... against any liability that may arise apart from this Act in respect of a compensable disability arising from the employment ".
It must be conceded that, on a literal reading of the phrase " any liability ", divorced from its context, those words are capable of extending to any liability whatsoever, including for example, a contractual liability such as that presently under consideration.
But due regard must be had to the context in which they appear, including the overall, integrated scheme of the Act.
As to these aspects Mr White QC made the following points:-
. In assessing the probable intention of the legislature it is important to bear in mind that the Act directs its attention to the erection and maintenance of a funded scheme of compensation. The present contention of Jennings does not fit comfortably with that concept, because it necessarily opens a potential Pandora's Box of diverse unfunded liabilities, the scope of which cannot be foreseen, because they are the product of a range of uncontrolled contractual liabilities of many types. If Parliament had intended to open such a Box it is to be expected that some means of funding the liabilities would have been provided for - it was not.
. Both sections 54 and 105 use the common expression " in respect of a compensable disability ". If this includes contractually generated liabilities then section 54 must have operated to negate liability save in respect of non-economic loss or solatium. Both sections speak with a common voice. If the statutory result contended for by Jennings in relation to section 105 was intended, this appears inconsistent with the manner in which section 54(1) would necessarily operate.
. In context the words " any liability " must be taken to mean any liability imposed by the law involuntarily and not liabilities voluntarily assumed by contract. This is in keeping with the stated objects of the Act - to establish a compensation scheme as between employers and employees. Section 105 does not have as its purpose the conferral of a benefit upon a third party, not of those categories, and cannot, logically, seek to invoke the principle of Bull v Attorney-General for New South Wales in its favour.
It seems to me that, in their totality, these considerations combine to underpin the reasoning in J R Engineering . I am unable to escape the conclusion that, when section 105 speaks of any liability " that may arise apart from ... [the Act] ... in respect of a compensable disability " it is directing its attention to a liability arising by operation of the general law directly from the occurrence of the relevant compensable injury; and not some voluntarily assumed, consequential, liability created by a contract entered into between the employer and some third party. The word "arise" does not seem apt to comprehend some voluntary assumption of liability by contract.
Furthermore, the reasoning of Wilson and Gaudron JJ in Workers Corporation Board (Q) v Technical Products Pty Ltd (1988) 165 CLR 642 at 650 clearly favours a restrictive, rather than expansive, interpretation of the phrase "in respect of". As they there said:-
" There is no apparent reason why a workers' compensation statute should be concerned to protect a plaintiff who may not bear any relation whatever to a worker. Nor is there any ready explanation why such a statute should not only protect such a person by ensuring that there is a statutory fund out of which his damages may be paid, but also ensure the payment in full of such damages regardless of the amount of compensation and other damages the Fund has already been called upon to bear in respect of the injury to the worker.
We think these considerations strongly favour a narrower construction of s8(1)(b) of the Act consonant with the primary meaning of the words 'damages in respect of that injury'."
I would therefore maintain the stance that J R Engineering has not been shown to have been incorrectly decided. It follows that Jennings is not entitled to the relevant declaration sought by it. Any liability of Ceilfix to Jennings is that stipulated for by section 54.
I now turn to the difficult issue of contribution debated by the parties.
In the course of his submissions Mr Quick QC drew attention to the reasoning of the High Court in Unsworth v Commissioner for Railways (1958) 101 CLR 73 (" Unsworth "). That case focused on the relevant statute stipulating for contribution as between joint tortfeasors, on the one hand, and specific railways legislation, on the other The latter capped potential liability of the Commissioner in respect of damages for personal injury at oe2,000.
A jury found that the Commissioner was responsible to the extent of 85% for the damages sustained by a widow and children in relation to a fatal collision between a vehicle in which her late husband was a passenger and some unlit trucks across a level crossing. The balance of 15% was apportioned against the deceased driver. Total damages sustained were assessed at oe5,615.
The majority of the High Court held that, in assessing the amount of the liability of the Commissioner for contribution, such amount should first be ascertained independently of the statutory limitation of quantum; and, if the result as ascertained exceeded the sum of oe2,000 then the relevant section should be applied to limit the amount of the Commission's liability to such sum.
Mr Quick QC argued that a similar conceptual approach should be adopted in the application of section 54 in this case.
In the instant case the total permissible non-economic loss, after deducting the 10% apportioned against Valkonen was $225,000, for which both Jennings and Ceilfix were both nominally liable to Valkonen in full. However, by virtue of the provisions of section 54 of the Act, the liability of Ceilfix was capped at $141,904.
In those circumstances, applying the Unsworth approach, it appears to me that the initial calculation was to determine the nominal apportionment sum.
In accordance with the order of the Full Court Ceilfix was nominally liable to contribute 30% of the total damages awarded to Valkonen - i.e. 30% of $5,925,000=$1,777,500.
However, section 54 stipulated that, at the time of the accident, the only liability attaching to Ceilfix was to be a liability at common law for non-economic loss or solatium.
It is common ground that, at the relevant time, the liability of the parties to Valkonen for non-economic loss was, by virtue of the Wrongs Act, $250,000 - which reduced to the net sum of $225,000 by virtue of the apportionment of 10% responsibility against Valkonen. The 30% contribution of Ceilfix to that sum computes to $67,500. In accordance with the reasoning in Unsworth , as that sum is less than the "cap" of $101,360 stipulated by section 54(4) of the Act, it becomes the amount with which Ceilfix (and thus WorkCover) is fixed as its proper quantum of contribution to Jennings.
I took Mr Quick QC to be propounding some higher figure, but I frankly do not pretend to understand the logic of the computation approach espoused by him. True it is that, on one reading, the judgment of the Full Court on appeal from the learned trial Judge in the Valkonen action, might suggest an approach which, in effect, ignores the provisions of the Act. I do not consider that this was ever intended. If necessary the order in question can be clarified pursuant to the liberty to apply reserved by it. I take the order in question merely to be directing attention to broad issues of liability and not to be addressing the precise application of the conclusions arrived at, in terms of detailed quantum computation. However, until that situation is clarified there is a difficulty in this Court making a truly definitive order.
Mr White QC argued that, by virtue of the provisions of section 54(3) of the Act, the above figure of $67,500 was not recoverable from WorkCover, because the section 43 payment of $70,100 made by it had to be offset against it.
In my opinion Mr Quick QC is correct when he asserts that section 54(3) was inapplicable to the present situation. That provision mandated that, where an action is brought against an employer for non-economic loss arising from a compensable disability, due allowance had to be made for any lump sum paid, (inter alia) by virtue of section 43, to the person by or on whose behalf the action is brought.
As Mr Quick QC pointed out the claim by Jennings against Ceilfix is simply not a proceeding which meets that description. Furthermore, to allow the offset would be to confer a double benefit on WorkCover in a manner not intended by the legislation. WorkCover already enjoyed a charge, pursuant to section 54(7), over the moneys paid by Jennings to the extent of all sums paid by the former to Valkonen, including the $70,100 in question.
I would reject Mr White's contention.
There only remains for consideration the submission of Mr Quick QC to the effect that, in any event, the orders for costs made by the Full Court in its judgment entered on 29 November 1995 constitute a liability of Ceilfix, apart from the Act, in respect of a compensable disability. They are therefore embraced by section 105 as amended in 1988, and WorkCover is liable, as insurer, to indemnify Ceilfix against them.
This proposition is based on the width of expression of the phrase " in respect of " recognised in J R Engineering.
It seems to me that the short riposte to such a proposition is that ventured by Mr White QC.
There can be no doubt that - as Mr White QC put it - costs orders are adjectival or consequential in nature. They do not stand independently of a liability imposed by law. In the instant case the costs ordered by the Full Court against Ceilfix are consequential upon the liability findings of the Full Court against relevant parties, including Ceilfix. The adjectival liability for costs is co-extensive with the primary liability to which it relates (cf Forney v Dominion Insurance Co Ltd (1969) 3 All ER 831 at 835). It cannot logically be wider than such liability.
It follows, as night the day that Mr Quick's contention as to costs must be rejected in light of the conclusion to which I have come concerning primary liability.
I would make declarations in the form proposed by the Chief Justice.
NYLAND J
For the reasons expressed by the Chief Justice I agree that the claim by Jennings for a declaration that WorkCover is obliged to indemnify Ceilfix against the whole of its liability to Jennings should be rejected.
I also agree that a declaration should be made that WorkCover is obliged to indemnify Ceilfix against its liability for legal costs payable to Jennings in connection with Jennings' claim against Ceilfix for contribution.
A declaration should be made that WorkCover is obliged to indemnify Ceilfix against its liability to contribute to the damages payable by Jennings to Valkonen, and that the amount of that indemnity cannot exceed $101,360.
WILLIAMS J
The facts of this matter are comprehensively reviewed in the judgment of Olsson J. The action has been referred to this Full Court for trial upon the pleadings which raise three issues as to the construction of the WorkersRehabilitation and Compensation Act (1986).
(1) The ambit of s105
In Errington v Target (1995) 65 SASR 378 I expressed a view as to the effect of the legislative scheme contained in the Workers Rehabilitation and Compensation Act after amendment in 1988; at 384 (with the concurrence of Doyle CJ and Prior J) I said:
"The employer who is relevantly associated with the employment of a worker acquires monetary obligations to pay levies and fines in terms of Pt5, Div4 of the WR & C Act but is otherwise comprehensively protected from liability which might otherwise accrue with respect to the "compensable disability" howsoever arising. That protection is provided either by statutory bar to other action against the employer (eg s54(1)) or else by statutory indemnity insurance of the employer by WorkCover (eg s105(1)). Consistent with this policy, Parliament's intention as expressed in s54 is generally to remove any right of action against the relevant employer except within the framework expressly provided in the Act itself. However, an exception is provided by s54(2) as regards liability arising out of the use of a motor vehicle in certain circumstances."
Relying upon this statement and the language of s105 itself the plaintiff in the present action contends that the protection to an employer provided by the statutory scheme extends to liability for risk which is voluntarily assumed by the employer under a contract with a third party.
In the present case the employer Ceilfix (who was the ceiling subcontractor in the construction of a supermarket) as a term of its subcontract gave a wide indemnity to the head contractor (Jennings) in respect of liability which might be incurred by the head contractor. By a judgment given on 29 November 1995 in other proceedings ( Valkonen & Anor v Jennings Construction Ltd (Unreported, Full Court, 29 November 1995 S5344) the Full Court has construed this indemnity as extending to the head contractor's common law liability in negligence to the subcontractor's workman arising out of an accident on the worksite on 27 April 1988. The employee ( Valkonen ) suffered injury which gave rise to the common law liability on the part of Jennings and which also gave rise to a "compensable disability" within the Act.
Jennings now seeks a declaration that the obligation by way of indemnity which Ceilfix agreed to assume at the suit of Jennings is a "liability" for which Workcover is responsible in accordance with s105 of the Act.
Shortly after the accident s105 was amended by the Act No39 of 1988. As the basis for a claim that the insurance of the employer mentioned in s105 extends to liability arising upon the contractual indemnity the plaintiff now seeks to apply that amendment retrospectively to the consequences of the accident on 27 April 1988. It is unnecessary for me to consider whether the amendment operates retrospectively in view of the way in which I would read down the language of s105 as discussed below.
Section 105 (in its amended form) relevantly provides that an employer is insured [by Workcover] "against any liability that may arise apart from this Act in respect of a compensable disability".
Although s105 is expressed in unlimited terms in imposing a liability upon Workcover, I consider that Parliament intended that s105 should be confined to the insurance of risk in respect of obligations compulsorily imposed by law upon an employer (as opposed to liabilities which are voluntarily assumed).
Legislation of the type now under examination is not concerned with obligations which are contractual in origin. The general words of the Act must be read in light of the nature, purpose and scope of the legislation. As a matter of construction a limitation must be placed upon the generality of the language of s105 if Workcover's risk is to be manageable.
In Mynott v Barnard (1939) 62 CLR 68 Latham CJ considered the approach which should be taken in principle as to the ambit of Workers Compensation legislation; at 78 His Honour described the nature of the liabilities arising out of such a statute:
"They have none of the characteristics of contractual obligations. They attach independently of the will of the parties. The parties cannot by agreement exclude or modify their own rights and obligations which arise under the Act......
If an employer and a worker were to agree that dependants should have no rights under the Act, it is clear that the agreement would be quite ineffectual. If they were to agree that rights of compensation should exist other than those created by the statute, the procedure of the statute would not be available for the enforcement of such rights...."
The Chief Justice was dealing with different legislation from that which the Court is now concerned but the underlying fundamental principle is the same. In Mynott v Barnard at p80 the Chief Justice identified a body of law (constituting "peremptory rules") which attaches to parties irrespective of their will; in my view these laws may arise by statute or by common law.
In my view the liabilities mentioned in s105 are those imposed by law irrespective of the will of the parties; I am of opinion that s105 does not extend to liabilities which are voluntarily assumed - in this case by contract. I stand by the general statement quoted from Errington, but the comprehensive protection to which I there refer must be read as applying only to the immutable liability imposed compulsorily upon an employer whether by statute or common law. Peremptory rules are not peculiar to Workers Compensation legislation; the same approach has been taken, for example, with the requirements of the Moneylenders Acts and Testators Family Maintenance legislation.
The "procedure of the statute" in the present case contemplates rules of substantive law which are peremptory in their effect. It is not unusual that substantive law should be concealed under procedural masks (per Bray CJ Australian Continental v ATS (1974) 8 SASR 127 at 133-4). (The legislative scheme of the Workers Rehabilitation and Compensation Act includes machinery such as s54(7) for adjusting rights consequential upon the making of claims and payment. I regard such provisions as forming part of the peremptory law.)
In the case of a compulsory scheme of insurance relating to the obligations of employers with regard to compensable disability of workers it would be unreasonable to apply the language of a section such as s105 in such a way as to expose the compulsory statutory insurer (Workcover Corporation) to all risks in respect of all obligations howsoever incurred. Some limitation must be imposed upon the ambit of the risk to which Parliament intended that the Act should apply. It would be unreasonable that employers in the course of managing their affairs should have carte blanche to expose Workcover to risk. Reasonableness has been applied as the test in relation to other similar legislation (see Tomalin v Pearson (1909) 2 KB 61 at 65). Adopting that test I consider it to be unreasonable that a risk accepted by an employer as a term of a contract (and not otherwise imposed by law) should be subject to the insurance cover provided by s105.
It follows that in my opinion Workcover Corporation has no obligation under s105 to indemnify Ceilfix in respect of its contractual obligation to Jennings in so far as these obligations go beyond the peremptory obligations attaching to an employer and arising outside the Workers Rehabilitation and CompensationAct .
The plaintiff invited the present Full Court to review the Full Court decision in Workers Rehabilitation and Compensation Corporation v JR Engineering Services Pty Ltd (1995) 180 LSJS 276. I have reached my conclusion by a different route from that taken by the Court previously. I reach my decision by giving a restrictive application to the word "liability" in s105 so as to exclude liability for risk which an employer may voluntarily assume. I would not endorse the reasoning in JR Engineering.
(2) Contribution
Jennings has also claimed contribution from Ceilfix in respect of Jennings' liability at common law in respect of injury to Ceilfix's employee Valkonen for "non-economic loss". This claim is made in the light of the WorkersRehabilitation and Compensation Act as it existed prior to the amending Act No39 of 1988 which took away a right of contribution from an employer. My conclusion is that in terms of s54 the Workers Rehabilitation and CompensationAct (in its 1986 form) has effectively restricted Ceilfix's obligation to contribute with regard to this head of liability in the same way as the Act restricts Valkonen's primary right to claim against his employer. However, to the extent of its liability for this obligation peremptorily imposed by law, Ceilfix is comprehensively insured under s105.
Ceilfix's liability to contribution under s25 of the Wrongs Act 1936 to damages payable to Valkonen cannot exceed the liability for which the employer "would have been liable" if sued by its employee Valkonen - see Wrongs Act s25(1)(c). It is not just and equitable that a person's liability to contribute should exceed that person's primary liability (see Wrongs Acts26).
As at the date of the accident by virtue of s54(1) and (4) the WorkersRehabilitation and Compensation Act recognised a liability on the part of an employer at common law for non-economic loss but so as not to exceed $101 360.00 (being 1.4 times "the prescribed sum" - at the relevant date being $72 400.00). (Pursuant to s53(3) this amount would be subject to "due allowance" being made for any lump sum paid by the employer under Div5 or 6 in the event of action against Ceilfix for non economic loss. In the present case an amount of $70 100.00 was paid to Valkonen under s43 (being part of Div5). In the present circumstances Ceilfix is entitled to have this amount brought to account in the course of the final accounting in according with s54(5) and
(7)).
Applying the principles in Unsworth v Commissioner of Railways (1958) 101 CLR 77 at 91-93, Ceilfix is only required to contribute its proper share of the amount to which Valkonen is entitled in respect of the relevant category of damage - in this instance non-economic loss.
The parties are in agreement that as regards non-economic loss Valkonen's loss relevantly was $250 000.00 less 10 per cent for his own share of responsibility - leaving $225 000.00 as the loss in respect of which Jennings can claim contribution. The abovementioned decision dated 29 November 1995 of the Full Court has fixed Ceilfix's percentage share of responsibility at 30 per cent and Ceilfix can therefore be called on by Jennings to contribute $67 500.00 (being 30 per cent of $225 000.00). That amount is less than the limitation of liability under s54 which I have previously calculated at $101 360.00 and that lesser amount represents the amount of the liability under s105 in respect of which Ceilfix is relevantly insured by Workcover and exposed to a claim for contribution by Jennings. Accordingly the plaintiff Jennings is entitled to a declaration that the defendant Workcover is liable to indemnify Ceilfix to the extent of $67 500.00 being the full extent of the employer's responsibility to contribute to the common law damages (arising apart from the Workers Rehabilitation and Compensation Act ) which the plaintiff must pay in respect of the injuries to Ceilfix's workman which have given rise to "compensable disability" as mentioned in s105. As I have mentioned Ceilfix is entitled to recover in accordance with s53(7) the amount of $70 100.00 which has been paid out to the injured workman.
(3) Costs of action no.681 of 1991
The question has been raised as to the liability of Workcover to indemnify Ceilfix for the costs of Supreme Court Action No681 of 1991 in which the Full Court made its order as abovementioned of 29 November 1995. Insofar as Jennings in these proceedings made a contractual claim for indemnity and Ceilfix resisted that claim the costs associated with that issue do not fall within s105 of the Workers Rehabilitation and Compensation Act .
Insofar as Ceilfix properly and reasonably defended Jennings' common law claim (seeking third party contribution for negligence) I consider that Ceilfix is entitled to indemnity under s105 for its own costs (properly incurred) and also for any costs which it may thereby become liable at the suit of Jennings or any other necessary party to the proceedings. Bearing in mind the comprehensive way in which s105 is expressed (and construing it reasonably within the legislative scheme) I consider that the payment of proper costs are the responsibility of Workcover. In this respect Workcover's liability is unlimited except as to reasonableness.
Full Court orders of 29 November 1995 do not address this division of Ceilfix's costs and it will be for Ceilfix to establish as against Workcover any amount which reasonably represents its costs relating to the contribution issue.
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