Kennards Hire Pty Ltd v Koufu

[2005] NSWCA 413

CITATION:	Kennards Hire Pty Ltd v Koufu [2005] NSWCA 413
HEARING DATE(S):	1 November 2005
JUDGMENT DATE:	1 November 2005
JUDGMENT OF:	Mason P at 1; Tobias JA at 2; Brownie AJA at 33
DECISION:	Appeal dismissed with costs

CATCHWORDS:	WORKERS’ COMPENSATION – Claim for common law damages – Whether worker entitled to commence within 6 months of injury – Legislative objective of delaying commencement of proceedings – Exception where liability denied – Whether employer had denied liability – Whether denial “unequivocal” – Workers’ Compensation Act 1987 s 151C
LEGISLATION CITED:	Motor Accidents Act 1988 Workers Compensation Act 1987
CASES CITED:	Lampson (Australia) Pty Limited v Mackay [2004] NSWCA 152 Sydney Ports Corporation v Collins; National Direct Imaging Pty Limited v Lamy (2003) 56 NSWLR 232 Taylor v Francoif (1990) 19 NSWLR 444
PARTIES:	Kennards Hire Pty Limited Michael Koufu
FILE NUMBER(S):	CA 40732/04
COUNSEL:	A: M Elkaim SC / M Gollam R: R Turner SC / S Walsh
SOLICITORS:	A: Lander & Rogers, Sydney R: O'Neill Marengo, Sydney

LOWER COURT JURISDICTION:	District Court
LOWER COURT FILE NUMBER(S):	DC 13171/01
LOWER COURT JUDICIAL OFFICER:	O'Toole DCJ

CA 40732/04

MASON P
TOBIAS JA
BROWNIE AJA

Tuesday 1 November 2005

KENNARDS HIRE PTY LIMITED v MICHAEL KOUFU

Judgment

1 MASON P: I agree with Tobias JA.

2 TOBIAS JA: At all material times the respondent was employed by the appellant. On 31 August 2001 he was injured in the course of that employment. He apparently made a claim for workers’ compensation which was accepted by the appellant’s workers’ compensation insurer, NRMA Workers’ Compensation (New South Wales) No 2 Pty Limited (the insurer), in a letter from the insurer to the respondent dated 18 September 2001. The author of that letter, Mr James Murphy, was described in the letter on the insurer’s letterhead as a Senior Claims Officer.

3 On or about 19 November 2001 the respondent instructed Ms Tracey Lynn O’Neill of O’Neill Marengo, Lawyers, to act on his behalf in relation to the accident. She appreciated that because of imminent legislative amendments to the Workers’ Compensation Act 1987 (the Act) governing modified common law damages which were to come into force on 27 November 2001, any proceedings under the existing law required the filing of an ordinary statement of claim on or before 26 November 2001.

4 Ms O’Neill was also aware of the terms of the then s 151C of the Act which relevantly provided as follows:

"(1) A person to whom compensation is payable under this Act is not entitled to commence court proceedings for damages in respect of the injury concerned against the employer liable to pay that compensation until 6 months have elapsed since notice of the injury was given to the employer.
(2) Despite subsection (1), the person is entitled to commence court proceedings against the employer if either of the following occurs:
(a) the employer denies all liability in respect of the injury,
(b) the employer admits partial liability in respect of the injury but the person is dissatisfied with the extent to which liability is admitted."

5 Given that less than six months had passed since the notice of the respondent’s injuries had been given to the appellant (the accident only having occurred on 31 August 2001), Ms O’Neill was conscious of the fact that she could only commence court proceedings on behalf of the respondent for damages in respect of his injuries if the appellant or its insurer denied all liability in respect of those injuries within the meaning of s 151C(2)(a).

6 With this in mind and having been provided by the respondent with Mr Murphy’s letter to him of 18 September 2001, she telephoned Mr Murphy on 22 November 2001 and, according to [4] of her affidavit sworn 11 May 2004 and read before the primary judge, she asked Mr Murphy the direct and specific question,

“Will the insurer be admitting to breach of duty of care and negligence on behalf of the defendant?”.

Mr Murphy replied with words to the effect:

“That whilst at workers’ compensation the claim has been accepted we will not be admitting breach of duty of care on behalf of the employer”.

7 Ms O’Neill made a contemporaneous file note of this conversation which recorded the facts to which she deposed in her affidavit and which is worth noting:

“Attending on phone with James Murphy, Senior Claims Officer NRMA:
Discussing with him the situation with regard to admitting breach of duty of care and negligence on behalf of the employer. He indicated to me that whilst at Workers Compensation the claim had been accepted he would not be admitting breach of duty of care on behalf of the employer. I asked him to put that in writing. He indicated he would try and get a letter over to me today.”

8 On the same day Ms O'Neill sent a letter to Mr Murphy indicating the respondent’s intention to bring common law proceedings in negligence against the appellant in relation to the accident. The letter then continued:

“Would you please advise as a matter of extreme urgency whether you are prepared to admit breach of duty of care and all liability on behalf of the employer in this matter. In light of the legislative changes we would ask for your response by close of business Friday 23 November 2001.”

9 Later that afternoon at approximately 4.10pm Ms O’Neill again telephoned Mr Murphy and (I infer) asked a question to which he replied with words to the following effect:

“I will try to get back to you about giving a reply, hopefully later today but, if not, then tomorrow. The reply will be that we are not admitting a breach of duty of care.”

10 Again, Ms O’Neill made a file note of that conversation in these terms:

“Telephone discussion with James Murphy at 4.10pm.
When he said that he had our letter and he would get back to us about giving a reply hopefully later today but if not tomorrow. The reply would be that they are not admitting breach of duty of care. He confirmed our earlier discussion.”

11 Ms O’Neill then briefed counsel to draw a draft ordinary statement of claim and statement of particulars which she received on 23 November. She then faxed a further letter to Mr Murphy enclosing those draft documents. The letter then continued:

“Please advise as a matter of urgency whether you are prepared to admit breach of duty of care and all liability on behalf of the employer in this matter by 12.00 pm, Monday, 26 November 2001 .” (original emphasis)

12 The only reply Ms O’Neill received to this letter was on 26 November 2001 when Mr Murphy faxed to her a copy of his letter to the respondent dated 18 November 2001 but with the date changed to 26 November 2001 and with a hand notation marking it to Ms O’Neill’s attention.

13 On the same day Ms O’Neill filed an ordinary statement of claim and statement of particulars in the District Court. These were served on the insurer on behalf of the appellant on 27 November 2001. The insurer later (on 21 January 2002) indicated it was prepared to accept such service on the appellant’s behalf.

14 On 12 February 2002 Mr D Whiting of Lander & Rogers, Lawyers, wrote to Ms O’Neill indicating they had received instructions from the insurer to act on behalf of the appellant in the matter. Notice of Grounds of Defence was filed by those solicitors on 29 May 2002 in which, apart from denying that the appellant breached any duty of care it owed to the respondent, pleaded that by reason of s 151C of the Act the respondent was not entitled to commence the proceedings which, so it alleged, were a nullity.

15 On the same day the appellant’s solicitors filed a Notice of Motion seeking an order that the statement of claim be dismissed pursuant to s 151C of the Act.

16 Ms O’Neill’s affidavit of 11 May 2004 was filed in opposition to that Notice of Motion. It deposed to the conversations with Mr Murphy to which I have already referred. Mr Murphy swore an affidavit on 24 May 2004 in response to that of Ms O’Neill. In that affidavit he admitted the conversations deposed to by Ms O’Neill in her affidavit which occurred on 22 November 2001 but added that there were additional conversations at the time which he recollected to be in the following terms:

“Ms O’Neill further stated: ‘Are you denying the claim?’ I replied: ‘No, I’m not admitting the Common Law claim’. She replied: ‘So, are you denying the Common Law claim?’ I replied: ‘No, I’m not denying liability for the Common Law claim but I am not admitting liability either. I have accepted the workers compensation claim’.”

17 Mr Murphy also referred in his affidavit to the conversation with Ms O’Neill later in the afternoon of 22 November 2001 but said that he was unable to recollect the precise content of his reply except to say he would later send a letter setting out the current position of the workers’ compensation claim. This he did by providing a copy of his letter to the respondent of 18 September 2001 with the date changed to 26 November 2001.

18 The Notice of Motion was heard by the primary judge, O’Toole DCJ, on 28 May 2004 and adjourned to 18 August 2004 for addresses at the conclusion of which her Honour delivered her judgment. She noted the conflict between Ms O’Neill and Mr Murphy in relation to part of the conversations and that each had been extensively cross-examined. After referring to the demeanour of each of these witnesses and to the sustained attack on the credibility and reliability of each of them, she concluded (at [5]) that Ms O’Neill’s evidence was more reliable than that of Mr Murphy. She therefore, at least inferentially, rejected his added conversations which I have recorded in [16] above. There is no challenge to that finding or to that inference.

19 After reciting the facts to which I have referred, including the conversations between Ms O’Neill and Mr Murphy to which the former had deposed in her affidavit, her Honour made the following findings:

"30. I conclude that Ms O'Neill repeatedly drew Mr Murphy's attention to the distinction between the plaintiff's claim for worker's compensation benefits which the insurer was paying and the plaintiff's potential right to damages for the defendant's negligence. I accept Ms O'Neill's vehement assertion that throughout her telephone conversations with Mr Murphy she understood that he, on the insurer's behalf, did not admit and would not be admitting the defendant's 'breach of duty of care' to the plaintiff.
31. I conclude that at relevant times Ms O'Neill reasonably believed, and acted reasonably in believing, that Mr Murphy had denied liability in negligence for the employment injury on the insurer's behalf and that neither the insurer nor the defendant would be admitting liability therefor. Ms O'Neill also believed, reasonably, from Mr Murphy's words that he would confirm in writing his statements to her that 'we will not be admitting breach of duty of care on behalf of the [defendant]'.
32. I conclude that the unequivocal words 'We do not admit breach of duty of care' or '[The insurer does] not admit breach of duty of care' which Mr Murphy uttered to Ms O'Neill, ostensibly on the insurer's behalf and with its authority, constituted the insurer's denial of liability as provided in s 151C of the Act: vide Collins and the cases discussed therein by the Supreme Court of New South Wales, Court of Appeal."

20 The reference by her Honour in [32] to Collins is to the decision of this Court in Sydney Ports Corporation v Collins; National Direct Imaging Pty Limited v Lamy (2003) 56 NSWLR 232. In that case Stein and Giles JJA, Santow JA agreeing with both of them, delivered separate judgments arriving at the same conclusion. Relevantly for present purposes Stein JA, after referring to s 52 of the Motor Accidents Act 1988, which was in terms similar to s 151C of the Act and the decisions of this court thereon, said in relation to s 151C at 238:

“27. An examination of Pt 5 of the Act and the provision in s 151C itself leads to the conclusion that the principal purpose of the six months delay in the commencement of legal proceedings is to enable the parties to negotiate a settlement if that is possible.
28. The exceptions in s 151C(2)(a) and (b) are a reflection that there is no good purpose served in delaying the commencement of proceedings once it is clear that the plaintiff has ‘a fight on his hands’ if he wants to recover anything with respect to his claim.”

21 The reference to “a fight on his hands” by Stein JA in [28] of his judgment, was taken from the judgment of Handley JA in Taylor v Francoif (1990) 19 NSWLR 444 where his Honour at 447, after referring to the “evident purpose” of s 52 of the Motor Accidents Act, namely

“...to delay the commencement of legal proceedings to require and enable the parties, if possible, to negotiate an overall settlement",

continued in these terms:

"The exception in s 52(2)(a) reflects the view that no good purpose is to be achieved by delaying the commencement of legal proceedings once it is clear, as the Chief Justice put it during argument, that the claimant has a fight on his hands, if he wants to recover anything in respect of his claim.”

22 Stein JA also observed (at 238 [31]) that the approach to the exception in s 151C(2)(a) must be an objective one so that the primary judge was, with respect, in error when she referred in [29], [30] and [31] of her judgment to Ms O’Neill’s understanding or belief that Mr Murphy had denied the appellant’s liability in negligence for the respondent’s injuries.

23 Giles JA in Collins also referred to the objective of s 151C in these terms (at 243 [65]):

“...it is plain that the objective is to require the worker to seek his damages by negotiation with the employer rather than litigation in the first instance, with an entitlement to proceed to litigation if negotiation is unlikely to be fruitful because the employer has denied all liability or has admitted partial liability but not to an extent satisfactory to the worker.”

24 His Honour then referred to the words “denies all liability in respect of the injury” in s 151C(2)(a) and continued (at [66]):

“Denial of all liability does not need an express claim by the worker upon the employer - anticipatory rejection of any claim to damages will show that negotiation is unlikely to be fruitful just as much as rejection of a claim once made, if not more so. A denial of liability can be found in conduct as well as words. But the strong words will not be fulfilled by failure to volunteer liability, and are unlikely to be fulfilled by failure to respond to a claim. Silence or equivocation is not denial. There must be true denial of liability.” (emphasis added)

25 The last mentioned passage from the judgment of Giles JA in Collins was cited as being “undoubtedly correct” by Stein JA who, with the agreement of Ipp and Bryson JJA, said in Lampson (Australia) Pty Limited v Mackay [2004] NSWCA 152 at [16] that

“[t]here is simply no way that the claimant’s silence in failing to respond to the opponent’s solicitor’s letter could amount to a denial of liability. Not answering the letter cannot be seen as accepting the letter. The failure to volunteer liability in the circumstances of this case cannot be relied upon as a denial of liability. It follows that there was no ‘true denial of liability’ by the employer.”

26 Unlike the facts in Collins, and for that matter the facts in Lampson, the latter being a case of failure to respond to a letter on behalf of the plaintiff seeking an admission of liability, in the present case the appellant through Mr Murphy did respond by the use of the words, “We don’t admit breach of duty of care of the employer”. Nevertheless, it was submitted by the appellant that words which constitute no more than a non-admission of the plaintiff’s case do not amount to a “true denial of liability” within the meaning of those words as used by Giles JA in Collins. It was submitted that there was in fact no denial until the Notice of Grounds of Defence was filed.

27 The appellant further submitted that her Honour had made a quantum leap from her references in [29], [30] and [31] to the belief of Ms O’Neill as to the meaning of Mr Murphy’s words of non-admission and her finding in [32] that those words constituted an unequivocal denial by the insurer of liability in terms of s 151C(2)(a) of the Act. The basis of this submission, as I understand it, and which was properly conceded by senior counsel for the appellant not to be his strongest point, was that it was clear that Ms O’Neill did not in truth regard those words as constituting a denial of liability given that in her letters to the insurer of 22 and 23 November 2001 she had requested the insurer to advise as a matter of extreme urgency “whether you are prepared to admit breach of duty of care and all liability on behalf of the employer in this matter”.

28 I do not see the fact that Ms O’Neill wrote in those terms to Mr Murphy as in any way involving a quantum leap of the nature of that advanced by the appellant. Given that satisfaction of the sub-section involves an objective test, the words in fact used by Mr Murphy constituted in truth a denial of liability.

29 Nevertheless, the appellant submitted that the statement “We don’t admit breach of duty of care” was equivocal and thus did not satisfy the sub-section so that the primary judge was in error in concluding otherwise in [32] of her judgment. It was submitted that those words were not an express denial of liability but were like a non-admission in a pleading. However, senior counsel for the appellant accepted that the Court should not approach conversations between persons for the purpose of determining whether there was a denial of liability within the meaning of s 151C(2)(a) as one would a pleading. Rather it was necessary to have regard to the context of the provision and its purpose so that, in terms of the observations of Stein JA in Collins, the conversations between Ms O'Neill and Mr Murphy were to be considered on the basis of whether, objectively, the insurer was stating to Ms O’Neill that her client had “a fight on his hands” if he wanted to recover anything with respect to his claim for damages.

30 Accordingly, the only issue as I see it was whether the words used by Mr Murphy, considered objectively, amounted to a true denial of liability by the insurer. In my opinion they did. The words “We will not be admitting breach of duty of care on behalf of the employer” constituted an unequivocal statement on behalf of the appellant that the respondent had a fight on his hands with respect to establishing a critical element of the appellant’s liability, namely, that the appellant had breached his duty of care to the respondent. In my view there was nothing equivocal about that assertion. It was sufficient to satisfy the sub-section and her Honour was correct in so concluding.

31 For the foregoing reasons in my opinion the appeal should be dismissed with costs.

32 MASON P: I agree.

33 BROWNIE AJA: I also agree.

34 MASON P: The order of the court is the appeal is dismissed with costs save that no costs will be payable referable to the notice of contention.

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