Manser v Spry

[1994] HCA 50

HIGH COURT OF AUSTRALIA

MASON CJ, BRENNAN, DAWSON, TOOHEY, AND McHUGH JJ

MANSER v SPRY AND ANOTHER

(1994) 181 CLR 428

26 October 1994

Damages—Workers' Compensation (S.A.)

Workers' Compensation (S.A.)—Compensation—Liability of employer to pay—Right of action against third party for damages—Same disability—Right to recover amount of compensation from third party—Workers Rehabilitation and Compensation Act 1986 (S.A.), s. 54(5), (7).

Orders

Appeal allowed.

Set aside the answer of the Full Court of the Supreme Court of South Australia to Question (1) and in lieu thereof answer it as follows:

In so far as the plaintiff has received or is entitled to receive compensation under the Workers Rehabilitation and Compensation Act 1986 (S.A.) which does not have to be repaid to the WorkCover Corporation of South Australia and which is compensation for a loss or expense for which the defendant would be liable but for the receipt or entitlement, the receipt or entitlement should be taken into account in the assessment of the plaintiff's award of damages in a way which ensures that the plaintiff does not receive and retain double compensation for the same loss or expense.

The appellant to pay the costs of the respondents in this appeal.

Decision

MASON CJ, BRENNAN, DAWSON, TOOHEY AND McHUGH JJ On 25 November 1988, a motor vehicle which the first respondent, Jeana Anna Spry, was driving and a truck which the appellant, Graham Manser, was driving came into collision. She sustained injuries to her neck and back. She issued a summons out of the District Court of South Australia claiming damages for personal injuries allegedly occasioned by the negligence of Mr Manser. Subsequently, on 22 July 1991, Ms Spry suffered an aggravation or exacerbation of the injuries to her neck and back in a work accident which gave rise to a "compensable disability" for which she was entitled to receive and has received payments under the Workers Rehabilitation and Compensation Act 1986
(S.A.) ("the Act"). She has been unable to resume employment following the work accident and has been receiving medical treatment.

2. The corporation which administers the Act ("Workcover") gave a notice dated 14 January 1993 in purported pursuance of s.54(7) of the Act claiming payment out of the damages in the common law action for all compensation which had been paid and which might become payable thereafter by Workcover to Ms Spry under the Act. These payments consist of weekly payments, hospital and medical expenses and a lump sum for non-economic loss. Workcover intervened in the District Court proceedings to pursue its claim. The question whether Workcover would be entitled to repayment of compensation out of Ms Spry's (the plaintiff's) damages raised a question as to the assessment of those damages in the common law action. Judge C. R. Lee stated a case raising two questions for determination by the Full Court of the Supreme Court of South Australia:

"(1) With respect to the sums paid or to be paid to or on behalf of the plaintiff pursuant to the Workcover Act, what impact, if any, should those sums have on the assessment of the plaintiff's damages in the action?

(2) Does any and what liability attach to the defendant with respect to the Notice dated 14 January 1993."

In the Full Court, Workcover appeared to argue for an affirmative answer to Question (2). The Full Court answered Question (2) "No" and the second respondent, Workcover, accepting that answer, did not appear on this appeal. The other parties to the appeal in this Court - the plaintiff and defendant - also accepted the answer to Question (2).

3. Question (1) concerns the assessment of damages in the common law action and the answer to that question does not affect Workcover. That question was framed on the assumption that Mr Manser would be liable in damages for the consequences of Ms Spry's work accident unless the Workcover payments and entitlements preclude or diminish her common law right to recover damages for those consequences. Regrettably, the stated case omitted to state facts which supported the assumption and the omission led to some confusion as to the issues to be determined on this appeal. However, the parties were willing to have this Court answer Question (1) on the footing that the issue between the parties was whether damages should be assessed by taking account of the compensation which the plaintiff had received and would receive under the Act without any obligation to repay Workcover. Although that question can arise only on the assumption that the defendant would otherwise be liable in damages for the consequences of the work injury, this Court was invited to determine the answer to Question (1) on that assumption. The question for determination is whether the plaintiff is entitled both to receive and retain compensation by way of weekly payments payable during incapacity, medical and hospital expenses and a lump sum payable for non-economic loss under s.43 of the Act and to recover damages in the common law action assessed without reduction on account of compensation received or to be received. The effect of the answer given to Question (1) by the Full Court ("None") was to hold that the plaintiff is entitled
both to compensation and to damages assessed without taking compensation into account. The defendant submits that that answer, taken together with the answer to Question (2), allows the plaintiff to recover twice for the same loss or damage: once from Workcover and again from the defendant. To determine what the plaintiff should recover from the defendant, it is desirable first to note what she is entitled to receive and retain from Workcover.

The obligation to repay compensation

4. In the Full Court, Workcover relied on s.54 of the Act to support a right to repayment of the amounts paid out or to be paid out by it to or on behalf of the plaintiff. A liability to repay is created by s.54(5) and (7) of the Act which provide:

"(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). (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; and

(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)."

5. A plaintiff upon whom a defendant has tortiously inflicted an injury has a "right of action ... for damages" within the meaning of those words in sub-s.(5)(b) and the damages awarded must include some damages "in respect of" a subsequent exacerbation of the injury that is not too remote. Thus, on one reading of sub-s.(5)(b), it could be said that a plaintiff who has a "compensable disability" as the result of an exacerbation of an injury tortiously inflicted has "a right of action ... against a (tortfeasor) for damages in respect of the disability" within the meaning of those words in that sub-section. But there is a preferable construction. The phrase "for damages in respect of the disability" is descriptive of the nature of the right of action against the tortfeasor when it accrues, that is, when the plaintiff first suffers any loss or damage as a result of the defendant's tortious conduct. On this construction, sub-s.(5)(b) does not comprehend the case where damages are enlarged because a further event has exacerbated the original injury.

6. The language of sub-s.(7)(b) assists in choosing the latter construction. The event to which that provision refers is the receipt by a plaintiff of damages from "the wrongdoer" in pursuance of those rights which arise from the same trauma as gave rise to the rights to compensation under the Act. The term "trauma" is defined by s.3 to mean "an event, or series of events, out of which a compensable disability arises". Thus sub-s.(7) operates only when the rights in pursuance of which the damages are received arise from the event, or series of events, out of which the right to compensation under the Act arises. If damages are received pursuant to rights which arose from the tortious infliction of the original injury and the right to compensation arose out of a subsequent event which exacerbates the original injury, sub-s.(7) does not operate. It operates only when the tortious infliction of an injury is the event out of which the right to compensation arises. That being so, the only right of action referred to in sub-s.(5)(b) is a right of action for damages arising when the infliction of an injury by the tortfeasor gives rise to a right to compensation under the Act. So construed, sub-ss.(5) and (7) have no application to a case where the right to compensation arises from an event subsequent to the tort in which the original injury was inflicted.

7. This was the construction attributed to s.54 by the Full Court and accepted by the parties to this appeal. It means that if the plaintiff recovers damages quantified by reference, inter alia, to an exacerbation of her original injury caused by the subsequent work accident, the plaintiff will be entitled to retain both the damages and the payments made and to be made under the Act. The defendant submits that, unless the damages are reduced by taking compensation under the Act into account, the plaintiff will recover more than the amount which is just compensation for the loss and damage inflicted by the defendant's negligence. That submission is directed, of course, to the issue under Question (1).

The general principle

8. In Haines v. Bendall ((1) (1991) 172 CLR 60 at 63 per Mason CJ,
Dawson, Toohey and Gaudron JJ) the majority said:

" The settled principle governing the assessment of compensatory damages, whether in actions of tort or contract, is that the injured party should receive compensation in a sum which, so far as money can do, will put that party in the same position as he or she would have been in if the contract had been performed or the tort had not been committed: Butler v. Egg and Egg Pulp Marketing Board ((2) (1966) 114 CLR 185 at 191.); Todorovic v. Waller ((3) (1981) 150 CLR 402 at 412.); Redding v. Lee ((4) (1983) 151 CLR 117 at 133.) ; Johnson v. Perez ((5) (1988) 166 CLR 351 at 355, 386.) ; M.B.P (S.A.) Pty. Ltd. v. Gogic ((6) (1991) 171 CLR 657.); Livingstone v. Rawyards Coal Co. ((7) (1880) 5 App Cas 25 at 39.) ; British Transport Commission v. Gourley ((8) (1956) AC 185 at 197, 212.) . Compensation is the cardinal concept. It is the 'one principle that is absolutely firm, and which must control all else': Skelton v. Collins ((9) (1966) 115 CLR 94 at 128.) , per Windeyer J Cognate with this concept is the rule, described by Lord Reid in Parry v. Cleaver ((10) (1970) AC 1 at 13.) , as universal, that a plaintiff cannot recover more than he or she has lost."

9. However, as Walsh JA. pointed out in Adams v. Ascot Iron Foundry Pty. Ltd. ((11) (1968) 72 SR(NSW) 120 at 134.), the settled principle does not solve the problem whether a benefit to which a plaintiff is entitled is relevant to - that is, whether it goes in reduction of - the damages which a tortfeasor is to pay for the loss or damage caused by the tort. That problem was addressed by Dixon CJ in a well-known passage of his judgment in The National Insurance Co. of New Zealand Ltd. v. Espagne ((12) (1961) 105 CLR 569 at 573.):

"There are certain special services, aids, benefits, subventions and the like which in most communities are available to injured people. Simple examples are hospital and pharmaceutical benefits which lighten the monetary burden of illness. If the injured plaintiff has availed himself of these, he cannot establish or calculate his damages on the footing that he did not do so. On the other hand there may be advantages which accrue to the injured plaintiff, whether as a result of legislation or of contract or of benevolence, which have an additional characteristic. It may be true that they are conferred because he is intended to enjoy them in the events which have happened. Yet they have this distinguishing characteristic, namely they are conferred on him not only independently of the existence in him of a right of redress against others but so that they may be enjoyed by him although he may enforce that right: they are the product of a disposition in his favour intended for his enjoyment and not provided in relief of any liability in others fully to compensate him. This is readily seen in the case of benevolence."

In the same case, Windeyer J said ((13) ibid. at 598.):

" The most satisfying of the reasons that have been given for refusing to diminish damages because of voluntary gifts is that they are given for the benefit of the sufferer and not for the benefit of the wrongdoer. That, it may be said, cuts across the principle that damages for negligence are compensatory and not punitive. ... But I do not think the two propositions necessarily come into collision. A donor can say who is to benefit by his generosity."

Later, his Honour said ((14) ibid. at 600.):

"it is not, I think possible, to enunciate an exhaustive rule for all parts of this vexed topic. And the questions that arise can never be determined in the abstract. Each must depend on the terms of the particular contract, pension scheme, charitable benefaction or statute governing the benefit conferred."

To ascertain whether a statutory benefit possesses the "distinguishing characteristic" that it is to be enjoyed independently of, and cumulatively upon, the right to damages, the court must endeavour to discover the intention of the legislature ((15) ibid. at 573, 599-600; Redding v. Lee (1983) 151 CLR 117 at 125, 142, 163; Haines v. Bendall (1991) 172 CLR at 74-75.).

10. There are three possible indicia of a relevant legislative intention: the financial source of the benefit, the presence of a provision which requires a repayment of a statutory benefit out of the damages awarded or paid and the nature of the benefit. If a scheme for provision of a benefit be funded by contributions made by employers and employee-beneficiaries as a kind of insurance against misfortune, the principle in Bradburn v. Great Western Railway Co. ((16) (1874) LR 10 Ex 1.) indicates that the benefit is to be enjoyed by a beneficiary who encounters the misfortune without reduction of the damages to which he or she is otherwise entitled. That view has been taken of benefits paid under contributory pension schemes created under statute ((17) Parry v. Cleaver (1970) AC 1; Smoker v. London Fire Authority (1991) 2 AC 502; and see Redding v. Lee (1983) 151 CLR at 138.). If statute provides that a particular benefit is to be repaid out of damages, there is a clear indication that that benefit is not to go in reduction of the tortfeasor's liability. When such a provision relates only to one or some of the benefits provided under the statute, the non-repayable character of the other benefits may imply, according to the context, either that the legislature intended that the receipt and retention of the benefit should not be taken into account in the assessment of damages or that it had no such intention ((18) See Hood Construction Pty. Ltd. v. Nicholas (1987) 9 NSWLR 60 at 72.). Whether an implication of such a legislative intention should be drawn depends largely on the nature of the benefit. Gibbs CJ said in Redding v. Lee ((19) (1983) 151 CLR at 125.):

"If the statute expressly provides (as some statutes relating to workers' compensation have done) that a plaintiff who has recovered damages shall repay the amount of the benefit it will be clear that the receipt of the benefit must be disregarded in the assessment. In many cases, however, the statute under which the benefit is provided will give no assistance of this kind. Then it will be necessary to consider closely the nature of the benefit itself. The conclusion that the benefit is intended for the plaintiff personally and not in reduction of the damages may more readily be drawn when it is seen that the receipt of the benefit is not dependent on the loss of wages or earning capacity ... for which the plaintiff claims damages (cf. Parry v. Cleaver ((20) (1970) AC at 42.) , per Lord Wilberforce) and is not intended to replace the lost wages or remedy the loss of earning capacity."

Finally, if all indicia of intent fail, the "settled principle governing the assessment of compensatory damages" which the majority stated in Haines v. Bendall must be applied. In Adams v. Ascot Iron Foundry Pty. Ltd., Walsh JA., who described that principle as the "dominant rule", said ((21) (1968) 72 SR(NSW) at 135.):

" The difficulty lies in ascertaining the relevant intention from an Act, which does not expressly declare any intention one way or the other. The difficulty ... is in attempting to extract from the Act an actual meaning or intention with reference to the question which has to be resolved. The question may be one to which the Parliament or the draftsman of the Act did not in fact advert at all. Nevertheless, if it is possible to do so, it is necessary to extract from the Act indications of what was intended. If one cannot find any real indications pointing one way or the other, or if one finds indications both ways which are evenly balanced, it may be that the question must then be resolved by taking the view that the dominant rule ... should operate."

The character and incidents of compensation payments under the Act

11. Section 54 of the Act requires repayment to Workcover of compensation benefits paid to or on behalf of a worker under the Act if the rights to compensation arise from the same trauma as gave rise to the right to damages. And if the worker sues a third party for damages in tort arising from the "same trauma", s.54(4b) precludes the third party from recovering contribution against the employer except where the trauma is inflicted in a motor vehicle accident and the employer was or ought to have been insured against that liability. It can be inferred from these provisions that a purpose of the Act is to ensure that Workcover is recouped when its liability arises from an event for which another source of compensation is also liable. For this reason, repayment by the plaintiff to Workcover of compensation is made to depend on whether the "same trauma" test is satisfied. But Div.9 of the Act (which includes s.54) contains no indication of intention as to whether the plaintiff is to enjoy both the statutory benefits and unreduced damages in cases other than the "same trauma" cases. It is necessary, therefore, to examine the character of the benefits paid and payable under the Act.

12. Compensation under the Act is payable in respect of a disability which "arises from employment" within the meaning of that term as expanded by s.30 of the Act. The compensation paid and to be paid to the plaintiff in this case falls into three categories. The first category consists of medical and hospital expenses payable under s.32. The purpose of these payments, which may be paid either to the worker or to the provider of the relevant service (s.32(3)), is to indemnify the worker, wholly or in part, against health care expenses incurred as the result of the compensable disability (s.32(1)). The second category consists of weekly payments which, pro tanto, make up for weekly earnings lost by reason of incapacity for work produced by the
compensable disability: s.35. Or, in the place of the weekly payments, an actuarially calculated lump sum can be paid when the disability is permanent: s.42. The third category consists of a lump sum for non-economic loss for a permanent and compensable disability
under s.43. This payment is in substitution for a worker's entitlement to damages for non-economic loss suffered in circumstances where his or her employer would, but for s.54(1) or (4a) of the Act, be liable or where a fellow-worker would be liable in negligence. The lump sum payable under s.43 is thus a statutory substitute for that component of common law damages which reflects non-economic loss for a tortiously inflicted injury, albeit a lump sum is payable under the Act only if a worker's injury produces a compensable disability.

13. All of these payments are made in respect of the same matters as are taken into account in assessing damages in tort and for which the plaintiff has claimed in her action. Since the liability for these payments must arise from an event occurring during employment and since the employer's common law liability is excluded except in the case of motor vehicle accidents where an insurer is or ought to be on risk to indemnify the employer ((22) See s.54(2).), the Act provides a measure of protection for a worker who suffers a disability where at least one of the causes of that disability is work related. The Act is not designed to confer benefits to be added to the damages to which the worker might otherwise be entitled at common law for a loss caused by an event which is not work related. The compensation benefits paid or payable under the Act are ordinary incidents of a worker's employment which must be taken into account in assessing the damages of a plaintiff-employee for loss and damage for which a tortfeasor is liable at common law.

14. We would therefore allow the appeal, set aside the Full Court's
answer to Question (1) and answer it as follows:

In so far as the plaintiff has received or is entitled to receive compensation under the Workers Rehabilitation and Compensation Act 1986 (S.A.) which does not have to be repaid to the WorkCover Corporation of South Australia and which is compensation for a loss or expense for which the defendant would be liable but for the receipt or entitlement, the receipt or entitlement should be taken into account in the assessment of the plaintiff's award of damages in a way which ensures that the plaintiff does not receive and retain double compensation for the same loss or expense.

15. In accordance with the conditions on the grant of special leave to appeal in this case, the appellant shall pay the respondents' costs of this appeal and the orders for costs in the Courts below will not be disturbed.