Raeburn v Tenix Defence Systems Pty Ltd

[2007] VSCA 90

SUPREME COURT OF VICTORIA

COURT OF APPEAL

No 5825 of 2004

JOHN RAEBURN
	Appellant
v
TENIX DEFENCE SYSTEMS PTY LTD	Respondent

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JUDGES:	MAXWELL ACJ, NETTLE and ASHLEY JJA
WHERE HELD:	MELBOURNE
DATE OF HEARING:	23 April 2007
DATE OF JUDGMENT:	11 May 2007
MEDIUM NEUTRAL CITATION:	[2007] VSCA 90

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PRACTICE AND PROCEDURE – Costs – Accident compensation – Whether amount of judgment more than statutory offer but less than 90% of statutory counter offer – Whether amount of judgment equates to jury verdict or net amount after deduction of statutory compensation payments – Whether potential for unfairness in operation of s 134AB(12), (28) Accident Compensation Act 1985 – Appeal dismissed.

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APPEARANCES:	Counsel	Solicitors
For the Appellant	Mr J B Richards SC with Mr A D B Ingram	Clark & Toop
For the Respondent	Mr R P Gorton QC with Mr P H Solomon	Herbert Geer & Rundle

MAXWELL ACJ,
NETTLE JA
ASHLEY JA:

1. The appellant (“Raeburn”) sued the respondent (“Tenix”) for common law damages for a workplace injury.  After a 12-day trial before a Supreme Court judge and jury, the jury delivered a verdict in Raeburn’s favour.  The jury assessed his damages for pain and suffering at $150,000 and for pecuniary loss at $300,000, a total of $450,000.  Interest was subsequently agreed in the sum of $20,000.

1. In the period between the injury and the conclusion of the trial, Raeburn received some $203,078 by way of compensation payments under the Accident Compensation Act 1985. He accepts that he must give credit for that amount, such that the amount payable to him by Tenix is $266,922 (being the jury verdict of $450,000 less compensation of $203,078 plus agreed interest of $20,000).

1. The sole issue raised by this appeal is whether, for the purposes of determining who should pay the costs of the trial, Raeburn should be treated as having recovered $450,000 (as he contends) or the net sum of $266,922, as the Judge found.  In our opinion, for the reasons which follow, the learned Judge’s conclusion was correct and the appeal must fail.

The costs provision

1. The common law proceedings were brought in accordance with s 134AB of the Act.  Subsection 134AB(12) establishes a procedure for the making of pre-trial offers, which must be complied with before proceedings can be commenced.[1]  The Authority must make “a statutory offer in writing” and, if the worker does not accept that statutory offer, he/she must make a “statutory counter offer in writing”. 

   [1]In the absence of the consent of the Authority or leave of Court.

1. The worker’s rejection of the Authority’s offer carries potential cost consequences should the worker proceed to trial.  Under s 134AB(28) –

·if the worker fails to establish any liability to damages, or obtains a judgment which does not exceed the Authority’s statutory offer, then the worker must pay the costs of the proceeding;

·if the judgment amount is not less than 90% of the worker’s statutory counter offer, and more than the Authority’s statutory offer, the Authority must pay the costs of the proceeding;

·if the judgment amount is more than the Authority’s statutory offer but less than 90% of the worker’s statutory counter offer, each party bears its own costs.

The learned Judge concluded that the present case fell into the third of these categories, such that Raeburn must bear his own costs of the trial.

1. The critical phrase for present purposes in s 134AB(28) is the following:

“If judgment is obtained … in an amount …”

What was the amount of the judgment which Raeburn obtained?  He argues that it was the $450,000, being the jury verdict.  Tenix argues, and the Judge accepted, that it is the net amount after deduction of the statutory compensation.

1. Subsection 134AB(25) relevantly provides as follows:

“If a judgment … is … entered in favour of a worker …, the amount of the judgment … must be reduced by …”

the relevant amount of statutory compensation paid to the worker.  Counsel for the appellant argues that this provision contemplates a two-stage process, the first stage being the entry of judgment for the amount of the jury’s verdict – that being the judgment amount which he argues is relevant for the costs provision – and the second stage being the subsequent reduction of that judgment amount by the amount of the statutory compensation.  We reject that submission.  It is, in our view, the clear intent of the provisions that the reduction be effected when the judgment is entered.  It is a single step process.

1. This conclusion is consistent with the line of authority to which the learned Judge was referred, and on which he relied, beginning with the decision of Sholl J in Francis v TR & L Cockram Pty Ltd.[2]  The statutory command contained in subsection (25) has been part of accident compensation law in Victoria since (at least) the Workers Compensation Act 1953.  There have, as the authorities demonstrate, been slight variations in the language of the successive enactments, but the legislative intent has been clear and consistent, as has the line of judicial interpretation.  As the Appeal Division said in Wellbridge v Jackson,[3] the statutory requirement to reduce “the amount of the judgment” by the amount of compensation –

“has always been taken in practice to mean that the amount for which judgment would otherwise be entered, in accordance either with the judge’s assessment of damages or a jury verdict, shall be reduced by the amount of compensation already paid…”

[2][1957] VR 538. See also Gonis v Rootes (Australia) Limited [1960] VR 465; Alevras v Sidney Cooke Fasteners Pty Ltd [1972] VR 383; Wellbridge v Jackson [1990] VR 689; Rukavina v Incorporated Nominal Defendant [1992] 1 VR 677; O’Connell v Melbourne Excavations and Demolitions Pty Ltd (unreported, 7 March 1997).

[3]Supra at 699.

1. Counsel for the appellant contends that the wording of subsection (25) is “subtly yet quite distinctly different” from the predecessor provisions.  He points to the fact that the Workers Compensation Act 1958 used the phrase “Where a judgment … is to be entered …”, whereas subsection (25) uses the words “If a judgment … is … entered”. The latter formulation, he argues, requires that the judgment must first have been entered before the act of reduction takes place.

1. In our view, the difference in wording does not signify any change in legislative intent.  There is, as Ashley JA pointed out during argument, independent statutory confirmation that the reduction made for the amount of compensation must be reflected in the judgment amount as entered.  Subsection 134AB(26) requires that the reduction for compensation must be made before the reduction (if any) is made for contributory negligence.[4]  It is axiomatic, as Counsel properly conceded, that the judgment amount as entered is the amount arrived at after the reduction (if any) for contributory negligence.  It necessarily follows that the reduction for compensation must also have been made in arriving at the amount of the judgment.

   [4]It thus follows the pattern set by s 65(1) and (2) of the Workers Compensation Act 1958 as inserted by the Workers Compensation (Actions) Act 1981, notwithstanding that s 65(1) referred to the situation “where a judgment or order for damages in favour of a worker is to be entered or made …”.  See also the similar operation given to the now-repealed s 135(4A) of the Act, a less clear provision, in Rukavina, (supra) at 687-690.

Unfairness

1. Counsel for the appellant argued, in effect, that the construction placed upon s 134AB(28)(d) by the judge below was so unfair in its consequences for his client, and would be so unfair to plaintiffs more generally, that such construction should be rejected in favour of an alternative construction which was available and which did not produce those consequences.  The statutory counter offer may well have been made a very long time before the trial comes to its conclusion, in which case the amount of compensation received – and hence the amount of the mandatory reduction – will have increased very substantially.  The larger the reduction, the lower the amount of the judgment will be, and the greater the risk that the judgment amount will fall below 90% of the worker’s counter offer.  Counsel presented calculations showing that the critical date in the present case was 20 January 2006.  Had the verdict been received before that date, the amount of the judgment after the reduction for compensation would still have exceeded 90% of the counter offer.  By the time the verdict was delivered on 12 October 2006, however, the net amount had fallen below 90%.

1. The risk to a plaintiff, represented by the steady growth before trial in the aggregate of compensation payments received, has long been a feature of the relationship between statutory compensation and common law damages.  As Little J said more than 30 years ago, in Alevras v Sidney Cooke Fasteners Pty Ltd,[5] where the jury verdict for the plaintiff against his employer was for a lesser amount than the compensation which he had been paid –

“As to costs, the plaintiff in instituting a proceeding with the action must be taken to have accepted the risk that he would not be awarded damages in a sum exceeding the amount of compensation paid to him.”

The assessment of that risk must, necessarily, involve estimating the future total amount of compensation receipts, in the knowledge that any amount awarded by a jury will have to be reduced by the accrued amount of compensation.

[5]Supra at 384.

1. So also, before the enactment of s 134AB(28), the procedures of payment into court, and thereafter of offer of compromise, could work adversely to a plaintiff because of compensation payments received. 

1. There was a time, however, when this was not entirely so.  The County Court Rules as they stood in 1985 provided, by O 19 r 7(3), that the amount recovered by a plaintiff for the purposes of payment into court, should be –

“(a)the amount of the judgment or order … including any amount for interest …;  and

…

(c)any amount which has been deducted pursuant to the provisions of s 66(1) of the Workers Compensation Act 1958 as amended …”

Section 66(1) concerned common law proceedings brought against third parties.

1. The significance of the rule was discussed in Ascom Equipment Pty Ltd v Resetar.[6]  Murphy J, whose knowledge of this area of the law was very great, observed that –

“The rationale for the discrimen in para (c) of O 19, r 7(3) between amounts deducted pursuant to s 66(1) of the ... Act … and amounts deducted pursuant to s 65(1) of the same Act is not immediately apparent. Perhaps it was thought that a third party should not obtain a benefit from the payment of workers compensation made by an employer in circumstances where the third party is found responsible for the liability of the employer to make those payments…, but that on the other hand an employer should obtain such benefit, having already made the payments in question.”[7]

The distinction which his Honour noted, of course, serves to highlight the converse position which applied when  a common law proceeding was brought by the plaintiff against his or her employer; which in turn tends to emphasize the longstanding, potentially adverse, consequence of receipt of workers compensation in the context of  the costs of common law proceedings of that character.

[6][1986] VR 148.

[7]Ibid 152.

1. But notwithstanding the matters to which we have just referred, Counsel’s submission about unfairness had real force.  Section 134AB of the Act contains a regime which was novel when first introduced into s 135A by the Accident Compensation (Miscellaneous Amendment) Act 1997. By that regime, a worker is prohibited, ordinarily, from commencing a substantive common law proceeding except if, an obligatory conference having been held between the parties, the Authority[8] makes a statutory offer of compromise,[9] or is deemed to have done so,[10] and the worker rejects that offer and makes a statutory counter offer[11] which is not accepted by the Authority.[12] Counsel submitted that the consequence of s 134AB(12) and (28) is that, given the uncertainty as to when the proposed proceeding will come to trial, but given also the certainty of a significant time lapse between commencement of a proceeding and trial, a worker is put in the position of having to make a low statutory counter offer in an attempt to avoid the consequences of subsection (28)(d). That works an unfairness, counsel submitted, at least because the Authority can accept the counter offer and is then able to terminate payments of compensation.

   [8]Or self insurer, we need not repeat this alternative.

   [9]Subsection 134AB(12)(b).

   [10]Subsection (13).

   [11]Subsection (12)(c).

   [12]Subsection 12(d).

1. We see no reason to doubt that a worker’s concern about the operation of subsection (28) might cause a sequence of events of the kind described;  specifically, where the worker remains on compensation payments at the time when the counter offer is made. 

1. Counsel for Tenix submitted that the potential for unfairness was ameliorated  because, most often, weekly payments of compensation will not continue beyond a two year period.  That submission is true as far as it goes.  But it must be remembered that the only persons able to bring a common law proceeding are those who satisfy the “serious injury” test;  and it is those persons who are most likely to have an entitlement to weekly payments beyond the two year period.

1. Counsel for Tenix also submitted that a worker could elect not to accept payments of weekly compensation in the period between statutory counter offer and trial, so as to better protect his or her position in the context of the operation of subsection (28)(d).  That submission, which presupposed a continuing entitlement to weekly compensation over a protracted period, and hence a very disabled worker, to our mind ignored the reality of the worker’s need to keep financially afloat in the pre-trial period.  It would be a serious indictment of the operation of the Act if a worker was constrained to renounce a compensation entitlement in an attempt to avoid an adverse costs consequence at trial of a permitted common law proceeding.

1. It was further submitted by counsel for Tenix that s 134AB was designed to restrict proceedings at common law and “to place enormous pressure on parties to resolve their disputes without litigation”.  We agree with that submission, but with this qualification.  In our view, the pressures imposed by the operation of subsections (12) and (28) seem much the greater upon the worker than upon the Authority.  The worst that the Authority can do, in the end result, is to be ordered to pay the successful plaintiff’s costs.[13]  But for the plaintiff to get a favourable  costs order, he or she, having been obliged to make a counter offer in response to the Authority’s offer or deemed offer – the former of which may be for a nominal sum, and the latter of which is deemed to be zero – must then obtain judgment not simply for more than the Authority’s offer or deemed offer but for more than 90% of the statutorily obliged counter offer after making allowance for all compensation received up to judgment.

   [13]As to which see subsection (29).

1. In the event, if s 134AB(28)(d) could be given a construction such as Counsel for the appellant urged, there would be cause to adopt it.  But for the reasons which we have given, we cannot accept that such a construction is available.

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