Smith v MMG Golden Grove Pty Ltd
[2020] WADC 103
•24 JULY 2020
JURISDICTION : DISTRICT COURT OF WESTERN AUSTRALIA
IN CIVIL
CITATION: SMITH -v- MMG GOLDEN GROVE PTY LTD [2020] WADC 103
CORAM: BURROWS DCJ
HEARD: 10-12 SEPTEMBER 2018 & 5 JUNE 2019
DELIVERED : 24 JULY 2020
FILE NO/S: CIV 2457 of 2015
BETWEEN: SPENCER JAMES RICHARD SMITH
Plaintiff
AND
MMG GOLDEN GROVE PTY LTD
Defendant
MEMBERS OF CHAUCER SYNDICATE 1084
Third Party
Catchwords:
Damages for breach of contract - Third party proceedings - Public liability insurance policy - Effect of waiver of subrogation clause in Employer Indemnity Insurance Policy - Reasonableness of settlement between plaintiff and defendant - Whether public liability insurance policy responds to defendant's claim to be indemnified for component of settlement repaid to workers' compensation insurer - Effect of exclusion clause - Extent to which public liability insurance policy responds to claim for indemnity for defendant's legal costs of defending plaintiff's claim - Deductible - Delay of notification of claim - Settlement of claim without third party consent
Legislation:
Civil Liability Act 2002 (WA), s 5B
Insurance Contracts Act 1984 (Cth), s 13, s 54
Occupiers' Liability Act 1985 (WA), s 4
Workers' Compensation and Injury Management Act 1981 (WA), s 92(c), s 93, s 301, s 160, s 175
Result:
Third party liable to indemnify defendant for settlement sum paid to plaintiff and defence cost of investigating and defending plaintiff's claim together with interest on these sums to be determined.
Representation:
Counsel:
| Plaintiff | : | No appearance |
| Defendant | : | Mr G R Hancy |
| Third Party | : | Mr G J Pynt |
Solicitors:
| Plaintiff | : | Not applicable |
| Defendant | : | DLA Piper Australia - Perth |
| Third Party | : | HWL Ebsworth Lawyers (Perth) |
Case(s) referred to in decision(s):
Allianz Australia Insurance Ltd v Inglis [2016] WASCA 25
Barnes v Toll Transport Pty Ltd [2011] TASSC 25
Byrne v People Resourcing (Qld) Pty Ltd [2014] QSC 269
Co-operative Bulk Handling Ltd v State Government Insurance Commission (1990) 3 WAR 145
Dowthwaite Holdings Pty Ltd v Saliba [2006] WASCA 72
Fitzgerald v Lane [1989] 1 AC 328
Gordian Runoff Ltd v Heyday Group Pty Ltd [2005] NSWCA 29
Hi-Tec Demolition Co Pty Ltd v Mainline Demolitions [2000] WASCA 342
Insurance Commission of Western Australia v Kightly [2005] WASCA 154
Lumbermens Mutual Casualty Co v Bovis Lend Lease Ltd [2005] 1 Lloyd's Rep 494
McCann v Switzerland Insurance [2000] HCA 65; (2000) 203 CLR 579
Moltoni Corporation v QBE Insurance [2001] HCA 73; (2001) 205 CLR 149
Morris v Ford Motor Co Ltd [1973] QB 792
Multiplex Constructions Pty Ltd v Irving [2004] NSWCA 346
Nigel Watts Fashion Agencies Pty Ltd v GIO General Ltd (1994) 8 ANZ Ins Cas 61‑235
Petrofina (UK) Ltd v Magnaload Pty Ltd [1984] 1 QB 127
State Government Insurance Office (Qld) v Brisbane Stevedoring Pty Ltd [1969] HCA 59; (1969) 123 CLR 228
Thomas & Co v Brown (1899) 4 Com Cas 186
Trident General Insurance Co Ltd v McNiece Bros Pty Ltd (1988) 165 CLR 107
Unity Insurance Brokers Pty Ltd v Rocco Pezzano Pty Ltd (1998) 192 CLR 603
Woodside Petroleum Development Pty Ltd v H & R - E & W (1997) 18 WAR 539
Woodside Petroleum Development Pty Ltd v H & R - E & W Pty Ltd (1999) 20 WAR 380
BURROWS DCJ:
Background
In this action the defendant MMG Golden Grove Pty Ltd (MMG) seeks indemnity for its liability to Spencer Smith (the plaintiff) in respect of a claim for injuries suffered on 4 November 2013 when he was working underground at the Golden Grove Mine (the accident). The mine was owned and operated by MMG. The plaintiff was employed by Central Earthmoving Company Pty Ltd (CEC). CEC was subcontracted by MMG to perform haulage of ore, underground road grading and management of the run of mine (ROM) pad at the mine.
The plaintiff and MMG settled the action in June 2017 for $488,500. A settlement and release agreement dated 16 August 2017 was entered into by MMG, the plaintiff, CEC and Allianz Australia Insurance Limited (Allianz). CEC was insured with Allianz under an employer's indemnity insurance policy (the Allianz Policy). The settlement agreement was filed with WorkCover on 17 August 2017. The parties were notified that the Director of WorkCover did not intend to disapprove of the agreement on 23 August 2017.[1]
[1] Exhibit 3, settlement agreement and exhibit 5, letter dated 23 August 2017 from the Director of WorkCover to Mills Oakley Lawyers.
MMG was insured by the third party Chaucer Syndicate 1084 (Chaucer) as a principal under a miscellaneous liability policy pursuant to a contract of insurance between Chaucer and CEC (the Chaucer Policy).[2]
[2] Exhibit 65.
By the third party proceeding MMG seeks to recover from Chaucer the settlement sum paid to the plaintiff of $488,500 and the costs incurred by it in the investigation of the accident and the defence of the plaintiff's claim of $64,598.24 plus interest on those amounts.
The following facts are not in dispute:[3]
[3] Statement of agreed facts 6 September 2018.
1.MMG is a company incorporated under the Corporations Act 2001 (Cth), and at all material times, held mining lease number 59/195 known as the Golden Grove Mine. (the mine)
2.The Golden Grove Mine comprised of the Gossan Hill underground mine and the Scuddles underground mine.
3.In December 2011, MMG as principal and CEC as contractor entered into a written agreement called 'Services Agreement for the provision of underground haulage, underground grading and ROM management' bearing contract number MA-MMGGRP-2011-0098.[4] (the services agreement)
[4] Exhibit 2.
4.The term of the services agreement was from 1 December 2011 to 30 November 2014.
5.By the services agreement CEC agreed to provide services to MMG broadly described as:
5.1 haulage of ore from the Gossan Hill underground mine to the run of mine ROM pad;
5.2 underground road grading of the Gossan Hill underground and the Scuddles underground mine; and
5.3 management of the ROM pad.
6.MMG is a principal under the services agreement.
7.The plaintiff commenced an action alleging that:
7.1CEC employed him as an underground grader operator;
7.2 he was injured when he was working at the mine on 4 November 2013 during the course of his employment with CEC;
7.3 the accident happened when:
7.3.1. he had been grading the Amity Decline between locations known as 1013 and 1024;
7.3.2. he had exited the grader;
7.3.3. he had tested the drainage flow by placing water on the roadway from the service header on the decline; and
7.3.4. a rock struck him on the head while he was turning off a service valve.
8. The Amity Decline was a section of the Gossan Hill underground mine.
9. On 22 June 2017, MMG settled the plaintiff's action and agreed to pay amounts to him, or on his behalf, totalling $488,500 which comprised:
9.1. $260,000 for general damages, past and future economic loss and future medical expenses
9.2. $58,500 for costs and disbursements; and
9.3. $170,000 to CEC by its workers' compensation insurer representing a partial repayment of the amount of workers' compensation payments that had been received by or for the plaintiff (totalling $220,984).
10.MMG has incurred expenses in the investigation of the accident and the defence of the plaintiff's claim against MMG in the action exceeding $10,000.
Issues in contention
The following issues are in contention between the parties:
1.Did the settlement reached between the plaintiff and MMG exceed the range of a reasonable settlement?
2.Should MMG's claim for indemnity be discounted by $170,000 on the basis that MMG had no liability to pay any sum to Allianz for worker's compensation paid to the plaintiff by reason of:
(a)the worker's compensation exclusion clause in 6.1(a) of the Chaucer Policy;
(b)an entitlement to be indemnified for this sum by Allianz or MMG's worker's compensation insurer; and or
(c)the waiver of subrogation clause in the Allianz Policy.
3.Whether the applicable deductable under the Chaucer Policy is $10,000 or $50,000.
4.Is MMG entitled to be indemnified by Chaucer for its legal costs and expenses incurred in defending the plaintiff's action? And, if so:
(a)whether the legal costs and expenses incurred were unreasonably incurred in defending the action; and
(b)whether any legal costs and expenses were incurred for a reason other than the investigation and defence of the plaintiff's action?
5.What is the consequence of late notification by MMG of the plaintiff's claim to Chaucer and of the settlement being entered into without the consent of Chaucer?
Insuring provisions
It is necessary to firstly set out the relevant provisions of the services agreement and insurance policies.
The services agreement
Pursuant to clause 17.1 and the schedule to the services agreement, CEC agreed to effect and maintain for the term of the services agreement:
(i)a public liability insurance policy with a minimum coverage amount of $20 million;
(ii)a workers' compensation insurance policy 'as required by statute' that indemnified:
against liability for … injury to persons employed by [CEC] including liability under statute and at common law,
and which covered MMG and CEC for their respective 'rights, interests and liabilities'.
The Allianz Policy
In accordance with the terms of the services agreement CEC took out an employer's indemnity insurance policy with a principals' indemnity extension with Allianz for the period 31 October 2013 ‑ 31 October 2014 (the Allianz Policy).[5]
[5] Exhibit 64.
MMG was insured with Allianz under a principal indemnity endorsement to the Allianz Policy.[6] This endorsement relevantly provides that Allianz:
will indemnify the Principal against legal liability to pay damages, and in addition will pay all reasonable costs and expenses incurred with our written consent ... at common law for personal injury sustained by any person employed by you under a contract of service ... if such injury is an injury in respect of which such person is entitled to recover from you both compensation under the Act and (subject to section 92 of the Act) damages independently thereof and if you would be entitled to indemnity under the Policy in respect of any compensation so recovered ...
[6] Exhibit 64.
The reference to the Act is the Workers' Compensation and Injury Management Act 1981 (WA) (WCIMA).
The principal indemnity endorsement is subject to the following relevant terms and conditions:
1The indemnity provided by this endorsement only applies where you have a contractual obligation to the Principal to obtain employers indemnity insurance that extends cover to the Principal in respect of the Principal's liability for personal injury sustained by any person employed by you under a contract of service or apprenticeship.
2The indemnity provided by this endorsement only applies if you are entitled to indemnity under the Policy in respect of a legal liability to pay damages for personal injury sustained by any person employed by you under a contract of service or apprenticeship. (emphasis added)
...
7We waive any rights of subrogation against the Principal.
(emphasis added)
The Chaucer Policy
CEC was insured with Chaucer under the Chaucer Policy for the period 31 October 2013 ‑ 31 October 2014.
It is not in dispute that MMG was insured under the Chaucer Policy by virtue of the services agreement and the definition of 'insured' in clause 5.7(e) of the Chaucer Policy.[7]
[7] Third party closing submissions, par 22(c).
The relevant definitions and clauses in the Chaucer Policy are:
By Clause 1, the Insuring Clause, Chaucer agreed to:
pay to or on behalf of the Insured all Claims which the Insured shall become legally liable to pay by way of compensation and claimant's costs and expenses in respect of Personal Injury ... first happening during the Period of Insurance as a result of an Occurrence in connection with the Insured's Business ...
By Clause 4.1:
the amount of the deductible is specified in the Schedule and is the amount which is payable by the Insured in respect of:
(a)any compensation (including claimant's costs and expenses) payable by an Insured in respect of a Claim; or
(b)Defence Costs.
Clause 4.2 provides:
The Insurers liability applies only to that part of the amount payable to dispose of a Claim which exceeds the Deductible and the Deductible will be borne by the Insured at the Insured's own expense.
The schedule provides as follows:
Deductibles: Public Liability:
AUD 10,000 any one occurrence
But
AUD 50,000 any one occurrence in respect of Worker to Worker Claims ...
By clause 5.4 defence costs are defined as:
expenses including legal, investigative and expert (medical and non‑medical) costs, fees, disbursements and expenses) incurred with the prior written consent of Insurers by or on behalf of the Insured or Insurers in the investigation of an Occurrence or settlement or defence of a Claim.'
By clause 5.7 the Insured' means the 'Insured named in the Schedule' and includes ...
(e)any principal in respect of the liability of such principal arising out of the performance by the Insured of any work performed under written contract or agreement with such principal. Provided this policy shall only indemnify the principal to the extent that the Insured is required to insure such liability pursuant to such written contract or agreement, but subject always to the terms of this policy.
The insured named in the schedule is CEC.
Clause 5.8 defines the 'Insured's business' as 'the business specified in the Schedule'. The 'Business of the Insured' is described in the Schedule as:
Site Preparation, Earthmoving, Commercial Civil Works and any other activities incidental thereto.
Clause 5.20 defines 'Worker' as:
any person deemed to be employed by the Insured pursuant to any Workers' Compensation Law.
Clause 5.21 defines 'Workers' Compensation Law' as:
any law relating to compensation for Personal Injury to Workers.
Clause 5.22 defines 'Worker to Worker' as:
any recovery by a Workers Compensation Insurer, Self Insurer or WorkCover authority.
Clause 6 deals with exclusions:
[The Chaucer policy] does not cover liability for:
Workers' Compensation
6.1(a)personal injury to any Worker in respect of which the Insured is or would be entitled to indemnity under any policy of insurance ... pursuant to or required by any legislation relating to Workers Compensation Law ... whether or not such policy... has been effected.
Provided that this policy will respond to the extent that the Insured's liability would not be covered under any such policy ... had the Insured complied with its obligations pursuant to such law ...
The Chaucer Policy contains a: 'Cross Liability' clause:
7.2Subject at all times to the terms of this policy, each person or party indemnified is separately indemnified in respect to Claims made by any of them against any other of them ...
It also contains a 'Claims Assistance' clause:
7.3In the event of an Occurrence which may give rise to a Claim the Insured shall: ...
(b)give notice in writing to Insurers as soon as practicable of every Occurrence, and shall immediately forward to Insurers all information as Insurers may reasonably require. Every letter, Claim, demand, writ, summons or process shall be promptly forwarded to Insurers.
(c)not, without Insurers written consent, make any admission, offer, promise or payment in connection with any Occurrence or Claim. ...
Was the settlement reasonable?
The relevant principles
An insured who relies on a settlement agreement as the basis for its claim for indemnity must prove by extrinsic evidence that it was under a liability covered by the policy and that the amount paid was reasonable: Lumbermens Mutual Casualty Co v Bovis LendLease Ltd [2005] 1 Lloyd's Rep 494.
The general rule is that 'the party who asserts must prove': Barnes v Toll Transport Pty Ltd [2011] TASSC 25 [19] (Evans J).
In Unity Insurance Brokers Pty Ltd v Rocco Pezzano Pty Ltd (1998) 192 CLR 603 an insured claimed damages for negligence against his insurance broker for failing to make full disclosure to the insurer. The insured compromised his claim against the insurer for less than the full amount of the indemnity under the contract of insurance. The insured claimed from the broker the difference between what he would have been entitled to from the insurer if full disclosure had been made and the settlement sum. The question for the High Court was whether that was the correct measure of damages in tort. It held that to be the correct measure, as long as the settlement was reasonable when judged objectively by reference to the circumstances at the time, including the reasoning supporting the advice upon which the insurer acted in accepting it: Dowthwaite Holdings Pty Ltd v Saliba [2006] WASCA 72 [94] (McLure JA).
The principles to be extracted from Unity Insurance Brokers on reasonableness can be summarised as follows:
(a)The test of reasonableness is an objective one: [6] (Brennan CJ) and [129] (Hayne J).
(b)Evidence of the advice which the insured received to induce it to enter into the settlement is not proof in itself of the reasonableness of the settlement advised. The factors which lead to the giving of the advice are factors relevant to the reasonableness of the settlement but the only relevance of advice given by the insured's legal advisers to settle is that it tends to negative the hypothesis that the insured acted unreasonably in accepting the settlement: [6] (Brennan CJ).
(c)Evidence of the receipt of advice may be important but what will usually be much more important is the reasoning that supported that advice because that will ordinarily reveal why it was thought reasonable to compromise the claim as it was: [129] (Hayne J).
(d)The reasonableness of a settlement depends on the circumstances existing at the time, provided the plaintiff has acted reasonably in discovering the circumstances material to the settlement at that time: [7] (Brennan CJ).
(e)Reasonableness must be judged by reference to the material the parties had available to them at the time the compromise was reached. It is not to be judged according to whether material which was obtained later shows that a different result might have been obtained: [130] (Hayne J).
(f)Consideration will often be required of whether the party maintaining that the settlement was reasonable had made sufficient inquiries and had sufficient information available to it to warrant reaching the compromise: [131] (Hayne J).
(g)In making that inquiry attention may need to be given to whether the cost of seeking further information would outweigh the benefit that it was reasonable to expect may be obtained from doing so: [131] (Hayne J).
(h)What is a reasonable compromise of the claim will almost always require consideration of the chances of the parties succeeding in their respective claims or defences and that prediction of likely outcomes must always be imperfect and imprecise: [132] (Hayne J).
It is important to restate what Kirby J said at [97]:
The law encourages the settlement of legal disputes, the courts could not cope if it were not the fact that the overwhelming majority of cases are compromised … Any rule which effectively discourages settlement or encourages parties to litigate issues to finality which they are content to settle would need to be closely examined.
Relevant to this case, Hayne J stated at [146] when discussing the discount between the settlement sum and amount claimed of between 40% and 50%:
It is as well to remember, however, that there are uncertainties inherent in litigation and that predictions of the chances of success in litigation can never be precise. It follows that the comparison between the amount of the settlement and the amount of the claim can never be anything more than a general indication of what the parties see as the risks of continuing litigation.
In this case Chaucer does not submit MMG's entry into the settlement was unreasonable. It accepts that on the information available at the time of settlement MMG was likely to be held by a court to be liable to pay damages to the plaintiff in the action.
Chaucer argues that the settlement was not reasonable to the extent it was not discounted for:
1.The risk of the plaintiff failing on liability.
2.The prospect that regardless of the accident the plaintiff might have moved to Queensland with his de facto partner in early 2015 and not worked on a remote mine site again from that time due to his age, work history, and previous thoracic spine and knee injuries.
MMG argues the settlement was reasonable, having regard to the plaintiff's claim, adequately 'discounted' for litigation risk.
Both parties filed written submissions on the reasonableness of settlement in which each set out their respective calculations as to the quantum of the plaintiff's claim. MMG did not call the plaintiff or his legal advisers to give evidence as to the basis upon which the settlement sum was agreed. No advice from counsel to the plaintiff or to MMG on the settlement was tendered in evidence.
It is accepted by Chaucer that in order to prove reasonableness it is not necessary for MMG to prove that its negligence caused the plaintiff's injuries or that MMG owed the plaintiff a duty of care.[8]
[8] ts 124.
For completeness I am satisfied that as the leaseholder of the mine and a principal employer as defined by the Mines Safety and Inspection Act 1994 (WA) MMG was required to take such measures as are practicable to ensure that the mine was such that persons who were at the mine were not exposed to hazards. This statutory obligation was sufficient to underlie a relationship between MMG and the plaintiff that gave rise to a general duty of care.
As the occupier of the mine MMG owed the plaintiff, an entrant to the mine, a duty as occupier to protect him from dangers including the danger of injury from falling rocks.
The plaintiff's account of the accident is recorded in the undated mining incident form.[9] He describes:
Had just finished changing the camber of the decline, I parked the grader up so that I could walk over to the header and turn the water valve on to see if the water was flowing the way I wanted it to (it did) I then went and turned the header off when a rock hit me in the head-shoulder-arm-wrist/hand. Collected my thoughts/hard hat/glasses and went back to my grader to call my shift boss George who took me to see the medics on the surface.
[9] Exhibit 7.
The plaintiff signed a statement of the evidence he would be prepared to give in court as a witnesses on 6 May 2014.[10] This statement was given in the course of an interview with an insurance assessor for Allianz, Mr LeCocq.
[10] Exhibit 53.
The plaintiff stated that he was an experienced plant operator. He had formal qualifications in machine operation and a certificate of applied science in occupational health and safety. He had worked in the mining industry for approximately 30 years. He had been carrying out the type of duties he performed on the day of the accident for approximately 10 years. A summary of the machinery licences and various industry qualifications held by the plaintiff is contained in exhibit 44.[11] It is evident that his machinery operation experience in underground mine was extensive and he was well versed in workplace health and safety matters.
[11] Initial assessment report for vocational rehabilitation conducted by CRS Australia dated 14 May 2014.
As to the accident the plaintiff's account in the evidence statement is consistent with the incident report.[12]
[12] Paragraphs 32 – 35; Exhibit 53.
An Incident Cause Analysis Method investigation report (ICAM report) was prepared by MMG in relation to the accident.[13] The report found a 15 kg rock had been dislodged from the decline wall at a height of 4.1 m falling approximately 2 m and striking the plaintiff on the helmet. It describes the plaintiff having to use 'excessive force' to shut off the water header and in doing so the rock was dislodged. No further explanation of the term excessive force is contained in the report nor is the source. It appears in the narrative description of the accident. It is not referred to in the conclusions of the report in relation to the factors which contributed to the accident.
[13] Exhibit 10.
The investigation found the area where the accident occurred had substandard ground support installed. Ground support is the mechanism for stabilising the rock face. It also found there was no evidence of check scaling (removal of loose rocks) and ground support inspection in the area as normally required. The area had two fault lines converging in the wall behind the service headers and was often wet due to intermittent drill holes draining water to the area. Visibility of the ground condition was reduced due to the installation of a water deflector to divert water off the wall to be channelled to a drain and sump. The ground conditions were described as poor. The area of the Amity Decline section between 1013 and 1024 was developed and supported in May 2009. It had not been check scaled since that time. The area had reduced activity in the 12 months prior to the accident and was being prepared for increased activity when the accident occurred.
The ICAM report concluded that ground support was inadequate to provide a safe work environment. If the decline had been supported in accordance with approved ground support standard the incident would not have happened.
I am objectively satisfied when applying statutory factors under s 4 Occupiers' Liability Act 1985 (WA) in relation to breach of duty the facts show that a finding of liability against MMG was likely in this case:
(a)the gravity and likelihood of the probable injury were high if steps were not taken to protect the wall of a decline in the mine against rock fall;
(b)the circumstances of the plaintiff's entry onto the premises were that he entered under a contract to perform work as a grader operator. MMG was obtaining a commercial benefit from his presence;
(c)the nature of the premises, being a mine;
(d)MMG knew that grader operators would be in the mine;
(e)the age of the plaintiff, he was 46 at the time of the accident;
(f)the plaintiff was not in a position to appreciate the danger; and
(g)the burden on the occupier of eliminating the danger or protecting the person entering the premises from danger was an ordinary incident of mine operations; and the risk of the danger to persons was high and not removed because:
(i)ground support was not in accordance with approved instructions; and
(ii)there was no evidence of check scaling and ground support inspections which were usually required.
Applying the factors set out in s 5B of the Civil Liability Act 2002 (WA) (CLA) in relation to duty of care achieves a similar result:
(a)the risk of injury was foreseeable and not insignificant;
(b)there may have been a significant probability that harm would occur if care were not taken;
(c)a reasonable person in the position of MMG would have taken precautions against the risk of harm.
(d)if harm occurred it might be serious; and
(e)the burden on the occupier of eliminating the danger or protecting the person entering the premises from danger was an expected burden for a mine operator was expected to bear in order to reduce or eliminate the high risk of injury from rock fall in a mine.
Chaucer submits that at the time MMG settled the claim liability was not a foregone conclusion and that the settlement failed to discount the value of the plaintiff's claim for the risk that he might not succeed on liability or be found to be contributorily negligent.
Chaucer in its closing submissions questions the plaintiff's credibility as to how the accident happened citing the omission in the initial report of the use of excessive force to turn the header off.
It also challenges the ICAM report on the basis that it was not signed, is undated and does not refer to any specific mining regulations or specified standards. It does accept that the ICAM report suggests MMG might have exposure on the issue of liability.
As regards the ICAM report I do not accept the submission of Chaucer. The report was prepared by an investigation team comprising of Luke Harris, MMG superintendent health and safety, Mark O'Malley superintendent mining contracts, Nigel McIvor, service crew and safety representative and Craig Harper, CEC safety and training advisor. The fact that report reached what can only be viewed as adverse conclusions against the employer of three of the authors speaks to its objectivity. The report specifies that the ground supports in the mesh and bolted area were not to the required standards as mesh was installed at 4.1 m above the floor when it ought to have started 3.5 m above the floor level.[14]
[14] Exhibit 10; TB 234.
In closing submissions Chaucer also challenges the admissibility of and findings of the expert report commissioned by the plaintiff's solicitors from Mr John Dunlop.[15] Mr Dunlop holds a Masters of Engineering Science (Mining) and is a fellow of the Australian Institute of Mining and Metallurgy (AusIMM) with extensive experience in operational, management and consulting roles spanning 47 years. Mr Dunlop's conclusions did not differ in any significant way from the ICAM report. He concluded the required measures to prevent the rock falling from the shoulder of the main decline were not followed and were therefore not in place at the time of the accident. These measures being assessment of the effectiveness of the rockbolts and steel mesh which were installed in 2009. He found the steel mesh did not extend sufficiently far enough down from the shoulder of the decline profile as required by MMG's installation specifications. As a result rocks became loose over time which were not adequately restrained by the wire mesh.
[15] Exhibit 55.
Mr Dunlop found there was insufficient ground control monitoring of the area, which if there had been, would have identified the risk of a rock falling. In his opinion the loose rock was located in such a position as to present a hazard to anyone who might happen to be operating the air or water valves located in the fall path of the loose rock.
Mr Dunlop's report is consistent with the ICAM report. His qualifications and experience are appropriate to qualify Mr Dunlop as an expert in relation to the opinions expressed therein. He specifically referred to the Western Australian Mines Safety and Inspection Regulations 1995 (WA) and the requirements for the annual updating of a ground control management plan.[16] MMG did not have such a plan.
[16] TB 705.
The combined effect of the reports undoubtedly impacted on MMG's consideration of the risk of proceeding to trial on the issue of liability. From an objective view point it is difficult to see how liability could have been denied by MMG.
I do not accept the submission of Chaucer in relation to the plaintiff's credibility.
In relation to the plaintiff's credibility if it was he who described to the ICAM report authors using excessive force to turn the header off then his credibility is not impacted in any way. He could only be described as being forthright and honest. Alternatively, if the term 'excessive force' was an opinion reached by the report authors independently of anything said by the plaintiff, then this is not relevant to the plaintiff's credibility.
It is to be noted from medical reports tendered in evidence which were obtained at the request of the plaintiff's solicitors and Allianz that the plaintiff is described variously as 'straightforward and focused' with no discrepancy between his reported symptoms and his clinical findings;[17] 'straightforward and co-operative who gave an uncomplicated account of his problems and there were no inconsistencies noted with examination';[18] and 'a very straightforward chap who will try his best to maximise his recovery if at all possible'.[19] There is no suggestion in any of the documents tendered that the plaintiff was anything other than straightforward and honest in his dealings with the medical and occupational professionals seen by him after the accident. Those materials were in the possession of MMG when it compromised the action and must have impacted on its assessment of the appropriate settlement amount. Looking objectively at the materials before me nothing contained therein impacts on the credibility of the plaintiff.
[17] Exhibit 25, Dr Mary Wyatt's report, 20 May 2014.
[18] Exhibit 33, Dr Mary Wyatt's report, 28 January 2015.
[19] Exhibit 20, Mr Paul Taylor's report, 11 February 2014.
From an objective viewpoint I am satisfied that there was little, if any, likelihood, of the plaintiff being found liable for contributory negligence based on the expert reports. If the rock was dislodged by the plaintiff turning the header tap off, an adequate ground support system may have prevented it from falling by containing it within the mesh or it may have been prevented from falling if an inspection had identified it as loose. The appropriate discount for such a remote risk is in my view reasonably encompassed in the total discount of 35% - 40% in settlement of the claim which I shall refer to when dealing with quantum.
It follows that the reasonableness of the settlement should be viewed in the context that had the matter proceeded to trial MMG was likely to be found liable for damages sustained to the plaintiff who did not have any readily foreseeable credibility issues, and who was unlikely to be found to have contributed to causing the accident.
I now turn to manner in which each party has assessed quantum.
Submissions of MMG on quantum of plaintiff's claim
It is useful to set out the calculations of the parties on quantum in full:[20] (substituting exhibit references for trial brief references)
[20] Defendant's submissions on reasonableness of settlement dated 12 September 2018, pars 40 ‑ 73.
MMG's calculations
General damages
The plaintiff sustained head and neck compression injuries. The rock pierced his helmet and caused a soft tissue indentation on his scalp.[21] He developed a haematoma at the point of contact.[22] He subsequently complained of nausea, headaches, neck pain, left shoulder pain and a minor injury to his right arm.[23]
[21] Exhibit 19.
[22] Exhibit 20.
[23] Exhibit 19, Exhibit 20, Exhibit 23, Exhibit 25 and Exhibit 38.
The plaintiff was ultimately diagnosed with a mildly arthritic neck which was rendered symptomatic by the rock fall and ongoing neck muscle spasms were causing his pain and cervicogenic headaches.[24] His neck pain failed to permanently improve despite three cervical and occipital nerve facet block injections, one of which was performed under general anaesthetic.[25] He was left with chronic neck pain which was thought would gradually improve over the next two to three years.[26] Due to a worsening of symptoms by April 2015, he underwent investigations of potential left shoulder pathology which identified mild degeneration and inflammation and prominent C3/4 disc protrusion with possible C4 nerve compression.[27] In addition to neck pain and headaches, the plaintiff has complained of pressurised ringing in both ears. Investigations identified typical noise induced hearing loss and his neck pathology being the likely source of his tinnitus. He was provided with general guidance on management of his hearing complaints with no specific treatment regime.[28]
[24] Exhibit 32, Exhibit 33.
[25] Exhibit 21, Exhibit 22, Exhibit 23, Exhibit 27, Exhibit 28, Exhibit 29, Exhibit 30 and Exhibit 31.
[26] Exhibit 33.
[27] Exhibit 34.
[28] Exhibit 32, Exhibit 33, Exhibit 34, Exhibit 35, Exhibit 36 and Exhibit 37.
By October 2015 he continued to experience headaches and neck pain and also complained of altered sensation in his left arm and hand. He was assessed as unable to work in his pre-accident occupation in the future.[29]
[29] Exhibit 39.
The plaintiff received extensive medical treatment including acupuncture, manual therapy, electrotherapy, physiotherapy, hydrotherapy, medication, facet joint injections and a gym program.[30]
[30] Exhibit 16, Exhibit 25 and Exhibit 33.
His symptoms had impacted on his quality and enjoyment of life. He ceased his favourite activities of riding quad bikes and road bikes and going fishing, boating and walking in the bush.[31]
[31] Exhibit 47.
A reasonable award for damages for pain and suffering and loss of enjoyment of life may have been of the order of $60,000 or more. After the deduction required by the Civil Liability Act (CLA) this would still be around $40,000.
Economic loss
The plaintiff completed Year 10 at high school and then worked on a cattle station for four years before spending 28 years as a machine operator (sometimes in a supervisor/manager capacity) in the mining and other industries. At the time of the rock fall, he was working 12 hour shifts on a two week on one week off rotating roster.[32]
[32] Exhibit 44, Exhibit 45, Exhibit 46 and Exhibit 47.
Following the rock fall, the plaintiff initially returned to excavation work which caused an increase in symptoms. He then operated a front end loader before being relocated to office work performing alternative duties including light vehicle driving and general cleaning. His neck pain and headaches increased throughout the day and he was stood down from work after exhibiting signs of distress which placed him at risk of further injury.[33]
[33] Exhibit 44, Exhibit 45, Exhibit 46 and Exhibit 47.
He moved into general labouring duties and trade assistant duties by May 2014.[34]
[34] Exhibit 44, Exhibit 45, Exhibit 46 and Exhibit 47.
By the following month, CEC had no more light duties and he was redeployed to work for Josh Oliveri Auto Electrical.[35]
[35] Exhibit 44.
For workers' compensation the plaintiff was paid $2,411.94 gross ($1,714 net) per week for the first 13 weeks, which was then reduced to $1,905.68 gross ($1,402 net) per week in accordance with the provisions of the WCIMA.[36]
[36] Exhibit 14.
He redeemed this claim on 8 May 2015. By that time he had received $138,073.30 in weekly workers' compensation payments.[37] The plaintiff was earning at least $1,714 net per week prior to the rock fall. He had not returned to work before the redemption.
[37] Exhibit 16.
The plaintiff was not fit to return to his pre-injury role because he needed to avoid coarse vibrations, awkward postures and heavy lifting above shoulder height.[38]
[38] Exhibit 33, Exhibit 39.
He underwent a vocational assessment in December 2014 which suggested he was suited to obtaining qualifications and then working as an aircraft mechanic (a role which was not achievable within the workers' compensation scheme). He was assessed as fit for work as a plant operator in the manufacturing or construction industries or machine operator in some roles.[39]
[39] Exhibit 45.
The plaintiff's tax returns show the following income from employment:[40]
[40] Exhibit 68.1-13.
(a)financial year ending 30 June 2007: $86,010 (gross/year) $1,299 (net/week);
(b)financial year ending 30 June 2008: $93,484 (gross/year) $1,302 (net/week);
(c)financial year ending 30 June 2009: $97,689 (gross/year) $1,385 (net/week);
(d)financial year ending 30 June 2010: $78,215 (Gross/year) $1,160 (Net/week);
(e)financial year ending 30 June 2011: $120,579 (gross/year) $1,665 (net/week);
(f)financial year ending 30 June 2012: $126,209 (gross/year) $1,725 (net/week);
(g)financial year ending 30 June 2013: $114,922 (gross/year) $1,616 (net/week); and
(h)financial year ending 30 June 2014: $121,240 (gross/year) $1,692 (net/week).
These documents confirm that $1,714 net per week was a reasonable assessment of the plaintiff's pre-accident earning capacity.
He returned to work on 28 July 2015 as a truck driver.[41]
[41] Exhibit 51.
From 28 July 2015 to 30 June 2016 he earned $65,105 taxable income and $52,400 net of tax income or about an average of $1,100 net per week over 48 months. In the following financial year his pay slips suggest a total for net income of $43,000 over about 38 weeks or an average of $1,130 per week.[42]
[42] Exhibit 51.
The plaintiff's weekly loss, after he returned to work was of the order of $600 per week.
His past net of tax loss to the end of July 2015 was about $155,000. He also paid about $35,000 income tax on the workers' compensation (estimated at about 22.5% of gross income). From August 2015 to August 2017 his ongoing weekly loss was of the order of $600 per week, or a further $62,000.
Hence past loss of earnings was of the order of $250,000.
Interest would not be recovered on the estimated net of tax workers' compensation payments of $103,500, because no financial loss was incurred to the extent of those payments. The net past loss was $51,500. Interest on loss to the end of July 2015 would be about $2,700 ($51,500 x 1.75 years x 3%). Interest on the loss from August 2015 was about $3,700 ($62,000 x 2 x 3%) giving estimated interest loss of more than $6,000.
Past loss of superannuation may have been of the order of 10% of past economic loss or $25,000 (estimated 9% of gross income [1 and 1/3 of net income] reduced by 25% for costs of superannuation).
In August 2017 the plaintiff was 50 years old. He had the potential to work another 17 years (to age 67) or more as a grader operator in a mine. Loss at the rate of $550 per week for 17 years, using a 6% weekly multiplier of 563, would be $310,000. The application of a factor of 5% for contingencies that might adversely affect the fact and rate of earnings would reduce future earnings to $295,000.
Future loss of superannuation might be of the order of $25,000.
Gratuitous or paid services
Heavier tasks were undertaken with pain.[43] In the future the plaintiff may have required paid services for heavier household tasks. An allowance of $5,000 might be appropriate to cover a lifetime of potential need for assistance.
[43] Exhibit 25, Exhibit 32 and Exhibit 33.
Futuretreatment
Some future treatment might be required to address the plaintiff's pain. An orthopaedic surgeon suggested the plaintiff might benefit from rhizotomies to his upper and mid cervical spine.[44] An allowance of $10,000 might be appropriate to cover a lifetime of potential need for treatment.
[44] Exhibit 39.
Special damages
The plaintiff received treatment that was paid as statutory allowances under workers' compensation, totalling $32,209.[45] In addition he incurred expenses of $5,239.[46]
[45] Exhibit 14, Exhibit 15 and Exhibit 16.
[46] Exhibit 59.
Summary
A reasonable assessment of damages would approach $670,000:
General damages $40,000.00
Past economic loss and superannuation
and interest $280,000.00
Future economic loss and Superannuation $295,000.00
Paid or unpaid services $5,000.00
Special damages $37,000.00
Future treatment $10,000.00
The plaintiff's particularised claim was for almost $750,000.[47]
The settlement sum was $430,000. This represents a discount of more than 40% on the amount claimed and more than 35% on the damages assessment set out in these submissions.
If $170,000 were deducted from the assessment of $670,000 the result would still be an amount ($500,000) greater than the settlement sum.
If general damages were as low as $30,000 and future economic loss reduced to a 'global' allowance of $100,000 for the value of the lost opportunity to work in higher paid work in the mining industry the assessment ($530,000) would still be greater than the settlement sum.
There is also value in settling to avoid not only the risk that a court might award a higher sum but also the risk of incurring further, substantial and potentially irrecoverable, legal costs.
[47] Papers for the judge, pars 28 ‑ 35.
It is to be noted that the plaintiff's particulars of damages filed 9 December 2015 in the sum of $749,499 did not include special damages, did not discount future loss economic loss which was particularised at $410,627 ($721 net per week for 19 years), nor did it incorporate an amount for general damages.
The amount paid by the workers' compensation insurer was stated to be $178,073 in weekly payments including the Fox v Wood component and $44,709.81 for medical, vocational, rehabilitation and travel expenses in the particulars of claim.
Submissions of the third party on quantum
Chaucer's calculations on damages are as follows:[48]
[48] Submissions filed 13 September 2018.
Head of Damage
Calculation
General Damages:
$19,000 - $24,000
(after CLA s 9 $21,000 deduction)
Fox v Wood component:
$35,000 (approximate)
Past Economic Loss, including lost superannuation and interest:
$40,000 - $70,000
Future Economic Loss, including lost superannuation:
$125,000 - 135,000
Gratuitous or paid services:
Nil (below CLA s 12(3) threshold)
Future treatment:
$5,000 - $7,500
Special damages:
$45,000
Sub-total:
$269,000 - $316,500, but say $270,000 ‑ $320,000
Less Workers' Compensation:
$222,783.11
Total:
$47,216.89 - $97,216.89, but say: $50,000 ‑ $100,000
Notes on quantum calculation 'A' general damages
A range $40,000 ‑ $45,000, before a CLA s 9 deduction, is appropriate bearing in mind that the plaintiff's main concern was neck pain, he did not require surgery and had been and would be able to work full time in a job suited to him by his wide range of qualifications, skills and experience.[49]
[49] Exhibit 33, Exhibit 44 and Exhibit 47.
Past economic loss
Period 1: February 2014 ‑ 28 February 2015 (52 weeks) the plaintiff was fit for truck driving during this period, as evidenced by his work for CEC between November 2013 and June 2014 and his work for Josh Oliveri Electronics[50] after that. Also, by opinions expressed by Dr Wyatt, Consultant Occupational Physician, in her reports dated 14 May 2014[51] and 28 January 2015[52] and by Dr Cheung, Adult Spinal Surgeon, in his report dated 3 August 2015.[53] During this period, there is about a $600 net per week difference between: a) what the plaintiff was earning with CEC at the time of his accident ($1,714 net per week - defendant's submissions on the reasonableness of the settlement, [55]); and b) the plaintiff's earning capacity as a truck driver ($1,130 net per week - defendant's submissions on the reasonableness of the settlement, [57]):
[50] Exhibit 45.
[51] Exhibit 25.
[52] Exhibit 33.
[53] Exhibit 38.
52 weeks x $600 net loss per week = $31,200.00.
Interest, $31,200 x 3% x 3.4 years = $3,182.40.
Past loss of superannuation, say $798 gross loss per week x 10% x 85% (Jongen 15% discount) x 52 weeks = $3,527.16.
Interest on past loss of superannuation, $3,527.16 x 3% x 3.4 years = $359.77.
Total economic loss for the period: $38,269.33, but say $40,000.
Period 2: 1 March 2015 ‑ 30 June 2017 (122 weeks).
Based on the contents of the report of the defendant's expert Professor Mulvey dated 19 May 2017,[54] the plaintiff's earning capacity but for the Accident during this period had he continued working as an underground grader operator, would have been in the region of $80,000 - $100,000 gross per annum (not the $125,372 gross per annum claimed in the plaintiff's particulars of damages):
[54] Exhibit 56.
Scenario 1: If the plaintiff's earnings but for the Accident were $80,000 gross per annum (say $60,853 net per annum), he would have been exercising a capacity to earn $1,538.46 gross per week or $1,170.25 net per week. This would mean the plaintiff had no ongoing loss per week.
Scenario 2:If the plaintiff's earnings but for the Accident were $100,000 gross per annum (say $73,053 net per annum), he would have been exercising a capacity to earn $1,923.08 gross per week or $1,404.87 net per week. This would mean the plaintiff had an ongoing loss of approximately $300 net per week.
A $300 net loss per week x 122 weeks = $36,600, less one third for the prospect that the plaintiff would have moved to Queensland and stopped working on a remote mine site during this period even if the Accident had not happened = $24,400.
Interest, $24,400.00 x 3% x 2.3 years = $1,683.60.
Past loss of superannuation, say $399 gross loss per week x 10% x 85% x 122 weeks = $4,137.63, less one third for the prospect that the plaintiff would have moved to Queensland and stopped working on a remote mine site during this period even if the Accident had not happened = $2,758.14 Interest on past loss of superannuation, $2,758.14 x 3% x 2.3 years = $190.31. Total economic loss for the period between nil and $29,032.05, but say $30,000.
Total past economic loss for periods 1 and 2, between $40,000 and $70,000 inclusive of superannuation and interest.
Future economic loss
Given the physical demands of a FIFO worker working 12 hour shifts on a two weeks on one week off roster, and of working underground on a remote mine site and that the plaintiff (DOB -22 March 1967): was 50 years of age when his action settled:
•regularly changed jobs and had only been working for CEC for about six weeks at the time of the Accident;[55]
[55] Exhibit 47.
•worked in South Australia, Queensland and the Northern Territory before working for CEC;[56]
[56] Exhibit 25 and Exhibit 47.
•suffered a work related knee injury whilst working at a remote mine site for Byrnecut, his employer immediately before he worked for CEC;[57]
[57] Exhibit 53.
•suffered from an ongoing thoracic spine injury prior to starting work for CEC, for which he was taking Mobic anti‑inflammatories;[58] and
[58] Exhibit 48 and Exhibit 53.
•and his family moved to Queensland in early 2015, which might have happened even if the Accident had not happened,[59] a reduction of one third should be made to any allowance for net loss per week through until retirement age for contingencies and given the real prospect that the plaintiff would not have worked again on a remote mine site.
[59] Exhibit 33.
A reasonable allowance for future economic loss is as follows: Say $300 net loss per week x 562.9 (multiplier for 17 years) = $168,870.
Superannuation, say $399 gross loss per week x 10% x 85% x 562.9 (multiplier for 17 years) = $19,090.75 $168,870 + $19,090.75 = $187,960.75, less one third for contingencies and for the prospect that the plaintiff would not have worked again on a remote mine site even if the Accident had not happened = say $125,000 ‑ $135,000 inclusive of superannuation.
Alternatively, a lump sum for the plaintiff's reduced parameters of employment of say, $100,000 ‑ $125,000.
Gratuitous or paid services
An allowance of $5,000 is below the CLA, s 12(3) threshold and so no allowance should be made.
Future treatment
$5,000 ‑ $7,500 is an appropriate amount for future treatment expenses given the need to take into consideration the deferral factor of calculating the cost of possible rhizotomies and steroid injections in the future, as well as the possibility that he may need to undergo a left ankle arthroscopy.[60] A global allowance has also been made for the plaintiff's ongoing simple medication requirements.[61]
Calculation of the quantum of Allianz's claim against the defendant for recovery of workers' compensation paid by Allianz to the plaintiff but for the settlement
Allianz paid the plaintiff $220,984 in workers' compensation: Settlement agreement, Recital G.
Section 92(c), alternatively s 93, of the Workers' Compensation and Injuries Management Act 1981 (WA) required the defendant to pay to CEC the whole of the amount of the workers' compensation Allianz paid to the plaintiff.
[60] Exhibit 32 and Exhibit 39.
[61] Exhibit 39.
Chaucer argues the plaintiff's long term thoracic spine pain should have been taken into account, along with his age and his move from Western Australia to Queensland, in formulating a view on how long the plaintiff would have continued working in remote areas if not for the accident. It argues that the plaintiff was unlikely to work until retirement age in his pre‑accident occupation.
Secondly, it argues the settlement for $430,000 plus costs of $58,500 is worth about $50,000 more because the plaintiff retained that amount of workers' compensation already paid (the shortfall between what Allianz paid the plaintiff and what it recovered from MMG).
Thirdly, MMG elected not to adduce in evidence:
(a) the legal advice given to MMG about settlement;
(b)MMG's negotiations with the plaintiff or Allianz leading to the settlement; or
(c)what was said in the course of in the course of negotiations by the plaintiff that may be relevant to the reasonableness of the settlement with him.
This is notwithstanding the provisions in the settlement agreement which required the plaintiff to co-operate with MMG in pursuing the third party proceedings.[62] Chaucer argues MMG failed to call the plaintiff to give evidence about the circumstances of the accident and the injuries and their effect. Had the plaintiff been called, they argue, questions as to why he relocated to Queensland and when he planned to retire from underground mining work could have been answered.
[62] Exhibit 3, clause 5.1 and clause 11.2(c).
Fourthly, Chaucer submits that MMG should have discounted the quantum of the plaintiff's claim by about 20% for the risk of losing on liability, including the chance that he might have suffered a reduction for contributory negligence.
Finally, Chaucer argues that the settlement with the plaintiff was also unreasonable because by reason of the 'Waiver of subrogation' condition, MMG never had a liability to pay the amount of workers' compensation to Allianz or if it did, Allianz was obliged to hand it back.
Findings on reasonableness of settlement
I am satisfied having taken into account the medical reports, vocational reports and tax returns that the settlement reached between MMG and the plaintiff was within a reasonable range. The settlement was discounted significantly from the amount claimed by the plaintiff which is sufficient to incorporate any risk of the plaintiff losing on liability or a reduction for contributory negligence.
I am also satisfied based on the medical reports and vocational rehabilitation reports that the plaintiff did all he could to rehabilitate himself into alternative employment.
Move to Queensland
It is evident that the plaintiff made the decision to relocate to Queensland to live with his long term partner because he was unable to return to his pre-injury role on a full-time basis.[63] The plaintiff's choice to relocate to Queensland with his partner has no bearing in my view, on the loss of his ability to perform underground grading work. The medical experts are uniform in their view that the plaintiff was unable to return to his pre‑accident employment. This was employment that he had been engaged in for a number of years. Prior to the accident the plaintiff had worked in Western Australia since 2002 for various employers at locations around the state. His roles included excavator driver, grader driver, loader, underground road train worker, leading hand, truck driver and underground grader operator. He had previously worked for CEC at the Golden Grove mine as an underground grader operator in January ‑ April 2007.[64] It is clear from the plaintiff's resume that he had worked in a variety of employments driving heavy machinery above and below ground in Western Australia, South Australia and the Northern Territory. There is no evidence to suggest that he would have relocated to Queensland had the accident not happened. Even if he had done so there is nothing to indicate that he would not have continued doing the same work in Queensland. I do not accept the submission that a discount of one third was appropriate to take into account the possibility the plaintiff would not work again remotely after returning to Queensland. The 6% deduction for contingencies made in the MMG calculations is appropriate in my view.
Failure to call the plaintiff to give evidence
[63] Exhibit 47; TB 458.
[64] Exhibit 47.
The plaintiff provided a statement of evidence to Allianz. I am satisfied that had the plaintiff been called to give evidence it is unlikely that he would have departed from this statement or from what he told the medical and vocational practitioners. At the time the statement of evidence was taken the plaintiff was working in the CEC workshop/office carrying out modified duties. He said it was his intention to return to his normal full time employment as a grader operator with CEC. At that point he had not lost any time from work. I have no reason to doubt the veracity of the plaintiff's intention contained in the statement of evidence.
Impact of pre-existing back injury
Chaucer argues the plaintiff's longstanding back injury may have prevented him from working until 65 as a machine operator. The injury was incurred by the plaintiff when he was 28. He disclosed that he was taking Mobic in his initial medical evaluation for employment with CEC.[65] A musculoskeletal and fitness assessment was carried out on 16 September 2013.[66] The plaintiff was assessed as having excellent range of motion, knee function and lifting technique. His upper limb and trunk strength was rated as very good, his overall assessment score was 98/100. He was assessed as fit for the job role with an overall risk assessment rated as 'low'.
[65] Exhibit 48.
[66] Exhibit 50.
That the plaintiff did not characterise his back injury as a disability in his statement of evidence is not surprising given the fact it had not prevented him from working in in the mining industry driving heavy machinery for many years prior to the accident. I am satisfied that the plaintiff's back injury was not impacting in his ability to perform his employment and there is no evidence to suggest it would have done so in the future.
The plaintiff underwent a left knee arthroscopy for a small meniscal tear in early 2012. He was off work for seven weeks. The problems in his knee joint had settled with no ongoing problems.[67] There is no evidence to suggest the knee issues impacted on his ability to perform his work with CEC or would cause issues in the future.
[67] Exhibit 32; TB 325.
Accordingly, no discount to the plaintiff's damages assessment was appropriate.
Discount for period November 2014-July 2015
I do not accept the submission of Chaucer that a discount is appropriate for the period November 2014 and July 2015 when the plaintiff did not work. The plaintiff was undergoing a return to work program with Josh Oliveri Electronics[68] until 22 December 2014. On 17 January 2015 he relocated to Brisbane, Queensland after it became evident that he would not be able to resume his pre-accident employment on a full-time basis. The plaintiff underwent an assessment with Freshstart Injury Management before leaving Western Australia on 16 January 2015. The rehabilitation goal of 'new employer/new duties' was established. At that point retraining as an aircraft mechanic was being investigated. The Freshstart report dated 22 January 2015,[69] confirms there was no work hardening program available for the plaintiff to continue working for 45 hours per week. At that point he was certified fit to work five days 9 hours a day performing light alternative duties. The plaintiff continued to attend Freshstart Injury Management for vocational rehabilitation assistance between January 2015 and March 2015. He was then able to find alternative work as a truck driver, the role he currently undertakes. Whilst the plaintiff did not engage in paid employment during the period November 2014 ‑ July 2015 I am satisfied that he was taking all reasonable steps to secure alternative employment and re-train himself during this period.
Chaucer's involvement in settlement
[68] Exhibit 45.
[69] Exhibit 47.
Attached to the third party's closing submissions, are letters dated 21 June 2017 and 24 January 2018 from its solicitors to MMG's solicitors. It is clear from that correspondence that the third party's solicitors were aware of the dates of the pre-trial conferences and made submissions in relation to the settlement of the plaintiff's claim. It also seems that representatives of the third party attended at or were in telephone communications with MMG's lawyers during various pre‑trial conferences after notice of the third party claim was given.[70] It seems that solicitors were updated on the progress of negotiations between MMG, Allianz and the plaintiff. In the letter dated 21 June 2017 the third party agreed not raise as a defence to the third party proceedings the unreasonableness of any settlement reached between MMG and the plaintiff of up to $360,000 inclusive of costs and interest. It is clear they had sufficient information in respect of the plaintiff's claim to make an assessment on quantum.
[70] Exhibit 4 and Exhibit 1.
It is also clear that the third party was made aware that MMG had offered the plaintiff $550,000 inclusive of workers' compensation and costs to settle the matter at the previous pre-trial conference. The settlement finally reached with the plaintiff was on more favourable terms to MMG than the initial settlement offer it made at the pre-trial conference. That is a factor I take into account in assessing the reasonableness of the settlement reached.
It is also clear from the correspondence of 21 June 2017 that the third party was aware of negotiations between MMG and Allianz to reduce the workers' compensation recovery amount. In that letter the agreed recovery amount was stated to be $140,000 rather than the $223,000 actually paid to the plaintiff.
In light of this correspondence I do not accept the third party's submissions at pars 39 and 82 of its closing submissions that it is 'groping in the dark' in understanding why MMG settled the plaintiff's claim for the amount it did and how the negotiations unfolded. It had clearly been appraised of the settlement negotiations, had input and made submissions as to the reasonableness of MMG's offer of $550,000 to the plaintiff and to the negotiations that it was involved in with Allianz to reduce the workers' compensation contribution.
I am satisfied based on the submissions on the reasonableness of settlement filed by MMG in this matter and the calculations contained therein that the settlement was within a reasonable range. The settlement sum was adequately discounted to take into account any risks on liability.
In this case there were sufficient materials available to assess the claim, it was not necessary to hear evidence from the plaintiff or the legal advisers of MMG as to the settlement negotiations.
Having reached the view that the settlement sum was reasonable the next question to determine is whether the settlement sum should be reduced by the $170,000 paid to Allianz.
Should MMG's claim for indemnity be discounted by $170,000
Component
Allianz had paid workers' compensation of $220,984 to the plaintiff pursuant to the Allianz Policy. As part of the settlement between the plaintiff and MMG, MMG paid $170,000 to Allianz. This payment was described in the settlement deed as 'discounted workers compensation recovery'. MMG argues that this description is inaccurate as the $170,000 represented a partial repayment of the workers' compensation payments paid to the plaintiff that otherwise would have been required to be deducted from a judgment sum pursuant to s 92 of the WCIMA.
Chaucer submits it is not liable for the $170,000 portion of the settlement sum because Allianz had waived its right of subrogation and because of the workers' compensation exclusion in clause 6.1 of the Chaucer Policy.
Waiver of subrogation
The insuring clause in the Chaucer Policy requires Chaucer to pay to or on behalf of MMG all claims which MMG 'shall become legally liable to pay'. Chaucer submits MMG was never legally liable to pay to Allianz the amount of workers' compensation paid by Allianz, for and on behalf of CEC, to the plaintiff, and accordingly, the policy does not cover the $170,000 recovery component of the settlement.
It submits that the waiver of subrogation condition in the Allianz Policy is intended to work in this way:[71]
[71] Closing submissions, pars 24 ‑ 29.
If:
(a)CEC is liable to pay workers' compensation to an employee; and
(b)Allianz, pursuant to the Allianz policy, indemnifies CEC for that liability by paying the workers' compensation to the employee, then subject to any 'waiver of subrogation' condition,
Allianz, by its right of subrogation, is entitled to:
(a)bring a claim in CEC's name, pursuant to s 93 WCIMA for recovery of the workers' compensation paid by it, against MMG (as the party that negligently caused the injury that gave rise to CEC's liability to pay); and
(b)require CEC to account to it for the receipt from MMG by reason of s 92(c) WCIMA, of any amount of workers' compensation paid by Allianz to the plaintiff.
Chaucer argues the waiver of subrogation clause in the Allianz Policy prevented any right of subrogation against a principal of CEC, the principal being MMG. It had no right to diminish its loss under the policy by receiving payment of the workers' compensation payments from MMG. If Allianz had tried to stand in the shoes of CEC to recover from MMG the workers' compensation payments it had made to the plaintiff pursuant to s 93 of the WCIMA, MMG could have defended the claim by saying the waiver of subrogation clause meant Allianz had no right to bring that action. If Allianz had no right to recover workers' compensation payments from MMG pursuant to s 93, but was entitled to receive and retain any payments of the amount of workers' compensation by MMG to CEC or Allianz pursuant to s 92(c) this would be an odd result.
It argues that MMG did not, in terms of the insuring clause, suffer a loss in respect of the liability because by reason of the waiver of subrogation condition Allianz agreed not to pursue MMG for recovery of the workers' compensation paid by CEC notwithstanding s 92(c) WCIMA. Further, notwithstanding s 301 WCIMA, (which prohibits contracting out of the provisions of the WCIMA), Allianz, CEC and MMG agreed on a recovery amount different to the recovery regime established by s 92(c) ($170,000 not the $220,984 paid to the plaintiff).
MMG argues Chaucer's submission is not supported by ambit of application of a waiver of subrogation rights clause. Allianz was not purporting to exercise a subrogation right in the litigation to which MMG was a party. Allianz had not commenced proceedings against MMG. The potential liability of MMG was to pay damages to the plaintiff. It was not a liability to Allianz.
MMG argues the settlement outcome was a judgment for damages. Pursuant to s 92(c) WCIMA judgment is to be entered for the full amount of damages claimed by a worker without regard to the compensation paid to the worker in accordance with the authority of Co-operative Bulk Handling Ltd v State Government Insurance Commission(1990) 3 WAR 145, 152. By the operation of s 92(c) the amount of workers' compensation paid is deducted from the damages (and hence a component of damages, rather than workers' compensation, is deducted) and repaid to the employer. The insurer who paid the workers' compensation then has an equity in that repaid sum that is held by the employer for the benefit of the insurer. The intention underlying the operation of s 92(c) is to avoid (double) recovery by a worker of both workers' compensation and damages for the same loss. It is distinct from the commonly understood meaning of 'subrogation' of an insurer using the insured's name to bring a recovery claim against a third party and distinct from the type of waiver clause under consideration in Woodside Petroleum Development Pty Ltd v H & R - E & W (1997) 18 WAR 539.
Relevant provisions of WCIMA
92.Both damages and workers' compensation not recoverable
Where in respect of an injury an action is brought by a worker for damages independently of this Act against his employer or against some other person (referred to in this section as the defendant) or against both of them -
(a)if the court decides the action should succeed, then after damages have been ascertained but before judgment is entered for the worker in the action, the worker shall be given a reasonable opportunity to elect whether to have judgment or to discontinue the action;
(b)if the action proceeds to judgment, including the acceptance of an offer to consent to judgment, against the employer only or against the employer and the defendant, there shall be deducted from the amount of the judgment and be paid to the employer a sum representing the amount (after apportionment in respect of any contributory negligence of the worker) actually recoverable by the worker by way of weekly or lump sum compensation, medical and other expenses paid pursuant to this Act, but where liability is apportioned between the employer and the defendant the defendant's liability to pay to the worker shall be reduced accordingly;
(c)if the action proceeds to judgment, including the acceptance of an offer to consent to judgment, against the defendant only or is settled by the acceptance of money paid into court by the defendant, the payments and expenses referred to in paragraph (b) shall be a first charge on the judgment or the amount of money paid into court and the defendant shall be bound to pay the amount of the compensation, and medical and other expenses to the employer and the judgment shall be pro tanto discharged by such payment, or the amount due under the charge shall be paid out of court to the employer or his authorised agent, as the case may be;
(d)if the action is discontinued the worker shall pay the costs of the employer or of the defendant or of each of them or such part of those costs as the court thinks fit;
(e)if the action proceeds to judgment, including the acceptance of an offer to consent to judgment, against the employer or the defendant or both or is settled by the acceptance of money paid into court by the employer or the defendant or by both of them, the worker shall not commence or continue proceedings for, or in relation to, compensation under this Act in respect of the same injury;
(f)if a worker's claim for damages against the employer or the defendant is settled by agreement otherwise than by a judgment, an acceptance of an offer to consent to judgment, or an acceptance of money paid into court -
(i)the employer or the defendant shall file a memorandum of the terms of the settlement with the Director within 3 months of the date of its execution by the worker;
(ii)the worker shall not commence or continue a claim for compensation under this Act in respect of the same injury unless the Director disapproves of the settlement within 6 weeks of the agreement for settlement being filed with the Director;
(iii)the Director shall not disapprove of the agreement unless he is satisfied the agreement was induced by fraud or misrepresentation or that it would clearly be for the worker's benefit to disapprove of it;
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93.Remedies against non-employers
(1)Where the injury for which compensation is payable under this Act was caused under circumstances creating a legal liability in some person other than the employer to pay damages in respect thereof but neither the employer nor any person for whose negligence the employer is legally responsible was negligent -
(a)the worker may take proceedings both against that person to recover damages and against any person liable to pay compensation under this Act for such compensation, but shall not be entitled to recover both damages and compensation and shall bring to account in reduction of his entitlement to compensation the amount recovered by way of damages;
(b)the employer is entitled to be indemnified by the person whose negligence caused the injury to the worker (in this section called the defendant) to the full extent of the employer's liability to pay compensation under this Act, whether or not the defendant has discharged his liability to pay damages to the worker by judgment or by settlement or otherwise.
(2)If there were -
(a)negligence by the employer or by some person for whose negligence the employer is legally responsible which caused or contributed to the worker's injury, the extent of the indemnity of the employer by the defendant is reduced by the proportion that the employer's negligence and that of any person for whose negligence the employer is responsible bears to 100%; or
(b)negligence by the worker which caused or contributed to the worker's injury, the extent of the indemnity of the employer by the defendant is reduced by the proportion that the worker's negligence bears to 100%.
(3)All questions as to the right or amount of any such indemnity may, in default of agreement between the employer and the defendant, at the instance of the employer, be determined by an arbitrator on any application made by the worker.
(4)If the defendant has paid the whole or any part of the damages to the worker in respect of the injury caused or contributed to by the defendant and the defendant is required to and has indemnified the employer for the payment of any compensation paid to the worker in respect of the same injury, the defendant may sue and recover from the worker the amount so paid to the employer not exceeding the amount of damages paid to the worker by the defendant.
(5)If the worker has been successful in proceedings to recover damages against the defendant and does not recover the full amount of such damages and any portion of the compensation under this Act paid by the employer to the worker has not been refunded to the employer out of the damages, then the employer may, at his own expense and in the name of the worker and upon giving the worker an indemnity against all costs and expenses, sue and recover from the defendant the amount of any balance of such damages then remaining unpaid, but any damages so recovered from the defendant in excess of the amount of compensation paid to the worker under this Act shall be payable to and received by the worker.
…
301.Contracting out prohibited
Except as provided by this Act, its provisions apply notwithstanding any contract to the contrary.
The relevant principles - Rights of subrogation and indemnity
The relevant principles in relation to subrogation were summarised by Steytler P in Insurance Commission of Western Australia v Kightly [2005] WASCA 154 [26] - [28]:
26The doctrine of subrogation is founded upon equitable principles: Burnand v Rodocanachi Sons & Co (1882) 7 App Cas 333 at 339; John Edwards and Company v Motor Union Insurance Company Ltd (1922) 2 KB 249 at 252 - 253; Australasian Conference Association Ltd v Mainline Constructions Pty Ltd (in liq) (1978) 141 CLR 335 at 348; Guthrie House Ltd v Cornhill Insurance Co Ltd (1982) 2 ANZ Ins Cas 60-466 at 77,610; Morganite Ceramic Fibres Pty Ltd v Sola Basic Australia Ltd (1987) 11 NSWLR 189 at 194; Napier v Hunter [1993] AC 713; and see, generally, the cases reviewed by Meagher, Heydon and Leeming, Meagher, Gummow and Lehane's: Equity Doctrines and Remedies, 4th ed (2002) at [9‑015]. It prevents the insured from making a double recovery, once from the insurer and once from the tortfeasor (in a tort case) in circumstances in which the insurer has undertaken to indemnify the insured against actual financial loss. It does that by giving two rights to the insurer. First, it gives to the insurer the right to require the insured to pursue any remedy available against the tortfeasor for the benefit of the insurer. Second, it gives to the insurer the right to recover from the insured any benefit received by the insured in diminution or extinction of the loss against which the insured has been indemnified. Brett LJ in Castellain v Preston (1883) 11 QBD 380 at 388 described the doctrine in the following way:
[A]s between the underwriter and the assured the underwriter is entitled to the advantage of every right of the assured, whether such right consists in contract, fulfilled or unfulfilled, or in remedy for tort capable of being insisted on or already insisted on, or in any other right, whether by way of condition or otherwise, legal or equitable, which can be or has been exercised or has accrued, and whether such right could or could not be enforced by the insurer in the name of the assured by the exercise or acquiring of which right or condition the loss against which the assured is insured, can be, or has been diminished.
27In the same case, at 401 - 402, Bowen LJ said, of the principle which must be applied, that:
It is a corollary of the great law of indemnity, and is to the following effect:- That a person who wishes to recover for and is paid by the insurers as for a total loss, cannot take with both hands. If he has a means of diminishing the loss, the result of the use of those means belongs to the underwriters. If he does diminish the loss, he must account for the diminution to the underwriters. In Simpson v Thomson 3 App Cas 279, at p 284 it is said by Lord Cairns, LC:
I know of no foundation for the right of underwriters, except the well known principle of law, that where one person has agreed to indemnify another, he will, on making good the indemnity, be entitled to succeed to all the ways and means by which the person indemnified might have protected himself against or reimbursed himself for the loss.
28When the nature and purpose of the equitable doctrine is understood in this way, it is easy to understand why it has often been said to apply only in cases of indemnity insurance: State Government Insurance Office (Queensland) v Brisbane Stevedoring Pty Ltd (1969) 123 CLR 228 at 240 - 241, per Barwick CJ; and Legh-Jones (ed), MacGillivray on Insurance Law, 10th ed (2003), at 578 [22-25] …
Parties to an insurance contract may vary the rights of the insurer under the doctrine of subrogation. In some cases, they agree to the exclusion or restriction of rights of subrogation: Morris v Ford Motor Co Ltd [1973] QB 792.
An insured is entitled to rely on a waiver of subrogation clause. So also is a third party who is entitled to enforce the benefits conferred on him or her by a contract of insurance: Trident General Insurance Co Ltd v McNiece Bros Pty Ltd (1988) 165 CLR 107.
A defendant is entitled to raise a waiver of subrogation clause as a complete defence to an action brought by the insurer in the insured's name that seeks to recover damages: Woodside Petroleum Development Pty Ltd v H & R - E & W Pty Ltd(575).
The Woodside case concerned the effect of a waiver by underwriters of a construction all risks policy of their rights of subrogation against parties expressed to be insured under the policy, but who were not contracting parties thereto. Woodside had developed and operated natural gas fields on the north-west shelf of the coast of Western Australia. In 1987, it decided to construct an oil and gas drilling platform offshore, Goodwyn 'A'. It entered into contracts with numerous contractors for the construction of the platform. The design contract for the substructure of the drilling platform was awarded to H & R - E & W Pty Ltd (HREW). HREW had been formed by two companies Hardcastle and Richards Pty Ltd and Earle and Wright Inc for the purpose of a joint venture. HREW subcontracted the design work to the joint venture. The subcontract provided for HREW to supervise and control the design work. Enserch Corporation indirectly controlled Earl and Wright Inc. Enserch guaranteed HREW's performance of the design contract and agreed to indemnify Woodside against losses incurred by reason of the breach or non‑performance of any of its terms. Woodside subsequently engaged Det Norske Veritas (DNV) to carry out design verification services for the project. Later there was a deed of novation whereby Det Norske Veritas Classification A/S (DNVC) replaced DNV as a party to the design verification contract. DNV guaranteed performance by DNVC of the design verification contract and it agreed to indemnify Woodside against losses incurred by reason of the breach or non‑performance of any of the terms of that contract.
In August 1989 Woodside entered a construction all risks insurance policy in relation to the drilling platform with a group of underwriters. When the platform came to be installed it suffered damage which required remedial work costing in excess of $280 million. Relying on their rights of subrogation some of the underwriters to the all risks insurance policy brought an action in the name of Woodside against HREW, Hardcastle and Richards, Earl and Wright Inc, Enserch Corporation, DNV and DNVC for their proportion of the insured loss, alleging that the loss was caused by design deficiencies for which they were responsible. The definition of 'principal assured' in the insurance policy included Woodside and defined 'other assured's' as:
contractors and any other company firm person or party (including but not limited to contractors and/or subcontractors and/or suppliers) with whom the [principal assured's or the assured's] … have, or in the past had, entered into agreement(s) in connection with the subject matter of Insurance and/or any works, activities, preparations et cetera connected therewith.
By virtue of clause 6 of the insurance policy the underwriters agreed to waive rights of subrogation against any assured.
In defence of the claim each of the defendants claimed to fall within the category of other assured's under the policy and raised as a defence that the underwriters had no right to be subrogated to any claim that Woodside might have against them for the loss that had been sustained by virtue of the waiver of subrogation clause contained in the policy. The primary judge, Anderson J, upheld the contentions of the defendants.
The decision was upheld on appeal. In Woodside Petroleum Development Pty Ltd v H & R - E & W Pty Ltd(1999) 20 WAR 380, 387, Ipp J said:
Ordinarily, the right of subrogation entitles the insurer to the advantage of every right of the assured, whether such a right is contractual, tortious, legal or equitable, 'by the exercise or acquiring of which right or condition the loss against which the assured is insured, can be, or has been diminished' (per Brett LJ in Castellain v Preston (1883)11 QBD 380 at 388).
But the right of subrogation does not entitle the insurer (in the absence of an assignment) to proceed in its own name against the alleged wrongdoer. The insurer is required to obtain authority from the assured authorising the insurer to proceed in the assured's name against the wrongdoer. If the assured refuses to give such authority the insurer can bring proceedings to compel it to do so ... Although no allegation as to the right of subrogation has to be made in the statement of claim, the defendant may raise the absence or inadequacy of that right in its defence; it is then for the insurer to justify its right to proceed in the name of the assured. The other side of the coin is that, where an insurer sues an alleged wrongdoer in its own name, purporting - wrongly - to exercise the right of subrogation, the third party may defend the claim by disputing the existence of any right on the part of the insurer to so bring the action in question.
His Honour went on to say at (389) – (390):
There are a number of authorities which speak of waiver clauses, akin to cl 6, resulting in a 'renunciation', or 'relinquishment' or 'abandonment' by the insurer of rights of subrogation. In my view, these words are not an entirely accurate description of the effect of such clauses. A 'renunciation', or 'relinquishment' or 'abandonment' of rights suggests that rights exist which are given up or lost. In my view, however, waiver clauses such as cl 6 affect rights of subrogation, as it were, at their birth. They prevent any rights of subrogation, to which they apply, from being implied under the contract of insurance or arising in equity. Neither the rules relating to the implication of terms in a contract nor the principles of equity will countenance the existence of a right of subrogation which is in direct conflict with the intention of the policy as reflected by an express waiver recorded therein.
On this construction, cl 6 is not a contractual promise, nor is it a 'benefit of this insurance'; it is merely a convenient way of defining and qualifying the rights of subrogation to which, by the policy, the underwriters become entitled. Thus, in my opinion, by cl 6, the underwriters do not have (and never had) rights of subrogation against persons who fall within the categories it defines. Further, once persons establish that they fall within such a category, they are entitled to challenge the existence of the underwriters' rights of subrogation against them. Their entitlement to do so does not arise because benefits are conferred on them under the policy, but because a basic element is missing from the underwriters' cause of action. …
His Honour considered a series of authorities dealing with whether a stranger to the contract of insurance may raise a waiver of subrogation clause in the insurance policy by way of defence to a subrogated claim commencing with Thomas & Co v Brown (1899) 4 Com Cas 186. His Honour agreed with the views expressed by Anderson J at first instance in Woodside, who said (572):
In my judgement a waiver of subrogation clause in a policy of insurance may be relied on by a person falling within the description of persons against whom subrogation has been waived, notwithstanding that such person is not a party to the contract of insurance or named as an additional assured for whose benefit the scope of cover extends. I take this to be a general rule of insurance law deriving from the first principles of the law of contract, not in any way dependent on the principles laid down in Trident. …
The relevant waiver under a waiver of subrogation rights clause in Woodside was of the right of the insurer to use Woodside's name to sue entities who fell within the definition of other assured in the policy but were not parties to the insurance contract. In Woodside there were sound commercial reasons for Woodside to desire the waiver of subrogation clause to extend beyond the cover provided by the policy. Such reasons were articulated in Petrofina (UK) Ltd v Magnaload Pty Ltd [1984] 1 QB 127 by Lloyd J:
In the case of a building or engineering contact, where numerous different subcontractors may be engaged, there can be no doubt about the convenience from everybody's point of view, including, I would think, insured's, of allowing the head contractor to take out a single policy covering the whole risk, that is to say covering all contractors and subcontractors in respect of loss of or damage to the entire contract works. Otherwise each subcontractor would be compelled to take out his own separate policy. This would mean, at the very least, extra paperwork; at worst it could lead to overlapping claims and cross‑claims in the event of an accident. Furthermore … the cost of insuring his liability might, in the case of a small subcontractor, be an uneconomic. The premium might be out of all proportion to the value of subcontract. If the subcontractor had to ensure his liability in respect of the entire works, he might well have to decline the contract.
The facts in this case differ from those in Woodside. I am satisfied the principles expressed by Ipp J in Woodside in respect of subrogation do not apply in this case. I agree with the submission of the defendant that the principle does not extend to a case where an insurer, in this case Allianz has abandoned its right to assert a claim in equity to recover from its own insured (CEC) an amount that has been recovered from a third party (MMG) that reduces the loss suffered by the insured. I accept the submission of the defendant that a contrary conclusion would lead to double recovery by the insured.
I am not persuaded by any of the authorities referred to me that Chaucer as a third party insurer has the benefit of the waiver of subrogation rights clause in the Allianz Policy. I am fortified in that view by the lack of any relevant authority on point. There is no basis to extend the waiver of subrogation clause in this case in the manner sought by Chaucer.
The amount of $170,000 repaid to Allianz was required to be paid pursuant to s 92 of the WCIMA. The fact that Allianz accepted a lesser amount then it paid to the plaintiff does not impact on the reasonableness of the settlement. Had Allianz insisted on the full amount being paid the settlement sum would have been higher. The reduced amount was recorded in a settlement deed approved by the director of WorkCover and represented a commercial settlement. The fact that a lesser amount was accepted by Allianz cannot be said to be an attempt to contract out the provisions of the WCIMA in the circumstances of this case.
Once a judgment sum is determined by judgment of the court for damages, or in the case of settlement between parties what happens to that judgements sum is impacted by s 92(c) of the WCIMA.
Under s 92(c) of the WCIMA judgment is to be entered for the full amount of damages claimed by a worker without regard to the compensation paid to the worker: Co-operative Bulk Handling Ltd v State Government Insurance Commission; Hi-Tec Demolition Co Pty Ltd v Mainline Demolitions[2000] WASCA 342 [6] (Kennedy J):
This Court has held on a number of occasions that under s 92(b) of the Act, which is concerned with actions for damages against the employer, judgment is to be entered for the full amount of the damages, without regard to the compensation paid to the worker - see Motor Vehicle Insurance Trust v Forbes [1985] WAR 50, at 54; Co‑operative Bulk Handling Limited v The State Government Insurance Commission (1990) 3 WAR 145; Miranda v H B Brady & Co Pty Ltd, unreported; FCt SCt of WA; Library No 940679; 1 September 1994; and EMS Holdings Pty Ltd v International Shipyards Pty Ltd, unreported; FCt SCt of WA; Library No 980655; 12 November 1998; and see also Redding v Lee (1983) 151 CLR 117, at 125. The position is clearly the same in relation to a judgment in an action falling within the terms of s 92(c).
By s 92 an amount that is equivalent to the amount of workers' compensation paid is required to be paid back to the employer not to the workers' compensation insurer. Parties independently of that can have and do have agreements between themselves about what will happen in respect of the workers' compensation insurer's claim for the amount paid by it in workers' compensation payments, as they did in this case.
An attempt by the liability insurer to have the benefit of the amount of workers' compensation paid is akin to seeking contribution for double insurance in a circumstance where that remedy is not available: Co‑Operative Bulk Handling Ltd (148). The liability insurer is obliged to pay the full amount of the judgment: Co‑Operative Bulk Handling Ltd (153). State Government Insurance Office (Qld) v Brisbane Stevedoring Pty Ltd[1969] HCA 59; (1969) 123 CLR 228.
The insurance indemnity outcome of payment in full conforms with the entitlement of a plaintiff to recover the full amount of damages from any one tortfeasor, subject to any reduction for contributory negligence which is an amount common to all tortfeasors: Fitzgerald v Lane[1989] 1 AC 328. As the defendant properly points out there is no 'proportionate liability' for the benefit of tortfeasors who cause personal injury. Personal injury claims are excluded from the ambit of the proportionate liability statutes.
Two decisions of the Court of Appeal of New South Wales that have been relied on by Chaucer suggest that where the insured, although liable to pay damages in full to a plaintiff, is obliged to make a payment to another tortfeasor under a contractual indemnity something less than full indemnity might be recoverable from the insurer depending on the form of the insuring clause: Multiplex Constructions Pty Ltd v Irving[2004] NSWCA 346; Gordian Runoff Ltd v Heyday Group Pty Ltd[2005] NSWCA 29 which concerned contribution claims pursuant to the equivalent of s 7(1)(c) of the Law Reform (Contributory Negligence and Tortfeasors Contribution) Act 1947 (WA) and insurer's obligations to indemnify in relation to it.
In Multiplex Constructions Pty Ltd v Irving, Fugen was the injured plaintiff's employer and a contractor to Multiplex at a building site. Both were held liable to pay damages to the plaintiff and each was determined to be equally culpable. Fugen had contracted to provide a complete indemnity to Multiplex. The full amount of the judgment was paid by Multiplex to the plaintiff and it received 50% of that amount from Fugen. Royal, Fugen's insurer, paid Fugen that amount.
Multiplex required Fugen to indemnify it for the additional amount paid by Multiplex. With the support of Multiplex, Fugen claimed from Royal the balance of the judgment amount. The New South Wales Court of Appeal held that Fugen was not entitled to be further indemnified by Royal.
Fugen was held not to be entitled to be indemnified against a contractual liability to Multiplex. Royal's policy provided indemnity against any amount that the insured became liable to pay independently of the Workers' Compensation Act 1987 (NSW) for any injury to any person who was a worker of the insured. The court, following its previous decision in Nigel Watts Fashion Agencies Pty Ltd v GIO General Ltd (1994) 8 ANZ Ins Cas 61‑235, held that indemnity in those terms covered liability to pay damages at common law but not contractual liability.
Ipp JA (with whose reasons Santow JA and Pearlman AJA agreed) held that the remaining 50% claimed by Fugen was not in respect of Fugen's liability at common law but in respect of its liability under the contract between it and Multiplex. He said that the 50% provided by Royal 'represented the full amount for which Fugen was liable to Mr Irving at common law as a joint or concurrent tortfeasor'.
The result resembles proportionate liability. The ultimate burden of the liability to the plaintiff was borne equally by Fugen and Royal. Royal's obligation to indemnify was reduced and it bore only a proportion of its insured's liability. Although Fugen was insured against its liability to pay damages to Mr Irving it recovered only half of what it was found liable to pay.
The court decided that there was no indemnity for contractual liability. It did not follow that the extent of Fugen's liability to the plaintiff Mr Irving was only 50% of the damages sum. A tortfeasor is liable for the full amount of the damages payable to the plaintiff. That outcome is not altered by any question of apportionment between one tortfeasor and another.
The reasoning in Multiplex Constructions was applied by the New South Wales Court of Appeal in Gordian Runoff Ltd.
Heyday (the first respondent) was insured by GIO against liability to pay damages 'for any injury to' an employee. Under a subcontract Heyday agreed to indemnify Baulderstone against any claim or proceedings in respect of injury to an employee of Heyday. The injured plaintiff was an employee of Heyday. Each of Baulderstone and Heyday was held liable to pay damages to the plaintiff and the respective degrees of responsibility were 65% Baulderstone and 35% Heyday. The plaintiff was entitled to judgment for the full amount of his damages against each defendant.
In Gordian Runoff, the court held that Heyday was only entitled to indemnity for 35% of the judgment amount from GIO.
Reasoning in Gordian Runoff appears to have been doubted in the later New South Wales Court of Appeal decision Glynn v Challenge Recruitment Australia Pty Ltd.
In Byrne v People Resourcing (Qld) Pty Ltd [2014] QSC 269 Carmody CJ reviewed Multiplex Constructions and Gordian Runoff but held, that he was bound by Brisbane Stevedoring.
In StateGovernment Insurance Office (Qld) v Brisbane Stevedoring Pty Ltd the plaintiff's employer was insured by SGIO against 'legal liability … to pay damages in respect of … injury'. The plaintiff was a wharf labourer who was injured when he was struck by a mobile crane owned by Queensland Shipping Services and hired to Brisbane Stevedoring. Both his employer and the owner of the crane were held liable to pay damages. The trial judge held that an indemnity clause in the hiring agreement entitled the owner to complete indemnity against the plaintiff's judgment. SGIO was, nevertheless, ordered to indemnify the employer in respect of all sums payable by the employer under the judgment for damages including sums payable to the crane owner by way of indemnity.
SGIO appealed. The High Court held that the insurer was obliged to indemnify the employer for the whole amount of the verdict and it was not necessary for any order to have been made for indemnity of the crane owner: (235) - (236) (Barwick CJ), (245) - (246) (Kitto J), (248) (Windeyer J), (251) (Owen JJ), (254) - (255) (Walsh J). According to Walsh J if the crane owner had paid the judgment and obtained recoupment from the employer this would only be a different mode by which the legal liability of the employer to pay the whole amount of the damages due to the plaintiff would be satisfied. The contract of indemnity in the hiring agreement did not change the character of the loss that the employer suffered and in respect of which it was insured.
In this case the Allianz Policy was CEC's insurance policy. MMG was insured under the 'Principal Indemnity Endorsement'. The policy provided cover for damages for MMG if CEC had a corresponding liability to pay damages.
Multiplex Constructions and Gordian Runoff are distinguishable from this case. Both concern a contract wording that differs from the insuring clause in the Chaucer Policy. Both concern claims against more than one tortfeasor, which the MMG case does not. They are contrary to the decision of the High Court in State Government Insurance Office (Qld) v Brisbane Stevedoring Pty Ltd, the binding authority.
Conclusions
In this case MMG did not have a right that was exercisable, and relevantly exercised, against CEC and that was waived by Allianz. It did not bring an action to recover workers' compensation.
The relevant claim was brought by the plaintiff against MMG to recover damages. I am satisfied Chaucer is obliged by the Chaucer Policy to pay the full amount of the damages sum under the liability owed to the plaintiff. From the fund so paid 'in respect of' the plaintiff's personal injury under the damages award the operation of s 92(c) results in an equity in Allianz's favour over that fund to the extent of the amount of workers' compensation paid. This prevents double recovery by MMG.
I accept the defendant's argument that no subrogation right, in the second sense of an indemnity right, arises in this case. The claim by the plaintiff translated into a judgment for damages against MMG. From the judgment for damages, and the corresponding fund recoverable by way of indemnity from Chaucer, MMG was entitled to be reimbursed the amount of workers' compensation paid. This is not a subrogation claim of the kind contemplated by the 'Principal Indemnity Endorsement'. Section 301 of the WCIMA prohibits parties from contracting out the provisions of the act.
Nor is it a subrogation claim that may be prevented by a waiver of subrogation rights clause as contemplated by Woodside Petroleum Development Pty Ltd v H & R - E & W Pty Ltd (1999) 20 WAR 380.
Chaucer carries the obligation to indemnify for a damages liability, rather than workers' compensation, liability. This conforms with the purposes of s 92 and s 93 of the Workers' Compensation Act by which a damages liability predominates over a workers' compensation liability and double recovery of both compensation and damages is avoided.
A split of ultimate responsibility for a loss, so that part is borne by a liability insurer and part by a workers' compensation insurer would, in my view, be contrary to the decision and outcome in Co-Operative Bulk Handling Ltd.
The payment to Allianz of portion only of the amount of workers' compensation paid was an agreed payment from the plaintiff's damages award that comprised a settlement entered into with the plaintiff and Allianz to avoid the need for a trial. Chaucer's argument is that MMG failed to effect a settlement based on assumptions that if the action went to trial, there would be a reduced award of damages, and Allianz could not enforce a right of subrogation. Allianz's position was irrelevant to assessment of damages at trial.
I accept the argument of MMG that in this case the amount that Chaucer as a liability insurer is obliged to pay to meet the judgment for damages is determined by the terms of the insurance contract. No deduction can be made for the fact that a different insurer paid workers' compensation.
I am satisfied that Chaucer is accordingly liable to indemnify its insured MMG for the full amount of the liability without reduction for the $170,000.
Breach of common law or Insurance Contracts Act duty to act in good faith
In the alternative Chaucer argues a breach of the common law or Insurance Contracts Act 1984 (Cth) (ICA), s 13 duty of utmost good faith Allianz owed to its insured MMG for Allianz to seek to recover the amount of workers' compensation payments from MMG when, by reason of the 'Waiver of subrogation' condition, it was not entitled to them.
This matter was not argued at trial and the closing submissions of the third party at par 30 of its closing submissions comprise bare assertions without detailed argument. The issue was not included in the list of issues to be determined.
For the sake of completeness I am satisfied there was no breach by Allianz at common law or pursuant to the ICA s 13. The reason being that already articulated. The $170.000 was payable pursuant to s 92 of the WCIMA. The waiver of subrogation clause was irrelevant to Allianz's entitlement to reimbursement out of the damages paid to the plaintiff.
The Chaucer public liability insurance policy workers compensation exclusion clause, 6.1(a)
Chaucer argues that clause 6.1: (a) the workers compensation exclusion clause excludes cover for the $170,000 component of the settlement sum paid to Allianz on the basis that MMG's liability to CEC or Allianz for recovery of worker's compensation paid to the plaintiff pursuant to s 92 (c); or s 93 (if any) WCIMA is a liability: for personal injury to
Mr Smith in respect of which MMG is or would be entitled to indemnity under any policy of insurance … Pursuant to or required by WCIMA s 160 (1) (a), the plaintiff being a deemed worker for the purpose of the WCIMA, s 175 (1).
It argues that s 92(c) makes MMG responsible for the workers' compensation paid to the plaintiff which is the liability contemplated by s 160 (1)(a) , being a liability to pay workers compensation to a deemed worker.
Section 160 WCIMA provides:
(1)Subject to this Act, every employer shall obtain from an approved insurance office and shall keep current a policy of insurance for —
(a)the full amount of the employer's liability to pay compensation under this Act to any worker employed by the employer including any increase in amount occurring during currency of the policy …
Section 175 WCIMA provides:
175. When principal, contractor and sub-contractor deemed employers
(1) Where a person (in this section referred to as the principal) contracts with another person (in this section referred to as the contractor) for the execution of any work by or under the contractor and, in the execution of the work, a worker is employed by the contractor, both the principal and the contractor are, for the purposes of this Act, deemed to be employers of the worker so employed and are jointly and severally liable to pay any compensation which the contractor if he were the sole employer would be liable to pay under this Act.
(2) The principal is entitled to indemnity from the contractor for the principal's liability under this section.
(3A) The indemnity conferred by subsection (2) does not allow the principal to recover from the worker —
(a) any amount which the worker receives from the contractor by way of compensation or damages in respect of a compensable injury; or
(b) any amount which the worker receives from WorkCover WA under section 174 in respect of the contractor's liability to pay compensation or damages to the worker.
(3B) The indemnity conferred by subsection (2) does not allow the principal to recover any amount from WorkCover WA.
(3) The principal is not liable under this section unless the work on which the worker is employed at the time of the occurrence of the injury is directly a part or process in the trade or business of the principal.
(4) Where the principal and the contractor are jointly and severally liable under this section, a judgment obtained against one is not a bar to proceedings against the other except to the extent that the judgment has been satisfied.
(5)Where compensation is claimed from or proceedings are taken against the principal, in the application of this Act a reference to the employer shall be read as a reference to the principal except where, for the purpose of calculating the amount of compensation, a reference is made to the earnings of a worker, the reference shall be read as a reference to the earnings of the worker under the contractor.
(6) For the purposes of this section, where sub-contracts are made —
(a)principal includes the original principal for whom the work is being done and each contractor who constitutes himself a principal with respect to a sub-contractor by contracting with him for the execution by him of the whole or any part of the work; and
(b) contractor includes the original contractor and each sub-contractor; and
(c) a principal’s right to indemnity is a right against each contractor standing between the principal and the worker.
(7)Where the injury does not occur in respect of premises on which the principal has undertaken to execute the work or which are otherwise under his control or management, subsections (1) to (6) inclusive do not apply.
(8)Nothing in this section makes either a principal or a contractor liable to pay any damages which, but for this section, the principal or contractor would not be liable to pay.
There is no dispute that the plaintiff is a deemed worker pursuant to the provisions of s 175(1) WCIMA.
MMG accept that the Chaucer Policy does not cover workers' compensation liability however it argues that MMG's liability to the plaintiff was a liability to pay damages and not a liability to pay workers' compensation.
Legal Principles
An insurance contract is a commercial contract should be given a businesslike interpretation McCann v Switzerland Insurance [2000] HCA 65; (2000) 203 CLR 579, [22], Gleeson CJ.
A condition for exclusion insurance policy is a limiting term in the sense that it conditions the promise made by the insurer in an insuring clause. Limiting terms should be given their natural and ordinary meaning and not be construed strictly narrowly Allianz Australia Insurance Ltd v Inglis [2016] WASCA 25, [25], McClure P.
Conclusion
In accordance with Co-operative Bulk Handing Ltd s 92(c) WCIMA is a payment from a damages award of the amount previously paid as workers' compensation. It is payment from an award of damages for an amount that equates to that previously paid as workers' compensation. It is not a workers' compensation payment. In this case workers' compensation was paid by CEC and Allianz not MMG.
Under s 93 WCIMA an employer has a right to make a claim against third party to bring proceedings to recover workers' compensation that has been paid. When such claims are brought by an insurer using the insured's name that constitutes a worker recovery action. In this case no claim was bought by the workers' compensation insurer Allianz against MMG. This was a claim bought by plaintiff for damages against MMG. Clause 6(1) does not exclude such a claim.
On a plain reading of the exclusion clause when considered with s 92 of the WCIMA this is not a worker to worker claim. I am satisfied the clause does not exclude Chaucer's liability to indemnify MMG in this case.
Relevant deductible
The Chaucer Policy provides the relevant deductible will be $10,000 unless the 'Claim' is payable 'in respect of' a 'Worker to Worker Claim', in which case it is $50,000. Therefore, the relevant inquiry is whether the 'Claim', that is the plaintiff's claim against MMG for personal injury as a result of the rock fall, is a 'Worker to Worker Claim'?
Chaucer submits the plaintiff's claim for common law damages against MMG is 'in respect of' the recovery by Allianz from MMG of the amount of the workers' compensation Allianz paid to The plaintiff, giving the phrase in respect of its widest possible meaning.
Chaucer argues on MMG's case, the claim by the plaintiff against MMG for common law damages and the settlement of it was 'in respect of' Allianz's recovery claim against MMG because the latter, by the WCIMA, s 92(c) was inextricably a part of the former. In this case there was some form of employee relationship to the insured, namely, MMG being deemed by the WCIMA, s 175 to be the plaintiff's employer.
MMG argues that by the terms of the settlement the payment was a recovery by the plaintiff and not a direct 'recovery by a Workers' Compensation Insurer'. When so viewed the deductible would not be $50,000. Judgment for the full amount was to be and was entered in the plaintiff's favour and partly discharged by a payment to Allianz. This voided double recovery by the plaintiff of workers' compensation and damages.
The payment of $170,000 was out of a fund of damages in the plaintiff's favour. It was not a 'recovery by a Workers' Compensation Insurer' in respect of which it seeks indemnity from Chaucer. MMG's claim for indemnity is for 'recovery by the plaintiff' of the amount of damages payable to the plaintiff.
For the reasons already stated I accept this argument. This was not a worker to worker claim. The plaintiff's claim was for damages not a worker to worker claim against MMG. The relevant deductible is $10,000.
Defence Costs
The third party argues the Chaucer Policy does not respond to MMG's claim to be indemnified for its own legal costs of defending the plaintiff's action.
Chaucer accepts that MMG is an insured as defined by the s 5.7(e) definition of insured in the Chaucer Policy.
It is argued by Chaucer the defence costs cover is by an independent insuring clause which covers insureds for their own loss, for first party loss. It covers them for the legal costs they incur, not their liability to pay the legal costs of the third-party.[72] The extent of the policy cover, it argues, is limited by the policy definition which only covers MMG to the extent the services agreement required CEC to arrange insurance. The services agreement requires CEC to arrange public liability insurance that covered MMG for its 'rights interests and liabilities'. Chaucer argues MMG's defence costs are a loss incurred by MMG not a liability to a third party. Nor, they submit do defence costs fall within the words of the definition 'rights or interests'. Rights and interests are intended to cover the rights or interests MMG might have on property the subject of first party insurance specified in the schedule to the policy and are not intended to cover incidental first party type cover in a liability insurance policy.[73]
[72] Chaucer closing submissions par 34.
[73] Chaucer closing submissions par 35.
I do not accept that the plain reading of clause 5.4 can limit the cover in the way suggested by Chaucer. MMG is an insured under clause 5.7(e). Defence costs are clearly defined as legal, investigative and expert (medical and non-medical costs, fees, disbursements and expenses incurred in the investigation of an occurrence or settlement or defence of a claim). Claim is defined in clause 5.3 as a 'demand for compensation made by a third party against the insured, but does not include the insured's costs and expenses.
The plaintiff's claim and resultant damages are clearly a liability to MMG. The payment of those damages turns that liability into a loss. I am satisfied the cost of investigating and defending the plaintiff's claim are recoverable pursuant to the Chaucer Policy. However, they do not extend to costs incurred by MMG in respect of third party proceedings.
Chaucer also argues there is no evidence the defence costs incurred by DLA Piper[74] were incurred with the prior consent of Chaucer as required by clause 5.4 of the Chaucer Policy
[74] Exhibit 1.
The requirement that costs not be incurred without Chaucer's written consent is controlled by s 54 of the Insurance Contracts Act 1984 (Cth).
54. Insurer may not refuse to pay claims in certain circumstances
(1)Subject to this section, where the effect of a contract of insurance would, but for this section, be that the insurer may refuse to pay a claim, either in whole or in part, by reason of some act of the insured or of some other person, being an act that occurred after the contract was entered into but not being an act in respect of which subsection (2) applies, the insurer may not refuse to pay the claim by reason only of that act but the insurer's liability in respect of the claim is reduced by the amount that fairly represents the extent to which the insurer's interests were prejudiced as a result of that act.
(2)Subject to the succeeding provisions of this section, where the act could reasonably be regarded as being capable of causing or contributing to a loss in respect of which insurance cover is provided by the contract, the insurer may refuse to pay the claim.
(3)Where the insured proves that no part of the loss that gave rise to the claim was caused by the act, the insurer may not refuse to pay the claim by reason only of the act.
(4)Where the insured proves that some part of the loss that gave rise to the claim was not caused by the act, the insurer may not refuse to pay the claim, so far as it concerns that part of the loss, by reason only of the act.
(5)Where:
(a) the act was necessary to protect the safety of a person or to preserve property; or
(b)it was not reasonably possible for the insured or other person not to do the act;
the insurer may not refuse to pay the claim by reason only of the act.
(6)A reference in this section to an act includes a reference to:
(a) an omission; and
(b)an act or omission that has the effect of altering the state or condition of the subject‑matter of the contract or of allowing the state or condition of that subject‑matter to alter.
The effect of s 54 is that Chaucer can only reduce the amount payable to the extent to which its interests have been prejudiced. It must prove both prejudice and its value in money terms: Moltoni Corporation v QBE Insurance [2001] HCA 73; (2001) 205 CLR 149. It has not done so in this case.
Being satisfied that Chaucer is required to indemnify MMG for costs reasonably incurred in defence of the plaintiff's claim, I now turn to the reasonableness of the costs claimed by MMG.
Reasonableness of costs rendered
MMG claims costs of $64,598.24 in the investigation of the accident and the defence of the plaintiff's claim against the defendant.
Chaucer submits the Chaucer Policy does not cover DLA's costs to the extent they are unreasonable or unnecessary.
An example of costs incurred unreasonably or unnecessarily they say are DLA's costs of attending multiple (at least six) pre-trial conferences when MMG could have settled the claim much earlier and obtained the LabourNet report of Professor Mulvey (exhibit 56) earlier. This report, they submit was an important trigger for the settlement however it was obtained only shortly before the action was settled.
I have reviewed the invoices rendered by DLA Piper Australia to MMG. On their face the work undertaken in respect of the matter for the period 15 July 2015 to 14 January 2016 seems reasonable. The third party makes no submission that the costs incurred during this period were not reasonably incurred. I would allow the claimed costs for this period together with interest thereon.
The date 14 January 2016 is the first reference in the invoices to dealings with the solicitors for Chaucer. In relation to pre-trial conferences the solicitors for Chaucer were contacted by telephone on the date of the first pre-trial conference which appears to have been conducted on 4 May 2016. A second pre-trial conference was adjourned at the request of the Plaintiff's solicitors. A further conference took place on 10 August 2016 after which third party proceedings were issued. The pre‑trial conference on 7 November 2016 was adjourned. There is a reference in the invoice relevant to that date to the requirement to provide workers' compensation policy documents to Chaucer's solicitors. A pre-trial conference took place on 22 February 2017 at which the offer to settle the plaintiff's claim for $550.000 was made. A further pre-trial conference took place on 21 April 2017, following which the report from Professor Mulvey at LabourNet was sought in early May. A further pre-trial conference was held on 1 June 2017 with a number of calls on that day recorded between the solicitors for Chaucer and MMG. The plaintiff's claim was was subsequently settled.
It is clear from the invoices that numerous telephone and email exchanges took place between the solicitors for MMG and Chaucer from 14 January 2016 to 15 July 2017, being the date of the last entry on exhibit 1. I cannot accept that the solicitors for Chaucer 'knew nothing about what happened at any of the pre-trial conferences or in any settlement negotiations between MMG, Allianz and Mr Smith' as asserted at par 39 of Chaucer's closing submissions based on the volume of communications between the parties, the timing of those communications, the dates of the communications immediately surrounding the pre-trial conferences and the content of the letters from HWL Ebsworth to DLA Piper dated 24 January and 21 June 2017.
There is nothing in the tax invoices provided and description of work done by DLA Piper in regards to the plaintiff's claim that appears unreasonable. However, I am satisfied that the definition of defence costs does not extend to the cost of work done or communications relating to matters other than the defence of the plaintiff's action, namely work done or communications relating to MMG's claim for indemnity under an insurance policy or work done in relation to the prosecution of the third party proceedings against the Chaucer Syndicate. The Chaucer Policy does not indemnify MMG for its costs of seeking indemnity under the Chaucer Public Liability insurance policy.
Consequence of late notification
Clause 7.3(b) of the Chaucer Policy states:
In the event of an Occurrence which may give rise to a Claim the Insured shall: …
(b)give notice in writing to Insurers as soon as practicable of every Occurrence, and shall immediately forward to Insurers all information as Insurers may reasonably require. Every letter, Claim, demand, writ, summons or process shall be promptly forwarded to Insurers.
It is not in issue between the parties that the defendant breached clause 7.3(b) by failing to notify the third party of the occurrence on 4 November 2013 for more than two years. The plaintiff commenced his action against the defendant by writ on 6 July 2015. The defendant claimed indemnity from the third party by letter dated 9 February 2016.[75] By par 17.2(c) of the amended defence to third party amended statement of claim refusal by the defendant to provide various insurance policies and correspondence is pleaded. No evidence as to these requests and delays was adduced at trial nor the prejudice suffered, if any, as a result.
[75] Exhibit 4.
The issue for determination is what the consequences of the breach are.
Chaucer Syndicate submits that the consequence of the breach is that the action took substantially longer than it would otherwise have taken to settle, meaning that both the plaintiff's legal costs and MMG's legal costs were substantially higher than they would otherwise have been. Also, they argue the plaintiff's claim might have settled for less if it had settled earlier.
They say damages are not an appropriate remedy for the breach. The appropriate remedy is a deduction from the amount claimed on the basis that the alleged breach did not cause that part of the loss.
Chaucer suggest a lump sum of between $50,000 and $100,000 to be an appropriate reduction in MMG's claim for these contingencies.
In this case Chaucer has failed to particularise any loss. Chaucer submits that one of the consequences of the breach was that the action took substantially longer than it would otherwise have taken to settle. There is no evidence before me to support this assertion. It is speculative.
There is no evidence before me as to the basis on which Chaucer seeks the lump sum deduction of between $50,000 and $100,000.
Chaucer has failed to satisfy me that any amount should be deducted for the breach by late disclosure.
Conclusion
In light of my findings I direct the parties to confer as to the appropriate quantum of defence costs and interest and to file a minute of proposed orders which reflect these reasons within 21 days. If the parties are unable to reach agreement within 21 days the matter will be relisted at a convenient time to resolve the outstanding disputes as to quantum.
I will hear the parties as to costs.
I certify that the preceding paragraph(s) comprise the reasons for decision of the District Court of Western Australia.
JG
Associate to Judge Burrows23 JULY 2020
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