State Government Insurance Commission v Co-operative Bulk Handling Limited

[1990] HCATrans 260

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IN THE HIGH COURT OF AUSTRALIA

Office of the Registry

Perth No P21 of 1990

B e t w e e n -

STATE GOVERNMENT INSURANCE

COMMISSION

Applicant

and

CO-OPERATIVE BULK HANDLING

LIMITED

Respondent

Application for special leave

to appeal

MASON CJ
DEANE J

TOOHEY J

TRANSCRIPT OF PROCEEDINGS

AT PERTH ON THURSDAY, 25 OCTOBER 1990, AT 10.47 AM

Copyright in the High Court of Australia

Bulk 1 25/10/90

MR C.J.L. PULLIN, QC:  May it please the Court, I appear

with MR G.P. BOURHILL, for the applicant.

(instructed by Phillips Fox)

MR P.G. da C. FOSS: If it please the Court, I appear with

MR G.J. PYNT, for the respondent. (instructed by

Mallesons Stephen Jaques)

MASON CJ:  Mr Pullin.

MR PULLIN:  Thank you, Your Honour. Your Honours, the

summary of submission indicates that the effect of
the Full Court's decision in this case is to

convert the SGIC, which was the insurer of the

common law risk, into the insurer of the workers'

compensation risk and we say that that result

brings about a result which is different in

Western Australian from the position in Victoria.

The Victorian case which dealt with the subject and

came to this Court was the Transport Accident

Commission v CMT Construction of Metropolitan

Tunnels and I have copies of that case which have

already been made available, as I understand it,

Your Honours.

MASON CJ:  Yes. The point of that decision was that under

the statute the amount in respect of workers'

compensation was deducted before judgment was

entered.

MR PULLIN: Entirely so, Your Honour, but that point was not

the point on which the judgment went off. That is
not a significant aspect of the case. All that was

held was that the liability to make compensation

payments-was not extinguished ab initio and there

had been no benefit derived by the employer as a

result of that but the decision nowhere says the

significant fact is the fact that there is a

deduction from the judgment before judgment is entered. So, we would say that that being the case, there is then a different result in the two

States.

The background I have set out, of course, is

the typical accident with a worker being injured as

a result of a co-worker's negligence and the

employer being vicariously liable.

MASON CJ:  We are aware of the facts of the case.

MR PULLIN: All right, Your Honour. Now, the position is

that the Full Court determined the matter simply by

looking at the policy which read that - and this is

the policy with the motor vehicle insurer promising
to insure the employer, that is CBH, in respect of

all liability for negligence which may be incurred

by CBH and they said, "Well, there was a judgment

Bulk 2 25/10/90

for $125,000. That is the liability, therefore'' -

just reading those words - "that is what must be

paid".

Now, in fact, CBH was suing in this case but

CBH had been indemnified already for workers'

compensation payments of about $70,000 and the

balance which fell due for payment when the common

law judgment was entered as a result of the

application of the Act, was $55,000, so my client

did indemnify them; it paid the $55,000. Now, why

should the employer then gain a windfall and
recover this $70,000 in circumstances where the

policy does not require it? The policy says - - -

MASON CJ: It may not be a windfall for the employer, may it

not? The employer may have been bound to refund it

to the workers' compensation insurer.

MR PULLIN: Yes, but in Victoria the workers' compensation

insurer - in this case, the workers' compensation

insurer, Wesfarmers, has worked in with the

employer and, together they have agreed that there

can be a subrogated claim come forward and, hence,

we see CBH suing.

In the Victorian case, the workers'

compensation insurer apparently did not have that

agreement and it sued in the third party

proceedings the employer and then the employer sued

or sought indemnity from the State Insurance

Office. So it is exactly the same structure except

here we do not have the workers' compensation

insurer in it as a party.

In Victoria, the result was that there could

be no recovery and the SIO really ran that first

step case, so here the employer will receive a

windfall if it chooses not to give the money to the

workers' compensation insurer, Wesfarmers, because

the Victorian authority says you cannot recover it

and, on that basis, we say that is a strange result

to come about.

Now, the Full Court, as I say, just looked at

the policy and chose not to look at the workers'

compensation legislation at all, and indeed, so far

as the CMT case is concerned, only

Mr Justice Rowland mentioned it and then just

simply said in a sentence that it is a different

Act and so really did not give proper consideration

to the effect of that decision.

MASON CJ: But, is it true to say that the Full Court did

not look at the workers' compensation legislation?

Bulk	25/10/90
MR PULLIN:	They just said it had nothing to do with it.

The policy says that there is a:

"insure ..... in respect of all

liability ..... what is the

liability ..... $125,000 - "

so, therefore, there should be judgment in favour

of Co-Operative Bulk Handling which will, as a

result, receive a windfall. The SGRC will,

therefore, become the insurer of the workers'

compensation risk without having received any

premium and Wesfarmers, if in fact it receives the

money, will not have carried any risk and will
never in cases where there is an injury caused at

work, despite the fact that it will calculate its

premiums on the basis that .it is to pay out for

them, will eventually get that money back. That

just cannot be right, in my submission.

The Full Court's decision in relation to each

of the judges can be seen. If I take the

Chief Justice, without going right through it he

deals with the facts, talks about questions of

double insurance and says, "This isn't a case of

double insurance" and we accept all of that, and

eventually ends up by saying on page 102, quoting

the terms of the policy:

The liability of the Trust was expressed in

terms of "all liability for negligence which

may be incurred by the owner or other person

in respect of the death or bodily injury -

et cetera.

The liability of the Trust under the Trust policy was unlimited.

And, ended up saying, on page 103:

In my opinion the present case is not a

case of double insurance. It is not a case

for contribution. It is not a case in which
the respondent had a legal defence to the

appellant's claim -

And, then says at the second-last paragraph on page

103:

The provisions of ss7(13) of the 1912 Act

and s92(b) of the 1981 Act contain nothing to

alter that position.

So, there is a consideration of it but it is a

dismissal of it without any discussion at all.

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MASON CJ: Yes, but His Honour did agree with the other

judgments. There is a discussion of section 92(b)

in the judgment of Mr Justice Rowland at page 117 and, quite clearly, Their Honours had in mind and

were following the judgment of Chief Justice Burt

in the Forbes, Brambles case.

MR PULLIN: Yes, but the Forbes, Brambles case, Your Honour,

was a quite limited point which provides no

guidance at all, in my submission. The argument in

that case was that the amount paid by way of

compensation should be deducted from the amount
recoverable and deducted from the assessment and

judgment entered for the balance and all the Forbes

case decides is that no, what happens is that you

deduct after judgment has been entered. Well, that

is perfectly clear on the Act as it stands, the new

Act, in any event so there is no question of that.

Forbes just provides no assistance at all, in

our submission. It was a quite limited point taken

on appeal and decided on that quite limited point.

MASON CJ: But, the principle of the Forbes case extends

more widely than that, does it not? At least it

was so regarded by Mr Justice Rowland. If you look

at page 120, the top paragraph on that page and the

reference there in the last line to "payment of

compensation" is a reference to payment of workers'

compensation.

MR PULLIN: In the last line in the first paragraph,

Your Honour?

MASON CJ: Yes, the top paragraph on page 120.

MR PULLIN: Yes, that is a quote from Sir Francis Burt's

judgment.

MASON CJ: Yes.

MR PULLIN: But, that is the effect ·of the provision in the

Workers' Compensation Act. There is no doubt that

there is, in effect, a satisfaction of the judgment

in part by the workers' compensation payments. If

I can say, in effect, what it says is that the

amount or, to use the precise wording of the

section, if I may, it says:

If the action proceeds to judgment ..... against

the employer only ..... there shall be deducted

from the amount of the judgment and be paid to

the employer a sum representing the

amount ..... actually recoverable by the worker

by way of weekly or lump sum compensation,

medical and other expenses paid pursuant to

this Act -

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So, it does not say who shall deduct it; "there shall be deducted" but one assumes that, put aside

all questions of insurers, the employer is allowed

to deduct it. There is a judgment for the full

amount. The employer is allowed to deduct from the

amount of the judgment and pay the balance.

TOOHEY J:  Mr Pullin, it is not an answer to the complaint

in the particular case but I suppose if the

Full Court is right the situation can be remedied

by some provision in these policies, can it not;

an indemnity which is qualified by reference to any

amount of workers' compensation paid?

MR PULLIN:  I would like to think about that, Your Honour, a

little longer than perhaps I have now but anything

is possible, but I suppose there could be

legislation but that is always - - -

TOOHEY J:  No, I was not thinking of legislation but, in so

far as the point is said to have wide implications

and, of course, that is true, I suppose, in terms

of existing policies but for the future, is it

something that is capable of being met by a

rewording of the policy?

MR PULLIN: Well, Your Honour, it is the standard form

policy which is used in most of the States. The

wording is almost identical; that is, there is an

indemnity with respect to liability for common law

claims.

TOOHEY J: Yes, but no doubt that has been structured by

reference to provisions, historically at any rate,
that are not comparable to the one that we are

faced with here in the Workers' Compensation Act.

MR PULLIN: Well, in fact, New South Wales, the -

Your Honour will realize that New South Wales first

decided to get rid of common law claims and then

re-introduced them. In the re-introduced form,

there is a provision which,· although differently

worded, in my submission, results in a deduction	after assessment. So, it will arise in
New South Wales as well.
Now, it may be an answer to say that statutory policies can be changed but, really, that is really
suggesting an amendment to legislation.

TOOHEY J: Yes, I see that.

MR PULLIN:  Your Honours, at present there are six other

matters on foot in Western Australia with similar

circumstances arising and one imagines that this is

going to be arising all the time.	I was just
indicating to Justice Toohey that in

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New South Wales under the restored common law

rights there is a provision which is similar in
effect, in my submission; that is, a deduction

after assessment in so far as that is in any way

important in the consideration of this question.

So, if it is thought there is a different statutory

provision in Victoria, then in New South Wales at

least, in my submission, there is likely to be this

same question arising and there doubtless reference

will be made to the Full Court decision in this

State as providing guidance as to what is to happen

between the workers' compensation insurer and the

statutory common law insurer.

Once again, it will be argued there, one

assumes, that there is an inconsistency in effect

between the High Court decision on the subject
coming from Victoria and the decision of the

Western Australian court here. Although it is

going to have to be reconciled, our submission is

it should be a reconciliation here rather than

waiting for decisions in New South Wales to arise

which will generate the same kind of debate.

MASON CJ:  Mr Pullin, is this legislation, as it were, still

current? There is a suggestion in the respondent's

outline of argument that in some way or other the

legislation is not current. In what way, I do not

follow.

MR PULLIN: Could I just explain that, Your Honour? Could

you turn to page 72 - if Your Honour looks just above 7A at (c), you will see a provision which

reads:

Any amount received by the worker from the employer by way of compensation under this Act

in respect of an injury by accident shall be

deducted from the amount recoverable by or

payable to a worker from or by the employer,

under a judgment for damages in respect of the

same injury.

That is the old Workers' Compensation Act. The new

Workers' Compensation Act provision is found on page 78 and that is the one that is in force now and I place all my argument on that provision and,

just reading the relevant parts, the first two

lines:

Where in respect of a disability an action is

brought by a worker for damages independently

of this Act against his employer -

Then, go down to (b), the first words:

If the action proceeds to judgment

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and go down to the next line:

against the employer only -

Go down to the next line:

there shall be deducted from the amount of the

judgment and be paid to the employer a sum

representing the amount -

Then, after the brackets:

actually recoverable by the worker by way of

weekly or lump sum compensation, medical and

other expenses paid pursuant to this Act -

and I have quoted that in my outline. That

provision still remains on foot and there is no

suggestion that that will be changed.

MASON CJ:  I follow.

MR PULLIN: And, as I say, that is different from the

Victorian provision which deducts beforehand but

the New South Wales' provision - perhaps I should

just hand it up to you. I am afraid there is only

- I am sorry, it appears there is only one copy,

Your Honours, but could I direct your attention to

section 151B.

TOOHEY J:	I am sorry, what are we looking at?
MR PULLIN:	I am sorry, Your Honours, there is only one copy and perhaps I could hand up a second copy of the
relevant part. That leaves me without a copy but
section 151B(l) - - -
MASON CJ:	So you say it is a like provision?
MR PULLIN: We say it is similar in effect.	It talks about

after recovery there was a tjeduction so that is the

same effect.

MASON CJ: Yes.

MR PULLIN: So, in our submission, the question is going to

arise in New South Wales as well. For those

reasons, we submit that special leave should be

granted.

MASON CJ: Yes, Mr Foss.

MR FOSS:  Mr Justice Wallace in the MVI Trust v Forbes,

Brambles decision which I will hand up to you

definitely did consider the consequences beyond

just the entering of the judgment. At page 55, he

considered the consequence with regard to the

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appellant and the second respondent and said

between those, it is a question of:

construction of the insurance policy ..... That

policy provided that the appellant insure the

second respondent "in respect of all liability

for negligence" -

which is the same policy as we are talking

of here -

incurred by the second respondent in respect

of bodily injury -

Then, at line 45:

It follows that "all liability for negligence"

(underlining supplied) forms the total damages

assessed by his Honour before taking into account any payments made pursuant to the provisions of the workers' compensation

legislation. Those damages were the measure

of the second respondent's total liability for negligence and in the circumstances payment of

workers' compensation must be disregarded in

the asessment of damages for negligence.

And, what His Honour plainly envisaged there was

that what the second respondent had to pay under

his policy was the total amount of damages
disregarding the amount of workers' compensation,
notwithstanding the fact that under the terms of

the Act some of that money was to come back again

and, really, the question we say here is, what is

to happen to that money that comes back after the

terms of the Act?

It really is a question of interpretation of

the specific provisions of this Act and to make the
distinction between whether the money comes out
before judgment is entered or whether it comes out
afterwards. If the intention of the legislature

was not to mean something by saying that it was not	to come out before and it specifically provides for	repayment of those moneys, there seems to be little
point in having it.

If you go to section 92, it says in

paragraph (b) not only that there should be

deducted from the amount of the damage an amount

equivalent to the sum actually recoverable by the

worker by way of weekly of lump sum compensation

but it says it shall be paid to the employer, that

sum representing the amount.

Now, it is a rather complicated sort of

provision for Parliament to enact if it did not

Bulk 9 25/10/90

intend it to have some sort of result and the result

that the Honourable Mr Justice Wallace said in MVIT

v Forbes was that it retained the total liability of

the common law insurer and meant that there was a

refund payable under the Act and that refund - if

the person happened to be self-insured which is

possible under the Act, if that refund - the person

was self-insured, they would put it in their pocket

because their total common law liability would have

been paid by the insurer.

If, on the other hand, the person was inured

under the Workers' Compensation Act, that money

would then go back to the workers' compensation

insurer. Now, that is the only way in which you

can make sense of this particular provision as to

why the Parliament went to such an elaborate

provision to make sure that it did not come out

before and that there was actually a payment of a

sum back and it does not make a lot of sense unless

you actually give it that sort of meaning.

It is consistent with the rest of the scheme

of the Act. Section 93 talks about the situation

where there is a third party involved and in those

circumstances it specifically makes quite clear

that the full recovery of that workers'

compensation insurance is given back to the

employer and that is consistent in style to what is

happening under section 92.

TOOHEY J:  Mr Foss, do the insurers not have any sort of

arrangement between themselves to meet this type of

situation?

MR FOSS:  No, there is not, Your Honour, but it is quite a

common sort of thing where - it is not like a knock

for knock agreement where they are in fact handling

the same type of liability as you have with two

cars banging into one another. Here you are

covering quite different sorts of liability.

TOOHEY J: That is true but this is a situation that must

arise constantly.

MR FOSS: It is a situation that has been raised in clause

4.3 of the affidavit as to other circumstances and

it is quite a common one and quite easily resolved.

The example that was given, for instance, in the

affidavit was, what happens if you have a

construction contract where you have both a property insurance and you have a liability insurance, and they said, "Well, this is a similar

sort of an example". Well, that is easily handled

by the insurance industry. Usually the property

insurer ends up paying the full amount and that is

quite easy because if you work various rights of

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subrogation it always ends up with the property

insurer being the basic insurer and the liability

insurer merely taking up the extra part.

But, here, Parliament has intervened and has

made it quite specific in section 92 that it is not

just a matter of the worker's compensation insurer

paying it and that going towards reducing the

liability at common law, which is what would happen

in the example given at 4.3 of the affidavit.	It
specifically preserves that liability and no

explanation can be given for why it would go to the

trouble of preserving that liability.

TOOHEY J: Well, I seem to recall and, I must confess, my

recollection is very hazy, that there were some

decisions of this Court many years ago which gave

rise to problems because of a question as to

whether judgment should be entered for the full

amount where there had been an entitlement to

workers' compensation and it was a result of that

trend of litigation that these sort of provisions

were introduced.

MR FOSS: That is exactly the point, Your Honour, and I

think this has specifically preserved the situation

that judgment is to be entered for the full amount.

Now, that does have a consequence. If judgment

were entered for the reduced amount, I do not think
we could argue that there was a liability in the

common law insurer to indemnify us for the amount

for which judgment had not been entered.

MASON CJ: Well, Transport Accident would be against you on

that.

MR FOSS: Yes, and I think that is the reason why this is

really a matter of construction of two different

Acts of Parliament and that is why special leave should not be granted because it is really just a
matter of the differences between our Act and the

Victorian Act and there is also the

South Australian Act which, again, they have not

followed the Transport Accident case because they

have come to the conclusion that their judgment is

to be, generally speaking, entered without

deducting the workers' compensation payments and it

was as a basis for that, they decided not to follow

the Transport Accident case.

But, that is the distinction between the two. They are very clearly distinguishable and, in that

Transport Accident case, one of the - His Honour,

when giving an idea as to the sorts of things that

have happened, indicated one of the changes was

this particular point; that the Act now provided

for judgment on the balance whereas previously it

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was not judgment on that balance. It would have

been judgment for the full amount and that two were

maintained as two separate liabilities.

But, in the Victorian situation, they have not been maintained as two separate liabilities. Here,

quite plainly, they have because of the mechanism

they have set up to artificially provide for a

judgment of the full amount and provide for a

payment back out of that judgment. There is quite

an artificial construction so far as Parliament has

set it up and it obviously was set up in order to

preserve the two liabilities as separate

liabilities and to have an amount of money coming

back which represented the workers' compensation

payment.

If you look at section 92(b), it is an unusual

piece of drafting but the only explanation you can

give to it is that in the light of these cases, and

there have been a number of cases over the years,

it was intended to preserve the separate entities

of the workers' compensation liability and the

common law liability and to have a piece of money

coming back which then could be dealt with under

the ordinary rights of subrogation.

Again, that is a concept well understood in

insurance law. If there is a recovery relating to
the particular loss that you have suffered, then

the person who is entitled to that is the insurer

who bore that particular loss. It would be a much

simpler situation just to provide that judgment

would be entered for the balance and, in some

circumstances, that is what the case is but in

Western Australia it is not and it was done that

way on purpose and the only way in which you can

understand the scheme of this Act is to see that

the workers' compensation insurer is to only be

liable where it is purely a workers' compensation

liability, without any common law involvement.

So, the arguments that have been raised at

various times during this case are that - the first

one was to try and overcome MVIT v Forbes and to

say that the judgment should be in such a way that

the money comes out before you take out the

judgment.

The second argument is to say, "Well, we have

discharged your liability", and the third argument

is to say - and this is the one we say there is -

that you only discharge your liability by paying

the full amount, then there is a repayment back and

it is a matter of which of the insurers - and it is

an insurance question - are entitled to that money

that comes back.

Bulk 12 25/10/90

It was suggested by my learned friend that it

would be windfall profit if the money came back to the person but, of course, if a person has insured

himself for a full common law liability and he was

sued purely at common law, then the net result as

far as the HVIT or, in this case, the SGIC was

concerned is they would pay the full amount of that

judgment and he would be in exactly the same

situation as he would be in in this particular

instance.

What this legislation does is - it says it

does not really matter in what order you are sued,

whether proceedings for compensation are taken or whether immediately proceedings at common law are

taken, but the net result at the end of that is

that the full amount of the damages are paid by the

SGIC and you do not have to pay anything yourself.

If, in the meantime, because of the social

implications of workers' compensation - you have to

pay workers' compensation - you get that back if,

in fact, the person is entitled to recover those

damages at common law.

TOOHEY J:  What happens in the event of a compromise of a

personal injury claim so that there is no judgment?

MR FOSS: That sort of happened in this particular case,

Your Honour, and the case has not been fought on

that basis. What happened in this particular case

is it was compromised without reference to the

defendant and was settled at a lower sum and when

the action came on it was actually agreed between

the parties that we would proceed on the basis that

the proper way in which it should be done at all
times is for there to be judgment for the full

amount and, therefore, the liability, I believe - I
do not think you could settle it without having

regard to the rights of the defendant.

So, for instance, take the situation of MVIT

taking over the action, I do not believe they have

the right to settle without having regard to the

rights of the defendant. So, there would be an

action against them if they settled without having
regard to that.

In HVIT v Forbes, His Honour made it quite clear that that was the liability they had to pay

and, therefore, what the applicant here is seeking

to do is to set aside HVIT v Forbes. That is a

particular case for Western Australian statutes and

there is no reason why you should do it.

Your Honours have already in the case of - which is

mentioned - National Employers Mutual General

Insurance Association Ltd v State Government

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Insurance Commission, number S, refused leave to

appeal on that one, in the case of the

South Australian legislation and if it is merely

the insurance point that you have already received
indemnification or who receives the moneys received
back, then I do not believe there is any particular

point or difficult point of law involved in that

and it was easily dealt with by the way that

Their Honours dealt with it in this particular

case, and we adopt that argument.

MASON CJ: Yes, Mr Pullin.

MR PULLIN:  May it please the Court, there are four points

in reply I wish to make. The first is the MVIT

case did not deal, in my submission, with any

question which arises in this case. Could I take
the Court to page 53 where the ground of appeal is
set out at the top and one can see the quite
limited point which was in issue there. It is just

opposite line 5, the indentation, which reads:

"The trial judge erred in concluding that the

provisions of s 92(b) of the ..... Act required

him to enter judgment for the first
respondent -

that is, the plaintiff -

in the sum of -

X dollars -

which sum included workers' compensation paid

by.the second respondent ..... through its

insurer to the first respondent ..... prior to

trial.

That was the only issue about whether or not there

should be entry for judgment of the amount

including the workers' compensation or not and it

was on that quite limited point and provides, in my

submission, no guidance at all.

MASON CJ:	The last paragraph commencing on page 55 is in principle against you, is it not?
MR PULLIN:	It may suggest that, Your Honour, but it is

quite incidental and, in my submission, quite

accidental because the issue - all the attention of
the court was directed to this question which is

set as the point in issue in that case, not the

issue that we are arguing here which is, really,

this question of the relationship between or, I

suppose in the end, the liability of the insurer
under its policy taking into account the effect of

the Act.

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MASON CJ: Yes. Now, you did say in your address in-chief

that the result in this case was a windfall for the

employer.

MR PULLIN: Yes.

MASON CJ:  Now, I still do not understand how that comes

about because the employer is obliged to refund the

amount to the workers' compensation insurer under

the policy with that insurer.

MR PULLIN:  But why would that be, Your Honour, because what

is coming back is not - the CMT case has held that

that is not so because CMT - let us assume in this

case that Wesfarmers and CBH had not been friends

and that Wesfarmers had found it necessary to

exercise its rights under the policy and claim

subrogation which was, in effect, what the workers'

compensation insurer was doing in CMT. It was

saying, "Look, you have received a benefit" and they were not in agreement as the two are here.

Now, let us assume in another case that there

is no such agreement. Then, the position will be

that the insurer will end up with a windfall

because he will sue, rely upon this case to recover

his money and then rely on CMT as a reason for not

paying it on to the workers' compensation insurer,

and if I can also answer a point made by my learned

friend about the Transport Accident Commission

case, my learned friend says, contrary to my

submission, that it was significant that there was

a difference between the legislation in Victoria

and here.

In the joint judgment at page 447, after

analysing the difference in the original Victorian

legislation and the legislation which was then in

force, the reasons for there being a change in

approach in the legislation were identified in

three - there were three reasons set.

DEANE J: Mr Pullin, I am sorry, I do not understand still

how employer can get a windfall. I mean, assume he

is not friendly with his compensation insurer.

Then, two positions can arise; one is, he has been

covered for his workers' compensation payments and

he gets the payment back, which means that he has
recovered the payments which were covered by the

insurance. Why would he not, as a matter of

course, have to refund them to his insurer?

MR PULLIN:  No. Your Honour, can we take this case where in

fact CBH has not had to pay out any workers'

compensation insurance, $70,000, so he is not out of pocket and he is not out of pocket in relation

to the common law claim because SGIC has paid that.

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He now sues us and says, "I want the $70,000" and he will win - and has won that case in this case

here.

DEANE J: Well, I do not follow. If he is not friendly with

his workers' compensation insurer, he is entitled

to have payments made from the negligence verdict

and he must account for those payments to his

workers' compensation insurer because they

represent what he was insured against.

MR PULLIN: Well, not according to CMT, Your Honour.

DEANE J: Well, now, can you show me why CMT says that?

That is what I do not follow. I can understand

that if you say the workers' compensation insurer

cannot force him to sue, but that is a different

thing.

MR PULLIN: Yes. Well, the position is, in CMT, worker sues

CMT for $250,000. Before judgment, $31,000 of

workers' compensation is deducted and judgment is

entered for the balance, so that is step one.	The
workers' compensation employer then says, "Well,
look, I paid the workers' compensation.	I want

you", CMT, the employer, "to give me that money".

The CMT, the employer, then says to the equivalent of my client, the SIO in that case, "Well, if

that's so, you must indemnify me", so that step is

the same as the one in this case.

Mr Justice O'Bryan said, "No, NEM, the

workers' compensation insurer has no such right".

The Full Court of the Supreme Court, then, overturns that and says, "No, that is not right.

The workers' compensation insurer can recover it

from the employer" and therefore the employer is

entitled to indemnity from SIO.

It, then, comes to this Court and this Court

says, "No, that is not righ_t. Mr Justice O'Bryan

was right" and the workers' compensation insurer

has no entitlement to recover and the reasons for

that are twofold, and they are set out in the

headnote, Your Honour, accurately set out - the two

reasons which were given. First:

That the satisfaction of a judgment for

damages did not extinguish ab initio liability

to pay compensation unde~ the Act.

So, the Court said, "Well, why do you", the

workers' compensation insurer, "want anything back

because you always had that obligation. You're
just doing what you had to do under your policy".

The second reason that was given by the Court was:

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That the insurer's payment was by way of indemnity against the employer's liability

under the Act and hence was not recoverable

from the employer.

So, the end result is that the workers'

compensation insurer fails. Now, because there is

no point made of the difference between the

Victorian Act and the Western Australian Act about

whether you would made your deduction before or

after judgment, that is not a critical factor;

Wesfarmers, in this case, would fail in an action

against the CBH, the employer.

DEANE J: If the CBH had actually got the money back

pursuant to the provisions of the Act?

MR PULLIN: Well, yes, but the odd thing is that is why this

decision is wrong we say.	Why can they get the
money back?	Why is it that the employer in this
case is entitled to get the money back?	How can it

possibly be that it can recover under the terms of

its policy?

DEANE J: But that is avoiding the question. I mean, assume

the Act entitles them to receive the payment of the

workers' compensation payments, I just cannot

comprehend how it can be said they can keep those

payments and do not have to reimburse the workers'

compensation insurer.

MR PULLIN: Because it has been said by the High Court in

CMT that those payments retain their character as

workers' compensation payments whereas what the

employer in this case is recovering is an indemnity

for damages in common law. So, he is winning the

case because - - -

DEANE J:  No, he is not. What he is obtaining under the Act

is a refund of the workers' compensation payments

on the construction against you.

MR PULLIN:  No, Your Honour, because the Full Court - all it

did was to say, "The premium says you are

indemnified for liability for common law damages.

What's your beef, because the money - - - "

DEANE J:  But, what the Full Court says was, "Of course the

employer has to refund them to the workers'

compensation insurer".	I mean, they spelled it out
in no uncertain terms.

MR PULLIN: Yes, but the case is not a case about insurers,

of course. The case is all about the two parties,

not about workers' compensation parties. It is

about the employer suing the State Government

Insurance Office for its indemnity for common law

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damages. The Full Court said the Workers'

Compensation Act, really has nothing to do with

this. They have absolutely set that aside. The

decision in this case is based upon what the policy

says and they say, "Well, look, the policy says

there is indemnity with respect to common law

damages. Pay up". We say that one must have

regard to the legislation; one simply cannot do

that.

DEANE J: Well, if you look at page 119, the last paragraph,

the last two or three sentences, you would disagree

with that, would you? I mean, that is not put in

terms of this particular case. That is put in

terms of the abstract working.

MR PULLIN:  The answer to that, Your Honour, is CMT says

that is wrong.

DEANE J:  So you disagree with that?

MR PULLIN: Yes. If, in fact, a workers' compensation

insurer tries to rely on that, he will have cited

against him, CMT. That, with respect, is really a

throw-away line unnecessary to the decision. It is

really obiter because the decision has been reached

on the basis that the policy says you indemnify for

common law, you insure against common law

liability.	The liability in this case is $130,000.
The Act has got nothing to do with it.	We say that
is wrong.

DEANE J: Well, I must confess, looking at the Act in this

case, I would have thought that that was plainly

and demonstrably right which must mean that either

CMT turns on the different wording of the Victorian

Act or -

MR PULLIN:	Which is does not say, of course, Your Honour.
DEANE J:	- - - or my approach to insurance law is wrong

because CMT says it is.	I cannot quite see that in
CMT yet but that may be -

MR PULLIN: Perhaps it is CMT that needs review, then,

Your Honour. But, that is the problem; that there

is a difficulty because of CMT standing as

authority against the recovery by the workers'

compensation insurer.

The South Australian case - and I am told that special leave was refused in that case, but that

was a double insurance case, in our submission;

nothing to do with this case at all. They are my

submissions in reply.

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MASON CJ: Yes, thank you, Mr Pullin. The Court is of

opinion that the decision of the Full Court in this
case is not attended with sufficient doubt to

justify the grant of special leave to appeal.	The
application is, therefore, refused.

MR FOSS:	I ask for costs, Your Honour.
MASON CJ:	You do not oppose costs, do you, Mr Pullin?
MR PULLIN:	Not at all, Your Honour.
MASON CJ:	The application is refused with costs.

AT 11.35 AM THE MATTER WAS ADJOURNED SINE DIE

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