State Government Insurance Commission v National Employers' Mutual General Insurance Association Limited

[1990] HCATrans 39

IN THE HIGH COURT OF AUSTRALIA

Office of the Registry

Adelaide No A39 of 1989

B e t w e e n -

STATE GOVERNMENT INSURANCE COMMISSION

Applicant

and

NATIONAL EMPLOYERS' MUTUAL GENERAL

INSURANCE ASSOCIATION LIMITED

Respondent

Application for special leave to
appeal

MASON CJ DAWSON J

SGIC

TOOHEY J

TRANSCRIPT OF PROCEEDINGS

AT MELBOURNE ON FRIDAY, 9 MARCH 1990, AT 11.21 AM

Copyright in the High Court of Australia

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MR B.T. LANDER, QC:  May it please the Court, I appear with

my learned friend, MRS. WALSH, for the applicant.

(instructed by Ward & Partners)

MS E.F. NELSON, QC:  May it please the Court, I appear with

my friend, MR R.W. EVANS, for the respondent.

(instructed by Ward Nolan & Co)

MR LANDER:	The applicant contends and contended in the court below, that the principles that this Court decide:i
in TRANSPORT ACCIDENT COMMISSION V  CMT CONSTRUCTION
govern this matter and it is the applicant's
contention that these principles were directly
applicable unless the principles themselves do not
apply,where an insurer is seeking contribution from
another insurer or in the other event, where unless the South Australian legislation may be distinguished. If the applicant is right about that, the sum of
$11,502,which was the workers compensation payments,
did not extinguish the employers concurrent and separate liability at common law. Therefore, it would follow, it is submitted by the applicant,
there would be no double insurance in respect of that sum and therefore it would follow that the next
question that needs to be answered is whether the
motor vehicle policy, which is at the application
book at page 14, covers an employer's liability for
workers compensation.  Now we say three matters are
raised that would give rise to special leave. The
first is:  do the principles in the CMT case extend
to actions involving contribution as between
insurers, and that point was left open in the CMT case?
Secondly, do the principles in the CMT case apply,
having regard to the South Australian legislation and
then thirdly, does the fourth schedule of the MOTOR VEHICLES ACT insure the owner of that motor
vehicle only against a liability for common law
damages for personal injuries, or does it extend to
cover the owner's liability for payments of workers
compensation?
the Full Court. Justice Jacobs, with whom Now those matters were addressed in
Justice Prior agreed, held that although the sum
of $11,502 was technically a payment of workers
compensation, nevertheless, as the payment was in fact
discharging a liability that the employer also had
at common law, then it was subject to the indemnity by both insurers. That, in our submission, is wrong and is wholly inconsistent with the reasoning in the
CMT case, unless His Honour had found that the CMT case did not apply to matters of double insurance or unless His Honour was able to find that the legislation
in South Australia was so different,. such that the
CMT case could not apply to it.  But His Honour, as the
Court will be aware, did not apply his mind to either
of those two matters, and simply found, as he did,
without considering the reasoning in the CMT case.
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Justice White, with whom Justice Prior also agreed,

decided firstly that the CMT case was not a case of

double insurance and therefore was not strictly in

point. Secondly. that in any event CMT could be

distinguished on. the differences in the legislation.

Thirdly, that when he talked to the legislation, he

determined that the Victorian section 79(2) and the

South Australian section 82(6) were so different

that the CMT case did not apply. He went on then

to find that by reason of section 82(1) of the

South Australian Act, that in the absence of express

provision in the South Australian Act which modifies
the law so as to exclude Act payments or their

equivalent from the principles of double insurance,

there is a liability to contribute one half of the

full amount of the damages to be assessed.

MASON CJ: What do you say about the distinction that

Mr Justice White drew between the legislation in

this case and the legislation in the CMT case,

which he deals with at pages 29 and 30?

MR LANDER:  It is a distinction in our submission which is

a distinction without a difference. The same process

of assessment must take place under both of the provisions and the same deduction must be made,

whether it be made from a judgment sum in the

case of the Victorian section, or the sum recoverable

in the South Australian section. The end result is

simply the same and in our submission there is no

distinction; no distinction that allows the CMT case

to be distinguished in any event between the

Victorian legislation and the South Australian

legislation. There is, however, a distinction in

the legislation that was not adverted to by the

Full Court and that is a distinction that occurs

between section 79(l)(a) of the Victorian legislation.

We have a copy of the Victorian legislation as it

applied in the CMT case, if we might hand it up.

MASON CJ: Yes, if you would.
MR LANDER:	And also can we hand up a copy of the South Australian

legislation, section 82(3) and (5)

It is section 79Ul-(1A}., which is at the bottom of

the first page of the type-written Act, and Your Honours

will see there that section 79 of the Victorian Act

has this effect: it shall not-

affect the right of any person to take and

prosecute any proceedings for damages -

Under- (lA) (b) there is a residual right in the worker after

the payment of damages to continue with his claim

for workers compensation. And that was dealt with

in the CMT case. So under Victorian legislation

there are, in some circumstances, rare, as C}IT said,

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circumstances where the worker may continue with

his workers compensation case. In the South

Australian legislation it has to be accepted that

under section 82(3) no such residual right remains

and Your Honours will see there that the worker

shall not connnence or continue with proceedings in

those circumstances mentioned. And section 82(5)

also expands on that where it talks of any payment -

by way of damages ..... shall be deducted from the

sum recoverable by the workman -

So there is a point of distinction, we must accept, between the South Australian Act and the Victoria Act.

We must also accept that this Court relied upon, to

a certain extent, section 79 of the Victorian Act for

the process of its reasoning in the CMT case, but it

is our submission that the distinction again is not

so as to deny the reasoning to the South Australian Act,

because in all other respects the South Australian Act

is on all fours with the Victorian Act, not only

with respect to the present provisions but also to the

history of the legislation itself. And in our submission,

it is a matter of importance in South Australia that

this Court determine whether the principles in CMT would

apply to the South Australian legislation, having

regard to the distinction that I pointed out to the

Court.

The other matter, as I put to the Court, that

is a matter of importance to be determined is whether

or not the CMT reasoning does apply when there are

matters of dual insurance. This Court in CMT did

leave open or stated expressly that the CMT case was

not a case of double insurance. If we are right

about the matters that we put to the Court in relation

to CMT's application in South Australia, it also

raises in South Australia the question of the MOTOR

VEHICLES ACT and section 104. The point it raises

there is that under section 104 of the MOTOR VEHICLES ACT

in South Australia, all motor vehicles must be insured

pursuant to the fourth schedule of the MOTOR VEHICLES ACT. against any liability in respect of oersonal injury or

death. In South Australia that has been construed as

only to give an indemnity in respect of common law

damages and there is a decision of a single judge in

South Australia in respect of that. In Victoria,which

has not unlike legislation, there is a decision of
the Full Court of the Supreme Court of Victoria which

states that under the Victorian Act the liability to

indemnify is not -only in relation to common law

damages, but also in relation to workers compensation

liability that might be attracted by the owner as

the employer, in the circumstances of there being a

use of the motor vehicle at the time of the happening

of the injury.

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Again in South Australia it is important, in our

submission, - - -

DAWSON J: What is the point you make out of that?

MR LANDER: That there are two decisions, if Your Honour

pleases, in relation to like legislation, as to

the cover that is given by identical policies in

different States. It is important in South Australia

that it be determined whether or not the cover is

only in respect of connnon law damage or does extend

to workers compensation liability, because there are

still a good number of exempt employers under the

new workers compensation provisions who may,

arguably, be able to say that they have a cover

in respect of workers compensation by reason of the

motor vehicle policy, if the injury is caused by or

arises out of the use of a motor vehicle.

DAWSON J:  No, you are missing the point. There would still

be double insurance, would there not?

MR LANDER:  Not in those circumstances, if Your Honour pleases,

because the employer now would not be insured. It

would be, not only not double insurance, it would be

an action by the employer against the SGIC claiming

a right to be indemnified, rather than a case of
double insurance, in those circumstances, because the

employer would not be otherwise insured under the

scheme as presently is provided in South Australia.

DAWSON J:	But he was insured otherwise.
MR LANDER:	In the circumstance of this case, yes.
DAWSON J:	Yes, so there would still be double insurance in

this case?

MR LANDER:	In this case it still could be double insurance.
MR LANDER:	In this case it still could be double insurance.

If this Court determined that the fourth schedule

did cover workers compensation liability, it would

be double insurance.

DAWSON J:	But the question does not really arise, does it?
MR LANDER:	Well, . it does arise, if Your Honour pleases, if

this Court determines that the workers compensation

payments have a character of their own and do not

come within the connnon law liability cover. If the

fourth schedule only covers a liability at connnon

law, then it is not double insurance. If the fourth

schedule covers a liability at connnon law, together

with workers compensation liability, then there

is double insurance. That is the third question that

arises if CMT applies to South Australia.

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Now it is submitted, in our submission, that

Justice White erred in the distinction he made on

the legislation, but we have mentioned to the Court

one other possible distinction. He also erred in

his reasoning pursuant to section 82(1) of the Act,

where His Honour found that section 82(1), and his

provides as is shown.

reasoning is at page 45 of the application book,

MASON CJ: What page is this?

MR LANDER:  Page 45 of the application book, Your Honour. Page 23 of Your Honour's decision.

MASON CJ: I think it must be page 34; that is page 23 of

the judgment.

MR LANDER:  Thank you, Your Honour. Page 34, I have been

provided with a different book. At page 34,

His Honour discusses the question of section 82(1).

It is our submission that section 82(1) has nothing

whatsoever to do with questions of double insurance.
What section 82(1) has to do with is the right of
the employee to bring an action for connnon law damages
and does not raise at all questions of double
insurance and in fact section 82 in the WORKERS'
COMPENSATION ACT is included under the heading

"Alternative Remedies" and section 82 and the

following sections are all concerned with what

other alternative remedies the worker would have

at connnon law or against third parties. It is not

to the point, in our submission, and it does not

provide any answer as His Honour suggests, to the

CM question of double insurance.

Now, for all those reasons, it is our submission

that the decision of the Full Court is wrong and

that the special leave points, the three points

that have been raised, would give rise to this

Court granting special leave.

Now, I should say, before sitting down, of course, the fourth schedule policy covers all motor vehicles

in South Australia. They are our submissions.

MASON CJ:  Ms Nelson.

MS NELSON:  May it please the Court. We did send by facsimile

some written submissions on Monday. I am told I

should not therefore assume that Your Honours have

received them and I ask now if you have?

MASON CJ:  No, I think you ought to assume we have not received
them, Ms Nelson.

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MS NELSON: Well, as a precaution I do have copies and I

hand them up.

MASON CJ: Yes.

MS NELSON:  The application for special leave in this case

arises because of the way in which judgment was

recorded in the court at first instance. Unlike

the situation in Victoria, it was perfectly

possible for a South Australian court to have
recorded what the parties agreed to be an

appropriate assessment of damages in this case

which was something a little in excess of $71,000.

Had that been done, the parties would then - that

is, the two insurers - have applied the principles

of double insurance contributed equally to that

award; the employer would have recovered the whole

of the $11,000 paid by way of workers compensation

and pursuant to its policy of insurance with the

respondent would have returned that money to the

respondent. So that for all practical effects,

it would have meant a sharing of responsibility.

MASON CJ:	Why was the judgment entered in this form?
MS NELSON:	It is not an uncommon practice or it was not prior

to the enactment of the 1987 Supreme Court Rules for judgment to be entered,where the employer on the face of it was the only tortfeasor, merely as

a matter of convenience between the parties. It

is really a pragmatic consideration, it is not a

question of legal principles. It saves the

arithmetic and the plaintiff - and I suspect

this is the real reason - knows precisely what

amount he is going to obtain from the judgment

in addition to moneys he has already received.

MASON CJ: What affect does the alteration of the rules in

1987 have?

MS NELSON:  It does not affect the position because it is

left to the situation as it used to be. The

alteration to the rules is that unless otherwise

expressed by the parties, the judgment is deemed

to be an amount in addition to workers compensation

payments. So that one would assume that where a

double insurance problem arises that if the parties

were to approach the judge and request the

judgment to be recorded in full for the reason

that there are double insurers, that that would

still happen. I merely alert Your Honours

to the fact that now there is some sort of

legislative provision there whereas before it was

purely a matter of practice. Some people chose to

have judgment recorded in full and asked that it

be noted that that judgment included workers

compensation payments so that the employer's position

in terms of recovery was preserved, and some people

simply, as a matter of convenience, elected to have

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it recorded in the manner in which this judgment

was recorded, and I submit that this is not a

matter of general application either in Australia

as a whole or in South Australia particularly because

this was, if one likes, an idiosyncratic way

of recording a judgment.

As I read the Victorian legislation, there was

no choice, it was mandatory, that the judgment had

to be recorded after deducting payments of workers

compensation. So that the character, because of

that legislative interference in Victoria of the

workers compensation payments, did not change;

whereas, in South Australia, it is my submission

that the payment of workers compensation by reason

'	of the different legislative provisions is provisional
only and it therefore does not attract the same
considerations as this Court gave in the case to which the applicant has referred, namely, the
CM'I' case.

The CM'I' case is properly distinguishable and

of no application, in my submission, to the South Australian position. In the CM'I' case the workers

compensation insurer sued the employer for the

whole of the amount paid by way of workers compensation.

It was not a double insurance question at all, it was

really an attempt to circumvent the operation of the

legislation, and that is not the position in

South Australia.

In order to advance that argument, the appellant

in the CM'I' case of necessity was forced back into

arguing the proposition that the liability to pay

compensation was void ab initio or became void when

damages were assessed and arguably, the character

of the workers compensation payment by reason

thereof remained unchanged. It never forms part of

the judgment for damages. Whereas, in South

Australia, the position is totally different. I reiterate my initial submission that had the judgment been entered in a different way - - -

MASON CJ: Yes, I think we follow that, Ms Nelson.

MS NELSON:  Yes, thank you. The other definite distinction

in this case is that here it is a clear case of

double insurance: on the one hand, the third

party comprehensive insurer and on the other hand,

the insurer against the employer's liability to

pay common law damages.

The submission urged by my learned friend

relating to the question of liability pursuant to the fourth schedule of the MOTOR VEHICLES ACT is,

in my respectful submission, irrelevant. That

really revolves only around the question of whether,

under those circumstances, there is a liability that

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can arise in the third party insurer, independently

of a common law liability, to contribute to workers

compensation. I do not advance that as part of my

case. It is really unnecessary for me to advert to

that at all.

DAWSON J: It was not raised below, was it?

MS NELSON:  I think it was. I think the case of

C.E. HEATH was advanced.	I would be very surprised
if it was not.	But in that case of

C.E. HEATH UNDERWRITING, what happened was that

the plaintiff took action at common law and in
the alternative sought workers compensation. His

action at common law was dismissed and I think

workers compensation was assessed somehow pursuant

to the provisions of the Act. There was then an
attempt within the context of the two insurers

having been involved in the common law claim

for the workers compensation insurer to claim half

of those payments from the third party insurer

for the motor vehicle. And that case, really,

was a question of whether it was appropriate

outside the context of common law damages for a
contribution to be sought from the third party

insurer. So, in my submission, it is irrelevant

to the consideration of the present case. It does not

adva1'Ce it· 1n· an~- lt1ay ~ shape or form.

In the· present cas.e·, it is' my submission

that the employer is liable to pay common law

damages if it is appropriate and under the

circumstances of the employer having already

paid something by way of workers compensation,

he can recover that. If there are two tortfeasors

it is clear law in South Australia that it is

advisable to record a single judgment against all

tortfeasors. for the full amount recoverable and

then the employer tortfeasor deducts, pursuant to

section 82 if called upon to satisfy the judgment,

that amount that he has already advanced. In my

submission, this case really comes down to saying

it is desirable to record judgment for the full

amount recoverable against an employer where there

is double insurance because then, pursuant to those

principles, there would be a contribution by the

double insurers and the practical effect, as I have said, would be to repay to the workers compensation

insurer half of the workman's compensation paid.

The other areas where, in my submission, the

Full Court of South Australia was correct in

distinguishing the CMT case are the provisions of

the Victorian Act and, in particular, the manner

of recording the judgment. I do argue that the

CMT case affirms the proposition that if the

liability to pay compensation is extinguished by

a subsequent award of common law damages then the

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employer must reimburse the workers compensation

insurer and if a proportion of the employer's

responsibility is to be met by the other insurer

then it follows that that other insurer must also

contribute to the payments made by the workers

compensation insurer.

So that my position in this case is that

unlike the Victorian case, the situation in

South Australia is that there is no continuing

right whatsoever to workers compensation after

an award of damages whereas that under the Victorian

Act there is notionally a continuing residual

right of some sort. There is, in both situations,

I concede, a legislative intention to avoid

double recovery. The language of the sections

are different in that the South Australian

legislation refers to the"sum recoverable" and

it would be my respectful submission that adopting

the description of the legislative intention that

the then Chief Justice, Chief Justice Gibbs of

this Court used in BATCHELOR V BURKE, the

South Australian situation should be viewed as a

provisional payment which possibly could be

construed as an advance against the employer's

liability to pay cotimlon law damages.

When those cormnon law damages are, in fact, paid

there is an extinguishing of the employer's liability
to continue paying workers compensation, and to

that extent, although that remark in the CMT case

is obiter, then it does affirm the proposition

that I am advancing in this case. Those are the

matters I wish to cover.

MASON CJ: Thank you, Ms Nelson. Yes, Mr Lander.

MR LANDER:	If the Co~rt pleases, it is not simply a matter of the manner in which the judgment was recorded. The rules of the supreme court require that the
judgment be entered for the lesser amount. The
decision that is referred to in Justice White's
reasons of BASSANESE, a decision of the Full Court, also suggests the same, that the amount is entered
for the lesser amount, not the greater amount. But
more importantly than that, section 82(6) would
only .allow the worker to recover against his
employer the. lesser amount and would only allow
the employer to recover against his insurer the lesser amount and, we would submit, then
would only allow the insurer, in a matter of
double insurance, to sue for the lesser amount,
and it is not simply the procedural method of how
a judgment is recorded in South Australia that is raised here. What is raised here is the wider and
more fundamental matter as to whether or not in
any event CMT applies and it is not a point of
distinction to attempt to distinguish section 82(6)
from section 79(2) because their practical results

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are exactly the same although their words are
different and, in our submission, it is not to

the point whether the money is deducted before

judgment or after judgment.

As to the second matter and particularly the matter Your Honour Justice Dawson raised in

relation to the fourth schedule, that was argued,

if Your Honour pleases, below. It is adverted to

by Justice White at page 32 of the application book

but they do not need to decide it because of their reasoning. Those are the matters we put in reply.

MASON CJ:	Thank you, Mr Lander.
The Court is of opinion that the decision of the Full Court of the Supreme Court of South Australia
is not attended with sufficient doubt to justify the
grant of special leave to appeal. Accordingly, the
application is refused.

Ms Nelson, do you apply for costs?

MS NELSON: · I do, Your Honour.

MASON CJ:  You do not oppose that, Mr Lander?

MR LANDER: It cannot be resisted

MASON CJ:  The application is refused with costs.

AT 11.54 AM THE MATTER WAS ADJOURNED SINE DIE

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