Victorian WorkCover Authority v Direxa Engineering Australia Pty Ltd (Ruling)
[2013] VCC 1959
•13 December 2013
| IN THE COUNTY COURT OF VICTORIA AT Melbourne CIVIL DIVISION | Revised Not Restricted Suitable for Publication |
Damages AND COMPENSATION LIST
SERIOUS INJURY DIVISION
Case No. CI-12-02895
CI-12-02961
| VICTORIAN WORKCOVER AUTHORITY | Plaintiff |
| v | |
| DIREXA ENGINEERING AUSTRALIA PTY LTD | Defendant |
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JUDGE: | HIS HONOUR JUDGE O'NEILL | |
WHERE HELD: | Melbourne | |
DATE OF HEARING: | 24 September 2013 | |
DATE OF RULING: | 13 December 2013 | |
CASE MAY BE CITED AS: | Victorian WorkCover Authority v Direxa Engineering Australia Pty Ltd (Ruling) | |
MEDIUM NEUTRAL CITATION: | [2013] VCC 1959 | |
RULING
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Subject: ACCIDENT COMPENSATION
Catchwords: Recovery proceeding pursuant to s138 of Accident Compensation Act 1985 – nature and extent of statutory right of indemnity granted pursuant to s138(3) – effect of calculation of indemnity pursuant to s138(3)(a), and assessment of damages pursuant to s138(3)(b) where worker has not made a claim for common law damages – orders made conditional upon such claims being made
Legislation Cited: Accident Compensation Act 1985
Cases Cited: Victorian WorkCover Authority v Direxa Engineering Australia Pty Ltd (No 1) [2013] VCC 1039; Victorian WorkCover Authority v Direxa Engineering Australia Pty Ltd (No 2) [2013] VCC 1245; Victorian WorkCover Authority v Kenman Kandy; Victorian WorkCover Authority v AV Jennings Limited (2002) 6 VR 666; Esso Australia Ltd v Victorian WorkCover Authority & Anor (2000) 1 VR 246; Blundell v Musgrave (1956) 96 CLR 73; Demetrios v Gikas Dry Cleaning Industries Pty Ltd & Ors (1991) 22 NSWLR 561.
APPEARANCES: | Counsel | Solicitors |
| For the Plaintiff | Mr R Stanley QC with Ms L Glass | Wisewould Mahony |
| For the Defendant | Mr M Titshall QC with Ms G Cooper | Lander & Rogers |
HIS HONOUR:
1 I gave reasons for judgment in these proceedings on 23 September 2013.[1] Each concern a recovery proceeding brought by the plaintiff (“VWA”) against the defendant (“Direxa”). The two workers involved, Mr Davey and Mr Wrout, both suffered injury in the course of their employment with a labour-hire company, IRP Pty Ltd (“IRP”), at premises controlled by Direxa. Details of the findings, apportionment of liability and calculation of damages in accordance with s138(3)(b), are set forth in the judgments.
[1]Victorian WorkCover Authority v Direxa Engineering Australia Pty Ltd (No 1) [2013] VCC 1039; Victorian WorkCover Authority v Direxa Engineering Australia Pty Ltd (No 2) [2013] VCC 1245
2 When it came to enter final orders consequent upon the judgments, an issue was raised by Mr Titshall, for Direxa, as to the terms of those orders. After some debate on the issue, I directed each party to file and serve written submissions, which I have now had the opportunity of considering.
3 The issue arises in this way: In the course of my reasons, I apportioned liability for the injury suffered by Mr Davey as to 75 per cent to Direxa, and 25 per cent to IRP. Thus, in accordance with the formula prescribed by s138(3)(b), factor X was 75 per cent. I assessed damages for both pecuniary and non-pecuniary loss. In Mr Wrout’s case, I found Direxa solely liable, and again assessed damages.
4 Neither Mr Davey nor Mr Wrout has brought common law proceedings. I was advised Mr Wrout has solicitors acting on his behalf and who attended and observed for part of the proceeding. In evidence, Mr Davey said that he had not contemplated bringing common law proceedings and had not instructed solicitors. While it would appear likely, given my findings, that the workers will bring common law proceedings, that is not assured. If either worker brought common law proceedings, Mr Titshall said that Direxa could be significantly disadvantaged, and the application of the formula could result in an injustice.
5 Section 138 of the Accident Compensation Act 1985 (“the Act”), relevantly, provides:
“(1)Where an injury … for which compensation has been paid, or is or may be payable, by the Authority … was caused under circumstances creating a liability in a third party to pay damages …, the Authority, … is entitled to be indemnified by the third party in accordance with this section.
…
(3)The amount which a third party is required to pay as indemnity under subsection (1) is the lesser of—
(a)the amount of compensation paid or payable under this Act in respect of the injury …; and
(b)the amount calculated … in accordance with the formula—
where—
Xis the extent, expressed as a percentage, whereby the third party's act, default or negligence caused or contributed to the injury …;
Ais the amount of damages … for pecuniary loss and non pecuniary loss which the third party is or would have been liable to pay in respect of the injury …;
…
Cis the amount paid by the third party in respect of the injury … to the worker … under any settlement of, or judgment in, an action by the worker ... against the third party.”
6 As things presently stand, in each case, the amount of compensation paid by the VWA, as evidenced by the s239A Certificate, is significantly less than the assessment which I made for pecuniary and non-pecuniary damages in accordance with s138(3)(b). As neither worker has instituted common law proceedings, the value of factor C is zero. Thus Direxa is required to pay the amount of compensation paid to date by the VWA, and to indemnify the VWA for any amounts which may be required in the future, up to a cap or limit calculated in accordance with the formula expressed in s138(3)(b). The disadvantage or unfairness to which Mr Titshall refers could occur if either of the workers were to take common law proceedings, and a judge or a jury were to award compensation for pecuniary and non-pecuniary damages in an amount more substantial than that which was assessed by me, or in the case of Mr Davey, arrive at an apportionment of liability less favourable to Direxa than found by me.
7 Various examples were provided by Mr Titshall in his written submission.[2]
[2]See Direxa’s written submissions at paragraphs 42 and following
8 I accept Mr Titshall’s argument that there is the prospect, although I would assess it as remote, that Direxa may be disadvantaged, if, consequent upon my judgment, it pays to VWA the amount of compensation pursuant to s138(3)(a), and then subsequently one or both of the workers bring common law proceedings which may have the effect of lowering the “cap” established by the formula in s138(3)(b). I say “remote” because one would expect that were common law proceedings instituted by the workers, the likelihood would be that the findings I made upon the evidence, and the calculation of damages undertaken, would be adopted, and the matter resolved. It may be that my findings and assessment could create an issue estoppel. In Victorian WorkCover Authority v Kenman Kandy Pty Ltd,[3] the Court of Appeal said:
“It may of course happen that a worker’s common law action is not settled until after judgment in the action for indemnity or is settled before that time but part of the settlement sum is not paid until after that time. A question might arise in such a case whether the determination of the value of Factor C by judgment in the action for indemnity gave rise to an issue estoppel or whether, on the other hand, the action for an indemnity, arising as each payment is made or quantified, is analogous to a rating appeal, which does not give rise to an estoppel in respect of a subsequent year’s rates. … .”[4]
[3]Victorian WorkCover Authority v Kenman Kandy; Victorian WorkCover Authority v AV Jennings Limited (2002) 6 VR 666
[4]At paragraph 41
9 However, it should be admitted that there is the prospect that a subsequent common law action by one or other worker could affect the cap imposed by s138(3)(b) and thus leave Direxa in the position that it paid a certain amount for compensation in accordance with s138(3)(a), to subsequently find that a proceeding brought by either worker resulted in an award for damages which led to a lowering of the cap.
10 Mr Titshall submits that in order to address that potential unfairness, it is appropriate to make final orders which are conditional and contain an order to the effect:
“In the event that, after the date of this order, the defendant pays the worker damages by way of settlement, compromise or judgment of or in common law proceedings taken by the worker against the defendant in respect of the injuries, the following is to occur:
(a)the amount payable pursuant to the formula in s138 must be recalculated by including the sum paid by the defendant to the worker as factor C of the formula [‘the recalculated formula amount’];
(b)if the amount paid by the defendant pursuant to paragraphs 1 and 2 of this order [the amount of compensation paid or payable pursuant to s138(3)(a)] exceeds the recalculated formula amount, the plaintiff must repay the defendant the amount by which the amount paid exceeds the recalculated formula amount;
(c)Alternatively, if the amount paid by the defendant pursuant to orders 1 and 2 is less than the recalculated formula amount, the defendant must indemnify the plaintiff up to the recalculated formula amount rather than the amounts referred to in paragraphs 1 and 2 of this order.”
11 Mr Stanley, for the VWA, while not accepting that any common law claim brought by either worker could cause an injustice to Direxa in the calculation of the formula, said the matter could be appropriately addressed by a suitable “liberty to apply” order to be actioned in the event it became necessary after the conclusion of either worker’s common law proceedings.
12 As was said by Ormiston JA in Victorian WorkCover Authority v Kenman Kandy Pty Ltd:[5]
“[1] The interpretation and application of sections such as s 138 of the Accident Compensation Act 1985 is always fraught with difficulty and may from time to time produce seemingly anomalous results, … .”
[5](supra) at paragraph 1
13 I was taken to the judgment of President Winneke in Esso Australia Ltd v Victorian WorkCover Authority & Anor.[6] His Honour said:
“… The history of the section and, more particularly, its predecessors was traced by this Court in Scott v Bowyer [1998] 1 VR 207 at 220. On its face, the section appears to contemplate a comparison between two discrete amounts and the determination of the entitlement to indemnity in accordance with the lesser of those amounts. Thus, subs(3)(a) calls for a calculation of amounts ‘paid or payable’ by the employer or insurer pursuant to the Act ‘in respect of the injury’. Subs(3)(b) calls for a calculation of a notional sum of damages payable by a negligent third party to the worker at common law in respect of pecuniary and non pecuniary loss and adjusted by reference to the third party’s responsibility for that loss. Although the section states that it is the ‘lesser’ of these two amounts which constitutes the indemnity ‘which a third party is required to pay’, his Honour’s orders appear to reflect a ‘hybrid’ of the two calculations; his first order being made under subs(3)(a) to provide an indemnity in respect of compensation payments made under the Act to the date of trial; and the second order being made to accommodate the calculation under subs(3)(b) in order to provide a ‘ceiling’ beyond which indemnity in respect of future payments of compensation could not go. This was the manner in which his Honour was invited to construe s138 and it was also the manner in which counsel, on this appeal, have invited us to construe the section. It was said - and I think with some justification - that to give s138 any other construction would make it, for practical purposes, unworkable. Thus, it is said that the words ‘the amount of compensation paid or payable under this Act’, where appearing in subs(3)(a), should be read as meaning ‘accrued and payable’; and that they cannot reasonably contemplate an amount produced by a calculation of all future payments which might be payable to the worker pursuant to the Act. Further, it is said that subs(3)(b) is to be construed as providing a ‘ceiling’ to the indemnity contemplated by the section - a ‘ceiling’ produced, as I have said, by the third party’s notional liability at common law for pecuniary and non pecuniary loss, and then reduced in accordance with the third party’s share of responsibility for that loss. Construed in this way, it is said, the court can identify, once and for all, an entitlement to indemnity against a negligent third party which will not exceed that party’s proportionate responsibility for the worker’s notional damages at common law for pecuniary and non pecuniary loss. If the notional damages at common law, assessed in accordance with subs(3)(b), are less than the amounts of compensation already paid or accrued and payable, then the entitlement to indemnity contemplated by the section remains the amount so assessed. Thus, the formula calculation in every case governs the indemnity entitlement in employer or insurer and the liability of the negligent third party.
… Whilst, for my own part, I have some difficulty in construing the section in the manner proposed, I am content to adopt it, first because the parties have requested us to do so for the purposes of disposing of these appeals and, secondly, because it appears to reflect the practice which has been adopted by courts which have constantly dealt with claims under s138 of the Act. In this respect, I note that the judge in the Coats Paton case assessed the indemnity entitlement in the same manner.”[7]
[6](2000) 1 VR 246
[7]At paragraphs 16 and 17
14 Aside from that guidance, I was taken to no authority which had precisely considered the issue which confronts Direxa in this case.
15 Mr Titshall was critical of the VWA for bringing these proceedings when no claim had been made by the injured workers. He said these recovery proceedings were premature. However, it is clear from the section that the entitlement of the VWA to recover payments made and obtain an indemnity against any future payments, is not dependent upon the conclusion of a claim for common law damages by an injured worker. Indeed, a worker may never bring a common law claim for any one of a host of reasons. Were the VWA to sit back and await a worker to take action, its entitlement to recover payments of compensation may become statute-barred. Further, it is clear from the authorities that s138 confers upon the VWA a statutory right which it may exercise at any time once any amount of compensation is paid to an injured worker. The safeguard to a negligent third party is that the amount of compensation to be paid or which becomes payable, will not exceed a sum calculated in accordance with the formula expressed in s138(3)(b). It follows that the entitlement of the VWA is not dependent in any way upon whether a worker has or intends to undertake common law proceedings. Further, as Mr Stanley submits, the attribution of figures to each of the factors A, B, C and X set out in the formula in s138(3)(b), is to be determined as at the date of judgment.
16 The situation where a subsequent payment by a negligent third party to a worker could be taken into account was canvassed, but not determined in Victorian WorkCover Authority v Kenman Kandy:[8]
“… A question might arise whether the President’s statement, and in particular the italicised words in it,[9] as approved by four justices of the High Court, would preclude reliance by the third party tortfeasor on the later payment in any subsequent claim for indemnity, when, as seems likely, the problem now being discussed was not present to their Honours’ minds. It is unnecessary to attempt to answer any of these questions here.”
[8]Victorian WorkCover Authority v Kenman Kandy; Victorian WorkCover Authority v AV Jennings Limited (supra) at paragraph 41
[9]The reference is to President Winneke’s judgment that the Court identify “once and for all” an entitlement to indemnity.
17 Having determined the nature of the statutory right of indemnity provided by s138, and the possibility of a future payment made by Direxa upon one or both of the workers bringing common law proceedings, it remains as to how final orders should be formulated in order to give to Direxa some protection in the event the situation arises as contemplated by Mr Titshall’s submissions.
An order with “liberty to apply”
18 Order 59.02 provides that an order made by a court shall take effect on the day it is made unless the Court otherwise orders. Thus a court may direct that a judgment or order take effect on a day other than the date of the order. It is not uncommon for an order to be made depending upon some future event. For example, a party to litigation may be required to take some interlocutory step, such as file an amended pleading or provide an affidavit of documents, and in the event they fail to do so by a certain date, that party’s claim is dismissed.
19 Although there is some authority to the effect that a court administering purely common law principles has limited power to make a conditional award of damages,[10] there are circumstances where a court administering both equity and common law where an award of damages will bring about some injustice, an award may be made contingent upon some future event.[11] This Court has jurisdiction in equity.[12]
[10]Blundell v Musgrave (1956) 96 CLR 73 at 94 per Fullagar J
[11]Demetrios v Gikas Dry Cleaning Industries Pty Ltd & Ors (1991) 22 NSWLR 561 at 571, 573, 574
[12]Section 31 of the Supreme Court Act 1986
20 In my view, it is permissible in the circumstances which face Direxa in these proceedings to fashion orders upon judgment which:
(a) contemplate the prospect of the workers bringing common law proceedings for damages;
(b) adjusting factor C in the formula prescribed by s138(3)(b) should that occur;
(c) if necessary, adjusting the amount paid, or to be paid pursuant to s138(3)(a) at some future time when (and if) the VWA makes a claim upon Direxa pursuant to the indemnity.
21 I have drawn orders to that effect, and will hear from the parties as to any “fine tuning” which may be appropriate.
22 Further, it appears to me to be appropriate to grant liberty to the parties to apply in the event there is an amount paid by Direxa to one of the workers in a claim for damages. The purpose for such an order is to allow any difficulties with the operation of the formula to be reviewed, but also to specifically address a situation where Direxa pays any amount in the future to the VWA pursuant to the indemnity, and then at some later time, it pays an amount to one of the workers pursuant to a judgment or settlement. That is, there is no opportunity to adjust payments already made pursuant to the indemnity, at that time. In those circumstances, it would be appropriate for the matter to come back to the court for further consideration and an adjustment to the amount paid by Direxa, if necessary.
23 In his submissions, Mr Titshall raised the issue as to costs. I was informed that the parties have filed one or several offers of compromise, and the costs to which either VWA or Direxa may be entitled could alter dependent upon the outcome of the formula, after the conclusion of the workers’ common law proceedings. Put another way, Direxa may have a right to costs under its offer of compromise, depending upon the outcome of the workers’ common law claim. I note in the proposed orders submitted by the VWA, it seeks costs on a party-party basis up to the date of an offer of compromise and thereafter on an indemnity basis, together with certification for Senior Counsel, and various other consequent orders. In my view, it is appropriate to award costs to the VWA as it proposes. The offer of compromise made by each party must have been made in contemplation of the fact that neither worker had brought common law proceedings. Each knew they faced, at the conclusion of the recovery proceedings, the application of the formula set forth in s138(3)(b) where factor C was zero. Were one or other of the workers to bring common law proceedings after the offers of compromise, then further offers could have been filed.
24 Again, the VWA was entitled to bring the recovery proceedings and has a statutory right as to payment of compensation and indemnity as provided by s138. It was largely successful in those proceedings, and should be entitled to recover costs. I propose to make costs orders along the lines sought.
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