Victorian WorkCover Authority v National Foods Limited

[2009] VCC 305

IN THE COUNTY COURT OF VICTORIA Revised

Not Restricted

AT MELBOURNE
CIVIL DIVISION

DAMAGES & COMPENSATION LIST

Case No. CI-02-07075

VICTORIAN WORKCOVER AUTHORITY	Plaintiff
v
NATIONAL FOODS LIMITED	First Defendant
and
ECOLAB PTY LTD	Second Defendant
and
NALCO AUSTRALIA PTY LTD	Third Defendant

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JUDGE:	HIS HONOUR JUDGE O'NEILL
WHERE HELD:	Melbourne
DATE OF HEARING:	31 March 2009
DATE OF RULING:	3 April 2009
CASE MAY BE CITED AS:	Victorian WorkCover Authority v National Foods Limited, Ecolab Pty Ltd & Nalco Australia Pty Ltd
MEDIUM NEUTRAL CITATION:	[2009] VCC 0305

RULING

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Catchwords: RECOVERY ACTION – s.138 Accident Compensation Act 1985 – application for discovery of documents relating to settlement of principal action.

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APPEARANCES:	Counsel	Solicitors
For the Plaintiff	Ms M A Hartley
For the First Defendant	Mr M Martin (Solicitor)
For the Second Defendant	Mr D Wattis (Solicitor)
For the Third Defendant	Ms G Clifford (Solicitor)
HIS HONOUR:

1          In or about January and February 2002, Terrance Lofkin (“the worker”) was employed by Hindorff Engineering as a labourer, and in the course of that employment worked at premises under the control of the first defendant at Wells Road, Chelsea Heights (“the premises”). He brought a proceeding (“the principal proceeding”) against the first defendant, and the second and third defendants, who were responsible for maintenance of various cooling towers at the premises. He alleged that while at the premises he contracted Legionnaires’ disease, and suffered significant injury.

2          On the 10 November 2008, after six days of hearing, the principal proceeding was resolved.

3 The current proceeding is a recovery action by the Victorian WorkCover Authority (“the Authority”) as plaintiff against the same three defendants pursuant to s.138 of the Accident Compensation Act 1985 (“the Act”). The Authority alleges that each of the defendants was negligent or in breach of its duty and is entitled to be indemnified pursuant to that section.

4          As stated, the principal proceeding resolved upon terms which I am told were confidential to the parties. As a result of a psychological illness of Mr Lofkin, the recovery proceeding has not yet been heard, and I have recently listed it for hearing commencing 21 September 2009.

5          This ruling concerns an application by summons by the Authority for discovery of the following material:

“(a)	Settlement documentation and the release in the matter of Terrance Lofkin v National Foods and Others.
(b)	Letters, emails and information in relation to payments by each defendant to Terrance Lofkin.
. . . .”

6          An affidavit of Mr Dominic Cook, solicitor for the plaintiff, and sworn 27 March 2009, was filed in support of the application, and I heard oral argument from the parties.

7 Section 138 of the Act provides that where the Authority pays compensation as a result of injury to an employee under circumstances which would create a legal liability in a third party to pay damages to that worker, the Authority may seek indemnification from that party. The amount of the indemnity is to be determined by reference to Section 138(3).

8          It is clear that one or other or all of the defendants have paid or contributed to a payment to the worker in resolution of the principal proceeding.

9          I am advised the Authority has previously sought discovery from the defendants in this proceeding. Discovery is the disclosure by one party of documentary information relating to questions to be determined in the proceeding which could assist the other party in establishing its claim, or defence. Discovery is an ongoing obligation.

10        Ms Hartley submits that the documents sought are discoverable on the following bases:

(a)	They are relevant to the assessment of factor “C” pursuant to the formula contained in s.138(3)(b);
(b)	They are relevant for the plaintiff to know what amounts had been paid to the worker by the defendants to enable the Authority to properly conduct its case, particularly as to the liability of the respective defendants under the statutory indemnity created by s.138;
(c)	Contribution by the respective defendants to the worker is relevant to enable the Authority to structure an appropriate offer of compromise.

11        I am informed that the terms of settlement between the worker and the defendants were confidential and approaches to him by the Authority seeking disclosure of the terms have been refused. The fact that the terms of settlement as between those parties are said to be confidential is not, in my view, a bar to discovery in the present proceeding.

12        Further, the terms of that settlement could not be said to be privileged as a communication between client and lawyer. Nor does disclosure of the contribution to the worker give rise to a public interest immunity argument which may base a valid objection to production.

13        In response to the application, the defendants submitted as follows:

(a)	Section 138(1) requires the Authority to prove that there was a legal liability established in one or all of the defendants such as to give rise to the statutory indemnity. The contribution of the defendants to the worker is not relevant to any issue in such a determination.
(b)	The contribution by the defendants is only relevant once that issue is determined and it is akin to, say, disclosure of payments of weekly compensation made by the Authority in a common law proceeding brought by a worker who obtains a judgment for economic loss.
(c)	The disclosure of such information could be prejudicial to the determination by the trial judge. It could tend to influence the judge as to the proportion of contribution which he or she would be required to determine as between the defendants.
(d)	The Authority, pursuant to the formula, is required, once liability had been established, to prove quantum, that is factor “B” in the formula. It was not relevant to any aspect of proof in that regard to disclose the contribution by the defendants to the worker.

14        A “without prejudice” offer made in the course of a proceeding is protected from disclosure in the course of discovery.[1] The purpose of this exception relates to public policy, namely parties should be encouraged to facilitate a compromise of a proceeding wherever possible and ought not be hindered in any way from so doing by the risk of disclosure of the terms of an offer which may act as an admission as to liability.[2] This principle does not have application to the present proceeding. The principal proceeding is a separate proceeding, and decided on different issues.

[1]             Williams’ Civil Procedure: 29.01.730

[2]             Cutts v Head [1984] Ch 290, at 306

15 In order to prove its case, the Authority must lead evidence as to why the defendants would be liable to the worker under common law principles. If the Authority succeeds in proving there was liability on behalf of one or all of the defendants, then the extent to which that party is to indemnify the Authority is determined by the application of s.138(3). That section provides that the amount the third party is to pay pursuant to the indemnity under s.138(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 –

X

[A − (B + C)] × .”

100

16        Factor “A” in the formula is the amount of damages which a third party would be liable to pay under common law principles were it not for the provisions of this Act. Such damages include damages awarded for pain and suffering, economic loss, medical and like expenses, and possibly under other heads. Factor “C” is the amount paid by any third party to the worker under any settlement.

17        The defendants argue that the settlement contributions only become relevant if a court were to find there was legal liability in any one of the defendants. That may be, but in the course of the recovery proceeding, it will be also necessary for the Authority to prove factor “A”, that is, damages for which a third party may be liable. To that point, the contribution by the defendants to the worker previously paid are not relevant to any aspect of the case to be proved by the Authority. However, in order to complete the formula and thus determine the extent of the liability of a defendant, Factor C must be established. While that, in my experience is usually advised to the Court at the conclusion of the evidence, it is, none the less an element of the Authority’s case which must be established and therefore documents which relate to it are, prima facie, discoverable.

18        The Defendants argue that were the terms to be disclosed by discovery, it could lead to the contributions being disclosed to the Court through evidence. The terms could not be used as an admission against any defendant. A defendant may resolve a proceeding against a worker for a range of reasons, including expediency, commercial considerations, as well as the prospects of a finding against that defendant. Were details to be disclosed to the court, there would be the prospect of the judge hearing the trial being influenced as to the respective proportionate liability to be borne by each defendant. Ms Hartley argues that a judge is capable of setting aside from consideration any such issues. If documents relating to contribution were to be discovered, they would not be admissible except for the purpose of establishment of the formula. It would not be necessary to tender any such documents into evidence until the end of the proceeding. In fact in my view, their admission would be objectionable until that time. Thus the prospect of them influencing a Judge would be removed.

19        Ms Hartley further argues that the disclosure of the documents are sought to enable her client to make a considered offer of compromise. The Authority is a professional litigant, and well able to assess the liability of the respective defendants, and the quantum required by Factor “A”. However, unless it was appraised as to the contribution of the defendants, then any offer of compromise would be of little effect as it would not know the calculation as a result of the formula. There is merit in this argument in my view.

20        For all of these reasons, I am of the view that there ought to be discovery of the contribution of the respective defendants to the settlement of the principal proceeding. However, the documents sought in the Summons are wide. There is no relevance in the Authority obtaining the terms of settlement with the worker, nor the letters, emails and information referred to. It is necessary only for the amount of the contribution of each defendant to be disclosed. I would have thought that practical effect to the defendants’ obligation as to discovery could be given by each defendant simply informing the Authority of their respective contribution.

21        I shall make consequent orders.

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