VWA v Venamis Group Pty Ltd and Lockwood (Ruling)
[2011] VCC 954
•30 June 2011
| IN THE COUNTY COURT OF VICTORIA | Revised |
Not Restricted
AT MELBOURNE
CIVIL DIVISION
DAMAGES AND COMPENSATION
GENERAL DIVISION
Case No. CI-05-01400
| VICTORIAN WORKCOVER AUTHORITY | Plaintiff |
| v | |
| VENAMIS GROUP PTY LTD | First Defendant |
| (ACN 097 323 610) | |
| and | |
| DAVID NEIL LOCKWOOD | Second Defendant |
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| JUDGE: | HIS HONOUR JUDGE PARRISH |
| WHERE HELD: | Melbourne |
| DATE OF HEARING: | 20, 21 and 22 October 2010 |
| DATE OF RULING: | 30 June 2011 |
| CASE MAY BE CITED AS: | VWA v Venamis Group Pty Ltd and Lockwood (Ruling) |
| MEDIUM NEUTRAL CITATION: | [2011] VCC 954 |
RULING
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Catchwords: ACCIDENT COMPENSATION – S.138 Accident Compensation Act 1985 – whether receiver and manager of “employer” can be a third party within meaning of s.138 – the effect of the third party becoming bankrupt, s.82(1), 82.(2) and s.153 of the Bankruptcy Act 1966 (Cth).
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| APPEARANCES: | Counsel | Solicitors |
| For the Plaintiff | Ms F M McLeod SC with | Wisewoulds |
| Mr D Turner. | ||
| For the Defendants | Mr A R Kirby | Brand Partners |
| HIS HONOUR: |
1 Pursuant to s.138 of the Accident Compensation Act 1985 (as amended) (“the Act”), the Victorian WorkCover Authority (“the Authority”) seeks indemnity from the second defendant, David Neil Lockwood (“Lockwood”), in respect of compensation paid to Mr Murat Goga (“Goga”), who suffered Legionella arising out of or in the course of his employment with F & T Industries Pty Ltd (“F & T”).
2 The Writ was issued in 2005 and the Statement of Claim accompanying the Writ only sought, at that time, indemnity from Venamis Group Pty Ltd, trading as CWTS Total Water Treatment Solutions (“Venamis”). Pursuant to an Order made on 18 July 2007, the Writ and Statement of Claim were amended to also seek indemnity from Lockwood. Senior Counsel for the plaintiff informed me that the proceeding against Venamis had resolved with no payment of any indemnity.
The Proceeding
3 By way of the Amended Statement of Claim, the Authority alleges:
(a)
at all material times Goga was employed by F & T as a machine operator at premises situated at 39 Nelson Street, Moorabbin;
(b)
in or about February 2002, Goga contracted Legionella with its complications (“the injuries”) from cooling towers at the premises of F & T;
(c)
Goga lodged a Claim for Compensation (“the Claim for Compensation”) dated 26 March 2002 and thereafter was paid compensation pursuant to the provisions of the Act consisting of weekly payments, medical and like expenses, rehabilitation expenses and claimant expenses;
(d)
Lockwood was appointed Receiver and Manager of F & T by Exelerate Funding Pty Limited on 29 June 2001 under the terms of its debenture charge registered on 11 September 2000.
In particular, it is alleged by the Authority:
“6 At all material times [Lockwood]:
(a) was the agent of the employer by reason of his appointment as Receiver and Manager under the Charge; (b) managed and controlled [F & T’s] business and property; (c) by reason of the matters in paragraphs 6(a) and (b): (i) had a responsibility for the health and safety of [Goga]
(ii) was the responsible person for the purposes of Regulations 5, 12(1) and 12(2) of the Health (Legionella) Regulations 2001 (Vic).
(e) On or about 20 November 2001, Venamis provided a report to Lockwood in accordance with Regulation 12(1) of the Health (Legionella) Regulations 2001 (Vic) that a water sample in F & T’s cooling tower system revealed a heterotrophic colony count exceeding 100,000 colony- forming units per millimetre and that Lockwood failed or neglected to carry out remedial treatment as required by that Regulation. Further, on or about 11 February 2002, Venamis provided a further report to Lockwood in accordance with Regulation 12(1) of the Regulations and Lockwood failed or neglected to carry out remedial treatment as required by the Regulation;
(f)
The development of Legionella by Goga was caused by the negligence and/or breach of duty owed to Goga by Lockwood in the control, care and maintenance of the cooling towers and air-conditioning systems at the premises of F & T.
(g)
In such circumstances, the injuries suffered by Goga were caused under circumstances creating a legal liability in Lockwood to pay damages to Goga and, accordingly, Lockwood was liable to indemnify the Authority pursuant to s.138 of the Act.
4 By way of his defence, Lockwood in particular asserts:
“20 Further or alternatively, if the worker contracted injuries as a result of [Lockwood’s] negligence (which is not admitted but is expressly denied), such injuries were not caused under circumstances as creating a liability in [Lockwood] to pay damages within the meaning of s.138 of the Accident Compensation Act 1985 because [Lockwood] was acting at all material times as the agent of F & T Industries Pty Ltd (Receiver and Manager appointed) and was acting within the scope of that authority. 21 Further or alternatively, [Lockwood] became bankrupt on the filing of his debtor’s petition on 4 June 2004, from which bankruptcy he was discharged on 19 December 2007. 22 In the premises, if [Goga] contracted injuries in circumstances creating a legal liability in [Lockwood] to pay damages within the meaning of s.138 of the Accident Compensation Act 1985 (which is not admitted, but is expressly denied) and if the [Authority] has paid, or may pay compensation in respect to such injuries, then the [Authority’s] claim for indemnity under s.138 of the said Act is, and was at all material times, a claim provable in the bankruptcy of [Lockwood] and [Lockwood] was released from such claim on his discharge from bankruptcy by operation of s.153 of the Bankruptcy Act 1966 (Cth).”
5 I shall refer to the defence raised in paragraph 20 of Lockwood’s Defence as the “third party defence” and the defence raised in paragraphs 21 and 22 of Lockwood’s Defence as the “bankruptcy defence”.
6 Lockwood admits that he was appointed as Receiver and Manager of the property of F & T on 25 June 2001, ceased to act as Receiver and Manager on 16 April 2004, that F & T was wound up on 20 March 2003 and insofar as he acted as Receiver and Manager of F & T from 25 June 2001 to 19 March 2003, he acted as its agent, and from 20 March 2003 to 16 March 2004, he acted as agent for his appointor. Lockwood denies that he received notification from Venamis and also denies that he was negligent or breached any duty of care owed by him to Goga.
Preliminary Issues
7 Counsel for the Authority and Lockwood both sought that the “third party defence” and “bankruptcy defence” be heard as preliminary questions pursuant to Rule 47 of the County Court Civil Procedure Rules 2008.
8 Both Counsel agreed that if Lockwood was successful in asserting that as agent of the employer he could not be a “third party” within the meaning of s.138 of the Act, such defence was a complete defence to any claim under s.138 of the Act.
9 Counsel for Lockwood submitted that even in the event that his client was a “third party” within the meaning of s.138 of the Act, the bankruptcy defence was also a complete defence to the proceeding. Senior Counsel for the Authority accepted it had the potential to be a complete defence to the proceeding, but also there was the potential that, properly construed, such a defence (if it be one) may only be a partial defence and leave Lockwood exposed to indemnify the Authority to some extent. Of course, the “bankruptcy defence” would only become relevant if Lockwood was otherwise found to have a liability under s.138(1) of the Act.
10 I acceded to the request of the parties that these issues be heard as preliminary questions subject to taking the evidence of Goga, who had travelled interstate to give evidence. Goga gave evidence on 20 and 21 October 2010.
11 For completeness, I should also point out that following discussion during the proceeding, the Court was notified by Senior Counsel for the plaintiff indicating that she sought to tender as evidence the Court Book save for Court documents.[1]
[1] Pages 21 to 308 of the Court Book are tendered and marked as “Exhibit 1”.
12 In determining the preliminary questions, it is necessary to have some understanding of the history and operation of s.138 of the Act, together with an understanding of the legal role played by a receiver and manager privately appointed to a company.
Section 138 of the Act
13 As at February 2002 (the date when Goga contracted Legionella), s.138 read:
“(1)
Where an injury or a death for which compensation has been paid, or is or may be payable, by the Authority, a self-insurer or an employer was caused under circumstances creating a liability in a third party to pay damages or that would have created such a liability if the injury or death had been caused in Victoria or that would, but for section 134A, create such a liability in respect of the injury or death, the Authority, self-insurer or employer is entitled to be indemnified by the third party in accordance with this section.
(2)
In determining for the purposes of subsection (1) whether an injury or death was caused under circumstances creating a liability in a third party to pay damages or that would have created such a liability if the injury or death had been caused in Victoria in respect of the injury or death, Divisions 8A and 9 of Part IV must not be taken into account.
(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 or death; and
(b) the amount calculated in accordance with the formula –
X
[A − (B + C)] × 100 Where –
X is the extent, expressed as a percentage, whereby the third party's act, default or negligence caused or contributed to the injury or death;
A is the amount of damages (disregarding the extent, if any, whereby any other person's act, default or negligence caused or contributed to the injury or death) for pecuniary loss and non pecuniary loss which the third party is or would have been liable to pay in respect of the injury or death were it not for the provisions of this Act and the Transport Accident Act 1986;
B is the amount recovered or recoverable by the Authority, the self-insurer or the employer under section 137 from the Transport Accident Commission (otherwise than under a settlement);
C is the amount paid by the third party in respect of the injury or death to the worker or the dependants of the worker under any settlement of, or judgment in, an action by the worker or dependants of the worker against the third party.
(4)
Judgment against or settlement by a third party in an action by a worker, or dependants of a worker, in respect of an injury or death referred to in subsection (1) does not eliminate or diminish the right of indemnity given by this section, except to the extent provided in this section.
… (5)
If the Transport Accident Commission is liable to make payment to the Authority under section 137(5A) or to a self-insurer under section 137(5B) in respect of a death or injury and the Authority or self-insurer is entitled under this section to be indemnified by a third party in respect of the liability, the entitlement of the Authority or self-insurer is subrogated to the Transport Accident Commission by virtue of this subsection.
14 When the Act commenced in 1985,[2] s.138 consisted of a single paragraph in similar terms to the earlier s.62(b) of the Workers Compensation Act 1958, which Act, in general terms, applies to industrial accidents in Victoria up to 4.00 pm on 31 August 1985.
[2] See Act No. 10191 of 1985
15 The original s.138 only made reference to compensation that “has been paid”. Minor amendments occurred over the years but significantly, s.102(1)(b) of the Accident Compensation (WorkCover Insurance) Act 1993 made several amendments to s.138 and in particular, after the word “paid” were inserted the words “or is or may be payable”.
16 In 1994, a wholly new s.138 was substituted and was deemed to operate from 1 December 1992. The new s.138 was in similar (but not the same) terms as the present s.138. By Act No. 60 of 1996, a new formula was substituted for the previous formula contained in s.138(3)(b) of the Act.
17 Section 138 of the Act has also been recently amended by Act No 9 of 2010 which came into operation on 5 April 2010. Such amendments are not relevant to any issues to be determined in this proceeding.
18 The High Court[3] has approved the comments of Winneke P in Esso Australia Pty Ltd v Victorian WorkCover Authority,[4] when he described the nature of the indemnity under s.138 of the Act in the following way:
“[T]he statutory right of indemnity conferred by the [Compensation] Act upon the person who has paid the compensation is not to be equated to the cause of action which the worker would, but for the [Compensation] Act, have had against the person liable to pay damages to him. This is so notwithstanding the fact that it is an ingredient of the statutory right, sought to be enforced, that the person from whom the indemnity is sought was liable to pay damages to the worker. The claim to enforce the entitlement to indemnity is not a claim in tort. It is a cause of action created by statute for an indemnity against a person liable to pay damages to another.”
[3] Victorian WorkCover Authority v Esso Australia Ltd (2001) 207 CLR 520, at 527
[4] (2000) 1 VR 246, at 257
19 Furthermore, the High Court[5] also accepted the construction of s.138 as put forward by Winneke P. Winneke P had observed:[6]
“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.”
Later Winneke P continued:[7]
“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.
[5] See Victorian WorkCover Authority v Esso (Australia )Ltd (op.cit.) at 530
[6] See Esso Australia Ltd v Victorian WorkCover Authority (op.cit) at 252
[7] See Esso Australia Ltd v Victorian WorkCover Authority (op.cit) at 252
20 Given the nature of the indemnity under s.138 of the Act, the Court of Appeal has also given some direction as to what entity can be a “third party” within the meaning of s.138 of the Act and also, at what time the liability of a third party is created to indemnify pursuant to s.138 of the Act.
21 In DSG Pty Ltd v Victorian WorkCover Authority,[8] a worker who was employed pursuant to a contract of service with a labour hire company was hired to DSG Pty Ltd (“DSG”) to perform work, and on 10 October 2000, suffered injury. Compensation was paid by his employer and a proceeding was brought by the Authority pursuant to s.138 of the Act against DSG for indemnity in respect of such compensation payments.
[8] (2008) 20 VR 514
22 DSG submitted that pursuant to s.9 of the Act, it was deemed to be an “employer” and the worker was deemed to be a “worker” of DSG, and in such circumstances, it was submitted that if DSG was an “employer”, albeit through the operation of s.9 of the Act, it could not be a “third party” for the purposes of s.138 of the Act.
23 It was held by the Court of Appeal that DSG was a “third party” for the purposes of s.138 of the Act. In particular, Pagone AJA (with whom Ashley JA and Dodds-Streeton JA agreed) stated:[9]
“The subject matter of s 138 is the right of indemnity by a person who has paid or who is obliged to pay compensation in respect of an injury under the Act. Compensation in this case has been paid in the first instance by Catalyst [the labour hire company] which was then reimbursed by VWA. The appellant [DSG] is a ‘third party’ in relation to those payments and the claim under which they were made. The Act does not define ‘third party’ and the natural and ordinary meaning of those words in the context of s 138 is any person having a liability but who was not a party to the compensation which was claimed and paid or for whom that payment is or may be payable. The Act establishes a comprehensive scheme for the making of claims and the payment of compensation to injured workers under those claims. The claim here was made by Mr Holt to Catalyst and paid by Catalyst to Mr Holt. Amounts were then reimbursed by the VWA to Catalyst. The appellant is a third party to the claim and payments between Catalyst and Mr Holt and, if it were relevant, the reimbursement between VWA and Catalyst.
The construction of ‘third party’ contended for by the appellant is inconsistent with the evident purpose of s 138 and is productive of avoidable distortions to the operation of the Act. The section is designed to match the burden of payment with the legal liability in respect of a compensable injury. The appellant’s argument, however, if accepted, would lead to a mismatch between obligation and burden. No policy reason was suggested for that result and, indeed, it is fundamentally contrary to the scheme and objectives of the Act.”
Later, Pagone AJA states:[10]
“The critical question is not whether the appellant may be an employer but, rather, whether it is a third party in the context of the specific operation of s 138 on the particular facts. Whatever the appellant’s primary liability may, or may not, have been, the fact is that in respect of any claim made and any compensation paid or payable by another person, namely by Catalyst, or by VWA, the appellant is a third party … ”
[9] at paragraph 87
[10] at paragraph 89
24 In Victorian WorkCover Authority v Kenman Kandy Pty Ltd & Ors,[11] the issue arose as to the appropriate formula to apply in a s.138 proceeding in circumstances where a worker was paid compensation over a period of time during which the formula contained in s.138(3)(b) of the Act changed. Batt and Vincent JJA (with whom Ormiston JA agreed) stated:[12]
“The entitlement to indemnity under s 138 — a substantive right — arises where there has been a death or injury sustained in circumstances where compensation ‘has been paid, or is or may be payable’. The section creates a statutory right and corresponding co-extensive liability.
…
Three situations are encompassed by s 138(1); first, that an actual payment has been made; second, that there is a present obligation to make a payment of compensation; and third, that some or further compensation may become payable. There is a clear intendment by the inclusion of the words ‘is or may be payable’ that the entitlement to the indemnity can arise prior to the making of any payment at all. … .”
[my emphasis].
[11] (2002) 6 VR 666
[12] Victorian WorkCover Authority v Kenman Kandy Pty Ltd & Ors (2002) 6 VR 666, at paragraph 11
25 The Court accepted that if the entitlement to indemnity was to arise only after some payment of compensation had been made, the amendment made to s.138(1) in 1993 could have no consequence and the introduction of the extra words would be pointless.
26 The Court held:[13]
“Section 138(1) confers an enforceable right, of definite and calculable extent, which arises upon the happening of the death or injury concerned, and determines the position for each of the affected parties. The right is one to be indemnified ‘in accordance with this section’, which prima facie means the section as existing at the time the event happens. That provides the measure.”
[13] at paragraph 15
27 Later, after discussing any implications of the High Court decision of Victorian WorkCover Authority and Anor v Esso Australia Ltd,[14] the Court stated:[15]
“… It is important to bear in mind that the Court did not address the specific questions before us. There is, in our view, nothing in the judgments in the case which casts doubts upon the construction adopted above. Setting to one side the possibility of securing a declaratory judgment, it would seem to be self-evident that an action to recover amounts whether paid or payable cannot, as a practical proposition, be instituted until at least the sums involved have been identified. Until then it may be accepted that the right is inchoate or contingent. An entitlement to be indemnified for a potential liability that has not arisen is under such a scheme enforceable by action as and when the amounts in respect of which recovery is sought have been paid or become payable. Only then can the pre-existing entitlement be vindicated by action. Conceptually there is no difficulty in accepting the existence of an entitlement to indemnity until a particular ceiling is reached which is enforceable by more than one action for the specific amounts covered by it as they fall due. This view does no violence to the terms of s 138 and is consistent with the statutory scheme as described by Winneke, P …
Contrary to the submission of the appellant, it does not follow from the fact that the statutory cause of action arises when each amount of compensation is paid or payable that the substantive law then in existence is the law to be applied to identify and evaluate the right of indemnity. Here, as already stated, an element in that cause of action is the formula in existence at the date of injury.”
[my emphasis].
[14] (op.cit.)
[15] at paragraphs 16 and 17
Submissions of the Parties in Relation to the “Third Party Defence”
28 Senior Counsel for the plaintiff submitted that Lockwood was a “third party” for the purposes of s.138 of the Act and the “third party defence” was not made out. In particular, she submitted:
(a)
That prior to the appointment of Lockwood, Goga had commenced employment with F & T and continued to be employed by F & T at all material times. F & T held an insurance policy as required by s.7 of the Accident Compensation (WorkCover Insurance) Act 1993. At no time was Lockwood the “employer” of Goga and the definition of “employer” contained in s.5(1) of the Act does not include a receiver or agent of the employer. Goga was paid compensation by his employer and not Lockwood.
(b)
Although Lockwood, during the term of his appointment, was an agent of the employer, and thus of a disclosed principal, he is a separate juristic person and remains independent of F & T. In this sense, Lockwood, for the purposes of s.138, was a “third party” as he was not the payer of the compensation which is the subject of the indemnity.[16]
(c)
That the present situation is analogous with Meigh v Wickenden[17] where a privately appointed receiver and manager was held to be an “occupier” within the meaning of the Factories Act and was therefore liable for breach of the safety regulations despite being agent for the company. In particular, Viscount Caldecote CJ stated:[18]
[16] See DSG Pty Ltd v Victorian WorkCover Authority (op.cit.) at [87]
[17] [1942] 2 KB 160
[18] at 165
“The contention of counsel for the appellant [the manager and receiver] was that the company continued after as before the appellant’s appointment as receiver and manager to be the occupier of the factory and that the appellant was, as the case found, merely the agent of, and manager of the business of, the company. The contention for the respondent was that the appellant, by entering in pursuance of the exercise of the powers of condition 11 of the debenture, became the ‘occupier’ within the meaning of s.133 of the Act. The finding in the case that the appellant was the agent of the company as manager of his business was said, by counsel for the respondent, to be a finding of law and not of fact. I am inclined to agree with that view, but I see no reason to disagree with the finding as I understood the sense in which I read it. The provision in condition 11 of the debenture that: ‘any receiver so appointed shall so far as the law allows be deemed to be the agent of the company for all purposes and the holder of this debenture shall not be under any liability for his remuneration or otherwise’, which is a usual one in such debentures, has the effect of protecting the debenture holder from liability as mortgagee in possession or as principal. ... .
Also, no doubt, this provision has the effect of making it clear that the receiver is to be paid by the company and not by the debenture holder. If, however, the finding that the appellant was the agent of the company as manager of its business is to be understood as meaning that the appellant acted under the directions of companies, that is to say, under the directions of the directors of the company, I disagree with the finding as an obvious misstatement of the legal position. I do not think that is what the justices intended to find. For the reason that it is not consistent with their finding that the appellant was occupier of the factory. He was appointed, not to receive directions from the directors, but to give directions. He might at any time remove them and appoint someone to take over their duties. He might himself perform those duties, if he had the necessary technical qualifications. It may, indeed, be said with accuracy, I think, that he took the place of the directors and was responsible in their stead for the management of the affairs and business of the company even while he permitted them to manage the business under him. No doubt, the company continued to exist, and, unless and until steps were taken to wind up the company’s affairs and to liquidate the company, it would continue to be answerable for engagements into which the company had entered before the appointment of the appellant as receiver.”
(d)
Regulation 5 of the Health (Legionella) Regulations 2001 defines “responsible person” to mean the person who owns, manages or controls the cooling tower system or warm water system”.
Counsel submitted that consistent with Meigh v Wickenden,[19] Lockwood satisfied such definition.[19] Meigh (op.cit.)
29 Counsel for Lockwood submitted that his client is not a “third party” within the meaning of s.138 of the Act in the circumstances of this matter. In particular, it was submitted:
(a) On being appointed receiver and manager of F & T, Lockwood was, in essence, the employer and clearly its agent. (b) He managed the company, not the directors, under the charge by which he was appointed and in particular, Counsel made reference to the following matters: (i) as receiver he is the agent of F & T (see Clause 24.5);
(ii) as the receiver he had the power to carry on and manage or concur in the carryon and the management of F & T’s business;
(iii) he had the power to employ persons.
(c)
Section 9 of the Corporations Act defines “officer” of a corporation to include a receiver. Section 420 of the Corporations Act provides for wide statutory powers for a receiver, including to engage or discharge employees.
(d)
Being an agent of a disclosed principal, Lockwood has no liability for where the principal is responsible for the agent. In particular, reference was made to Gran Gelato Ltd v Richcliff (Group) Ltd,[20] where the Court stated:
[20] [1992] CH 560 and 451
“… in general, in a case where the principal himself owes a duty of care to the third party, the existence of a further duty of care, owed by the agent of the third party, is not necessary for the reasonable protection of the latter. Good reason, therefore, should exist before the law imposes a duty when the agent already owes to his principal a duty which covers the same ground and the principal is responsible to the third party for his agent’s shortcomings. … .”
Counsel for Lockwood points out that there is no claim or plea that the
defendant has acted outside his agency.DSG Pty Ltd v Victorian WorkCover Authority[21]can be distinguished as in that matter, DSG was not a party to the compensation which was claimed and paid. In the circumstances of this matter, Lockwood, being the agent of a disclosed principal, effectively was the payer of the compensation.
[21] op.cit.
Ruling
30 I rule that Lockwood can be a “third party” in the proceeding brought by the Authority. Curiously, essentially both Counsel relied on Lockwood being an agent of F & T to support their submissions. Whereas the Authority submitted that such a relationship caused the agent to be a separate juristic person and thus could be a third party, counsel for Lockwood submitted that being an agent of a disclosed principal caused the principal to be liable rather than the agent.
31 Furthermore, both parties accepted that on the appointment of Lockwood as a receiver of F & T, he assumed significant powers to run and control F & T. Senior Counsel for the Authority submitted that notwithstanding those powers, the law was clear that he continued to be an agent with those powers given by the charge and those contained within the Corporations Act. Counsel for Lockwood essentially submitted that such powers were so far ranging, Lockwood effectively became the employer.
32 I find that Lockwood is able to be a “third party” in the circumstances of this matter because:
[22] DSH (op. cit.)
(a) in law, he is the agent of F & T, not F & T. At no time during his appointment was there a contract of employment between Goga and him – at all material times Goga remained a worker employed by F & T. (b) although Lockwood is the agent of F & T, it is the principal, F & T, which has paid compensation to Goga and been reimbursed by the Authority. Section 138 of the Act permits the payer of such compensation to seek indemnity from other parties who would have a liability to pay damages to Goga. In this context, and consistent with DSG,[22] the policy of s.138 of the Act permits indemnity from any party, other than obviously the payer of the compensation. 33 I also refer to Meigh v Wickenden[23] where a privately appointed receiver and manager is held to be an “occupier” within the meaning of the Factories Act 1937 (UK) (even though he was expressed to be an agent of the company) and, he was liable for a breach of safety regulations when an employee was injured in an industrial accident during the course of the receivership.
[23] Meigh (op. cit.)
34 Although that decision may be contrasted with a series of cases which indicate that there is no change in the occupation of the company’s premises upon the appointment of a receiver and manager who takes possession as an agent of the company,[24] it is probably attributable to the specific statutory context and its inherent policy considerations. In a similar way, bearing in mind the ambit of the Health (Legionella) Regulations 2001, policy considerations may be apposite.
[24] See Australian Mutual Provident Society v Geo Myers & Co Ltd (in liq) (1931) 47 CLR 65; Granger v South Wales Electric Power Distribution Company [1931] 1 Ch 551
Submissions of the Parties in Relation to the “Bankruptcy Defence”
35 Whether such defence is made out, turns much on the interpretation of part of s.82 of the Bankruptcy Act 1966, which states:
“(1)
Subject to this division, all debts and liabilities, present or future, certain or contingent, to which was bankrupt was subject at the date of the bankruptcy or to which he or she may becomes subject before his or her discharge by reason of an obligation incurred before the date of the bankruptcy, are provable in his or her bankruptcy …
(1A) …
(2) Demands in the nature of unliquidated damages arising otherwise than by reason of a contract, promise or breach of trust are not provable in bankruptcy.”
36 Section 153 of the Bankruptcy Act 1966 provides that where a bankrupt is discharged from a bankruptcy, the discharge operates to release him from debts provable in the bankruptcy. Furthermore, a “debt” is defined in s.5 of the Bankruptcy Act to include a “liability”.
37 Lockwood was a bankrupt from 4 June 2004 to 19 December 2007 and payments of compensation were made from 27 February 2002 to late 2006 or early 2007 in respect of compensable injury sustained in or about February 2002.
38 Counsel for Lockwood submits:
(a)
Claims under s.138 of the Act are by way of a statutory cause of action and are not claims in tort for unliquidated damages.[25]
(b)
Any liability to indemnify under s.138 is a provable debt for the purposes of the Bankruptcy Act 1966. In particular, he relies on the passage of Batt and Vincent JJA in Victorian WorkCover Authority v Kenman Kandy Pty Ltd[26] wherein it is stated that the entitlement to indemnity under s.138 (a substantive right) arises where there has been injury sustained in circumstances where compensation “has been paid, or is or may be payable”. The section creates a statutory right and a corresponding co- extensive liability. Counsel for Lockwood submits that the statutory entitlement and the co extending liability can arise prior to the making of any payment at all is consistent with the words “is or may be payable”.
[25] See Esso Australia Pty Ltd v Victorian WorkCover Authority (op.cit.) at 256-257; Accident Compensation Commission v Haynes [1992] 1 VR 691, citing Borg Warner (Aust) Ltd v Zupan [1982] VR 437
[26] (op.cit.) at paragraph 11
Furthermore, he submits that it is not to the point that an action to recover amounts may not be instituted until at least the sums involved have been identified, as such entitlement (and co extensive liability) is inchoate or contingent.
(c) Reference was made to the decision of Official Trustee in Bankruptcy v C.S. & G.J. Handby Pty Ltd,[27] wherein the Full Court of the Federal Court heard an appeal from a decision whereby a judge held that a debt incurred by a bankrupt director of a wound up company should be admitted as a provable debt within the meaning of s.82(1) of the Bankruptcy Act 1966. [27] (1989) 21 FCR 19
The bankrupt was a director of a debtor company. The respondent in the proceeding recovered judgment by default in the Supreme Court against the company for the price of goods sold and delivered to the company. Subsequently, it was ordered that the company be wound up and some time later the director became bankrupt. The respondent lodged a proof of debt claiming that the bankrupt was indebted to the respondent in the amount of the judgment obtained against the company, relying on s.556 of the Company’s (Tasmanian) Code which, for present purposes, provides that a director of a company may become liable for a debt incurred by the company if there were reasonable grounds to expect that the company was unable to pay such debt as and when it became due.
The issue at first instance and before the Full Court of the Federal Court was whether the claim by the respondent was of a kind which was capable of being admitted to proof.
The Federal Court held, inter alia:
(a) Section 82(1) (of the Bankruptcy Act 1966) should extend to debts or liabilities arising under a statute. (The Court held that the nature of such claim was neither one in contract nor in tort).[28] (b) The nature of the claim under the statute was not one for damages and further, that a statutory claim for indemnity is not a demand in the nature of unliquidated damages.[29] [28] op. cit. at page 25
[29] op. cit at pages 26-27
(d) Reference was also made to Lofthouse v Commissioner of Taxation[30] wherein Warren J (as she then was) dealt with the issue of contingent liability in the context of an insolvent trading claim. Her Honour held[31] that the word “contingent” means the thing that may or may not happen, a possibility of the future. In particular, her Honour stated:[32] [30] (2001) 164 FLR 106
[31] op. cit. at paragraph 43
[32] op. cit. at paragraph 43
“A fundamental misconception underlies the submissions for the Commissioner. They were premised on the assertion that no entitlement to an indemnity arose under s588FGA of the Corporations Act until an order was made. Such analysis disregards entirely the requirements of s82 of the Bankruptcy Act, and, for present purposes, the key word in the section being the word ‘contingent’. The Shorter Oxford English Dictionary defines ‘contingent’, inter alia, as meaning ‘a thing that may or may not happen, a possibility of the future’. In my view it was beyond dispute that as at 16 November 1999, the date of the composition, a liability by the third parties to the Commissioner under s588FGA may or may not have happened, it was, at that stage a possibility of the future.”
39 Senior Counsel for the Authority submitted:
(a) There is no debt or a liability (present or future, certain or contingent) to which Lockwood was subject at the date of bankruptcy or to which he became subject prior to his discharge from bankruptcy. It was submitted that the Court of Appeal in Kenman Kandy[33] must be “understood to mean that if a legal liability is incurred to pay or an amount has been paid, then the entitlement is to be calculated by the measure in the section at the time of the accident”. In this sense, the ratio of Kenman Kandy is that the formula contained in s.138(3)(b) of the Act to calculate the quantum of the indemnity is the formula applicable at the time of injury.
[33] op.cit.
(b)
Section 138 of the Act is not to be read as imposing an obligation at the time of the injury, in the sense that the obligation is said to be incurred “to pay compensation then, in the sense of the words of s.82(1) of the Bankruptcy Act”. Section 138 merely creates a liability arising at the time the injury was caused to the worker to enliven a statutory right to a new cause of action and which is only “derivative in the sense that the injury must be caused in circumstances creating a legal liability to some person”. Reference is made to Borg Warner (Aust) Ltd v Zupan.[34]
(c)
The claim for indemnity under s.138 only arises when the payment is in fact made and that each payment gives a right to a separate right of action under the section if the conditions in the section are satisfied.[35]
(d)
Because the right to indemnity is conferred by statute and any question of limitation does not arise as a new right of action arises with each payment of compensation, it was submitted that it would be inconsistent with the policy of the legislation to construe the statute as providing for the existence of a right to indemnity as at the date of injury and then denying recovery under the indemnity on the footing that the compensation paid to an injured worker would have been time barred.[36]
(e)
It was submitted that the liability of a third party under the statutory indemnity does not arise until demand is made and generally this occurs at the time the proceedings are instituted and served. The amount is not fixed or ascertained until such time as a court makes its determination. It was submitted that it is at that time that the obligation is said to have been incurred, not at the time the compensation is paid, simply because a number of factors in the statutory formula are not satisfied and determined until the court makes the adjudication.
(f)
Furthermore, any liability for indemnity under s.138 is “unliquidated” until such time as a court fixes the amount of the indemnity and, accordingly, would not be a provable debt as it would be excluded by s.82(2) of the Bankruptcy Act 1966.
[34] op.cit.
[35] Counsel relied on Attorney-General v Arthur Ryan Automobiles Ltd & Ryan [1938] 2 KB 16 which case concerned a provision in the United Kingdom Worker’s Compensation Act (1925) which is in similar terms.
[36] It was submitted that such proposition is consistent with Tickle Industries Pty Ltd v Hann & Richardson (1974) 130 CLR 321 and the recent decision of WorkCover Queensland v Amaca Pty Ltd [2010] HCA 34, at paragraph 39
40 Neither Counsel could refer me to any particular decision dealing with the novel factual situation in this matter.
41 For the purposes of this ruling, I make the following findings of fact:
(a)
Lockwood was appointed Receiver and Manager of F & T on 25 June 2001 by Exelerate Funding Pty Ltd under the terms of its debenture charge registered of 11 September 2000;
(b) Goga contracted Legionella in or about February 2002; (c) F & T was wound up on 20 March 2003; (d)
Lockwood continued to act as Receiver and Manager of F & T to 19 March 2003;
(e)
From 20 March 2003 to 16 March 2004, Lockwood continued to be Receiver and Manager of F & T (in liquidation) as agent of his appointor;
(f) Lockwood was a bankrupt from 4 June 2004 to 19 December 2007; (g)
Payments of compensation (weekly payments, medical and like expenses et cetera) were made from 27 February 2002 to late 2006 or early 2007;[37]
(h)
Lockwood was added as a defendant to the s.138 proceeding pursuant to an Order made on 18 July 2007.
[37] See s.239A Certificate at page 218 PCB
42 Given those facts, can it be said that Lockwood was subject as at the date of the bankruptcy (4 June 2004) to a present or future liability, whether it be certain or contingent under s.138 of the Act? Alternatively, on such facts, can it be said that Lockwood became so liable before the discharge of his bankruptcy (19 December 2007) by reason of an obligation incurred before the date of his bankruptcy (4 June 2004)? Of course, for the purposes of this ruling it is assumed that Lockwood is liable to pay damages within the meaning of s.138(1) of the Act which, of course, is yet to be decided.
43 The High Court in Victorian WorkCover Authority v Esso Australia Ltd recognised that indemnity provisions such as s.138 have been interpreted as conferring distinct rights of action against the tortfeasor which arise when each payment of compensation is made by the employer to the worker. In particular, the High Court stated:
“Some of the indemnity provisions in worker's compensation statutes have been interpreted as conferring distinct rights of action against the tortfeasor which arise when each compensation payment is made by the employer or insurer and which will succeed if the other conditions laid down in the provision are satisfied.[38] It may be taken, for present purposes, that s138 is such a provision.
However, the other conditions attached to the statutory entitlement may produce the result that a claim under the statute is not simply one to recoup compensation payments already made, by analogy to an action to recover moneys paid at the implied request of the tortfeasor. Rather, it may be that in no case can the amount which the tortfeasor is obliged to pay as indemnity be fixed in advance of the determination of the amount of damages which the tortfeasor is liable to pay to the worker in respect of compensable injury. S138 gives rise to such a situation.
Both at trial and in the Court of Appeal, s138 was construed as providing the amount for indemnity in respect of compensation payments made under the Compensation Act up to the date of trial and to indicate a ‘ceiling’ beyond which the indemnity in respect of the total payments of compensation, past and future, could not go. … .”[39]
[38] The Court referred to Attorney-General v Arthur Ryan Automobiles Ltd (op cit)
[39] See Victorian WorkCover Authority v Esso Australia Ltd (op cit) at paragraphs 18, 19 and 20
44 The Court of Appeal in Kenman Kandy Pty Ltd,[40] acknowledged such an approach but asserted that it does not follow from the fact that the statutory cause of action arises when each amount of compensation is paid or payable that the then existing law is to be applied to identify and evaluate the right of indemnity. The Court recognised that an element of the cause of action under s.138 is the formula in existence as at the date of injury.
[40] (2002) 6 VR 666
45 Consistent with the decision of Kenman Kandy Pty Ltd, it appears clear enough that as at the date of Goga suffering his compensable injury (February 2002), s.138(1) of the Act conferred on the Authority a right to be indemnified “in accordance with this section” (that is to say, the section as existing at the time of the injury) which then provides the measure (that is, the appropriate formula). In this sense, an element of the statutory cause of action is the formula in existence as at the date of injury. The Court of Appeal recognised that s.138(1) of the Act creates a statutory right and a corresponding co- extensive liability as at the date of the injury. The Court of Appeal also recognised that on a practical level, such right may not be exercised until such time that payments of compensation have been identified. However, and importantly, in my view, the right to seek indemnity and the corresponding co- extensive liability is “inchoate or contingent” until the payments of compensation have been identified.
46 In the present matter, Goga, for the purposes of the ruling, suffered injury in February 2002, Lockwood became a bankrupt on 4 June 2004 and payments of compensation in respect to the compensable injury were paid to Goga between 27 February 2002 and late 2006 or early 2007. Lockwood was added as a defendant and thus a claim made for indemnity on 18 July 2007 when he was still a bankrupt. I do not consider it to the point when the claim for indemnity was made or indeed, the date on which it is actually determined as Lockwood was subject, as at the date of his bankruptcy, to a contingent future liability within the meaning of s.82(1) of the Bankruptcy Act 1966.
[41] See W A Brown & Sons Pty Ltd, Re [1964-5] NSWR 575; Public Transport Commission (NSW) v J Murray-Moore (NSW) Pty Ltd (1975) 132 CLR 336, at 351; Philip Morris Limited v Ainley & Incorporated Nominal Defendant [1975] VR 345, at 350
Ruling 47
In all the circumstances, I rule that any liability of Lockwood to indemnify the Authority pursuant to s.138 of the Act in respect of compensation paid to Goga is a provable debt and liability within the meaning of s.82(1) of the Bankruptcy Act 1966.
48
Furthermore, I am of the opinion that leaving aside when the liability to indemnify occurs, such liability is a statutory indemnity and is neither “unliquidated” or “damages” as those words are used in s.82(2) of the Bankruptcy Act 1966. It has been held that a statutory claim for indemnity is not a demand in the nature of unliquidated damages.[41] Accordingly, I rule that s.82(2) of the Bankruptcy Act 1966 has no relevance to the present proceeding.
Conclusion
49 I call on the parties to consider appropriate orders for the further disposition of this matter.
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