Zurich Australian Insurance Ltd v Allianz Australia Insurance Ltd

[2008] WASCA 71

JURISDICTION     :   SUPREME COURT OF WESTERN AUSTRALIA

TITLE OF COURT :   THE COURT OF APPEAL (WA)

CITATION:   ZURICH AUSTRALIAN INSURANCE LTD -v- ALLIANZ AUSTRALIA INSURANCE LTD [2008] WASCA 71

CORAM:   WHEELER JA

PULLIN JA
BUSS JA

HEARD:   7 FEBRUARY 2008

DELIVERED          :   27 MARCH 2008

FILE NO/S:   CACV 93 of 2007

BETWEEN:   ZURICH AUSTRALIAN INSURANCE LTD

Appellant

AND

ALLIANZ AUSTRALIA INSURANCE LTD
Respondent

ON APPEAL FROM:

Jurisdiction              :  DISPUTE RESOLUTION DIRECTORATE, WORKCOVER WA

Coram  :COMMISSIONER NISBET

File No  :C 23 of 2007

Catchwords:

Workers' compensation - Dispute between insurers - Entitlement to compensation

Legislation:

Workers' Compensation and Injury Management Act 1981 (WA), s 18, s 21, s 22, s 57A, s 58(3), s 60, s 62, s 73, s 74, s 178(1)(d)

Result:

Appeal allowed

Category:    B

Representation:

Counsel:

Appellant:     Mr M H Zilko SC

Respondent:     Ms F C E Davis

Solicitors:

Appellant:     Greenland Legal Pty Ltd

Respondent:     Crisp Civitella Slater

Case(s) referred to in judgment(s):

Andreassen v Rural West Pty Ltd [2007] WASCA 265

McGovern v Midalco Pty Ltd (Unreported, WASCA, Library No 980007, 19 January 1998)

Mokta v Metro Meat International Ltd [2005] WASCA 143

Ogden Industries Pty Ltd v Lucas (1967) 116 CLR 537

1. WHEELER JA:  This appeal arises from the following circumstances.

   •30 June 2002:  Allianz becomes workers' compensation insurer for Jadsco Pty Ltd (the employer).

   •1 October 2002:  Mr Donaldson commences employment with the employer.

   •30 June 2003:  Allianz ceases to be the workers' compensation insurer for the employer.

   •1 July 2003:  Zurich becomes workers' compensation insurer for the employer.

   •24 September 2003:  Mr Donaldson sustains an injury at work.  The details of the injury are not relevant.  It should be noted, however, that it apparently involved the gradual onset of pain in the wrists and hands.

   •17 November 2003:  Mr Donaldson files a claim for workers' compensation (the claim).

   •2 January 2004:  Zurich accepted liability for the claim.  It did not notify Allianz of the claim for approximately 18 months.  There was no statutory requirement for it to do so.

   •17 August 2005: Zurich sought recovery from Allianz of the payments it had made in respect of the claim, pursuant to s 74 of the Workers' Compensation and Injury Management Act 1981 (WA) (the Act), which read (in 2003 when the injury was sustained):

   74.Dispute between insurers

   (1)Where a worker is entitled to compensation for a fresh disability or the recurrence of an old disability from an employer but there is a dispute between insurers as to liability to indemnify that employer, the insurer of the employer of the worker at the time of the latest disability or recurrence is liable to indemnify the employer until a dispute resolution body has otherwise determined.

   (1a)An employer or insurer may refer to the Director for conciliation under Part IIIA a dispute between insurers notwithstanding any term or condition of any policy of insurance providing for some other means of settling disputes.

   (2)A dispute resolution body shall determine which insurer is liable or how liability is to be apportioned and may make such order as it thinks proper for the reimbursement of one insurer by another and for the indemnity of the employer in respect of his liability under this Act.

   •Allianz took a preliminary jurisdictional point, and two questions raising that point were settled and submitted to an arbitrator.  It is not clear whether Zurich agreed that there should be a preliminary point determined, or simply agreed with the form of the questions proposed.  In any event, the questions were dealt with on the papers by the arbitrator.

   •19 December 2006:  apparently after a significant delay, the arbitrator answered those questions. 

   •4 May 2007:  Commissioner Nisbet allowed Allianz's appeal from the arbitrator.

   •29 May 2007:  Zurich filed its notice of appeal to this court.

   •June 2007:  Pullin JA ordered that the application for leave to appeal be heard together with the appeal. 

2. That brings me to the point in issue, which is this: Allianz contends that it is a necessary precondition for the operation of s 74 of the Act that there must be either an order that the worker is entitled to compensation, or agreement between the disputing insurers that the worker is so entitled. Allianz apparently disputes that Mr Donaldson is entitled to compensation.

3. The basis for the denial that Mr Donaldson is entitled to compensation does not appear from the papers before us.  It does appear, however, that Allianz further contends that there must be an anterior and separate hearing at which an order is made to the effect that the worker is entitled to compensation; that is, Allianz says that a worker's entitlement to compensation is not an issue which can be dealt with by the arbitrator in the course of an application brought by an insurer against another insurer pursuant to s 74.

4. The arbitrator disagreed with Allianz, but the commissioner agreed.

5. The arguments of the parties before us appeared to be essentially restating the arguments which each made respectively to the arbitrator and to the commissioner.  Allianz's position appears to boil down to a few simple (and, in my view, in important respects, incorrect) propositions.  They are propositions at odds both with the express words of the Act, with its purpose of enabling disputes to be determined in a way which is "fair, just, economical, informal and quick" (s 3(d)), and with the legislative philosophy which appears to underlie provisions which deal with delay and disputes.  I deal with them below. 

6. Proposition 1: Before subs (2) of s 74 can arise, a worker must be "entitled to compensation", since the two subsections (s 74(1) and (2)), read together, make it plain that the "liability" of which s 74(2) speaks is liability for the compensation to which the worker is entitled. This proposition is accepted by both parties and appears to be correct.

7. Proposition 2:  A worker "is entitled" to compensation if, and only if, there has either been agreement by all relevant insurers that the worker is so entitled, or there has been a determination by an arbitrator made pursuant to pt III div 5 of the Act that the worker is so entitled. 

8. This proposition, in my view, confuses the question of the existence of an entitlement with the manner of its determination and enforcement. Section 18 of the Act provided that "[i]f a disability of a worker occurs, the employer shall, subject to this Act, be liable to pay compensation ... ". The expression "subject to this Act" refers, presumably, to the various qualifications and exceptions surrounding the liability so created, such as the exception created by s 22 concerning serious and wilful misconduct. It is, however, the disability (now injury) (together with the incapacity which, pursuant to s 21, fixes the date of the liability to pay) which creates the liability. That understanding arises from what I would take to be the plain meaning of s 18. That view is fortified by the difference in wording between s 73(1) and s 74. The former commences with the words "Where there is a dispute between employers as to liability but no dispute that the worker is entitled to compensation …". A similar formulation could have been used in s 74, had the legislature intended that it apply only where insurers agreed, or because of a determination were unable to dispute, that the worker was entitled to compensation.

9. The understanding set out above is consistent with the view taken in this court:  see Mokta v Metro Meat International Ltd [2005] WASCA 143 [44]; McGovern v Midalco Pty Ltd (Unreported, WASCA, Library No 980007, 19 January 1998). It is consistent with the reasoning in Ogden Industries Pty Ltd v Lucas (1967) 116 CLR 537. In that case, there was a question as to when an employer's liability to compensate the dependants of an injured worker arose. The competing views expressed were that it arose either when the worker was injured (see Barwick CJ, 552, 554, Kitto J, 563), or when the worker died (Taylor J, 571, Windeyer J, 584 ‑ 6, Owen J, 597). No member of the court contemplated that it would arise only when an order might be made.

10. The entitlement is the correlative of the liability, so that it must "arise" at the time the employer becomes liable. 

11. Proposition 3: Section 74(2) does not give the arbitrator power to determine, in proceedings between insurers, the issue of a worker's entitlement to compensation. That can be determined only pursuant to pt III div 5 of the Act.

12. This proposition may be correct, if by "determine" is meant determine conclusively, as against the worker, whether the worker is entitled to compensation.  However, it is incorrect if it is intended to assert that the arbitrator cannot, for the purpose of deciding as between insurers which of them is liable, consider, as a step in that process, whether the worker has an entitlement to compensation.  The confusion which, in my view, this proposition betrays is similar to the confusion about the ability of a medical panel to consider questions of causation, discussed recently by this court in Andreassen v Rural West Pty Ltd [2007] WASCA 265 [12] ‑ [13].

13. In any event, I note that s 58(3), s 60 and s 62 of the Act allow employers to have determined the question of liability to make weekly payments claimed, and to make application to have payments reduced or discontinued. The ability to make those applications appears to be that of the employer, rather than the insurer, but it is likely that the insurer's right of subrogation could be exercised in this context. It would seem to me probable that, if there appeared to be some dispute about the worker's entitlement, the arbitrator could give directions facilitating the joinder of all parties, so that all relevant questions could be determined at one time, if it appeared to the arbitrator that that would effect a saving of time and expense. However, I am not able to form any concluded view about the way in which Mr Donaldson's entitlement might, procedurally, be determined in a way binding upon both him and upon the insurers. This issue has not been fully canvassed before us.

14. Additional propositions: There are, it was submitted, a variety of odd results which might flow if s 74(2) could be invoked in the absence of a prior determination by an arbitrator that a worker was entitled to compensation, and in the absence of agreement between insurers about that fact. However, I do not see them as creating any significant difficulty.

15. It was submitted that it would be unfair for an insurer which had not been notified, pursuant to s 57A, for many months, to be faced with a claim which it had not had an opportunity to consider and, if necessary, investigate in a timely way. However, the Act recognises that employers and/or insurers may not always be notified promptly and, generally, does not provide that delay will bar a worker's entitlements: see s 84I(1)(d) (now s 178(1)(d)), s 57A(2). Some potential prejudice to the rights of the respondent in a situation such as the present is unfortunate, but does not appear to me to be so unlikely a result as to be inconsistent with the scheme of the Act.

16. It is also suggested that it would be odd if, in proceedings between insurers, the worker were to be found not to be entitled to compensation, since the insurer who had commenced paying would, nevertheless, have to keep paying the worker until it could obtain a determination relieving it of liability.  That does not appear to be an odd result.  In the present case, Zurich no doubt undertook its own appropriate inquiries, and considered that it should accept that Mr Donaldson was entitled to compensation.  It paid accordingly.  There is, to my mind, nothing odd about Mr Donaldson being able to retain those payments from Zurich, or about Zurich being required to continue making payments (if that is the case) as a result of its own informed commercial decision.  That outcome is not rendered unfair or odd simply because, in defence of its interests, Allianz may have been able to persuade an arbitrator that Mr Donaldson had no relevant entitlement.

17. I set out below the questions asked of the arbitrator and the answers which, in my view, should have been given.

    Question 1:Whether it is a necessary precondition for the operation of s 74 of the Act that the worker be "entitled to compensation".

    Answer:Yes.

    Question 2: Whether an application can be brought pursuant to s 74 of the Act in the absence of:

    aan order to the effect that the worker is entitled to compensation; or,

    bthe insurers in dispute either consenting to or conceding the worker's entitlement to compensation.

    Answer:Yes.

18. It follows that I would allow the appeal, set aside the orders of  the commissioner, and in lieu thereof order that the appeal to the commissioner be dismissed.

1. PULLIN JA:  I agree with Wheeler JA.

2. BUSS JA:  I agree with Wheeler JA.