Abdiaziz Abdulle v QBE Insurance

CATCHWORDS: Damages - whether deduction by third party tortfeasor from portion of plaintiff's verdict attributable to future losses of compensation paid by plaintiff's employer is permissable.

LEGISLATION CITED: Workers Compensation Act 1987 S 151Z

Allianz Workers Compensation Act Ltd v Evans (2003) DCR 154. CASES CITED: Tamerji v Rhee [2008] NSW CA 314. Turner v George Weston Foods Ltd [2007] NSW CR 67.

PARTIES: Abdiaziz Abdulle (Plaintiff) QBE Insurance (Australia) Limited & anor

COUNSEL: Mr J Jobson (Plaintiff) Mr L King (Defendant)

1 This is an action by the plaintiff against two defendants, QBE Insurance (Australia) Limited, which I shall hereafter refer to as "QBE" and Craig Mostyn and Co Pty Limited which I shall hereafter refer to as "Mostyn". I thank counsel for their concise submissions, which have enabled me to deliver ex tempore reasons at the conclusion of argument.

2 The statement of claim first asserts that the plaintiff commenced proceedings against Mostyn in this Court seeking common law damages, and that QBE was the public liability insurer of Mostyn, and had agreed to indemnify Mostyn against damages that could be awarded against them in proceedings brought by the plaintiff pursuant to a policy of insurance between Mostyn and QBE.

3 It pleads that on 27 May 2008 Balla DCJ in this court awarded judgment in favour of the plaintiff against Mostyn for $105,000, together with costs. It asserts that on 4 June 2008 the plaintiff's solicitors sent to the solicitors for the defendants an authority to receive in the usual form, directing that no moneys be deducted or forwarded to third parties. It asserts that QBE, as the indemnifying insurer in respect of the verdict moneys, authorised, without the plaintiff's approval, payment of the indemnity sum to a third party. It asserts that the defendants, in breach of direction, forwarded to third parties the judgment sum, and that by so acting the defendants have failed to respond to a request by the plaintiff for the verdict sum and have converted that sum.

4 The statement of claim was amended by leave by the addition of paragraph 12, which claims against the second defendant the remainder of judgment moneys in matter no 964/06 as an unsatisfied debt, together with interests and costs on an indemnity basis pursuant to the Act, meaning presumably the Civil Proceedings Act. No point was taken as to the form of the proceedings by QBE or Mostyn, the action being substantially conducted against Mostyn rather than QBE, and the result is that the proceedings raise for decision the question whether the payment made by QBE on behalf of Mostyn was correctly made.

5 It may have been better if the proceedings had been brought simply by way of notice of motion seeking to enforce the judgment in the proceedings between the plaintiff and Mostyn in which damages were awarded by Balla DCJ, but both parties are content that the question be decided in these proceedings, and I shall do so.

6 Some agreed facts were handed up by the parties, and it is as well that I recite them in their entirety. They read as follows: "1.On 3 February 2004 the plaintiff suffered injury in the employ of Forstaff Pty Limited ("Forstaff") whilst working in the premises of Craig Mostyn and Co Pty Limited ("the defendant").

2.On 9 March 2006 the plaintiff commenced proceedings in this Court against the defendant claiming damages for his injury.

3.The plaintiff's claim was heard by Balla DCJ in May 2008 and her Honour delivered reserved reasons for judgment on 27 May 2008. A copy of her Honour's reasons is annexed hereto.

4.Between the date of his injury and May 2008 the plaintiff was paid weekly compensation and medical and like expenses were paid on his behalf by Forstaff through its workers compensation insurer, such payments having ceased before 27 May 2008 and totalling $96,726.80.

5.On 4 January 2008 Forstaff commenced proceedings against the defendant in this Court for the recovery of the compensation paid.

6.On 19 May 2008 the defendant agreed to indemnify Forstaff in respect of the compensation paid pursuant to s 151Z(1)(d) of the Workers' Compensation Act 1987 and consequent upon that agreement, terms of settlement were filed on 4 June 2008 and judgment was entered accordingly.

7.On 16 June 2008 the defendant paid the compensation to Forstaff by way of cheque payable to its workers compensation insurer.

8.On 1 August 2008 the defendant paid to the plaintiff the balance of the damages ordered to be paid by Balla DCJ, being the sum of $8000.26 after deductions of refunds owing to Medicare and Centrelink." I say immediately that no point is taken by the plaintiff as to the propriety of the deductions in respect of sums owing to Medicare and Centrelink. The only point taken by the plaintiff is that deduction of the amount the defendant had paid to Forstaff was contrary to law.

7 The plaintiff's argument can be summarised briefly, and I hope without doing violence to it, as follows. Mr Jobson says that s 151Z(1)(a) and (b) apply to the rights of the plaintiff, whom I shall hereafter call "the worker" in this context, and that subparas (d) and (e1) of s 151Z(1) have no application, and that subs (4) of s 151Z(1) qualifies the obligation of repayment by the worker to the employer contained in s 151Z(1)(d).

8 The defendant's argument is that the present fact situation triggers only the operation of s 151Z(1)(d) and (e1), and that subparas (a) and (b) of s 151Z(1) have no application, and neither does s 151Z(4) because it is dependent for its operation on the application of subpara (b) of s 151Z(1).

9 Before embarking on an analysis of the competing arguments it is as well to set out the relevant provisions. S 151Z(1)(a) and (b) read as follows: "If the injury for which compensation is payable under this Act was caused under circumstances creating a liability in some person other than the worker's employer to pay damages in respect of the injury, the following provisions have effect:

(a) the worker may take proceedings both against that person to recover damages and against any person liable to pay compensation under this Act or payment of that compensation, but is not entitled to retain both damages and compensation;

(b) if the worker recovers firstly compensation and secondly those damages, the worker is liable to repay out of those damages the amount of compensation which the person has paid in respect of the worker's injury under this Act, and the worker is not entitled to any further compensation."

"If the worker has recovered compensation under this Act, the person by whom the compensation is paid is entitled to be indemnified by the person so liable to pay those damages (being an indemnity limited to the amount of those damages)."

"If any payment is made under the indemnity and, at the time of the payment, the worker has obtained judgment for damages against the person paying under the indemnity (but judgment has not been satisfied) the payment, to the extent of its amount, satisfies the judgment."

"If a worker is liable under subsection (1)(b) to repay any money out of damages recovered by the worker, the worker is not liable to repay the money out of any damages payable after the date of recovery by way of periodic or other payments for loss of future earnings for any capacity or for future expenses." 10 Mr Jobson's argument is that it is nothing in point that the employer Forstaff commenced indemnity proceedings under s 151Z(1)(d) against Mostyn, nor that Mostyn, before it paid out such part of the worker's judgment as it did pay to him, agreed with Forstaff to settle the indemnity proceedings brought by Forstaff against it by agreeing to pay, pursuant to that indemnity, the compensation previously paid to the worker by Forstaff, in the sum of $96,726.80, nor that judgment was entered accordingly in those indemnity proceedings by Forstaff against Mostyn after that time.

11 Mr Jobson's central proposition for the worker is that subparas (a) and (b) of s 151Z define the worker's obligations against Mostyn, and that those obligations are qualified by s 151Z(4). Shortly, he says that in the present situation the worker, as at the date of the judgment he recovered against Mostyn, had an obligation under s 151Z(1)(b) to repay out of the judgment for damages he received against Mostyn the amount of compensation he had received to the person paying it, namely Forstaff, his employer, but that this obligation is qualified by s 151Z(4), in that the worker is not liable to repay out of his damages any portion of Balla DCJ's verdict that is attributable to future loss of earnings or future loss of earning capacity. As I have said, Balla DCJ's reasons were appended to the agreed facts, and they reveal at p 8 that the sum of $50,000 was allowed by her Honour in respect of future economic loss, and further at p 9 that her Honour allowed the sum of $10,000 for future out of pocket expenses. Mr Jobson argues for the worker that these two sums are caught by s 151Z(4), so that the worker is not liable to repay Forstaff under s 151Z(1)(b) such part of his damages as is attributable to future economic loss or future out of pocket expenses.

12 In support of that argument Mr Jobson cites the decision of Rein DCJ (as he then was) in Allianz Workers Compensation Limited v Evans (2003) DCR 154, and also what he recognises to be obiter dicta by Campbell JA in Tamerji v Rhee [2008] NSWCA 314, on the subject of the meaning of s 151Z(4). The conclusion reached by Rein DCJ in Allianz is set out in [36] in his judgment where his Honour said this; "Faced with two competing constructions, neither of which is without problems, I have come to the view that the restriction in s 151Z(4) is to be read widely - that is, to read "recovery" as meaning recovery by payment, in accordance with earlier authority, and "other payments" to include any payment. One factor which encourages me in this view is that I can not see any legislative purpose in distinguishing between payments for future losses to be paid as a lump sum and those that are paid over time, and secondly because it does not seem unreasonable for the legislature to have deemed it appropriate to limit the employer to recovery from moneys recovered by the worker from the third party in respect of what it paid out, not elements for which it has provided no compensation to the worker (i.e. future losses)."

13 The submission of the employer is set out by Rein DCJ at [30] where he records that it submitted that s 151Z(4): "is really concerned with structured settlements where the worker is paid by instalments rather than by a lump sum representing future loss."

14 The submission of the plaintiff in that case was that his Honour should interpret s 151Z(4) in the way that he eventually did, that is to say, to read it as excluding from the operation of s 151Z(1)(d) any portion of a judgment in favour of the worker against a tortfeasor that is attributable to future losses, either in the form of future wage loss or future out of pocket expenses, or for that matter any other loss in the future. My obligation as a matter of comity is to follow that decision unless I think it is plainly wrong, if it is in point in the present case.

15 In Tamerji v Rhee at [19] in the reasons of Campbell JA the following appears: "The employer conceded that s 151Z(4) precluded it from recovering any part of the award attributable to Goldring DCJ's assessment of damages for future economic loss ($92,628), for future expenses ($57,644 plus $15,000)."

16 Hence at [22] his Honour recorded that: "The dispute concerns whether the worker has liability to repay concerning the damages payable in relation to past medical expenses incurred after the worker's compensation injurer declined liability, and in relation to past domestic assistance."

17 It will be seen that Tamerji did not therefore raise for decision the point agitated in Allianz discussed above.

18 However at [34] in Tamerji Campbell JA said this: "In my view, s 151Z(1)(b) operates whenever a worker recovers any amount of compensation under the WCA for an injury, and later recovers damages in respect of that injury from some person other than the employer. In that circumstance, subject to 151Z(4) , the total amount of damages that the worker receives is a fund from which the worker is liable to repay the total amount of compensation that a person has paid in respect of the injury."

19 The same qualification, "subject to s 151Z(4)" occurs in paras [40] and [41] of his Honour's reasons, and indeed at [39] his Honour said this, referring to Turner v George Weston Foods Limited [2007] NSWCA 67: "Turner was a case in which the limitation s 151Z(4) imposes upon an employer's right of recovery of compensation was not relevant. In those cases where an award of damages has been made that includes a lump sum, or other provision for making payments, to cover loss of future earnings, or earning capacity for future expenses, those payments intended to make provision for the future of the worker are excluded from the amount of damages for which the worker must repay compensation."

20 Recognising that these words are obiter dicta, because the interpretation of s 151Z(4) was agreed upon rather that raised for decision in that case, Mr Jobson nevertheless understandably seizes upon them and urges that they are authoritative guidance for me as to the proper interpretation of s 151Z(4). He urges that Allianz Insurance is an authority precisely in point as it raises the present problem, and that I should follow it and interpret s 151Z(4) as Rein DCJ did, supported by what said in obiter dicta by Campbell JA in Tamerji.

21 The argument of the defendant Mostyn, which conducted the defence of the action on behalf of itself and QBE, may, I hope, again without doing violence to it, be summarised as follows. It says that the chronology set out in the agreed facts is crucial. What occurred in this case is that regardless of the fact that the plaintiff commenced proceedings for damages against Mostyn before Forstaff commenced damages against Mostyn for indemnity, the proceedings between Forstaff and Mostyn were settled by an agreement.

22 The argument of Mr King SC is that where, as here, a payment is made under the indemnity created by s 151Z(1)(d) by the tortfeasor, in this case Mostyn, to the employer, in this case Forstaff, and where that payment is made, as here, after the worker has obtained judgment for damages against the person paying the indemnity, here Mostyn, and that judgment has not been satisfied, then sub-para (e1) of s 151Z(1) has the result that in accordance with the wording of the sub-paragraph, the payment made by Mostyn to Forstaff, to the extent of its amount, satisfies the judgment obtained by the worker against Mostyn, so that Mostyn is then entitled to deduct the amount of that payment from the amount it has paid the worker in satisfaction of the judgment against it, as it did in this case.

23 Mr King's argument is that sub-paras (a) and (b) of s 151Z(1) have no application in this case, because there is no question of repayment under subpara (b) of s 151Z(1) by the worker to Forstaff of the amount of compensation Forstaff paid him in respect of his injury, because payment of that sum had antecedently been made by Mostyn to Forstaff in the circumstances contemplated by subpara (e1) of s 151Z(1), namely where the worker had obtained judgment for damages against Mostyn and that judgment had not been satisfied.

24 As I understand his argument, Mr Jobson resists that conclusion by asserting that sub-para (e1) only applies where the situation in subpara (d) alone obtains, that is to say, where recovery is sought either by action or otherwise by a person liable to pay damages to the worker, in this case Mostyn, and in circumstances where the worker, as here, has independently taken action for damages against the person liable to pay damages in respect of his injury, here Mostyn, under subparas (a) and (b) of s 151Z(1), so that subpara (e1) has no application. That interpretation seems to me to be precluded by the very terms of subpara (e1) of s 151Z(1), because it includes the words: "If...the worker has obtained judgment for damages against the person paying under the indemnity (and the judgment has not been satisfied)...."

25 Those words seem to be to contemplate precisely the present situation.

26 I raised with counsel during argument the possibility that this was a case to which subparas (a) and (b) as well as subparas (d) and (e1) of s 151Z(1) may apply, so that subs (4) of s 151Z may qualify the rigour of subpara (e1) of s 151Z(1). As I understood him, Mr Jobson for the worker embraced that proposition, but Mr King to my mind effectively refuted it by pointing out that in this case, because of the sequence in the agreed facts, there was no question of the worker's liiability to repay out of his damages the amount of compensation paid by Forstaff in respect of his injury in accordance with subpara (b) of s 151Z(1), because this sum had already been paid by agreement by Mostyn to Forstaff after Forstaff had exercised, in this case by action, its right of indemnity under s 151Z(1)(d), and that payment had been made in the precise circumstances contemplated by s 151Z(1)(e1). That argument, though it leads to unpleasant consequences for the plaintiff, which without hypocrisy I genuinely regret, seems to me to be conclusive.

27 How, one might ask rhetorically, can the obligation under s 151Z(1)(b) arise from the point of view of the worker if the sum he is liable to repay his employer Forstaff has already been repaid independently by the person liable to pay him damages, here Mostyn, after Forstaff exercised its right of indemnity against Mostyn under s 151Z(1)(d)? In those circumstances, any limitation on the worker's obligation under s 151Z(1)(b) expressed in s 151Z(4), if it exists, does not apply to the circumstances obtaining here, which to my mind are those contemplated in s 151Z(1)(e1).

28 If, however, I were called upon to decide the question of interpretation of s 151Z(4), I regret that my conclusion would have been that his Rein DCJ's decision was plainly wrong, and that Campbell JA's observations about its meaning in Tamerji were obiter and concerned a question not raised for decision in that case, namely the interpretation of s 151Z(4), and were therefore not binding upon me. The reason is that the words in s 151Z(4) reading "any damages payable after the date of recovery by way of periodic or other payments for loss of future earnings, or earning capacity, or for future expenses" (emphasis added) seem to me to connote sums payable by way of further damages after the initial receipt of damages by the worker.

29 Mr Jobson's argument repeatedly stressed that in his submission the word "recovered" in s 151Z(4) means "received" by the worker, so it does not refer to mere judgment in favour of the worker against a person liable to pay him or her damages, but rather to actual receipt of the damages by the worker. It seems to me that it logically follows from Mr Jobson's argument that the words "date of recovery" in s 151Z(4) refer to the date of actual receipt by the worker of his initial award of damages. Those words do indeed, as Mr King submitted, seem to contemplate the situation obtaining where structured settlements are reached between the worker and the person liable to pay damages to him or her.

30 Mr King points out at on p 4 of his written submissions, the effect of which I hope I have summarised adequately, that: "It is telling that s 151Z(4) - originally s 150(5) - was repositioned in the Act in 1989 when modified claims for damages against employers were reintroduced in 1989 and structured settlements were explicitly provided for in s 151Q. This married up with the provision for structured settlements included in the Motor Accidents Act 1988. A similar provision is now included in the Civil Liability Act 2002."

31 I accept this submission, and it seems to me to indicate that the legislative intention was to quarantine payments under structured settlements which involved, to quote s 151Z(4), "damages payable after the date of recovery by way of periodic or other payments for loss of future earnings, or earning capacity, or for future expenses", from the obligation to repay otherwise created by s 151Z(1)(b), such obligation being specifically referred to in the opening words of s 151Z(4).

32 Otherwise, with due respect to his Honour, if the interpretation adopted by Rein DCJ in Allianz and contended for by Mr Jobson is applied, the subsection means that the worker is not liable to repay out of damages "recovered", i.e. received by him or her, the "money out of any damages payable after the date of recovery", which is "periodical or other payments for loss of future earnings, or earning capacity, or for future expenses", or to put it another way, that the worker is not liable to repay out of any damages recovered, i.e. received by him or her, any damages payable after the date of receipt, which could not possibly include any portion of the damages initially recovered, which were attributable to future loss of earnings, or earning capacity, or for future expenses.

33 The absurdity of that result is indeed referred to by Rein DCJ at [31] in Allianz where his Honour, referring to the interpretation of s 151Z(4) which he eventually accepted, said this: "On this approach, the words 'payable after the date of recovery' used in s 151Z(4) do not make sense, since something cannot be payable after it has been paid."

34 With due respect, that demonstrates the precise problem I face with the interpretation of s 151Z(4) reached by his Honour and contended for by the worker, and I do not think that more need be said.

35 It follows that even if s 151Z(4) applied here, I would have interpreted it in the way suggested by Mr King, i.e. to refer to structured settlements, and therefore to payments payable at a future time under structured settlements by way of "periodic or other payments for loss of earnings, or earning capacity, of for future expenses", rather than as referring to portion of damages already "recovered", i.e. received by the worker which are attributable to "payments for loss of future earnings, or earning capacity, or for future expenses". It follows that I would have concluded that the obligation in s 151Z(1)(b) of repayment by the worker to Forstaff here was not qualified by s 151Z(4) in the way suggested by him.

36 As I have said, the result is an unfortunate one from the point of view of the plaintiff, and one which I do not reach with any pleasure. It is apparent from what was said in State of New South Wales v Taylor (2000) 204 CLR 461 by Kirby J at 476-477 [49] has application here. His Honour referred there to a number of restrictions which could be described as "tough and unsympathetic [to workers] by comparison with the common law" created by the current legislation being discussed here. However if that is the natural and ordinary meaning of the legislation, as I think it is in this case, it must be applied, whatever any individual judge may think of its policy.

37 In those circumstances there must be a verdict for the defendants, and I so find.

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