ABDULLE v QBE INSURANCE [2010] NSWCA 60 | Case summary

1 April 2010 Abdiaziz ABDULLE v QBE INSURANCE (AUSTRALIA) LIMITED Judgment 1 JUDGMENT of the COURT delivered by BASTEN JA: On 3 February 2004 the applicant was employed as a casual labourer in premises operated by Craig Mostyn & Co Pty Ltd ("Craig Mostyn & Co"). He suffered an injury in the course of work. On 27 May 2008 Balla DCJ gave judgment in the applicant's favour in the District Court against Craig Mostyn & Co in an amount of $105,000. 2 By the date of judgment the applicant had received payments from his employer's workers' compensation insurer in amounts totalling $96,726.80. Despite instructions from the applicant's solicitors that the full amount of the judgment was to be paid to them, without deduction, they received an amount of only $8,000, the bulk of the balance having been paid to the workers' compensation insurer. (The difference involved deductions paid to Medicare and Centrelink, which are not the subject of challenge.) 3 Curiously, as noted by the trial judge, the applicant then commenced proceedings in the District Court against the insurer of Craig Mostyn & Co seeking judgment for converting the amount payable to the applicant, by paying it without authority to the workers' compensation insurer. 4 On 26 May 2009 Armitage DCJ gave judgment for the defendant, dismissing the claim. The applicant now seeks leave to appeal against that decision. 5 As will be seen, the case involved a straightforward application of the terms of s 151Z(1)(b) and (4) of the Workers Compensation Act 1987 (NSW). His Honour's explanation of the application of those provisions was correct. Were it not for statements made in earlier authorities which might have given rise to some doubt, this is a matter in which leave to appeal should have been refused. However, in order to clarify the proper construction of those provisions in the Workers Compensation Act, it is appropriate to grant leave to appeal but to dismiss the appeal with costs. Recovery of damages 6 Section 151Z of the Workers Compensation Act has, relevantly for present purposes, two functions. The first is to deal with the potential for double recovery by the worker who is entitled both to workers' compensation and to common law damages from a third party tortfeasor in respect of an injury. Secondly, it provides for the workers' compensation insurer to recover any payments of compensation from a third party tortfeasor responsible for the damages. It is convenient to set out the relevant provisions: " 151Z Recovery against both employer and stranger (1) 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 for 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 a person has paid in respect of the worker's injury under this Act, and the worker is not entitled to any further compensation, (c) if the worker firstly recovers those damages the worker is not entitled to recover compensation under this Act, (d) if the worker has recovered compensation under this Act, the person by whom the compensation was 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), (e) if any payment is made under the indemnity and, at the time of the payment, the worker has not obtained judgment for damages against the person paying under the indemnity, the payment is, to the extent of its amount, a defence to proceedings by the worker against that person for damages, (e1) 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…. … (4) 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 or earning capacity or for future expenses." 7 In contrast to earlier provisions, s 151Z does not require a worker to elect between seeking compensation and seeking damages, but provides that he or she is "not entitled to retain" both damages and compensation: s 151Z(1)(a). Nevertheless, the section envisages that the worker may "recover" both compensation and damages, in which case the worker is "liable to repay out of those damages the amount of compensation which a person has paid in respect of the worker's injury under this Act": s 151Z(1)(b). Subject to one qualification, the quantum of the damages recovered constitutes the limit of the worker's liability with respect to repayment of compensation. 8 The qualification arises from the terms of sub-s (4), which applies if a worker is liable to repay money out of damages recovered, pursuant to sub-s (1)(b). In such a case, 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 or earning capacity or for future expenses". 9 Both provisions envisage that a worker "recovers" or has "recovered" damages. However, sub-s (4) only operates where the damages recovered do not constitute the full extent of the worker's entitlement to damages, there being an entitlement to a future payment or payments of the kind described. 10 If recovery of damages involves a payment received by or on behalf of the worker, neither provision was engaged in the present case, because the applicant received no payment, either directly, or through his solicitors. 11 Statutory provisions with respect to receipt of both compensation and damages have taken different forms at different times. However, the language adopted has not varied significantly. In dealing with a provision precluding claims for damages where a worker had "recovered" compensation, Latham CJ stated in Smith v Commonwealth Oil Refineries Ltd [1938] HCA 33; 60 CLR 141 at 147 (Rich, Starke and Dixon JJ concurring): "In the first place there are several authorities which decide that under such a provision as this neither making a demand or claim under the Workers' Compensation Acts on the one hand, nor obtaining judgment at common law on the other hand, amounts to recovery. Recovery for the purpose of such a provision as this means receipt of moneys. It has been so held in Cumberland v. Lanarkshire Tramways Co (1927) SC 407. … The words of clause 24 appear to be reasonably clear. The worker 'is not entitled to recover both damages and compensation.' If the word 'recover' is interpreted as involving receipt, then if the worker receives a sum of money and that sum of money is paid as, and received as, compensation it would appear prima facie to be the case that he has recovered compensation under the Act and therefore would be excluded from recovering damages." 12 Watson v Newcastle Corporation [1962] HCA 6; 106 CLR 426 involved s 64 of the Workers Compensation Act 1926 (NSW), which had a similar approach to the present s 151Z(1). As explained by Windeyer J at 445: "Under the New South Wales Act the worker does not now have to elect between compensation or damages. He may pursue proceedings for both, and obtain both an award of compensation and a judgment for damages; but he cannot retain the fruits of both, his rights in respect of them being adjusted in the manner set out in sub-s (a) of s 64." 13 At that time, the right of indemnity, now found in paragraph (d) of s 151Z(1), was found in paragraph (b) of s 64 of the former Act. In its current form that paragraph states: "(d) if the worker has recovered compensation under this Act, the person by whom the compensation was 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) …." 14 In Watson Windeyer J continued: "Moreover, throughout s 64 the word 'recover' must, it seems, mean not the recovery of a judgment for damages or of an award of compensation, but the actual receipt of moneys, whether as the result of satisfaction of a judgment or award or by the settlement of a claim. The scheme of sub-s (a) seems to require this meaning. The word 'retain' demands it: and the provision for payment to the employer 'out of such damages' assumes a judgment satisfied, not a judgment that has proved fruitless. There is nothing surprising in this; for it is the meaning that the word 'recover' commonly has in workers' compensation law: Smith v Commonwealth Oil Refineries Ltd … at 147." 15 There is no reason to suppose that any different construction should apply to s 151Z. As the applicant has never recovered damages, paragraph (1)(b) is not engaged and nor is sub-s (4). Structured settlements 16 There is a further reason why the applicant must fail. Ultimately, his argument was that the effect of sub-s (4) was to immunise, for his retention, any amount by way of damages paid for loss of future earnings or earning capacity or for future expenses. However, that is not what sub-s (4) says: rather it envisages an award of damages which involves an immediate payment to be followed by periodic or other payments to cover future loss or expense. Such an arrangement may arise under s 22 of the Civil Liability Act 2002 (NSW) or, relevantly to the point of statutory construction, under s 81 of the Motor Accidents Act 1988 (NSW). The latter provision was in force at the time sub-s (4) was introduced (with other provisions of a new s 151Z) by the Workers' Compensation (Benefits) Amendment Act 1989 (NSW). (The latter Act also introduced s 151Q into the Workers Compensation Act which involved a provision for structured settlements of damages obtained from employers: that provision is not directly relevant because s 151Z is concerned with the liability of persons other than the worker's employer, but it may support the inference that the drafter was aware of the possibility of such provisions at the time s 151Z(4) was introduced.) 17 Only one further step is required to uphold the rejection of the applicant's claim. The payment was made to the workers' compensation insurer by or on behalf of the third party tortfeasor, in fulfilment of the indemnity arising under par (d). If, at the time of payment, the applicant had not obtained a judgment for damages, the payment would be a defence to the worker's claim: s 151Z(1)(e). If the payment were made after the worker had obtained judgment, but before the judgment had been satisfied, the payment, to the extent of its amount, would satisfy the judgment: s 151Z(1)(e1). The payment having been made in circumstances covered by the latter provision, the action brought by the applicant in debt against the third party tortfeasor must fail. Earlier dicta 18 Reference has been made to three decisions, two in this Court, bearing upon the proper construction of these parts of s 151Z. In Allianz Workers Compensation Ltd v Evans (2003) 1 DCLR (NSW) 154, Rein DCJ was faced with a claim by the workers' compensation insurer against the worker, to recover payment of part of the compensation paid by it. There was no dispute that the worker was required to pay and had paid, amounts other than those relating to future losses. The worker sought to resist payment of future losses, on the basis that they were excluded by sub-s (4). There was no doubt that paragraph (1)(b) was engaged and that the qualification in sub-s (4) might be relevant. His Honour expressed some doubt as to how the condition of operation, which seemed to assume that damages had been paid, but also that further payments were due after the "date of recovery", was to be understood. His Honour referred to a submission that the subsection was concerned with "structured settlements" and accepted that that might explain reference to "periodic" payments, but did not accept that it comfortably encompassed "periodic or other" payments. His Honour concluded at [36]: "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 to this view is that I cannot see any legislative purpose in distinguishing between payments for future losses that are 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 monies recovered by the worker from the third party in respect of what it paid out, not elements for which it had provided no compensation to the worker (ie future losses)." 19 With respect, that view should not be accepted. It removes from sub-s (4) the words "payable after the date of recovery by way of periodic or other payments". Such radical surgery is not permissible. That language is, as submitted by the employer in that case, consistent with a structured settlement involving future payments which are not periodic. The approach adopted in Evans would also lead to inconsistency with the terms of the indemnity, which is capped by reference to "the amount of those damages" and not by the amount of those damages payable otherwise than for future loss. 20 In the District Court, Armitage DCJ was directed to remarks made by this Court in relation to the operation of s 151Z(4). In Turner v George Weston Foods Ltd [2007] NSWCA 67; 4 DDCR 571 the Court was not concerned with the operation of s 151Z(1)(b) or (4), but in the course of his reasons Campbell JA explained that one objective of s 151Z(1) was to ensure that the third party tortfeasor was the person who should bear the cost of compensating the injured worker, "up to the full amount of the damages for which that wrongdoer is liable": at [37]. In Tamerji v Rhee [2008] NSWCA 314; 73 NSWLR 1 at [39], Campbell JA (with the agreement of Beazley and Ipp JJA) stated: " Turner was a case in which the limitation that section 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 from which the worker must repay compensation." 21 As was correctly noted by the trial judge and counsel in the present matter, the remarks in Tamerji were unnecessary for the determination of the case. The issue had been identified as "whether the worker has a liability to repay concerning the damages payable in relation to past medical expenses incurred after the workers compensation insurer declined liability, and in relation to domestic assistance": at [22]. Tamerji rejected the proposition that the obligation to "repay" was to be identified by reference to specific heads of damage. Nor did the operation of s 151Z(4) require consideration, the employer having conceded that it was precluded from recovering any part of the damages awarded for future economic loss or future expenses: at [19]. 22 It appears that the concession was misconceived. Nor was s 151Z(4) in play, Tamerji not being a case which involved a structured award of damages with a lump sum payable at one point in time, to be followed by further payments, periodical or otherwise. 23 Once it is accepted that in this case the terms of s 151Z(1)(b) were not engaged, and therefore s 151Z(4) had no operation, the applicant's submissions relying upon the reasoning in Allianz and the dicta in Tamerji set out above were of only indirect relevance. Nevertheless, in their terms the submissions should be rejected. The reasoning in Allianz should not be accepted and the dicta in Tamerji should not be followed because they do not adequately reflect the limited operation of s 151Z(4). That section does not operate where an award of damages covering future loss or expenses "includes a lump sum, or other provision for making payments", as stated in Tamerji, but rather applies where an award includes a lump sum and other provision for making payments. The difference in language is small but significant. The point may have been obscured by the concession made by the employer in that case. Thus, although the applicant's argument must be rejected for other reasons, its reliance on the dicta in Tamerji should also be rejected and the statement in that case corrected. Conclusions 24 The decision of Armitage DCJ, rejecting the applicant's claim, was correct. Further, his Honour's rejection of the reasoning in Allianz and his unwillingness to follow the dicta in Tamerji, were also soundly based. Because the correction of the dicta in this Court properly requires consideration by this Court, it is appropriate to grant leave to appeal. 25 The orders of the Court are:

ABDULLE v QBE INSURANCE

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