Anthony v Australian Native Landscapes Pty Ltd

Apprenticeship and Traineeship Act 2001 Civil Liability Act 2002, ss 30, 31, 33 and Pt 3 Legal Profession Act 2004, s 347 NSW Self Insurance Corporation Act 2004 Occupational Health and Safety Act 2000, ss 8(1) and 26(1) Workers Compensation Act 1916 (Qld), ss 8(1), 9 and 9A LEGISLATION CITED: Workers Compensation Act 1926, s 18(2A)-(2K) and Appx 1 of Div 1 Workers Compensation Act 1987, ss 151 P, 155(1), 155(1A), 158, 159(1) and Div 1 of Pt 7 Workers Compensation (Amendment) Act 1986 Workers Compensation (Benefits) Amendment Act 1989 Workers Compensation Legislation Amendment (Trainees) Act 2003, cl 2 of Sch 6 Workers Compensation Regulation 2003, cl 49(1) and Form 3 in Sch 1 Workplace Injury Management and Workers Compensation Act 1998, s 250

Annetts v Australian Stations Pty Ltd (2000) 23 WAR 35 Bankstown Foundry Pty Ltd v Braistina (1986) 160 CLR 301 Carr v Financial Corporation of Australia Ltd (1982) 42 ALR 29 East Finchley Pty Ltd v Federal Commissioner of Taxation (1989) 90 ALR 457 Federal Commissioner of Taxation v Comber (1986) 10 FCR 88 Fennell v Supervision and Engineering Services Holdings Pty Ltd and Santos Ltd (1988) 47 SASR 6 Hughes v Sydney Day Nursery Children's Services Inc [2000] NSWSC 462; [2002] NSWCA 11 Kimberly-Clark Australia Pty Ltd v Thompson (2006) 67 NSWLR 87 CASES CITED: Manufacturers' Mutual Insurance Ltd v Hooper (1988) 5 ANZ Insurance Cases 60-849 Muller v Dalgety & Co Ltd (1909) 9 CLR 693 Multiplex Constructions Pty Ltd v Irving; Fugen Holdings Pty Ltd v Irving [2004] NSWCA 346 Nicol v Allyacht Spars Pty Ltd (1987) 163 CLR 611 Podrebersek v Australian Iron and Steel Pty Ltd (1985) 59 ALJR 492 Rheem Australia Ltd v Manufacturers' Mutual Insurance Ltd [1984] 2 NSWLR 370 Riley v Commonwealth (1985) 62 ALR 497 Tame v New South Wales; Annetts v Australian Stations Pty Ltd (2002) 211 CLR 317 TNT Australia Pty Ltd v Christie (2003) 65 NSWLR 1 Workers' Compensation Board (Qld) v Technical Products Pty Ltd (1988) 165 CLR 642

Debbie Kay Anthony (Plaintiff) Australian Native Lanscapes Pty Ltd (Defendant/Cross-claimant) PARTIES: Workers Compensation Nominal Insurer (First Cross-defendant) NSW Self Insurance Corporation (Second Cross-defendant) ACE Insurance Ltd (Third Cross-defendant)

Mr BD Dooley SC (Plaintiff) Mr JW Catsanos (Defendant/Cross-claimant) COUNSEL: Mr KW Andrews (First Cross-defendant) Mr GJ Parker (Second Cross-defendant) Mr PM Morris (Third Cross-defendant)

Carroll & O'Dea (Plaintiff) Berry Buddle Williams (Defendant/Cross-claimant) SOLICITORS: David Veasey (First Cross-defendant) Turks Legal (Second Cross-defendant) DLA Philips Fox (Third Cross-defendant)

1 In the course of cleaning a conveyor machine blocked with green waste mulch, Robert Moore had his right arm dragged into the moving roller thereby severing it at the shoulder joint. The incident occurred on 19 November 2003 at Mr Moore's workplace at North Ryde in premises occupied by Australian Native Landscapes Pty Limited and known as the Ryde Transfer Station Complex. At the time, Mr Moore was 15 years of age and had been employed by Australian Native Landscapes since 9 October 2003 as a trainee engaged in work associated with the cleaning of conveyors and the greasing of grinders and loaders on the machines. In performing such work, Mr Moore was supervised by Eden Abela, who was employed by Australian Native Landscapes as the manager of the premises; Mr Abela was Mr Moore's uncle. Mr Moore planned to commence an apprenticeship as a diesel mechanic in January 2004.

2 Australian Native Landscapes and its managing director, Patrick Noel Soars, were prosecuted in the Industrial Court of New South Wales by the WorkCover Authority of New South Wales (Inspector Kenneth Kumar) for breaches of the Occupational Health and Safety Act 2000, being respectively s 8(1) for failing to ensure the health, safety and welfare of Mr Moore in relation to its operation of the recycling facility and s 26(1) in deeming Mr Soars to have contravened the same provision. Each of them pleaded guilty.

3 Mr Moore eventually sued Australian Native Landscapes in negligence for damages as to the injuries sustained in the incident. In the meantime, he received compensation under the Workers Compensation Act 1987. The common law proceedings were settled on 10 June 2008. The present action brought by Mr. Moore's mother, Debbie Kay Anthony, as plaintiff against Australian Native Landscapes as defendant was for nervous shock causing mental harm to her as a result of the severe and traumatic injuries to her son from the incident due to the defendant's negligence. The defendant denied liability to the plaintiff and sought indemnity from various insurers in respect of the plaintiff's claim but each denied any liability to so indemnify the defendant. The identity of the relevant insurer was the major issue in the proceedings.

The claim, defences and cross-claim 4 The statement of claim was filed on 17 November 2006 and pleaded thirteen particulars of negligence by the defendant against Mr Moore. Essentially, the particulars alleged a failure to provide or maintain a safe and proper system of work, including exposure of Mr Moore to a known and foreseeable risk of injury and failures to warn of the dangers, to adequately supervise, to properly instruct, to provide and maintain safe plant, to direct that the conveyor was turned off during the cleaning process and to have a stop device to operate automatically once the guard was removed. Specifically also, negligence was pleaded in the defendant's direction to Mr Moore to remove the mulch from the conveyor by hand and to allow or direct removal of the guard from the conveyor while cleaning took place.

5 The claim pleaded that the plaintiff's injury, which caused anxiety, depression, irritability and post-traumatic stress disorder, resulted from the injuries to Mr Moore. Damages were sought for non-economic loss, out-of-pocket medical and related expenses and economic loss for past and future lost earning capacity.

6 The defendant, on the pleadings filed on 20 November 2007, did not admit employment of Mr Moore and denied occurrence of the subject incident, injury to Mr Moore, negligence to Mr Moore and injury, loss and damage to the plaintiff. In particular, the defendant pleaded that the plaintiff could not establish it owed a duty of care to her or had breached that duty. In addition, the defendant pleaded that Mr Moore was negligent in the manner in which the injuries to him were sustained, such contributory negligence covering his failure to take proper precautions for his own safety, failure to follow instructions, failure to follow the defendant's policies and procedures and failure to keep a proper lookout at all times. However, at the hearing of the action on 10 and 11 June 2008 the defendant did not lead any evidence against the claim to support any of its assertions in the notice of defence and, in particular, no evidence from Mr Abela as the supervisor who was present at the time and place of injury to Mr Moore but who was present at court and available to give evidence. In the result, although liability and contributory negligence were put in issue, the defendant's counsel during submissions admitted a duty of care to Mr Moore; as to the plaintiff, a duty of care and breach thereof were not admitted but counsel acknowledged that no evidence or submissions were put to the contrary. Counsel acknowledged further that if psychiatric injury were established as being suffered by the plaintiff then she would be entitled to damages for nervous shock plus costs; it was agreed between the plaintiff and the defendant that the quantum of any such damages was $50,000.

7 I have to express my concern at the state and contents of the defendant's pleading in this matter. In accordance with s 347 of the Legal Profession Act 2004, the defendant's solicitor provided a certificate to the required effect that there were "reasonable grounds for believing on the basis of provable facts and a reasonably arguable view of the law that the defence to the claim for damages in these proceedings has reasonable prospects of success." Having in mind the non-admissions and denials in the notice of defence in the context of the lack of evidence and submissions at hearing, I think the pleading, filed in November 2007, misstated the true position - the Industrial Court prosecution proceedings apparently occurred in June 2006 when the defendant pleaded guilty to the charge related to the subject incident and certain relevant admissions were made.

8 A pleading, such as a defence, has the purpose of identifying and crystallising the real issues for determination. Fortunately, here, there does not seem to have been any actual prejudice suffered thereby by the plaintiff. The hearing of the claim as between her and the defendant was dealt with on 10 June 2008 in a short time-frame and without any seeming difficulty as the balance of the hearing (estimated at three days) on that day and concluding on 11 June 2008 was concerned with the indemnity of the defendant for any verdict to the plaintiff from the relevant insurer on risk. Even so, I regard it as timely to raise this question of the need for an appropriate pleading. In doing so, I am very conscious of the difficulty in which the defendant was placed in not making admissions with all of the three insurers denying liability to it for any verdict obtained by the plaintiff, but, in my view, in the Court's process the pleading is of fundamental importance, particularly with the s 347 certificate, in conditioning an insurer's position qua an insured. After all, and this is the position in this case, where an issue arises as to which insurer is on risk the Court determines that issue and makes an indemnity order accordingly; in the meantime, the real issues as between the principal parties should not be masked and the Court should not be asked to expect otherwise.

9 On 1 February 2008 the defendant filed a cross-claim against the three insurers potentially on risk. The cross-claim, as became common ground, is to be viewed on the basis that Mr Moore was a "trainee" employed by the defendant within the meaning of the Apprenticeship and Traineeship Act 2001. The defendant had sought an indemnity for the plaintiff's claim against it from each of the three insurers but they denied any liability to so indemnify. On the basis that one or other of the insurers was liable in respect of the plaintiff's claim, the defendant sought an order that the insurers indemnify it as to any liability it incurred (plus interest and costs), payment of its costs in defending the plaintiff's claim, interest on monies expended by it in relation to the plaintiff's claim and payment of the costs of any successful insurer or of any amounts the defendant became liable to pay such successful insurer. Each of the three insurers resisted the cross-claim.

10 It was agreed that the defendant held a valid workers compensation policy of insurance complying with Div 1 of Pt 7 of the Workers Compensation Act in the form prescribed by Form 3 in Sch 1 to the Workers Compensation Regulation 2003 as issued to it by QBE Workers Compensation (NSW) Pty Limited as agent for the Workers Compensation Nominal Insurer. The Nominal Insurer was the first cross-defendant to the defendant's cross-claim and was sued for liability to the defendant under the terms of the statutory workers compensation policy independently of the Workers Compensation Act for any injury to the worker.

11 The second cross-defendant to the defendant's cross-claim was the NSW Self Insurance Corporation, constituted under the NSW Self Insurance Corporation Act 2004 and the statutory successor of the Insurance Ministerial Corporation, sued for liability to the defendant pursuant to the deemed statutory workers compensation policy under s 158(3) of the Workers Compensation Act for trainees, such as Mr Moore. It was claimed that the deemed policy insofar as the defendant was concerned covered the full amount of the employer's liability independently of the Workers Compensation Act for any injury to a trainee.

12 As to the third cross-defendant, ACE Insurance Limited, it was sued under an insurance policy for public and products liability held by the defendant for indemnity in respect of damages for personal injury to the plaintiff as a result of the incident causing injury to Mr Moore.

13 Each cross -defendant denied liability to the defendant.

Issues for determination 14 As the case was argued, the following issues arise - (1) Whether the defendant breached its duty of care to Mr Moore as its worker by negligently causing him injury or damage in the incident occurring at the workplace on 19 November 2003.

(2) If (1) be met, then whether the worker was guilty of contributory negligence in relation to the subject incident and, if so, to what extent.

(3) If (1) be met, then whether the plaintiff suffered nervous shock in the nature of a psychological or psychiatric injury as a result of the injury to the worker.

(4) Whether the defendant owed a duty of care to the plaintiff and, if so, whether the duty had been breached justifying an award of damages in the agreed amount of $50,000.

(5) As to the cross-claim by the defendant for indemnity for any damages due to the plaintiff: (a) whether s 158(3) of the Workers Compensation Act as to a deemed policy of insurance for trainees, on its true construction, extends to injury to the plaintiff as a stranger to the employment contract or is limited to injury to the trainee;

(b) whether the statutory workers compensation policy in Form 3 of Sch 1 to the Workers Compensation Regulation , on its true construction, operates to indemnify the defendant as the employer of the worker for liability for injury sustained by the plaintiff as a stranger; and,

(c) depending upon the answers to (a) and (b), the respective liability of each of the first, second and third cross-defendants to the defendant for indemnity for any damages found for the plaintiff.

Subject incident on 19 November 2003 15 Mr Moore gave evidence in the case. He was born on 10 November 1988. After completing Year 9 of high school, he commenced employment with the defendant at its Ryde Transfer Station in early October 2003 as a trainee under the supervision of Mr. Abela; Mr Abela also happened to be his uncle. It seems that a number of machines were located at the Ryde site for the purpose of recycling green waste, including conveyors, and the duties of Mr Moore involved him in cleaning and greasing such machinery. He said he performed the work in accordance with the directions of Mr Abela but in doing so received no training, no induction and no warnings about any dangers associated with the work. The green waste would be delivered to the site, ground by the machines into mulch and recycled for later use.

16 The conveyors were belt-driven with rollers and carried the green waste to and from a grinding machine into hoppers. It was necessary, as Mr Moore said, to clean the conveyors on a daily basis of mulch which fell off the conveyor belt causing it to move off centre. The cleaning function was performed, perhaps somewhat surprisingly, while the machine was operating after removal of the wire mesh guard and the process was to use the palm of the hand across the rollers to clear the clogged roller of accumulated mulch.

17 On 19 November 2003, Mr Moore said he was asked by Mr Abela to clean the conveyors and Mr Abela stood next to him as he did so. He used his hand to clean one side of the roller, without any problem, and then went to the other side. Mr Abela gave him a broom brush to clean that side of the roller - he said he had never before used a brush. He leaned in towards the moving roller and passed the brush across it using his right hand; as he did so, the bristles of the brush caught in the roller, his fingers were then caught and his arm was then drawn into the roller severing it from the shoulder.

18 Under cross-examination, Mr Moore readily admitted awareness that the machinery was dangerous and that it was dangerous to place his hands near dangerous machines. He added, however, that he acted as Mr Abela instructed him and did not consider his uncle would place him in a dangerous position. Indeed, as a trainee, he did not think he could decline to do the job asked of him.

19 Ambulance, police and fire rescue services later arrived at the site and retrieved Mr Moore's arm from the conveyor belt and roller; amputation of the arm from the shoulder blade occurred as a result of the incident.

20 Mr Moore's evidence was not challenged. I accept it.

Duty of care to worker and breach of duty 21 I have no difficulty in accepting, as indeed was conceded by the defendant, that as the employer of Mr Moore it had a non-delegable duty to him to take reasonable care for his safety in the workplace; specifically, the duty was to provide on the site a safe system of work: see Nicol v Allyacht Spars Pty Ltd (1987) 163 CLR 611; and TNT Australia Pty Ltd v Christie (2003) 65 NSWLR 1.

22 It may be undoubted on the evidence that the defendant breached in serious respects the duty of care it owed to Mr Moore. He was plainly, in my view, subjected to an unsafe system of work in being required to clean dangerous machine with his bare hands and by the use of a hand-held broom brush while the machine was in operation. That position is exacerbated by the defendant's failure to provide Mr Moore with adequate induction, training and warnings in relation to the work concerned.

23 In the Industrial Court proceedings, the defendant, in pleading guilty to the charge against it under the Occupational Health and Safety Act, made the following admissions by conceding that: "(a) it failed to properly and securely guard the conveyors installed in the Facility which were used by its employees so as to prevent contact with the dangerous parts of the conveyors;

(b) it failed to provide and maintain a safe system of work and/or work procedure in relation to the cleaning and maintenance of the conveyors;

(c) it failed to provide adequate training, instruction, information, supervision and warning to its employees working on or in the conveyors;

(d) it failed to properly implement such measures as may be identified by a risk assessment which would have been necessary to eliminate the risks associated with employees working on the conveyors;

(e) its employees, and in particular Mr Moore, were placed at risk of injury as a result of the failures identified in (a) to (d) above; and

(f) there were grave consequences of the accident on 19 November 2003 which included the horrific injuries sustained by Mr Moore."

24 I find the defendant was negligent in causing severe loss and damage to Mr Moore in quite extreme and horrific circumstances.

Contributory negligence 25 I find no contributory negligence in Mr Moore for what occurred to him on 19 November 2003 at the Ryde facility of the defendant.

26 In Podrebersek v Australian Iron and Steel Pty Ltd (1985) 59 ALJR 492 at 493-494, the High Court said that the apportionment as between a plaintiff and a defendant of their respective shares in the responsibility for what occurred involved a comparison of culpability, that is, the degree of departure from the standard of care of the reasonable man and of the relative importance of the acts of the parties in causing the damage. Their Honours said it was to the whole conduct of each party which had to be compared and, as King CJ observed in Fennell v Supervision and Engineering Services Pty Ltd and Santos Ltd (1988) 47 SASR 6 at 12, "misjudgement is not contributory negligence." As Mason, Wilson and Dawson JJ said in Bankstown Foundry Pty Ltd v Braistina (1986) 160 CLR 301 at 310, the question is whether "the conduct [of the plaintiff] amounted to mere inadvertence, inattention or misjudgement or to negligence rendering him responsible in part for the damage."

27 In this case, Mr Moore as a worker was simply following the system of work in place and where he was directly instructed by his supervisor, Mr Abela, what to do; indeed, Mr Abela stood beside Mr Moore as he proceeded to clean the conveyor machine. It is true that Mr Moore was aware of the risks involved with dangerous machines but, as he said, he did not think his uncle would place him in a dangerous position and did not consider he could decline to do the job asked of him. Of course, at the time, Mr Moore was a 15-year old trainee with employment experience at the Ryde facility of only one month. In any event, I am well satisfied that the concessions made by the defendant in the Industrial Court proceedings mean it was wholly culpable, in a comparative sense with Mr Moore, in causing the damage.

28 The defence of contributory negligence is dismissed.

Duty of care to plaintiff and breach of duty 29 The plaintiff's claim for damages against the defendant depends upon the mental harm suffered by her arising wholly or partly from nervous shock in connection with the injury suffered by Mr Moore, her son, by the defendant's negligent acts or omissions. That negligence has been established. The provisions of Pt 3 of the Civil Liability Act 2002 apply to the claim, specifically s 30 thereof.

30 Whilst not admitting a duty of care in this respect to the plaintiff or any breach thereof, the defendant expressly offered no evidence and made no submissions against such findings. Indeed, its counsel acknowledged that if it be shown the plaintiff suffered a psychiatric injury then she would be entitled to damages for nervous shock in the agreed amount of $50,000; the only caveat, said counsel, was whether there should be any deduction for contributory negligence by Mr Moore pursuant to s 30(3) of the Civil Liability Act - of course, on my findings, this deduction for contributory negligence by Mr Moore does not arise. I consider the active non-resistance by the defendant to this claim for nervous shock was, in the circumstances, a most proper and fair course to take. The reasons may be shortly stated.

31 The defendant's counsel helpfully referred to the consideration of the action for mental or nervous shock as reviewed by the Full Court of the Supreme Court of Western Australia in Annetts v Australian Stations Pty Ltd (2000) 23 WAR 35 and on appeal by the High Court in Tame v New South Wales; Annetts v Australian Stations Pty Ltd (2002) 211 CLR 317. As Gummow and Kirby JJ observed in the appeal proceedings (at 388 in para [208]), "assuming that the other elements of the cause of action have been made out, liability in negligence, for which damage is the gist of the action, should turn on proof of a recognisable psychiatric disorder, not on the aetiology of that disorder;" and Gleeson CJ as to the negligent conduct of a defendant in such cases said (at 338 in para [41]) it was conduct "likely to result in mental anguish of a kind that could give rise to a recognised psychiatric illness." Of course, there is the need in establishing the action for a relevant or sufficient relationship between the parties. At first instance in Annetts, Ipp J (at 56-60 in paras [89]-[104]) with whom Malcolm CJ and Pidgeon J agreed, considered that in terms of proximity between a plaintiff and a defendant as to the closeness in time and space to the incident concerning the victim and a close tie of love and affection to the victim. Here, the plaintiff was Mr Moore's mother: see s 30(2)(b) and (5) of the Civil Liability Act.

32 Section 31 of the Civil Liability Act limits liability to pay damages for pure mental harm to harm consisting of a recognised psychiatric illness and s 33 similarly limits damages for economic loss for consequential mental harm to a resultant recognised psychiatric illness.

33 Dr Jonathan Phillips, a consultant psychiatrist, assessed the plaintiff on 21 February 2007. In the meantime, since the November 2003 incident concerning her son she had consulted a general practitioner and a psychologist relating to the difficulties experienced but was not taking medication of any type or attending any doctors or counsellors on a regular basis for treatment. In that respect, Dr Phillips considered she had unmet treatment needs and added in his report of 17 April 2007: "The plaintiff requires comprehensive treatment for her dysthymic disorder, including a combination of focussed cognitive behavioural psychotherapy (controlled catharsis, psycho-education, optimising of her coping mechanisms) and medication with a modern anti-depressant agent. A reasonable course of treatment would include 20 hours of therapy with a psychiatrist or clinical psychologist. She would require monthly follow-up in the year after conclusion of formal therapy, and second-monthly follow-up in the second year. The plaintiff should be medicated with a modern anti-depressant agent minimally for one year but perhaps indefinitely.

The plaintiff should undertake a further 6-10 sessions of therapy, primarily on behaviouristic lines, to improve her capacity to cope with panic, this including training in deep relaxation and systematic desensitisation to the feared situation.

Whilst Ms Anthony should make useful gains with therapy, I doubt that she will achieve full symptomatic improvement given that her son now has to cope with the loss of his right arm and knowing that her son will continue to have problems in the major domains of his life. At best the plaintiff's prognosis will remain uncertain."

34 The review of the plaintiff by Dr Phillips was clearly most comprehensive and in his report he dealt with her personal reaction to her son's injuries, symptoms experienced by her in the week following the incident, further symptoms, current symptoms, her personal background and circumstances and mental state examination. Dr Phillips diagnosed two related psychological disorders, according to the recognised Diagnostic and Statistical Manual of Mental Disorders (4th ed, 2005, American Psychiatric Association) - DSM IV, being a dysthymic disorder (chronic pervasive middle-grade depressive spectrum disorder) and a panic disorder with agoraphobia (acute high level anxiety symptoms). Given, as Dr Phillips explained, that the plaintiff heard about her son's accident in a series of steps before seeing him in hospital some time later, he said it was the "history of rising psychological alarm, particularly through the period of linked stressors, and it has been accumulative shock of these stressors which has led to her now chronic psychological decompensation." He said it was undoubted that her resultant condition was of "intensity sufficient to interfere with the smooth conduct of her life, and to reduce the quality of her life."

35 Specifically, Dr Phillips found the plaintiff's symptoms following the incident had been across the depression and anxiety spectrums. He described the symptoms occurring in this way: "Symptoms following the accident included a sense of confusion, a desire to cry (but not in front of her son), increased levels of anger, a desire to avoid others, self-criticism and the psycho-physiological experiences of dizziness, a sense of being light-headed and acceleration of her heart rate. The plaintiff next developed intermittent panic symptoms, beginning whilst she was driving through a tunnel. The plaintiff's current symptoms include ongoing intermittent panic (accompanied by difficulties with breathing, dizziness), episodic feelings of disorientation, angry ruminations, a sense of personal alienation and aloneness, significant frustration, pervasive despondency, an ongoing dislike of relating with others and exhaustion." 36 Dr Phillips reassessed the plaintiff on 4 June 2008 and, in a report the following day, recorded continuing symptomatology. He found: "Ms Anthony's depression/anxiety symptoms include difficulties with travel; avoidant behaviour; the leading of a restricted lifestyle; unusual irritability; a tendency to overreact to minor stimuli; despondent mood with feelings of helplessness, uselessness, guilt and self-pity; impaired sleep; exhaustion; lack of sex drive; an inability to enjoy close contact with her children; a tendency to become overly concerned by various matters with associated rumination; loss of capacity for enjoyment in life and virtually daily panic attacks characterised by light-headedness, palpitations, excessive sweating, disorientation, rising fear and a belief she might faint.

Whilst Ms Anthony's current symptoms are similar to but not identical with symptoms noted at my earlier examination, the two previous diagnoses will apply. Interestingly, the plaintiff has a significant increase in anxiety symptoms. A third diagnosis of adjustment disorder with anxiety can be made. However for diagnostic economy I prefer to consider her anxiety symptoms as being closely linked with depressive symptoms and subsumed within the diagnosis of dysthymic disorder."

37 The conclusion of Dr Phillips was, given the plaintiff's normal emotional attitude prior to Mr Moore's serious accident, that it "was the receiving of bad news about her son's accident which triggered the plaintiff's psychological decompensation with the subsequent development of a dysthymic disorder and a panic disorder with agoraphobia…both disorders have become chronic and pervasive…of intensity sufficient to interfere with the plaintiff's everyday life and to reduce the plaintiff's pleasure and quality of life."

38 Dr Phillip's evidence was unchallenged and uncontradicted. There was no reason not to accept it. I will do so.

Conclusion on plaintiff's claim 39 The defendant had a duty of care to the plaintiff which it breached in relation to its negligence to Mr Moore. She thereby suffered, if I could put it crudely, nervous shock. It was in the form of mental harm from two recognised psychiatric illnesses, namely, dysthymic disorder and panic disorder with agoraphobia. She is entitled to a verdict against the defendant in the amount of $50,000; there is to be no deduction for contributory negligence. In the ordinary course, I see no reason why the defendant should not pay the plaintiff's costs but I will hear the parties on that before making a final order.

Defendant's cross-claim 40 The major issue in the proceedings, and about which most of the hearing was concerned, was the defendant's cross-claim against the three insurers as to which of them was liable to indemnify the defendant for its liability to the plaintiff.

41 Statutory scheme and regulatory framework: The legislative provisions under the Workers Compensation Act in which this issue falls to be decided may be stated in summary form as follows - * An employer is to obtain from a licensed insurer (here the first and third cross-defendants) a policy of insurance for the full amount of the employer's liability for workers compensation benefits in respect of all workers and for an unlimited amount in respect of the employer's liability independently thereof for any injury to any such worker: s 155(1). * Special provisions as to insurance for trainees were inserted into the former Workers Compensation Act 1926 in s 18(2A)-(2K) by the Workers Compensation (Amendment) Act 1986; such provisions were replaced on the enactment of the 1987 statute and appear therein in s 158. * Section 158 was repealed by the Workers Compensation Legislation Amendment (Trainees) Act 2003 operative from 1 January 2004; but, pursuant to the savings and transitional provisions in cl 2 of Sch 6, s 158 was continued until 31 December 2004 or the end of the traineeship, whichever first occurred. * Section 158 therefore is relevant to the present case which concerned an injury to Mr Moore as a trainee on 19 November 2003. * The terms of the statutory workers compensation policy to be issued by a licensed insurer are those prescribed by the regulations: s 159(1) and cl 49(1) and Form 3 in Sch 1 to the Workers Compensation Regulation 2003 which commenced on 1 September 2003. * The employer (the defendant here) of a trainee is not required by s 155 to obtain a policy of insurance in respect of a trainee: s 158(2). * The employer of a trainee shall be deemed to hold a policy of insurance with the Insurance Ministerial Corporation (the second cross-defendant is the statutory successor under the NSW Self Insurance Corporation Act 2004) for the full amount of the employer's liability for workers compensation benefits in respect of that trainee and for an unlimited amount in respect of the employer's liability independently thereof for any injury to that trainee: s 158(3). * The terms of the deemed insurance policy are those prescribed by the regulations being those as for the statutory workers compensation policy: s 158(4), (6) and Form 3 in Sch 1 to the Workers Compensation Regulation. * A licensed insurer (such as the first and third cross-defendants) is not subject to any liability in respect of a trainee to the extent the employer of the trainee is indemnified under the deemed insurance policy: s 158(5). * The Consolidated Fund is appropriated to the extent necessary to reimburse the NSW Self Insurance Corporation (the second cross-defendant) for payment in respect of any liability incurred under the deemed insurance policy: s 158(8). * As to damages for psychological or psychiatric injury, no such damages are to be awarded except in favour of the injured worker or a parent (here the plaintiff), spouse, brother, sister or child of the injured person who, as a consequence of the injury has suffered a demonstrable psychological or psychiatric illness and not merely a normal emotional or cultural grief reaction: s 151P.

42 The terms of the statutory and deemed policy of insurance in Form 3 of Sch 1 to the Workers Compensation Regulation in relevant respects are as follows: Part 1 Preliminary

worker has the same meaning as in the Act (including the extended meaning it has because of Schedule 1 (Deemed employment of workers) to the Act).

The Insurer will indemnify the Employer against all of the following sums for which the Employer becomes liable during or in respect of the period of insurance: (a) compensation that the Employer becomes liable to pay under the Act to or in respect of any person who is a worker of the Employer…,

(b) any other amount that the Employer becomes liable to pay independently of the Act…for any injury to any such person (not including liability in respect of an injury, suffered by a person other than such a worker, arising out of any rescue or attempted rescue),

(c) costs and expenses incurred with the written consent of the Insurer in connection with the defence of any legal proceeding in which any such liability is alleged.

43 For completeness, having in mind the arguments put on the true construction and meaning of the statutory form of the insurance policy under the present 1987 statute, the previous form of indemnity policy under the 1926 statute in Appx 1 of Div 1 thereof relevantly stated as to liability: "…the Employer shall be liable to pay compensation under the Act to or in respect of any person who is or is deemed by the Act to be a worker of such Employer or to pay any other amount not exceeding one hundred thousand dollars in respect of his liability independently of the Act for any injury to any such person,

THEN, and in every such case the Insurer will indemnify the Employer against all such sums for which the Employer shall be so liable; the Insurer will also pay all costs and expenses incurred with the written consent of the Insurer in connection with the defence of any legal proceedings in which such liability is alleged.

44 It is apparent from the statutory scheme that an employer of a trainee was relieved of the cost and responsibility to take out with a licensed insurer the compulsory insurance policy by deeming the employee to be covered by it. Liability for any workers compensation benefits to or in respect of the trainee and any other amount independently of compensation, such as common law damages (together with costs and expenses incurred in connection with defending any legal proceeding), for any injury to the trainee was to be indemnified not by the licensed insurer of the employer but by the Insurance Ministerial Corporation (now the NSW Self Insurance Corporation) out of consolidated revenue. In such a situation, it would seem reasonable to accept that the purpose of the scheme, and hence of s 158, was to encourage employers to participate in training programmes by employing trainees and to provide a source of funds for indemnity purposes for any liability incurred - thereby the employer was relieved of the financial burden of obtaining insurance and of paying any compensation or damages.

45 The defendant took out a public liability policy with the third cross-defendant to cover the period from 30 June 2003 to 30 June 2004. With a deductible excess of $10,000 for each and every occurrence, the policy provided coverage, as presently relevant, for indemnity for "all sums which the Insured shall be legally liable to pay compensation in respect of: (i) personal injury,…as a result of an Occurrence happening in connection with the business of the Insured": cl 1 of Insuring Agreements. In addition, the policy provided for payment by the third cross-defendant of "all reasonable charges, expenses and legal costs incurred…by …the Insured with the written consent of ACE in the settlement or defence of any claim for Compensation, including any appeal, in respect of which the Insured is entitled to indemnity under this Policy: cl 4(a). However, in the Exclusions to the policy it was provided in cl 1(a) that the policy did not apply to "any liability for personal injury in respect of which the Insured is or would be entitled to indemnity under any fund, scheme, policy of insurance or self insurance pursuant to or required by any legislation relating to Workers Compensation whether or not such insurance has been effected." In addition, cl 1(c) excluded "any liability relating to Employment Practices." In the Definitions section of the policy in cl 1(a), personal injury was stated to include "shock, fright, mental anguish or mental injury."

46 Defendant's case: Counsel for the defendant, Mr JW Catsanos, submitted it had ample insurance coverage for indemnity from any one of three insurers for any liability incurred in respect of the plaintiff. Primarily, counsel said the defendant had coverage under the deemed policy of insurance which was triggered by s 158 as to trainees, such as Mr Moore, so that the second cross-defendant was liable to indemnify it for the damages plus costs to which the plaintiff was found to be entitled. If s 158 had no application, then that meant the third cross-defendant was liable because the exclusion clause in the public liability policy was ineffective as the claim was not one under any policy related to workers compensation; otherwise, the first cross-defendant was liable under the statutory workers compensation policy.

47 In support of the operation of s 158 and the statutory form of policy in the present circumstances, as to injury caused to a person consequent upon injury to a trainee, Mr Catsanos relied on the reasoning in Rheem Australia Ltd v Manufacturers' Mutual Insurance Ltd [1984] 2 NSWLR 370 and Manufacturers' Mutual Insurance Ltd v Hooper (1988) 5 ANZ Insurance Cases 60-849 for the proposition that under the statutory and regulatory scheme it was entitled to be indemnified by the deemed insurer in respect of its liability to the plaintiff arising from the nervous shock she suffered as a consequence of the injury to her son, Mr Moore. Section 151 P of the Workers Compensation Act was said to confirm such operation of s 158 and of the statutory form of policy even though the injury was to the plaintiff as a stranger to the employment.

48 First cross-defendant's case: For the first cross-defendant as the nominal insurer, Mr KW Andrews of counsel adopted the submissions of Mr Catsanos as to liability to the defendant of the second and third cross-defendants. Counsel emphasised that the defendant pursuant to s 158(2) was not required to obtain a policy of insurance with the first cross-defendant in respect of Mr Moore as a trainee. In any event, as counsel put, the first cross-defendant as a licensed insurer was not subject to any such liability, by reason of s 158(5), to the extent the defendant as the employer was indemnified, as indeed it was, under a deemed policy of insurance which put the second cross-defendant on risk. If for some reason the second cross-defendant avoided liability then the third cross-defendant as the public liability insurer had responsibility.

49 Mr Andrews referred to Multiplex Constructions Pty Ltd v Irving; Fugen Holdings Pty Ltd v Irving [2004] NSWCA 346 in which the Court of Appeal unanimously held that the statutory form of workers compensation policy did not extend to liability acquired by contract where the employer sought indemnity under the policy to satisfy a liability to indemnify a contractor for damages sustained by its employee. In the course of the reasoning, the decisions in Rheem and Hooper were distinguished but their Honours, as counsel pointed out, expressed no doubts about their correctness where consequential liability to a third party was held to be recoverable under the statutory policy as such liability flowed directly from the liability of the employer in that capacity to the employee: see per Santow JA, with whom Pearlman AJA agreed, in paras [8]-[10] and per Ipp JA, with whom Pearlman AJA agreed, in paras [33]-[38]. As Ipp JA explained (in para [39]): " Rheem and Hooper were concerned with the question whether the indemnity under the policy extended to liability to some person other than the injured worker. They were not concerned with whether indemnity under the policy extended to liability for claims arising other than in respect of common law negligence or breach of statutory duty. Rheem and Hooper were not concerned with what was meant by the obligation to indemnify against liability 'for' an injury. The issues, in these two cases, differed from the issues decided in Nigel Watts ."

50 Given from Multiplex that the statutory policy was referable to consequential liability to a third party, such as the plaintiff, for injury to the worker as a trainee then, as Mr Andrews submitted, as the second cross-defendant was deemed to be covered by it liability for the injury to the plaintiff related to the second cross-defendant; it was therefore liable to indemnify the defendant under the policy for that liability. Otherwise, counsel said, the third cross-defendant was liable under the public liability policy and not the first cross-defendant who was relieved by s 158(2) and (5).

51 Second cross-defendant's case: Mr GJ Parker of counsel for the second cross-defendant, in resisting any liability to the defendant for indemnity of the damages found for the plaintiff, made two submissions as follows: "(i) Where a trainee suffers injury subsection 158(3) deems the employer to hold a policy with NSW Self Insurance Corporation (as the successor of Insurance Ministerial Corporation) which is limited to the full amount of the employer's liability for any injury (as defined in section 155(1A) to that trainee ) . In the present matter only Mr Robert Moore satisfies that description. The policy 'deemed' to be held by the employer does not extend to injury to a stranger, namely Debbie Kay Anthony. (Original emphasis)

(ii) The wording of the insuring clause in the statutory form of the policy of insurance does not indemnify the employer for liability for injury sustained by a stranger."

52 Mr Parker's first submission involved a pure point of statutory construction of s 158 of the Workers Compensation Act. If it be found not to apply then sub-s (3) of the section did not operate to deem applicable to the second cross-defendant the statutory policy of insurance so that there was no liability in the second cross-defendant. In the alternative, if s 158 be applicable, the terms of the policy in cl 3(b) did not extend to the claim for mental harm to the plaintiff who was not a worker so that again the second cross-defendant was relieved of liability.

53 At the base of the submission as to s 158, Mr Parker contended that the injury to the plaintiff was a separate injury from that to Mr Moore - I think that to be true. However, counsel went on to submit that the injury was neither dependent upon nor derivative from the injury to Mr Moore; indeed, said counsel, whilst Mr Moore in fact sustained severe injury that was not an essential ingredient of the plaintiff's action. I disagree. In my view, the action by the plaintiff for nervous shock required a dependency upon the injury to Mr Moore caused by the negligent conduct of the defendant. As Gleeson CJ found in Tame; Annetts (at 338 in para [41]), the negligence there to the victim resulted in mental anguish to the third party of a kind that could give rise to a recognisable psychiatric illness. It was this "consequential" relationship which in the present case was well established by the evidence of Dr Phillips and its relevance was amply demonstrated in cases such as Rheem, Hooper and Multiplex as I have earlier noted in referring to the submissions of Mr Catsanos and Mr Andrews. To the extent Mr Parker submitted, wrongly I think, that the injury to Mr Moore was not essential to the plaintiff's action, and so removed the operation of s 158, counsel's later submissions as to the construction and meaning of s 158 were thereby infected.

54 Mr Parker as to s 158(3) emphasised that it "deemed" a policy of insurance in the statutory form to be held rather than a policy being held in fact so that, in reliance on what Griffith CJ held in Muller v Dalgety & Co Ltd (1909) 9 CLR 693 at 696, it was a "statutory fiction" which required attention to the purpose for which the fiction had been created. In other words, so counsel put, the fiction is only applicable in its particular context and not to extend its meaning by implication: see per Fisher J in Federal Commissioner of Taxation v Comber (1986) 10 FCR 88 at 96; and East Finchley Pty Ltd v Federal Commissioner of Taxation (1989) 90 ALR 457 at 478. Accepting, as I think one may, the dual purpose of s 158 as being to encourage employers to participate in training schemes and to provide a source of funds for the payment of injury benefits, Mr Parker said it would be unlikely to have been the intention of s 158 to expose the public revenue to a range of potential claimants having no connection to the trainee; thus, the section should not be interpreted so as to give access to the fund to persons who were relevantly strangers to the scheme, such as the plaintiff.

55 I may immediately say I accept the purposive approach to the construction of s 158 and the purposes so identified by Mr Parker. However, I do not accept what counsel said flowed from that. In encouraging the employment of trainees and to provide a fund to compensate for injuries sustained by them, I do not see why such benefits should necessarily be limited to the trainee and not extend to compensation for damage sustained by a third party in consequence of injury to the trainee. That is, there seems to me to be no logical reason from the purposes of the section themselves to exclude damages to a third party where the injury to the third party has the sufficient connection with the employment of the trainee. Otherwise, s 158 and its purposes would not be given full effect as there would be a restriction in the employment of a trainee by potentially lesser cover.

56 It is to be seen from the statutory scheme that s 158 operates to exclude liability of a licensed insurer to the extent the employer of a trainee is indemnified under the deemed insurance policy which, in terms, is the same as the standard form of statutory policy. It would be strange if s 158 itself operated, but as Mr Parker suggested it did, to exclude liability in the deemed insurer to indemnify for damages to a third party where the third party may have been able to recover under the standard form of policy from the licensed insurer if the trainee had been provided for as an ordinary worker absent s 158. In my view, s 158 is to be viewed, consistent with its purposes, in shifting responsibility as to trainees for indemnity from the licensed insurer to the deemed insurer but in terms conterminous with the liability of the licensed insurer under the standard form of statutory policy. Put another way, liability of the deemed insurer, if at all, is to be determined in terms of the standard form of statutory policy and s 158 is to be construed in a manner to give effect to that.

57 Nevertheless, Mr Parker relied on the words in s 158(3) that in the case of liability for workers compensation benefits under the statute the reference is to "liability…in respect of that trainee" whereas in the case of liability independently of the statute, that is for common law damages as here, the reference is to "for any injury…to that trainee." The submission was, by reliance on what Santow JA said in Multiplex (in para [10]), that the use of different expressions - "in respect of" and "for" - suggested the latter was used in a narrow and more direct sense as injury to the trainee and not to persons other than "that trainee." Support was sought also on this approach from what Basten JA said in Kimberly-Clark Australia Pty Ltd v Thompson (2006) 67 NSWLR 87 at 200 in para [56] adopting Workers' Compensation Board (Qld) v Technical Products Pty Ltd (1988) 165 CLR 642. I will return to this in considering the statutory form of policy.

58 Mr Parker's second submission related to the construction of the deemed policy of insurance in the event the first submission failed and the plaintiff be held to be within the ambit of s 158 so as to bring the deemed policy into operation.

59 Counsel submitted that cl 3(b) of the policy could not sustain a meaning which extended the cover to include persons other than those correctly identified as the "worker." The plaintiff here was therefore excluded. Mr Parker emphasised the phrase in the sub-clause of "for any injury to any such person" as being referable only to the "person who is a worker" in sub-cl (a). Such approach to the construction of the policy wording was, as counsel said, consistent with the decision in Technical Products and, indeed, with the following comment by McHugh JA in Hooper (at 75, 309): "…In its setting, the natural meaning of the indemnity seems to me to be limited to liabilities payable to the worker or his dependants in respect of injury or death to the worker…"

60 As to the apparently contrary decisions in Rheem and Hooper, as relied upon by the other cross-defendants, Mr Parker said they concerned the expression in the statutory form of policy under the 1926 statute of "in respect of his liability independently of the Act for any injury to any such person." It was put, by reference to what Santow JA said in Multiplex (in para [10]), that that expression was potentially wider than the corresponding expression in the presently relevant policy under the 1987 statute of "for any injury to any such person." Counsel again relied on Kimberly-Clark in which Basten JA (in para [56]) adopted Technical Products to hold that "the statutory concept does not extend to a claim for nervous shock brought by a stranger to the employment relationship, against the employer, merely because the cause of the nervous shock was an injury (causing death) to an employee."

61 Section 151P of the Workers Compensation Act, concerning damages for psychological or psychiatric injury in which para (b) clearly referred to damages being available to family members of a worker so injured as a consequence of injury to the worker, was acknowledged by Mr Parker as constraining the plaintiff's claim but was said to be "mere happenstance and other claimants would not be constrained by the provisions of the workers compensation legislation."

62 Finally, Mr Parker stressed the differences in wording of the respective statutory policies under the 1926 and 1987 statutes and the proposition that Rheem and Hooper did not control the present matter. To the extent that Studdert J in Hughes v Sydney Day Nursery Children's Services Inc [2000] NSWSC 462, a decision concerning the 1987 form of policy, followed Rheem and Hooper the decision was incorrect. Counsel made the formal submission that if it be held Rheem and Hooper did control the construction of the present statutory policy then those cases were wrongly decided.

63 Third cross-defendant's case: Counsel for the third cross-defendant, Mr PM Morris, put the basic submission for the public liability insurer that the policy so issued to the defendant excluded in cl 1(a) liability for personal injury in respect of which the defendant had indemnity under a policy pursuant to legislation relating to workers compensation. Thus, if the defendant was entitled to indemnity under either the statutory policy issued by the first cross-defendant or the deemed policy affecting the second cross-defendant then the public liability policy would not respond. Stating the question as to whether the standard form of statutory policy applied, Mr Morris submitted that the Court was bound to follow Rheem and Hooper, as Studdert J did in Hughes, and find that it did. The third cross-defendant should therefore have a verdict against the defendant on the cross-claim.

64 In supporting the approach in Hughes, Mr Morris relevantly explained that the policy issued under the 1926 statute and the policy issued under the 1987 statute had been described as "for all practical purposes…identical" (per Ipp JA in Multiplex at [33]); "in comparable terms" (per Basten JA in Kimberly-Clark at 200 in para [55]); and "essentially the same (per Studdert J in Hughes in para [233]).

65 Counsel helpfully reviewed the decisions in Rheem and Hooper and the reasoning of Studdert J in Hughes. He then dealt with the later cases which considered Rheem and Hooper in Multiplex, Kimberly-Clark and Technical Products and distinguished them. However, Mr Morris submitted that Rheem and Hooper were not distinguishable from the present case.

Consideration of cross-claim 66 For the reasons earlier given, I find against Mr Parker's first submission as to s 158 by itself and in its terms not extending to injury to the plaintiff as a stranger to the employment contract. The section, in my view, and as I have said consistent with its purposes, is to effectively enliven as against the deemed insurer the provisions of the standard statutory policy where there be injury to a trainee. The section's terms are conterminous or coextensive with the policy so that liability will depend upon whether the policy in its true meaning applies. If it does, consistent with the authorities, then the second cross-defendant as the deemed insurer incurs liability to indemnify the defendant thereby releasing the first and third cross-defendants; if it does not, then the first and second cross-defendants are released from liability which then falls upon the third cross-defendant. Either way, the first cross-defendant, it seems to me, has no liability and it would only have been potentially liable if the second cross-defendant's first submission that s 158 did not apply to make it the deemed insurer had been successful; the licensed insurer, the first cross-defendant, in that situation would have been the insurer on risk in the ordinary way.

67 The essential wording in cl 3(b) of the statutory policy in providing cover from the relevant insurer for indemnity to the employer (other than for workers compensation benefits under the statute) is: "…any other amount that the Employer becomes liable to pay independently of the Act…for any injury to any such person…"

68 The corresponding wording in the indemnity policy under the 1926 statute was: "…any other amount …in respect of his liability independently of the Act for any injury to any such person…"

69 On the face of these provisions, I am wholly satisfied that they are essentially the same and identical in their scope. In the context of a statutory policy of insurance in workers compensation legislation, I think each should be construed in the same way and given the same meaning. The common and directly operative words are "for any injury to any such person" where "such person" refers to the worker. The question here then emerges whether those words extend to provide indemnity to the defendant for damages incurred by it for nervous shock caused to the plaintiff as a result of or in consequence of its negligence to Mr Moore causing him injury.

70 In Rheem, the husband of a worker successfully obtained damages against the employer for loss of consortium of his wife who was injured at the workplace. The employer was found to be entitled to recover an indemnity in respect of that liability from the insurer under the statutory policy in its 1926 form. It was held unanimously by the Court of Appeal (Glass JA, with whom Samuels JA and Mahoney JA agreed) that the operative words in the policy of "liability…for any injury to" a worker meant "liability to any person consequent upon or in respect of injury to" a worker and such an indemnity included any claim at common law by a person other than the injured worker and specifically a claim by a spouse for loss of consortium: see per Glass JA at 375. As Mahoney JA added (at 376): "An examination of the history and the form of those provisions indicates, I think, that the meaning to be given to "for" is a wide rather than a narrow one and that the word is wide enough to include a claim against the employer by dependants of the worker under the Compensation to Relatives legislation. And, in my opinion, if this be so, then it follows that the terms of the policy are wide enough to include a claim for loss of consortium of the kind here in question." 71 Relevantly, Mahoney JA concluded (at 377): "I am conscious also that, if this be the ambit of the words of the prescribed policy, it may comprehend, eg, claims by third parties for nervous shock arising from injury to the worker. But, once the words of the policy are seen as extending to liability to third parties, eg, dependants, and are not restricted to liability to dependants as such, then there is no basis in the wording of the legislation for restricting what would otherwise be the ordinary effect of the language of the policy. If the ambit of the prescribed policy is to be limited either by considerations of public interest or (if it be permissible) by the terms of the regulations, such a restriction should, I think, be imposed otherwise than by this Court." 72 It may be interposed by way of emphasis that the operative words for liability in cl 3(b) of the statutory policy, namely, "for any injury to any such person", conceptually correspond identically with the words in s 158(3) which make it operative with respect to trainees, namely, "liability…for any injury…to that trainee." There is every reason to accept that such similar expressions should be similarly construed. Applying Rheem gives those words in the section, in my view, the meaning of "liability to any person consequent upon or in respect of injury to a trainee." This is an additional reason for regarding s 158 as applicable in the present circumstances as to injury to the plaintiff and not limited to the trainee's injury. It shows too that the boundaries of both s 158 and cl 3(b) are, as I have earlier said, conterminous.

73 As I understand the position, the decision in Rheem has stood now for nearly a quarter of a century and where the legislature has not seen fit to disrupt its interpretation of the policy wording. With the enactment of the successor 1987 legislation the form of statutory policy has been effectively repeated and, of much significance, s 151 P was inserted into the statute by the Workers Compensation (Benefits) Amendment Act 1989 which commenced on 1 October 1989 and, in my view, was confirmatory of the reasoning and approach in Rheem. Section 151 P, I think, may not be seen as mere chance, as Mr Parker suggested, but rather as an explicit and deliberate provision only supportive of a wide view of the terms of the statutory policy in extending to third parties damages for psychological or psychiatric injury as a consequence of injury to a worker - the policy must, I think, be seen to respond accordingly.

74 Hooper, decided by the Court of Appeal four years after Rheem and again in relation to the 1926 form of indemnity policy, unanimously applied Rheem in a situation where a worker was fatally injured in an accident arising out of or in the course of employment and indemnity was allowed to the employer under the statutory policy for its common law liability to the widow who suffered mental or nervous shock upon hearing of her husband's death. It was held by Hope JA, with whom Priestley JA and McHugh JA agreed (at 75,308): "… Rheem has taken the operation of the provision outside an area limited by reference to the employer's liability to the worker and his dependants, and established that if a third party suffers loss as a consequence of an injury to a worker in the course of or arising out of the worker's employment giving rise to a liability in the employer to that third party, that liability of the employer is a liability for an injury to a worker within the meaning of sec 18(1).

In my opinion the employer was entitled to be indemnified by the insurer in respect of its liability to the worker's widow arising from the mental and nervous shock which she suffered as a result of the worker's injury and death." 75 In the same case, McHugh JA (at 75,309) did observe that "if the construction of the policy in issue in this case could be approached independently of the decisions upon it, I would be in favour of allowing this appeal…But the course of decision on the indemnity holds otherwise." However, his Honour followed precedent and applied Rheem.

76 Rheem and Hooper were called for consideration by Studdert J in Hughes where a pregnant worker claimed to acquire a virus during employment which she passed on to her unborn child in utero and caused him a disabling condition. His Honour found against the claim on the facts but held also, in applying Rheem and Hooper, that assuming injury to the worker and passing the virus to the child would have meant the statutory policy applied to cover liability to the child as a consequence of injury to the worker. The reasoning of his Honour (in paras [228]-[239]) included consideration of the decision in Technical Products which was distinguished as involving differences in language in the respective NSW and Queensland legislative provisions. Studdert J said: "[236] The narrower construction of the Queensland scheme in Technical Product s does not bear upon the correctness of the decision in Rheem or how the form of statutory policy in New South Wales should be construed.

[238] In the result a finding that the first plaintiff acquired primary infection during her pregnancy arising out of and, in addition, in the course of her employment, would have amounted to 'injury' within the meaning of the policy so as to expose the first cross defendant to a liability for the claims of both the first plaintiff and the second plaintiff. This is because the policy is to be construed as a policy that would have covered liability to the second plaintiff as a liability consequent upon the injury to the first plaintiff. The second plaintiff's injury would have been a direct consequence of the injury to the mother.

[239] Thus had the plaintiffs succeeded against the defendant, the defendant would have been entitled to indemnity by the first cross defendant for its liability to both plaintiffs for damages recovered against it; and the first cross defendant would also have been obliged (as the policy provided) to 'pay all costs and expenses incurred with the consent of the insurer in connection with the defence of [these] proceedings.'"

77 The decision of Studdert J in Hughes was the subject of a successful appeal to the Court of Appeal ([2002] NSWCA 11) but not on the question of the indemnity policy and, indeed, the two plaintiffs at first instance were successful in achieving judgments on the facts.

78 Reference should be made to the decision of the High Court in Technical Products. That case involved a claim for nervous shock suffered by a wife as a consequence of serious injury to her husband in the course of his employment. She sued for damages and the employer sought indemnity from the insurer in accordance with s 8(1) of the Workers Compensation Act 1916 (Qld). The section required insurance against "damages arising under circumstances creating also, independently of this Act, a legal liability in the employer to pay damages in respect of that injury." Section 9 established a Fund for compensation and s 9A provided that where an injury entitling a worker to compensation from the Fund was received under "circumstances creating also, independently of this Act, a legal liability in the employer to pay damages in respect of that injury", the damages payable by the employer should be reduced by the compensation payable from the Fund. It was held by the High Court that "damages in respect of that injury" in s. 8(1) meant damages in respect of injury to a worker, assessed by reference to his injury. The phrase did not, it was held, extend to damages for nervous shock to a person other than the worker where they would be assessed, not by the injury, but by its effect on another.

79 It will be immediately apparent, and as Studdert J found in Hughes, that the statutory language in Technical Products was materially different from the language in the 1926 and 1987 versions of the statutory policy in NSW which focused on the phrase "for any injury to any such person." The High Court in Technical Products referred to Rheem and Hooper and in respect of which Wilson and Gaudron JJ (at 652) said related to "a statute which in our view is materially different from the Queensland legislation"; their Honours did not question the correctness of Rheem and Hooper. Further as to the decision in Rheem, Deane, Dawson and Toohey JJ simply commented (at 657) that it was "sufficient for present purposes to say of that decision that it depended upon the form of the policy in question."

80 The decisions in Rheem and Hooper were also the subject of comment by Basten JA in Kimberly-Clark which was a case concerned with procedural requirements and the concept of "work injury damages" in s 250 of the Workplace Injury Management and Workers Compensation Act 1998. it was held by Basten JA, with whom Ipp JA and Bryson JA agreed, that the relevant phrase in s 250 did not extend to a claim for nervous shock brought by a stranger to the employment relationship merely because the cause of the nervous shock was an injury to an employee. His Honour as to Rheem noted that it was distinguished in Technical Products and observed (at 200 in para [55]) that it was a decision which "depended upon the form of the policy in question." Again, and similarly with the reference to Hooper, Basten JA did not question the correctness of those two decisions.

81 The provisions in the statutory policy in cl 3(b) concerning rescuers powerfully reinforce coverage of the policy to an injury received by a person other than the worker. This provision to exclude liability in respect of an injury arising out of any rescue or attempted rescue referred to the injury being "suffered by a person other than such a worker." It was inserted into the statutory form of policy, after the decisions in Rheem and Hooper found the policy extended to injury to a person other than the worker, so that liability to indemnify with respect to claims by rescuers (not being workers) was expressly excluded. The Executive, however, did not see fit to exclude third parties generally from coverage nor specifically as to claims for nervous shock. In my view, this means that the policy by making an express reference to rescuers indicates that other persons not being workers are omitted from the policy exclusion: expressio unius est exclusio alterius. The only condition for inclusion in the policy of the injury to the third party being that it was, to use the words of Glass JA in Rheem, "consequent upon or in respect of injury to" a worker. Application of the maxim expressio unius is particularly useful in cases, as here, where it confirms the earlier interpretation of the words in the policy by Rheem and Hooper: see Carr v Financial Corporation of Australia Ltd (1982) 42 ALR 29 at 37; and Riley v Commonwealth (1985) 62 ALR 497 at 505.

82 I find that the circumstances of the present case are directly analogous to and covered by the reasoning in Rheem and Hooper to which decisions I am bound and, like Studdert J in Hughes, I therefore consider the statutory policy applies to the defendant's claim for indemnity. As s 158 is operative, that creates liability in the second cross-defendant as the deemed insurer.

Conclusion on defendant's cross-claim 83 Section 158 is effective to make operative the provisions of the statutory insurance policy against the second cross-defendant as the deemed insurer. The policy is applicable to the defendant's cross-claim for indemnity from the second cross-defendant as to the damages it has incurred to the plaintiff for nervous shock. The first and third cross-defendants are thereby relieved of any liability to the defendant. The defendant is entitled to a verdict against the second cross-defendant for $50,000 plus the costs and expenses incurred in connection with the defendant's defence of these proceedings. The first and third cross-defendants are entitled to verdicts against the defendant. In the ordinary course, costs should follow the respective events but the parties will be heard on this if alternative relief be sought.

Orders 84 The parties are directed to confer as to appropriate orders to give effect to this decision and to prepare short minutes of order, including as to costs, before final orders are made.

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