Batchelor v Burke

The award of interest on judgments in South Australia is made under s. 30C of the Supreme Court Act 1935 S.A., as amended. Sub-section (1) of that section provides:

Unless good cause is shown to the contrary, the court shall, upon the application of a party in favour of whom a judgment for the payment of damages, compensation or any other pecuniary amount has been, or is to be, pronounced, include in the judgment an award of interest in favour of the judgment creditor in accordance with the provisions of this section. It is unnecessary for present purposes to refer to the other provisions of the section, except to say that a lump sum in lieu of interest may be awarded (sub-s. (3)). The effect of s. 30C has been considered by the Judicial Committee in Thompson v. Faraonio [1] where their Lordships adopted the statement of principle made by this Court in Fire and All Risks Insurance Co. Ltd. v. Callinan [2] that in the case of loss of earning capacity interest should be allowed "only on that part of the damages awarded under that head which represents compensation for those detriments the practical impact of which, in terms of economic loss actually incurred, has already, at the date of judgment, been experienced by the plaintiff". This statement was subsequently approved by this Court in Cullen v. Trappell [3] . If this principle is applied to the present case, it would appear that interest should not be awarded in respect of the respondent's loss of earnings before the trial, since that loss has been made good by the payments of workers' compensation, and the respondent has not suffered any financial detriment from a practical point of view. 1. (1979) 54 A.L.J.R. 231, at p. 233. 2. (1978) 140 C.L.R. 427, at p. 432. 3. (1980) 146 C.L.R. 1, at p. 18.

The Full Court in the present case, in reaching a different conclusion, followed an earlier decision of King J. (as he then was) in Solomon v. Irving [4] . In that case his Honour said [5] :

As between the plaintiff and the defendant, the plaintiff has not had the money to which he was entitled and the defendant has had the use of it. To the extent of the workmen's compensation payments, the plaintiff has not been out of pocket. But he received those payments from a third person, his employer, by reason of a statute which gives him rights against the employer which are independent of his rights against the defendant. The fact that he has not been out of pocket to the extent of those payments has no more relevance to the award of interest than if he had not been out of pocket because he had been able to borrow money from a third person free of interest or had received voluntary assistance from a third person by way of gift. In all these cases the receipt of the money is, as regards the defendant, res inter alios acta. If interest is awarded on the amount of the general damages undiminished by the compensation payments, the plaintiff derives a benefit by the receipt of interest on an amount in respect of which he has not been out of pocket. If the amount on which interest is awarded is diminished by the compensation payments, the defendant derives a benefit by escaping the payment of interest on an amount of which he has had the use and to which the plaintiff was entitled. I do not think that the fact that the plaintiff was entitled to receive, and did in fact receive, compensation payments from his employer alters, as between the plaintiff and the defendant, the consequences of the principle that the plaintiff "ought in justice to be placed in the position in which he would have been had the amount of the verdict been paid to him at the commencement of the action"; Ruby v. Marsh [6] , per Barwick C.J. This view is reinforced by a consideration of the second reason given by Barwick C.J. in that case as follows: "In the second place the power to award interest on the verdict from the date of the writ is to provide a discouragement to defendants, who in the greater number of actions for personal injuries are insured, from delaying settlement of the claim or an early conclusion of proceedings so as to have over a longer period of time the profitable use of the money which ultimately the defendant agrees or is called upon by judgment to pay". 1. (1977) 15 S.A.S.R. 595. 2. (1977) 15 S.A.S.R., at pp. 596-597. 3. (1975) 132 C.L.R. 642, at p. 652.

The question whether the damages recoverable by a plaintiff are to be reduced because part of his loss has been recouped by payments made by a third person is one which has led to considerable difficulty in particular cases. In the solution of the problem thus presented, the use of the expression res inter alios acta has not proved of much assistance. This was recognized by Dixon C.J. in National Insurance Co. of New Zealand Ltd. v. Espagne [7] , when he said:

"To say" [that the advantage accruing to the injured plaintiff] "is res inter alios acta appears difficult when the very man injured is one of the parties between whom the thing is done; how can he come within the word "alios"?". Of course the question in the present case is not whether the compensation received from the employer should be deducted from the damages, but whether its receipt should be taken into account in deciding whether interest should be awarded. The two questions however present analogies. 1. (1961) 105 C.L.R. 569, at p. 572.

In my opinion it is not possible to say that workers' compensation received in respect of an injury in respect of which damages have been awarded is completely collateral or too remote to be taken into consideration in deciding whether the plaintiff in being deprived of his wages has suffered a detriment which should be remedied by an award of interest. It is not necessary to attempt the impossible task of devising a "principle so general as to be capable of covering the great variety of benefits from one source or another which may come to an injured man after, or because, he has met with an accident", to use the words of Lord Wilberforce in Parry v. Cleaver [8] . The answer to the question whether the compensation should be taken into account in the present case is largely provided by a consideration of the legislation under which the compensation is payable - the Workmen's Compensation Act 1971 S.A., as amended. By s. 9 (1) of the Act, if in any employment personal injury arising out of or in the course of the employment is caused to a workman, his employer is rendered liable to pay compensation in accordance with the Act. The amount of compensation payable where, as in the present case, total or partial incapacity for work has resulted from the injury is governed by s. 51. By sub-s. (1) the workman is entitled to a weekly payment during the incapacity equal to his average weekly earnings during the period of twelve months immediately preceding the incapacity if he has been so long employed, but if not, then for any less period during which he has been in the employment of the same employer. Sub-section (4) fixes the total liability of the employer in respect of amounts payable under the section, and sub-s. (5) provides that during total incapacity no workman is to receive a lesser weekly amount than that prescribed, notwithstanding that the prescribed amount exceeds the average weekly earnings. Section 84 deals with the situation that arises when a workman has sustained an injury for which compensation is payable in circumstances in which a third party is liable to pay damages in respect of that injury. By par. (a) of that section, the workman may take proceedings both against the third party to recover damages and against the employer for compensation. However, par. (b) provides that a workman who receives any money from a third party in respect of an injury and compensation under the Act shall repay to the employer such amount of that compensation as does not exceed the amount recovered from the third party. In other words, a workman who is entitled to recover damages from a third party is not disentitled to receive compensation from his employer, but when he is paid damages he must repay to the employer the compensation he has received to the extent that it does not exceed the amount of the damages. The employer is given a charge on moneys payable by the third party to the workman to enable this right to repayment to be made effective (s. 84 (C)). Moreover, if a workman has received compensation but no damages, or less than the full amount of the damages to which he is entitled, the third party is liable to indemnify the employer against so much of the compensation paid to the workman as does not exceed the damages for which the third party is liable (s. 84 (d)). The intention of the legislation is to provide compensation to take the place of the earnings lost by a worker as a result of an injury suffered in certain circumstances, and to enable the employer who pays the compensation to be recouped if the injured workman obtains damages. Clearly the advantage given to a workman by this legislation is not conferred upon him with the intention that he may retain the compensation even if he enforces his right to damages, and since the amount received as compensation is repayable to the extent to which damages are recovered the fact that the injured worker has received compensation will not relieve the tortfeasor who caused the injury of liability. That however does not mean that any advantage or disadvantage which results to the injured worker, and which is relevant in some other way to the assessment of damages, should be disregarded as collateral or remote. The legislation has treated the payment of compensation and of damages in respect of any one injury as closely related, and the fact that the lost earnings have been replaced by compensation paid under a statutory scheme whose very purpose is to provide money to take the place of the lost wages should be regarded when the court comes to consider whether a plaintiff has suffered any practical detriment by the loss of the earnings. In the present case it was not suggested that there was any significant lapse of time between the loss of earnings and the payment of the compensation. In those circumstances, when the plaintiff who has lost earnings has received compensation instead, he has not been out of pocket by reason of the failure to pay him damages, even though the compensation is repayable when the damages have been received. The circumstance that the compensation was paid by a third person (the employer) obviously does not mean that the payment was irrelevant to the enquiry whether in fact the plaintiff has suffered a practical detriment by the loss of his wages, and it does not provide any reason in law for disregarding the fact that the plaintiff received the compensation in place of the wages.

In accordance with the principle which has been accepted in this Court and in the Privy Council it would therefore not be right to award interest in respect of that portion of the award which represents damages for earnings lost before trial but replaced by payment of workers' compensation. It would not be consistent with that principle to award interest simply to discourage defendants from delaying the settlement of claims. The interest is awarded to compensate the plaintiff for the detriment that he has suffered by being kept out of his money, and not to punish the defendant for having been dilatory in settling the plaintiff's claim.

For these reasons I am of the opinion that interest should not have been awarded on the portion of the award in question in the present case. I would accordingly allow the appeal and reduce the damages awarded by the amount of $2,024.63.

The Workmen's Compensation Act 1971 S.A. operated in the respondent plaintiff's circumstances to make available to him from his employer (or insurer) sums by way of compensation for loss of earnings, the sums being refundable in the event of a successful action for damages. Interest should not be awarded on the basis that the plaintiff was deprived of a sum or sums of money representing his probable earnings or part of his earnings when the fact is that by operation of the Act he was not deprived of them. To the extent that his earnings were made up by workers' compensation he suffered no deprivation.

The appeal should be allowed and the damages awarded should be reduced by the sum of $2,024.63.

I have had the advantage of reading the reasons for judgment of the Chief Justice in this appeal. I agree with those reasons and there is nothing I can usefully add.

I would allow the appeal for the reasons given by the Chief Justice.

I have had the advantage of reading the reasons for judgment of the Chief Justice. I agree with those reasons and accordingly I would allow the appeal.