Torts - Negligence - Two events - Whether injuries separate or are an aggravation of the other - Consent judgment - Whether it included both or only one injury - Turns on own facts

Colgate-Palmolive Co v Cussons Pty Ltd [1993] FCA 536; (1993) 46 FCR 225

Fountain Selected Meats (Sales) Pty Ltd v International Produce Merchants Pty Ltd [1988] FCA 202; (1988) 81 ALR 397

John S Hayes & Associates Pty Ltd v Kimberly-Clark Australia Pty Ltd (1994) 52 FCR 201

Re Wilcox; Ex parte Venture Industries Pty Ltd (1996) 141 ALR 727

Tetijo Holdings Pty Ltd v Keeprite Australia Pty Ltd, unreported; FedCt No WAG 55/88; Library No 225 of 1991; 3 May 1991

Unioil International Pty Ltd v Deloitte Touche Tohmatsu [No 2] (1997) 18 WAR 190

Walton v McBride (1995) 36 NSWLR 440

1 JUDGMENT OF THE COURT: On 27 October 1999 a Deputy Registrar of the District Court of Western Australia struck out the statement of claim in an action brought by the appellant for damages for personal injury allegedly arising from a work-related injury. The Deputy Registrar also dismissed the action. On 20 April 2000 a Judge of the District Court dismissed the appellant's appeal against the orders of the Deputy Registrar. This is an appeal from the decision of the District Court Judge.

2 On 20 March 1995 the appellant suffered an injury to his neck in an incident that occurred while he was employed by Sadleirs Transport Co (NSW) Pty Ltd ("Sadleirs"). The appellant was receiving Workers' Compensation benefits as a result of that incident. He suffered an aggravation to the neck injury on 18 July 1995. As part of a rehabilitation programme the appellant began work with the respondent as a forklift driver. On 27 March 1997, in the course of the rehabilitation programme, he suffered an injury to his shoulder. A critical issue is whether the shoulder injury was a further aggravation of the neck injury suffered on 20 March 1995 or an entirely separate and distinct injury.

3 The medical practitioners apparently had some difficulty in making an exact diagnosis of the neck injury. According to a report of Mr David Wright, orthopaedic surgeon, dated 27 March 1997 it is best described as "a strained facet joint at the C6/7 level". The shoulder injury is described as "a rotator cuff tear of the left shoulder". In a radiological report of Dr Scott dated 17 April 1997 it is described as a "tear of the supraspinatous tendon".

4 The appellant consulted Mr Bradford of Bradford & Co, Solicitors. Mr Schwikkard of Phillips Fox, Solicitors was representing Sadleirs. Negotiations ensued to settle the appellant's claim against Sadleirs both under the Workers Compensation and Rehabilitation Act 1981 ("the Act") and at common law. The appellant filed an application for leave to commence proceedings under s 93D of the Act. The application was listed for hearing on 29 July 1997.

5 This document was not included in the Appeal Book but was tendered and marked Exhibit 2 for the purposes of the appeal. It indicates that leave was sought to commence an action "for damages in respect of personal injuries arising out of the negligence of [Sadleirs] ... on 20 March 1995".

6 On 21 July 1997 Bradford wrote to Schwikkard making a proposal for settlement. Bradford referred both to the neck injury and to the shoulder injury. He said:

"In relation to the shoulder injury we see this as being caused by the same continuous conduct of [Sadleirs], having started off with [Sadleirs'] negligence and then the duty transferring to [Sadleirs'] rehabilitation provider and an injury occurring during such rehabilitation programme which, but for the accident would not have occurred.

...

Our client will be entitled to [general damages] and to this must be added a component for the shoulder injury, anticipated surgery and recovery phase."

7 On 28 July 1997 an informal conference occurred between Bradford and Schwikkard concerning the proposed settlement. At the conference Schwikkard told Bradford that his client was not in a position to indemnify the respondent in respect of the shoulder injury and he was concerned solely with the neck injury. The parties agreed on a settlement. It was a term of the settlement that the appellant would indemnify Sadleirs against any claim that the respondent might make against Sadleirs resulting from any common law claim made by the appellant against the respondent.

8 On 29 July 1997, by consent, leave was obtained to commence proceedings against Sadleirs.

9 On 31 July 1997 the appellant filed, simultaneously, a writ of summons and a consent judgment disposing of the action against Sadleirs in accordance with the settlement that had been reached. The indorsement of claim on the writ is in these terms:

"The [appellant] claims damages against [Sadleirs] arising from negligence, breach of contract of employment and/or breach of statutory duty of [Sadleirs] which caused personal injury to the [appellant] during the course of his employment with [Sadleirs] on or about 20 March 1995 ('the initial injury') and for the recurrence/exacerbation of the initial injury on 18 July 1995 and [27] March 1997."

10 The consent judgment was for $73,000 (exclusive of payments already made under the Act) plus $7000 as a contribution to costs. It is expressed to be "in full and final settlement of all causes of action the [appellant] may have had for damages against [Sadleirs] arising out of the matters in the [appellant's] indorsement of claim".

11 In about April 1998 the appellant commenced proceedings against the respondent. The statement of claim asserts negligence on behalf of the respondent as a result of which, on 27 March 1997, the appellant suffered a "rotator cuff tear of the left shoulder". The action continued through the interlocutory stages. In the discovery process the respondent became aware of the settlement of the Sadleirs action. It then made the application to strike out the statement of claim and the action.

The Reasons for Decision of the District Court Judge

12 The learned District Court Judge set out the background material. He noted that the Deputy Registrar had concluded that the injuries inflicted upon the plaintiff by the events of 27 March 1997 were the subject of the proceedings and settlement in the Sadleir action. Counsel for the appellant had submitted that there was no injury to the shoulder prior to the 27 March 1997. His Honour reviewed and set out some of the medical evidence, including reports from specialists and general practitioners and progress certificates. His Honour also referred to the letter from Bradford &Co of 21 July 1997 before continuing:

"It is the submission of counsel for the defendant that:

1. The Writ and consent judgment in the Sadleir's action established that the plaintiff compromised his cause of action in respect of the incident on 27 March 1997 for a sum of money. It is not in dispute that the plaintiff received that money.

2. Even if it were permissible or necessary to look behind that document progress medical certificates and medical reports (sent to GIO, Sadleirs insurer) are clearly directed to the left shoulder injury (as well as the neck injury) and a letter from the plaintiff's solicitors to Sadleirs solicitors (Phillips Fox) dated 21 July 1997 (annexure D to the affidavit of Ms Vanden Driesen dated 26 October 1999), and Phillips Fox's letter to GIO dated 28 July 1997 (annexure E to Ms Vanden Driesen affidavits sworn 10 December 1998) make it clear that the shoulder injury was included in the settlement.

That is a submission that I accept.

The plaintiff has filed affidavits indicating that the left shoulder injury is not part of any settlement. In my view those affidavits are nothing more than subjective beliefs and do not advance the plaintiff's position.

Clearly on the documentation the plaintiff is holding the defendant responsible for the left shoulder injury, is suing in respect of that injury and seeks damages in respect to that injury.

Where there are multiple tortfeasors and the plaintiff settles with only one of them, the Law Reform (Contributory Negligence and Tortfeasors Contribution) Act 1947 provides that judgment is not a bar to subsequent action against the other tortfeasors: s7; XL Petroleum (NSW) Proprietary Limited v Caltex Oil (Australia) Proprietary Limited [1985] HCA 12; (1984-1985) 155 CLR 448 at 459-460; Thompson v Australian Capital Television Pty Ltd and Others [1996] HCA 38; (1996) 141 ALR 1.

However the plaintiff cannot recover in aggregate more than the amount of the initial settlement: s7(1) (b); Castellan v Electric Power Transmission Pty Ltd (1967) 69 SR (NSW) 159; Boyle v State Rail Authority (NSW) (1997) 14 NSW CCR 374.

The plaintiff in the present action did settle his claim and has in fact received the full amount of the settlement and therefore in my view cannot recover any more from the present defendant. Accordingly, in my view the action should be struck out.

It follows in my view that the appeal should be dismissed."

13 The District Court Judge had before him affidavits from Schwikkard and Bradford giving details of how the settlement on 28 July 1997 was reached. These are the affidavits to which his Honour referred in the passage from his reasons for judgment that we have set out.

14 The grounds of appeal are voluminous. However, they come down to one concise contention, namely, that the trial Judge erred in failing to find that the incident of 27 March 1997 was both a new and separate event and a new and separate injury to the left shoulder. We think that this is somewhat inappropriately phrased. The respondent's application was to strike out the action on the pleadings and without trial. It would therefore be more accurate to say that the trial Judge erred in failing to find that it was reasonably arguable that the March 1997 incident and injury were new and separate from what had occurred in March 1995.

15 There is a subsidiary issue. In dismissing the appeal the trial Judge upheld the order of the Deputy Registrar that the appellant pay the respondent's costs on an indemnity basis. That order is also challenged.

Did the Consent Judgment cover the March 1997 incident?

16 A consent judgment, while not itself a contract, is evidence of the contract upon which it is based. It is no less a contract simply because there is superimposed on it the command of the court. Where a consent judgment embodies an agreement which amounts to a contract between the parties, the court will only interfere with it on the same grounds as it would with any other contract. In other words, the judgment must be construed according to its tenor and according to the conventional principles upon which contracts are interpreted.

17 The primary duty of a court in construing a written contract is to endeavour to discover the intention of the parties from the words of the instrument in which the contract is embodied: Australian Broadcasting Commission v Australasian Performing Rights Association [1973] HCA 36; (1973) 129 CLR 99 per Gibbs J at 109 - 10. There are some circumstances in which resort can be had to extrinsic evidence. In Codelfa Construction Pty Ltd v State Rail Authority of New South Wales [1982] HCA 24; (1982) 149 CLR 337 at Mason J said, at 352;

"The true rule is that evidence of surrounding circumstances is admissible in the interpretation of the contract if the language is ambiguous or susceptible of more than one meaning. But it is not admissible to contradict the language of the contract when it has a plain meaning. Generally speaking facts existing when the contract was made will not be receivable as part of the surrounding circumstances as an aid to construction, unless they were known to both parties, although ... if the facts are notorious, knowledge of them will be presumed."

18 The restriction on the use of the parties' negotiations and evidence of subjective intention was the subject of comment in Investors Compensation Scheme Ltd v West Bromwich Building Society [1998] 2 WLR 896. Lord Hoffman (in whose speech Lord Goff of Chieveley, Lord Hope of Craighead and Lord Clyde concurred) said at 913:

"The law excludes from the admissible background the previous negotiations of the parties and their declarations of subjective intent. They are admissible only in an action for rectification. The law makes this distinction for reasons of practical policy and, in this respect only, legal interpretation differs from the way we would interpret utterances in ordinary life. The boundaries of this exception are in some respects unclear."

19 We raise this because in his process of reasoning the trial Judge effectively ignored the affidavits of Schwikkard and Bradford on the grounds that they were "nothing more than subjective beliefs". There is no doubt that evidence of subjective beliefs or intentions of the parties is inadmissible as an aid to construction. It may well be that the affidavit of Bradford does little more than set out what the solicitor hoped to achieve from the settlement. However, the same cannot be said of the affidavit of Schwikkard. While it too contains the evidence of what the solicitor "considered prudent" in the interests of his client, it contains evidence of the letters passing between the parties and some of what was said at the informal conference. It aids in establishing what was known to the parties at the time when the contract was entered into.

20 But the first port of call is the language of the instrument itself. The indorsement of claim, the consent judgment and the originating summons seeking leave to commence the action have to be read together. The indorsement specifies as "the initial injury" that which occurred on 20 March 1995 and it claims damages in respect of that injury. It also claims damages for the recurrence or exacerbation of "the initial injury" on 18 July 1995 and 27 March 1997. The originating summons was limited to injuries arising out of negligence on 20 March 1995. There is no mention of negligence or of an injury occurring on 27 March 1997. Counsel for the respondent submitted that "the initial injury" is not defined, for example, as a neck injury. This may be said to create an ambiguity requiring or permitting resort to extrinsic evidence as an aid to construction.

21 The objective facts known to the parties at the relevant time included the medical evidence. We think it is fair to say that there is evidence in the medical reports to support the view that there was some mention of a shoulder problem which existed before 27 March 1997. This is the import of a report from Mr Richard Beaver, orthopaedic surgeon, dated 18 March 1997. Some of the Progress Medical Certificates also mention shoulder, as well as neck, problems. But the mere fact that there is mention of shoulder, as well as neck, problems before 27 March 1997 is not of itself conclusive that there was no separate injury to the shoulder that occurred as a result of an incident on that day. In any event, there is other medical evidence (prior to the date of the settlement) that tends in the other direction. We mention, by way of example, two reports of Mr Greg Janes, orthopaedic surgeon, dated 6 May 1997 and 3 July 1997, which outline the history given to him by the appellant and which specify separate injuries arising from separate occurrences. There is a report from Mr David Wright following an examination conducted on 11 March 1997 which mentions neck problems only. The report of Dr Maguire dated 25 July 1997 specifies separate injuries.

22 Other objective facts known to both parties come from the exchanges of correspondence between the solicitors. It was known to the solicitors for the appellant and for Sadleirs that the appellant had attempted to have Sadleirs admit liability for the shoulder injury. This attempt had failed. It was also known that the appellant was contemplating a separate action against the respondent arising from the 27 March 1997 incident and that Sadleirs would not compensate the appellant for that injury except to the extent that it was, or might be, an aggravation of "the initial injury". In addition, it was known that the appellant would be required to indemnify Sadleirs against any claim against it by the respondent arising from the foreshadowed action.

23 Looked at against this background, it seems to us that the proper construction of the consent judgment is that it was designed to cover, and only to cover, matters for which Sadleirs could be liable. This is the initial injury which occurred on 20 March 1995, the admitted aggravation on 18 July 1995 and any further aggravation that might have occurred on 27 March 1997. This leaves open the possibility that the appellant might have another or other claims for which Sadleirs could not, on any construction, be liable. This would be the case, for instance, if the shoulder injury occurring on 27 March 1997 was a new and separate injury totally unconnected with the neck injury suffered on 20 March 1995.

24 On the other hand, there may, in the foreshadowed action against the respondent, have arisen an argument about whether the shoulder injury was entirely new, or whether it was in part new and in part an aggravation of the initial neck injury manifesting itself in shoulder symptoms. If the latter, there would need to be an inquiry as to the extent, if any, to which the whole or part of the settlement effected between Sadleirs and the appellant had an impact on the ability of the respondent to claim contribution against Sadleirs. Alternatively, questions could arise whether the damages payable to the appellant ought to be reduced on account of the settlement. If a need for some disentangling of this nature did arise, the onus in relation to competing causes would be on the respondent: Watts v Rake [1960] HCA 58; (1960) 108 CLR 158 at 160 per Dixon J. This may also explain why Schwikkard sought, and obtained, the indemnity on behalf of Sadleirs.

25 In our view, the trial Judge was in error in declining to give any weight to those aspects of the Schwikkard affidavit that related to objective facts. He also erred in concluding (as seems to be the case) that the medical evidence showed conclusively that the initial injury incorporated the shoulder injury which was the subject of the second action. That may still be shown to be case but it ought not to have been decided on a strike-out application without a full explanation of all of the evidentiary material.

26 The statement of principle enunciated by the trial Judge in pars 18 and 19 of the reasons for judgment about the effect of the Law Reform (Contributory Negligence and Tortfeasors Contribution) Act 1947 is entirely unexceptional. However, it proceeds on the basis that there are multiple tortfeasors and only one tort. The case that the appellant wishes to mount is that there are two tortfeasors, each of whom is responsible for a separate tort. We believe that the case which the appellant proposes to advance in that regard is arguable. If the appellant makes good that contention, the legislation will have no application.

27 In our view the appeal must succeed. This makes it unnecessary for us to consider whether an award of costs on an indemnity basis was justified.

28 We would allow the appeal and set aside the trial Judge's order dismissing the appeal. The consequence is that the order of the Deputy Registrar striking out the statement of claim and dismissing the action and ordering costs against appellant should also be set aside. Further, the respondent's application by summons dated 18 December 1998 should be dismissed.