Esso Australia Ltd v Victorian WorkCover Authority & Anor [2000] VSCA 74

[2000] VSCA 74

Accident Compensation - Claim for indemnity pursuant to Accident Compensation Act 1985 (s.138) in respect of compensation payments "paid or payable" - Nature of the entitlement to indemnity discussed - Whether notional assessment of damages pursuant to s.138(3)(b) of the Act contemplates assessment of "damages in nature of interest" - Whether court entitled to award penalty interest pursuant to s.60 of Supreme Court Act on amounts of compensation recovered - Whether the action is a "proceeding for the recovery of debt or damages" - s.138 Accident Compensation Act 1985; s.60(1) of Supreme Court Act 1986.

2. These two appeals raise similar questions relating to the proper interpretation of s.138 of the Accident Compensation Act 1985 ("the Act"). The purpose of the section, which is headed "Indemnity by Third Party" is to confer an entitlement to indemnity upon employers or insurers who have paid or have a liability to pay compensation benefits under the Act to injured workers. If those workers have suffered injury in circumstances creating a legal liability in the third party to pay damages to the workers in respect of it, then s.138 requires that negligent third party to indemnify the employer or insurer against payments made or to be made in accordance with the terms of the section.

5. The section at the relevant times was in the following form:

(1) Where an injury or a death for which compensation has been paid, or is or may be payable, by the Authority, an authorized insurer, a self-insurer or an employer was caused under circumstances creating a legal liability in a third party to pay damages or that would, but for section 134A, create such a liability in respect of the injury or death, the Authority, authorized insurer, self-insurer or employer is entitled to be indemnified by the third party in accordance with this section. (2) In determining for the purposes of sub-section (1) whether an injury or death was caused under circumstances creating a legal liability in a third party to pay damages in respect of the injury or death, Division 9 of Part IV must not be taken into account. (3) The amount which a third party is required to pay as indemnity under sub-section (1) is the lesser of -

(a) the amount of compensation paid or payable under this Act in respect of the injury or death; and

(b) the amount calculated in accordance with the formula -

X is the extent, expressed as a percentage, whereby the third party's act, default or negligence caused or contributed to the injury or death;

A is the amount of damages disregarding the extent, if any, whereby any other person's act, default or negligence caused or contributed to the injury or death) for pecuniary loss and non pecuniary loss which the third party is or would have been liable to pay in respect of the injury or death were it not for the provisions of this Act and the Transport Accident Act 1986;

B is the amount recovered or recoverable by the Authority, the authorized insurer, the self-insurer or the employer under section 137 from the Transport Accident Commission (otherwise than under a settlement);

C is the amount paid by the third party in respect of the injury or death to the worker or the dependants of the worker under any settlement of, or judgment in, an action by the worker or dependants of the worker against the third party.

(4) Judgment against or settlement by a third party in an action by a worker, or dependants of a worker, in respect of an injury or death referred to in sub-section (1) does not eliminate or diminish the right of indemnity given by this section, except to the extent provided in this section."

23. Problems have arisen as to the way in which the section is to work in practice in calculating the amount of and entitlement to indemnity. At the outset it seems desirable to identify the problems against the background of the facts in the "Esso Australia Appeal".

26. In 1989, Esso was the occupier of the Oil Platform in Bass Strait known as the "Kingfish West Oil Platform". The Platform was constructed to accommodate a team of workers who worked and slept on board on a rotational weekly basis. AFCO Industrial Services Group Pty Ltd (now in liquidation) contracted with Esso to provide services to the "rig". The agreement between Esso and AFCO required the latter to provide, inter alia, the services of AFCO's employees to perform a variety of tasks. Esso agreed to provide accommodation for those employees.

29. Pursuant to the agreement referred to in the preceding paragraph one of AFCO's employees, Kazimer Wsol, was working on the platform in January 1989. Provided for his sleeping accommodation was a small "bunk room" in which he was required to occupy the upper bunk. On 10 January 1989, he fell from that bunk on to the hard floor, injuring his back. The back injury which he suffered deteriorated over time until he became quite incapacitated and he has not worked since September of 1989.

32. Each of the respondents, namely, Victorian Workcover Authority (VWA) and F.A.I. Workers' Compensation (Vic.) Pty Ltd (FAI) has, at various times and pursuant to the Act, had the obligation of making payments to Wsol in respect of his injuries. By the time the action was tried it was agreed that $115,000 (approximately) had been paid by V.W.A. and $220,000 (approximately) by F.A.I.. F.A.I. was at all material times the authorized insurer of AFCO and, in that capacity, remains liable to pay compensation benefits pursuant to the Act to Wsol. The insurers maintained that the injuries suffered by Wsol occurred "under circumstances creating a legal liability" in Esso to pay damages and that, accordingly, Esso was liable to indemnify them pursuant to s.138.

35. As I read the transcript of the proceedings before His Honour, it was agreed between the parties that the matter should proceed as if it were a common law damages claim by Wsol against Esso, in conformity with s.138(3)(b) of the Act, in order to determine what amount of damages for pecuniary and non pecuniary loss Esso would have been liable to pay to Wsol in respect of his injury "were it not for the provisions of, [inter alia] the Act". Further, as I understand it, it was agreed that His Honour should determine the extent of Esso's fault for Wsol's injury expressed as a percentage; it being contended (at least by Esso) that the actions of AFCO and Wsol himself were each responsible for contributing to the injuries sustained. If these assessments were made, it was contended, then it would be possible to calculate the amount referred to in the formula set out in s.138(3)(b) and, thus, to compare that amount with the amount referred to in sub-s.(3)(a) in order to determine which was the "lesser" amount in accordance with which the entitlement to indemnity would be fixed.

38. In the course of reasons, published on 23 November 1998, his Honour found that the injury which the worker sustained on the rig had wholly incapacitated him. He further found that Wsol had in no way contributed to his own injuries which, in His Honour's view, were entirely attributable to the substandard accommodation facilities provided for him, including inappropriate facilities for providing access to and for alighting from the upper bunk. His Honour considered that both Esso and AFCO had failed in their respective duties as occupier and employer in failing to take reasonable care to ensure that the bunkroom facilities for the worker were of reasonable standard. In apportioning blame between the two (see para [10] of his reasons), his Honour had regard to the fact that Esso was the occupier and controller of an off-shore facility and, thus, the person with the "primary" responsibility for ensuring that the facilities were satisfactory. Nevertheless, AFCO was the employer of Wsol with its own non-delegable obligation to ensure that its worker was not exposed to foreseeable risk of injury. His Honour referred to various clauses in the agreement between the two organizations and also to the fact that senior officers from AFCO visited the rig from time to time, inter alia, for the purposes of observing and making recommendations in respect of work conditions. In the end, his Honour apportioned responsibility for the worker's injuries as to 80% against Esso, and as to the remaining 20% against AFCO.

41. His Honour then turned his attention to the notional assessment of damages which would have been payable to the worker in a common law suit against a negligent third party in respect of pecuniary loss and non pecuniary loss (see para [14] Of his Honour's reasons). He assessed the non pecuniary loss in a sum of $150,000 and then, under the rubric of "pecuniary loss" assessed various sums for "special damages" ($74,000); loss of earning capacity, both "past" ($320,863) and "future" $272,985). He then went on to assess a sum of damages for "interest" which he assessed at $187,000. The sum total of these amounts came to approximately $1 million which his Honour expressed to be his assessment of damages for pecuniary and non pecuniary loss.

44. I apprehend that what his Honour had done was to calculate degrees of responsibility for the worker's injuries and amounts notionally recoverable at common law by the worker in respect of pecuniary and non pecuniary loss, in aid of calculating the amount, which the formula prescribed by s.138(3)(b) requires to be calculated, as a step along the path to a determination of the amount which Esso was required to pay as indemnity to the respondents. Before that determination could be made, the amount calculated by his Honour pursuant to sub-s.(3)(b) had to be compared with "the amount of compensation paid or payable under [the] Act in respect of the injury ... " (s.138(3)(a)). It is the lesser of the two amounts which sets the limit of the third party's liability to indemnify. In this case, the parties accepted that his Honour's assessment constituted the limit of indemnity for which Esso was liable.

47. Having considered his Honour's published reasons, which were delivered on 23 November 1998, the parties came together again on 27 November. Trial counsel for Esso contended that his Honour, in making the notional calculation under s.138(3)(b), was not entitled to include a sum for damages by way of "interest"; nor, so it was submitted, did s.138 contemplate that interest should be paid, pursuant to s.60 of the Supreme Court Act 1986, upon sums ordered by the court to be paid in partial satisfaction of the indemnity entitlement. Alternatively, Esso's counsel submitted his Honour should not order interest at penalty interest rates as counsel for the insurers was claiming.

50. Ultimately, on 10 December 1998, his Honour published his final orders. In the course of doing so, he said in attendant reasons:

"As a consequence of the assessment of damages I made (paragraph 14 of the primary judgment) and apportionment of liability (paragraph 10 of the primary judgment) and upon the basis of the amounts certified pursuant to s.249A of the Accident Compensation Act 1985 to have been paid ..., putting aside for the moment the matter of interest, I order that the defendant [Esso] pay to the firstnamed plaintiff [VWA] the sum of $116,226.22 and that the defendant pay to the secondnamed plaintiff [F.A.I.] the sum of $219,000 to indemnify the plaintiffs for amounts paid by them to or on behalf of the worker ..."

54. His Honour then made what he called "a minor adjustment" to the sum which, in making the notional assessment of damages pursuant to s.138(3)(b), he had awarded for "interest" on the damages, but said that it would not alter his initial assessment of those damages - namely, $1 million. In respect of the question relating to interest on judgment his Honour accepted the argument of insurers' counsel that it was appropriate to award such interest at penalty rates pursuant to s.60 of the Supreme Court Act 1986. His Honour concluded that it "conformed to the scheme and requirements of the Accident Compensation Act" to, first, assess damages by way of interest under the formula prescribed by s.138(3)(b) and then to assess a further amount for interest upon the judgment sum. The two assessments, in his Honour's view, were "conceptually and historically" distinct and, thus, an award of interest on the judgment sum did not constitute "interest upon interest" as Esso had contended.

57. His Honour further concluded that it was appropriate to calculate the interest at "penalty" rates. It was his view that "the damages I have awarded herein clearly fall within the meaning of the words 'debt or damages' in s.60(1) Supreme Court Act 1986", which words his Honour said were "of conspicuous breadth". Accordingly, his Honour ordered:

1. that Esso pay to V.W.A. The sum of $116,226.22 plus interest fixed at $7,206.66;

2. that Esso pay to F.A.I. the sum of $219,000 plus interest fixed at $80,600.22;

(a) for all further payments of compensation made under the Accident Compensation Act 1985 to the worker (Wsol) in respect of his injury; and

(b) in an amount (sic) "exceeding the further sum of $421,795.22 - in other words up to total limit of $760,000".

65. The apparent discrepancy in the amounts of interest awarded to the first and second respondents, we were told, becomes explicable because the first respondent had only joined in the proceedings well after they had been instituted by the second respondent. Further, and notwithstanding that the figure of $760,000 referred to in the final orders made by his Honour is plainly not 80% of $1 million, it is explained by the fact that the worker had already been paid $50,000 by Esso in a claim made by him against it. Thus the $760,000 is the product of 80% of $1 million less the $50,000 ($950,000). The $50,000 which had already been paid by Esso, fell to be subtracted from the total amount assessed pursuant to the formula prescribed by sub-s.(3)(b) of s.138 because it was comprehended by what was called factor "C" of that formula.

68. On the hearing of these appeals, the Court was informed by counsel that there has been little consideration given by appellate courts to the proper construction of s.138 of the Act, which was introduced into the legislation in its present form by Act No. 50 of 1994. The history of the section and, more particularly, its predecessors was traced by this Court in Scott v. Bowyer [1998] 1 V.R. 207 at 220. On its face, the section appears to contemplate a comparison between two discrete amounts and the determination of the entitlement to indemnity in accordance with the lesser of those amounts. Thus, sub-s.(3)(a) calls for a calculation of amounts "paid or payable" by the employer or insurer pursuant to the Act "in respect of the injury". Sub-s.(3)(b) calls for a calculation of a notional sum of damages payable by a negligent third party to the worker at common law in respect of pecuniary and non pecuniary loss and adjusted by reference to the third party's responsibility for that loss. Although the section states that it is the "lesser" of these two amounts which constitutes the indemnity "which a third party is required to pay", his Honour's orders appear to reflect a "hybrid" of the two calculations; his first order being made under sub.s.(3)(a) to provide an indemnity in respect of compensation payments made under the Act to the date of trial; and the second order being made to accommodate the calculation under sub-s.(3)(b) in order to provide a "ceiling" beyond which indemnity in respect of future payments of compensation could not go. This was the manner in which his Honour was invited to construe s.138 and it was also the manner in which counsel, on this appeal, have invited us to construe the section. It was said - and I think with some justification - that to give s.138 any other construction would make it, for practical purposes, unworkable. Thus, it is said that the words "the amount of compensation paid or payable under this Act", where appearing in sub-s.(3)(a), should be read as meaning ""; and that they cannot reasonably contemplate an amount produced by a calculation of all future payments which might be payable to the worker pursuant to the Act. Further, it is said that sub-s.(3)(b) is to be construed as providing a "ceiling" to the indemnity contemplated by the section - a "ceiling" produced, as I have said, by the third party's notional liability at common law for pecuniary and non pecuniary loss, and then reduced in accordance with the third party's share of responsibility for that loss. Construed in this way, it is said, the court can identify, once and for all, an entitlement to indemnity against a negligent third party which will not exceed that party's proportionate responsibility for the worker's notional damages at common law for pecuniary and non pecuniary loss. If the notional damages at common law, assessed in accordance with sub-s.(3)(b), are less than the amounts of compensation already paid or accrued and payable, then the entitlement to indemnity contemplated by the section remains the amount so assessed. Thus, the formula calculation in every case governs the indemnity entitlement in employer or insurer and the liability of the negligent third party.

71. Whilst, for my own part, I have some difficulty in construing the section in the manner proposed, I am content to adopt it, first because the parties have requested us to do so for the purposes of disposing of these appeals and, secondly, because it appears to reflect the practice which has been adopted by courts which have constantly dealt with claims under s.138 of the Act. In this respect, I note that the judge in the Coats Paton case assessed the indemnity entitlement in the same manner.

74. As the appeal proceeded, it became clear that the only challenges which the appellant is making to the reasons and orders given and made by the judge in the Esso appeal are, in summary, as follows:

(a) that his Honour failed to give adequate reasons for the apportionment of liability between AFCO and Esso; thus leading to an apportionment which was plainly wrong;

(b) that, in calculating the amount produced by the application of the statutory formula prescribed by s.138(3)(b), his Honour erroneously included a sum for "damages in the nature of interest" or, alternatively, erroneously applied a penalty interest rate;

(c) that his Honour was in error in allowing interest, pursuant to s.60(1) of the Supreme Court Act 1986 on the sums which he ordered to be paid by Esso to the respondents, pursuant to s.138(3)(a), being amounts already paid as compensation to or on behalf of the worker (paragraphs 1 and 2 of his Honour's orders of 10 December 1998);.

(d) that, having allowed a sum for interest in calculating the notional amount in accordance with sub-s.(3)(b) of the section, his Honour - in allowing a further amount of interest on the sums awarded pursuant to sub-s.(3)(a) - was awarding "interest upon interest" contrary to s.60(2)(a) of the Supreme Court Act.

Although, amongst other things, the appellant asked us to set aside his Honour's order that F.A.I. was entitled to be indemnified by Esso in respect of all future payments of compensation made under the Act by F.A.I. to the worker, up to total limit of $760,000, it became apparent on the appeal that the appellant was merely claiming adjustments to the figures set out in that order which would necessarily be made should any of its grounds of appeal succeed.

80. In the Coats Paton appeal, the only issue was whether the judge who determined the action was in error in refusing to order interest under s.60(1) of the Supreme Court Act (the provisions of which apply to proceedings in the County Court by virtue of s.50 of the County Court Act 1958) in respect of amounts which he ordered the respondent to pay to the appellants pursuant to s.138(3)(a) of the Act. Because this issue will need to be determined by us in the Esso appeal, that determination will necessarily dispose of the Coats Paton appeal.

85. I turn now to the issue of the judge's apportionment of responsibility between Esso and AFCO. It was contended by the appellant's counsel that the judge has given manifestly inadequate reasons for his apportionment of 80:20 against the interests of the appellant and that the inadequacy of the reasons is reflected in the apportionment itself which, so it is submitted, can be seen to be manifestly erroneous. A reasonable apportionment of responsibility, it was contended, would have been 50:50.

88. In my opinion there is no substance in this ground. Granted that it is an incident of the judicial process that a judge should give reasons which are sufficiently adequate to enable it to be seen that justice has been done between the parties and to enable an appellate court to discern whether the decision is attended by error, it nevertheless remains true that the sufficiency of reasons will depend upon the circumstances of each case and the issues which fall to be determined (Sun Alliance Insurance Ltd. v. Massoud [1989] V.R.8 at 18-19 per Gray, J.). In this case the issue which fell to be determined by the judge was apportionment of blame between joint tort-feasors for the injury suffered by the worker. In reaching his conclusion his Honour recited the material facts upon which he found that Esso had fallen short of the standard of care which the law required of it as the occupier of the "rig", including the "bunkroom", and upon which he had found that AFCO had fallen short of the standard of care required of it as the worker's employer. The apportionment of blame between the two fell to be assessed by making a comparison of the significance of the respective departures from the relevant standards of care required. Such a comparison involves matters of relative emphasis, proportion and value judgment upon which reasonable minds might differ and which does not readily admit of articulation. As has been repeatedly said in this connection:

"A finding on a question of apportionment is a finding upon a question, not of principle or of positive findings of fact or law, but of proportion, of balance and relative emphasis, and of weighing different considerations. It involves an individual choice or discretion, as to which there may well be differences of opinion by different minds." (British Fame (Owners) v. Macgregor (Owners) [1943] A.C. 197 at 201 per Lord Wright.)

In citing this passage in Podreberserk v. Australian Iron & Steel Pty Ltd [1985] HCA 34; [1985] 59 A.L.J.R. 492 at 493-4, the High Court said:

"Such a finding, if made by a judge, is not lightly reviewed. The task of an appellant is even more difficult when the apportionment has been made by a jury."

For my own part, I am far from persuaded that his Honour's reasons for apportioning blame as he did are inadequate; nor am I persuaded that the apportionment which he made was erroneous. It is, I think, tolerably clear from his Honour's reasons that he regarded Esso as the person primarily responsible for the worker's injury because it was the occupier and person in control of the premises where the injury occurred, premises which were not as easily accessible to the employer for day to day inspection or observation of defects. His Honour noted, however, that the employer remained subject to its non-delegable duty not to expose its servants to unnecessary risk of injury in the performance of their tasks and, to that end, enjoyed the right to visit the premises and, if necessary, make recommendations if it believed that the safety of the worker was at risk. However, whilst these facts led his Honour, correctly in my view, to the conclusion that both the occupier and the employer were in breach of their respective duties to the worker, it is equally clear that they point unerringly to the conclusion to which his Honour came; that the person who had the immediate control of the rig, and the facilities within it, had by far the greater opportunity to rectify the defects which existed. The circumstances of this case are very different from those which existed in the case of Bourke v. Hassett [1998] VSCA 24; [1999] 1 V.R. 189 upon which counsel for the appellant sought to rely. I am not persuaded, for the reasons given, that his Honour was in error in making the apportionment which he did nor in the reasons which he gave for making such apportionment. I would, accordingly, reject this ground of appeal.

Award of Interest in applying the Formula under s.138(3)(b)

96. It was next contended by the appellant that the judge, in calculating the amount of the notional damages for pecuniary and non pecuniary loss in accordance with the formula stipulated in s.138(3)(b) of the Act, erroneously included in the calculation a notional amount of damages in the nature of interest. His Honour initially included a sum of $187,000 for this item over the objection of trial counsel for the appellant. Upon further argument, and in accordance with a concession made by respondents' trial counsel, his Honour, as I have said, adjusted this figure downwarded to $173,000 but, notwithstanding the adjustment, maintained his ultimate assessment of notional damages in the sum of $1 million . If his Honour was in error in including this figure in the assessment of the notional common law loss, the parties are agreed that the "ceiling" for the future indemnity entitlement in the respondents will be $277,795.22, and not the $421,795.22 stipulated in his Honour's order 3(b).

99. In my opinion, the appellant's counsel is correct in contending that the judge, in calculating the amount of notional damages for pecuniary and non pecuniary loss in accordance with the formula in s.138(3)(b), was in error in allowing as part of that loss an amount for damages in the nature of interest. The respondents' counsel contended before us that such an amount was properly included as part of the worker's notional pecuniary loss because it is an amount of damages which the worker would have been entitled to recover had he been permitted to bring an action at common law against the negligent third party, Esso. However, the formula in s.138(3)(b) for calculating the notional common law damages for pecuniary loss is confined to an amount which the negligent third party "would have been liable to pay in respect of the injury" and, in my view, damages in the nature of interest are not "pecuniary loss damages" paid "in respect of the injury". Rather interest is awarded under the Supreme Court Act for an entirely different purpose; namely for the plaintiff being held out of his entitlement to damages between the date of commencement of the action and the date of judgment. If it been intended that such loss should be taken into account in the calculation required by the sub-s.(3)(b), then no doubt the legislature would have said so. However, in my opinion, the structure of sub-s.(3) and the purpose for which the calculations are to be made - namely, the calculation of amounts representing the scope of an indemnity against payments of compensation paid or payable - would suggest that the inclusion of an amount for interest on notional damages is otiose to that structure and purpose. Counsel for the respondents submitted, I thought somewhat faintly, that although the inclusion of a sum for interest cannot be seen to be directly accommodated within the words of the sub-section, nevertheless the notional award of such a sum could be justified upon the basis that it is pecuniary loss which derives from other pecuniary loss payable in respect of an injury and thus is to be seen as indirect pecuniary loss payable in respect of the injury. For the reasons already stated, I reject that submission. The introduction of an interest component into the formula stipulated in Sub-s.(3)(b) would, in my view, introduce speculative factors foreign to the intent of the legislature; factors such as when the injured worker would have brought his proceedings and the length of time between commencement of proceedings and the date of judgment and/or settlement. The ground of appeal, in my opinion, is accordingly made out. If the other members of the Court agree that this ground should succeed, paragraph 3 of the orders made by his Honour on 10 December 1998 will need to be altered to substitute a figure of $277,795.22 for the figure of $421,795.22 contained in that order.

104. I now turn to the question of whether his Honour was correct to have awarded amounts of interest pursuant to s.60(1) of the Supreme Court Act on the sums of $116,226.22 and $219,000 which he ordered to be paid respectively to the first and second respondents in partial satisfaction of the indemnity entitlement which he found to exist. S.60(1) of the Supreme Court Act provides:

"The Court, on application in any proceeding for the recovery of debt or damages must, unless good cause is shown to the contrary, give damages in the nature of interest at such rate for the time being fixed under section 2 of the Penalty Interest Rates Act 1983 as it thinks fit from the commencement of the proceedings to the date of judgment over and above the debt or damages awarded."

His Honour awarded, as interest, a sum of $7,206.66 on the amount of $116,226.22 ordered to be paid to V.W.A., and a sum of $80,600.22 on the amount of $219,000 ordered to be paid to F.A.I. As I have already indicated, his Honour did so on the basis that the orders which he had made in favour of the respondent clearly fell within the words of s.60(1) - namely that the proceeding before him was one "for the recovery of debt or damages" and that those words were "of conspicuous breadth" and that the policy underlying the provision was "not to be readily deflected nor ... pared down in a restrictive fashion". In support of his decision that interest was payable, his Honour referred to and relied upon certain passages in the judgment of Gobbo, J. in Mario Piraino Pty Ltd v. Roads Corporation ([1991] 2 V.R. 534 at 536-7) and B.P. Exploration Co. (Libya) Ltd. v. Hunt (No.2), ((1983) 2 A.C. 352 at 373 per Lord Brandon of Oakbrook). His Honour was not "deflected" from the view to which he had come by the contrary decision of the trial judge in the Coats Paton case to which his Honour had been referred by counsel.

109. Senior counsel for the respondents in the Esso appeal submitted that his Honour was correct to have awarded interest pursuant to s.60(1) of the Supreme Court Act. It was submitted that, although the amounts ordered to be paid by his Honour could not be comprehended by the words "debt or sum certain" within the meaning of s.58 of the Supreme Court Act, the proceeding before his Honour was one for the "recovery of debt or damages" within the meaning of s.60(1) of the Act. It was contended that these words are, as his Honour concluded, words of sufficiently wide import to accommodate the sums which the respondent had claimed and which his Honour ordered to be paid pursuant to s.138(3)(a) of the Act. Counsel referred, in addition to the authorities upon which his Honour relied, to passages in the judgment of the High Court in Crisp & Gunn Co-operative Ltd. v. Hobart Corporation [1963] HCA 55; (1963) 110 C.L.R. 538 at 542-3, and to the decision of Lockhart, J. in Lumley Life Ltd. v. IOOF Friendly Society [1991] FCA 147; (1991) 100 A.L.R. 600 at 604-5. In his role as senior counsel for the appellants in the Coats Paton appeal, he relied upon the same arguments to support his contention that the trial judge in that case was in error in declining to award interest on the amounts which he ordered to be paid pursuant to s.138(3)(a) of the Act.

112. In the Esso appeal, counsel for the appellant submitted that the proceeding before the judge was not one "for the recovery of debt or damages", but rather was a claim to enforce an entitlement to indemnity created by statute which, on no view of the authorities, could be comprehended by the words "proceeding for recovery of debt or damages" as contained in s.60(1) of the Supreme Court Act. He contended that the orders made by his Honour to pay sums to the respondents were a necessary incident of the entitlement to indemnity which he had found to be established. They were neither a debt nor were they damages.

115. In my view, the appellant's submissions in respect of this issue are to be preferred. It must be steadily borne in mind what it is that s.138 seeks to achieve. In a statutory scheme calculated to benefit injured workers, and to spread the cost impact of doing so, the section confers upon the Authority, insurers and employers a statutory entitlement, exercisable at times to suit themselves, to be indemnified by negligent third parties against compensation which has been paid or is payable to injured workers up to, but not exceeding, a limit which, if not agreed, is to be established by the courts. If, when so assessed, it can be seen that the limit of the entitlement exceeds the amount or amounts of compensation so paid or payable, then the person entitled to the indemnity can call upon the negligent third party to pay such amounts to it in partial satisfaction of the entitlement. If, on the other hand, the amount so paid or payable to the injured worker exceeds the limit of the entitlement so established then the employer or insurer who has paid such benefits can only be indemnified up to that limit. So analysed it can be seen, in my opinion, that the statutory entitlement to indemnity conferred by the section is not to be equated with the concept of a right to recover debt or damages within the meaning of s.60 of the Supreme Court Act. The person who is seeking to enforce his entitlement is not bringing proceedings to recover "debt or damages". Rather he is enforcing a statutory right which is sui generis and which, if established, will have as one of its incidents a right to call for payments already made in partial satisfaction of those rights. The nature of the entitlement was, I think, accurately described by Murphy, J. in Borg Warner Australia Ltd. v. Zupan [1982] VicRp 44; [1982] V.R. 437 at 442 and by Menhennitt, J. in . ; at 349.

118. These, and other, authorities make it abundantly clear that the statutory right of indemnity conferred by the Act upon the person who has paid the compensation is not to be equated to the cause of action which the worker would, but for the Act, have had against the person liable to pay damages to him. This is so notwithstanding the fact that it is an ingredient of the statutory right, sought to be enforced, that the person from whom the indemnity is sought was liable to pay damages to the worker. The claim to enforce the entitlement to indemnity is not a claim in tort. It is a cause of action created by statute for an indemnity against a person liable to pay damages to another (Tuckwood v. Rotherham Corporation [1921] 1 K.B. 526 at 540 per Aitkin, L.J.). Nor is the action to enforce the right of indemnity to be confused with, or characterized as, a right to recover a debt or damages from the person liable to indemnify. In the Borg Warner case, supra, the Full Court was called upon to determine the effect of s.64 of the Workers Compensation Act 1926 (N.S.W.) which provided a right of indemnity in terms similar to those contained in s.62 of the Workers Compensation Act 1958 (Vic.) - the statutory predecessor of s.138. In discussing the nature and effect of the right to indemnity provided by s.64, Murphy, J. (with whose reasons Starke, J. agreed) said (at 442):

"Certainly the effect of s.64 of the N.S.W. Act is not to render the third party liable to indemnify [the employer] for a statutory tort, making him liable in damages to the person paying compensation, such damages being limited to the amount of the compensation paid."

Likewise, in Philip Morris Ltd. v. Ainley, supra, Menhennitt, J. considered the nature of the right to indemnity conferred by the former s.62(1) of the Workers Compensation Act 1958 (Vic.) and, in particular, whether it was an action "in contract or tort" for the purposes of the applicable costs rule. His Honour said (349):

"The fact that the right being enforced is the creature of statute need not produce the result that the action is not one of tort. However the cause of action appears to me to have none of the elements of a common law cause of action in the definitions to which I have referred. It is not a common law action for unliquidated damages within the definition of Salmond on Torts. Nor is it a civil right of action available under the English common law for the recovery of unliquidated damages within the definition in Halsbury ... . In essence, the action is one to enforce a statutory right by a statutory cause of action. This is made clear by the section itself."

It can be accepted that the authorities relied upon by the judge and by counsel for the respondents establish that the words in s.60 of the Supreme Court Act are, in appropriate cases, to be given a broad meaning and to comprehend claims for recovery of damages or compensation in a far wider field than actions to recover damages in tort or contract. But in each of those cases it could be seen with some clarity, in my opinion, that the proceeding was one for the recovery of debt or damages. Thus, in the Mario Piraino case, supra, interest was held to be payable pursuant to s.60(1) of the Supreme Court Act upon compensation claimed and awarded, pursuant to the Planning and Environment Act 1987, for loss suffered as a consequence of land being reserved for a public purpose. The judge rejected the argument that "damages" in s.60 should be confined to compensation for a wrong that is either a tort or breach of contract. In the B.P. Exploration Co. (Libya) case, supra, the House of Lords concluded that interest was payable, pursuant to the English equivalent of s.60, upon sums recovered by an injured party to a contract pursuant to the Law Reform (Frustrated Contracts) Act 1943. Each case was, and in my opinion can be seen to be, discretely different from a claim for the statutory indemnity conferred by s.138 of the Act. Likewise, the cases of -, supra, and , supra, upon which the respondents relied before us, do not support the contention that the claim for the statutory indemnity is a "proceeding for the recovery of debt or damages". Each was concerned with the question whether the action in question was an action to "recover debt or damages" sufficient to support a payment into court within the meaning of the relevant rules. In each case, the court was able, and in my view entitled, to conclude that the action in respect of which the "payment in" was made was one "to recover debt or damages". However, and for the reasons which I have given, a claim under s.138 of the Act to establish an entitlement to indemnity can, in no way, be distorted into such a proceeding. To award interest on sums ordered to be paid in partial satisfaction of an indemnity entitlement will simply, as it has in the Esso case, distort the nature and extent of the right conferred by s.138.

125. Having regard to the nature of the right conferred by s.138, it is perhaps not surprising that counsel have not been able to refer us to any authority supporting the contention that it is a right which attracts an award of interest pursuant to s.60. Indeed, the scheme contained in the Act itself suggests, in my view, that it is not contemplated that such interest should be paid. There are a number of sections in the Act, to which we were referred by counsel, which specifically confer a right to recover "interest as prescribed" on sums claimed. The Act defines "interest as prescribed" in much the same way as does s.60. Not surprisingly no such right is attached to claims to establish indemnity entitlements pursuant to s.138.

128. I am, accordingly, of the view that his Honour, in the Esso appeal, was in error in awarding interest on the sums which he ordered to be paid pursuant to s.138(3)(a); and that the judge in the Coats Paton appeal was correct in declining to do. Having reached this conclusion, it is unnecessary for me to consider the further arguments of the appellant that his Honour was in error in awarding interest at the rates which he did or whether, in the light of his assessment of notional damages, his order amounted to an award of compound interest, contrary to s.60(2)(a) of the Supreme Court Act.

131. For these reasons I would allow the appeal in the Esso case to the extent of reducing the limit of the indemnity in the manner which I have proposed and by further setting aside his Honour's award of interest on the sums ordered to be paid pursuant to sub-s.(3)(a). I would dismiss the appeal in the Coats Paton case.

143. The formal order of the court in the appeal of Esso Australia v. Victorian Workcover Authority & Anor will be:

Orders 1, 2 and 3 made by his Honour below are set aside and in lieu thereof the following orders are to be substituted:

(1) that the defendant pay to the firstnamed plaintiff the sum of $116,226.22;

(2) that the defendant pay to the secondnamed plaintiff the sum of $219,000;

(3) that the secondnamed plaintiff be entitled to be indemnified by the defendant:

(a) for all further payments of compensation made under the Accident Compensation Act 1985 by the secondnamed plaintiff to the worker, Mr Kazimer Wsol, in respect of the injury caused to him on 10 January 1989; and

(b) up to an amount not exceeding a further sum of $277,795.

156. In the matter of the appeal of Victorian Workcover Authority & Ors v. Coats Paton Pty Ltd, that appeal will be dismissed with costs.

162. In the Esso appeal we will order that the appellant's costs of the appeal be paid by the respondents.

165. We will grant an indemnity certificate pursuant to the Appeal Costs Act to the respondents.