Consideration
14 The LR Act was enacted following a report of the New South Wales Law Reform Committee. In addressing consequences of the proposed reform as to contributory negligence, the Committee was of the view that it was "just and equitable" that the repayment by the worker to the employer under s 64(a) of the 1926 Act should be reduced in proportion to the diminution of the worker's damages by reason of contributory negligence, and that a worker suing an employer should not be in a different position from a worker injured by a third party on the way home from work and the compensation to be taken in satisfaction of the damages under s 63(5) should also be proportionately reduced. It is evident that the legislature adopted these views.
15 Although in recommending the reform the Committee considered that it would facilitate settlements, the report did not go into whether or how the consequences should apply in the case of a settlement.
16 The words of the original LR Act, however, were against proportionate reduction where there was a settlement. The reductions in provisos (c) and (d) to s 10(1) were "to the same extent as the damages recoverable by him". The measure chosen was directly referable to the reduction in the body of s 10(1), that "the damages recoverable … should be reduced to such extent as the court thinks just and equitable … ". This required a determination by the court, which the definition in s 9 said meant the court by or before whom the claim fell to be determined; the claim was plainly enough the worker's claim in respect of the worker's damage. That is, the consequential reductions were tied to the objective fact of the court-determined reduction. Section 10(2) ensured that the fact was ascertainable, by requiring that the total damages which would otherwise have been recoverable be recorded.
17 The words of the current LR Act are a little different, but to the same effect. The reductions are now "to the same extent as the damages recoverable by the claimant are reduced under s 9". It is difficult to read "under section 9" as meaning "by reason of the existence of s 9" rather than "in accordance with s 9", as the respondent submitted, when s 9(1)(b) prescribes not just what shall happen (reduction to a just and equitable extent) but who determines what shall happen (reduction to such extent as the court thinks just and equitable). It remains that the consequential reductions are tied to the objective fact of the court-determined reduction, ascertainable through the recording required by s 11.
18 If this is not the correct construction of the LR Act, it must be asked how else a measure of the consequential reductions can be found where there is a settlement.
19 A settlement is ordinarily a compromise between the parties according to their assessments of the likely outcome of the worker's claim. In the assessments, perceived factual and legal difficulties for one or the other of the parties, or for both, play a part, although with differing perceptions. The perceived difficulties will commonly go beyond any question of contributory negligence, to core questions of liability and the extent of damages recoverable; a compromise will not often turn on contributory negligence, but will involve other considerations also, and there will be a compromise because the parties come to divergent global assessments of all the considerations.
20 It will as a rule not be possible to ascertain the reduction for contributory negligence in fact made in the settlement. First, contributory negligence will be one amongst a number of undifferentiated considerations. Secondly, there will not be common ground as to the significance of that consideration, perhaps even that it is a consideration. In the nature of a settlement, the actual reduction in the worker's damages by reason of s 9 of the LR Act will seldom be articulated; at best, there will be competing assertions and a final compromised amount.
21 A purported agreement upon the extent of a just and equitable reduction, as part of the settlement, would bring its own difficulties. In coming to a compromise with the wrongdoer, the worker will be concerned to deny or minimise contributory negligence. The amount of the credit to an employer wrongdoer in the assessment of damages will no doubt be part of the compromise, but for repayment to the employer out of damages recovered from a third party wrongdoer the worker will be concerned to admit and maximise contributory negligence. A purported agreement could be viewed by the third party with some suspicion; it would not readily be imposed on the third party.
22 For these reasons, the reduction in fact made in the settlement could not be a satisfactory measure of the consequential reductions. The alternative is finding what reduction would have been made if the court had been called upon to determine it.
23 How will that arise? Under the 1926 Act, reduction in the credit to the employer would arise in a dispute over satisfaction of the judgment or later in a dispute over the defence to the proceedings. The current LR Act makes no provision for consequential reduction, so it will not arise. Recovery by the employer under s 64(a) of the 1926 Act was, and under s 151Z(1)(b) of the 1987 Act will be, by proceedings brought against the worker to enforce the statutory liability to repay, and reduction in the recovery will arise in that satellite litigation.
24 A trial within a trial could be held in the satellite litigation - indeed, s 151Z(2) requires a trial within a trial of the damages which the worker could have recovered from the employer, in order to arrive at a reduction in the worker's damages. But such a trial may come to be held long after the occurrence of the wrong, and when it comes to be held the worker's concern will have changed to admission and maximisation of contributory negligence. The realities of litigation can not be ignored, and this is not a satisfactory situation.
25 Of more importance in the construction of the LR Act, it does not fit within its terms. Even if "under section 9" in s 10(2) be taken as meaning "by reason of the existence of section 9", the reduction found in the later trial is not to such extent as the court hearing the worker's claim thought just and equitable. It is to such extent as the court hearing the later trial finds that court hearing the worker's claim might have thought just and equitable, or at most would probably have thought just and equitable. To borrow from another legal domain, what the court hearing the worker's claim would have done is a past hypothetical, in the assessment of damages found according to the degree of probabilities or possibilities: Malec v J C Hutton Pty Ltd (1990) 169 CLR 638; Sellers v Adelaide Petroleum NL (1994) 179 CLR 332. The past hypothetical extent is not "the same extent of reduction as the damages recoverable by the claimed are reduced under section 9" (emphasis added).
26 I accept that the legislature should be taken to have been aware that most worker's claims, including those in which there is a question of contributory negligence, are resolved by settlement rather than by court decision. Section 151Z(5) is a recognition of settlements. That gives particular point to the respondent's submission that, where there is a question of contributory negligence, the worker who settles should not be disadvantaged by greater recovery to the employer from the worker's damages. The respondent submitted that the means of resolution should not matter, and that settlement should be encouraged rather than discouraged.
27 Too much, however, should not be made of the disadvantage to the worker who settles, or of encouraging settlement.
28 When contributory negligence defeated the worker's claim, if contributory negligence was alleged the prospect of it being established came into the assessments of the likely outcome of the worker's claim. The worker's damages as arrived at in the settlement might for that reason have been less than those recoverable if the worker had successfully litigated the claim, but less damages or any particular lessening of damages was but part of the overall assessments. That the worker had to repay the full amount of the workers compensation benefits out of the damages had to be taken into account in the worker's decision to accept the amount of the settlement.
29 So also in a settlement now that contributory negligence brings reduction in the worker's damages. If contributory negligence was alleged, the prospect of it being established and the extent of the reduction in damages came into the assessments of the likely outcome of the worker's claim, typically together with other considerations. Reduction or any particular reduction was but part of the overall assessments. It is incorrect to start from the proposition that there was contributory negligence and so there should be reduced repayment of the workers compensation benefits, or any particular extent of reduction, on account of contributory negligence. In the absence of such a starting-point, full recovery to the employer must be factored into the settlement, according to each party's perception.
30 No doubt in some cases contributory negligence will be apparent, the dispute being over its extent. Accepting that full recovery to the employer where there is a settlement may be a disincentive to settlement, there must be weighed against the good of more settlements the bad of more litigation when it is later necessary to find what reduction for contributory negligence would have been made if the court had been called upon to determine it. It is by no means clear that the balance favours the respondent's submission.
31 The legislative will must be found in construction of the LR Act. I respectfully do not see in "recoverable" in ss 9(1)(b) and 10(2) of the LR Act the importance found by Hodgson JA, whose reasons I have also benefited from reading in draft. It is not just a matter of reduction of recoverable damages, but also of the measure of the reduction. The measure is the court's determination, which I have no difficulty in extending to redetermination on appeal, the redetermination being substituted as the court's determination. The legislation favours certainty: there is either full credit or recovery, or a reduction in the credit or recovery ascertained from the court-determined (and recorded) reduction.