How should the matter be resolved?
38 As already observed, the effect of Nigel Watts and Multiplex is that the GIO policy does not respond to any damages otherwise payable to the plaintiff which are paid by Heyday to or on behalf of Baulderstone in discharge of Heyday's contractual indemnity under its sub-contract with Baulderstone.
39 Notwithstanding the foregoing, in Multiplex (at [45]) it was suggested during the course of argument on that appeal that there was a basis on which the appeal could succeed on the indemnity issue, namely, that Fugen became liable to pay Mr Irving, independently of the 1987 Act, the full amount of the verdict ordered against Multiplex (because Fugen was a joint and several concurrent tortfeasor in respect of the damages Multiplex was ordered to pay Mr Irving). Therefore, as Fugen became liable to Mr Irving for all the damages awarded to him, Royal was obliged to indemnify Fugen against the full amount of the verdict.
40 Transposing that argument to the present case, it suggests that as Heyday became liable to pay to the plaintiff, independently of the 1987 Act, the full amount of the verdict ordered against it, GIO is obliged to indemnify Heyday against that liability. It might also be contended that the position of Heyday is stronger than that of Fugen as both Heyday and Baulderstone were sued to judgment by the plaintiff whereas only Multiplex was sued by Mr Irving.
41 In Multiplex, Royal submitted in response to this argument that it was not obliged to indemnify Fugen against the full amount of Mr Irving's damages because the expression "becomes liable" in clause 3(b) of the Royal policy (which was in the same terms as the GIO policy) means becomes liable "when the liability of the insured is established in the sense of being crystallised by settlement, arbitration or verdict" and the liability of Fugen was never crystallised in this way. Of course, in the present case, it was. Ipp JA rejected this construction of the words "becomes liable". His Honour considered (at [59]) that the policy responded to claims for compensation at the time of injury to the worker with the consequence that the phrase "becomes liable" in clause 3(a) and, therefore, in 3(b), must mean liable when the injury to the worker occurs, that being when the liability of the employer to the worker accrues.
42 Accordingly, his Honour considered that subject to what follows, Fugen did become liable to pay Mr Irving the full amount of the verdict ordered against Multiplex notwithstanding that Fugen's liability had never crystallised in a verdict against it. The present case, it might be said, is a fortiori in that Heyday's liability to the plaintiff did crystallise in the judgment entered against it for the full amount of the modified common law damages to which the plaintiff was assessed to be entitled to recover from his employer.
43 Nevertheless, Ipp JA considered (at [69]-[70]) that there was a fallacy in the argument that required its rejection. That fallacy lay in the omission to have proper regard to the rule that an indemnity, in the context of insurance, is a promise by one party to keep the other harmless against loss or a promise to make good the loss suffered by another. As his Honour said:
"…for an insured to be entitled to require the insurer to implement an indemnity, the insured must be susceptible to a relevant loss."
44 His Honour accepted that Fugen as a joint and concurrent tortfeasor was liable to Mr Irving for 100% of his damages. However, the following additional matters needed to be taken into account:
· Mr Irving had obtained judgment against Multiplex for the full amount of his damages which debt Multiplex had discharged;
· Multiplex was held entitled to be indemnified by Fugen in respect of the full judgment sum by reason of the contract between it and Fugen;
· Royal had indemnified Fugen in respect of 50% of the amount which Fugen was required to indemnify Multiplex;
· Royal did so as that 50% represented the full amount for which Fugen was liable to Mr Irving at common law as a joint and concurrent tortfeasor;
· The remaining 50% claimed by Fugen from Royal was not in respect of Fugen's liability at common law but in respect of its liability under the contractual indemnity.
45 Accordingly, Ipp JA considered that Fugen was no longer liable to Mr Irving for any amount owing in respect of his common law negligence. This being so, the 50% for which Fugen claimed indemnity from Royal (which had not been paid) constituted Fugen's loss arising from its contractual obligation to Multiplex and which Nigel Watts precluded Fugen from recovering.
46 The present case might be said to be distinguishable from Multiplex in a number of respects. Firstly, as I have already observed, Heyday "bec[a]me liable" to pay damages in the amount of the judgment entered against it for the plaintiff's injury within the meaning of clause 3(b) of the GIO policy. Secondly, the plaintiff is entitled to recover the full amount of that judgment irrespective of Heyday's contractual obligation to Baulderstone to indemnify it against so much of that judgment as was apportioned to Baulderstone's responsibility therefor. Thirdly, on the basis of the facts before the primary judge and at the time judgment was entered, obviously Baulderstone had not discharged the judgment against it.
47 Accordingly, so the argument runs, Heyday is susceptible to a demand by the plaintiff for payment of the full amount of the judgment debt entered against it which represents its liability for common law negligence in respect of which clause 3(b) of the GIO policy provides cover. In these circumstances, consistency with the principles expounded in Multiplex requires that Heyday be indemnified by GIO for the full amount of its judgment debt.
48 Acceptance of the foregoing argument involves acceptance of Gordian's submissions, which I have summarised in [32] above. It assumes that the total amount for which judgment has been entered in favour of the plaintiff against Heyday represents the latter's common law liability to the plaintiff arising out of his employment or, to adopt the expression employed by Kirby P in Nigel Watts (see [23] above), it represents Heyday's common law liability to the plaintiff "qua worker".
49 However, in my opinion there is a fallacy in this argument of the nature of that identified by Ipp JA in Multiplex. Although the plaintiff is entitled to recover the whole of the judgment sum entered against Heyday, the true extent of its common law liability as a joint or concurrent tortfeasor with Baulderstone is only in respect of 35% of that sum. In other words, Heyday's common law liability to the plaintiff arising out of the latter's employment or qua the plaintiff as an employee, extends only to 35% of the judgment sum.
50 In Multiplex, Fugen and Multiplex had been found by the trial judge to be each responsible for 50% of Mr Irving's damages. As I have already noted, Ipp JA (at [70]) considered that as the policy was one of indemnity, Royal's promise to indemnify Fugen extended only to any loss it suffered or to which it was susceptible.
51 The only loss to which Fugen, as a joint or concurrent tortfeasor with Multiplex, was susceptible to Mr Irving was as to the 50% of Mr Irving's damages for which it had been found responsible. That was the extent of its common law liability in its capacity as an employer "qua worker". It was not liable to pay the other 50% because that was the responsibility of Multiplex although the latter could claim indemnity against Fugen for that share of its liability to Mr Irving because of the contractual indemnity in the sub-contracts cf Mulitplex per Santow JA at [8], [10], [17] and [21].
52 But as Ipp JA pointed out (at [74]-[75]), that 50% had no connection with any common law liability of Fugen to Mr Irving as a joint or concurrent tortfeasor. Any claim by Fugen on Royal with respect to that 50% arose solely from its contractual liability to Multiplex under the sub-contract.
53 There is no reason in principle why the above reasoning should not be applied to the present case. Heyday has been found liable to the plaintiff for $902,744.65 but is only responsible for 35% of that sum. GIO is liable to indemnify Heyday with respect thereto. To the extent that Heyday may pay the plaintiff the balance of 65% for which Baulderstone is responsible, it would be doing so not as a consequence of its common law liability to the plaintiff qua worker, but as a consequence of its contractual obligation to Baulderstone under the sub-contract. The GIO policy does not respond to that obligation.
54 The foregoing analysis does not depend on the whim of the worker as to whom he or she sues. It matters not that the worker sues both tortfeasors as in the present case or only the non-employer tortfeasor as in Multiplex. It matters not that the worker obtains a judgment for the full amount of his damages against whomever he sues or even that he enforces that judgment against only one of joint defendants. Where there is an employer as well as a non-employer tortfeasor, the only common law liability of the former to the worker is the share of the worker's modified common law damages for which the employer has been found to be responsible. That is the only loss which it has sustained and for which it has ultimately, in an employment context, "become liable" to pay for any injury to the worker within the meaning of clause 3(b) of the GIO policy. It has not "become liable" to pay the share of the non-employer tortfeasor: that is the responsibility of that party.
55 Although at one point I was concerned with the prospect of a worker suing a non-employer joint tortfeasor, obtaining judgment but then being unable to recover it due to that tortfeasor being either insolvent or uninsured, on reflection I can see no reason in principle why the employer's insurer, even absent any contractual indemnity between the tortfeasors, should be required to cover the liability to the worker of a non-employer tortfeasor merely because that tortfeasor is unable to pay its share of the judgment debt entered against it. The mere fact that the worker is entitled to enforce the judgment in the full amount against each of the employer and non-employer tortfeasors (where both are sued) cannot be allowed to extend the insurer's liability beyond that which, on its true construction, the policy is intended to cover, namely, the common law liability of the employer qua employer only.
56 For reasons to which I have already adverted, clause 3(b) of the GIO policy extends only to, firstly, the liability of the employer tortfeasor and, secondly, that employer's common law liability to the worker "qua worker". It cannot be made to extend to a non-employer's liability arising out of its own negligence unconnected with the worker's employment.
57 Furthermore, it must be kept in mind that the employer is only liable to pay capped or modified common law damages under the 1987 Act, whereas the non-employer tortfeasor is subject to no such constraint on the damages payable by it subject only to any reduction effected by the application of s 151Z(2)(c) of that Act. Where the worker is entitled to take proceedings to recover damages from both employer and non-employer joint tortfeasors but only takes action against the latter (as in Multiplex), then the effect of s 151Z(2)(d) is to require determination of the contribution which the non-employer tortfeasor would be entitled to recover from the employer tortfeasor otherwise than under the 1987 Act.
58 Accordingly, whether or not cross-claims are filed, s 151Z(2) requires a determination of the contribution which the employer qua employer is required to make pursuant to s 5 of the Law Reform Act. In such circumstances, the determination of the employer's share of the responsibility for the worker's damages is, inter alia, based upon a comparison of the culpability of each tortfeasor, that is, upon the degree of departure from the standard of care of the reasonable employer as distinct from, in the present context, that of the reasonable construction site occupier and contractor.
59 The foregoing considerations bear upon the correctness of the argument in Multiplex referred to in [39] above. The assumption there adopted was that Fugen became liable to pay Mr Irving (its employee) the full amount of the verdict ordered against Multiplex as Fugen was a joint tortfeasor in respect of the damages Multiplex was ordered to pay. Only Multiplex had been sued by Mr Irving and, as noted in [22] above, had been ordered to pay Mr Irving damages in the sum of $504,003.
60 Ipp JA (at [46]) referred to the obligation of Fugen to pay the full amount of the verdict ordered against Multiplex in these terms:
"Royal, rightly, did not dispute that Fugen and Multiplex, by their separate and independent acts, caused one and the same damage to Mr Irving. They were, accordingly, joint or concurrent tortfeasors and, when Mr Irving sustained his injury, each became severally liable for the whole of the damage caused to him: Barisic v Devenport (1978) 2 NSWLR 111 (at 140). Had Mr Irving sued both Multiplex and Fugen he would have been entitled to a joint judgment against both for the full amount of his damages. Had he sued each in two separate actions he would have been entitled to separate judgments against each for the full amount of his damages. In those circumstances the rights of Multiplex and Fugen as between themselves would have had to be determined by verdicts against each other: Speirs v Caledonian Collieries (1957) 57 SR (NSW) 483 (at 511)."
61 However, the damages assessed against Multiplex were not constrained or capped as they would have been if assessed against Fugen under Division 3, Part 5 of the 1987 Act. Although it is true that Barisic v Devenport is authority for the proposition that damages assessed against joint and several tortfeasors must be for the same amount because they are liable to compensate for the same damage and, therefore, judgment is given in solidum against both, this principle must give way to any statutory provision to the contrary.
62 The 1987 Act contains such provisions. As I have noted in [57] above, damages are required to be assessed separately and differently with respect to employer and non-employer tortfeasors, it being apparent that (subject to questions of jurisdictional limits such as in the present case but which do not, in my opinion, alter the operation of the principle) the damages assessed against the employer will be less than those assessed against the non-employer.
63 Accordingly, with respect I do not believe it was correct to argue in Multiplex that Fugen was liable to pay Mr Irving the full amount of the verdict ordered against Multiplex. On the contrary, Fugen was not liable to pay Mr Irving anything. It was, however, liable pursuant to s 151Z(2)(d) of the 1987 Act to pay Multiplex contribution as a joint tortfeasor in an amount to be determined as if the whole of the damages were assessed as modified common law damages in accordance with Division 3 of Part 5 of that Act.
64 Accordingly, the result ultimately arrived at in Multiplex, namely, that Fugen was only entitled to claim indemnity from Royal for 50% of the verdict ordered against Multiplex could (and should in my respectful opinion) have been determined upon the basis that as a consequence of s 151Z(2)(d) of the 1987 Act, Multiplex was only entitled (but for the contractual indemnity) to recover from Fugen as a joint tortfeasor the amount of the contribution for which Fugen would be held to be responsible under s 5(1)(c) of the Law Reform Act. The amount so recoverable was required to be determined as if the whole of the damages which Mr Irving was entitled to recover against Fugen, were assessed in accordance with the provisions of Division 3 of Part 5 of the 1987 Act.
65 The position is no different where, as in the present case, the injured worker sues both the employer and non-employer joint tortfeasors. Although separate judgments are entered against each tortfeasor for damages assessed on different principles, it is the apportionment of responsibility pursuant to s 5(1)(c) of the Law Reform Act which determines the amount which the employer tortfeasor "becomes liable to pay…for any injury to" the plaintiff worker within the meaning of clause 3(b) of the GIO policy.
66 The impact of the 1989 amendments to the 1987 Act was described by Allen J in Leonard v Smith (1992) 27 NSWLR 5 at 8 in these terms:
"The new approach, in such a case, which underlies the relevant provisions of the Workers Compensation Act 1987, is that the damages recoverable by the plaintiff are to be assessed as if the plaintiff has joined the employer tortfeasor as one of the defendants (whether or not he has done so) and that the total of the damages recoverable is derived by ascertaining the percentage of the responsibility for the accident of each of the individual tortfeasors sued (including the employer) and calculating what that percentage yields of the amount of the damages which would have been recoverable by the plaintiff from that individual tortfeasor if the plaintiff had sued him alone. The damages recoverable by the plaintiff is the total of the figures so calculated. In other words the plaintiff's right is treated not as a right to recover the full amount of damages from whichever tortfeasor (or tortfeasors) he chooses to sue but as if his right is to recover damages from each of the individual tortfeasors sued (including the employer) in accordance with the degree of the responsibility of that tortfeasor for the accident applied to the amount of the damages for which that tortfeasor would be liable to the plaintiff if he alone had been responsible for the accident."