Gordian Runoff Ltd v Heyday Group Pty Ltd

District Court Act 1973 (NSW) Law Reform (Miscellaneous Provisions) Act 1946 (NSW) LEGISLATION CITED: Queensland Workers Compensation Acts,1916 to 1966 (Qld) Workers Compensation Act 1987(NSW)

Barisic v Devenport (1978) 2 NSWLR 111 Grljak v Trivan Pty Ltd, 19 April 1996 (unreported) Leonard v Smith (1992) 27 NSWLR 5 Multiplex Constructions Pty Limited v Irving & Ors; Fugen Holdings Pty Limited v Irving & Ors [2004] NSWCA 346 CASES CITED: New South Wales v Kennelly (No 2) [2001] NSWCA 472 Nigel Watts Fashion Agencies Pty Limited v GIO General Limited (1995) 8 ANZ Insurance Cases 61-235 Speirs v Caledonian Collieries (1957) 57 SR (NSW) 483 State Government Insurance Office (Queensland) v Brisbane Stevedoring Pty Limited (1969) 123 CLR 228 The Workers Compensation Board of Queensland v Technical Products Pty Limited (1988) 165 CLR 642

Gordian Runoff Ltd Heyday Group Pty Ltd PARTIES: Baulderstone Hornibrook Pty Ltd GIO Workers Compensation (NSW) Pty Ltd Steven John Garrard

A: J M McIntyre SC 1R: No appearance COUNSEL: 2R: J Sexton SC 3R: L King SC / J Kernick 4R: No appearance

A: Ebsworth & Ebsworth SOLICITORS: R: Stephen Crofton & Uniacke

IN THE SUPREME COURT OF NEW SOUTH WALES COURT OF APPEAL CA 40335/04 DC 12469/01

BEAZLEY JA SANTOW JA TOBIAS JA

Friday 25 February 2005 GORDIAN RUNOFF LIMITED v HEYDAY GROUP PTY LIMITED & ORS

W sued H, his employer, and B, an occupier and controller of premises where W was injured, for breach of a common law duty of care. H were subcontractors engaged by B. Their contract provided that H would indemnify B for any loss, claim or proceedings in respect of the personal injury of an employee of H (the contractual indemnity). H had a GIO workers compensation insurance policy which covered H's common law liability (but not the contractual indemnity). H also had a construction works legal liability policy with G. This policy excluded liability for bodily injury to any employee of H, occurring in the course of employment, for which there existed prescribed workers compensation insurance (ie the GIO insurance).

The primary judge found in favour of W. Under the Workers Compensation Act 1987 (NSW) W became entitled to separate judgments against H and B for the full amount of the damages. Between H and B the judge apportioned 65% of the responsibility to B and 35% to H. His honour also found that GIO's policy only covered H for liability arising under the Act (35%). H's obligations arising under the contractual indemnity were found to have been responded to by G's policy.

G appealed from this order arguing that W's judgment against H created a liability to which the GIO policy should fully respond. G also argued that clause 5 of the GIO policy, which provided that GIO was "directly liable to any Worker … to pay the compensation under the Act or other amount independently of the Act for which [H] is liable and indemnified under this policy" enabled the court to give a broader construction to clause 3 (which provided that H would be indemnified for "compensation that [H] becomes liable to pay under that Act due or in respect of any person who is a worker of the employer"). As a result clause 3 ought to respond to the whole judgment against H notwithstanding the fact that a third party non-employer tortfeasor had been found liable for a portion of the judgment. This construction was said to avoid the consequences of an insolvent and/or uninsured non-employer tortfeasor.

Held: (per Tobias JA, with Beazley and Santow JJA agreeing) (1) H's common law liability to W, arising out of W's employment with H (ie to W "qua worker") extends only to 35% of the judgment sum notwithstanding the fact that W is entitled to recover the entire judgment sum entered against H (which represents 100% of the damages). As H is only responsible for 35% of the judgment sum, GIO is only liable to indemnify H with respect thereto.

Nigel Watts Fashion Agencies Pty Limited v GIO General Limited (1995) 8 ANZ Insurance Cases 61-235; Multiplex Constructions Pty Limited v Irving & Ors; Fugen Holdings Pty Limited v Irving & Ors [2004] NSWCA 346, applied.

(2) Where there is an employer and a non-employer tortfeasor (regardless of whether both or only one tortfeasor is sued by the worker), the only common law liability of the employer is its share of the worker's modified common law damages for which the employer is responsible. This is the only loss for which the employer has 'become liable' (to adopt the words of the GIO policy) in an employment context. There is no reason in principle why an employer's insurer 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 entered against it. The fact that the employee is entitled to enforce the judgment in the full amount against each tortfeasor cannot extend the insurer's liability beyond that covered by the policy.

(3) Even if a worker does not take action against a non-employer tortfeasor, s 151Z(2) of the Act requires a determination of the contribution which the employer qua employer is required to make pursuant to s 5 of the Law Reform (Miscellaneous Provisions) Act 1946 (NSW). The non-employer's damages, however, are modified as the employer's are under the Part 5, Division 3 of the Act. Notwithstanding the fact that separate judgments are entered against joint tortfeasors, what determines, under the employer's workers compensation insurance policy, the amount the employer tortfeasor 'becomes liable' to pay for injury to the worker is the apportionment of responsibility pursuant to s 5(1)(c) of the Law Reform (Miscellaneous Provisions) Act 1946 (NSW).

IN THE SUPREME COURT OF NEW SOUTH WALES COURT OF APPEAL CA 40335/04 DC 12469/01

BEAZLEY JA SANTOW JA TOBIAS JA

Friday 25 February 2005 GORDIAN RUNOFF LIMITED v HEYDAY GROUP PTY LIMITED & ORS Judgment 1 BEAZLEY JA: I agree with Tobias JA. 2 SANTOW JA: I agree with Tobias JA. 3 TOBIAS JA: On 20 July 1999 the fourth respondent (the plaintiff) sustained injury when he fell at a construction site occupied and controlled by the second respondent (Baulderstone) and whilst in the employ of the first respondent (Heyday). Heyday was a subcontractor engaged by Baulderstone. 4 The plaintiff instituted proceedings in the District Court of New South Wales against both Heyday and Baulderstone claiming damages for breach by each of its common law duty of care as well as certain statutory duties. The primary judge, McLoughlin DCJ, found for the plaintiff against both defendants. Although not immediately apparent from his Honour's judgment, it is common ground that he assessed the plaintiff's damages against Heyday in the sum of $900,853.04 (later increased by agreement to $902,744.64) and against Baulderstone in the sum of $1,086,277.79 (later increased by agreement to $1,088,169.30). 5 A Minute of Judgment dated 3 December 2003 was prepared by the parties which purported to give effect to his Honour's judgment. Pursuant to its terms, it was ordered that there be judgment for the plaintiff against Heyday in the sum of $196,336.79 and against Baulderstone in the sum of $700,932.85. 6 Subject to the matter referred to in the next paragraph, it was agreed at the hearing of the appeal that the plaintiff was in fact entitled to the entry of judgment against Heyday in the sum of $902,744.64 and against Baulderstone in the sum of $789,563.20. The plaintiff's judgment against Baulderstone is less than the amount of damages assessed by his Honour because of the jurisdictional limit of the District Court of $750,000 together with interest. Although a memorandum of consent to that court having unlimited jurisdiction may be signed and filed pursuant to s 51 of the District Court Act, for some inexplicable reason this did not occur. 7 At the commencement of the hearing before this Court, the third respondent, GIO Workers Compensation (NSW) Pty Limited (GIO), submitted that the damages assessed by his Honour against Heyday were also limited by the jurisdictional limit of the District Court and foreshadowed that it would seek the Court's leave to file a cross-appeal to have any judgment against Heyday reduced from $902,744.64 to $789,563.20. However, as the plaintiff had not had an opportunity to consider his position with respect to any such application, it was stood over for further directions on the publication of the Court's judgment on the substantive issues in the appeal. 8 A number of cross-claims were filed in the proceedings. One was filed by Heyday against GIO claiming indemnity with respect to the plaintiff's claim pursuant to a policy of workers compensation issued by GIO, No. WC320400 (the GIO policy). Another was filed by Heyday against the appellant, Gordian Runoff Limited (Gordian), claiming indemnity pursuant to a construction works legal liability policy issued by Gordian, No. C10034448 (the Gordian policy). In essence, Heyday alleged that to the extent to which it was not indemnified by GIO against its liability to the plaintiff, it was entitled to be indemnified by Gordian. A third was filed by Baulderstone against Heyday claiming that it was entitled to be indemnified in respect of any judgment obtained against it by the plaintiff or, alternatively, that it was entitled to a contribution from Heyday pursuant to s 5(1)(c) of the Law Reform (Miscellaneous Provisions) Act 1946 (the Law Reform Act). 9 The issue which arose out of these cross-claims concerned a promise of indemnity contained in the sub-contract between Baulderstone and Heyday whereby Heyday agreed to indemnify Baulderstone against any loss, claim or proceedings in respect of personal injury to any employee of Heyday (the contractual indemnity). GIO asserted that the GIO policy did not extend to indemnifying Heyday against any amount that it was required to pay Baulderstone pursuant to the contractual indemnity. Gordian asserted to the contrary. 10 Excluded from cover under the Gordian policy was liability for bodily injury to any employee of Heyday occurring in the course of his employment in Heyday's business for which insurance against liability was provided under a policy in the form prescribed by or issued pursuant to any workers compensation legislation. Gordian accepted that any liability of Heyday to the plaintiff, which was not covered by the GIO policy, would be covered by its policy. 11 Having found for the plaintiff against both Heyday and Baulderstone and assessed the various heads of damages, the primary judge held (presumably pursuant to s 5(1)(c) of the Law Reform Act) that responsibility for the plaintiff's accident should be apportioned as to 65% to Baulderstone and 35% to Heyday. His Honour also found that GIO was only liable for Heyday's obligations that "arise … under the Workers Compensation Act 1987 as amended and not further". Accordingly, he determined that the insurance protection to Heyday in respect of its obligations arising under the contractual indemnity fell upon Gordian to the maximum of the District Court's jurisdiction. 12 It will be recollected that the Minute of Judgment erroneously recorded judgment for the plaintiff against Heyday in the sum of $196,333.79 and against Baulderstone in the sum of $700,932.85. The former amount represented, so the Court was informed, 35% of the sum of $900,853.04 after deductions of workers compensation payments already received by the plaintiff. The latter amount apparently represented 65% of the sum of $1,086,277.79 after deduction of those same payments. Accordingly, the Minute was intended to enter judgment for the plaintiff against each of Heyday and Baulderstone in a sum which reflected their respective share of responsibility for the plaintiff's injuries 13 Subject to the impact of Division 3 of Part 5 of the Workers Compensation Act, 1987 (the 1987 Act) on the assessment of damages against Heyday as the plaintiff's employer and of s 151Z(2)(d) on the damages assessed against Baulderstone, the plaintiff was entitled to a separate judgment against each of Heyday and Baulderstone for the full amount of his damages as duly assessed against each. The amounts differed as the plaintiff was entitled only to modified common law damages against Heyday but subject only to any reduction pursuant to s 151Z(2)(c), to unlimited damages against Baulderstone. The rights of those parties as between themselves could only be determined by verdicts against each other on their respective cross-claims. In other words, there was no basis upon which the damages awarded in favour of the plaintiff against each of Heyday and Baulderstone could be severed and the rights of Heyday and Baulderstone inter se could only be determined in proceedings between them under the Law Reform Act. So much was acknowledged by the parties and resulted in the agreement referred to in [6] above. 14 However, by the Minute of Judgment it was ordered that on the cross-claim of Heyday against GIO, there be a verdict and judgment for Heyday and that GIO indemnify Heyday in respect of the judgment in favour of the plaintiff against Heyday in the sum of $196,336.79. On the cross-claim of Heyday against Gordian, it was ordered that there be a verdict and judgment for Heyday and that Gordian indemnify Heyday in respect of the entirety of its liability in the proceeding in excess of the indemnity to which it was entitled from GIO. It would seem that the effect of this last order was that Gordian was required to indemnify Heyday in an amount being the difference between its "entire" liability to the plaintiff of $900,853.04 (presumably after deduction of workers compensation payments) and $196,336.79 being the amount to which it was entitled to indemnity from GIO. It is against that order that Gordian appeals to this Court.

The terms of the GIO policy 15 The workers compensation policy issued by GIO to Heyday was in the statutory form. The cover provided by the policy is set forth in clause 3 in, relevantly, the following terms: "The Insurer will indemnify the Employer against all of the following sums for which the Employer becomes liable during or in respect of the period of insurance: (a) compensation that the Employer becomes liable to pay under the Act due or in respect of any person who is a worker of the Employer… (b) any other amount that the Employer becomes liable to pay independently of the Act… for any injury to any such person." 16 Relevant also to the argument in the appeal is clause 5 of the GIO policy which provides as follows: "The Insurer (as well as the Employer) is directly liable to any worker and (if the worker dies) to the worker's dependants or other persons to pay the compensation under the Act or other amount independently of the Act for which the employer is liable and indemnified under this Policy. This means that a claim can be made and action taken directly against the Insurer."

The decision of the Court of Appeal in Nigel Watts and Multiplex 17 As a consequence of the recent decision (given on 28 October 2004) of this Court in Multiplex Constructions Pty Limited v Irving & Ors; Fugen Holdings Pty Limited v Irving & Ors [2004] NSWCA 346, it was common ground that the description of the cover in clause 3 of the GIO policy extended only to an employer's common law liability and did not extend to its liability for any additional contractual obligations. So much had been decided by an earlier decision of this Court in Nigel Watts Fashion Agencies Pty Limited v GIO General Limited (1995) 8 ANZ Insurance Cases 61-235. 18 In Nigel Watts, the employer was a company with office premises rented from another company (the landlord). The employer had workers compensation insurance with a common law extension issued by the insurer. The employer's principal had been seriously injured when entering a lift in the office premises. He received workers compensation benefits from the employer and then sued the landlord claiming damages for common law negligence. The landlord in turn issued a third party notice joining the employer as a third party which claim was, in part, based on the contract of lease under which the lessee was obliged to indemnify the lessor against all actions and claims for which the lessor became liable in respect of or arising out of any damage or injury from any cause whatsoever to any person caused or contributed to by the use of the demised premises by the lessee or any servant thereof. 19 The first instance judgment in the third party claim was given against the employer in favour of the landlord upon the terms of the indemnity in the lease. The insurer refused to indemnify the employer in respect of the judgment. The employer sued for indemnity and was unsuccessful at first instance. It then appealed to this Court. 20 It was held that as the judgment against the employer as third party rested entirely upon the employer's contractual liability under the lease, the workers compensation policy issued by the insurer to the employer did not respond to such a liability. 21 In Multiplex, the plaintiff, Mr Irving, was injured whilst employed by Fugen Holdings Pty Limited (Fugen) who was a subcontractor to Multiplex. Royal & Sun Alliance Insurance (Australia) Limited (Royal) was Fugen's workers compensation insurer at the time. Mr Irving only sued Multiplex claiming that it had negligently caused him his injuries. He did not sue his employer, Fugen. However Multiplex joined Fugen by way of cross-claim, claiming an indemnity under the sub-contract in respect of the full amount it, Multiplex, was required to pay Mr Irving. In the alternative, Multiplex claimed contribution or indemnity from Fugen under s 5 of the Law Reform Act. 22 The trial judge found that Multiplex had breached its common law duty of care to Mr Irving and assessed damages in the sum of $504,003. He also found that Fugen, as Mr Irving's employer, was a joint tortfeasor in that it had breached its non-delegable duty of care to him. His Honour apportioned responsibility between Fugen and Multiplex at 50% each. However, by the sub-contract between Multiplex and Fugen, the latter was obliged to indemnify Multiplex for the whole of the plaintiff's judgment against it. 23 Fugen brought a cross-claim against Royal alleging that it was obliged to indemnify it in respect of the amount that Fugen was obliged to pay Multiplex. The trial judge dismissed this cross-claim on the ground that the policy did not cover claims under a contractual indemnity, following this Court's decision in Nigel Watts. On appeal to this Court, Fugen contended that Nigel Watts was wrongly decided. Ipp JA, with whom Santow JA and Pearlman A-JA agreed, held that Nigel Watts was correctly decided. 24 Ipp JA cited with approval (at [37]) the following passage in Nigel Watts from the judgment of Kirby P, with whom Mahoney and Handley JJA agreed, at 75,642: "This claim must be rejected. The phrase in the policy is of long standing. Its purpose is plain. It is to provide indemnity to an employer for common law liability to a worker qua worker . It is not to provide indemnity to the employer in respect of every other way in which the employer might be liable to other persons, as by a promise in a contract of lease. The judgment against the employer as third party rested entirely upon the employer's contractual liability under the lease. It was based on the exceptional provisions of that document. The workers compensation policy issued by the insurer to the employer did not respond to such a liability." (emphasis added)

The appellant's submissions 25 Gordian submitted that the present case was distinguishable from that in Nigel Watts and Multiplex. The injured worker did not sue his employer in either of those cases. Accordingly, no judgment had been entered against the employer in favour of the injured worker for the full amount of any assessed damages. On the other hand, in the present case the plaintiff sued both Heyday and Baulderstone. Judgment had (or ought to have been) entered against Heyday for the full amount of the damages (albeit modified common law damages) in the sum of $902,744.64. In terms of what Kirby P said in Nigel Watts, that was Heyday's common law liability to the plaintiff "qua worker". Because it was the amount which the primary judge had found that Heyday was liable to pay pursuant to its common law liability to the plaintiff, it was an amount in respect of which Heyday was liable otherwise than pursuant to its contractual indemnity to Baulderstone. Accordingly, the full amount was covered by the GIO policy. 26 Gordian placed some reliance upon the decision of the High Court in State Government Insurance Office (Queensland) v Brisbane Stevedoring Pty Limited (1969) 123 CLR 228. In that case, the plaintiff worker was awarded damages for personal injuries sustained by him against his employer and the owner of a mobile crane. The employer had hired the mobile crane and the hiring agreement containing a clause whereby the employer agreed to indemnify the crane owner for all or any claims from injury arising out of the use of the crane. The employer held a policy of insurance complying with s 8(1) of the Queensland Workers Compensation Acts, 1916 to 1966 (the Queensland Act) legislation and had joined its insurer as a third party to the action. The trial judge apportioned responsibility equally between the employer and the owner of the mobile crane. He further held that the indemnity clause in the hiring agreement to be in operation between the parties; ordered the employer to indemnify the crane owner against the plaintiff's verdict and the employer's insurer to indemnify the employer in respect of all sums payable by the employer in respect of damages including sums payable by the employer to the crane owner by way of indemnity against the crane owner's liability for damages for contribution. 27 The relevant statutory workers compensation policy issued under the Queensland Act required the insurer to indemnify the employer "against all sums for which, in respect of injury to any worker employed by him, he may become legally liable by way of…damages arising under circumstances creating also, independently of this Act, a legal liability on the employer to pay damages in respect of that injury". 28 The High Court held that the employer's "liability to pay damages" within the meaning of the policy wording mandated by the Queensland Act, was its liability to pay the whole of the amount of the plaintiff's verdict and, further, that even if the crane owner paid the employee's verdict, the employer's payment required to recoup the crane owner's payment would be in satisfaction of a liability by way of damages in respect of the employee's injury within the meaning of the policy. 29 Barwick CJ (at 240) considered that although the crane owner's right to recover the amount which he had paid in satisfaction of the plaintiff's verdict against him and the employer's obligation to repay that amount were derived from the contract of indemnity, the sum paid by the employer to the crane owner would nonetheless constitute damages arising under circumstances creating a legal liability in the employer to pay damages in respect of injury to its employee. His Honour said: "Thus, in the situation supposed, in my opinion, any sum paid by the respondent to the second defendant under the indemnity in the hiring agreement would be properly included in the indemnity which the appellant may be ordered to afford the respondent under the W orkers Compensation Act policy. A different result might possibly follow if no verdict had been found against A [the employer], but I have no need to discuss that possibility in connection with this case." 30 Gordian submitted that the possible "different result" to which the Chief Justice referred at the end of the foregoing citation was applicable to the cases of Nigel Watts and Multiplex in which no verdict had been found against the employer as the latter had not been sued by the plaintiff. On the other hand, the present case was more on all fours with that in Brisbane Stevedoring because the plaintiff had sued not only Baulderstone but also his employer, Heyday, and obtained a verdict against each. 31 This Court in Nigel Watts did not refer to the decision in Brisbane Stevedoring. It was, however, submitted in Multiplex that Nigel Watts was contrary to Brisbane Stevedoring as a consequence whereof it was wrongly decided. Ipp JA (at [41]) expressed the view that the wording of the relevant Queensland policy, the subject of Brisbane Stevedoring, differed considerably from that considered in Nigel Watts as a consequence whereof Brisbane Stevedoring was not relevant to the decision in that case. The differences between the Queensland policy and the New South Wales policy in terms of the extent of cover provided by each was highlighted by Santow JA in Multiplex at [11]. His Honour (at [13]) agreed with Ipp JA that the policy wording in the case of Brisbane Stevedoring with its reference to "legal liability …in respect of that injury" differed materially from the New South Wales policy. This being so, it seems to me that Gordian can gain no comfort from the Brisbane Stevedoring decision. 32 This notwithstanding, Gordian submitted that in the present case Heyday had a direct liability to the plaintiff in the amount of the judgment entered against it and that that was an amount which, within the meaning of clause 3(b) of the GIO policy, it had become liable to pay for the plaintiff's injury. Reliance was placed upon the decision of the High Court in The Workers Compensation Board of Queensland v Technical Products Pty Limited (1988) 165 CLR 642 at 652 where it was held that the object of the legislation (in that case s 8(1) of the Queensland Act) was to provide benefits to injured workers and their dependents in respect of injury suffered by the worker in the course of his employment. It was contended that that was also the object of the statutory GIO policy which would be frustrated if that policy did not cover the full amount of the judgment entered in favour of the plaintiff against his employer, Heyday. 33 Finally, Gordian submitted that clause 5 of the GIO policy supported its argument given the necessity to ensure that a worker was fully recompensed in respect of any liability of his employer to him. As clause 5 provided that the insurer (as well as the employer) was directly liable to the worker for any amount for which the employer is liable independently of the 1987 Act, this justified a broad construction of clause 3 to encompass the full amount for which any judgment had been entered in favour of the worker against his employer and that it did not matter that in third party proceedings a non-employer tortfeasor had been found responsible for a proportion of that judgment sum. Such a construction was necessary, so it was submitted, to avoid a situation where, for instance, the non-employer tortfeasor was insolvent and uninsured. If the employer was also insolvent (as in the present case), then the plaintiff worker would only be entitled to so much of the judgment sum as represented its proportion of responsibility for the plaintiff's injuries and would be unable to recover the balance. 34 It was thus submitted that in the event that the workers compensation insurer paid the full amount of the plaintiff's verdict against the employer, it would be subrogated to the rights of the employer against any non-employer joint tortfeasor who was found liable to contribute to that judgment. If that tortfeasor was unable to pay, then it was better that the loss should fall upon the insurer than upon the worker. This would accord with the object of the legislation as articulated in Technical Products.

GIO's submissions 35 GIO submitted that the answer to the issue posed by the appeal should not depend on procedural differences so that the insurer is worse off where the plaintiff sues the employer and obtains a verdict than where he or she only sues the non-employer tortfeasor who seeks contribution against the employer. It pointed to the statement by Santow JA in [23] of Multiplex where his Honour indicated that he agreed with Ipp JA that liability of the workers compensation insurer should not, and does not, depend on the adventitious fact of whether the worker elects to sue the employer, or some other joint or several tortfeasor. At [67] Ipp JA said: "But, the liability of the workers compensation insurer to the employer should not depend on the whim of the worker, that is, as to whether his or her claim should be made against the employer or against the some other joint or several tortfeasor. The more or less arbitrary decision by a worker not to sue his or her employer, but rather another joint or concurrent tortfeasor should not be permitted to impose the whole burden on that other tortfeasor to the exoneration of the employer and its workers compensation insurer." 36 GIO further submitted that when one looked at the substance of the matter, but for the contractual indemnity Heyday as employer would only have been required to pay 35% of the plaintiff's verdict against it, the other 65% being apportioned to and payable by Baulderstone. Accordingly, it was submitted that Heyday's true liability for the plaintiff's injury was equivalent to only 35% of the judgment sum. 37 Were it not for the contractual indemnity which was not covered by the GIO policy, the other 65% of the plaintiff's judgment would be payable by Baulderstone or its insurer, Gordian. It was not to the point that the plaintiff might recover the whole of the judgment sum from Heyday as he was entitled to do. Nor was it to the point that if GIO paid the whole of the judgment sum entered against Heyday, it could but for the contractual indemnity have recovered 65% thereof from Baulderstone pursuant to Heyday's cross-claim for contribution under the Law Reform Act. Accordingly, the GIO policy did not extend to an amount greater than that for which Heyday had been found liable, namely, 35% of the judgment sum.

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."

See also the example given by Allen J at 9. 67 Allen J's analysis was adopted by this Court (Handley JA, Sheller and Powell JJA agreeing) in Grljak v Trivan Pty Ltd (No 2), 19 April 1996 (unreported) and by Beazley JA, with whom Young CJ in Eq agreed, in New South Wales v Kennelly (No 2) [2001] NSWCA 472. The position is accurately summarised in the commentary to s 151Z in Mills Workers Compensation New South Wales at 5059-5060 as follows: "In dealing with a case where both the employer and a third party are concurrently liable to the worker, the legislation has departed from the general principle that a plaintiff may choose the third party as defendant and recover from that defendant the full amount of damages payable by that defendant, without regard for what that defendant may be able to recover by contribution from other persons, including the employer. Instead, damages recoverable by the worker from the third party are to be calculated as if the worker had joined the employer tortfeasor as a defendant (whether the employer has in fact been joined or not): the total of the damages recoverable is derived by ascertaining the percentage responsibility of each of the individual tortfeasors (including the employer), applying that percentage to the amount of damages which would have been recoverable from that individual tortfeasor if that tortfeasor had been sued alone, and adding together the individual amounts of damages so ascertained."

Conclusion 68 The analysis of Allen J and Mills set out above relating to the impact of the 1989 amendments to the 1987 Act and, in particular, to that of s 151Z, demonstrate that pre-1989, the position at common law, where a worker could choose whether or not to sue his employer and could recover the whole of his damages from the party sued without regard to the entitlement of that party to recover contribution from a third party joint tortfeasor, has been replaced by a new regime. Under the 1987 Act, the worker's right to recover damages is now to be treated on the basis that that right extends to each individual tortfeasor (whether the employer or non-employer tortfeasor) to the extent only of that tortfeasor's percentage of responsibility for the accident. The analysis of Multiplex and the present case (which I have addressed in [62]-[65] above) is, I believe, consistent with those principles. 69 In my opinion, it follows that the ultimate decision in Multiplex mandates the conclusion that GIO is liable only to indemnify Heyday in respect of 35% of the judgment sum entered against it. I would therefore accept GIO's submissions and, subject to any variations to the orders made by the primary judge as a consequence of the matters referred to in [6]-[7] above, I would propose that otherwise the appeal should be dismissed with costs. **********

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