Calculation of Judgment Amount - Operation of Limitation Act
141 There remains to be considered what is the appropriate amount for which judgment should have been given, in light of the findings so far. Because the worker was entitled to take proceedings independently of the Act to recover damages from her employer, but has not done so, and neither has she accepted satisfaction of a judgment against her employer, the present is a situation in which section 151Z(2)(e) applies.
142 The Appellant submits that the way in which section 151Z(2)(e)(i) operates is "by subtracting from the payments of compensation which are not statute barred the employer's contribution to the notional damages". In my view that is not the calculation that section 151Z requires to be made, but (at least in the present case) it comes to the same mathematical answer as a calculation performed on the correct principle.
143 In a situation where a worker has not taken proceedings against the employer or accepted satisfaction of a judgment against the employer, the consequence that the chapeau of section 151Z(2)(e) says then follows, namely that "subsection (1) applies as if the worker had not been entitled to recover damages from that employer", needs to be understood bearing in mind the history of this section and its statutory predecessors. Giles JA in I & J Foods Pty Ltd v Bergzam Pty Ltd (1997) 14 NSWCCR 486 explained that the statutory predecessor of section 151Z(1) contained in section 64(1) Workers Compensation Act 1926 was held in Public Transport Commission of New South Wales v J Murray-More Pty Ltd [1975] HCA 28; (1975) 132 CLR 336 to not entitle an employer to indemnity from a wrongdoer for compensation payments if the employer's negligence had contributed to the occurrence in respect of which a right to compensation arose. Giles JA held that the phrase "as if the worker had not been entitled to recover damages from" the employer, in the chapeau of section 151Z(2)(e) was
"… a tolerably clear statement that the limitation declared in Public Transport Commission of New South Wales v J Murray-More Pty Ltd should be deemed out of existence so as to permit partial indemnity."
144 Sub-paras (i) and (ii) of section 151Z(2)(e) go on to state how that "partial indemnity" operates.
145 The operation of each of those sub-paras requires the calculation of two amounts.
146 The first is "the compensation paid by that employer". In my view the clear meaning of that expression is the total amount of compensation ever paid by the employer (in the present case, $157,973.45, which for ease of explanation of the method I shall treat as $157,000 in round figures), not a figure that has been reduced in some fashion pursuant to a statute of limitations.
147 The second amount that must be calculated for the operation of sub paras (i) and (ii) is "the amount of the contribution that could be recovered from that employer as a joint tortfeasor or otherwise". That amount of that contribution is ascertained under section 151Z(2)(d). The phrase "the amount of the contribution that could be recovered from that employer as a joint tortfeasor or otherwise" echoes the similar phrases (differing only saying "the employer" instead of "that employer") that occur in section 151Z(2)(c) and (d). All those phrases mean the same thing. In the present case, the amount of that contribution is nil.
148 When the correct amount to adopt for "the compensation paid by that employer" is $157,000, that amount exceeds nil, and so it is sub-para (i) that applies. The operation of subpara (i) would then give the amount for which indemnity can be obtained under subsection (1)(d) as being the difference between those amounts, namely $157,000.
149 It is still necessary, however, to apply section 151Z(1)(d) according to its terms. Because of the words in brackets at the end of section 151Z(1)(d), the amount actually recoverable under the indemnity is limited to the amount of the damages that the indemnifier is liable to pay to the worker. The practical effect of this is that the indemnity under section 151Z(1)(d) is for whichever is the lesser of the amount derived from section 151Z(2)(e)(i) and the amount of the damages that the indemnifier is liable to pay to the worker.
150 The reasoning so far does not mean that the Limitation Act does not enter into the calculation of the amount of an indemnity that is recoverable in a situation where section 151Z(2)(e) applies. All that it shows is that the Limitation Act does not operate on section 151Z(2)(e) itself.
151 It would be seriously anomalous for a limitation period to apply when section 151(1)(d) operated in circumstances where a worker had sued his or her employer, but not to apply when section 151(1)(d) operated in circumstances where a worker had not sued his or her employer. In my view no such anomaly arises.
152 South Eastern Sydney Area Health Service v Gadiry [2002] NSWCA 161; (2002) 54 NSWLR 495 shows that the rationale for there being a limitation period in the action under section 151Z(1)(d) is that there is a separate right of indemnity in relation to each amount of compensation paid, and as each amount of compensation comes to be more than six years old the statutory right to recover it become statute barred.
153 The provision that operates to bar recovery in an action that sues on section 151Z(1)(d) is section 14(1)(d) Limitation Act 1969, which establishes a six-year limitation period for any cause of action to recover money recoverable by virtue of an enactment: Turner v George Weston Foods at [41], 580-581. Considered by themselves sections 151Z(2)(e) (i) or (ii) do not involve the assertion of any cause of action to recover money recoverable by virtue of an enactment. Rather, what 151Z(2)(e)(i) and (ii) do is to set out a means by which a calculation is performed for the purpose of the cause of action that arises under section 151(1)(d), and any limitation period then applies to section 151(1)(d).
154 There are two different ways, not different in substance, in which one can explain how section 14(1)(d) Limitation Act operates in a situation where section 151Z(2)(e) also applies, and the first payment of compensation was made more than six years before proceedings to enforce the indemnity under section 151Z(1)(d) were commenced. One is if one first considers what the right of the employer would have been to recover indemnity under section 151Z(1)(d) immediately before six years prior to the date of commencement of proceedings. If, at that date, the amount of compensation paid by the employer exceeded the amount of the contribution that could be recovered from that employer, there would be a cause of action to recover the amount of the excess under section 151Z(1)(d) ("the Six Years Old Amount"). By the time proceedings were actually brought, the cause of action to recover the Six Years Old Amount would have become statute barred. By the operation of section 63 Limitation Act, the right to recover that sum is extinguished. At the time the calculation is done for the purpose of the proceedings that are actually brought, "the compensation paid by that employer" is treated as being the total amount of compensation ever paid by the employer, the operation of subpara (i) then proceeds to calculate the excess of that total amount of compensation over the amount of contribution that could be recovered from the employer, and the amount of that excess is then the amount for which proceedings for indemnity can be brought. However, in those proceedings the defendant has a partial defence to a claim to recover that amount, by reason of the right to recover the Six Years Old Amount having become statute barred.
155 The other way of explaining it is that, at the time that the indemnity is actually sued for, the combined operation of section 151Z(2)(e)(i) means that the upper limit on the amount for which the indemnity is recoverable is the lesser of the amount obtained by performing the calculation in section 151Z(2)(e)(i), and the amount of the damages that the worker could recover from the person from whom the employer seeks indemnity. Even so, the indemnity is still for a series of individual payments of compensation. Insofar as the amount for which the employer seeks indemnity is made up (up to the upper limit of the total amount) of individual payments that are more than six years old, each of those individual payments more than six years old has become statute barred.
156 Doing the calculation in the correct way is of significance in a situation where an amount is recoverable by way of contribution from the employer. As Giles JA explained in I & J Foods v Bergazam, in that situation:
"… para (e) adjusted the employer's indemnity so that the burden of the compensation paid under the Act would remain with the employer to the extent of the employer's fault which led to the employer paying contribution to the third party."
157 If an employer has not committed a tort that has injured the worker, but has paid compensation, the effect of section 151Z(1)(d) is that the employer can recover back from the indemnifier the full amount of compensation paid, up to the limit of the amount of damages that the indemnifier is liable to pay to the employer. However, if the employer is at fault, it is not entitled to indemnity for the full amount of the compensation paid, up to that limit. Rather, the employer is required to bear the compensation, up to the proportion of the compensation that equals the degree of fault of the employer, and only after the employer has borne the amount of compensation to that extent does it have a right of indemnity from some other wrongdoer liable to pay damages for the same injury.
158 This can be illustrated by an example in which the measure of damages that the worker could recover from the non-employer is $200,000, the measure of damages that the worker can recover from the employer is $150,000, the employer has paid compensation of $75,000, and the employer is 40% at fault. The amount of contribution that the non-employer can recover from the employer under section 151Z(2)(d) is 40% of $150,000, namely $60,000. Applying section 151Z(2)(e)(i), the upper limit of the indemnity recoverable under section 151Z(1)(d) is the excess of the compensation paid over the amount of that contribution, namely $15,000. If the employer had paid only $50,000 in compensation, there would be no excess of the compensation paid over the amount of the contribution, and so the employer would not have an indemnity. If the employer had paid $100,000 in compensation, the excess of the compensation paid over the amount of the contribution would be $40,000. In this way, the employer bears the compensation up to the amount of the contribution that can be recovered from it.
159 If the employer had paid $100,000 in compensation, but $20,000 of it was paid more than six years before the action was brought, the method of calculation advocated by the Appellant seems to proceed as though "the payments of compensation that are not statute barred" are $80,000, and the amount of indemnity is ascertained by subtracting $60,000 from that, resulting in $20,000. In my view that is a mistaken way of proceeding. Rather, one should first do the calculation that deducts from the total amount of compensation the amount of the employer's contribution, thereby arriving at a figure of $40,000. But, while that $40,000 is the total amount for which indemnity can be claimed, the indemnity is still in relation to particular payments of compensation that the employer has made. The employer is able to allocate that $40,000 so that the employer seeks indemnity for $40,000 that was paid less than six years before action was brought. In that way, the limitation period does not operate to cut down the amount of indemnity recoverable - the employer is still entitled to indemnity for $40,000. It nonetheless remains true that the employer has paid in total $100,000, of which it can recover back $40,000. Thus, even in the situation where some of the payments of contribution are more than six years old, the employer still ends up bearing the first $60,000 of the compensation paid.
160 The correct calculation of the amount of the indemnity in the present case is as follows: