CLELANDS COLD STORES (AUST) PTY LTD (ACN 006 443 410)

Appeal - Strike out application - No reasonable cause of action - Principles - Turns on own facts

Workers' Compensation and Rehabilitation Act (1981), s 84A, s 84B

Workers' Compensation and Rehabilitation Amendment Act 1993, Div 2 Pt 2

Greenhalgh v Mallard [1947] 2 All ER 255

Jackson v Goldsmith [1950] HCA 22; (1950) 81 CLR 446

Kinch v Walcott [1929] AC 482 (PC)

McCarthy v Moreay Nominees Pty Ltd (1995) 13 SR (WA) 357

Morgan v Banning (1999) 20 WAR 474

Power v City of Perth, unreported; DCt of WA (Kennedy DCJ); Library No 4686; 9 November 1995

Waddington v Silver Chain Nursing Association, unreported; FCt SCt of WA; Library No 980728; 19 December 1998

1 MURRAY J: I agree with Wheeler J that this appeal should be allowed and that the orders made by the District Court, both by Nisbet J and the Registrar, should be set aside. I agree that it would be appropriate that in lieu of those orders there should be an order that the appellant's appeal from the Registrar's decision should be allowed, that the decision of the Registrar should be set aside, and in lieu thereof there should be an order dismissing the application made by the respondents to strike out the appellant's action. I have nothing to add to her Honour's reasons.

2 WHEELER J: This is an appeal from a decision of Judge Nisbet of the District Court striking out the appellant's action as disclosing no reasonable cause of action. There is a notice of contention filed by the first respondent, and the second respondent in effect abides the decision of the court. For a reason to which I will refer shortly, it is the notice of contention, rather than the grounds of the appeal, which now forms the subject matter of the dispute between the parties. The way in which the notice of contention arose can best be seen by setting out the relevant portions of his Honour's reasons in the District Court. There are some five pages, which I set out in full, as follows:

"1 NISBET DCJ: By an amended writ of summons dated 20 September 1999 the appellant brought an action against the first respondent as the workers' compensation insurer for the second respondent, the appellant's employer. In his statement of claim indorsed on the writ the appellant alleges that during the course of his employment with the second respondent he sustained five injuries on 6 November 1989, 23 April 1990, 24 April 1992, 20 January 1993 and 13 August 1993 respectively. The appellant further alleges that at various times after each of the injuries he was in receipt of weekly payments of workers' compensation pursuant to the provisions of the Workers' Compensation and Rehabilitation Act 1981. He then says that on or about 24 December 1993 the first respondent issued a notice pursuant to the provisions of s61 of the Act seeking discontinuance or reduction of those workers' compensation payments and shortly thereafter instructed the second respondent not to pay any further payments of weekly compensation to the appellant and in consequence (it may be inferred) thereby refused to indemnify the second respondent in respect of any such payments.

2 At that time s61 of the Act provided that weekly payments of compensation '... shall not be discontinued or reduced without the consent of the worker or an order of the Directorate ...'. The appellant then pleaded that he did not consent to the discontinuance of payments, the Conciliation and Review Directorate had not ordered discontinuance or reduction of the payments and additionally, by way of a particular of further breach of s61, that he brought an application pursuant to s61(3) of the Act within the time there provided. In consequence, the appellant pleads, the discontinuance of weekly payments was unlawful.

3 What the appellant then pleads in effect is that the unlawful discontinuance of his weekly payments was designed to 'soften him up' for a settlement such that on 15 February 1994 he agreed to settle his claim for the sum of $20,000 by way of a consent judgment at common law in the sum of $17,500 in settlement of his claims in respect of the first four of his injuries and by way of payment of the further sum of $2500 in respect of his fifth injury which settlement was to be effected by a deed of release.

4 The agreement was given effect in about May 1994 by a payment by the first respondent to the appellant of the sum of $20,000.

5 The appellant next pleads that the $20,000 was a settlement at an undervalue in consequence of which he has brought an action against his former legal adviser for breach of his duty of care toward him, which action I was informed during the course of the hearing of this appeal was extant and continues in this Court.

6 The appellant next pleads that the first defendant was under a common law duty of care not to cause (in effect) economic loss to the appellant by unlawfully discontinuing his weekly payments of compensation and further and in the alternative that the first respondent owed him a duty to act in good faith so as not to unlawfully discontinue his payments of weekly compensation. There then followed pleas of the breach of the duty of care and good faith and particulars of damages suggesting that the appellant's claim was undervalued by something in the order of $105,600 (when para 14.4 of the statement of claim is properly understood).

7 Insofar as may be material precisely the same duties and breaches are pleaded against the second respondent as are pleaded against the first respondent.

8 The statement of claim was met with an application by the respondents to strike it out on a number of grounds namely:

1. It disclosed no reasonable cause of action.

2. It was scandalous, frivolous or vexatious.

3. It constitutes an abuse of the process of the court because the dispute is within the exclusive jurisdiction of the Conciliation and Review Directorate.

4. It constitutes an abuse of the process of the court by reason of the principle of res judicata.

5. It constitutes an abuse of the process of the court by reason of the principle of issue estoppel.

9 The second respondent applied to 'set aside' the writ of summons on the sole ground that s84B of the Act conferred exclusive jurisdiction on the Directorate of Conciliation and Review in relation to any dispute regarding weekly payments of compensation pursuant to the Act.

10 The applications came on for hearing before the Deputy Registrar in Chambers on 7 December 1999. The order extracted following that hearing dated 14 December 1999 by the solicitors for the first respondent inadvertently misleads in that it suggests that the writ of summons was only struck out against the first defendant, when a draft of the Deputy Registrar's 'reasons' shows that insofar as may be discerned it would appear that his intention was that the whole action against each of the first and second respondents be dismissed ('so my determination is that the applications are successful').

11 The 'reasons' of the Deputy Registrar (if they can be called that) give no clue to the precise ground upon which his order was made save that he appears to have based his decision on the fact of the deed pleaded by the appellant in his statement of claim that he entered into in respect of his fifth injury. The Deputy Registrar regarded the deed as being an end to the matter and one presumes this is because he considered that it would be an abuse of process to permit the action to continue in the face of the deed.

12 The deed was exhibited to an affidavit filed by the first respondent and it is not all clear in its terms. In fact it is fair to say that it is very poorly drafted. It annexes a letter which is said to set out the terms of the settlement being a letter from the first respondent's solicitors to the appellant's then solicitors dated 24 February 1994. That letter in turn provides in part as follows:

'1. Our client is to pay your client a lump sum amount of $17,500 in full and final settlement of all back injuries sustained by your client arising out of or during the course of your client's employment with Clelands Cold Stores Pty Ltd and specifically including injuries sustained by your client as a result of accidents that occurred on the 6th November 1989 and the 13th August 1989 and for all recurrences and/or aggravations of the aforesaid injuries arising out of or in the course of your client's employment with Clelands Cold Stores Pty Ltd during our insurer client's period of risk.

4. Our client is to contribute an amount of $2500 towards payment of your client's legal costs (inclusive of disbursements).

6. The manner of giving effect to this settlement is at the discretion of our client.

Our client's instructions are that you have not issued any common law proceedings in respect to your client's alleged injury although we confirm from our telephone discussion of the 17th February 1994 that your client was issued with a certificate of common law registration from the Workers' Compensation and Rehabilitation Commission in respect of the alleged accidents of on or about December 1989 (which from our client's records appear to refer to an alleged accident of on or about the 6th November 1989) and the 13th August 1993.

We advise that our client's instructions are to effect settlement by filing consent orders for redemption of your client's workers' compensation claim at the Workers' Compensation Board and also by executing a common law consent judgment at the District Court in respect to all back injuries suffered by your client prior to the 30th June 1993 (which is to be filed with the certificate of common law registration) and to execute a deed of discharge in respect to all back injuries including all alleged back injuries suffered by your client subsequent to the 30th June 1993 ... (my emphasis).

We enclose, for your signature, Workers' Compensation Board application and consent orders, District Court consent documents and deed of discharge. You will note that we have allocated an amount of $500 and $1000 for costs in respect of the Workers' Compensation Board consent orders, $15,000 and $1500 for costs in respect to the District Court consent orders and an amount of $2000 is to be paid by our client to your client upon execution of the deed of discharge.

You will also note that we have specifically pleaded six accident dates in the Workers' Compensation Board documents being the 6th November 1989 to the 30th November 1989, 23rd April 1990, 24th April 1992, 20th January 1993 and the 13th August 1993 being the dates on which your client has alleged suffering back injury during the course of his employment with Clelands Cold Stores Pty Ltd (my emphasis). ..... "

13 I next turn to the indorsement on the writ of summons in action number 1051 of 1994 taken out by the appellant in this Court against the second respondent as defendant. It is dated 18 February 1994. The indorsement reads as follows:

'The plaintiff's claim is for general damages and special damages for back injuries and all injuries of whatsoever nature suffered by the plaintiff as a result of an accident that occurred on or about 6 November 1989 (lifting cartons of frozen meat) arising out of or in the course of the plaintiff's employment with the defendant and for all injuries resulting from recurrences and/or aggravations of the aforesaid injuries, such recurrences and/or aggravations arising out of or in the course of the plaintiff's employment with the defendant between the 6th November 1989 and the 30th June 1993, all of the aforesaid injuries being caused by the negligence and/or breach of contract and/or breach of statutory duty of the defendant, its servants or agents.'

14 As the letter from the first respondent's solicitors clearly disclose, all of these documents to be filed in respect of a settlement of the plaintiff's claim were prepared by the first respondent's solicitors! A fair reading of them discloses confusion as to what causes of action are being settled for what consideration, such that a court may indeed be loathe to act in its inherent jurisdiction to prevent an abuse of its process to give effect to a deed which speaking of 'aforementioned disabilities', and 'alleged disabilities' then goes on to provide the bar relied upon by the first respondent:

'3. This Deed may be pleaded by the Releasees or any of them in bar to any claim for damages brought by the Releasor or any person claiming through the Releasor arising out of the alleged disability.'

15 If this was the only ground upon which the first respondent sought to have the appellant's cause of action struck out I would have no hesitation in refusing the claim. I would oblige the first respondent to plead out its defence because in the circumstances as I have outlined it would probably be met with a plea in reply of non est factum and indeed, other issues might arise such as those which were canvassed by this Court in a very similar situation: McCarthy v Moreay Nominees Pty Ltd (1995) 13 SR (WA) 357. Likewise, for the same reasons, namely the lack of precision in the terms of the issues that are said to be subject to the doctrine of res judicata and, alternatively or issue estoppel, I would also refuse to strike out the statement of claim."

3 His Honour found, however, that the area of greatest difficulty for the appellant lay in the nature of the pleaded causes of action against the respondents. His Honour formed the view that there was no duty of good faith and by each of an insurer and an insured towards a person on whom the contract of insurance conferred a benefit but who was not a party to the contract. His Honour analysed the state of the authorities before him in arriving at that conclusion. It is however conceded by the first respondent, and no issue appears to be taken by the second respondent, that the subsequent decision of this Court in Ilievska-Dieva v SGIO Insurance [2000] WASCA 161 must lead to the conclusion that an allegation of a duty to act in good faith in circumstances of the kind set out by his Honour is arguably available. Such a claim being arguable, it should not have been struck out on that basis.

4 The first respondent, however, seeks to maintain the result arrived at by his Honour, arguing that his Honour was in error in failing to give "full effect" to the deed of relief and in not concluding that the appellant's action should have been struck out by reason of res judicata or issue of estoppel arising from the consent orders which had been made.

5 There was a further ground of contention that his Honour erred in failing to find that the specific jurisdiction arising under the Workers Compensation & Rehabilitation Act (1981), particularly s 84A and s 84B, precluded the appellant's claim from being justiciable in the District Court. This, as I understood it, was but faintly pressed. The alleged unlawfulness of the discontinuance of weekly payments is in the statement of claim but one of the circumstances upon which the appellant relies in establishing the breach of the duty of good faith which is alleged. The action is not one to recover weekly payments or to force the respondents to make weekly payments but is for loss of an opportunity, which loss arose by reason of circumstances which included the discontinuance of weekly payments. I am unable to see how the provisions referred to preclude the appellant's action.

6 The relevant principles are not in doubt and are summarised in Kimberley Downs Pty Ltd v Western Australia, unreported; SCt of WA; Library No 6414; 25 August 1986. A claim should only be struck out as disclosing no reasonable cause of action in the following circumstances:

• the rule is intended to apply only to cases which are really not arguable and not to cases where under the previous practice demurrer would have been the proper course;

• on the application, not only must all the facts alleged in the statement of claim be accepted as true, but it must be taken for granted that on all other points the pleading is unassailable;

• great care must be exercised to ensure that the plaintiff is not improperly deprived of his or her opportunity for the trial of his or her case by the appointed tribunal;

• the rule should not be reserved for those cases where argument is unnecessary to show the futility of the plaintiff's claim. Argument, even extensive argument, may be necessary to demonstrate that the plaintiff's case is so clearly untenable that it cannot succeed;

• as a general rule a plaintiff is entitled as of right to have his or her case heard, to have the facts found and then to argue the question of law as it arises before the trial judge upon the facts as found. It is only in cases in which it can be seen from the outset that, however the facts be found, there is no basis for the legal conclusion contended for by the plaintiff that the pleading should be struck out; and

• a court at first instance should be careful not to risk stifling the development of the law by summarily rejecting a claim where there is a reasonable possibility that, as the law develops, it will be found that a cause of action will lie.

7 The appellant argues that the claim should not be struck out at this stage, but that the respondents should be required to plead either the consent judgment or the deed of release, or both, to which the appellant would then have an opportunity to reply. It is submitted that in the circumstances of this case there are, in any event, a number of reasons why it may be that the deed and the consent judgment are either invalid or are unenforceable in respect of some or all of the injuries pleaded in the statement of claim.

8 It appears to me that the former argument is correct in principle. There are open as a matter of law a number of possible ways in which a party to a consent judgment or a deed of release may avoid it, so that that the mere existence of such a judgment or deed cannot be a complete answer to a claim at this stage of the proceedings. By analogy with a limitation defence, it is appropriate to require a defendant to plead such a matter, and then see what reply may be made. Further, looking to the circumstances of this case, it appears to me that his Honour was correct in forming the view that the lack of precision in the terms of the "issues" that are said to be the subject to the doctrine of res judicata, the lack of precision in the deed, and the possible replies which might be made to both, are such that it would be inappropriate in any event to strike out this statement of claim.

9 So far as the consent judgment is concerned, the terms of the indorsement are set out in his Honour's reasons above. It is to be noted that it refers to an accident on 6 November 1989 and recurrences and/or aggravations of injuries arising from that accident. By contrast, the appellant seeks to plead in the present claim that he suffered on successive dates what appear to be distinct injuries. They are pleaded to be, in the alternative, recurrences of the disability suffered as a result of the first material injury sustained on 6 November 1989. It may be that, to the extent that recurrences are pleaded, the settlement of the earlier claim bars the bringing of the action, but it may not if the injuries are indeed distinct and separate injuries rather than recurrences or aggravations.

10 Further, under the applicable legislation at the time, being s 5 - s 17 inclusive of the further transitional provisions found in Div 2 of Pt 2 of the Workers' Compensation and Rehabilitation Amendment Act 1993, damages could not be awarded in respect of a "notifiable cause" unless a relevant certificate was filed in the District Court. A "notifiable cause" was defined to mean "any cause of action seeking common law damages arising on or before 30 June 1993". It appears from correspondence annexed to the affidavit of Claire Estelle Bibby sworn 29 March 2000, that a certificate of common law registration may have been filed only in respect of one, or perhaps two, of the relevant injuries. It is therefore argued on behalf of the appellant that it would be inconsistent with that statutory scheme for damages to be awarded by way of consent judgment, in respect of those injuries for which there was no certificate. This submission gives rise to questions of statutory construction, but it appears to me to be at least arguable on its face.

11 So far as the deed of release is concerned, there are, as his Honour noted, certain difficulties in relation to its construction. It recites six separate "disabilities" and recites also that an agreement was reached between the releasor and the releasees as to the settlement of claims for damages, the terms of such settlement being set out in a letter which the deed requires to be "read with this deed". The operative part of the deed provides that the releasor releases the releasees from all claims in respect to the "aforementioned disabilities" which would appear on its face to be a reference to the disabilities specifically referred to. However, cl 3 of the operative part provides that the deed may be pleaded by the releasees in bar to any claim for damages "arising out of the alleged disability". The question obviously arises as to what singular disability is referred to, or, perhaps, whether the deed is capable of being rectified or of being construed so that the reference to a singular disability covers all of the disabilities recited. When the letter embodying the terms of settlement is "read with" the deed as the deed requires, it is to be noted that the first of the numbered terms of settlement set out in it refers to a settlement of all back injuries sustained as a result of "accidents that occurred on the 6th November 1989 and the 13th August 1989 and for all recurrences and/aggravations of the aforesaid injuries ... ". As with the indorsement of claim, the use of this terminology gives rise to the question of whether a settlement in those terms is capable of covering what are sought to be pleaded in the present action as distinct injuries.

12 Finally, as his Honour noted, there are a variety of bases on which such a deed, or a consent judgment, may be set aside. His Honour referred to a potential plea of non est factum in relation to the deed, and also to the possibility of a question arising as to the authority of the appellant's then solicitor to settle the claim. There is at present little material which suggests that either the doctrine of non est factum would apply or that the appellant's solicitor lacked authority to settle all claims. At present, the appellant's affidavit dated 16 September 1999 raises those issues only obliquely, if at all. In relation to the settlement of the workers' compensation claim, he deposes only that he was unhappy with the "circumstances" in which it was settled, while in relation to the consent judgment, he deposes that he was not told at the time when he settled the common law claim that he would not be able to make any further claim. However, this is not the stage at which it is appropriate for a Judge to enquire into whether a pleading which might potentially be made could be supported at trial. It is enough to note that there are potential defences to the pleading of the consent judgment in the deed, and that there is also, albeit referred to only vaguely, some potential factual basis for raising those issues.

13 Finally, the first respondent asserts that the statement of claim contains an admission that there was a valid settlement of all the appellant's claims. That "admission" is contained in par 10.1 of the statement of claim which relevantly reads:

"On or about 15 February 1994, the plaintiff agreed to settle ... his claim for all entitlements to compensation against the second defendant in respect of the disability arising out of the first to fifth material injuries as follows: ... "

I do not think that this pleading can be construed as an admission that whatever settlement took place was made with the plaintiff's authority and without any question of mistake, duress, undue influence or the like arising. In the context of the statement of claim, it is pleaded as no more than a reference to the plaintiff's agreement to a course of action, in circumstances in which he may or may not have understood precisely what action was proposed and what the consequences of that action may have been.

14 I have dealt with the issues above in the way in which they were raised by the parties to the appeal. However, I must observe that there appears to me to be a conceptual difficulty underlying the way in which the appellant, in particular, approached the claim which the appellant seeks to make in these proceedings. If it is correct, as the appellant strongly suggested during the hearing of this appeal, that both the consent judgment and the deed of settlement are invalid, or unenforceable, or liable to be set aside, in respect of some or all of the injuries which are pleaded, then it appears to me that there has not truly been what is pleaded in the statement of claim as a "settlement at under value". If that settlement is liable to be ignored or set aside for any of the reasons set out above, then it is not easy to see how the loss and damage pleaded to flow from the settlement can be established, since what is pleaded is a loss of opportunity to recover damages over and beyond those recovered by way of settlement.

15 If there was in truth no "settlement" in respect of any or all claims, then the opportunity to recover damages in respect of them would appear to continue. However, it may be that there are matters of law, not raised before us, which would have the effect of now precluding the appellant from pursuing his claim. There were in the transitional provisions of the Workers' Compensation and Rehabilitation Amendment Act 1993, to which I have referred, and in other provisions which have amended the workers' compensation legislation since, strict time and other limits which govern the taking of such action. It may be that even if the settlement were set aside or considered to be unenforceable, the appellant would now be precluded from taking such action. It may be that the statement of claim requires clarification in relation to the issue of causation. However, that was not a matter which was raised before the court on this appeal, and I have therefore confined these reasons to dealing with the issues raised in the respondents' notice of contention, and in the appellant's submissions in reply to it.

16 For the reasons set out above, it is my view that this appeal should be allowed, and that this Court should quash the order of Judge Nisbet made 13 April 2000 dismissing the appellant's appeal against the decision of the Deputy Registrar on 7 December 1999 by which the Registrar dismissed the appellant's action against the first and second respondents. In lieu thereof, there should be an order that the appellant's appeal from the Registrar's decision be allowed and that the decision of the Registrar dismissing the appellant's (plaintiff's) claim be quashed.

17 MILLER J: I have had the opportunity of reading in draft the reasons of Wheeler J in this matter. I agree with her Honour's reasons and with the orders proposed.