(1) Medcalf v Perry(2) Macksville Hospital v Medcalf

CA 40047/99; 40089/99 EQ 9180/97; 7047/97

BEAZLEY JA GILES JA BROWNIE AJA

Where a worker is injured twice, in the one employment, and suffers a single incapacity, but has different rights to damages in relation to the two injuries, it may be proper to apportion the benefit of the defence under s 63(5) of the Workers Compensation Act 1926 (NSW) as between those injuries.

(ii) Stand over the question of costs for 7 days to enable short minutes of order to be brought in or alternatively if short minutes cannot be agreed, that the matter be relisted before the Court for further argument.

CA 40047/99; 40089/99 DC 9180/97; 7047/97

BEAZLEY JA GILES JA BROWNIE AJA

1 BEAZLEY JA: I have had the advantage of reading in draft the judgments of Giles JA and Brownie AJA. 2 I agree that both appeals should be dismissed. That leaves the question of costs. On the employer's appeal, I consider that costs should follow the event. However, different considerations arise in relation to Mrs Medcalf's appeal. 3 That appeal was, in effect, a protective appeal against the eventuality of the employer's appeal being successful. It was appropriate that Mrs Medcalf protect herself in that way. This was particularly so as all parties agreed that if the employer's appeal was successful it would follow that the quantum of the solicitor's liability would correspondingly increase. However, the consequence of the employer's appeal being unsuccessful is that the solicitors have been brought in to defend an appeal which it became unnecessary to litigate. It does not seem appropriate in that circumstance that costs should follow the event, as both parties have incurred costs which they would not have incurred had the employer's appeal not been brought. 4 Had the appeals been procedurally combined, I am of the opinion that the appropriate order would have been for the employer to pay the costs of both parties in the Medcalf appeal. Because it appears to me that the proper outcome of these two appeals is the employer pay those costs, I consider that the necessary procedural mechanism should be put it place to facilitate the making of an order to that effect. An order that the appeals be consolidated is one such procedure. 5 I would propose in the circumstances that the parties be given 7 days to consider the judgments and if agreement is reached as to costs having regard to the view I have expressed, to bring in short minutes of order dealing with the disposal of the appeals as well as costs. If the parties are not able to agree the matters can be relisted for further argument on costs. 6 I propose therefore the following orders:

(ii) Stand over the question of costs for 7 days to enable short minutes of order to be brought in or alternatively if short minutes cannot be agreed, that the matter be relisted before the Court for further argument. 7 GILES JA: Mrs Medcalf ("the worker") injured her back in 1980, and again in 1983, while employed with The Macksville District Hospital ("the employer"). She returned to work about two months after the 1980 injury, and economic loss for the two months was part of the claim which she brought against her solicitors Perry & Smith ("the solicitors") for allowing her action against the employer in respect of the 1980 injury to become statute barred. Following the 1983 injury she was permanently incapacitated for work, and economic loss from the date of the injury was part of her claim against the solicitors and part of her claim against the employer in respect of the 1983 injury. 8 The trial judge found that the worker's "ongoing problems" should be "apportioned equally between the incidents in which she injured her back". It was accepted in the appeals that the ongoing problems brought the worker's permanent incapacity for work, that this was a finding of equal contributions of the injuries to the permanent incapacity, and that it followed that in relation to economic loss the solicitors were liable for half the economic loss following the 1983 injury and the employer was liable for the other half of that loss. The judge so acted in his assessments of damages. There was no appeal from the finding of equal contributions of the injuries to the permanent incapacity. 9 The employer had paid workers' compensation to the worker. The judge was given agreed figures for the weekly payments and medical and other expenses from the date of the 1983 injury. Counsel for the employer initially provided what was referred to as a list of payments made "in respect of the accident 20 October 1983". The figures were later changed, in unknown circumstances. There was no other description, if that was a description, of which injury gave rise to the right to workers' compensation in satisfaction of which the payments were made. There was no evidence directed to that matter. 10 The judge used these figures in two ways, first by deduction from past economic loss in calculating interest on that loss and secondly by deduction from the gross damages. In the claim against the solicitors both deductions were in assessing the damages in the notional claim against the employer which the solicitors allowed to become statute barred, taking 30 June 1990 as the date on which the claim against the employer would have been heard. As to calculation of interest on past economic loss, in the claim against the solicitors the judge deducted what appears to have been the whole of the weekly payments to 30 June 1990 and allowed interest on the balance, and in the claim against the employer he deducted half the weekly payments to the date of trial and allowed interest on the balance. As to the gross damages, in the claim against the solicitors he effectively deducted half the workers' compensation payments from the damages notionally assessed against the employer, and in the claim against the employer he deducted half the workers' compensation payments from the damages assessed against the employer.

The Employer's Appeal 11 A subsidiary question in the appeal was whether the deduction of only half the weekly payments from the past economic loss in calculating interest was erroneous. There was discrepancy in this respect between the calculation of interest on past economic loss in the claim against the solicitors and the calculation of interest on past economic loss in the claim against the employer. The employer submitted that the whole of the weekly payments should have been deducted. The worker's submissions did not deal with the question, and the solicitors were understandably silent on the matter. 12 In my view, the error was not as suggested by the employer. The figures for past economic loss from which the judge deducted the weekly payments were themselves half the economic loss for the relevant periods, in accordance with the equal liability for the worker's permanent incapacity for work. Deducting the whole of the weekly payments for the relevant periods from both figures would leave the worker without proper compensatory interest on her real economic loss. 13 The principal question in the appeal was whether the deduction of only half of the workers' compensation payments from the damages was erroneous. The employer submitted that it was, saying that the judge should have deducted the whole of the worker's compensation payments from the damages assessed against it. The worker was inclined to agree, and said that if the whole of the workers' compensation payments were deducted from the damages assessed against the employer then her damages assessed against the solicitors should be appropriately increased. Since the latter damages had a 25 per cent discount for loss of a chance, the worker would regain from the solicitors only 75 per cent of the amount lost from her recovery from the employer. The solicitors disagreed, and said that the judge was correct. 14 The argument in the appeal turned on s 63(5) of the Workers' Compensation Act 1926 ("the Act"), applicable to the worker's cause of action because her injuries were received prior to 30 June 1987 (see Workers Compensation Act 1987 Schedule 6 Part 14 cl 1). It was not submitted that deduction of the workers' compensation payments was required or warranted, whether as to the whole or half, on some other ground. 15 Section 63(5) was part of a wider scheme in ss 63 and 64 of the Act intended to regulate recovery by a worker with common law rights as well as entitlement under the Act, and in particular to prevent double recovery. It provided - "63(5) Where any payment by way of compensation under this Act has been made, the payment shall, to the extent of its amount, be a defence to proceedings against the employer independently of this Act in respect of the injury." 16 The exercise is one of statutory construction. How, if at all, does s 63(5) apply in the circumstances of this case? 17 The only actual proceedings against the employer independently of the Act were the worker's claim in respect of the 1983 injury. However, the worker's claim in respect of the 1980 injury involved notional proceedings against the employer independently of the Act, since it was necessary to find what would have happened if the solicitors had brought the action against the employer in respect of that injury within time. There were in concept two proceedings against the employer independently of the Act, one in respect of the 1980 injury and one in respect of the 1983 injury. Section 63(5) could provide a defence in each. 18 The defence s 63(5) provided depended on finding payment by way of compensation under the Act. It did not relate the payment by way of compensation to which it referred to any particular injury giving rise to a right to workers' compensation. Under the Act a worker who had received an injury was entitled to receive compensation from his employer in accordance with the Act (s 7(1)). The compensation included compensation where permanent incapacity for work resulted from the injury (s 9(1)). A single incapacity could be attributable to more than one injury (Bushby v Morris (1980) 1 NSWLR 81 at 87-8; National & General Insurance Co Ltd v South British Insurance Co Ltd (1982) 149 CLR 327 at 332). Payment by way of compensation for permanent incapacity for work attributable to two injuries giving rise to workers' compensation could therefore be payment by way of compensation for the purposes of s 63(5), operating as a defence in proceedings in respect of both injuries. 19 The payments in the present case were following the 1983 injury. On the judge's finding, the permanent incapacity for work giving rise to the right to the workers' compensation was caused equally by the 1980 injury and the 1983 injury. The fact that the payments were following the 1983 injury does not exclude the causal relationship of the 1980 injury, as found, to the worker's permanent incapacity. Nor does counsel's description when the list was provided govern the characterisation of the payments. The workers' compensation payments were, therefore, on the judge's finding, for permanent incapacity for work equally attributable to both injuries. 20 In these circumstances, I do not think that the whole of the workers' compensation payments should have been deducted from the damages assessed against the employer. Either s 63(5) did not apply to provide a defence in either of the two proceedings against the employer, one notional proceedings and one actual proceedings, or it applied to provide a defence in each proceedings with an apportionment of the payment by way of compensation. The second of these alternatives is more in accord with the scheme of which s 63(5) was part, and can readily enough be accepted when the payment by way of compensation provided compensation not for the injuries but for the permanent incapacity resulting from the injuries. The injuries gave rise to the right to workers' compensation, but the payments compensated for the incapacity. 21 In my opinion, therefore, s 63(5) operated to provide a defence in the claim against the employer, on the judge's finding to the extent of half the payment by way of compensation. The judge was correct in the course he took. 22 The employer referred to Australian Iron & Steel Pty Ltd v Government Insurance Office of New South Wales (1978) 2 NSWLR 59. The employer in that case paid worker's compensation to the worker, and then settled the worker's common law claim for a further sum clear of the worker's compensation payments. It claimed indemnity from its insurer for the workers' compensation payments. The policy excluded liability to pay workers' compensation. The insurer accepted that it was liable to provide indemnity against the settlement sum in the common law claim, but argued that the workers' compensation payments were an independent liability within the exclusion. It was held that, in accordance with proper principles of assessment, the worker's damages included a sum equal to all sums paid by way of compensation, so that (per Glass JA at 63) - " … the proper analysis is that the payments had a dual character. They were, it is true, referable to an independent head of liability. But they were also stamped with another character viz that they were payments on account of damages for which credit would have to be given if damages were later recovered." 23 The employer argued that the workers' compensation payments in the present case were also payments on account of damages, for which credit should have been given by the judge. However, the point in Australian Iron & Steel Pty Ltd v Government Insurance Office of New South Wales was quite different from that in the present case, and there was only one injury. Describing the payments as on account of damages says nothing about whether they compensated for a permanent incapacity attributable to the 1983 injury to the exclusion of the 1980 injury.

The Worker's Appeal 24 The appeal was in the claim against the solicitors. There was no appeal in relation to the deduction of the whole of the weekly payments to 30 June 1990 in calculating interest. 25 The question in the appeal was related to the principal question in the employer's appeal. In assessing the damages in the claim against the solicitors the judge deducted from the value of the worker's right to sue at common law the value of her workers' compensation rights as at 30 June 1990, in order to arrive at her loss: Scott v Echegaray (1991) Aust Torts Reports 81-120 at 69,134-5; Tipper v Williams (No 2) (NSWCA, 6 May 1994, unreported); Williams v Bodewes (1997) Aust Torts Reports 81-449 at 64,574-6. He included in the workers' compensation rights what he described as "past weekly payment to 30 June 1990" and "future weekly payments to the date of trial". The amounts were slightly different from the amounts of the deductions to which I have referred in the employer's appeal, for reasons which were not explained, but the effect was to deduct half the weekly payments from the damages notionally assessed against the employer. No point was taken that the deduction was only in relation to weekly payments, or that actual weekly payments may have been taken rather than the capital value of the future payments. 26 The question was whether the deduction of half the weekly payments was erroneous. The worker submitted that it was, saying that the weekly payments were made in respect of the 1983 injury, or that they should have been considered compensation paid for the 1983 injury and so should have been put aside in assessing the damages against the solicitors. It became plain, however, that the worker's appeal was protective against success by the employer in its appeal, and that the worker was content with the status quo if the employer's appeal failed. It follows from what I have said in relation to the employer's appeal that the weekly payments were properly regarded as compensation for permanent incapacity attributable to the 1980 injury equally with the 1983 injury, and that there was no error in this respect in what the judge did. 27 In my opinion, on the questions raised in the appeals each of the appeals should be dismissed. As the parties were agreed that adjustments were necessary in a respect or respects not the subject of these reasons, however, they should file short minutes which give effect to their agreement but are otherwise consistent with these reasons. As to costs, I agree with what is said, and the course proposed, by Beazley JA. 28 BROWNIE AJA: Most of the facts in these cases are no longer in dispute, and they can be summarised quite briefly, by reference to the findings of the trial Judge, Charteris ADCJ. 29 The plaintiff, Ms Medcalf, was injured on two occasions, in 1980 and in 1983, in the course of her employment with The Macksville & District Hospital ("the employer"). She retained Messrs Perry & Smith ("the solicitors") to act for her in relation to those injuries. They negligently allowed her claim in respect of the 1980 injury to become statute barred, so that she lost the opportunity to obtain damages from the employer in respect of the 1980 injury. But for that negligence, she had a seventy five per cent chance of success in respect of her claim for damages against the employer in respect of that injury, and her action against the employer for negligence in respect of that injury would have come on for trial on or about 30 June 1990. 30 In due course there were heard, together, the plaintiff's action for damages against the solicitors, and her action for damages against the employer in respect of the 1983 injury. His Honour found in favour of the plaintiff on both cases, found that the plaintiff's ongoing problems and the whole of her economic loss should be apportioned equally between the two injuries, and assessed damages in the two cases accordingly, discounting the damages awarded against the solicitors by twenty five per cent by reason of his earlier finding that the plaintiff had a seventy five per cent chance of success, as against the employer in relation to the 1980 injury. 31 The two appeals relate to the way in which his Honour dealt with the workers' compensation payments that had been made to or on behalf of the plaintiff by the employer, or on its behalf. 32 Section 63(5) of the Workers' Compensation Act 1926 ("the Act") provides:- "Where any payment by way of compensation under this Act has been made, the payment shall, to the extent of its amount, be a defence to proceedings against the employer independently of this Act in respect of the injury." 33 In the case between the plaintiff and the employer, his Honour assessed damages for non-economic loss, and interest on that sum, and then considered the various components of the claim for economic loss, both past and future. He then allowed the plaintiff one half of the total sum, so assessed for economic loss, and arrived at a gross figure for damages; and he then deducted one half of the total payments made under the Act. In the case between the plaintiff and the solicitors, the methodology was generally similar, but of necessity a little more complicated in that, first, his Honour had to assess the damages as at 30 June 1990, and then add interest from that date to the date of judgment; and, secondly, he had to deduct twenty five per cent from the total damages assessed, in consequence of his earlier finding that what the plaintiff had lost in consequence of the negligence of the solicitors was a seventy five per cent chance of succeeding as against the employer in respect of the 1980 injury. Putting these complications aside, what his Honour did, once again, was to assess the non-economic damages, add one half of the economic loss, and subtract one half of the total of the workers' compensation payments made. 34 The employer now appeals, contending against the plaintiff that, pursuant to s.63(5) of the Act, it had the benefit of a defence in respect of the whole of the workers' compensation payments made after the date of the 1983 injury; and the plaintiff appeals as against the solicitors, saying that if the employer's appeal succeeds, the amount of the damages awarded to her as against the solicitors should be increased. All parties accept that the two appeals are to be resolved by reference to the single question: how does s.63(5) of the Act operate, given the findings of fact of the trial Judge, not contested on appeal, that the whole of the plaintiff's ongoing problems (that is, her symptoms and difficulties suffered after the happening of the 1983 injury) and the whole of her economic loss, should be apportioned equally between the two injuries? (Once that question is decided, there is no debate about the proper computation of interest, as part of the damages.) 35 Contrary to a view held earlier, it is now established that a single incapacity for work may result from separate injuries. If the injuries were sustained by a worker in separate employments, this may mean that the injured worker is entitled to awards under the Act against both employers although, of course, the worker is only entitled to be actually paid once. Until the insertion of s.7A into the Act in 1980, there was no provision in the Act either for the apportionment of liability between those two employers, or for one employer to recover contribution from the other: Morris v George [1977] 2 NSWLR 552, on appeal Bushby v George [1980] 1 NSWLR 81. 36 The proposition that a single incapacity may, for the purposes of workers' compensation legislation, be attributable to more than one injury was apparently accepted by the High Court in National & General Insurance Company Limited v South British Insurance Company Limited (1982) 149 CLR 327, 332, but at 336 the Court left open for future consideration the question whether, as the Privy Council had apparently accepted in Bushby, "common law principles of causation are applicable to determine whether it can properly be said for the purposes of the Act, that a particular incapacity 'results' from a specified injury". 37 Section 7A provided that where the incapacity of a worker results from more than one injury the liability to pay compensation might be apportioned. Subsequent cases explain that this meant liability between employers, but that the section had no application where the worker was injured more than once, whilst within the one employment: National Employers' Mutual General Insurance Association Limited v Calver [1983] 3 NSWLR 107, 114. Nor did s.7A inhibit the right of an injured worker to proceed against one or both employers: Pickersgill v Freightbases Pty Limited [1983] 3 NSWLR 117. 38 Cases as Calver, Pickersgill and Vanramer Pty Limited v Higgins (1991) 24 NSWLR 661 also discuss the position where a worker is injured twice, so as to be entitled to benefits under the Act, but is entitled to damages in respect of one only of those injuries; and National & General and other cases deal with the position, both as between different employers and between different insurers of the one employer, as to which employer or which insurer is at risk when a worker, injured on more than one occasion, becomes entitled to the benefits of s.11(2) of the Act, that is, when the partial incapacity of a worker is deemed to be a total incapacity. 39 However, the present case throws up a problem not the subject of any prior reported decision. The plaintiff has a single incapacity for work, resulting from two injuries, sustained in the employment of the one employer, whilst the one insurer has been on risk; but her rights to recover damages in respect of the two injuries differ. In the events that have happened, she has now a right to damages against her solicitors, to recover seventy five per cent of the damages she might have recovered against her employer in respect of a 1980 injury; and she is entitled to damages from her employer in respect of a 1983 injury. 40 The employer contended for a rule of law that the whole of the moneys paid under the Act are available to it by way of defence under s.63(5). It submitted that, whilst the findings of the trial Judge, apportioning all of the plaintiff's ongoing problems and all of her economic loss to the two injuries equally, was unexceptionable at common law, for the purpose of assessing damages, there was no justification for dividing up the benefits of s.63(5) as between the two injuries. It contended that the employer, and the employer alone, was entitled to the benefit of that defence. 41 In Baker v Willoughby [1970] AC 467, 492, Lord Reid said:- "But it is a commonplace that the law regards many events as having two causes: that happens whenever there is contributory negligence for then the law says that the injury was caused both by the negligence of the defendant and by the negligence of the plaintiff. And generally it does not matter which negligence occurred first in point of time. I see no reason why the appellant's present disability cannot be regarded as having two causes, and if authority be needed for this I find it in Harwood v Wyken Colliery Co [1913] 2 KB 158. That was a Workmen's Compensation Act case. But causation cannot be different in tort. There an accident made the man only fit for light work. And then a heart disease supervened and it also caused him only to be fit for light work. The argument for the employer was the same as in the present case. Before the disease supervened the workman's incapacity was caused by the accident. Thereafter it was caused by the disease and the previous accident became irrelevant: he would have been equally incapacitated if the accident had never happened. But Hamilton LJ said, at p.169: '… he is not disentitled to be paid compensation by reason of the supervention of a disease of the heart. It cannot be said of him that partial incapacity for work has not resulted and is not still resulting from the injury. All that can be said is that such partial incapacity is not still resulting "solely" from the injury.'" 42 In Bushby at 87-88 Lord Keith of Kirkel said:- "(19) It is well established in common law contexts that an injury or incapacity may be attributable to more than one cause, in the legal sense, operating concurrently. If any authority be required for that proposition, it is sufficient to refer to Baker v Willoughby , particularly the speech of Lord Reid, where it is to be observed also that he equiparated the legal view of causation in tort to that in the field of workmen's compensation. Their Lordships are of the clear opinion that there is indeed no difference between the two, subject to the qualification that in a claim for workers' compensation it is unnecessary to prove that the incapacity was the natural and probable consequence of the injury. The question of foreseeability does not arise. It is sufficient that the incapacity results from the injury by a chain of legal causation unbroken by any novus actus interveniens. (20) In truth, the finding by the Commission in this case that the worker's incapacity resulted both from the accident of 1964 and from that of 1966, which is not now attacked as being unsupported by sufficient evidence, really concludes the matter. There is no room for an artificial rule of law that, in such a situation, one or other accident must necessarily be selected as the cause of the incapacity, apparently, on an entirely arbitrary or capricious basis. Their Lordships conclude that the existence of such a rule of law is unsupported by principle or authority. None of the numerous decisions in the Workers' Compensation Commission and Court of Appeal of New South Wales relied on by the appellants as affording such support, which their Lordships have carefully examined and which it is unnecessary to cite at length, are properly to be understood in that sense. (21) Counsel for the appellants sought to derive support for his contention from the absence in the Act of 1926 of any provision regulating contribution among two or more employees against each of whom a worker has obtained an award of compensation in respect of a single incapacity; the absence of such a provision might be taken to favour the view that the ambiguity should be resolved to the effect of holding that only one award was permissible. But their Lordships can perceive no ambiguity in s.9(1). There is no doubt about the ordinary and natural meaning of the words 'results from'. The issue in the appeal does not turn upon any problem in the construction of s.9(1), but upon the application of ordinary legal concepts of causation. The absence of any provision for contribution may amount to a lacuna in the Act, but a similar lacuna existed at common law as regards contribution among joint tortfeasors. It is clear enough that a worker who obtains awards against two or more employers in respect of a single incapacity cannot legally enforce both or all of them to the effect of obtaining multiple payment of compensation. Satisfaction of one award will pro tanto release the employers against whom the other awards have been obtained: D'Angola v Rio Pioneer Gravel Co Pty Ltd . Thus, in the present case, the Commission was quite correct in noting (it did no more than 'note') on each award that compensation paid thereunder would pro tanto discharge the liability of the respondents against whom the other awards had been made."

43 Noting the reservations of the High Court about this passage in National & General, I consider that we should follow this decision. The result for which the respondent contends would produce an "entirely arbitrary and capricious" result: the employer, found to be liable for only fifty per cent of the plaintiff's economic loss and for the non-economic damages attributable to her ongoing problems, would receive the windfall benefit of the whole of the workers' compensation payments, made in respect of both injuries; and the liability of the solicitors would be increased accordingly (subject to the twenty five per cent discount). No reported decision supports such a result, and nothing in the Act or any other consideration of general principle seems to require it. Whatever might be said about causation for workers compensation purposes generally, in the limited context of the dispute in these two cases, it seems to me that the decision of the learned trial Judge was correct. 44 One might test the proposition for which the employer contends by considering slightly different questions of fact. If the plaintiff's rights against the employer in relation to the 1980 injury had been preserved, and if the 1983 injury had happened without fault on the part of the employer, there is no obvious reason why the employer's rights under s.63(5) should be treated as lost. Similarly, if both injuries had happened without fault on the part of the employer, but the 1980 injury had happened by reason of the negligence of some third party, there is no obvious reason why the employer should not have the benefit of s.64(1)(a) or (b) (giving the employer an indemnity). 45 I propose therefore that the appeal of the employer be dismissed with costs. In relation to the appeal brought by the plaintiff against the solicitors, the parties agreed that certain adjustments needed to be made to the award of damages, by reason of a slip, and orders should be made as proposed by Beazley JA.

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