Supreme Court of NSW|1998-10-23|Before: Meagher JA, Beazley JA, Ireland J, By Meagher JA, Mr P

Op Industries Ltd v Mmi Workers Compensation (NSW) Ltd Matter No Ca 40022/96 [1998] NSWSC 632 (23 October 1998)

OP INDUSTRIES LTD v MMI WORKERS COMPENSATION (NSW) LTD

The Supreme Court of New South Wales Court of Appeal

OP INDUSTRIES PTY LIMITED v MMI WORKERS COMPENSATION (NSW) LIMITED & ORS

In the hearing below on common law negligence, Ireland J determined the appellant liable as to $149,233 and the third respondent Central West Apprentices Group Limited as to $73,232, for injuries sustained by an employee, Mr Ward. There was no finding of contributory negligence. The first respondent is the appellant's insurer for the purposes of the Worker's Compensation Act. Although no question of statutory compensation under the Act arises, Mr Ward was found to be a worker within the Act. Who exactly was Mr Ward's employer at the date of injury was in issue below, and was construed as Central West Group Apprentices Limited by the application of Clause 1 of Schedule 1 of the Act.

The appellant seeks on appeal a finding that its liability is no greater than the third respondent and a corresponding reduction in the amount of damages payable by the appellant to Mr Ward; a finding that Mr Ward was, by operation of the common law, an employee of the appellant so as to obtain indemnity from the first respondent for its liability to Mr Ward; and thirdly that the first respondent indemnify the appellant for the costs of this appeal and the hearing below.

The effect of the statutory deeming of Clause 1 of Schedule 1 is limited to recovery of statutory compensation within the Act by operation of the phrase "for the purposes of this Act". Clause 1 is intended to assist an injured worker to identify potential employers liable to pay compensation under the scheme of the Act. This clause cannot be tortured into a provision depriving a worker of the exercise of his common law rights.

The balance of indicia favours the view that the appellant was at all material times Mr Ward's employer: Mr Ward's employer originally was undoubtedly the appellant; subsequent to his indentureship to the third respondent, the appellant continued to control and direct Mr Ward's employment, pay him his nett wage and compensate the third respondent for taxation payments and workers compensation payments made by the third respondent on Mr Ward's behalf.

The first respondent is bound to indemnify the appellant under its statutory policy.

1. To determine whether the appellant was Mr Ward's employer at the date of injury, the arrangements and conduct of the parties are examined as a whole. To construe Clause 1 Schedule 1 of the Act narrowly within the phrase "for the purposes of the Act" so as to limit its operation to the recovery of statutory compensation is unnecessary in order to achieve the objectives of the Act and may well introduce or leave open complications the clause was intended to overcome.

OP INDUSTRIES PTY LIMITED v MMI WORKERS COMPENSATION (NSW) LIMITED & ORS

MEAGHER JA: This appeal arises out of a decision by Ireland J involving an injury suffered by Mr P J Ward in an accident which befell him on 20 March 1990. He was then working on some scaffolding about 3.5 metres high, when he fell to the ground through a large hole in the scaffolding which was unguarded. His Honour found that the injury was serious, and entitled Mr Ward to verdicts totalling $222,465. His Honour found no contributory negligence. The conclusions that (a) the plaintiff, Mr Ward, was entitled to a verdict, (b) the quantum was unexceptional and (c) there was no contributory negligence, are accepted by all parties to this appeal. What this appeal is basically concerned with is against whom any verdict should be given, and on what basis.

Mr Ward left Bathurst High School when he was seventeen, after having completed his School Certificate. He then became a car detailer for a few months with Bathurst Motors. Then he worked with another employer, and finally ended up working for OP Industries Pty Limited, the appellant, as a labourer. At the suggestion of his employer he went to see the respondent Central West Group Apprentices Limited to organise an apprenticeship. He signed an indentureship with that body, whereby he undertook to learn from them the mysteries of plumbing and they undertook to instruct him in those mysteries. Apparently at the expense of Central West Group Apprentices Limited, he successfully completed a plumbing course at a TAFE. He was then allotted by Central West Group Apprentices Limited to the appellant as "host-employer".

Thus, he continued to do his old work for the company which formerly employed him. There was no question of doing any work for Central West Group Apprentices Limited, as that organisation did not carry on the business of plumbing, or indeed any other trade. Any practical training in plumbing was given whilst doing jobs for the appellant. What Central West Group Apprentices Limited did was to operate as a sort of employment agency.

His payment was a little more complicated. In the first instance the appellant paid him his (presumably nett) wage. Central West Group Apprentices Limited paid his insurance premium and tax, but was reimbursed by the appellant for amounts expended in that regard. In addition, his wages as an apprentice were less than the wages he had formerly earned as a labourer; and the appellant paid him a supplementary amount to cover the difference. On the other hand, he had signed a quantity of documents at Central West Group Apprentices Limited's office which designated that organization as his "employer".

It was against this background that Mr Ward issued a statement of claim against both the appellant and Central West Group Apprentices Limited. Two defendants were chosen because he did not know who his "employer" was at law. Against such defendants he alleged common law negligence, breach of contract and breach of statutory regulations. Merely to read it is to see it is wholly unremarkable. It is like many other statements of claim. It has nothing to do with worker's compensation. It is not a claim for compensation payable under the Workers Compensation Act. Truly, that Act must affect the litigation, since it contains all sorts of caps and limitations applicable to common law litigation. But that does not convert a common law action into a workers compensation claim.

The respondent MMI Workers Compensation (NSW) Limited is the appellant's insurer, and issued it with a policy in statutory form.

The first, and principal point raised on this appeal is the correctness of his Honour's finding that Clause 1 of Schedule 1 of the Act converted, for the purposes of the litigation and for all purposes, Central West Group Apprentices Limited into Mr Ward's sole "employer", and therefore precluded Mr Ward (or anyone else) from claiming that the appellant was his employer.

"1. Workers lent or on hire (cf former s6(1), def "employer")

If the services of a worker are temporarily lent or let on hire to another person by the person with whom the worker has entered into a contract of service or apprenticeship, the latter shall, for the purposes of this Act, be deemed to continue to be the employer of the worker while the worker is working for that other person."

Mr Cranitch SC, learned senior counsel for the appellant, submitted that his Honour's decision on this point must be wrong, and in my view this submission compels acceptance, if for no other reason because the effect of the statutory deeming is limited to "the purposes of this Act." It is intended to assist an injured worker to know which of several potential "employers" is liable to pay him compensation under the Act. It cannot be tortured into a provision depriving a worker of the exercise of his common law rights.

This leads to the question of who was Mr Ward's employer? In my view, it was the appellant. It was undoubtedly originally the employer, and Mr Ward's change from labourer to apprentice brought no change to that situation. The appellant continued to control Mr Ward, to give him day to day direction, to supply him with tools, to designate what, if any, work he was to do. As far as Central West Group Apprentices Limited is concerned, it took no interest in his behaviour, and never once even visited the appellant's business from the date of the indentureship until the date of the accident. In addition, in effect the appellant was Mr Ward's paymaster. As against this, Central West Group Apprentices Limited paid his tax and Worker's Compensation payments in the circumstances I have outlined. In my view, the balance of indicia favours the view that the appellant was at all material times Mr Ward's employer.

From this it also follows that the first respondent MMI Workers Compensation (NSW) Ltd is bound to indemnify the appellant under its statutory policy.

I should add that I am now of the view that the judgment of Mahoney JA is preferable to that of Sheller JA in Western Regional Organisers of Councils Groups Apprentices v Stratona Pty Limited (unreported, 29 August 1995).

1. That the findings of his Honour as to the employment of the Second Respondent with the appellant be set aside.

2. That the verdict and judgment for the Second Respondent against the appellant be set aside.

3. That the Second Respondent be declared to be an employee of the Appellant for the purposes of this action.

4. That the damages awarded to the Second Respondent against the Appellant be reassessed in accordance with Division 3 of Part 5 of the Workers Compensation Act, 1987.

5. That the First Respondent be ordered to indemnify the Appellant in respect of the damages to be paid by the Appellant to the Second Respondent pursuant to Order 4 above.

6. That Verdict and Judgment be entered for the Appellant against the First Respondent on the Second Cross Claim.

7. That the First Respondent be ordered to pay the costs of:

(b) The appellant in the trial including any costs of the Second Respondent which were ordered to be paid by the Appellant; and

(8) The First Respondent to have a certificate under the Suitors Fund Act.

The second respondent, Mr Ward, was injured in the course of his employment on 20 March 1990. In his action in the Common Law Division, in which judgment was given in December 1995, he was awarded $73,232 against the third respondent, Central West Group Apprentices Ltd, and $149,233 against the appellant, OP Industries Pty Ltd. Each was ordered to pay half of Mr Ward's costs. A cross-claim by Central West Group against OP Industries was dismissed, and each was ordered to pay its own costs. A further cross -claim by OP Industries against the first respondent, MMI Workers Compensation (NSW) Ltd, was also dismissed, and OP Industries was ordered to pay MMI's costs of that cross-claim. OP Industries has appealed. No other party has appealed or given a notice of contention.

(i) Mr Ward's damages award against it be reduced to the amount which Mr Ward was awarded against Central West Group, which was assessed in accordance with Div.3 of Pt 5 of the Workers Compensation Act 1987;

(ii) MMI indemnify OP Industries in respect of its liability to Mr Ward; and

(iii) MMI pay OP Industries' costs of this appeal and the trial, including the costs which OP Industries was ordered to pay.

References in this judgment to provisions of the Workers Compensation Act 1987, including any references expressed in the present tense, relate to the Act as it existed at the time which is material to this appeal.

The first of the orders sought by OP Industries depends upon conclusions that Mr Ward was a worker and it was his employer at the time when he was injured for the purpose of assessing the common law damages to which he is entitled from OP Industries. If OP Industries was Mr Ward's employer for the purposes of Pt 5 of the Workers Compensation Act, "Common Law Remedies", there must be a substantial reduction in OP Industries' liability to Mr Ward in accordance with Pt 5 Div 3 "Modified Common Law Damages".[1] Since no attempt was made in this Court to increase the damages Mr Ward was awarded against Central West Group, his total damages would be substantially reduced.

The second and third orders sought by OP Industries depend upon conclusions that Mr Ward was a worker and it was his employer at the time when he was injured within the meaning of the policy of insurance[2] held by OP Industries from MMI in compliance with s155 of the Workers Compensation Act. That policy was in Form 7 of Schedule 1 to the Workers Compensation (General) Regulations 1987. If OP Industries succeeds on this part of its appeal, it will be entitled to an indemnity from MMI in respect of its liability to Mr Ward.

Both Division 3 of Part 5 of the Act and the indemnity provided by a policy in Form 7 of the Schedule 1 to the Workers Compensation (General) Regulations 1987 were concerned with an employer's liability to its worker in respect of an injury to the worker. The relationship of "worker" and "employer", which was discernible in the definition of "worker" in subs3(1) of the Act, was central to the operation to the Act and the statutory policy of insurance. That definition was as follows:

"worker means any person who has entered into or works under a contract of service or apprenticeship with an employer, whether by way of manual labour, clerical work or otherwise, and whether the contract is expressed or implied, or is oral or in writing, but does not include:

Obviously, Mr Ward was a worker and OP Industries was initially his employer. However, when he signed a contract of apprenticeship with Central West Group, it became his employer. The single question for decision on this appeal is whether OP Industries was nonetheless Mr Ward's employer by virtue of the arrangements and conduct of the parties at the time when he was injured.

Section 5 and Clause 1 of Schedule 1 to the Workers Compensation Act were in the following terms:

"5. Deemed employment of workers (cf former s.6(3A)-(14E))

1 Workers lent or on hire (cf former s 6 (1), def "employer")

After Mr Ward became apprenticed to Central West Group, it temporarily lent or let on hire his services to OP Industries. That conclusion is supported by the circumstance that OP Industries could not terminate his employment but could only "return" him to Central West Group to find him another person to provide him with practical training, and I did not understand OP Industries to submit that Mr Ward's services had not been temporarily lent or let on hire to it by Central West Group. However, OP Industries argued that Clause 1 of Schedule 1 to the Act was inapplicable to the determination of whether it or Central West Group was Mr Ward's employer at the time when he was injured. According to OP Industries, the phrase "for the purposes of this Act" in Clause 1 of Schedule 1 should be confined to the provisions of the Workers Compensation Act which relate to statutory compensation.[3] The only reason advanced in support of that proposition was an assertion that, historically, such compensation was the Act's primary concern.

The construction of Clause 1 of Schedule 1 which OP Industries sought was not only unnecessary in order to achieve the Act's objectives but might well have introduced or left open complications which Clause 1 of Schedule 1 was clearly intended to avoid. Such a construction would have been contrary to s5 of the Act, the plain literal meaning of Clause 1 of Schedule 1, and the decision of this Court in Western Sydney Regional Organisation of Councils Group Apprentices v Statrona Pty Ltd & Ors.[4] Accordingly, in my opinion, OP Industries' submission should not be accepted.

See, for example, Dokoza v Stadkite Pty Ltd (1997) 42 NSWLR 544.

[2] See Employers Mutual Indemnity Association Ltd v K v Hutcherson Pty Ltd (1976) 2 NSWLR 302, at pp304-305

[3] "Compensation" was also defined in subs3(1) of the Workers Compensation Act.

Compensation Act 1987

Workers Compensation (General) Regulations 1987

Compensation Act 1987

Workers Compensation (General) Regulations 1987

Op Industries Ltd v Mmi Workers Compensation

At a glance

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Judgment (53 paragraphs)

Op Industries Ltd v Mmi Workers Compensation (NSW) Ltd Matter No Ca 40022/96 [1998] NSWSC 632 (23 October 1998)

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Legislation Cited (4)

Cases Cited (2)