HRNG ADELAIDE, 8, 12 February, 1991 #DATE 22:5:1991 Counsel for Plaintiff: Mr D.M. Quick, QC

with Mr G.A. Britton Solicitors for Plaintiff: Russell and Russell Counsel for Defendant: Mr S. Walsh Solicitors for Defendant: Ward and Partners Counsel for Workers Mr J.R. Mansfield, QC Rehabilitation and Compensation with Mr M.K. Ricketts Corporation: Solicitors for above: Gun and Davey

JUDGE1 KING CJ This case is stated to the Full Court by a judge of the District Court in unusual circumstances. The plaintiff sustained injury while travelling to work in consequence of a motor vehicle accident involving a motor vehicle driven by the defendant. The plaintiff received payments of compensation from the Workers Rehabilitation and Compensation Corporation pursuant to the Workers Rehabilitation and Compensation Act 1986 in respect of disability caused by the accident, and may be entitled to compensation by way of lump sum payment for non-economic loss calculated in accordance with section 43 of the Act. The plaintiff sued the defendant for damages and obtained judgment in the sum of $23,511. The Corporation gave notice to the defendant and the plaintiff claiming a charge on the judgment sum pursuant to section 54(7)(e) of the Workers Rehabilitation and Compensation Act. There being a dispute between the plaintiff and the Corporation as to the amount of the latter's entitlement, the plaintiff applied in the District Court proceedings for an injunction restraining the defendant and S.G.I.C., the third party insurer of the defendant, from paying to the Corporation any part of the judgment sum. The Corporation was given leave to intervene. The District Court judge thereupon stated this case. 2. This Court need not concern itself with any question as to the correctness of the procedural steps which have been taken by the parties or the court because all interested parties were represented before us and all agreed that we should answer the questions so far as that is practicable in proceedings so constituted. The questions in the Case Stated are as follows:

"I (i) Whether, upon the findings made in the said judgment and on the facts now found by agreement, the said sums and each of them, namely; Medical expenses $1,596.00 Physiotherapy and Chiropractic expenses 658.00 Rehabilitation expenses 858.00 Weekly payments for compensation 12,630.00 Total $15,743.00 constitute compensation paid or payable to the plaintiff under the Act and in particular within the meaning of Section 54 of the Act. (ii) If yes to (i) above, in respect of all or any of the said sums - (a) Does the Corporation have a first charge to the extent thereof upon the damages awarded in the said action in favour of the plaintiff; and (b) Is the Corporation entitled to recover from the defendant to

the extent thereof from the said judgment sum. II (i) Whether, in the circumstances outlined and to the extent relevant upon the finding made in the said judgment the amount

payable pursuant to Section 43(3) of the Act or some part of it and if so how much of it (having regard to the provisions of Section 54(7)(d)(i) of the Act) constitutes compensation payable to the plaintiff under the Act and in particular within the meaning of Section 54 of the Act. (ii) If yes to (i) above in respect of the said sum or some of which part of it - (a) Does the Corporation have a first charge to the extent thereof upon the damages awarded in the said Action in favour of the plaintiff; and (b) Is the Corporation entitled to recover the extent thereof from the defendant or some part of it and if so how much of it having regard to the provisions of Section 54(7)(d)(i) of the Act. III If the Corporation is not presently entitled to claim from the said judgment sum the said amounts totalling $15,743.00 or any portion thereof and the said amount payable pursuant to Section 43(3) of the Act or any part thereof under the Act in the events aforesaid, then in respect of each amount :- (i) Is the amount of the said judgment sum and which part of it to be held by the defendant through SGIC pending a Determination as to the amount of compensation paid or payable under the Act in respect of disability; or (ii) Is such amount to be paid by the defendant through SGIC to and held by the Corporation pending the Determination. IV (i) Is interest payable - (a) by the defendant to the plaintiff upon the said judgment sum until payment of it, or some part of it, to the Corporation; and (b) by the defendant to the Corporation upon the said judgment sum to the extent of the Corporation's right to recover the said sum or some part thereof until payment of it to the Corporation.

(ii) If yes to (i) (a) above, then is such interest included in the amount of the defendant's unsatisfied liability to the plaintiff for the purposes of Section 54(7)(d)(i) of the Act." 3. The difficulty as to the payments set out in Question I(i) arises in this way. The amounts set out for medical expenses, physiotherapy and chiropractic expenses and rehabilitation expenses were paid by the Corporation. They were not allowed, or were not allowed in full, by the trial judge in the action against the defendant. The medical expenses paid by the Corporation include charges made by a general surgeon, Mr Russell, and by two other doctors to whom Mr Russell referred the plaintiff for investigation. The plaintiff was under the care and management of a Dr Matto who had made appropriate referrals, and the evidence did not prove any need for the involvement by Mr Russell. The judge therefore disallowed his charges and those of the doctors to whom he referred the plaintiff. The physiotherapy expenses paid by the Corporation included charges of a physiotherapist which were disallowed in part by the judge as unreasonable, it appearing that the fees charged were 112 per cent higher than she would have charged for treatment for a non-compensable condition. Certain gymnasium charges included under the heading of rehabilitation expenses were disallowed in part because of lack of evidence of the reasonableness of the charges. An amount paid by the Corporation to rehabilitation consultants engaged by the Corporation was disallowed on the ground that it was not an expense incurred by the plaintiff. The Corporation claims to be entitled to include the full amounts paid by it in the amount of its charge on the judgment sum notwithstanding that the plaintiff has been unable to recover them in full. 4. The provisions which govern the Corporation's rights of recovery are to be found in the following subsection of section 54: " (5) Where -

(a) compensation is paid or payable under this Act in respect of a compensable disability; (b) a right of action exists against a person other than the employer for damages in respect of the disability, the person by whom the compensation is paid or payable is entitled to recover from that person the amount of the compensation in accordance with subsection (7)." " (7) Where - (a) compensation is paid or payable to a person ('the injured party') under this Act; (b) the injured party has received, or is entitled to, damages from another person ('the wrongdoer') in pursuance of rights arising from the same trauma as gave rise to the rights to compensation under this Act; (c) the person by whom the compensation is paid or payable under this Act ('the claimant') is entitled to recover the amount of the compensation by virtue of subsection (5) or (6), then the following provisions apply:

(d) the claimant is entitled to recover the amount of compensation paid or payable under this Act from the wrongdoer or the injured party but subject to the following qualifications: (i) no amount may be recovered from the wrongdoer in excess of the

wrongdoer's unsatisfied liability to the injured party; (ii) the claimant must exhaust its rights against the wrongdoer

before recovering against the injured party; iii) no amount may be recovered from the injured party in excess of the amount of the damages received by the injured party; (e) the claimant shall, on giving notice to a wrongdoer of an entitlement to recover compensation under this section, have a first charge, to the extent of the entitlement, on damages payable by the wrongdoer to the injured party; (f) any amount recovered by the claimant against a wrongdoer under this subsection shall be deemed to be an amount paid in or towards satisfaction of the wrongdoer's liability to the injured party; (g) an action for the recovery of compensation under this subsection - (i) may be heard and determined by the Industrial Court; and ii) must be commenced within 3 years after the date of the trauma referred to in paragraph (b)." 5. Mr Mansfield, QC, for the Corporation, argued that amounts which are actually paid by the Corporation for treatment and rehabilitation are paid under the Act even if they are unreasonable and therefore irrecoverable by the plaintiff against a third party. The worker's entitlement to compensation for expenses is limited, however, to expenses "reasonably incurred by the worker", section 32(1). In Thompson and Sons v. The North Eastern Marine Engineering Company Limited 1901 1 KB 428 at 437 Kennedy J expressed the opinion that in an action by an employer against a third party wrongdoer to recover compensation paid to the worker, the third party would be entitled to dispute the reasonableness of the compensation paid by the employer by agreement with the worker. I think that that must be so as a matter of sense and justice and that a construction of the Act which would preclude that must wrong. I would hold that the expenses paid or payable under this Act and therefore recoverable by the Corporation under section 54(5) are limited to expenses "reasonably incurred by the worker" and that any excess has not been paid "under this Act". 6. In some situations compensation paid in respect of expenses not reasonably incurred may nevertheless be regarded as compensation paid under the Act and form part of the Corporation's entitlement to recover because the worker is precluded from disputing that they have been reasonably incurred. The worker may be estopped by his conduct from asserting the unreasonableness of the expenses. In some cases the Corporation may undertake the arranging of the medical treatment on behalf of the worker and may pay the accounts direct. Clearly no estoppel would arise in those cases. In other cases, although not arranging the treatment, the Corporation may by its conduct undertake responsibility for checking the reasonableness of the charges. In such cases, there could be no estoppel against the worker from asserting the unreasonableness of the charges although there might be an estoppel against asserting the unreasonableness of the treatment arrangements. In yet other cases, the worker might make his own arrangements for treatment and, having received the accounts, claim against the Corporation. In doing so, he would be representing that the expenses were reasonably incurred and would be precluded from asserting the contrary in subsequent recovery proceedings. If a payment is compensation paid under the Act, notwithstanding that it was not reasonably incurred, because the worker is precluded from disputing that it was reasonably incurred, it is compensation so paid for all purposes and therefore recoverable by the Corporation not only in an action against the worker but also in an action against the wrongdoer. This is no injustice to the wrongdoer as his liability is limited to the amount of his unsatisfied liability to the worker. For the same reason, in an action by the Corporation to enforce the charge on the damages payable to the worker, the relevant "entitlement" would include any such payment. 7. Something further needs to be said about rehabilitation expenses. Part III of the Act enables rehabilitation services to be provided to workers in programmes established or approved by the Corporation. Mr Mansfield contended that the cost of such services could be recovered under section 54. Clearly such cost is not an expense "incurred by the worker" within the meaning of section 32. Mr Mansfield pointed to the definition of compensation in section 3 as including "any monetary benefit payable under this Act". But the provision of rehabilitation services is not the payment of a monetary benefit. It appears to me to be quite clear that the cost of Part III rehabilitation services cannot be compensation paid or payable under the Act and therefore recoverable pursuant to section 54. If, of course, the worker reasonably incurs expense in connection with his rehabilitation which is payable as compensation under section 32(2)(c), such compensation is payable under the Act and thus recoverable under section 54. 8. How then is Question 1 to be answered? The findings of the learned trial judge as to the reasonableness of the expenses were made in an action between the plaintiff and the defendant to which the Corporation was not a party. In an action by the Corporation to enforce the charge under section 54(7)(e), the Corporation must be entitled to prove that the expenses claimed were reasonably incurred by the worker. The question can be answered in these proceedings only in general terms. I would answer Question 1 as follows:- 1. (i) Yes, in so far and only in so far as they are expenses reasonably incurred by the plaintiff in consequence of the disability. (ii) Yes, to the extent of the Corporation's entitlement. 9. The entitlement of a worker to compensation under the Act for non-economic loss is governed by section 43. I set out the first three subsection: "43. (1) Subject to this Act, where a worker suffers a permanent disability and the disability is compensable under this Act, the worker is entitled (in addition to any entitlement apart from this section) to compensation for non-economic loss by way of a lump sum. (2) Subject to this section, the lump sum shall be a percentage of the prescribed sum determined by reference to the third schedule. (3) Where a compensable disability in respect of which compensation is payable by way of a lump sum under subsection (1) is not mentioned in the third schedule, the lump sum shall be fixed by the Corporation as a percentage (not exceeding 100 per cent) of the prescribed sum having regard to - (a) the nature of the disability; and (b) the extent to which the worker's ability to lead a normal life has been impaired by the disability." The plaintiff's disability is not mentioned in the Third Schedule and the Corporation has not as yet fixed the lump sum under subsection (3). 10. In order to answer Question 2, it is necessary to arrive at a view of the scheme of recovery established by section 54. Subsection (5) of that section confers a right of recovery upon the person, referred to as "the claimant" and including, of course, the Corporation, by whom compensation is paid or payable under the Act. The claimant is entitled to recover the amount of the compensation paid or payable under the Act from the wrongdoer to the extent of the wrongdoer's unsatisfied liability and from the injured party to the extent of any amount not recovered from the wrongdoer but not exceeding the damages which the injured party has received. These amounts may be recovered by action and any such action must be instituted within 3 years of the trauma giving rise to the entitlement to damages and compensation. The charge on damages payable by the wrongdoer to the injured party, conferred by section 54(7)(e) extends to the amount of the claimant's entitlement to recover compensation from the wrongdoer. What is the extent of that entitlement? 11. Mr Mansfield argued that the word "payable" in the expression "paid or payable" which defines the extent of the entitlement, is apt to include not only amounts presently payable but also amounts which will or might become payable in the future. There are difficulties about this construction. It requires that in an action brought by the claimant within the stipulated period of 3 years after the trauma, it will be necessary to place a valuation on the claimant's often contingent liability to pay compensation in the future. So the wrongdoer, or alternatively, the injured person may find themselves liable to pay to the claimant a sum representing an estimate of the present value of amounts which the claimant may in the event never have to pay. Moreover, the claimant's action may have to be brought before the injured person has brought, or at least finalized, action against the wrongdoer. The estimate of future liability made in the one action may differ from that made in the other action. The injured person's damages may be depleted by amounts representing such an estimate, which turn out not to correspond with the amounts allowed in the injured person's action. For these and other reasons Mr Quick, QC, for the plaintiff, argued that the work "payable" must be construed as restricted to amounts presently payable in the sense of presently due and quantified although not yet paid. 12. I think, however, that a consideration of the section as a whole makes it plain that the claimant's entitlement to recover compensation is co-extensive with the liability to pay compensation. The intention disclosed is that the claimant is to be indemnified to the extent of the wrongdoer's liability to damages. I can see no warrant in the Act for limiting the entitlement to recover to amounts actually paid and to amounts due and quantified at the time of the institution of the claimant's action or at any other time which may be thought to be relevant. That being so, notwithstanding the difficulties, I think that the word "payable" must be understood as including amounts of compensation which the claimant will or may become liable to pay in the future. 13. There is no provision of the Act which assists in determining how a court is to arrive at a sum in the present which represents compensation payable in the future. There are well established principles in the law as to common law damages to enable damages to be assessed in comparable situations. I think that the legislature must have intended that those principles be applied by analogy to the present problem. The task of the court would be to arrive at a sum of money, payable at the time of judgment in the claimant's action, which represented a fair valuation of the claimant's future and often contingent liability. 14. The entitlement in respect of which the charge under section 54(7)(c) is created is co-extensive with the entitlement to recover against the wrongdoer. The amount for which the charge attaches is limited by the amount of the entitlement assessed in accordance with the principles which I have discussed. It is limited, however, in my opinion, in another way. The charge is created by the giving of a notice. There must be both entitlement and notice. It seems to me that the wrongdoer can only be affected by the charge to the extent of the notice which he has received. He is under a legal liability to satisfy the injured person's judgment forthwith. It cannot be the wrongdoer's obligation to ascertain the amount of the claimant's claimed entitlement. The responsibility of notifying the wrongdoer must be that of the claimant. It follows that the claimant must give notice of the amount of the claimant's claim and the charge can be operative only to the extent of the amount so notified, such amount not exceeding the amount of the true entitlement. 15. The position of the wrongdoer against whom judgment has been obtained, or who desires to settle an injured person's claim, might be difficult. His liability to the injured person will be satisfied by payment to the claimant only to the extent of the claimant's entitlement. If he pays to the claimant an amount in excess of the true entitlement, he will remain liable to the injured person for the excess. If the injured person and the claimant are not in agreement, the wrongdoer, for his own protection, may have to interplead in an action by the claimant to enforce the charge, or if no such action is brought, may have to institute interpleader proceedings. 16. I would answer Question II as follows: II (i) The amount payable pursuant to section 43(3) is an amount payable under the Act. (ii) (a) The amount for which the Corporation has a first charge, subject to giving proper notice of such amount, on the sum awarded in the action, includes an amount which, paid now, represents a fair valuation of the Corporation's future liability to the plaintiff under section 43(3). (b) Section 54(7)(d)(i) does not limit the amount recoverable from the defendant by reference to any individual component of the Corporation's entitlement, including its liability under section 43(3), but rather limits the total amount so recoverable to the total amount of the defendant's unsatisfied liability. 17. In view of the answers which I propose to the first two questions, I do not think that it is necessary to answer the third question. The plaintiff is entitled to have his judgment against the defendant satisfied and the defendant would not be justified in withholding any part of it which is not subject to the charge as defined by the amount nominated in the Corporation's notice. If there are competing claims by the plaintiff and the Corporation, it may be necessary for the defendant to interplead. 18. The fourth question relates to statutory interest on the judgment. Section 153 of the Local and District Criminal Courts Act, so far as material, is as follows: "153 (1) ... judgments ... of any local court, Judge, or special magistrate for the payment of money - (a) ...

(b) shall carry interest on the amount thereof for the time being remaining unpaid at the rate prescribed by Rules of Court from the date thereof until payment." The provision is unequivocal and unqualified. Mr Mansfield agreed that the Corporation could have no claim to interest. The fact that a charge exists in respect of the whole or part of the amount of the judgment cannot negate the express provision that the judgment bears interest until paid. 19. I do not think that the statutory interest can be included in the defendant's unsatisfied liability for the purpose of section 54(7)(d)(i). It cannot be included in the Corporation's entitlement for the purpose of section 54(7)(e). Moreover the charge created by section 54(7)(e) is a charge "on damages payable" and does not extend to interest on the judgment. 20. I would answer Question IV as follows: IV (i) (a) Yes. (b) No. (ii) No.

JUDGE2 MILLHOUSE J I agree with the order of the Chief Justice for the reasons he has given.

JUDGE3 DEBELLE J I agree with the reasons for judgment of the Chief Justice, which I have had the advantage of reading. There is nothing I can usefully add. It follows that I agree with the answers proposed.