Phung v Advanced Arbor Services Pty Ltd

Court of Appeal (NSW)|2010-08-17|Before: Beazley JA, Basten JA, Johnson J

Background 2 The appellant is a registered dentist. Between 2002 and 2003, the appellant provided dental services to a Mr Todd Dean in the circumstances explained below. 3 In December 2001, Mr Dean had signed a certificate and indenture of traineeship with the respondent as his employer. There was no dispute that Mr Dean's traineeship had been approved by the Industrial and Commercial Training Council of New South Wales for the purposes of the Australian Traineeship System and that accordingly, he was a trainee for the purposes of the Workers Compensation Act 1987, s 158(1). Section 158 makes provision in relation to workers compensation insurance for trainees, by providing that the employer of a trainee shall be deemed to hold a policy of insurance with the Insurance Ministerial Corporation (the statutory insurer). 4 Johnson J found that Mr Dean was employed by the respondent as a trainee, and that on 19 December 2001 he suffered an injury to his mouth and jaw in the course of that employment. Following his injury, the respondent, through its principal Mr Beattie, arranged for Mr Dean to come under the care of the appellant for the purposes of dental treatment arising from the injury he had sustained. The dental work carried out by the appellant was paid for by GIO General Limited as agent for the statutory insurer. 5 In 2003, the statutory insurer arranged for Mr Dean to be independently examined by Dr Andrew Howe, consultant dentist. Dr Howe initially reported to the insurer by telephone as to the "[e]xtremely poor dentistry job" that the appellant had performed on Mr Dean. Dr Howe considered that the work undertaken was "a complete case of fraud … by [the] dentist". In a later written report, Dr Howe expressed the opinion that it was extremely unlikely that any of the dental services provided by the appellant to Mr Dean, which involved removing the nerves from all of the teeth, reducing all the teeth and placing crowns on all 28 teeth, was necessary. 6 The statutory insurer continued to make payment after receipt of the initial information from Dr Howe. The clams officer dealing with the matter believed that as liability for the claim had been accepted, there was an obligation on it to continue to make payments. Subsequently, the statutory insurer, pursuant to its claimed right of subrogation, brought the proceedings subject of this appeal in the name of the respondent in the Supreme Court, Common Law Division, claiming repayment of the moneys paid to the appellant for the dental treatment afforded to Mr Dean by the appellant. 7 The claim for reimbursement and/or repayment of the moneys paid to the appellant was advanced on three bases; unjust enrichment due to mistake; contract; and breaches of, relevantly, the Fair Trading Act 1987, s 42 for false and misleading conduct. The appellant denied liability. The respondent had also based its claim on the statutory right to indemnity provided by the Workers Compensation Act, s 151Z. That pleading was abandoned, both parties accepting that Mahony v J Kruschich (Demolitions) Pty Ltd [1985] HCA 37; (1985) 156 CLR 522 applied, so as to make that claim unavailable. 8 Three matters were in issue before the trial judge. The first issue related to the injury sustained (the injury issue); the second was whether the respondent was the appropriate party to seek recovery of moneys paid to the appellant for the dental treatment provided to Mr Dean (the proper plaintiff issue); and the third was whether, if the respondent was the appropriate plaintiff, it had made out any of its causes of action (the causes of action issue).

The injury issue 9 The injury issue was essentially resolved before the trial judge by an admission made by the appellant pursuant to the Civil Procedure Act 2005, s 70(1)(c). The admission was in these terms: "That treatment and advice provided by [the appellant] to Mr Todd Dean was so inexcusably bad as to constitute a novus actus interveniens as to terminate the relationship between the injury sustained by Mr Dean on 19 December 2001 and the consequences of the treatment provided to Mr Dean by [the appellant]." 10 The trial judge, in any event, made a finding that the treatment provided to Mr Dean by the appellant was not reasonably necessary as a result of the workplace injury on 19 December 2001 and that the standard of treatment provided by the appellant fell so far below proper professional standards as to be grossly negligent or inexcusably bad: see Mahony v J Kruschich. 11 There is no challenge to his Honour's finding and the s 70 admission remains on the record.

The proper plaintiff issue 12 The trial judge summarised the essential issues raised by the parties in respect of the proper plaintiff issue in these terms: "[44] In summary, [the respondent] submitted that:

(a) [the respondent] was required to hold a policy of insurance for its liability under the WC Act for injury to a worker as mandated by s.155 WC Act;

(b) Mr Dean was a worker employed by [the respondent] and was also a trainee as defined in s.158 WC Act;

(c) as at December 2001, the legislation deemed the employer of a trainee to hold a policy of insurance with the New South Wales Insurance Ministerial Corporation for the full amount of the employer's liability under the WC Act in respect of the trainee for any relevant injury: s.158(3) WC Act;

(d) the consequence of Mr Dean being a worker employed by [the respondent] and a trainee under the Australian Traineeship System, meant that: (i) [the respondent] was liable to pay compensation for injury to Mr Dean under the WC Act, (ii) [the respondent's] compulsory insurance required by s.155 WC Act was by way of indemnity insurance provided by the New South Wales Insurance Ministerial Corporation at the time of the accident, and subsequently by its legal successor, the New South Wales Self Insurance Corporation, pursuant to s.158 WC Act,

(e) the principles of subrogation permit the insurer to bring the present proceedings in the name of [the respondent], as employer, to recover sums of money paid to [the appellant] in the circumstances of this case.

(a) the payments made to [the appellant] with respect to his treatment of Mr Dean were not paid by [the respondent], but by GIO General Limited or some other manifestation of the New South Wales Government such as the [Treasury Managed Fund]

(b) [the respondent] was not entitled to recover the payments from [the appellant];

(c) in any event, [the respondent] cannot rely upon s.158 WC Act as the section did not apply in respect of insurance for any period after 30 September 1999: s.158(11) (as amended in 1998);

(d) whatever arguments may be advanced in support of the claim that [the appellant] ought repay the moneys received by him for his treatment of Mr Dean, [the respondent] had no standing to bring these proceedings, nor is the insurer entitled to bring these proceedings in the name of [the respondent];

(e) although the principles of subrogation were not challenged … these principles did not assist [the respondent] in this case." 13 Two matters referred to in [44] and [45] should be mentioned, so as not be a distraction from the issues on the appeal. First, the obligation to have a policy of workers compensation insurance under s 155 is not relevant to the disposition of the proceedings, as Mr Dean was a trainee. The only relevant provision is s 158: see s158(2). Secondly, the appellant no longer contends that s 158(11) applied. Accordingly, there is no dispute that s 158 was in force at the time of Mr Dean's injury and during the period in which he was undergoing treatment.

The causes of action issue 14 On the first day of the trial, the appellant conceded that he had to repay the money, but maintained the respondent was not the correct recipient. On the final day of the hearing, the appellant acknowledged that GIO General Limited made the payments to him under a mistake of fact, but that GIO General Limited was negligent in not checking that proper payments were being made. The appellant contended that the respondent's recourse, if any, was therefore to GIO General Limited. 15 His Honour rejected this submission on the basis that negligence does not preclude recovery by a plaintiff whose mistake led to payment: see Mason and Carter, Restitution Law in Australia, 2nd ed, 2008 at [421]; Kelly v Solari (1841) 9 M & W 54; 152 ER 24; Banque Financiere de la Cite v Parc (Battersea) Limited [1999] 1 AC 211 at 235; Scottish Equitable Plc v Derby [2000] 3 All ER 793. His Honour held, at [97], that all payments had been made under the same mistake of fact, in the sense that the insurer believed it had a legal liability to make the payments. His Honour was satisfied, therefore, that the respondent had established its claim for restitution of the moneys paid. 16 His Honour also held that there was a contract in existence between the appellant and the respondent: the respondent offered the appellant the opportunity to see and treat Mr Dean; the appellant accepted the offer and treated Mr Dean in exchange for payment by the respondent. 17 His Honour was satisfied that the objective intention of the respondent and the appellant was to enter into an agreement whereby the appellant provided professional dental services reasonably necessary to treat the workplace injury complained of by Mr Dean, in exchange for payment. 18 His Honour also found that the respondent was entitled to relief pursuant to the Fair Trading Act and the Trade Practices Act 1974 (Cth), but considered that relief was more appropriately granted under the Fair Trading Act. 19 On the appeal, the appellant contended that the trial judge erred on both the 'proper plaintiff' issue and the 'causes of action' issue. Before dealing with the appellant's submissions on each of these issues, it is convenient to first refer to the relevant statutory provisions which governed the respondent's insurance obligations in respect of Mr Dean.

Relevant legislative scheme 20 Section 158 made provision for workers compensation insurance for trainees. "Trainee" was defined in s 158(1)(a) to mean: "… a person who is a trainee under a traineeship approved by the Industrial and Commercial Training Council of New South Wales for the purposes of the Australian Traineeship System …" 21 Section 158(2) provided that s 155 did not require an employer to obtain a policy of insurance in respect of a trainee. 22 Section 158(3) provided: "The employer of a trainee shall be deemed to hold a policy of insurance with the Insurance Ministerial Corporation for the full amount of the employer's liability under this Act in respect of that trainee and for an unlimited amount in respect of the employer's liability independently of this Act (but not including a liability for compensation in the nature of workers compensation arising under any Act or other law of another State, a Territory or the Commonwealth or a liability arising under the law of another country) for any injury (as defined in section 155 (1A)) to that trainee." 23 Section 159 provided, relevantly, that a policy of insurance, in so far as it related to any liability under the Workers Compensation Act, contained only such provisions as prescribed by the regulations. 24 The relevant regulations were contained in the Workers Compensation (General) Regulation 1995 (the Regulation). Clause 52 provided that for the purposes of the Workers Compensation Act, s 159 a policy of insurance must contain the provisions specified in Form 4. Clause 53 provided: " 53 Trainees under Australian Traineeship System

(1) A policy of insurance deemed to be held by an employer under section 158 of the Act must contain the provisions specified in Form 4 in respect of domestic or similar workers, subject to the omission of any reference to the payment of premiums for the policy and the making of a proposal in relation to the policy." 25 Schedule 1 to the Regulation contained the prescribed forms. Form 4, referred to in the Regulation, cl 53, was the statutory form of employers insurance policy prescribed by the Regulation (the statutory policy). Clause 3 of the statutory policy provided that the insurer would indemnify the employer against compensation that the employer became liable to pay under the Workers Compensation Act. Clause 5 provided: " 5 Insurer is directly liable to workers

The Insurer (as well as the Employer) is directly liable to any worker … to pay the compensation under the Act or other amount independently of the Act for which the Employer is liable and indemnified under this Policy. This means that a claim can be made and action taken directly against the Insurer." 26 Clause 12 provided: " 12 Subrogation

The Insurer can use the name of the Employer in any proceedings to enforce, for the benefit of the Insurer, any order made for costs or otherwise. The Insurer has the right of subrogation in respect of all rights which the Employer may have against any person or persons who may be responsible to the Employer or otherwise in respect of any claim for any injury covered by this Policy. The Employer must execute such documents as may be necessary for the purpose of vesting any of those rights in the Insurer, as and when required to do so by the Insurer." 27 The Workers Compensation Legislation Amendment (Trainees) Act 2003, cl 8 provided that: "Section 158(2) of this Act (as in force immediately before its repeal by the 2003 amending Act) continues to have effect in relation to any person employed as a trainee immediately before that repeal until 31 December 2004, or to the end of the traineeship, whichever first occurs." 28 The Insurance Ministerial Corporation, being the deemed insurer pursuant to s 158(3), was constituted as a corporation by the Government Insurance Office (Privatisation) Act 1991. Pursuant to s 24, the assets, rights or liabilities that were part of the business undertaking of the GIO (which was a body corporate incorporated under the Government Insurance Act 1927) were to be part of the new privatised corporation other than excluded undertakings. 29 The NSW Self Insurance Corporation Act 2004 constituted the NSW Self Insurance Corporation as a body corporate to have the functions with respect to the operation of government managed fund schemes, and entering into insurance or other agreements. Schedule 1, Pt 2, cl 2 provided that the NSW Self Insurance Corporation was a continuation of and the same legal entity as the New South Wales Insurance Ministerial Corporation constituted by the Government Insurance Office (Privatisation) Act. The NSW Self Insurance Corporation Act Sch 1, cl 3 provided for the continuation of the Treasury Managed Fund which was "taken to be a government managed fund scheme subject to this Act".

Issues on the appeal 30 The appellant raised a number of interrelated grounds of appeal, which essentially derived from the underlying proposition that the respondent was not Mr Dean's employer. These grounds of appeal effectively raised 3 issues: (1) The respondent was not Mr Dean's employer for the purpose of the Workers Compensation Act. Rather, the Australian Traineeship System was the employer; (2) the respondent was not liable, either itself or through its insurer, to pay for medical or related treatment under the Workers Compensation Act, s 60; (3) the trial judge erred in finding that the respondent had a contract of insurance with the named insurer, the Treasury Managed Fund.

The proper plaintiff issue 31 The appellant submitted that once the respondent abandoned its claim for recovery under the Workers Compensation Act, s 151Z, the identity of Mr Dean's employer was irrelevant, as there were no longer any worker's compensation issues involved. The appellant accepted that the moneys were paid to him by an insurer and that in accordance with his concession at trial that the moneys had been paid to him under a mistake fact, and subject to expiry of the limitation period upon which the appellant would seek to rely, the moneys were repayable to the insurer that had paid the moneys. He contended therefore that the only issue for his Honour was which insurance company was responsible for workers compensation payments for Mr Dean. 32 The appellant initially contended that the entity responsible for such payments was the Australian Traineeship Scheme. He also contended that the Australian Traineeship Scheme was Mr Dean's employer. In the course of oral argument, the appellant submitted that Mr Dean's employer was the State of New South Wales. This submission was seemingly based upon the next proposition advanced by the appellant, namely, that the insurer in this case was the Treasury Managed Fund, which it alleged was the entity that paid for Mr Dean's treatment. In this regard, the appellant accepted that GIO General Limited would have a right of recovery, as it acted as agent for the Treasury Managed Fund. 33 The appellant's submissions suffered from an immediate difficulty, in that neither the Australian Traineeship System nor the Treasury Managed Fund is a legal entity. Accordingly, the Australian Traineeship Scheme could not be an employer and the Treasury Managed Fund could not be an insurer. 34 Despite the appellant's resistance to the proposition, Mr Dean was employed by the respondent as a trainee and the worker's compensation insurance arrangements in respect of that employment were governed by the provisions of the Workers Compensation Act and the Regulation set out above. There was a deemed statutory policy of insurance pursuant to s 158(3) in respect of which the NSW Self Insurance Corporation, as the statutory successor to the NSW Insurance Ministerial Corporation, was the insurer and thus entitled to be subrogated to such rights as the respondent had to the recovery of the moneys paid to the appellant. 35 The origin of the appellant's difficulty in accepting that Mr Dean was employed by the respondent appears to have derived from the fact that some of the correspondence relating to the matter was on letterhead entitled "Treasury Managed Fund". In those letters, the Australian Traineeship Scheme was described as the employer. However, his Honour found it was clear on the evidence that this information came from a computer system that "pre-populates" documents and was not a true indication of the identity of employer. There was also evidence from a Ms Howard, an insurance officer at GIO General Limited, that under the Australian Traineeship system "the actual employers were businesses from all across the State". 36 His Honour was satisfied from Ms Howard's evidence that the respondent was Mr Dean's employer. There is no basis to disturb this finding, which also finds support in the Certificate and Indenture that Mr Dean signed with the respondent. I would only add that the appellant's submission that the State was Mr Dean's employer finds no support, either in the evidence or in the statutory scheme and must be rejected. 37 There is a further matter which should be mentioned. The appellant's submission that the insurer who paid the appellant was the Treasury Managed Fund not only suffers from the flaw to which I have referred, it fails to take into account the observations made by Smart AJ in an interlocutory judgment on 9 February 2009. His Honour said: "[3] While some of the documents bear the heading Treasury Managed Fund, it is not, as such, a legal entity. As a result of the combination of the Government Insurance Office (Privatisation) Act 1991 No 38 sections 4(1) (definition of Ministerial Corporation) 24 and 28 and NSW Self Insurance Corporation Act 2004 ss7(2)(c) and (d) and Schedule 1 clauses 2 and 3, NSW Treasury Managed Fund is taken to be a Government managed fund scheme subject to the latter Act and is subject to and part of NSW Self Insurance Corporation which is a continuance of and the same legal entity as NSW Insurance Ministerial Corporation constituted by the 1991 Act earlier mentioned.

[4] While the Treasury Managed Fund and TMF were convenient descriptions for use in argument, the judgment and in the amended statement of defence as presently proposed, in view of the terms of the legislation where those descriptions are used in the pleadings, each should be taken as including a reference to NSW Self Insurance Corporation otherwise it may be necessary for the defendant to amend his pleading and that would involve unnecessary expense. It is apparent from the legislation (see especially s7(2) and 11 (2)(e)of the latter Act) that the NSW Self Insurance Corporation is a Workers' Compensation Insurer and that it operates via the Treasury Managed Fund, part of Consolidated Revenue. It also operates via GIO General Ltd. (See Spencer Bower, Turner and Handley, "The Doctrine of Res Judicata", 3 rd edn, [169]-[171])." 38 The appellant expressly stated in his written submissions that the interlocutory decisions of Smart AJ (and of Hall J) in the matter do not form part of the challenge on the appeal. This must be taken as an acceptance of the findings made in those judgments. It is apparent from Smart AJ's judgment that his Honour permitted the pleadings, including the appellant's defence, to proceed without formal amendment on the basis that a reference to the Treasury Managed Fund was a reference to the NSW Self Insurance Corporation. In addition, the appellant did not dispute a statement made by senior counsel for the respondent at trial that the payments had been made to the appellant by GIO General Limited on behalf of the NSW Ministerial Corporation (succeeded by the NSW Self Insurance Corporation as explained above) out of something referred to as the Treasury Managed Fund. It is difficult, therefore, to see the basis upon which the appellant now seeks to maintain the arguments that have been advanced on the appeal. 39 In conclusion on the proper plaintiff issue, it is clear on the evidence that the respondent was Mr Dean's employer and that pursuant to the Workers' Compensation Act, s 158, there was a deemed policy of workers compensation insurance in place in respect of Mr Dean.

The causes of action argument 40 This issue can be disposed of briefly. The appellant conceded that the moneys paid to it were paid under a mistake of fact and that the person who paid them was entitled to be repaid. The evidence established that the moneys were paid for and on behalf of the respondent by GIO General Limited as the agent for the statutory insurer. The appellant did not maintain his argument that the payments had been paid negligently, accepting, it would seem, correctly, that negligence is not a defence to a claim for restitution based on a mistake. In those circumstances, the appellant is liable to repay the moneys to the respondent. 41 However, the appellant continued to resist his liability to repay the respondent, expressing a concern that the moneys may not reach the insurer who paid them. This is not a concern of the appellant. The proceedings subject of the appeal were brought by the insurer in the name of the respondent pursuant to its right of subrogation. Accordingly, the respondent is entitled to be repaid because the payments were made by the insurer under the mistake that they were in discharge of the respondent's worker's compensation liability to Mr Dean. 42 Alternatively, the respondent alleged that it had entered into a contract with the appellant whereby the appellant was to provide dental treatment to Mr Dean arising from workplace injury. The contract alleged was oral and was made between Mr Beattie, on behalf of the respondent, and the appellant. Mr Beattie told the appellant that he had an employee who had injured his mouth at work and was complaining of having a sore mouth and teeth. Mr Beattie asked whether the appellant would look at the employee and the appellant said that he would. Mr Beattie then said that it was a workers compensation matter; that Mr Dean would come and see him; and that Mr Dean would not have to pay any bills in relation to dental damage caused by the injury sustained at work, as the respondent's insurance company would pay these bills. Mr Beattie told the appellant that someone would contact him to make an appointment on behalf of Mr Dean. This subsequently occurred and Mr Dean came under the appellant's care. Mr Beattie enquired of the appellant on a couple of occasions how the treatment was proceeding. The appellant informed the respondent during the course of the treatment that there was a lot of work to be done. 43 Mr Beattie was not cross-examined and the appellant did not give evidence. As the trial judge found, this conversation contained all the essential elements of a contract. There was an offer by Mr Beattie on behalf of the respondent that the appellant see and treat Mr Dean for his workplace injury and that his fees would be paid for by the insurance company. The defendant accepted. The respondent made the appointment and the appellant wrote letters to the respondent to which his fee invoices attached. His Honour's finding of contract is unassailable. 44 Finally, the trial judge also found there had been a contravention of the Fair Trading Act and the Trade Practices Act. Given the conclusion I have reached that the moneys were repayable to the respondent, both on the basis that they had been paid under a mistake and on the basis that there had been a breach of contract between the appellant and the respondent, it is not necessary to deal with this further basis of recovery, although I would note that I do not disagree with his Honour's findings in this regard. 45 BASTEN JA: I agree with Beazley JA. 46 HANDLEY AJA: I agree with Beazley JA. **********

DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated.

Trade Practices Act 1974(Cth)

CITATION: Phung v Advanced Arbor Services Pty Ltd [2010] NSWCA 215

Banque Financiere de la Cite v Parc (Battersea) Limited [1999] 1 AC 211 CASES CITED: Kelly v Solari (1841) 9 M & W 54 Mahony v J Kruschich (Demolitions) Pty Ltd [1985] HCA 37; (1985) 156 CLR 522 Scottish Equitable Plc v Derby [2000] 3 All ER 793

LOWER COURT MEDIUM NEUTRAL CITATION: Advanced Arbor Services Pty Limited v Phung [2010] NSWSC 158

At a glance

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Judgment (23 paragraphs)

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