QBE Workers Compensation (NSW) Ltd v BAE Systems Regional Aircraft Ltd - [2005] NSWSC 232 - NSWSC 2005 case summary — Zoe

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QBE Workers Compensation (NSW) Ltd v BAE Systems Regional Aircraft Ltd

[2005] NSWSC 232

Supreme Court of NSW|2005-03-24|Before: Howie J

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Court

Supreme Court of NSW

Decision date

2005-03-24

Before

Howie J

Source

Original judgment source is linked above.

Judgment (59 paragraphs)

[1]

Background 1 His Honour: These proceedings arise out of a purported service of a Statement of Claim by the plaintiff, QBE Workers Compensation (NSW) Limited (QBE), on the defendant, BAE Systems Regional Aircraft Limited (BAE), a foreign company with no presence in Australia. There are two applications for determination. The first is a Notice of Motion by BAE, filed on 30 April 2004, seeking an order setting aside the service of the Statement of Claim and a declaration that the Court has no jurisdiction over BAE in respect of the subject matter of the proceedings. The second application is a Notice of Motion filed by QBE on 22 June 2004, seeking leave to proceed pursuant to Pt 10, r 2 of the Supreme Court Rules. 2 By Statement of Claim filed on 26 September 2003, QBE seeks an indemnity from BAE pursuant to section 151Z(1)(d) of the Workers Compensation Act (the Act). The indemnity claimed relates to the payment of compensation by QBE as workers compensation insurer for two airline companies, Ansett Australia Ltd (Ansett) and Eastwest Airlines Ltd (Eastwest). Compensation was paid to the worker in accordance with a Determination of the Compensation Court of New South Wales made on 28 April 1999. As a result of that Determination the worker has been receiving compensation since July 1999. 3 The background facts may be described briefly as follows. Ms Chew, a flight attendant, brought proceedings for compensation for an injury arising during the course of her employment with Ansett and Eastwest. Her case was that for a period from 1992 to 1993 she was exposed to fumes, toxic substances and other irritants while carrying out duties in the aircraft cabin. That aircraft was manufactured in England by BAE. Ms Chew alleged that the fumes to which she was exposed contained mobile jet oil 2 which in turn contained a toxic substance, triorthocresyl phosphate (TOCP). She alleged that exposure to TOCP resulted in her suffering a chronic pattern of symptoms diagnosed as Multiple Chemical Sensitivity. Alternatively she alleged that these symptoms resulted from an aggravation of a form of Glandular Fever or viral infection described as Epstein Barr virus. Judge Moran made the Determination for the payment of compensation on the alternate basis relied upon by Ms Chew having determined that Ms Chew was not exposed to toxic fumes in the aircraft cabin.

[32]

(i) Did BAE submit to the jurisdiction of the Court - Pt 10, r 1A(h)? 22 I have considered the application of this subrule first because in opening the case for QBE, Mr O'Dowd stated to the Court that his client relied "first and foremost" upon this ground. 23 QBE submits that, notwithstanding Pt 11, r 8(3), BAE should be taken as having submitted, or having agreed to submit, to the jurisdiction of the Court by reason of accepting service of the Statement of Claim on the basis that QBE would agree to extend the time of by which BAE had to file a notice of appearance in this Court. In effect QBE maintains that BAE is estopped from denying that it had agreed to submit to the Court's jurisdiction because there was an agreement based upon an offer and acceptance for consideration made between the parties by the letter of BLG dated 4 April 2004. It was submitted that BAE offered to accept that the Statement of Claim had been served upon it subject to a condition as to the extension of time for it to respond to the service. Solicitors for QBE accepted that condition on 14 April and the agreement came into force. 24 The argument was that by agreeing to accept service of the Statement of Claim, BAE had agreed to submit to the jurisdiction of the Court. QBE relies upon the future tense used in the letter of 4 April when the solicitor wrote "our client will accept service of the proceedings", but I was informed that after the letter of 4 April 2004 no further action was taken by QBE to effect service. The letter of 4 April does not indicate when it was that service was to be effected, if it were to be at some time in the future. 25 There is no doubt that a party to a contract can agree by the terms of the contract that a particular court would have jurisdiction over the party in disputes arising from the contract. I am willing to accept that there may in other situations be an enforceable agreement, expressed or inferred, that binds a party to accept the jurisdiction of a court that otherwise would not have jurisdiction over the party. But it is clear that, by accepting service of originating process outside the jurisdiction, a party could not by that act alone be taken to have submitted to, or agreed to submit to, the jurisdiction of the court issuing the process. That is made plain by the fact that the Rules and the prescribed Notice that must be served on the party accepting service, Form 13A, provide that the party may seek to have the service set aside. 26 In my opinion there was no agreement between BAE and QBE that the former, by accepting service, submitted to the jurisdiction of the Court. It is clear to my mind that BAE was prepared to act on the basis that it had been served with the Statement of Claim, despite the fact that it did not accept that the relevant rules had been complied with, provided that QBE agreed to an extension of the time within which it could make the appropriate response to service that had taken place in September 2003. BAE was granted the extension of time it sought to respond to the service of the Statement of Claim and within that time opted, instead of filing a notice of appearance, to seek to have service set aside. BAE has not submitted to the jurisdiction of the Court unconditionally.

[35]

QBE claims that, as Ms Chew has recovered compensation under the Act and as it has paid that compensation, it is entitled to be indemnified by BAE because BAE was liable, as a person other than Ms Chew's employer to pay damages in respect of the injury suffered by Ms Chew and for which she was compensated. 28 QBE submits that under s 151Z(1)(d) of the Act the statutory cause of action did not arise until the compensation referred to in the section had been paid. It submits that Pt 10, r 1A(a) applies for the following reasons: payment of compensation, which triggers the claim for an indemnity occurred in NSW; the statute giving rise to the indemnity is a NSW enactment; damage resulting from the negligence of BAE was suffered in NSW, and some of the acts of BAE relied upon to support the claim took place in NSW. QBE argues that the only thing that might deny this Court's jurisdiction was that the aircraft was manufactured by BAE in England but that this fact cannot be decisive in answering the question of where the liability of BAE arises under the section or for the application of the Rules. 29 QBE relies upon South Eastern Sydney Area Health Service v Gadiry (2002) 54 NSWLR 495 as support for the proposition that the right of indemnity under s 151Z(1)(d) of the Act is enlivened by the payment of compensation and that until such payment occurs the person by whom the compensation was paid does not have a complete cause of action. In that case the question for determination by the Court of Appeal was when time started to run in a claim under the section for the purposes of the provisions of the Limitation Act. Stein JA, with whose judgment the other members of the Court agreed, concluded at [37] that, as payment of compensation is necessary to enliven the statutory right of indemnity, until that event has occurred the employer does not have a complete cause of action. However, his Honour also concluded at [41] that each payment of compensation attracts the statutory right of indemnity and there is a distinct right of action against the tortfeasor when each compensation payment is made by the employer, see at [48]. 30 BAE, however, submits that the proper analysis of QBE's claim is that the right of indemnity claimed by it is not, in the words of Pt10, r 1A, "founded on" the payment of compensation as QBE argues, but on BAE's alleged liability for damages to the worker, Ms Chew. The principle applied in this analysis is that any enquiry as to where a cause of action arose must proceed on the basis of determining where the facts making up the elements of the cause of action occurred rather than where the statutory basis for liability is found. In support of this proposition, BAE relies upon the decision of Miles J in Nominal Defendant v Motor Vehicle Insurance Trust of Western Australia (1983) 3 NSWLR 309. At 315 in relation to Part 10 rule 1A his Honour stated:

[37]

BAE submits that this authority denies the simplistic proposition put forward by the plaintiff that the cause of action is founded on the statutory right of indemnity. 31 BAE also relies on Voth v Manildra Flour Mills Pty Ltd (1990) 171 CLR 538 in support of its submission that for the purposes of s 151Z and the Rules any liability it had for the injury occasioned to Ms Chew occurred in England and not in this State. Voth concerned a claim for damages on the basis of negligent advice alleged to have been given by the defendant, an accountant resident in Missouri, to the plaintiff company resident in New South Wales in respect of the duty of a related company, resident in the United States, to deduct and withhold tax payable in the United States. The claim was that as a result of the negligent failure to advise the company of this requirement the related company had to pay a penalty to the United States revenue. The question that arose for consideration was where the tortious conduct alleged against the defendant had occurred. The issue arose in the context of whether a stay should be granted of the proceedings in this State based upon private international law considerations but the Court held that the principles applied in that case should also be applied to applications such as those presently before the Court. 32 It was accepted in Voth that, as a result of the negligence of the defendant, damage had occurred both in the United States and in New South Wales. It was alleged by the plaintiff that negligent representations were received and acted upon in New South Wales. These were part of the facts upon which the Court of Appeal determined that the proceedings taken in New South Wales should be permitted to proceed, the majority finding that New South Wales was not a clearly inappropriate forum. 33 The High Court considered whether the tort alleged constituted a foreign tort. The plaintiff argued that the Court of Appeal was wrong in concluding that the cause of action did not involve a foreign tort on the basis that the allegation involved negligent representations received or acted upon in this State. After referring to observations of Lord Pearson in Distillers Co v Thompson [1971] Ac 458 at 467-468 that:

[42]

One thing that is clear from Jackson v Spittall and from Distillers is that it is some act of the defendant, and not its consequences, that must be the focus of attention. Thus, in Distillers the act of ingestion of the drug Distaval by the plaintiff's mother was ignored, the place of that act being treated like the place of the happening of damage, as one that might have been "quite fortuitous"." 34 The majority in Voth considered that the claim of the plaintiff could be described either as an omission, being a failure to advise, or as a positive act, being a negligent misstatement of fact, and noted that there can be cases where a failure to draw attention to a matter is for practical purposes the same as a positive statement as to that matter. But the majority held that, however it was approached, the negligent statement or the negligent omission arose from the providing of services by the defendant in Missouri. The majority concluded, at 569, that the tort, if there was one, was committed in Missouri notwithstanding that there might have been damage occasioned in New South Wales. 35 BAE argues, on the basis of the decision in Voth, that the question to be asked, in determining whether Pt 10 r 1A(a) applies, is where in substance the act of the defendant occurred that gives rise to the cause of action pursued by the claim. In the present case, so it is argued, the act of BAE that is at the heart of the claim by QBE is alleged negligence by BAE in the design and manufacture of the engine, whether that be a result of an omission or a positive act on the part of those employed by BAE. The design and manufacture of the engine clearly occurred in England. BAE argues, therefore, that the claim is founded on an act or omission occurring in England and it does not matter that damage was occasioned in New South Wales or that the damage resulted in payment of compensation in this State. In accordance with the reasoning in Voth, the tort, if there was one, occurred in England. Further, BAE argues that the fact that one or more of the elements of the cause of action occurred in this State is not decisive. 36 The question arises whether a general rule arising from breach of contract in Jackson v Spittal and applied to cases where the cause of action is one found on the negligent act or omission of the defendant in proceedings for damages arising from that act or omission should apply in the present case. The rule provides that the cause of action arises where the wrongful act of the defendant occurs. It was recognised by the Privy Council in Distillers at 90 that "the rule does not, however, provide a simple answer for all cases". In Nominal Defendant v Motor Vehicle Insurance Trust of Western Australia [1983] NSWLR 309 at 315G Miles J seems to have thought that the rule would not apply in cases involving a claim for indemnity with respect to workers' compensation payments. 37 It is clear that the proceedings brought by QBE are not proceedings in tort or in contract but are proceedings by way of a statutory right for an indemnity: Borg Warner (Aust) Ltd v Zupan [1982] VR 437. The nature of the right of indemnity arising under comparable legislation was considered in Tickle Industries Pty Limited v Hann (1974) 130 CLR 327. Barwick CJ in the course of his judgment referred with approval to statements made by the Court of Appeal in Tuckwood v Rotherham Corporation [1921] 1 KB 526 in the following passage:

[49]

………..the statutory right of indemnity conferred by the [Compensation] Act upon the person who has paid the compensation is not to be equated to the cause of action which the worker would, but for the [Compensation] Act, have had against the person liable to pay damages to him. This is so notwithstanding the fact that it is an ingredient of the statutory right, sought to be enforced, that the person from whom the indemnity is sought was liable to pay damages to the worker. The claim to enforce the entitlement to indemnity is not a claim in tort. It is a cause of action created by statute for an indemnity against a person liable to pay damages to another: Tuckwood v Rotherham Corp 41 In my opinion the cause of action by QBE arose in the State for the purposes of Pt 10 r 1A(a) as a result of the compensation paid by it to Ms Chew following a Determination made by the Compensation Court under a statute of this State and the right under s 151Z to claim an indemnity as a consequence. I do not believe that there is a true analogy between the tort cases, represented by Vorth, and the present because the claim is not based upon a tortious act or omission committed by BAE even though such an act or omission has to be proved by QBE before it can succeed in its claim. I do not believe that the policy reasons that have caused the courts to concentrate on the act of the defendant in cases of contract or tort and referred to in Distillers apply in relation to proceedings under the Act. Nor do I think that it is proper to equate the payment of compensation with damages arising from a defendant's conduct in proceedings based on tort as the argument of BAE does. The payment of compensation under the Act is not simply a consequence that may occur in any jurisdiction as a matter of chance regardless of where the tortious act or omission occurred. 42 I should indicate that if I had been of the view that I should apply the line of reasoning in Vorth, I would not have been persuaded to find that the cause of action arose in this State simply by reason of the particulars in the Statement of Claim alleging that there was a failure by BAE to warn Ansett or Eastwest of the alleged defects in the design and manufacture of the engine. I would have applied the decision of the Court of Appeal of Western Australia in ICI Australia Operations Pty Ltd v Kidde-Graviner Ltd [1999] WASCA 56 at [10] which accepted that "the courts will not permit a plaintiff, by adroit pleading, to bring a tort within the jurisdiction by alleging as a particular of negligence the wrongful act or omission within the forum when the substance of the wrongful conduct occurred elsewhere…". 43 It is unnecessary for me to consider the other basis upon which QBE sought to support the service of the Statement of Claim outside Australia being Pt 10 r 1A(f) but I do not believe that the subrule is intended to permit service outside Australia for every proceedings to enforce an indemnity simply because the claimant happens to bring the proceedings in this Court and regardless of the basis upon which the indemnity is said to have arisen. 44 I should now grant leave to QBE to continue the proceedings subject to the application by BAE to set aside service of the Statement of Claim.

[54]

(d) by reason of the Applicant's pre-existing condition exposure to the fumes from time to time resulted in an aggravation, acceleration or exacerbation of the Applicant's pre-existing condition by reason of the Applicant's unusual susceptibility and that aggravation, acceleration or exacerbation of the Applicant's pre-existing condition is a compensable "injury" within the meaning of the Worker's Compensation Act 1987 (NSW)" 48 It is clear that QBE defended the proceedings in the Compensation Court on the basis that Ms Chew did not suffer an injury as a result of toxic fumes entering the cabin. Rather it endeavoured to prove that the fumes to which Ms Chew was exposed would have resulted in no more than minor and transient irritation to a normal person but were injurious to Ms Chew because of her pre-existing viral condition. To this end it called a number of expert witnesses including Dr Crank, a chemist. 49 Dr Crank gave evidence that, although Mobile Jet Oil 2 contains TOCP, a toxic substance, the percentage of TOCP in the jet oil was as low as 0.03 per cent. He also stated that, given that the make up of air in the cabin was 60 per cent pure and 40 per cent recirculated air, there was no toxicity in the air to which Ms Chew was exposed. Judge Moran accepted the evidence of Dr Crank and made findings accordingly. 50 His Honour also accepted evidence of two doctors who were part of a panel of medical experts and were called by QBE as to the risk of injury arising from the fumes in the cabin. His Honour quoted from their evidence the effect of which was that, given the low level of contaminants, the air in the cabin was not a threat to the health of aircrew or passengers. Judge Moran also preferred evidence given by medical experts called by QBE that denied the validity of the diagnosis of multiple chemical sensitivity. 51 The result of his findings was that Judge Moran rejected the worker's primary claim that she had suffered a specific injury as a direct cause of her inhalation of toxic fumes in the cabin. Rather his Honour found that Ms Chew was suffering from a pre-existing, aggravated form of a viral infection and this made her susceptible to exposure to fumes that otherwise were harmless. 52 In the light of the evidence led by QBE and the findings made by Judge Moran, BAE argues that QBE ought not be allowed to proceed with a statement of claim that alleges, in paragraph 6, that Ms Chew was injured by inhaling fumes that contained TOCP. BAE argues that it is an abuse of process for QBE to seek to prove against BAE the very fact that it sought to deny before the Compensation Court. It is argued that it would bring the courts in this State into disrepute to permit a party to seek and obtain contradictory findings in different proceedings in which it is involved. 53 Alternatively BAE argues that there is insufficient prospect of QBE succeeding on the allegation in the statement of claim in light of the evidence that it relied upon in the proceedings in the Compensation Court to warrant it being put to the trouble and expense of defending the action. BAE accepts that the Court would not normally interfere in proceedings of this nature unless there is a high degree of certainty about the outcome of the proceedings if they were allowed to proceed: Agar v Hyde at [57]-[60]. But it argues that, in the light of the evidence QBE called before Judge Moran, there is no prospect of it proving that BAE breached a duty of care it owed to Ms Chew. 54 QBE argues that it is not bound by the findings of Judge Moran particularly given the nature of the proceedings in the Compensation Court. It stressed that the proceedings in that Court were concerned, not with finding fault on the part of BAE, but with determining whether the worker suffered an injury in the course of her employment. It argues that the Court cannot glean sufficient information from the judgment of Judge Moran to form any view about how those representing QBE decided to defend the action or the manner in which they did so. It submitted that Judge Moran found that the worker was injured from fumes in the aircraft cabin and, therefore, prima facie QBE is entitled to seek indemnification from the company that allowed fumes to enter the cabin. 55 It should be noted that the essence of the proceedings brought by QBE is to obtain an indemnity from BAE for the compensation paid by it to Ms Chew. That indemnity must, it seems to me, be seen in terms of the findings made by the Compensation Court in determining that compensation be paid. As I have pointed out, QBE sought to defend those proceedings, not on the basis that Ms Chew suffered no compensable injury, but rather that she did not suffer an injury directly as a result of the inhalation of toxic fumes containing TOCP. Presumably QBE had an interest in defending the proceedings to the extent of calling a significant case based upon expert evidence to deny the worker's claim based upon this ground. It was successful in achieving that result. The compensation payments, therefore, were made, not on the basis that the worker inhaled noxious fumes that contained TOCP, but rather that, because of some pre-existing disorder, the worker was injured by the inhalation of fumes not otherwise injurious to the health of those present in the cabin. 56 There is no particular allegation in the Statement of Claim inconsistent with the findings made by Judge Moran in accordance with the evidence called by QBE. For example, there is no claim that the fumes in the cabin were toxic. I presume that there was some substance in the fumes, such as TOCP, to which the worker was highly sensitive and which caused her injury and so paragraph 6 of the statement of claim would be consistent with the evidence before the Compensation Court. I am prepared to act on the basis that fumes entered the cabin because of some design or manufacture fault with the aircraft. 57 I accept that generally a court would not be entitled to strike out a Statement of Claim simply because there may be a perceived difficulty in proving one or more allegations made in it, even if there be material before the court upon which an assessment could be made of the strength of the evidence to be relied upon by the plaintiff. But the present case seems to me to be a highly unusual one by reason of the earlier proceedings in the Compensation Court and the stance taken by the plaintiff in those proceedings. Further, the nature of the present proceedings, being for an indemnity, seems to me to invite some consideration of the basis upon which the compensation order was made upon which BAE relies. I accept that no estoppels arise in the present case because the proceedings before the Compensation Court did not involve BAE. I also appreciate that the very nature of the proceedings in that Court were not concerned with finding fault on the part of any person or corporation let alone assigning fault to any particular entity. 58 But it seems to me to be wrong, in a general sense, for QBE to seek to obtain an indemnity from BAE on the basis that BAE breached its duty of care to the plaintiff in a way apparently inconsistent with how the proceedings were conducted in the Compensation Court. Clearly QBE defended the claim made by Ms Chew on the basis that the fumes that entered the cabin were not only non-toxic but were not a threat to the health of any of the persons in the cabin, be they airline staff or passengers. The evidence from BAE's medical experts was that:

[56]

This finding was consistent with the evidence of Dr Crank and appears to have been accepted by Judge Moran. 59 Further QBE launched an attack upon the evidence called by Ms Chew that, as a result of her inhalation of the fumes, she suffered a particular injury that accounted for her symptoms, being Multiple Chemical Sensitivity. It did this in two ways: firstly, by criticising the evidence of the worker's expert witness, Professor Winder, a criticism that was accepted by Judge Moran so that his Honour discounted his evidence, and, secondly, by calling medical evidence to the effect that such a medical condition did not exist. 60 Yet to succeed on the Statement of Claim, so it seems to me, QBE would have to adopt the reverse of the position it took on both issues in the Compensation Court and call evidence contrary to that it called before Judge Moran. QBE would also have to attempt to persuade this Court to make findings contrary to that which it persuaded Judge Moran to make being, firstly, that the fumes were injurious to the health of persons inside the cabin and, secondly, that Ms Chew was injured as a direct consequence of inhalation of the fumes and not because of her hypersensitivity due to an existing condition. 61 I come to that view because otherwise I cannot see how QBE could have any reasonable prospect of proving that BAE failed in its duty of care to Ms Chew. I do not believe that QBE has any basis for asking a Court to find that BAE ought to have reasonably foreseen that, notwithstanding that the fumes were not injurious to the health of persons generally, there might have been in the cabin persons, who, because of some pre-existing condition, could be injured by inhalation of the fumes. The possibility of QBE proving that BAE ought reasonably to have foreseen the risk of injury from non-toxic fumes to some person such as Ms Chew and should reasonably have taken some action to eliminate that risk seems to me to be so remote as to be realistically non-existent. Although, QBE was aware of the application to set aside the Statement of Claim based upon its conduct of the proceedings before Judge Moran, no evidence was placed before me in an attempt to explain how it might be that QBE's present claim could stand alongside its conduct in the earlier proceedings. 62 I was taken to decided cases and statements of principle in relation to claims of abuse of process arising from attempts by a party to relitigate issues that have been decided in earlier proceedings. These included Haines v Australian Broadcasting Corp (1995) 43 NSWLR 404, Rippon v Chilcotin Pty Limited (2001) 53 NSWLR 198 and statements made by Mason P in Trifunovic v Trifunovic (NSWCA, unreported, 18 December 1997) and Windeyer J in Harris v 718932 Pty Ltd [2000] NSWSC 784 at [27]. 63 QBE argues that these cases and the principles upon which they operate have no relevance to the present case because of the nature of the proceedings before the Compensation Court. It argues that the issue before that Court did not require a final determination on the question of the toxicity or otherwise of the fumes or the cause of Ms Chew's injury. It submitted that these issues were not fully litigated before the Compensation Court because the only issue there was the causal nexus between the injury suffered and the conditions of her employment. It relied upon the statement of Hunt CJ at CL in Haines at 414 as follows:

[58]

64 It seems to me, however, that the issue as to the nature of the fumes in the cabin and whether they directly caused an injury to Ms Chew was fully litigated in the sense that it was treated as important by the parties, it was an issue determined by Judge Moran and it was "properly argued" before the Court in the sense that Hunt CJ at CL used that term in the passage quoted above. As I have indicated, QBE chose to defend the proceedings by denying the worker's claim of direct injury from the inhalation of toxic fumes, even though it was willing to concede that she suffered a compensable injury on the basis that the fumes aggravated an existing condition. It won on the point it contested before Judge Moran and yet, so it seems to me, wishes now to argue a case contrary to that which it relied upon in that Court. 65 Whether an action is an abuse of process or in some other way improper of course depends upon the particular circumstances of the case. I take into account for present purposes the following: that BAE is a defendant without a presence in Australia; that the claim made by QBE is one for indemnity for compensation payments; that those payments were ordered on a basis apparently inconsistent with the claim being made against BAE; that QBE, for whatever reason, chose to dispute that aspect of the worker's claim that was most consistent with liability by BAE for her injuries; that QBE led evidence and made submissions opposing that aspect of the worker's claim; that it succeed in persuading the Compensation Court to reject that aspect of the claim; that there is no evidence before me to explain how QBE intends to prosecute the Statement of Claim in a way consistent with the manner in which it defended the worker's claim in the Compensation Court; and that having regard to the evidence it led in the Compensation Court, on the face of it QBE has no reasonable prospect of succeeding in proving that BAE breached the duty of care it owed the worker. 66 In those circumstances in seems to me that QBE should not be permitted to bring the present proceedings and, therefore, I order that the Statement of Claim be set aside. The plaintiff is to pay the defendant's costs. **********