Rooty Hill Medical Centre v Gunther

IN THE SUPREME COURT OF NEW SOUTH WALES COURT OF APPEAL 41026/00 DC 1377/99

MASON P HANDLEY JA HODGSON JA

11 March 2002 ROOTY HILL MEDICAL CENTRE PTY LTD & ANOR v MICHAEL GUNTHER

VICARIOUS LIABILITY - master and servant relationship - non-delegable duty

DAMAGES - Workers Compensation Act - lump sum compensation - future weekly compensation

The plaintiff suffered a cut to a finger whilst at a TAFE College. As a consequence of negligent medical treatment and advice the plaintiff suffered a ruptured tendon in the injured finger whilst at work. The trial Judge found the Rooty Hill Medical Centre liable for the negligence of the treating doctor. A credit of $37,094 was allowed for workers' compensation payments by the plaintiff's employer but no allowance was made for the worker's other compensation entitlements.

The appellant company submitted that there was no evidence to support a master-servant relationship with the treating doctor or the existence of a non-delegable duty. Both appellants submitted that the Judge should have reduced the damages for amounts payable under ss 66 and 67 (lump sum compensation) and s 40 (future weekly compensation) of the Workers Compensation Act 1987 (NSW).

HELD : (1) The appeal by the company on liability must fail. The evidence supported the inference that the company either employed the doctor or undertook to provide medical services to persons attending the medical centre. As there was no evidence to the contrary for the defendants, the company owed a non-delegable duty and was liable for any breach of duty by the doctor. (2) Section 151Z of the Workers Compensation Act did not apply but the damages had to be reduced to give effect to the overriding intention of Parliament that a worker should not be entitled to both compensation and damages. See Kempsey District Hospital v Thackham (1995) 36 NSWLR 492. (3) The plaintiff's damages must be reduced to reflect the probable amount that he could recover under s 66 for the loss of the efficient use of the injured finger. (4) The determination of the allowance in an award of damages for a lump sum payment for pain and suffering under s 67 must be based on expert evidence of the amount the Compensation Court would be likely to award. As the defendants called no evidence on this issue, this claim must fail. (5) No deduction should be made for any compensation payable under s 40. The section conferred a judicial discretion on the Compensation Court and there was no evidence of the way in which it would probably be exercised, and there was no evidence of the amount that could be awarded under the section. ORDERS

(2) Judgment of the District Court set aside except as to costs;

(3) Substitute a judgment for the plaintiff against both defendants for $103,250 with effect from 22 November 2000;

(4) Respondent to pay appellants' costs of the appeal but to have a certificate under the Suitors Fund Act. IN THE SUPREME COURT OF NEW SOUTH WALES COURT OF APPEAL 41026/00 DC 1377/99

MASON P HANDLEY JA HODGSON JA

11 March 2002 ROOTY HILL MEDICAL CENTRE PTY LTD & ANOR v MICHAEL GUNTHER

Judgment 1 MASON P: I agree with Handley JA. 2 HANDLEY JA: The defendants have appealed from a judgment for $113,750 entered by Christie DCJ in favour of the plaintiff. The proceedings arose out of the negligent medical treatment of a cut in the right middle finger of the plaintiff's right hand following an accident at a TAFE College on 25 September 1997. The plaintiff was taken by the College medical officer to the Rooty Hill Medical Centre where he saw the second appellant, Dr Suthaharan (the doctor). She inspected and dressed the wound and inserted three stitches. The plaintiff returned to the Medical Centre on routine follow up visits on 27 September and 1 October. On the latter occasion he saw a Dr Jayachandra (the other doctor), who noted that the wound had healed well, and removed the stitches. 3 On 8 October a tendon in the plaintiff's injured finger was ruptured while he was lifting heavy steel beams at work. The Judge found that the doctor had been negligent in her treatment of the initial injury and in her advice to the plaintiff, and this had caused or materially contributed to the rupture. There has been no appeal from this finding. 4 The Judge found that the first defendant, Rooty Hill Medical Centre Pty Ltd (the company), was liable for the negligence of the doctor. It has appealed from this finding. 5 The Judge assessed the plaintiff's damages at $150,825, but allowed a credit of $37,094 for workers' compensation payments by his employer. The assessment to this point was not challenged, but the appellants claim that the Judge should have deducted amounts for the plaintiff's entitlements to lump sum compensation under ss 66 and 67 of the Workers' Compensation Act 1987 (the Act), and future weekly compensation under s 40.

Liability 6 The Judge's decision that the company was liable was attacked on the ground that there was no evidence that she was the servant or agent of the company, or that it owed a non-delegable duty to the plaintiff. There is no direct evidence on these matters, but there is circumstantial evidence, and no evidence to the contrary. The defendants have had the same legal representation throughout and this would only be possible if there was no conflict of interest. This would be the case if the doctor was an employee of the company (see Employees Liability Act 1991), or if they were covered by the same insurance policy. 7 Such a policy would be needed if there was a master and servant relationship or if the company undertook to provide medical services and delegated the performance of that duty to doctors who were its independent contractors. If the company was only the landlord, or a service company providing non-medical services for the doctors, there would be no occasion for it to be insured against liability for professional negligence. 8 After the first accident, the plaintiff was taken to the Medical Centre where he saw the doctor (4). He had to wait before "a doctor" was available (11). The other doctor who saw the plaintiff at the Medical Centre on 1 October had access to the doctor's clinical notes, and made his notes on the same records (141). On 14 December 1998 the doctor gave a medical report to the plaintiff's solicitors on the letterhead of the "Rooty Hill Medical Centre". The report stated: "Michael Gunther, a male aged 25, presented himself to Rooty Hill Medical Centre on 25/9/97 …". The fees in respect of the plaintiff's treatment at the Centre were paid by the workers' compensation insurer to "Rooty Hill Medical Centre" (112). The Medical Practice Act 1992 contemplates that corporations may be providing medical services. See s 115, Part 8A, and s 187. 9 The doctor was called in the defendants' case. She said that the date stamps on the clinical notes were placed there by "the receptionist", and that the plaintiff had seen her "in one of the rooms in the medical practice" (35). She recognised the handwriting on the clinical notes for 1 October 1997 made by the other doctor (40). She said in cross-examination that at times the Rooty Hill Medical Centre was busy, and that when "it" was busy she would be seeing a patient every 15-20 minutes (42). The doctor was not asked any questions in chief about her relationship with the company, and she was not cross-examined on that issue. 10 This reticence on the part of counsel for the defendants suggests that her answers to any such questions would not have supported the company's case on this issue. This is "some evidence" that such examination-in-chief "would have exposed facts unfavourable to the party". See Commercial Union Assurance Company of Australia Ltd v Ferrcom Pty Limited (1991) 22 NSWLR 389, 418; and Smith v Chadwick (1884) 9 App Cas 187, 200 per Lord Blackburn. 11 The clear inference from this evidence is that the company either employed the doctor, or undertook to provide medical services to persons attending at the Medical Centre. In the latter situation the company must have retained the doctor as its independent contractor to provide those medical services. If so the company would owe a non-delegable duty to its patients and would be liable for any breach of duty by the doctor. See Kondis v The State Transport Authority (1984) 154 CLR 672, 679. The company's appeal on liability fails.

Damages 12 The accident at work on 8 October 1997, in which the plaintiff ruptured the tendon in his finger, gave rise to entitlements to compensation under the Act. The event giving rise to the plaintiff's right to damages against the appellants was the negligent treatment and advice given by the doctor on 25 September 1997. 13 Section 151Z deals with the situation where the injury for which compensation is payable creates a liability in some person other than the worker's employer to pay damages in respect of the injury. It does not apply because the later work injury merely increased the damages payable by the defendants for the earlier non-work injury. As Glass JA said in Kornjaca v Steel Mains Pty Ltd [1974] 1 NSWLR 343, 347: "It is necessary for the employer to prove … that the injury occurred under circumstances which created a liability in damages to the worker. It does not seem possible to regard a pre-existing liability which became more extensive on the happening of the injury, as one which was then created". 14 As I said in Kempsey District Hospital v Thackham (1995) 36 NSWLR 492 at 507, with reference to the above passage: "The decision in Kornjaca on the present point has never been disapproved and this Court has since applied similar reasoning in a number of cases". 15 Although s 151Z does not apply to cases such as the present, this Court, in a series of decisions starting with Hood Constructions Pty Limited v Nicholas (1987) 9 NSWLR 60, has held that a worker's damages must be reduced to give effect to the overriding intention of the Parliament, manifest in the section, that a worker should not be entitled to both compensation and damages. See Kempsey District Hospital v Thackham (1995) 36 NSWLR 492; Transfield Pty Limited v Mastrioanni (1998) 20 NSW CCR 193 (CA); and Franklins Self Service Pty Limited v Wyber (1999) 48 NSWLR 249. 16 The trial Judge followed this line of cases when he deducted $37,094 from the plaintiff's damages for past workers' compensation benefits. Because s 151Z does not apply in terms, the worker was not required to repay this compensation out of his damages, and there was no statutory defence in respect of the payments. The Court could only prevent the worker retaining both compensation and damages by reducing his damages by the amount of the compensation. 17 The issues as to damages arising on the appeal concerned the plaintiff's entitlements to further payments of compensation which had not been crystallised. The Judge made no deduction for such entitlements and gave no reasons for refusing to do so, although it is not disputed that the question had been raised in argument. The decisions of this Court in Kempsey District Hospital v Thackham (above at 508), the authorities there cited, and Transfield Pty Limited v Mastrioanni (above), establish that in circumstances such as the present the plaintiff's damages must be reduced to allow for payments of compensation he is entitled to receive in the future. 18 Section 66(1), as in force at the relevant time, provided that a worker who has suffered the loss of a thing mentioned in the Table as the result of an injury is entitled to receive lump sum compensation. Section 65(1) defines "loss" as including a loss of use, or of the efficient use, of the thing. Section 68(1) provided for the worker to receive an appropriate percentage of the relevant lump sum for a partial loss. The assessment of proportionate entitlements under s 66 may involve questions of degree, but cases such as the present do not involve the exercise of a judicial discretion. 19 Dr Edwards, who qualified for the defendants, assessed the plaintiff's loss of use of his right hand at 3% (123). Dr Thomson, who qualified for the plaintiff, assessed his permanent loss of efficient use of his hand at 15% (95), and Dr Tan, who was also qualified for the plaintiff, assessed this loss at 35% (100). If the question was before the Compensation Court one would expect the defendants to be contending for an award based on Dr Harvey's evidence, while the plaintiff would be contending for an award based on the evidence of Dr Tan. In this Court their submissions were inverted, with counsel for the appellants contending for an assessment based on 35%, and counsel for the respondent contending for one based on 3%. 20 Because of the discrepancies between the assessments, averaging is not appropriate, and the figures at both extremes appear excessive in the light of the other evidence. The lump sum compensation for a 15% loss is $10,500, and I would reduce the plaintiff's damages by this amount. The appellant did not seek a further reduction for any interest that might be awarded in the Compensation Court on this figure. 21 Such an award under s 66 would entitle the plaintiff to receive additional compensation for pain and suffering under s 67 because the threshold in sub s (2) is met. Sub section (7) defines pain and suffering as meaning: "(a) actual pain, or (b) distress or anxiety suffered or likely to be suffered by the injured worker, whether resulting from the loss concerned or from any necessary treatment". 22 The loss of enjoyment of life, for which general damages are awarded, at common law, includes losses which fall outside this definition. Section 67(1), as in force at the date of the injury, provided that the compensation for pain and suffering resulting from a loss should not exceed $50,000 and sub s (3) provided that this amount should only be payable "in a most extreme case". In other cases the amount payable should be reasonably proportionate to that maximum. The assessment of that amount calls for the exercise of a judicial discretion which s 67(4) commits to the Compensation Court. 23 Section 67(1A) refers to the distinction between injury and loss resulting from an injury and provides that "the pain and suffering for which compensation is payable under this section does not include pain and suffering that results from the injury but not from the loss". This is an entirely different test for pain and suffering from that sanctioned by the general law. It is not at all clear that the plaintiff has suffered, or will suffer, any appreciable pain and suffering as defined from the loss itself apart from the injury which caused that loss. 24 For these reasons the Judge's award of $50,000 for general damages is no guide to the award that may be made by the Compensation Court under s 67. It seems likely that s 67(1A) will exclude any, or any significant, award under s 67 in the present case. 25 This Court has held that allowances in awards of damages for lump sum compensation payable under s 67, and under s 66 where the Compensation Court would be called upon to make value judgments or exercise a judicial discretion, must be based on an assessment of the amounts the Compensation Court would be likely to award. As I said in Transfield Pty Limited v Mastrioanni (above at 201): "The question is not what this Court thinks was a proper amount to award in such a case but the amount which the respondent would more probably than not recover if he took proceedings in the Compensation Court". 26 In that case this Court followed its earlier decision in Kempsey District Hospital v Thackham (above) where Meagher JA, whose judgment on this point was endorsed by the other judges, said at 505: "If over-compensation is to be avoided, both amounts paid and amounts payable ought, so it seems to me, to be deducted … that does mean that within a common law case there must be a trial-within-a-trial so that the Common Law judge must decide what a Workers' Compensation judge would probably determine. However this is hardly a unique feature of the law". 27 A trial-within-a-trial on this issue took place at first instance in Franklins Self Service Pty Limited v Wyber (1999) 48 NSWLR 249. See at 267, 269, 270. There was no trial-within-a-trial in this case because the defendants called no evidence on this issue. 28 For these reasons, I reject the appellants' claim that a further amount should be deducted from the verdict to reflect the respondent's right to lump sum compensation for pain and suffering under s 67. 29 The appellants' final submission was that allowance should have been made for the respondent's rights to future compensation under s 40. The plaintiff returned to full time employment in November 1998, and received his last payment of compensation on 25 February 1999 for the week ending 3 March. The Judge awarded $50,600 as a cushion for future economic loss. The plaintiff was nearly 28 at the date of trial, with a future working life of some 37 years. The Judge found that he had suffered a 5 - 6% interference with his working capacity, although after re-training he had secured employment as a computer draftsman and "his overall economic well being in the future may well have been enhanced by reason of this injury". 30 Section 40 provides that the weekly payment of compensation for partial incapacity shall not exceed the reduction in the worker's weekly earnings, "but is to bear such relation to the amount of that reduction as may appear proper in the circumstances of the case". Sub s (2) provides in a case such as the present that the reduction in the worker's weekly earnings is the difference between "(a) the weekly amount which the worker would probably have been earning … but for the injury and had the worker continued to be employed in the same or some comparable employment", and (b) the average weekly amount that the worker is earning after the injury. Sub s (5) provides that the weekly payment of compensation for partial incapacity is not to exceed that which would be payable for total incapacity. This was relevantly capped by s 37(1)(a)(i) at $235.20 per week. 31 There was no evidence of the amount that the respondent would probably have been earning at the date of the trial but for the injury (s 40(2)(a)), and hence no evidence of the figure referred to in s 40(1), on which an award of weekly compensation would have to be based. The finding that the interference with the respondent's incapacity was only about 5 or 6%, and the evidence that at the date of trial he was in full time employment and had received no payment of weekly compensation for 20 months, make quite problematical the prospects of any award under s 40 in his favour. 32 The section confers a judicial discretion on the Compensation Court ("to bear such relation to the amount of that reduction as may appear proper in the circumstances of the case"), and there was no evidence of the way it would probably be exercised. For all these reasons I reject the appellants' claim for any deduction to reflect the respondent's rights to weekly compensation. 33 This Court has referred on several occasions to the practical difficulties that arise for the parties and the court in the assessment of damages because of the requirement for future compensation payments to be brought to account. It is possible, I say no more, that a defendant who is outside s 151Z could obtain a stay of proceedings until the plaintiff crystallised his compensation rights by award or settlement. No such application was made in this case and the question was not raised during argument. 34 The appellants have succeeded on only one of the issues that were argued but Miss Norton SC, who appeared for the respondent, did not oppose the making of an order that the respondent pay the appellants' costs of the appeal subject to the grant of a certificate under the Suitors Fund Act in favour of the respondent. 35 The following orders should be made:

(2) Judgment of the District Court set aside except as to costs;

(3) Substitute a judgment for the plaintiff against both defendants for $103,250 with effect from 22 November 2000;

(4) Respondent to pay appellants' costs of the appeal but to have a certificate under the Suitors Fund Act. 36 HODGSON JA: I agree with Handley JA.

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