State of New South Wales v Kennelly

IN THE SUPREME COURT OF NEW SOUTH WALES COURT OF APPEAL

CA 40259/99 MEAGHER JA BEAZLEY JA YOUNG CJ in EQ

Wednesday, 12 December 2001 THE STATE OF NEW SOUTH WALES v DOROTHY KENNELLY (NO 2)

JUDGMENT 1 MEAGHER JA: I have read Beazley JA's judgment in this matter. I disagree with it. I have said all I wish to say in my judgment of 10 April 2001, and am still of the same mind now as I was then. In my view the Notice of Motion dated 9 May 2001 should be dismissed with costs. I trust counsel will not continue to pester the Court with applications to revisit its judgments. 2 BEAZLEY JA: On 10 April 2001, the Court delivered its judgment in this matter and made the following orders:

(ii) New trial ordered; (iii) Respondent to pay the appellant's costs. 3 On 9 May 2001 the respondent filed a Notice of Motion seeking orders that: "1. Order (ii) of the Court be varied so as to order a new trial limited to the question of damages, [with the District Court to assess the measure of damages] under the Workers Compensation Act 1987 and the measure of blame to be apportioned to the Crown in right of NSW Government Cleaning Service.

2. That the orders of this Court be stayed." 4 The parties have consented to the Notice of Motion being determined on their filed written submissions. The written submissions sought to additional orders to those in the Notice of Motion, namely that the respondent be given a certificate under the Suitors' Fund Act 1951 (NSW) and that the Court review its judgment. The basis for seeking the review of the judgment is because, it was submitted, Meagher and Beazley JJA had construed the operation of s 151Z(2) of the Workers Compensation Act 1987 (NSW) erroneously, and in a manner for which neither party had contended either at trial or on the appeal. 5 At a directions hearing held on 12 September 2001 both parties were invited to file further submissions on the construction of s 151Z(2). Both parties did so in accordance with directions made that day. 6 I will deal more fully with the question whether the Court should review its judgment in respect of the construction of s 151Z(2) later in these reasons. The other issues raised by respondent's Notice of Motion can be dealt with shortly. In that regard, it should be noted that the appellant (who is the opponent to the Motion) neither consents nor opposes the original orders sought, but submits that the respondent must satisfy the Court that it is necessary or appropriate to vary its orders. The appellant also submitted that it should not be assumed that the Court erred in the orders it made.

Order 1 in the Notice of Motion: that the rehearing be limited to the question of damages 7 The appellant commenced its appeal in this Court by a Notice of Appeal without appointment in which it appealed against the whole of the primary judgment. However, in the Notice of Appeal, the appellant appealed from the following four parts of the trial judge's judgment only: "(a) The finding that there was no negligence on the part of the respondent's employer, the Government Cleaning Service, within the meaning of s 151Z(2) of the Workers Compensation Act 1987 as amended.

(b) The finding that it would not be just and equitable for the respondent's employer to contribute to the damages recovered by the respondent.

(c) The extent of the finding of contributory negligence on the part of the respondent.

(d) The award of $50,000.00 of general damages." 8 Significantly, for the purposes of the Notice of Motion, there was no appeal against his Honour's primary finding on liability that the State as occupier had breached its duty of care to the respondent. The appellant subsequently withdrew the appeal in relation to general damages and contributory negligence. That left as the issue in the appeal the matter raised in paragraph (a) and (b) above. It should be noted that, strictly, the trial judge did not make a finding that there was no negligence on the part of the appellant as employer. Rather, he found that as the two Departments were not at arms length and the appellant as employer had no choice but to clean the premises, it was not "just and equitable to require the employer to contribute" so that the "amount of contribution which would be assessed under s 5 (ii) of the Law Reform (Miscellaneous Provisions) Act 1946) would … be zero". 9 That last matter however, does not change the nature of the appeal brought, heard and determined by this Court. It was one in respect of damages. That is all the Court adjudicated upon, as is apparent from the judgments of the Court. Order (ii) was erroneously expressed. It should be amended so as to limit the new trial to the question of damages.

Order 2 in the Notice of Motion: application for a stay 10 The parties have agreed to a stay pending the determination of the Notice of Motion. As I consider the judgment should be reviewed there is no need for a stay. However, I would have granted a stay had it been necessary to do so.

Order 3: Suitors' Fund Act Certificate 11 It is convenient to deal next with the application that the respondent have a certificate under the Suitors Fund Act. 12 In appropriate cases the Court makes an order in respect of the Suitor's Fund Act 1951 (NSW) and usually makes an order in terms that a respondent have a certificate if so qualified. Such an order is usually made, even if not expressly sought. This is the very type of case where such an order is usually made. The omission to make the order was inadvertent and should also be rectified.

Should the Court Review its Reasons? 13 That leaves the question whether the Court should review its reasons. 14 In the affidavit in support of the respondent's Notice of Motion the respondent's solicitor stated: "4. It had not been contended by either party or argued in the appeal that the calculation of damages under s 151Z(2)(c) was other than as laid down in Leonard v Smith (1992) 27 NSWLR 5 and Grljak v Trivan Pty Limited (unreported, Court of Appeal 19 April 1996). The suggested operation of the provision in the judgment, to the extent that this is contrary to the decisions in Leonard v Smith and Grljak would appear to be inadvertent." 15 This point is reiterated in the written submissions, the respondent contending that the interpretation given to s 151Z(2) of the Workers Compensation Act 1987 (NSW) in para 12 of Meagher JA's judgment "is so clearly wrong as to call for correction". 16 The appellant accepts that the Court has power to review the judgment under Pt 40 r 9, Supreme Court Rules 1970 (NSW). It submits in the first instance that the practical result reached in the case by Meagher JA is no different than under the approach required by the construction given to the section in Leonard v Smith and Grljak v Trivan Pty Limited. However, appropriately, it has taken the alternative position that if the Court is of the view that the judgment as it stands may cause confusion in the courts below, the appellant does not oppose a variation of or addendum to the judgment. 17 For my part, I consider there has been error in the construction given to s 151Z(2) by Meagher JA and myself and accordingly, I consider that the judgment should be reviewed. 18 I should add at this point that the approach taken by Young AJA in his judgment did not require him to consider this construction point. 19 Finally before turning to the proper construction of s 151Z(2), it should be made clear that the respondent does not, on the application that the Court review its judgment, seek to review the question of whether the decision in Haines v Tempesta (1995) 37 NSWLR 24 applies to subsection 2.

Construction of Section 151Z(2) 20 Section 151Z is contained within Part 5 of the Workers Compensation Act 1987 (NSW). It provides "151Z Recovery against both employer and stranger

(1) If the injury for which compensation is payable under this Act was caused under circumstances creating a liability in some person other than the worker's employer to pay damages in respect of the injury, the following provisions have effect:

(a) the worker may take proceedings both against that person to recover damages and against any person liable to pay compensation under this Act for payment of that compensation, but is not entitled to retain both damages and compensation,

(2) If, in respect of an injury to a worker for which compensation is payable under this Act:

(a) the worker takes or is entitled to take proceedings independently of this Act to recover damages from a person other than the worker's employer, and

(b) the worker also takes or is entitled to take proceedings independently of this Act to recover damages from that employer,

(c) the damages that may be recovered from the person by the worker in proceedings referred to in paragraph (a) are to be reduced by the amount by which the contribution which the person would (but for this Part) be entitled to recover from the employer as joint tortfeasor or otherwise exceeds the amount of contribution recoverable …" 21 Part 5 restricts the entitlements of a worker to recover damages from an employer or others in circumstances where there are concurrent tortfeasors. The restrictions relate to the amount of damages recoverable and determines the proportion in which concurrent tortfeasors are to bear damages. 22 In Leonard v Smith Allen J analysed the operation of the section in the following way, considering it convenient to deal with para (d) first because to make the calculation required by (c) it is necessary to apply the figure derived from para (d). He said at 11: "What par (d) does is to apply the percentage of the employer tortfeasor's share in the responsibility for the accident not to the amount of the damages payable to the plaintiff by the other tortfeasor but to what the worker damages would have been if the plaintiff sued the employer … ('damages … assessed in accordance with the provisions of Division 3' of Pt 5). So the financial burden upon the employer tortfeasor is calculated as being his fault proportion applied to the damages he would have had to pay the plaintiff if sued alone - not that fault proportion applied to damages to which the other tortfeasor is liable." 23 As to para (c) his Honour concluded at 12: "This paragraph deals with the damages which the plaintiff worker may recover from the tortfeasor other than the employer tortfeasor in the proceedings which the plaintiff has taken for damages against that tortfeasor - be that tortfeasor an ordinary tortfeasor or a motor accident tortfeasor. Paragraph (c) provides for a reduction in the damages otherwise recoverable." 24 Cole J took the same approach to the construction of the section in Grljak v Trivan Pty Limited (except for one matter not presently relevant and which only arises in circumstances where different limitation periods apply in relation to the relevant causes of action). His Honour said at 13 -14: "Section 151Z(2) is directed to determining the amount of common law damages which a third party who has been sued must pay to the plaintiff worker. It is not addressing the amount of common law damages payable by the employer, if sued. That is dealt with by Division 3 (section 151E - 151T). It is addressing a legislative requirement that in determining the amount of common law damages which a third party sued in respect of an injury must pay, regard must be had to the circumstance that workers compensation is payable under the Act, and further that regard is to be had additionally to any entitlement, whether exercised or not, to sue the employer for common law damages.

Against that background section 151Z(2)(c) provides that in the worker's action against the third party, common law damages which the worker otherwise would recover are to be reduced. The amount of the reduction is the excess of the contribution which the third party would, except for Part 5, be entitled to recover from the employer (whether as joint tortfeasor or otherwise) over the amount of the contribution recoverable from the employer.

Subsection (2)(d) then addresses the amount of the contribution which is recoverable from the employer, whether as a joint tortfeasor or otherwise. The amount entitled to be recovered is to be determined as if the whole of the worker's common law damages were assessed in accordance with the provisions of Division 3. Subsection (2)(d), in addressing the amount that the third party 'is entitled to recover' from the employer, is not addressing the first integer in subsection (2)(c), namely, the amount of the contribution which the third party 'would (but for this Part) be entitled to recover from the employer', whether as joint tortfeasor or otherwise. Accordingly, one must assess the amount of contribution which, absent Part 5, the third party would have been entitled to recover from the employer, and deduct from that sum the amount which is in fact recoverable upon the basis that the contribution recoverable is calculated by reference to damages assessed in accordance with Part 5, and in particular Division 3." 25 The reference by his Honour to Part 5 and "damages assessed in accordance with Part 5" is of course, a reference to the assessment of damages under the Act which, as explained previously, are limited in amount. 26 Senior counsel for the respondent, in his helpful submissions as to the operation of the section, sought to illustrate the operation of the section in the following terms: "For practical purposes this can be illustrated in the present case by saying that given that damages at common law were assessed at $297,588.75, had they been calculated under the Act they must have been somewhat lower. That has not been done but for the sake of illustrating the correct operation of s 151Z(2) let it be assumed that damages under the Act come in at $250,000. Then for the sake of illustration let it be assumed that the Department of Education and Government Cleaning Service were each liable as to fifty per cent upon a proper apportionment of blame between them. Section 151Z(2) would work in this way:

(i) But for Part 5 of the Act, negligence having been established against each, the plaintiff would have recovered judgment against each under the ordinary common law in the sum of $297,588.75 but of course could only have enjoyed one satisfaction of the judgments. On the cross-claims between each there would have been judgment for each for fifty per cent of $297,588.75 viz judgment for each in the sum of $148,794.37.

(ii) By the combined effect of s 151Z(2)(c), (d) and the provisions of Division 3 as to the awarding of damages, the fund of damages from which contribution to the non-employer by the employer must be made would be recalculated, coming in at the assumed figure of $250,000. The non-employer would be entitled to judgment on its cross-claim to fifty per cent of that amount viz $125,000, not to judgment of $148,794.37.

(iii) Thus the two figures are exposed, namely what the contribution would have been but for Part 5 ($148,794.37) and what the contribution actually is ($125,000). Once those two figures are exposed the difference between them is $23,794.37. That is the figure by which, in the language of s 151Z(2)(c) the respondent's (plaintiff's) damages recoverable against the non-employer are to be reduced. It is 'the amount by which the contribution which the (non-employer) would (but for this Part) be entitled to recover from the employer … exceeds the amount of contribution recoverable'.

(iv) Thus the amount of $297,588.75 as damages assessed in accordance with the ordinary common law in favour of the respondent (plaintiff) against the Department of Education should be reduced by $23,794.37. Her damages against the Crown in right of the Department of Education should be assessed at $273,794.38." 27 This analysis is in accordance with the decisions in Leonard v Smith and Grljak v Trivan Pty Limited and is the approach which should be adopted in the assessment of damages in this case. 28 Accordingly, I propose the following orders: (i) Order (ii) of the Court of 10 April 2001 that a new trial be ordered be varied so as to order a new trial limited to the question of damages, with the District Court to assess the measure of damages under the Workers Compensation Act 1987 and the measure of blame to be apportioned to the Crown in the right of the New South Wales Government Cleaning Services.

(ii) The respondent to have a certificate under the Suitors' Fund Act if so entitled. 29 YOUNG CJ in Eq: I maintain the view I presented in my reasons of 10 April 2001. 30 However, on the assumption that the views of the majority are correct, I agree with Beazley JA that in all the circumstances the previous reasons of the majority should be reviewed. 31 I concur in the orders proposed by her Honour. ********

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.