Tamerji v Rhee

Court of Appeal (NSW)|2008-11-10|Before: Beazley JA, Ipp JA, Campbell JA

JUDGMENT OF: Beazley JA at 1; Ipp JA at 2; Campbell JA at 3

DECISION: (1) Leave to appeal granted. (2) Appeal dismissed with costs.

CATCHWORDS: WORKERS' COMPENSATION - alternative rights against employer and third parties - where worker injured in motor vehicle accident received compensation from employer - where worker later recovered damages from third party who caused the worker's injury - calculation of amount of compensation that worker is liable to repay to the employer out of those damages under s 151Z(1)(b) Workers Compensation Act 1987 - whether compensation of a particular type is repayable only from damages awarded in connection with that type of loss - literal construction - purposive construction - effect of s 151Z(4) Workers Compensation Act - effect of contributory negligence - comparison of conditions of entitlement and manner of quantification of compensation payable under Workers Compensation Act and Motor Accidents Compensation Act 1999

Law Reform (Miscellaneous Provisions) Act 1965 LEGISLATION CITED: Motor Accidents Compensation Act 1999 Workers Compensation Act 1987

CASES CITED: Tickle Industries Pty Ltd v Hann [1974] HCA 5; (1974) 130 CLR 321 Turner v George Weston Foods Limited [2007] NSWCA 67; (2007) 4 DDCR 571

PARTIES: Mahmoud Tamerji (Appellant) Hou Ihn Rhee (Respondent)

COUNSEL: J Jobson (Appellant) K Andrews (Respondent)

SOLICITORS: Milicevic Solicitors (Appellant) Leitch Hasson Dent, Solicitors (Respondent)

IN THE SUPREME COURT OF NEW SOUTH WALES COURT OF APPEAL CA 40868/07 DC 3120/07

BEAZLEY JA IPP JA CAMPBELL JA

26 NOVEMBER 2008 Mohmoud TAMERJI v Hou Ihn RHEE Judgment 1 BEAZLEY JA: I agree with Campbell JA. 2 IPP JA: I agree with Campbell JA. 3 CAMPBELL JA:

Leave to Appeal 4 The amount at issue in this appeal is less than $100,000, in consequence of which leave to appeal is required. However, in my view the issue raised by the appeal is sufficiently important to warrant the grant of leave.

Nature of the Case 5 The appeal raises a narrow but important question concerning the construction of section 151Z Workers Compensation Act 1987 ("WCA"). It concerns the situation that arises when a worker who has been injured, and in consequence has received payments of workers compensation from his employer, later recovers damages from someone other than his employer who has caused the worker's injury. It is clear that section 151Z obliges the worker to repay at least some of the amount of compensation he has received. The question at issue in the appeal concerns precisely how one calculates the amount of compensation that must be repaid. In particular, it concerns whether compensation of a particular type is repayable only from damages awarded in connection with that type of loss, so that, for example, compensation by way of periodical repayments is repayable only from damages awarded for past economic loss.

Facts 6 The Appellant ("the Worker") was employed as a taxi driver by the Respondent ("the Employer"). In October 2000 the Worker was injured when the taxi he was driving was run into by a motor vehicle driven by a Ms Gavin ("the Driver"). The Worker brought proceedings against the Driver in the District Court. The Driver admitted breach of a duty of care, but raised a defence of contributory negligence, and put the Worker to proof of causation of injuries and quantum of loss. 7 His Honour Judge Goldring gave judgment in that action on 11 May 2007. He was not satisfied about several significant items in the Worker's case concerning quantum. In the result, assessing damages in accordance with the Motor Accidents Compensation Act 1999 ("MAC Act"), he found that the Worker had established loss caused by the injury as follows: · Non-economic loss - nil (because 10% threshold under section 131 MAC Act was not exceeded) · Past economic loss - 340 weeks @ $150 per week - $35,700 · Future economic loss - $92,628 · Past medical expenses - $54,271 · Future medical expenses - $57,644 · Future surgery - $15,000 · Past domestic assistance - $10,584 · Future domestic assistance - nil 8 Those amounts total $265,827. His Honour found there was contributory negligence, which he assessed at 5%. In consequence, the Worker received a verdict against the Driver of $252,536. 9 This verdict amount was less than the amount of an Offer of Compromise that the Driver had made a few weeks before the trial started. In consequence, there was an order that the Driver pay the Worker's costs up to the date of that Offer of Compromise, and that the Worker pay the Driver's costs thereafter. 10 In July 2007 the Driver's solicitors sent a cheque to the Worker's solicitors for $256,747.16. That amount was arrived at by taking the verdict amount, deducting statutory deductions such as Medicare and Centrelink charges, and adding on $28,000, being the agreed net amount of costs payable by the Driver to the Worker. The costs that the Worker owed his solicitors in connection with the action against the Driver amounted to $151,804.39. 11 Prior to the commencement of his action against the Driver, the Worker had received workers compensation payments as follows: a. Weekly payments $109,752.90 b. Medical expenses $33,050.29 c. Lump sum pursuant to S66 } d. Lump sum pursuant to S67 } Combined $50,000.00 TOTAL $192,803.19

12 The Employer ceased paying workers compensation payments on 26 April 2005. 13 Promptly after the Worker's solicitor had received the cheque from the Driver's solicitor, the solicitors for the Employer wrote to the Worker's solicitor claiming an entitlement to be repaid the full amount of its payments of workers compensation, namely $192,803.19. 14 After some interlocutory skirmishing in the District Court, consent orders were made on 13 September 2007 under which the Worker's solicitors paid into court an amount of $104,942.77. That amount was the difference between the amount of the cheque that the Driver's solicitors had sent to the Worker's solicitors, and the amount of the costs owing by the Worker to those solicitors. I infer that the Worker's solicitors claimed a fruits of the action lien for the amount of their costs, and that that claim was conceded by the Employer's solicitors.

The Decision Below 15 The decision from which the present appeal is brought was given in the District Court by his Honour Acting Judge McGrowdie on 23 November 2007. That decision was given concerning a Notice of Motion brought by the Employer against the Worker, seeking an order for payment from the amount that had been paid into court of $100,555, together with interest, and certain costs. 16 The Notice of Motion was brought in proceedings that the Employer had begun in the District Court on 20 July 2007, seeking the recovery of compensation payments the Employer had made to the Worker. We were informed that the parties treated the sum paid into court as being the full extent of the recovery that the Employer could effect, if its arguments succeeded. 17 Section 151Z WCA provides, so far as is relevant: "(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, (b) if the worker recovers firstly compensation and secondly those damages, the worker is liable to repay out of those damages the amount of compensation which a person has paid in respect of the worker's injury under this Act, and the worker is not entitled to any further compensation, (c) if the worker firstly recovers those damages the worker is not entitled to recover compensation under this Act, (d) if the worker has recovered compensation under this Act, the person by whom the compensation was paid is entitled to be indemnified by the person so liable to pay those damages (being an indemnity limited to the amount of those damages), (e) if any payment is made under the indemnity and, at the time of the payment, the worker has not obtained judgment for damages against the person paying under the indemnity, the payment is, to the extent of its amount, a defence to proceedings by the worker against that person for damages, (e1) if any payment is made under the indemnity and, at the time of the payment, the worker has obtained judgment for damages against the person paying under the indemnity (but judgment has not been satisfied), the payment, to the extent of its amount, satisfies the judgment, (f) all questions relating to matters arising under this section are, in default of agreement, to be settled by action or, with the consent of the parties, by the Commission. … (4) If a worker is liable under subsection (1) (b) to repay any money out of damages recovered by the worker, the worker is not liable to repay the money out of any damages payable after the date of recovery by way of periodic or other payments for loss of future earnings or earning capacity or for future expenses." 18 The Employer claimed that the Worker's liability to repay compensation arose under section 151Z(1)(b). 19 The figure of $100,555 that the Employer claimed arises from the Employer's understanding of the operation of section 151Z(4). The Employer conceded that section 151Z(4) precluded it from recovering any part of the award attributable to Goldring DCJ's assessment of damages for future economic loss ($92,628) or future expenses ($57,644 plus $15,000). It asserted, however, that it is entitled to recover the full amount of all other heads of loss as assessed by Goldring DCJ. Thus, the amount of $100,555 was made up as follows: Past economic loss $35,700 Past medical expenses 54,271 Past domestic assistance 10,584 TOTAL $100,555

20 In the court below the judge held that the Employer was entitled to the amount of money it claimed, together with certain other figures for costs and interest. Adding together the various amounts to which the Employer was entitled, his Honour held that the Employer was entitled to payment out of the whole of the sum that had been paid into court.

The Worker's Submissions on the Appeal 21 Of the past medical expenses that were included in Judge Goldring's assessment, $33,050.29 was paid by the Employer's workers compensation insurer prior to the time it declined liability. Thus, of the total amount of $54,271 found by Judge Goldring to have been incurred for past medical expenses, an amount of $21,220.71 was not paid by the Employer's insurer. 22 The Worker accepts that he has a liability to make repayment of the damages payable in connection with the whole of the award concerning past economic loss, and of the damages payable in connection with that part of the past medical expenses that the Employer's workers compensation insurer actually paid before it declined liability. The dispute concerns whether the Worker has a liability to repay concerning the damages payable in relation to past medical expenses incurred after the worker's compensation insurer declined liability, and in relation to past domestic assistance. 23 Mr Jobson, counsel for the Worker, argues that section 151Z(1)(b) should be applied in relation to individual heads of damage concerning which compensation on the one hand, and damages on the other, are payable to a particular worker. On that approach, if an employer has not paid compensation concerning some particular head of damage that the worker suffers, the worker has no obligation to make any payment to the employer out of the amount of damages that has been awarded to the worker on that head of damage. 24 Mr Jobson points out that section 151Z(1)(b) makes the worker liable to repay out of the damages an amount of compensation that the employer has paid. How, he asks rhetorically, can an employer be repaid an amount that the employer did not pay in the first place? Thus, he submits, when the compensation payments that the Employer made contained no element relating to domestic assistance received by the Worker, the Worker should have no liability to make any payment to the Employer concerning the amount of damages the Worker has received arising from past domestic assistance. 25 Further, Mr Jobson submits, even if a worker has recovered damages concerning some head of damages in relation to which he has received a compensation payment, the amount that the worker is liable to repay from the damages received on that head is limited to the amount of compensation that the employer has actually paid concerning that head. In accordance with that argument, Mr Jobson submits that it is only $33,050.29 that the Worker must repay concerning past medical expenses. 26 Mr Jobson recognises that there are many respects in which the conditions of entitlement and the manner of quantification of compensation payable under WCA differs from the conditions of entitlement and the manner of quantification of a corresponding benefit under the MAC Act. Under the MAC Act non-economic loss is compensable only if there is whole person impairment in excess of 10% (section 131 MAC Act), but there is no such restriction on entitlement to periodical payments under WCA. Similarly, compensation for permanent impairment and pain and suffering under sections 66 and 67 WCA are assessed differently to the way in which they would be assessed under the MAC Act. Similarly again, the manner of assessment of out-of-pocket expenses under section 60 WCA can differ from the manner in which out-of-pocket expenses are assessed under the MAC Act. A further example is that section 60AA WCA allows compensation for domestic assistance in accordance with different criteria to those that apply to compensation for domestic assistance under the MAC Act. Mr Jobson submits that when there are these differences, sometimes quite significant in financial extent, there would be particular unfairness in requiring a worker to repay out of the damages received for some particular head of claim, anything more than the amount of compensation he had received concerning that head of claim. Indeed, requiring payment of any more could result in an unjustifiable windfall for the employer. Mr Jobson invokes the principle stated by Barwick CJ in Tickle Industries Pty Ltd v Hann [1974] HCA 5; (1974) 130 CLR 321 at 331, whereby: "… a meaning of the language employed by the legislature which would produce an unjust or capricious result is to be avoided. Unless the statutory language is intractable, an intention to produce by its legislation an unjust or capricious result should not be attributed to the legislature."

Decision 27 In my view, Mr Jobson's submission does not state the correct construction of the section.

The Language of the Section 28 I start by considering the language of the section. As the chapeau to section 151Z(1) makes clear, the subsection applies in a situation where two different conditions both apply - that there is an "injury for which compensation is payable under this Act", and that that injury "was caused under circumstances creating a liability in some person other than the worker's employer to pay damages in respect of the injury". 29 Considering the first of those conditions, section 9(1) WCA provides: "(1) A worker who has received an injury (and, in the case of the death of the worker, his or her dependants) shall receive compensation from the worker's employer in accordance with this Act." 30 Numerous other provisions of WCA set out the circumstances in which compensation of various different types is payable, to whom it is payable, and how one ascertains the amount of compensation that is payable. In my view, as a matter of the ordinary meaning of the words, there is an "injury for which compensation is payable under this Act" if there is an injury for which compensation of any kind whatsoever is payable under the WCA. 31 In my view, as a matter of the ordinary meaning of the words, an injury is "caused under circumstances creating a liability in some person other than the worker's employer to pay damages in respect of the injury" if any amount of damages is payable by the person other than the worker's employer in respect of the injury, regardless of how the amount of those damages might be made up. The "damages" are all the damages that the person other than the worker's employer must pay. 32 Section 151Z(1)(b) contains (twice) the expression "those damages". That expression refers back to the chapeau of section 151Z(1) and has the same meaning as "damages in respect of the injury" appearing in the chapeau. The "damages in respect of the injury" cover the entirety of the damages payable with respect to the injury. 33 The only place in section 151Z where particular heads of damage are mentioned is in section 151Z(4). In my view, the fact that specific heads of damage are mentioned in section 151Z(4) points up the contrast with the expression "damages in respect of the injury" and "those damages" in section 151Z(1), where no specific mention of particular heads of damage is made. 34 In my view, section 151Z(1)(b) operates whenever a worker recovers any amount of compensation under the WCA for an injury, and later recovers damages in respect of that injury from some person other than the employer. In that circumstance, subject to section 151Z(4) the total amount of damages that the worker recovers is a fund from which the worker is liable to repay the total amount of compensation that a person has paid in respect of the injury. (A further qualification, not relevant to this particular appeal, on that proposition arises under section 10(2) Law Reform (Miscellaneous Provisions) Act 1965, mentioned at para [42] below.) 35 Mr Jobson's submission is correct in recognising that it would be a strained use of language if section 151Z(1)(b) required the worker to "repay" an amount that the worker had never received. However, what section 151Z(1)(b) requires the worker to "repay" is something that the worker has received, namely the total of the amounts of compensation that have been paid to the worker in respect of the injury concerning which the worker has recovered damages. 36 Dicta in the High Court support this construction. In Tickle Industries Pty Ltd v Hann Barwick CJ (with whom McTiernan J agreed) considered a Northern Territory statute closely analogous to section 151Z. At 328 he took a global approach to the damages from which compensation should be repaid under the equivalent of section 151Z(1)(b): "Little difficulty arises in respect of pars (a) and (b) in the case where the workman or his representative sues and recovers damages from the tortfeasor whether by judgment or by agreement. Having obtained damages, he must to the extent of them repay the amount of compensation received by him."

The Purpose of the Provision 37 The construction of section 151Z(1)(b) that I prefer is consistent with the objectives of section 151Z(1) as a whole. 38 In Turner v George Weston Foods Limited [2007] NSWCA 67; (2007) 4 DDCR 571 I considered the construction of section 151Z(1) and concluded, at [37]: "The whole of section 151Z(1) can be seen as the means of achieving two objectives. The first is that, where an injured worker has a right to receive compensation from his or her employer, and also has a right to receive damages from some other person whose fault has caused the injury, it should be the person whose fault caused the injury that ultimately bears the cost of providing a remedy to the worker for that injury, up to the full amount of the damages for which that wrongdoer is liable. The second is that the injured worker should not be able to retain both the compensation and the damages, and thereby be doubly compensated."

Beazley and Hodgson JJA agreed. 39 Turner was a case in which the limitation that section 151Z(4) imposes upon an employer's right of recovery of compensation was not relevant. In those cases where an award of damages has been made that includes a lump sum, or other provision for making payments, to cover loss of future earnings or earning capacity for future expenses, those payments intended to make provision for the future of the worker are excluded from the amount of damages from which the worker must repay compensation. 40 Those objectives are advanced if (subject to section 151Z(4)) the amount of damages is treated as a single fund, from which the worker is liable to repay the total amount of compensation that he or she has received.

Unjust or Capricious Result? 41 I do not accept Mr Jobson's submission that the decision arrived at in the court below involved attributing an unjust or capricious operation to the statutory language. On the construction I prefer, and subject to section 151Z(4), if the worker does not recover damages that are as large as the amount of compensation that he or she has received, the amount that the worker is obliged to repay is merely the amount of the damages that the worker recovers. In that event, the total amount of money that the worker is entitled to keep is equal to the amount of compensation, but the person who was at fault bears the part of that amount that is due to his or her fault. If the worker recovers damages that are larger than the amount of the compensation received, the total amount of money that the worker is entitled to keep is the amount of the damages. Because the employer has already paid compensation to the worker, the amount of that compensation must be repaid to the employer to ensure that the amount of money that the worker ultimately recovers by reason of the injury is no greater than the amount of the damages awarded. Thus, the practical operation of section 151Z(1)(b) is that the amount of money that a worker ultimately receives is whichever is the greater of the amount of compensation paid, and the amount of damages awarded. I see nothing unjust or capricious in that.

Effect of Contributory Negligence 42 Both parties argued the appeal by reference to a question of principle, concerning whether the Worker has a liability to repay compensation out of the damages payable in relation to past medical expenses incurred after the workers compensation insurer declined liability, and in relation to past domestic assistance. They did not direct any submissions to the effect of Judge Goldring's finding of 5% contributory negligence. However, as this judgment may come to be considered in other cases, it is appropriate to mention that a finding of contributory negligence in the damages action can bear upon the way in which section 151Z operates to give to an employer a right to recover compensation. Apportionment of contributory negligence takes place, in an action for damages, pursuant to section 9 Law Reform (Miscellaneous Provisions) Act. Section 10(2) of that Act relevantly provides: "If the claimant is liable to repay compensation to his or her employer under … section 151Z of the Workers Compensation Act 1987 , the amount of compensation so repayable is to be reduced to the same extent as the damages recoverable by the claimant are reduced under section 9." 43 Section 10(2) varies the calculation under section 151Z(1)(b), in those cases where contributory negligence has reduced what would otherwise be the damages a worker recovers. 44 Consistently with that, the "damages payable after the date of recovery by way of … payments for loss of future earnings or earning capacity or for future expenses" in section 151Z(4) WCA would be the amount of the loss that the trial judge in the damages action assessed the worker as having suffered for loss of future earnings or earning capacity or for future expenses, reduced by the proportion that is attributable to the worker's contributory negligence. It is only the assessed loss, as so reduced, that quantifies the damages payable to which section 151Z(4) refers.

Orders 45 I propose that leave to appeal be granted but that the appeal be dismissed with costs. **********

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