Thomson v Allianz Australia Workers' Compensation [2005] NSWSC 885 | Case summary

2986/05 OLIVIA THOMSON v ALLIANZ AUSTRALIA WORKERS' COMPENSATION (NSW) LIMITED JUDGMENT 1 The plaintiff, Ms Thomson, contends that an agreement of compromise has been reached in respect of a workers compensation claim made by her and that the court should make a declaration accordingly, at the same time awarding her interest on $6,000 from 23 February 2005. Although the claim is cast in that way, it is, in essence, a specific performance claim. The defendant, Allianz Australia Workers' Compensation (NSW) Limited, denies that any agreement of compromise was made. The defendant also says that, if an agreement was made, it is affected by mistake and cannot be enforced. 2 Ms Thomson sustained a workplace injury in 1998. She made a claim for workers compensation for permanent loss of the use of her leg. That claim was settled in November 2000. The settlement was on the basis of 7½% impairment. A registered agreement was formulated accordingly. Ms Thomson's leg later deteriorated and she had further surgery in January 2002. She instructed her solicitors to make a further claim for permanent loss of the use of the leg and for compensation for pain and suffering. That claim was conveyed to the defendant by Ms Thomson's solicitors' letter of 14 December 2004: "We advise that we act for the above named in relation to workers compensation proceedings arising out of injuries sustained on 13 October 1998 and enclose, by way of service upon you, reports of Dr Wallace dated 5 November 2004 and 25 November 2002. We further particularise our claim pursuant to section 102 of the 1998 Act as follows: 1. A further 7.5% permanent loss of use of the left leg at or above the knee. 2. $20,000 with respect to 40% of the maximum for pain and suffering pursuant to Section 67. One half of the above is past pain and suffering. One half of the above is actual pain and one half is anxiety. We advise that at the expiration of eight weeks, we will immediately forward this claim to the Workers Compensation Commission for resolution of this dispute. Kindly review our client's claim and forward this letter onto your solicitor." 3 The defendant replied as follows on 16 February 2005: "We refer to your client's claim for lump sum compensation pursuant to Sections 66 and 67 of the Workers Compensation Act 1987 in respect to a further loss. We had your client medically examined by Mr David Meachin, Orthopaedic Surgeon and enclose a copy of the medical report. Based on the available medical evidence, including the enclosed report, we are prepared to make the following offer of settlement with respect to your client's claim: 1. $6,000.00 being 8% further loss of efficient use of L leg at or above the knee. In addition, we are pleased to offer $4,000.00 for pain and suffering pursuant to sec 67 of the Act. The above offer is made pursuant to s.342 of the Workplace Injury Management and Workers Compensation Act 1998. We consider the above offer constitutes a 'reasonable offer' for the purposes of s.342. We put you on notice that if the above offer is not accepted within 28 days we reserve the right to tender this letter at the appropriate time and make submissions pursuant to s.342 that the Applicant is not entitled to recover any costs beyond the date of this letter. Please obtain instructions from your client and contact us in order that we may attend to settlement procedure." 4 Ms Thomson's solicitors wrote to the defendant's solicitors on 23 February 2005 as follows: "We refer to your letter of 16 February 2005. In relation to your offer of $6,000, being a further 8% loss of use of the left leg above the knee, we have instructions to accept this offer. In relation to your offer for pain and suffering in the amount of $4,000, we have instructions to reject this offer. However, we advise that we do have instructions to make a counter offer of $15,000 solely in relation to pain and suffering. Could we kindly have your response at your earliest convenience." 5 The defendant's response of 3 March 2005 read: "We enclose a sealed copy of our Reply. We refer to the medical report of Dr Meachin dated 10/02/05. Dr Meachin assessed the workers current impairment as a result of the work injury at 8% (10% minus 2% for constitutional factors). Your medicine (Dr Wallace) assesses the workers [sic] as a result of the work injury at 15% (20% minus 5% for constitutional factors). You have rejected our offer, which was 7.5% above our medicine. We consider our offer more than reasonable in light of our medicine. To reach the section 67 threshold the worker will need an increase of 6.5%. There is no certainty that if the matter is referred to an AMS that the worker will get above the section 67 threshold. In these circumstances we are not willing to make any further offers and we will submit that the matter be referred to an AMS. If the AMS does not find an increase of 6.5% or greater then we will rely on offer dated 16/02/05 in respect of any costs orders." 6 Ms Thomson's solicitors wrote to the defendant on 22 March 2005 as follows: "We refer to your letter of 3 March 2005. With respect, we have not rejected your offer in relation to section 66 entitlements and in fact, as confirmed in our letter of 23 February 2005, we have accepted it. The only outstanding issue is the amount of the section 67 entitlements. If you dispute this fact, we will seek instructions from our client to take proceedings in the Equity Division of the Supreme Court to enforce her settlement in relation to section 66. We look forward to your response at your earliest convenience." 7 These proceedings were commenced on 16 May 2005. 8 The parties' correspondence took place in the context of the workers compensation legislation. It is therefore appropriate to refer to certain aspects of that legislation. Relevantly for present purposes, the Workers Compensation Act 1987 contemplates two types of compensation. The first is "permanent impairment compensation" in relation to which it is sufficient to quote s.66(1): "A worker who receives an injury that results in permanent impairment is entitled to receive from the worker's employer compensation for that permanent impairment as provided by this section. Permanent impairment compensation is in addition to any other compensation under this Act." 9 The second relevant type of compensation is "pain and suffering compensation". It is sufficient to quote s.67(1): "A worker who receives an injury that results in a degree of permanent impairment of 10% or more is entitled to receive from the worker's employer as compensation for pain and suffering resulting from the permanent impairment an amount not exceeding $50,000. Pain and suffering compensation is in addition to any other compensation under this Act." 10 Section 66A deals with registration of an agreement by a worker to receive compensation of either type. Section 66A(1) is as follows: "An agreement by a worker to receive an amount of permanent impairment compensation or pain and suffering compensation in respect of impairment may be registered by the Registrar. Once the agreement is registered the worker is not entitled to receive any additional compensation in respect of the impairment under an award of the Commission." 11 It is appropriate to quote also s.342 of the Workplace Injury Management and Workers Compensation Act 1998 to which reference is made in the correspondence and which was also mentioned in the course of correspondence: " Costs unreasonably incurred (1) If the Commission is satisfied that any costs on a claim were unreasonably incurred, the Commission is to order that those costs are to be treated as unreasonably incurred for the purposes of this section and the Commission is not to make an order for payment of those costs by any other party to the claim.

(4) The Commission may by order exempt any costs or a proportion of any costs from the operation of this section if of the opinion that it would be unjust not to do so because the legal practitioner concerned made all reasonable efforts to avoid unnecessary litigation in the proceedings or for any other reason should not be held responsible for the incurring of the costs concerned." 12 In the Act of 1998, "compensation" includes compensation under the Act of 1987 and thus extends to both permanent impairment compensation and pain and suffering compensation. 13 The parties' dispute concerns the classic method of contract formation by offer and acceptance. The nature of an offer, as such, is indicated at paragraph 207 of J.W. Carter and D.J. Harland, "Contract Law in Australia" (fourth edition, 2002): "An offer may be described as the indication by one person to another of his or her willingness to enter into a contract with that person on certain terms. The statement alleged to be an offer must indicate a willingness by the offeror to be bound without further negotiation as to the terms of the proposed contract. Although the making of an offer cannot, of course, in itself give rise to a contract, an offer does have legal significance in that it creates in the offeree a power subsequently to create a contract by the offeree's unilateral action, that is, by accepting the offer (provided that the offer has not previously been withdrawn or otherwise terminated)." 14 The real question before me is whether the defendant's letter of 16 February 2005 conveyed two offers, each of which was separately open for acceptance regardless of the other; or whether there was, in reality, a single and undivided offer capable of acceptance only as to its whole. 15 The defendant's letter of 16 February 2005 (as well as Ms Thomson's solicitors' letter of 14 December 2004 to which it responded) were composed against the background of Ms Thomson's workers compensation claim settled in 2000. That claim and the settlement of it had involved permanent impairment compensation but not pain and suffering compensation. The latter was not, at that time, available as the degree of permanent impairment had not reached the level specified in s.67. 16 What Ms Thomson sought, against the background of the 2000 settlement, was set out in the letter of 14 December 2004. That letter raised for the first time the matter of s.67 compensation and revisited the matter of s.66 compensation. The second paragraph referred to "our claim" and to particularisation of it pursuant to s.102 of the Act of 1987, which section deals with both s.66 situations and s.67 situations. The section says that a worker cannot commence proceedings in respect of compensation unless certain steps have first been taken, including notification of the claim. This applies alike to s.66 compensation and s.67 compensation. 17 The letter of 14 December 2004 referred, as I have said, to "our claim". The word "claim" is in the singular and the single claim mentioned is then "particularised" by reference to 7.5% permanent loss (obviously for s.66) and $20,000 (for s.67). The "claim" was obviously a "claim" for both these elements which were identified by the numerals 1 and 2 respectively. 18 It was therefore logical and to be expected that the defendant's reply addressed the two numbered items separately. In doing so, however, it began by referring to "your client's claim for lump sum compensation pursuant to Sections 66 and 67 of the Workers Compensation Act 1987 in respect to a further loss". The reply thus made it clear at the outset that it was treating the letter of 14 December 2004 as a "claim" for "lump sum compensation" pursuant to both ss.66 and 67. 19 Having set the stage in that way by referring to a single "claim" for "lump sum compensation" under both sections, the letter of 16 February 2005 set out the "offer of settlement" (singular) that the defendant was prepared to make "with respect to your client's claim" (singular). The intention was thus obviously to address the single claim which, consistently with the letter of 14 December 2004, had been mentioned at the start of the letter of 17 February 2005, being a "claim" referable to both s.66 and s.67. 20 The "following offer of settlement" was then set out, but in an odd and somewhat confusing way. Against the numeral 1 appears the reference to $6,000 (or 8%) for further loss of use of the leg (obviously related to s.66). One would expect that to be followed by the numeral 2 and the component of the offer referable to pain and suffering (related to s.67). Instead, the second element is introduced by the words, "In addition, we are pleased to offer …". Then follows a description of the pain and suffering component. 21 The claim conveyed by the letter of 14 December 2004 was a claim for both permanent impairment compensation and pain and suffering compensation, they being dealt with, as I have said, by the numbered items 1 and 2 respectively. It was not a claim for one to the exclusion of the other. Nor was it a claim proposing alternatives. Ms Thomson obviously sought both. When, therefore, the defendant said in its letter of 16 February 2005 that it was "prepared to make the following offer of settlement with respect to your client's claim", it was responding to (and must be taken to have been referring to) the single composite claim conveyed by the letter of 14 December 2004 and comprising both item 1 and item 2 in that letter. The genesis of the letter of offer was "your client's claim", without distinction between parts of that claim. 22 In addressing - and making an "offer of settlement with respect to" - "your client's claim …..", the defendant cannot but be seen as having communicated an offer concerning that claim as a whole and embracing both elements of it. That being so, it would be a non sequitur of a glaring kind to regard the reference to $6,000 permanent impairment compensation for further loss of use of the leg as a separate element of the response. That $6,000 item was concerned with only part of "your client's claim" and was not, of itself, any form of comprehensive response to "your client's claim". For the response to be comprehensive, it had to be a response to both elements of the claim. It must follow that the sentence starting "In addition" was part of "the following offer of settlement with respect to your client's claim" mentioned in the third paragraph of the letter. Only by adopting that construction does one find anything that can properly be described as an "offer of settlement with respect to your client's claim". 23 The conclusion that there was, in this way, a single offer of $6,000 permanent impairment compensation for further loss of use of the leg plus $4,000 pain and suffering compensation is reinforced by the later parts of the letter of 16 February 2005. There are, in the subsequent paragraphs, three references to "this offer" in the singular. Those references all relate to s.342 of the Workplace Injury Management and Workers Compensation Act 1998. That section is concerned with what it calls "costs unreasonably incurred". Its effect is to deprive a legal practitioner of an entitlement to recover "costs that the Commission has ordered are to be treated as unreasonably incurred". One of the bases on which costs may be found to have been unreasonably incurred is that they were incurred "after a reasonable offer of settlement of the claim was made to the party". 24 For the purposes of the Act of 1998, "claim" is defined by its s.4 to mean "a claim for compensation or work injury damages that a person has made or is entitled to make". The term "compensation" is defined by the same section as meaning "compensation under the Workers Compensation Acts" (which includes the 1987 Act) and as including "any monetary benefits under those Acts". 25 The claim conveyed by Ms Thomson's solicitors' letter of 14 December 2004 was a "claim" in this defined sense since it sought "compensation" consisting of both permanent impairment compensation and pain and suffering compensation, with distinct money sums ascribed to each component of the whole - 8% permanent loss of a leg to the first (which represents $5,625) and $20,000 for the second, making a total of $25,625. Let it be assumed, for the purposes of illustration that $5,000 would have been a reasonable figure for the first component and that $15,000 would have been a reasonable figure for the second component. It would follow that an undissected offer of $20,000 was a reasonable offer; and this would be the case, as an objective matter, even though there was no dissection. And an offer of $20,000 would remain reasonable even if, implicitly or explicitly, the offering party ascribed the inadequate sum of $2,000 to the first component and the over-generous sum of $18,000 to the second. 26 There was reference, in the course of submissions, to approaches taken under s.432. Mr Goodridge drew attention to the decision of the Workers Compensation Commission in Carolan v Baby's Stuff Pty Ltd (9 November 2004) where the questions raised by s.342 were addressed in relation to claims for permanent loss of use of an arm and severe bodily disfigurement. The claims were dealt with separately and Mr Goodridge referred to considerations that might cause a workers compensation respondent to offer a higher sum than otherwise for one component because of advantages that might produce in case of future recurrence. On the other hand, and as Zreika v QBE Workers Compensation (NSW) Ltd [2005] NSWSC 573 illustrates, it is possible for a case in which compensation is sought by reference to several heads to be compromised on a lump sum basis, although probably with some consensual allocation among the components for the purpose of the form of agreement required for s.66A purposes. 27 It is not unusual in negotiating situations for different components of a contemplated single transaction to be dealt with by reference to separate values. One party may be prepared to pay what it considers to be an inflated price for one component because it thinks that it is paying an exceptionally low price for the other. Such a party has no reason to complain about the high price if the two components are part of a composite transaction. But such a party does not intend the counterparty to be able to insist on sale of the first item at the inflated price without also transferring the second item at the low price. 28 Matters concerning s.432 were canvassed at the hearing in the context of a discussion of general practices. I am not persuaded, however, that consideration of general practices (if there be any truly identifiable as such) is in any way helpful in relation to the question of contract formation in this case. It is for that reason that I ruled inadmissible on relevance grounds evidence said to indicate such practices. 29 The contract formation question here has to be determined as a matter of construction (and according to objective manifestation of intentions) by reference to the actual parties' actual communications, viewed in the context of the events of 2000. By referring in the letter of 16 February 2005 to "your client's claim for lump sum compensation pursuant to Sections 66 and 67 of the Workers Compensation Act 1987 in respect to a further loss", the defendant was identifying the single claim made by means of the solicitors' letter of 14 December 2004. Then having set out "the following offer of settlement" by reference to the material appearing after the numeral 1 and the material inelegantly introduced by "In addition, we are pleased to offer", the defendant went on to refer on three occasions to "this offer" (singular) in the parts of the letter of 16 February 2005 dealing with s.432 of the Act of 1998. The defendant thus showed clearly that the two components, one as to permanent impairment compensation (identified by the numeral 1) and the other as to pain and suffering compensation (introduced by the words, "In addition, we are pleased to offer"), together made up one offer capable of being accepted as a whole but incapable of acceptance as to either part alone. 30 I am left in no real doubt that Ms Thomson, by the letter of 14 December 2004, submitted a single claim made up of two components neither of which was advanced without the other; and that the defendant, by the letter of 16 February 2005, made a single offer, referring separately to the same two components, which offer was available for acceptance as a whole but not as to one of the components to the exclusion of the other. 31 Ms Thomson's purported acceptance of one offer but not the other, by means of her solicitors' letter of 23 February 2005 did not represent unequivocal assent to the single offer conveyed by the defendant's letter of 16 February 2005. The letter of 23 February 2005 was thus ineffective to bring any contract into existence. No contract was concluded between Ms Thomson and the defendant. The issue of mistake does not arise. 32 The summons is dismissed with costs. **********

Thomson v Allianz Australia Workers' Compensation

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