Liability: consideration
58In order to determine the appeal it is necessary first to bear in mind that the appellant is standing in the shoes of Oxford Shop, Mr Tallouzih's employer, which paid compensation to Mr Tallouzih.
59Secondly it is necessary to understand the nature of a s 151Z claim.
60Section 151Z(1) addresses the situation of an injured worker entitled both to compensation under the WC Act from an employer and to damages at common law from a tortfeasor. It regulates, first, the worker's rights against the employer and the tortfeasor and, secondly, the ultimate burden for the worker's compensation as between the employer and the tortfeasor: Kurnell Passenger & Transport Service Pty Ltd v Randwick City Council [2009] NSWCA 59; (2009) 230 FLR 336 (at [28]) ("Kurnell") per McColl JA.
61In its first sphere of operation, s 151Z(1)(a) - (c) reflects the intention of Parliament that a worker should not receive double compensation: Kurnell (at [29]). In its second sphere of operation, the policy of s 151Z is to ensure that "an employer who paid the statutory compensation to an injured employee or, in the case of his death, to his dependants, where the injury or death, though occurring in the course of employment, was caused by the wrongful act or omission of another person was to be entitled to be indemnified against the payment of that compensation by that other person": Tickle Industries Pty Ltd v Hann [1974] HCA 5; (1974) 130 CLR 321 (at 326) per Barwick CJ (McTiernan J agreeing); referred to with approval in Victorian WorkCover Authority v Esso Australia Ltd [2001] HCA 53; (2001) 207 CLR 520 (at [13]) per Gleeson CJ, Gummow, Hayne and Callinan JJ.
62Thus s 151Z creates a legislative scheme designed to reimburse the party liable to pay compensation out of the fund provided by the party liable to pay damages (the "wrongdoer") but it applies only where the "'circumstances creating' liability for the compensable injury also create a liability in the tortfeasor to pay damages": Kurnell (at [31]); Franklins Self Serve Pty Ltd v Wyber [1999] NSWCA 390; (1999) 48 NSWLR 249 (at [52], [53], [99]) per Mason P (Sheller JA and Cole AJA agreeing).
63The right which is given to the employer who has paid compensation rests on the existence for however brief a time of a true liability to pay damages in some wrongdoer or wrongdoers in respect of the injury for which compensation was payable and has been paid and, in that sense, has been described as "derivative": Tooth & Co Ltd v Tillyer [1956] HCA 49; (1956) 95 CLR 605 (at 612) per Dixon CJ, Williams, Webb and Fullagar JJ; QBE Workers Compensation (NSW) Ltd v Dolan [2004] NSWCA 458; (2004) 62 NSWLR 42 (at [42] - [43]) per Beazley JA (Mason P and Tobias JA agreeing).
64The statutory right of indemnity conferred by s 151Z(1)(d) upon the person who has paid the compensation is not to be equated to the cause of action which the worker would have had against the wrongdoer. Section 151Z(1)(d) creates a cause of action separate to that vested in the worker: WorkCover Queensland v Amaca Pty Ltd [2010] HCA 34; (2010) 241 CLR 420 (at [14], [19]) per French CJ, Gummow, Crennan, Kiefel and Bell JJ. The claim to enforce the entitlement to indemnity is not a claim in tort, rather it is a cause of action created by statute for an indemnity against a person liable to pay damages to another: Esso Australia Ltd v Victorian WorkCover Authority [2000] VSCA 74; (2000) 1 VR 246 (at [28]) per Winneke P (Tadgell and Chernov JJA agreeing); approved Victorian WorkCover Authority v Esso Australia Ltd (at [14]) per Gleeson CJ, Gummow, Hayne and Callinan JJ. The liability of the wrongdoer is a "'notional liability at common law [or under a statute other than the Compensation Act] for pecuniary and non-pecuniary loss' ... having regard to limitations on the liability of the wrongdoer to the person who has received compensation": WorkCover Queensland v Amaca Pty Ltd (at [26]).
65Accordingly, the appellant's s 151Z(1)(d) entitlement is not, in form or substance, a claim for damages, but a cause of action created by statute for indemnity against a person liable to pay damages to another; the wrongdoer's liability is an ingredient of the statutory right: WorkCover Queensland v Amaca Pty Ltd (at [53]).
66The wrongdoer's liability to pay damages is to be assessed at the time of the act or omission causing the compensable injury and not at some later time such as when proceedings for indemnity are brought: Fuller v K & J Trucks Coffs Harbour Pty Ltd [2006] NSWCA 88; (2006) 67 NSWLR 516 (at [42]) per Bryson JA (Handley and Ipp JJA agreeing); United Airlines Inc v Sercel Australia Pty Ltd [2012] NSWCA 24; (2012) 260 FLR 37 (at [22]) per Allsop P (Macfarlan JA and Handley AJA agreeing).
67In Kurnell (at [39]), I explained:
"39 Determining the compensation the employer can recover from the tortfeasor pursuant to s 151Z(1)(d) involves a 'trial within a trial': Hickson (at [44]). The employer must establish five separate constituent elements: (a) that a worker was injured; (b) that the injury was one for which compensation is payable under the 1987 Act; (c) that it was caused under circumstances creating legal liability in the tortfeasor; (d) that the worker has recovered compensation under the 1987 Act for that injury from the employer; (e) that the employer has paid the compensation so recovered: Frank G O'Brien Ltd v Bain [1975] 1 NSWLR 373 (at 381) per Glass JA (with whom Reynolds and Hutley JJA agreed); see also Kornjaca v Steel Mains Pty Ltd [1974] 1 NSWLR 343 (at 347) per Glass JA; Kempsey District Hospital v Thackham (at 507) per Handley JA; Fuller v K & J Trucks Coffs Harbour Pty Ltd [2006] NSWCA 88; (2006) 67 NSWLR 516 (at [10]) per Bryson JA (Handley JA agreeing)."
68As the High Court explained in WorkCover Queensland v Amaca Pty Ltd (at [21]) when considering s 207B(7) of the Workers' Compensation and Rehabilitation Act 2003 (Qld) (the "Qld Act"), which for relevant purposes is in substantially the same terms as s 151Z(1)(d), "[w]hereas the right of indemnity is distinct from the cause of action of the person to whom compensation has been paid, the scope of the indemnity necessarily is tied to that cause of action."
69In WorkCover Queensland v Amaca Pty Ltd, the court explained (at [25] ff) why to say the phrase "to the extent of that person's liability" in s 207B(7)(a) of the Qld Act (cf s 151Z(1)(d): "liable to pay those damages (being an indemnity limited to the amount of those damages)") requires "a hypothetical assessment of damages that would have been payable had the person to whom compensation has been paid brought an action against the wrongdoer" is "apt to mislead".
70The court distinguished the liability of the wrongdoer per se to the worker from the liability of the wrongdoer to pay damages to the worker. It is the liability in the first sense to which the court looks in determining whether the wrongdoer had legal responsibility for the worker's injury or death at some point in time: WorkCover Queensland v Amaca Pty Ltd (at [26] - [28], [51]). A provision which imposes a condition which is of the essence of the jurisdiction of the court to entertain the worker's claim against the wrongdoer would, if unsatisfied, bar the employer from enforcing the right of indemnity: WorkCover Queensland v Amaca Pty Ltd (at [30]) and the cases referred to in footnote (40), in particular, Australian Iron & Steel Ltd v Hoogland [1962] HCA 13; (1962) 108 CLR 471 (at 488 - 489) per Windeyer J and Pedersen v Young [1964] HCA 28; (1964) 110 CLR 162 (at 169) per Windeyer J.
71Conversely, a general limitation on a personal action which does not affect the liability of the wrongdoer, but would operate "as a bar, when pleaded, to any remedy the [worker] may seek when bringing an action for damages pursuant to that liability", does not "affect an assessment of the right of the insurer to indemnity": WorkCover Queensland v Amaca Pty Ltd (at [28], [31]).
72This distinction is important in the context of the question raised at trial but not pursued on appeal, namely whether in seeking to enforce its statutory right of indemnity, the appellant was required to discharge the s 34 obligation of due inquiry. The primary judge held that the appellant was required to do so. In my opinion her Honour was correct in this respect.
73As I explain later in these reasons (see [81]), s 34(1) creates a cause of action against the Nominal Defendant, a condition precedent of which is that there must have been due inquiry for the purpose of identifying the motor vehicle for whose owner or driver's fault the Nominal Defendant is liable: s 34(3)). Thus, the only way the Nominal Defendant can be found to be "some person other than the worker's employer" (s 151Z(1)), in other words, to be statutorily liable for the true wrongdoer's fault, is if due inquiry has been undertaken, but been unsuccessful. Nevertheless, "the liability of the Nominal Defendant arises at the time of injury and the accompanying departure of the offending vehicle": Nominal Defendant v Australian Associated Press [1982] 1 NSWLR 127 (at 132) per Moffitt P (decided in respect of s 30(2)(a) of the Motor Vehicles (Third Party Insurance) Act 1942 and s 64(1)(b) of the Workers' Compensation Act 1926 neither of which is relevantly different from the provisions presently under consideration): Nominal Defendant v Hi-Light Industries Pty Ltd [2004] NSWCA 423; (2004) 61 NSWLR 585 (at [27]) per Ipp JA (Beazley and Tobias JJA agreeing).
74Mr Kelly submitted that Penrith City Council v East Realisations Pty Ltd (in liquidation) [2013] NSWCA 64; (2013) 63 MVR 180 ("Penrith City Council") was authority for the proposition that where an employer sought a s 151Z(1)(d) indemnity in an unidentified motor vehicle accident case, the time for assessing whether due inquiry has been undertaken was when the claim for indemnity is made.
75Penrith City Council was a case in which a worker, who was an employee of the Council, was injured in 2003 whilst a passenger on a bus when she was thrown from her seat as a consequence of the bus driver braking heavily in order to avoid colliding with a motor vehicle which had come to an abrupt stop in front of it. There was no collision and, apart from the bus driver apparently indicating from within the bus his ire at the other driver's actions, there was no interaction between them and the motor vehicle continued on its course: Penrith City Council (at [39]). The Police were not involved and the bus driver did not report the matter to his employer: Penrith City Council (at [30], [80]).
76The worker was travelling from her place of employment to her residence at the time. Accordingly she claimed, and was paid, workers compensation, but she did not claim damages from either the owner of the bus or the owner of the car: Penrith City Council (at [17]). The Council's workers compensation insurer pursued a s 151Z(1)(d) claim against, relevantly for present purposes, the Nominal Defendant to recover the compensation paid to the worker: Penrith City Council (at [18]).
77Tobias AJA (with whom Meagher JA and I agreed) observed (at [80]) that "the issue of establishing the identity of the car did not arise until 2008 when the appellant first made a claim for indemnity under s 151Z(1)(d) [by which stage] [t]he trail was not merely cold, but frozen". His Honour concluded (at [82]) "that as at 2008 there was no inquiry or search which would have established the identity of the relevant car ... [and that] any such inquiry of the liquidator of the [alleged bus owner] would have been purely ritualistic and would have proved futile".
78I do not understand Tobias AJA to have been enunciating a special rule for the purposes of a s 151Z(1)(d) action where the worker's claim involved an unidentified motor vehicle as to when the court considers whether the due inquiry obligation was satisfied. Rather, in my view, his Honour was merely dealing with the facts of that case where there was no collision, no exchange of details between the two drivers (or opportunity to do so) and the worker never sought to bring proceedings against the other driver. The only submission the Nominal Defendant made as to due inquiry was that the appellant should have made inquiries of the liquidator of the owner of the bus. In circumstances where there was no evidence the incident was ever reported to the bus owner, Tobias JA correctly rejected the proposition that that was a viable line of inquiry.
79The consequence for the present case is that the question whether the due inquiry obligation was satisfied had to be determined in a notional trial of Mr Tallouzih's proceedings against the tortfeasor. The case was conducted on the basis that that "tortfeasor" was the Nominal Defendant. Accordingly the primary judge had to consider, as her Honour did, whether Mr Tallouzih had a cause of action against the Nominal Defendant because due inquiry had been undertaken and been unsuccessful. Contrary to Mr Kelly's submissions, the case was not to be approached as if the appellant's indemnity action under s 151Z(1)(d) was itself an action under s 34 of the MAC Act. Rather, as I have said, the Nominal Defendant's liability to Mr Tallouzih was an ingredient of the appellant's statutory right of indemnity.
80Accordingly, the primary judge was correct in considering the due inquiry question from the time Mr Tallouzih's cause of action accrued and not, as Mr Kelly submitted, as if the clock started running when the indemnity proceedings were commenced.