In the recent case of United Airlines Inc. v Sercel Australia Pty Limited  NSWCA 24, the New South Wales Court of Appeal considered whether the two-year time limit imposed by Article 29 of the Warsaw Convention applied to a claim made by an employer for indemnity from the responsible airline in relation to workers' compensation payments.
In September 2005, Sandeep Arora, an employee of Sercel Australia Pty Limited, sustained an injury to his head, neck and knee when the United Airlines aircraft on which he was travelling braked heavily following landing. Sercel made workers' compensation payments under the Workers' Compensation Act 1987 (NSW) (NSW Act) and then sought compensation from United Airlines under section 151Z(1) of the NSW Act. That section provides:
"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:
(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)."
Arora brought no claim against United Airlines and the airline submitted that Sercel's claim for indemnity was out of time, not having been brought within two years.
The primary Judge Robison DCJ rejected that contention.
Court of Appeal
In the leading judgment of Allsop P, there is a detailed analysis of the governing legislation and a history of the implementation of the Warsaw Convention and its various amendments.
Section 37 of the Civil Aviation (Carriers' Liability) Act 1959 (Cth), (Carriers' Liability Act), which Act gives the Warsaw Convention, the Hague Protocol and Montreal Protocol No. 4 (together the Convention) force of law in Australia, provides:
"Nothing in (Part IIIC and the Convention) shall be deemed to exclude any liability of a carrier:
(a) to indemnify an employer of a passenger or any other person in respect of any liability of, or payment made by, that employer or other person under a law... providing for compensation... in the nature of workers' compensation; or
(b) to pay contribution to a tort-feasor who is liable in respect of the death of, or injury to, the passenger;
But this section does not operate so as to increase the liability of a carrier in respect of a passenger beyond the amount fixed by or in accordance with this Part."
President Allsop noted the following points in reaching his conclusion that the two-year time limit under Article 29 of the Warsaw Convention was inapplicable to the claim for indemnity under section 37 of the Carriers' Liability Act:
- The action was one for an indemnity not for damages.
- The liability of the person for the damages is to be assessed at the time of the act or omission causing the compensable injury regardless of whether the proceedings were taken or taken within the time prescribed by any limitation period.
- The limitation period for the cause of action under section 151Z(1)(d) of the NSW Act is six years under that Act.
- It was irrelevant that the worker was outside New South Wales when the injury occurred as this does not prevent compensation being payable under the NSW Act.
Allsop P made a thorough analysis of both the English and the French texts of relevant parts of the Convention and also looked at the enactment history going back to the Carriage by Air Act of 1935, noting that that Act did not provide for the action contemplated by section 37 of the Carriers' Liability Act ie workers' compensation indemnity and contribution between tort-feasors.
In 1959, and subsequently, the Carriers' Liability Act has had a provision dealing with indemnity and contribution. While each Act has had a two-year time bar applicable in certain respects, Allsop P noted that:
"Section 37 does not deal with an action for damages or liability for the injury or death of a passenger, though it does provide for liability of the carrier in respect of the injury to or death of the passenger. It deals with the liability to pay two types of payments (creating two co-relative rights of well known rights or entitlements) which might arise in respect of the death of or injury to a passenger - workers' compensation payments and contribution of another tort feasor who is also liable. Neither type of liability or right is for damages or for the primary liability, though as would have been understood in 1959, both are, or are likely to be conditioned on the existence of liability of the carrier to the passenger for injury or death."
While Article 29 of the Warsaw Convention extinguished the 'right to damages', it was noted that:
"The right of indemnity does not accrue until payment of the compensation is made. This will always be later, and possibly years later. It would be an unexpected operation of a law (and one that would also be unjust and capricious) if a time bar provision could operate to extinguish the right to sue, before it arose."
Accordingly Allsop P came to the conclusion that the right of indemnity in sections 14 and 37 of the Carriers' Liability Act was not subject to the two-year time bar in section 34 and Article 29.
His judgment was accepted by MacFarlane JA, who agreed with him and by Handley AJA who, like Allsop P, also noted that the conclusion was consistent with the decision of the Ontario High Court in Connaught Laboratories Limited v Air Canada  94 DLR (3rd) 586 and the recent decision by the Ninth Circuit in Chubb Insurance Co v Menlo Worldwide Forwarding Inc at 634F 3rd 1023, 1028 , those decisions involving claims for indemnity between carriers.
The decision will be greeted with concern by airlines (who may have already considered certain claims to have been time barred that might now be open to be pursued), but will no doubt be gladly received by workers' compensation insurers and employers (who might have thought that the gate for indemnity had been shut some time ago).
It should also be noted that while the decision related to the Warsaw Convention with the Hague Protocol and Montreal Protocol no 4, the same outcome could be expected if carriage had been subject to the Montreal Convention 1999.
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