Section 151Z (1)(d) of the Workers Compensation Act 1987 (NSW) (WCA) provides an employer with a right to indemnity from a third party. The indemnity allows the employer or its insurer to recover compensation payments from a person liable to pay damages for the same injury for which compensation was paid. The last decade has seen an increase in the importance of recovery claims as employers have become increasingly aware of the entitlement to recovery and the potential effect of successful recovery on their workers compensation insurance premiums.
Two 2012 decisions of the New South Wales (NSW) Court of Appeal, United Airlines Inc v Sercel Australia Pty Ltd  NSWCA 24 (United Airlines) and Izzard v Dunbier Marine Products Pty Limited  NSWCA 132 (Dunbier Marine), are of significance to recovery claims. The first has expanded the potential of employers and workers compensation insurers to claim recovery from airlines for injury to workers during flight. The second has introduced potential uncertainty into the assessment of the amount of the recovery sought under the indemnity.
RECOVERY CLAIMS SET TO TAKE OFF
In United Airlines, the NSW Court of Appeal considered whether the two-year time bar imposed by the Warsaw Convention (Convention) on claims for damages arising from international carriage by aircraft applied to a claim for recovery by an employer.
In 2005, an employee of Sercel, Mr Aurora, was a passenger on a United Airlines flight from Sydney to Houston, Texas. He sustained personal injury when the aircraft braked heavily on landing. Aurora made a claim for workers compensation in New South Wales, which was paid by Sercel. Sercel sought indemnity from United Airlines under Section 151Z (1)(d).
United Airlines argued that Sercel's claim for indemnity was out of time as it had not been brought within two years, as required by the Convention. The operation of the Convention and subsequent protocols has force of law in Australia through the operation of the Civil Liability (Carriers' Liability) Act 1959 (Cth) (CL Act).
The trial judge rejected United Airlines' submissions. United Airlines appealed.
The issues in the Court of Appeal were:
- Whether the action for recovery brought under section 151Z, which is expressly recognised by section 37 of the CL Act, was time-barred by operation of Article 29 of the Convention
- Whether Sercel was prevented from bringing recovery proceedings in NSW as the event on which the recovery claim was based occurred in Texas, there being no cause of action available to Sercel in Texas.
The Court of Appeal concluded that the two-year time bar did not apply to a claim for recovery under section 151Z. In coming to that view, President Allsop, who delivered the lead judgment, found that:
- The time bar imposed by Article 29 of the Convention applied to a right to damages
- The action under section 151Z(1)(d) was an action under a statutory indemnity, not a claim for damages
- The liability of the person to pay damages to a worker (one of the elements of the recovery action) is to be assessed at the time of the act or omission giving rise to the injury, regardless of whether the recovery proceedings were brought within any limitation period applicable to a claim for damages by the worker against that person
- The only limitation period applicable to the claim under section 151Z(1)(d) was the date six years from the date of each payment of compensation. That limitation period arises pursuant to section 14(1)(d) of the Limitation Act 1969 (NSW)
- Section 37 of the CL Act is not affected by the two-year time bar under Article 29, as: "Neither type of liability or right (being the right to indemnity or contribution recognised by section 37) is for damages or for primary liability, though... both are, or are likely to be conditioned on the existence of the liability of the carrier to the passenger for injury of death".
Addressing the second issue, the court held that it is irrelevant whether the worker was outside NSW when the injury occurred. The approach to choice of law issues taken in Regie Nationale Des Usines Renault SA v Zhang (2002) 210 CLR 491 (that the applicable choice of law to international torts was the law of the place where the injury occurred) was not applicable, as it concerned the rules for determination of the applicable law for torts. As the action by Sercel was not an action in tort, but a claim for statutory indemnity governed by the law of NSW, that indemnity applied to permit recovery of compensation paid in accordance with the operation of the NSW statute, unaffected by the law of Texas.
The decision is of significance to employers and their insurers as it establishes a potential entitlement to recovery in claims that were previously thought to be statute-barred. It also provides clarification to entitlement to bring recovery proceedings in claims where a NSW employee is injured outside the jurisdiction, in circumstances creating a liability in a third party to pay damages, subject to issues of enforcement of any judgment obtained against that party.
ASSESSMENT OF PERMANENT IMPAIRMENT – BACK TO THE FUTURE
Dunbier Marine Products, which manufactures boat trailers, had a contract with RBI Haulage Pty Limited (RBI) to transport its boat trailers from Melbourne to its Sydney depot by road. RBI's driver, Mr Izzard, drove a truck loaded with trailers to Sydney. While attempting to unload the trailers, Dunbier's Sydney depot manager, Mr Buckley, was injured when a steel perimeter frame used to support the trailers during transport fell on him.
Mr Buckley brought proceedings against Mr Izzard and RBI, claiming damages for breach of duty of care owed to him. As part of their defence to the proceedings, Mr Izzard and RBI argued that Mr Buckley's injuries had been contributed to or caused by the negligence of Dunbier and that any judgment recoverable by Mr Buckley should be reduced in accordance with section 151Z(2)(c) of the WCA. Mr Izzard and RBI also claimed contribution from Dunbier under section 5 of the Law Reform (Miscellaneous Provisions) Act 1946 (NSW).
Section 151Z(2) provides for the reduction in the damages awarded to a plaintiff based on the proportion of the responsibility of the plaintiff's employer. The amount of the reduction is adjusted by the operation of paragraphs (b) to (d) to take account of the reduced liability of the employer under Division 3 of Part 5 of the WCA (work injury damages provisions), which limit the damages that can be awarded to a worker against his or her employer to past and future economic loss and loss of superannuation.
As Mr Buckley had not sued Dunbier, Mr Izzard and RBI argued that their liability to Mr Buckley should be reduced by the liability of Dunbier, as Mr Buckley's employer, in accordance with section 151Z(2)(c).
The trial judge found Mr Izzard and RBI were liable in negligence to Mr Buckley but that Dunbier, if sued, would have had no liability to pay damages to Mr Buckley. Mr Izzard and RBI appealed.
On appeal, Dunbier argued that it was not liable to pay damages to Mr Buckley, as the threshold requirement of section 151H of the WCA had not been met. Section 151H provides that no damages may be awarded against the employer unless the injury to the worker results in a degree of permanent impairment that is at least 15% (assessed under AMA5 and the WorkCover NSW Guidelines).
An assessment of the degree of permanent impairment is a prerequisite to bring work injury damages proceedings against an employer. As Mr Buckley had not sued his employer, there was no Medical Assessment Certificate (MAC) assessing the degree of permanent impairment obtained in accordance with the provisions of the Workplace Injury Management Act 1998 (NSW) (WIM Act).
The NSW Court of Appeal found:
- As Mr Buckley had not sued his employer, the question of what damages the worker would have been entitled to recover from his or her employer was a hypothetical one, to be answered by reference to the circumstances existing at the time of the accident.
- The approach is analogous to professional negligence proceedings where there is a need to assess what would have been likely to occur at a notional trial of the plaintiff's proceedings. (A similar approach is adopted in the notional assessment of the worker's damages in recovery proceedings pursuant to section 151Z(1)(d) of the WCA.)
- In carrying out that task, the court was required to make a finding, on the balance of probabilities, as to whether the worker would have been able to establish that a medical assessment of his injuries would have revealed a degree of permanent impairment of at least 15%.
- Except in a case of catastrophic injury, the court would be required to consider the relevant medical evidence and the operation of the NSW WorkCover Guidelines in making its finding about the degree of permanent impairment.
This approach is a departure from the generally accepted view that the potential liability of an employer in relation to the questions of contribution and the defence under section 151Z(2)(c) of the WCA were governed by the existence of a MAC and the degree of whole person impairment it certified.
The effect of Dunbier Marine on recovery claims
The court's approach to the determination of an employer's liability has potentially significant implications for the assessment of claims for recovery under section 151Z.
Section 151Z(2)(e) provides for a modified form of recovery where a worker takes or is entitled to take proceedings for damages against his or her employer and does not do so, or does not accept satisfaction of judgment against the employer. In that event, the recovery amount is limited to the excess (if any) of the amount of compensation paid, over and above the amount of contribution that could have been recovered from the employer as a joint tortfeasor or otherwise (remembering that the amount is limited by operation of sub-section 151Z(2)(d) to the work injury damages liability of the employer).
Thus, where the employer has a liability to pay damages to the worker, the amount of the recovery will be reduced or eliminated entirely, due to the operation of the modified recovery under section 151Z(2)(e) where the court finds the degree of whole person impairment exceeds 15%.
The decision in Dunbier Marine means that a plaintiff employer in recovery proceedings can no longer rely on the absence of a MAC to argue that the modified recovery does not apply. Further uncertainty arises as the status of an existing MAC might no longer be conclusive evidence of the worker's degree of permanent impairment. For example, where a MAC assesses a worker as having a degree of whole person impairment less than 15%, the approach dictated by Dunbier Marine arguably allows the court to look at all of the medical evidence, in addition to the MAC.
Section 326 of the WIM Act states that an assessment certified in a MAC is "conclusively presumed to be correct as to the following matters in any proceedings before a court... with which the certificate is concerned". Those matters include the degree of permanent impairment of the worker as the result of an injury and whether the impairment is permanent. However, as Dunbier Marine characterised the question of the entitlement of a worker to recover damages from his or her employer, where the worker has not sued the employer as a hypothetical one, there must be some doubt as to whether a MAC is conclusive for the purposes of assessing the modified recovery under section 151Z(2)(e).
What is clear is that the Court of Appeal's decision has the potential to introduce considerable uncertainty into proceedings for recovery under section 151Z. In all recovery actions where the employer has a potential liability, particular care will need to be taken to assess the likelihood of a finding of liability in the employer and the potential for medical evidence to establish a permanent impairment of 15% or greater. The number of recovery actions where those issues arise is likely to increase as the proportion of recovery cases with liability issues increases following the restrictions imposed on "journey" claims by the 2012 amendments to NSW workers compensation legislation.
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