Australia: Byrne Judgment Summary: workers compensation - indemnity

Insurance Law Bulletin - May 2015
Last Updated: 4 June 2015
Article by Matthew Baker

In Byrne v People Resourcing (Qld) Pty Ltd & Anor [2014] QSC (Byrne), Carmody CJ held that WorkCover Queensland (WorkCover) was required to indemnify the plaintiff's employer, People Resourcing (Qld) Pty Ltd (PRQ) a labour hire company in relation to a contractual indemnity that PRQ had provided to one of its clients/host employers, Thiess John Holland (TJH).

In Byrne the injured PRQ worker's claim was settled prior to the hearing for $450,000.00 in agreed common law damages with the employer, PQR, indemnified by WorkCover and the host employer, TJH, each agreeing to pay $225,000.00 of the settlement representing their common law liability pending resolution of the counterclaims between PRQ, TJH and WorkCover.

TJH's contract with PRQ contained indemnities in TJH's favour. PRQ argued that WorkCover was required to indemnify it for the $225,000.00 it was required to repay to TJH pursuant to the contractual indemnity it had provided to TJH.

WorkCover denied it had a liability to indemnify PRQ beyond PRQ's common law liability on the basis that the balance $225,000.00 represented an outstanding liability to TJH as a contract debtor rather than a liability of PRQ to the plaintiff. WorkCover conceded that PRQ had become liable to pay damages to the injured worker but contended that the only recoverable loss within the Workers' Compensation & Rehabilitation Act 2003 (Qld) (WC&RA) was PRQ's 50% contribution to the injury as a co-tortfeasor and did not include the self-imposed contractual commitment to indemnify TJH.

The relevant sections of the WC&RA were sections 5, 8, 10, 383(1) and 384 which we set out below:-

"5 Workers' compensation scheme

  1. ...
  2. The main provisions of the scheme provide the following for injuries sustained by workers in their employment—
    1. ...
    2. ...

    1. employers' obligation to be covered against liability for compensation and damages either under a WorkCover insurance policy or under a licence as a self-insurer
  1. ...
  2. It is intended that the scheme should—
    1. ...
    2. ...

    1. provide for the protection of employers' interest in relation to claims for damages for workers' injuries.
  1. Because it is in the State's interest that industry remain locally, nationally and internationally competitive, it is intended that compulsory insurance against injury in employment should not impose too heavy a burden on employers and the community.

8 Meaning of accident insurance

Accident insurance is insurance by which an employer is indemnified against all amounts for which the employer may become legally liable, for injury sustained by a worker employed by the employer for—

  1. compensation; and
  2. damages.

10 Meaning of damages

  1. Damages is damages for injury sustained by a worker in circumstances creating, independently of this Act, a legal liability in the worker's employer to pay damages to—
    1. the worker; or
    2. if the injury results in the worker's death—a dependant of the deceased worker.
  1. A reference in subsection (1) to the liability of an employer does not include a liability against which the employer is required to provide under—
    1. another Act; or
    2. a law of another State, the Commonwealth or of another country.
  1. Also, a reference in subsection (1) to the liability of an employer does not include a liability to pay damages for loss of consortium resulting from injury sustained by a worker.

383 General statement of WorkCover's functions

  1. WorkCover's functions are as follows—
    1. to undertake the insurance business mentioned in section 384;
    2. to perform other functions conferred on it by this or another Act;

384 WorkCover's insurance business

  1. WorkCover may undertake the business of—
    1. accident insurance; and
    2. other insurance this Act authorises WorkCover to undertake.
  1. WorkCover may reinsure, on conditions that it considers appropriate, all or part of any risk accepted by it."

[Emphasis added]

Carmody CJ referred to a number of the New South Wales Court of Appeal authorities that upheld the workers' compensation insurers' refusal to indemnify an employer in relation to the employer's contractual liability. The New South Wales Court of Appeal Judgments referred to by Carmody CJ in his judgment were:-

  1. Nigel Watts Fashion Agency Pty Ltd v GIO General Insurance Limited (1995) 8 ANZ Ins cases 61-235;
  2. Multiplex Constructions Pty Ltd v Irving & Ors [2004] NSWCA 346 (Multiplex);
  3. Gordian Runoff Ltd v Heyday Group Ltd (2005) NSWCA 29 (Gordian Runoff).

Carmody CJ however relied on the High Court authority of State Government Insurance Office (Queensland) v Brisbane Stevedoring Pty Ltd (1969) 123 CLR (Brisbane Stevedoring) noting that in Brisbane Stevedoring the employer's legal liability was to pay damages "in respect of" the worker's injury. Carmody CJ held that it was plain from a combined reading of s8 and s10 of the WC&RA that PRQ's Policy covered damages for which it became liable to pay "to" a worker "for", not "in respect of", injury.

WorkCover argued that the term "in respect of" had a "larger" connotation and was of "wider import" in the context of injury insurance, having the effect of extending "...the ambit of liabilities...for which an insurer must give indemnity" to include a contingent liability derived from a contract (as well as the common law) whereas the narrower expression "for" does not. [Emphasis added]

PRQ contended that consistent with Brisbane Stevedoring, its legal liability to pay damages under the consent judgment, including any indemnity due to TJH, was a liability for which it had become liable in damages to the worker for injury and, therefore, within the WorkCover Policy. WorkCover, on the other hand, relied on the approach taken by the New South Wales Court of Appeal in the matters of Multiplex and Gordian Runoff.

Carmody CJ held that the main objects of the WC&RA scheme which expressly aided in the resolution of the interpretation issues were set out in part 2 section 5 and were as follows:-

  • "sub-section (2)(d) – that the employer's obligation to workers for employment injuries ' covered against liability... for damages under a WorkCover insurance policy...
  • sub-section (4)(c) – the protection of employers by the scheme in relation to claims for damages for worker's injuries; and
  • sub-section (5) – ensuring that the compulsory insurance against injury in employment not impose too heavy a burden on employers and the community to promote the State's interest in the continuing competitiveness of the industry."

Carmody CJ noted that sections 383(1) and 384 of the WC&RA limited WorkCover's authority to the business of "accident insurance". Accident insurance is described in s 8 of the WC&RA as "insurance by which an employer is indemnified against all amounts for which the employer may become legally liable, for injury sustained by a worker..for (b) damages". Damages is in turn defined in s 10(2) of the WC&RA as "damages for injury sustained by a worker in circumstances creating, independently of this Act, a legal liability in the ...employer to pay damages to the worker". Carmody CJ held that the only way of ensuring that the legislative intent was met was to determine the coverage of the statutory policy in line with Brisbane Stevedoring, that is, by reference to the worker's enforcement rights vis-à-vis co-tortfeasors, at least where, as was the case with the Byrne matter, the employer was joined as a defendant.

Carmody CJ held there was no textual or contextual support for the narrower WorkCover construction or any reason for supposing that the WC&RA imposed a deliberate limitation on the scope of the statutory policy to bypass Brisbane Stevedoring.

Carmody CJ held that Brisbane Stevedoring was binding on him and must be applied. He held that Brisbane Stevedoring was authority for the proposition that a negligent employer in PRQ's position incurs liability for the full amount of a judgment either by direct payment to the plaintiff or indirectly via reimbursement of an indemnified co-tortfeasor. He held that PRQ had therefore "become legally liable" to pay damages of $450,000.00 for the PRQ worker's injury or put another way, TJH's right to recoup $225,000.00 and PRQ's duty to repay it was a legal liability to pay damages that WorkCover must met.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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