- The High Court was asked to determine whether a finding of contributory negligence against a worker, in a claim for damages against a tortfeasor other than the employer, was necessary to trigger the provisions of Section 10(2) of the Law Reform Act in a claim by an employer for recovery of compensation payments made to a worker.
- On 12 March 2003, the worker (Mr Hickson) suffered an injury as a result of a collision with a motor vehicle driven by Mr Ala. The accident occurred whilst the worker was on a journey to his place of employment and accordingly, Section 10 of the Workers Compensation Act 1987 NSW applied.
- The worker received compensation payments from his employer (Goodman Fielder) and subsequently sued Mr Ala (the tortfeasor action) in tort in the District Court. The tortfeasor action was settled in the District Court in favour of the worker for $2.8 million plus costs. The order was pronounced orally and no formal order was settled and entered.
- Pursuant to Section 151Z(1)(b) of the 1987 Act, the employer commenced proceedings seeking repayment of workers compensation payments made to the worker (the repayment action). The Section stated that the worker was liable to repay, out of the damages received in the tortfeasor action, the amount of compensation which had been paid by the employer. It was common ground between the worker and his employer that contributory negligence had been a live issue in the claim against Mr Ala.
- Under Section 9(1)(a) of the Law Reform (Miscellaneous Provisions) Act 1965 NSW ('the Law Reform Act"), the damages recoverable in the worker's claim against Mr Ala were subject to a reduction for contributory negligence. Section 10(2) of the Law Reform Act provided for the reduction in the liability of the worker to repay workers' compensation in a case in which the damages recoverable at common law were reduced on account of contributory negligence.
- In the repayment action, the worker pleaded that his actions contributed to his injuries and that his liability to repay compensation to the employer was to be reduced to the same extent that the damages recoverable by him against Mr Ala were reduced.
District Court Proceedings
- Kearns DCJ held that s10(2) of the Law Reform Act operated to reduce the amount of worker's compensation benefits repayable to the employer from damages recovered in the tortfeasor action, without the requirement of a determination by a court concerning contributory negligence.
- His Honour went on to hold that, subject to the rules of evidence, evidence was admissible in the repayment action to establish the extent to which damages recovered by the worker in the tortfeasor claim were in fact reduced on account of his contributory negligence.
Court Of Appeal Proceedings
- An appeal by the employer was successful, with Giles JA and Hislop J (Hodgson JA dissenting) determining that in the absence of a determination by the court of the apportionment for contributory negligence made in the proceedings on the claim for damages against the wrongdoer (and in the absence of a tripartite agreement between the injured worker, the tortfeasor and the employer), Pt 3 of the Law Reform Act had no application and the total amount of compensation paid by the employer was repayable by the worker pursuant to s151Z(1)(b) of the Workers Compensation Act.
- Giles JA considered that a "trial within a trial", in the repayment action, as to the damages recoverable by the worker and the extent of the reduction, produced an unsatisfactory situation.
- It was noted that the worker's concern in the repayment action would have changed, ie in the tortfeasor action it would have been to minimise contributory negligence whilst in the repayment action it would be to maximise it.
High Court Determination
- Bell J with whom Gummow, Hayne, Heydon and Kiefel agreed, delivered the judgment of the Court. Bell J noted that the effect of the Court of Appeal decision was that s10(2) of the Law Reform Act did not operate on the amount of compensation repayable by the worker to reflect the common ground between the employer and the worker that contributory negligence had been a live issue in the settled tortfeasor action. It was accepted that this would not have been the case had the tortfeasor action proceeded to trial with a determination by the District Court.
- The critical issue was in respect of the construction of s.10(2) of the Law Reform Act:
"If the claimant is liable to repay compensation to his or her employer under section 64(1)(a) of the [1926 Act] or under Section 151Z of the [Compensation Act], the amount of compensation so repayable is to be reduced to the same extent as the damages recoverable by the claimant are reduced under section 9."
- As noted above, the effect of the decision of the Court of Appeal was that a critical determinant was the settlement of the tortfeasor action.
- The High Court held that in the circumstance of the repayment action the Court may be required to determine the damages recoverable by the worker and the extent of the reduction in respect of contributory negligence. This was a reflection of the fact that the parties in the repayment action were not the same as in the tortfeasor action. The desirability of finality did not justify reading s10(2) as confined to those cases in which the tortfeasor action proceeded to judgment with a Court determination to the extent of the worker's contributory negligence under s9(1)(b).
- The fact that this may lead to a "trial within a trial" was an incident of the working out of the respective liabilities under the statutory scheme and the common law.
- The reduction for which s9(1)(b) of the Law Reform Act provided, involved an exercise in apportionment. The reduction in liability to repay compensation for which s10(2) provided was proportionate to the reduction in the damages recoverable on account of the worker's contributory negligence.
- The decision has established that in a claim in which a liability is created in another tortfeasor other than the worker's employer, the extent of the worker's contributory negligence does not have to be determined by judgment in the tortfeasor claim in order to trigger the operation of s10(2) of the Law Reform Act.
- The High Court also confirmed the previously established principle enunciated in Tamerji v Rhee1 and GIO v CE McDonald2, that compensation recoverable from damages is to be reduced by the proportion of the worker's contributory negligence.
1.  NSWCA 314
2. (1991) 25 NSWLR 492
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