Encyclopaedia Britannica (Australia) Pty Limited v Alexander Pollack, Michael Ronald Phillip Pollack and the Government Insurance Office of New South Wales [1994] ACTSC 93 (21 September 1994)

SUPREME COURT OF THE ACT

ENCYCLOPAEDIA BRITANNICA (AUSTRALIA) PTY. LIMITED v. ALEXANDER POLLACK,
MICHAEL RONALD PHILLIP POLLACK and THE GOVERNMENT INSURANCE OFFICE OF NEW
SOUTH WALES
No. SC235 of 1987
Number of pages - 10
Worker's Compensation

COURT

IN THE SUPREME COURT OF THE AUSTRALIAN CAPITAL TERRITORY
MILES CJ

CATCHWORDS

Worker's Compensation - death of employee - payment of compensation to dependant child only - award of damages to dependant widow only - employer's right of indemnity from persons liable to pay damages in respect of injury - whether indemnity extends to liability in respect of widow - it does not - courts approve the "split action".

Worker's Compensation - statutory charge in favour of employer upon damages payable by tortfeasor to dependant of injured worker - whether charge attaches to damages payable to one dependant when compensation paid to a different dependant - it does not despite courts' approval of the "split action".

Workers' Compensation Act 1951
Compensation (Fatal Injuries) Act 1968

Tickle Industries Pty. Limited v. Hann and Another [1974] HCA 5; (1974) 130 CLR 321
Watson v. The Council of the City of Newcastle [1962] HCA 6; (1962) 106 CLR 426
ACT Engineering Pty Ltd. v. Cuckow (1973) 1 ACTR 93 at 96

HEARING

CANBERRA, 14-15 June 1994
21:9:1994

Counsel for the Plaintiff: Mr H.G. Shore

Solicitors for the Plaintiff: Hunt and Hunt

Counsel for the Defendants: Mr R. Crowe

Solicitors for the Defendants: Crossin Barker Gosling

ORDER

The Court Orders That:
1. The plaintiff is to be indemnified by the second defendant in respect of all amounts paid by the plaintiff to or on behalf of Chae Scorgie pursuant to the award made in the Court of Petty Sessions at Canberra on 24 February 1981 (Matter No. WC 80 of 1980) in which Chae Scorgie by her next friend Suzanne Virginia Scorgie was the applicant and the plaintiff was the respondent.
2. There be liberty to apply.
3. There be judgment for the defendants in the plaintiff's claim for damages.

DECISION

MILES CJ This is a claim for indemnity pursuant to para.22(1)(d) of the Workers' Compensation Act 1951, and in the alternative for damages relying on para.22(1)(c). Sub-s.22(1) provides as follows:

"Remedies both against the employer and a stranger
22(1) If an injury in respect of which compensation is payable under
this Act is caused under circumstances which appear to create a legal
liability in some person other than the employer to pay damages in
respect of the injury -
(a) the worker may take proceedings against that person to recover
damages and may also make a claim against the employer under this Act;
(b) where the worker receives both amounts under this Act and damages
from that other person, he or she shall repay to the employer so much of
those amounts as does not exceed the amount of the damages received from
that person;
(c) upon notice to that person, the employer shall have a first charge
upon moneys payable by that person to the worker to the extent of any
amounts which the employer has paid to the worker under this Act;
(d) where the worker has received amounts under this Act, but no damages
or less than the full amount of the damages to which he or she is
entitled, the person liable to pay the damages shall indemnify the
employer against so much of the amounts paid to the worker as does not
exceed the damages for which that person is liable; and
(e) payment of money by that person to the employer under either of the
last two preceding paragraphs shall, to the extent of the amount paid,
be a satisfaction of the liability of that person to the worker."

2. Sub-s.6(6) provided at all relevant times (it has since been repealed) that for the purposes of s.22 and s.23 any reference to a workman (sic) shall, when the workman has died as a result of the injury, "be read as a reference to any dependant of the deceased workman who has a legal claim in respect of the death of the workman." (Had sub-s. 6(6) survived, it would have been affected by amendments to the Act whereby the word "worker" was substituted for the word "workman".)

3. Terry Scorgie, a worker employed by the plaintiff, died from injuries received on 7 March 1980. Those injuries arose out of or in the course of his employment when he was riding a motorcycle in Capital Circle and it was struck by a motor vehicle owned by the first defendant and driven by the second defendant. It is common ground that the deceased worker's injuries resulted from the negligence of the defendants and that at all relevant times the defendants were insured against liability for such injury by the Government Insurance Office of New South Wales (GIO).

4. On 24 February 1981 the ACT Court of Petty Sessions made an award by consent under the Workers' Compensation Act against the plaintiff in favour of Chae Scorgie, the infant daughter and dependant of the deceased worker. The claim was made on behalf of Chae Scorgie by Suzanne Virginia Scorgie as her next friend. However, no claim was made by Suzanne Virginia Scorgie on her own behalf and that portion of the award ordered to be paid by way of lump sum, namely $35,743.33, was ordered to be paid into Court to be invested for the benefit of Chae Scorgie. The award also ordered payments of weekly compensation to be made to Suzanne Virginia Scorgie for the benefit of Chae Scorgie. All payments due under the award were made by the plaintiff in accordance with the terms of the award. It appears that Chae Scorgie has now reached an age where weekly payments are no longer due.

5. On 27 February 1984 the widow of the deceased worker, Suzanne Virginia Scorgie, recovered judgment in this Court against the second defendant for $336,132.85 together with costs, in a claim made by her solely on her own behalf pursuant to the Compensation (Fatal Injuries) Act 1968. The judgment sum was paid to Suzanne Virginia Scorgie in or about March 1984.

6. With respect to those responsible for the drafting, the pleadings, although adequate to cover the disputes between the parties, do not clearly identify the issues nor the respective causes of action or defences. I should state what I understand the issues to be as they emerged during the hearing.

7. The plaintiff claims that it is entitled under para.22(1)(d) of the Workers' Compensation Act to be indemnified by the defendants or one or other of them in respect of the amounts paid by the plaintiff to or on behalf of Chae Scorgie in accordance with the award made under the Workers' Compensation Act.

8. Alternatively, the plaintiff claims that the judgment sum for the damages recovered in the action against the second defendant in this Court under the Compensation (Fatal Injuries) Act was subject to a charge in favour of the plaintiff under para.22(1)(c) of the Workers' Compensation Act, that the second defendant was under an obligation not to deal with the judgment sum contrary to the charge, and that having paid the whole of the judgment sum to Suzanne Virginia Scorgie, the second defendant acted in breach of that duty, which breach gives a right to a claim for damages by the plaintiff against the second defendant for the value of the charge. The claim restricts the value of the charge to the sum paid pursuant to the award of worker's compensation, namely the lump sum of $35,743.33 together with the total amount of weekly payments of weekly compensation, amounting in all to $51,208.

9. The defences raised, as I understand them, are as follows.

10. With regard to the claim for indemnity the defendants say that the payments of worker's compensation under the award were to or on behalf of Chae Scorgie alone, and, in contrast, the action brought by Suzanne Virginia Scorgie was brought on her behalf alone, and not on behalf of Chae Scorgie. Therefore, say the defendants, the plaintiff has no right of indemnity against the defendants because the defendants never were at any relevant time liable in damages to Chae Scorgie.

11. With regard to the claim based on the charge, the second defendant says that he was not "required to grant any charge" over the damages payable to any dependant of the deceased, and denies that a charge was created at any time pursuant to para.22(1)(c). He also denies that any notice was given pursuant to that paragraph and denies that payment of the judgment sum to Suzanne Virginia Scorgie was in breach of any notice or requirement under para.22(1)(c), or in breach of any duty otherwise imposed by para.22(1)(c).

12. The following matters relating to the defence to the claim for damages are raised. It is alleged that the payments of worker's compensation were to or on behalf of Chae Scorgie, a dependant of the deceased, to her only. The action brought by Suzanne Virginia Scorgie was brought on behalf of herself only and not on behalf of Chae Scorgie. Hence Chae Scorgie has not received both worker's compensation and damages and there was not and never were monies payable by the second defendant to Chae Scorgie to which a charge could attach.

13. It is conceded, as I understand it, that there is no claim for damages against the first defendant.

14. It should be instructive to consider how the courts have dealt with claims of this nature and with the particular statutory provisions, here and elsewhere.

15. The provisions of para.22(1)(c) of the Northern Territory legislation, which are (or were) identical to those in this Territory, were examined by the High Court in Tickle Industries Pty. Limited v. Hann and Another [1974] HCA 5; (1974) 130 CLR 321. In a discussion of the history and policy of similar provisions in England and in Australia, Barwick, CJ said at 326:

"The basic question in the case is the construction of s.22,
particularly s.22(1)(d) of the Compensation Ordinance. The provisions of
the section have their origin in s.6 of the Workmen's Compensation Act
1906 of the United Kingdom as developed through the workers'
compensation legislation of the Australian States. Section 6 did not
cover all the eventualities for which s.22 of the Ordinance now caters.
But the policy of s.6(2), the prototype of s.22(1)(d) of the Ordinance,
in my opinion, was quite clear: 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. .....
There is obvious and necessary justice in giving the employer, who has
been involved in the payment of compensation by the wrongful act of
another, a right of recovery against that other but only up to the
amount of damage which that other has caused and for which he was
legally responsible. It is also necessarily just that the employee shall
not be able to defeat that right of recovery. Clearly, the right to
indemnity given by s.6(2) was a right of the compensating employer, in
no sense in the control of the injured employee or of his dependants."

16. The Chief Justice continued at 327:

"Two things are apparent from this treatment of the English provisions:
first, that the right of the employer is regarded as independent of the
action or inaction of the employee; it is a right given to the employer
who has paid compensation for an injury to his employee which has been
caused by the neglect or default of another; second, that the right of
the employer is a right against the wrong-doer. As Atkin LJ pointed out
(in Tuckwood v. Rotherham Corporation (1921) 1 KB 526), that is not an
action of negligence against the wrong-doer but for a cause of action
created by the statute against the wrong-doer. What Atkin LJ had to say
is well worthy of notice in the context of the present case."

17. Barwick CJ commented at 328 that the policy of workers' compensation legislation in Australia has "remained throughout" and "the meaning is clear, if a compensable injury is received in circumstances which indicate that it may have been caused by a tortfeasor, i.e. a person legally responsible for an act or omission causing an injury, then the various alternative situations are provided for". (Emphasis added)

18. On p.330 Barwick CJ continued:

"Paragraph (d) gives the compensating employer a right of indemnity to
protect him in these situations. This right is conditioned on either of
two circumstances: first, that the workman has received no damages and,
second, that the workman has received inadequate damages, i.e. an amount
for damages which is less than the sum which ought properly to be
assessed in respect of the compensable injury.
.....
It is clear that the workman's failure to recover damages cannot defeat
the compensating employer's right to an indemnity: indeed, it is the
employee's failure to obtain the full amount of damages which conditions
the employer's right to the indemnity ...
It is evident from the language of the paragraph that, by releasing the
tortfeasor or compromising his claim to damages for a sum less than the
full amount properly assessable for the injury received, the workman
cannot prevent the compensating employer obtaining an indemnity for the
compensation he has paid up to the amount of the damages properly
payable, or for the difference between the full amount of those damages
and the amount of damages actually received by the workman."

19. In Watson v. The Council of the City of Newcastle [1962] HCA 6; (1962) 106 CLR 426 the case was concerned with the provisions of s.64 of the Workers' Compensation Act 1926 of New South Wales which are similar but not identical to those in sub-s.22(1) of the Workers' Compensation Act of the ACT. However, in view of what Barwick CJ had to say in Tickle Industries, the effect must be taken to be no different. In Watson's case, a dependant widow obtained an award for worker's compensation on behalf of herself and two dependant children of the deceased worker. She then sued the tortfeasor for damages under the equivalent of the Compensation (Fatal Injuries) Act, but restricted the claim to one on behalf of the two dependant children only. She obtained a verdict against the tortfeasor on behalf of the children, but before judgment was signed and before the tortfeasor paid any part of the damages fixed by the verdict, the employer, who had paid the worker's compensation, claimed indemnity from the tortfeasor. It was held that the tortfeasor was not entitled to plead as a defence to the indemnity claim its liability to pay damages to the widow on behalf of the children pursuant to the verdict.

20. McTiernan J said at 432:

"The statutory right of indemnity contained in sub-s.(b) of s.64 was in
the Act when the recovery of compensation and the recovery of damages
were alternative remedies: that is to say, that the workman, having
recovered compensation could not then recover damages. The right of
indemnity then arose upon the recovery of compensation under the Act by
the worker from the employer. The right was part of a legislative scheme
under which the person liable to pay damages was not exposed to any
other liability than to indemnify the employer for compensation
recovered from him by the worker; when the worker recovered such
compensation it was not open to him to obtain a judgment for damages
against the alleged tortfeasor. Section 64 maintains that legislative
scheme in so far as the provisions of sub-s.(a) guard against the worker
retaining both damages and compensation and sub-s.(c) protects a
tortfeasor who has to pay under the indemnity created by sub-s.(b) of
s.64 from satisfying in full a judgment for damages obtained by the
worker against him pursuant to the right under sub-s.(a) to recover both
damages and compensation, if the latter is first recovered. The policy
which is evident on the face of s.64 is that compensation should not, as
a benefit for the worker, or a burden for the tortfeasor, be cumulative
on damages, that damages should, if recovered by the worker, as far as
they can, be the fund out of which compensation is paid, and that, as
between the employer and the alleged tortfeasor, the burden of
compensation recovered from the employer should be finally cast upon the
tortfeasor, but should not be a burden ultra the damages for which the
worker has obtained judgment against the tortfeasor."

21. However, the question arises in the present case, as it has arisen in others, whether the employer's right to indemnity against the tortfeasor is limited or affected in any way by the failure of the person bringing the dependency action for damages under the Compensation (Fatal Injuries) Act to do so on behalf of all persons who were dependant upon the deceased at the date of his death. I was informed by counsel and there appears to be no dispute that, despite the clarity of s.8 of the Compensation (Fatal Injuries) Act which provides that the single action under the Act shall be brought for the benefit of all those members of the deceased person's family who sustained damage by reason of the death, the courts have tolerated "split actions", that is, claims brought by the personal representative on behalf of some only of the deceased's dependant family, so that those persons who were dependant but on whose behalf the action is not brought may claim compensation as dependants under the Workers' Compensation Act. (The definition of "dependant" is not identical in each Act.) It was acknowledged by a Full Court of this Court in ACT Engineering Pty Ltd. v. Cuckow (1973) 1 ACTR 93 at 96, that:

"The practice whereby some members of a family obtain damages under Lord
Campbell's Act legislation and another member of that family obtains
compensation under workmen's compensation legislation is of course well
established, and supported by the highest authority (Kinneil Cannel and
Cooking Coal Co Ltd v. Sneddon (1931) AC 575; (1931) All ER Rep Ext 890;
Avery v. London and North Eastern Railway Co (1938) AC 606; (1938) 2 All
ER 592; Dey v. Victorian Railways Commissioners [1949] HCA 1; (1949) 78 CLR 62; (1949)
ALR 333; Lulich v. Bell Bros Pty Ltd (1967) 41 ALJR 268; (1968) ALR
129)."

22. It was held in that case that where a dependant widow took proceedings and recovered damages under the Compensation (Fatal Injuries) Act on behalf of herself and two only of three dependant children, she was entitled to bring proceedings under the Workers' Compensation Act on behalf of the third dependant child. Undoubtedly, the decisions referred to in the passage quoted are authority for the general proposition about the practice, although upon a close analysis none of them provides direct support for the "split action" now under consideration. Dey's case, for instance, was concerned with the former situation where the applicant had to elect between claiming worker's compensation and claiming damages against the employer. I am bound by Cuckow's case and the opinion expressed at 96 that para.22(1)(b) applies only were the same person receives both compensation and damages and "it is not sufficient that different members of a class of dependants receive both compensation and damages" (or perhaps, that some receive compensation only and some receive damages only). However, it is para.22(1)(d) upon which the plaintiff relies in the claim for indemnity.

23. It is said that if the present claim were to succeed then the result would be contrary to the long-standing policy of the legislation as it was explained by McTiernan J in Watson and Barwick CJ in Tickle Bros. That this anomaly does come about, however, would seem to me to be as an inevitable consequence of allowing the "split action". Once the practise of allowing the so-called split action is recognized at an authoritative judicial level, any anomalies that arise from it are not to be removed by a trial judge.

24. In Tickle Bros. Barwick CJ laid down at 334 the tests to be applied to a claim by an employer seeking an indemnity under para.22(1)(d). Those are, first that the employer must establish that the defendant was the tortfeasor, secondly, that the injury caused was compensable (in the sense that the worker received injury arising out of or in the course of his employment), and thirdly that the amount paid as compensation and claimed in the indemnity proceedings was properly payable under the Workers' Compensation Act. Fourthly, the amount of damages properly assessable in respect of injury caused by the tortfeasor must be determined. As Barwick CJ said, having established these matters, the employer will be entitled to judgment for the amount of compensation paid if those damages equal or exceed that amount. If not, the employer will have judgment for the amount of the damages.

25. In answering the question whether the defendant was the tortfeasor, regard must be had to the introductory words of sub-s.22(1) and the "circumstances which appear to create a legal liability" in the defendant. It is not necessary for there to have been a prior determination of liability on proceedings between the injured worker and the defendant; the right of indemnity is "against the tortfeasor as the person in whom a legal liability appeared to be created by the circumstances in which the compensable injury was received" (per Barwick CJ at 332). On any view, the circumstances of the injury resulting in the deceased's death appeared to create a legal liability in both defendants in respect of the negligence of the second defendant. That was a liability to pay damages under the Compensation (Fatal Injuries) Act to all persons who were by reason of the death deprived of economic support on the part of the deceased.

26. The second question, whether the injury was compensable, is clearly answered in the affirmative, and is not in issue.

27. The third question as to the amount of compensation paid is, not as a matter of principle, in issue. It is ascertained by reference to the amount of $35,743.33 paid into court pursuant to the award together with the total sum of periodic payments paid to or on behalf of Chae Scorgie for the time of the award until the cessation of payments when she ceased to be entitled to them, amounting in all to $51,208.

28. The final issue, namely the amount of damages properly assessable in respect of the injury caused by the tortfeasor, has to be calculated, in my opinion, as if the Court were assessing a claim for damages under the Compensation (Fatal Injuries) Act brought on behalf of Chae Scorgie. The fact that it is too late for such action to be brought is, in my view, immaterial. As Barwick CJ emphasised, the statutory right of the employer to claim indemnity from the tortfeasor cannot be defeated by the injured worker, and "an assessment of damages must be made, clearly not in an action by the (worker) but in an action by the employer". As the injured worker cannot foreclose the employer's right to an indemnity, neither can any one acting or failing to act on the worker's behalf. In other words, the exclusion of Chae Scorgie from the class of persons on whose behalf action was brought and judgment recovered under the Compensation (Fatal Injuries) Act does not affect the right of the employer to claim indemnity from the tortfeasor in respect of worker's compensation paid to Chae Scorgie.

29. The consequence of the above is that I am of the view that the plaintiff is entitled to the indemnity claimed. As to the amount in respect of which the plaintiff is so entitled, it is not possible to arrive at a conclusion at this stage. The parties did not present evidence on that issue, and the claim for an indemnity did not specify the amount contended for. But clearly, as a matter of law, if the damages to which Chae Scorgie would have been entitled exceed the amount of compensation paid, the indemnity is restricted to the compensation paid. If the damages properly payable would not have exceeded the compensation, the indemnity is restricted to the amount of the notional damages. Counsel for the defendants put before me certain figures to suggest that the damages of $336,132.85 awarded by Gallop J to Suzanne Virginia Scorgie included some $29.157, which was attributable to the dependency of Chae Scorgie upon the deceased. Gallop J used 70% as a percentage of dependency of Suzanne Virginia Scorgie, relying upon certain actuarial figures referrable to a family unit of two adults and one child. It is therefore appropriate to look to see how the damages would have been apportioned in favour of Chae Scorgie if she had been included as a dependant on whose behalf the action had been brought. However, the information furnished on this issue by the defendants is insufficient to arrive at a firm conclusion and liberty to apply to present further submissions (and evidence if necessary) is granted.

30. I turn to the claim for damages based on the charge for which provision is made in para.22(1)(c).

31. In this respect Barwick CJ said at 328-9:

"The paragraph enables the employer to give notice to the tortfeasor of
the payment of, and, presumably, of a claim for, statutory compensation.
In my opinion, the notice may be given before action is brought by the
workman against the tortfeasor, though the charge will not mature until
the damages are assessed or agreed. The employer will have a first
charge on the damages payable by the tortfeasor up to the amount of the
compensation paid. The notice, however, would be effective, in my
opinion, to prevent payment by or on behalf of the tortfeasor to any
person other than the employer of so much of the damages as equalled the
compensation paid or payable."

32. I think it is implicit in these words, and consistent with the scheme established by sub-s.22(1), that if the tortfeasor pays monies to which the charge attaches to any person other than the compensating employer, then the employer has a right to claim from the tortfeasor any damage that may follow as a result of the tortfeasor's failure to dispose of the monies consistently with the charge created in favour of the employer. If the damages have been paid to the worker, then the worker has the obligation to repay the amount of compensation received, not exceeding the amount of damages received under para.22(1)(b), and it may be that in that circumstance the primary right of the employer is not to seek to enforce the terms of the charge as against the tortfeasor. On the other hand, if, for any reason, the employer is unable to obtain reimbursement from the worker, then I think that the employer would be entitled to damages from the tortfeasor to the extent that reimbursement cannot be obtained from the worker, provided that notice were given to the tortfeasor pursuant to para.22(1)(c)

33. However, under the terms of para.22(1)(c) the charge is on the damages payable by the tortfeasor to the worker "to the extent of any amounts which the employer has paid to the worker" under the Workers' Compensation Act. This assumes that the damages are payable by the tortfeasor to the same person to whom the compensation has been paid. If the compensation has been paid to some person other than the person to whom the damages are payable, then no charge is created at all. Further, it is to be observed that the nature of the charge is such that it does not mature until there is a fund to which it can attach and that fund has to be in some way connected with the damages awarded. In the present case, Suzanne Virginia Scorgie refrained from claiming damages on behalf of Chae Scorgie, but because of the representative nature of the action which she did bring, no further action can be brought on behalf of Chae Scorgie under the Compensation (Fatal Injuries) Act. The damages were not awarded by reference to any claim that Chae Scorgie had or may have had. The damages to which Chae Scorgie would had been entitled have never been assessed or agreed. No fund has come into existence to which a charge under para.22(1)(c) can attach.

34. It was submitted on behalf of the defendants that no notice had been given under para.22(1)(c). The paragraph in the section leaves the requirement of notice very vague. What is necessary is that the tortfeasor be informed that the employer claims reimbursement from the tortfeasor of the compensation paid to the worker and that the employer looks to the damages payable by the tortfeasor to the worker as the source of such reimbursement. In the present case letters were written to the solicitor for the GIO by solicitors acting for the workers' compensation insurers of the plaintiff. The first letter was written on 10 December 1981, addressed to a DX number. That letter merely asked that the GIO note the workers' compensation insurer's interest. A second letter was written by the workers' compensation insurer to the Manager, GIO, in Canberra. There is no direct proof of receipt but I think on the balance of probabilities it was received by the GIO. In my view, the second letter was sufficient notice under para.22(1)(c). However, for reasons already given, the claim for damages must fail.

35. The formal order of the Court is that it declares that the plaintiff is to be indemnified by the second defendant in respect of all amounts paid by the plaintiff to or on behalf of Chae Scorgie pursuant to the award made in the Court of Petty Sessions at Canberra on 24 February 1981 (Matter No.WC 80 of 1980) in which Chae Scorgie by her next friend Suzanne Virginia Scorgie was the applicant and the plaintiff was the respondent. Liberty to apply.

36. There will be judgment for the defendants in the plaintiff's claim for damages.

37. Unless the parties wish to be heard the defendants are to pay the plaintiff's costs.