Aurora Energy Pty Ltd v Commonwealth of Australia [2006] FCA 143 (24 February 2006)

Last Updated: 24 February 2006

FEDERAL COURT OF AUSTRALIA

Aurora Energy Pty Ltd v Commonwealth of Australia [2006] FCA 143

CONTRACT – workplace injury – rehabilitation program with host employer – wages paid by original employer – work trial agreement prepared by original employer and forwarded to host employer but not signed by the latter – second injury while worker working for host employer – common law action brought by worker against host employer – whether unsigned work trial agreements formed part of contract – whether construction of term in contract required original employer liable to indemnify host employer


Safety, Rehabilitation and Compensation Act 1988 (Cth), s 45

Integrated Computer Services Pty Ltd v Digital Equipment Corp (Aust) Pty Ltd (1988) 5 BPR 11,110 at 11,117-11,118 applied
Brambles Holdings Ltd v Bathurst City Council [2001] NSWCA 61; (2001) 53 NSWLR 153 at [74]- [77] applied
Damevski v Giudice [2003] FCAFC 252; (2003) 133 FCR 438 at [82]- [88] applied
Codelfa Construction Pty Ltd v State Rail Authority of New South Wales [1982] HCA 24; (1982) 149 CLR 337 at 347-352 cited
Coghlan v S H Lock (Australia) Ltd (1987) 8 NSWLR 88 at 92 cited
Andar Transport Pty Ltd v Brambles Ltd [2004] HCA 28; (2004) 217 CLR 424 at [19] cited
Halford v Price [1960] HCA 38; (1960) 105 CLR 23 at 30, 34, 40, 41 cited

















AURORA ENERGY PTY LTD v THE COMMONWEALTH OF AUSTRALIA & COMCARE

HEEREY J
24 FEBRUARY 2006
MELBOURNE (HEARD IN HOBART)

IN THE FEDERAL COURT OF AUSTRALIA
TASMANIA DISTRICT REGISTRY	TAD 3 OF 2005

BETWEEN:	AURORA ENERGY PTY LTD PLAINTIFF
AND:	THE COMMONWEALTH OF AUSTRALIA FIRST DEFENDANT COMCARE SECOND DEFENDANT
JUDGE:	HEEREY J
DATE OF ORDER:	24 FEBRUARY 2006
WHERE MADE:	MELBOURNE (HEARD IN HOBART)

THE COURT ORDERS THAT:

1. Declare that the first defendant is liable to indemnify the plaintiff in respect of any damages awarded to Mr Shane Fowle against the plaintiff for injuries suffered by Mr Fowle in October 1997.
2. Declare that the plaintiff is not liable to repay the defendants any monies paid by them in respect of workers compensation to Mr Fowle arising from the injuries suffered by him in October 1997.
3. Order that the first defendant pay the plaintiff’s costs, including reserved costs.

Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.

IN THE FEDERAL COURT OF AUSTRALIA
TASMANIA DISTRICT REGISTRY	TAD 3 OF 2005

BETWEEN:	AURORA ENERGY PTY LTD PLAINTIFF
AND:	THE COMMONWEALTH OF AUSTRALIA FIRST DEFENDANT COMCARE SECOND DEFENDANT

JUDGE:	HEEREY J
DATE:	24 FEBRUARY 2006
PLACE:	MELBOURNE (HEARD IN HOBART)

REASONS FOR JUDGMENT

1 Mr Shane (Tony) Fowle was an employee of the Commonwealth working within the Australian Protective Service (APS). From about February 1996 he was on either sick leave or compensation leave from that employment. On 23 May 1996 the second defendant Comcare accepted liability on his claim for compensation for generalised anxiety disorder under the Safety, Rehabilitation and Compensation Act 1988 (Cth) (the SRC Act).

2 APS arranged with the Hydro Electric Commission (the Hydro), the predecessor of the plaintiff Aurora Energy Pty Ltd (Aurora), that, for the purposes of his rehabilitation, Mr Fowle should carry out some duties for the Hydro.

3 Mr Fowle worked under this arrangement for three successive periods. At all times Comcare paid him weekly compensation and other payments to which he was entitled under the SRC Act. The contribution of the Hydro to his wage in the respective periods was as follows:

• 29 July 1996 to 31 October 1996 – nil;

• 12 November 1996 to 7 May 1997 – 50 per cent;

• 12 May 1997 to 14 October 1997 – nil, other than training costs.

4 On 14 October 1997 Mr Fowle was injured as a result of a fall during a practical exercise in the course of his training with the Hydro. He has not returned to work with the Hydro, or APS.

5 In 2000 Mr Fowle commenced an action in the Supreme Court of Tasmania claiming damages for personal injuries sustained in his fall. In his amended statement of claim he alleged that he was at all material times contracted by the Hydro as a B grade Electrical Linesman. Aurora has denied this allegation.

6 The present proceeding was commenced in the High Court and remitted by that court to the Federal Court. Aurora seeks declarations that (i) the Commonwealth is required to indemnify it in respect of any damages awarded to Mr Fowle against it for injuries suffered by him in October 1997 and that (ii) it is not liable to repay the Commonwealth or Comcare any monies paid by them in respect of workers compensation to Mr Fowle arising from the injuries suffered by him in October 1997.

Rehabilitation workplace arrangements for Mr Fowle

7 APS engaged a private firm Vocational Rehabilitation Service Pty Ltd (VRS) to arrange a work placement for Mr Fowle. Before joining APS Mr Fowle had worked for the Hydro as a B Grade lineworker. On 8 July 1996 Mr Keith McVilly of VRS wrote to the Hydro concerning "the possibility of a work placement for Tony Fowle". The letter included the following:

"Tony has stated that his first choice is to return to his previous work with the HEC and to gain his A Grade Certificate. While I understand that there is no full time position available, we are seeking to develop a voluntary placement for a period of 3-4 months. During this time Tony will be able to decide if a return to the HEC is to be a long-term goal. It will also provide a good opportunity for Tony to regain some confidence and self esteem in relation to his vocational prospects.

While on placement, Tony’s wages will continue to be covered by his current employer, as part of a rehabilitation plan." (Emphasis in original)

8 On 12 July 1996 the Hydro replied advising that in regard to work place rehabilitation for Mr Fowle the Hydro would be able to provide assistance for a period of three months. The letter stated:

"It is understood that wages, superannuation, workers compensation etc are covered by his current employer. Please confirm this in writing."

9 On 22 July 1996 Mr McVilly replied to the Hydro thanking it "for making a work trial available to Mr Fowle". The letter stated:

"I have prepared a formal Return to Work Program. If this meets with your approval, I understand Tony can commence on Monday 29 July.
...
During the course of his placement, Tony’s wages and Workers’ Compensation will continue to be covered by Comcare."

Enclosed with that letter was a document entitled "VRS Return to Work Program". The "Host Employer" was said to be the Hydro and the employment status "supernumerary – all wage costs met by Comcare". This document was subsequently signed by Mr Fowle and an officer of the Hydro.

10 On 27 July 1996 Mr Tony Mihelcic of the Commonwealth Department of Administrative Services (DAS) faxed to Mr McVilly two documents, one of which was entitled "Work Trial Proposal" and the other "Work Trial Agreement". The former contained details of tasks to be undertaken by the worker.

11 The latter was expressed to be an agreement between Mr Fowle, his case manager Mr Mihelic, Comcare, APS and the Hydro "in relation to placing Shane Fowle into a realistic work environment as outlined in the Work Trial proposal and to accommodate the work restrictions and Return to Work Plan associated with his compensable condition". Obligations of the parties that were set out included:

"The former employer, ie Australian Protective Service, accepts liability for any injury sustained during the period of the Work Trial".

12 The Work Trial Agreement had been the subject of earlier discussion and amendment between Mr Mihelcic, who prepared the original draft, and Mr McVilly. In his covering fax of 27 July Mr Mihelcic asked Mr McVilly to get Mr Fowle and "the new employer" to sign it. However Mr McVilly on 30 July 1996 faxed back some suggested further amendments to which Mr Mihelcic faxed agreement on the same day.

13 It is agreed between the parties that (i) there is no evidence that a copy of the Work Trial Agreement was signed by any party and that (ii) an unsigned copy was sent to the Hydro for consideration but there is no evidence that the Hydro approved or signed it or forwarded it to any party. In a subsequent fax dated 4 October 1996 to Mr Mihelcic, Mr McVilly states that the original Work Trial Agreement "was lost by Hydro & officer concerned has himself been on WC leave!"

14 From 29 July to 31 October 1996 Mr Fowle carried out various duties and tasks for the Hydro. He received no salary or wage from the Hydro but Comcare paid him his entitlements under the SRC Act.

15 On 21 October 1996 Mr McVilly sent a fax to Mr Mihelcic confirming an earlier telephone conversation to the effect that the Hydro were willing "to extend Tony’s placement for a further three months (to 31 January 1997)" and that the Hydro "would be willing to discuss a salary sharing agreement with Comcare, possibly up to 50% of the Line Worker Salary".

16 Mr McVilly prepared a fresh Return to Work Program which included under "Comments":

"Workers’ Compensation insurance cover to be agreed between HEC and Comcare by exchange of letters."

17 On 8 November 1996 Mr Mihelcic made a file note recording a telephone conversation with Mr Peter Sutczak of the Hydro:

"Peter Sutczak from H.E.C. contacted me today regarding the payment of Tony Fowle’s salary during his work trial from 12 November. He stated the H.E.C. are concerned about the type of arrangements Tony will be under during the trial and the consequences should he sustained [sic] a work related injury. Peter stated that the H.E.C. have recently had a bad experience with a person who worked for a contractor and was working at H.E.C.

I advised Peter that APS/Comcare would be liable for workers compensation and stated that the previous contract made mentioned to [sic] this arrangement. I agreed to fax Peter a copy of the last contract.

Peter will ring me back to discuss what options are available for the payment of the salary."

On the same day Mr Mihelcic faxed to Mr Sutczak a copy of the previous Work Trial Proposal and Work Trial Agreement. The covering fax stated:

"As discussed I have faxed you a copy of the work trial agreement used for Tony’s first three months. A similar one will be prepared for his next three months. As you will see item 3 [sic – item 4 appears to be the relevant one] under the heading Current Employer makes reference to which organisation is responsible for ongoing liability."

18 After obtaining agreement from officers at APS and Comcare, Mr Mihelcic on 30 December 1996 faxed to Mr Sutczak a proposed amended copy of the Work Trial Proposal and Work Trial Agreement. The covering fax requested Mr Sutzcak to advise if the new wording was suitable for the Hydro’s needs. Clause 4 of the agreement stated:

"The current employer, i.e. the Australian Protective Service, accepts liability for any injury sustained during the period of the Work Trial. The Australian Protective Service is insured under the SRC Act against liability for death of or injury to Shane Fowle. In the event that an injury has occurred the matter will be handled by the Australian Protective Service and Comcare Australia."

19 Again it is agreed between the parties that no copy of the Work Trial Agreement sent on 30 December 1996 was signed by any party. There is no evidence that the Hydro approved it or forwarded it to any other party. (The foregoing language comes from the parties’ statement of agreed facts. It was accepted by counsel for the defendants that this statement is to be taken to mean that there is no evidence that the Work trial Agreement was "approved" in any formal sense. The possibility of adoption implied from a course of conduct is not excluded by the statement of agreed facts.)

20 From 29 November 1996 to 4 February 1997 Mr Fowle carried out various duties and tasks for the Hydro. The Hydro and Comcare shared the cost of his wage on a 50:50 basis. Comcare continued to pay him his entitlements under the SRC Act.

21 In late January 1997 the Hydro agreed to an extension of the then current work trial for a further 12 weeks on the same basis, including the equal sharing of his wage. This continued to 4 May 1997.

22 On 17 April 1997 the Hydro advised Mr Mihelcic that it would be difficult for it to employ Mr Fowle in a permanent position as a lineworker because he only possessed a B Grade Lineworker certificate. By a letter dated 22 April 1997 to Mr Mihelcic the Hydro offered to place Mr Fowle for a period of up to six months "to facilitate him achieving the qualification of A Grade lineworker". A training program was outlined. It was proposed that the Hydro would meet costs for training, clothing, protective equipment and materials and APS would meet his salary/wage.

23 An initial placement for the period 12 May to 10 October 1997 was arranged. A return to Work Program was prepared. The "Host Employer" was said to be the Hydro. The Program also stated: "Position Title: Linesman (Trainee)" and "Employment Status: Supernumerary, salary costs met by Comcare (100%)". The Program does not appear to have been signed.

24 The evidence does not disclose any fresh Work Trial Agreement being produced for the May-October 1997 period.

25 In the period 12 May to 14 October 1997 Mr Fowle carried out various duties and tasks for the Hydro by way of on the job training to upgrade his lineworker certificate. The Hydro paid his training costs but did not pay him any salary or wage. Comcare continued to pay him his entitlements under the SRC Act.

26 As already mentioned, Mr Fowle was injured at his work on 14 October 1997.

The contract

27 As I understood counsel’s submissions, the defendants did not dispute that there was a contract concerning Mr Fowle’s work at the Hydro, or that the parties to that contract were the Commonwealth (the legal entity standing behind APS), the Hydro, Mr Fowle and (probably) Comcare. Plainly Mr Fowle’s move to the Hydro called for the parties to provide for the respective rights and obligations which would arise in this new setting. As has been seen, this is what they attempted to do.

28 The formulation of the content of that contract however requires some attention. People do not always conduct their business dealings in classic text book terms of offer and acceptance. In Integrated Computer Services Pty Ltd v Digital Equipment Corp (Aust) Pty Ltd (1988) 5 BPR 11,110 at 11,117-11,118 McHugh JA (Hope and Mahoney JJA concurring) said:

"... in an ongoing relationship, it is not always easy to point to the precise moment when the legal criteria of a contract have been fulfilled. Agreements concerning terms and conditions which might be too uncertain or too illusory to enforce at a particular time in the relationship may by reason of the parties' subsequent conduct become sufficiently specific to give rise to legal rights and duties. In a dynamic commercial relationship new terms will be added or will supersede older terms. It is necessary therefore to look at the whole relationship and not only at what was said and done when the relationship was first formed."

His Honour also remarked (ibid):

"...it is an error to suppose that merely because something has been done then there is therefore some contract in existence which has thereby been executed ... Nevertheless, a contract may be inferred from the acts and conduct of parties as well as or in the absence of their words. The question in this class of case is whether the conduct of the parties, viewed in the light of the surrounding circumstances, shows a tacit understanding or agreement. The conduct of the parties, however, must be capable of proving all the essential elements of an express contract."

These statements were subsequently applied by the New South Wales Court of Appeal in Brambles Holdings Ltd v Bathurst City Council [2001] NSWCA 61; (2001) 53 NSWLR 153 at [74]- [77] (Heydon JA, Mason P concurring) and the Full Court of the Federal Court in Damevski v Giudice [2003] FCAFC 252; (2003) 133 FCR 438 at [82]- [88] (Marshall J, Wilcox J concurring).

29 Applying those principles, in my opinion the Work Trial Agreement in the form sent by Mr Mihelcic to Mr Sutczak on 30 December 1996, including cl 4 set out in [18] above, formed part of the contract which was in force at the time Mr Fowle suffered his injury. The Commonwealth and Comcare by their subsequent conduct, and in particular by meeting all Mr Fowle’s wages notwithstanding that he was doing work for the Hydro, impliedly accepted the terms in the Work Trial Agreement. Pre-contractual conduct can cast light on the genesis of the contract and its objective aim: Codelfa Construction Pty Ltd v State Rail Authority of New South Wales [1982] HCA 24; (1982) 149 CLR 337 at 347-352, Brambles at [24]. Here the essence of the term appeared in the original Work Trial Agreement ([11] above), which had been prepared by the Commonwealth. Subsequently the Hydro, through Mr Sutczak, emphasised the importance of indemnity ([17] above). The potential for workplace injury, and liability there for, was an obvious matter of concern for a substantial industrial employer like the Hydro.

Construction of the term

30 The "liability" in question, a potential liability which might arise at some time in the future, must be the liability of the host employer, the Hydro. "Liability" means any legal liability of the Hydro. Obviously "any injury" does not mean literally any injury suffered by Mr Fowle. An injury which he suffered at home and unconnected with his work would not involve any liability of the Hydro.

31 The expression "liability for any injury" cannot be limited, as the defendants argued, to exclude common law liability. The words are not qualified in any way. It would have been open to Comcare and/or APS, as the preparer of the document, to limit it to accord with their particular circumstances. It is not to the point that entitlement of a Commonwealth employee to sue the Commonwealth for damages at common law is limited in scope and amount by s 45 of the SRC Act. At all relevant times the potential liability of the Hydro included liability at common law for negligence. The Hydro enjoyed no statutory protection comparable to that in s 45 of the Commonwealth Act.

32 Moreover, the context and commercial purpose of the agreement tells against any such limitation. The reality was that the Hydro was doing Comcare and/or APS a favour by taking on Mr Fowle to assist with his rehabilitation, something which would be a benefit to them.

33 Counsel for the defendants submitted that the term in question, being an indemnity, should be construed strictly against the Hydro. However, this principle of construction is bound up with another rule, that documents should be construed contra proferentem (against the interest of the party which prepared or drafted the document): Coghlan v S H Lock (Australia) Ltd (1987) 8 NSWLR 88 at 92, Andar Transport Pty Ltd v Brambles Ltd [2004] HCA 28; (2004) 217 CLR 424 at [19], Halford v Price [1960] HCA 38; (1960) 105 CLR 23 at 30, 34, 40, 41. However, in the present case it is the Commonwealth which was the drafter or presenter of the document. One can infer that seeking to have a Commonwealth employee placed with an outside employer for the purposes of rehabilitation is a common occurrence. Since this is a benefit to Comcare and the Commonwealth (successful rehabilitation will lessen their financial burden), it is hardly surprising that the Commonwealth and/or Comcare would adopt a standard form of contract in which the outside employer is indemnified against the obvious possibility of liability for workplace injury. The present case is the reverse of the stereotypical situation where the party in the stronger bargaining position imposes a standard term on the weaker party: see Andar at [69] per Kirby J.

Orders

34 The declarations sought will be made. There have been consent orders as between the plaintiff and Comcare. There will be an order that the Commonwealth pay the plaintiff’s costs, including reserved costs.

I certify that the preceding thirty- four (34) numbered paragraphs are a true copy of the Reasons for Judgement herein of the Honourable Justice Heerey.

Associate:

Dated: 24 February 2006

Counsel for the Plaintiff:	D J Porter QC
Solicitors for the Plaintiff:	Wallace, Wilkinson & Webster
Counsel for the Defendants:	B Morgan
Solicitor for the Defendants:	Australian Government Solicitor
Date of Hearing:	8 December 2005
Date of Judgment:	24 February 2006