[Home] [Databases] [WorldLII] [Search] [Feedback] High Court of Australia

Bain v Frank G O'Brien Ltd [1976] HCA 29; (1976) 135 CLR 158 (21 June 1976)

CATCHWORDS

* Section 64(1) of the Workers' Compensation Act, 1926 (N.S.W.) provides, so far as is material, as follows: "Where the injury for which compensation is payable under this Act was caused under circumstances creating a legal liability in some person other than the employer to pay damages in respect thereof - (b) if the worker has recovered compensation under this Act, the person by whom the compensation was paid shall be entitled to be indemnified by the person so liable to pay damages as aforesaid."

HEARING

DECISION

2. I agree with my brother's conclusion that amounts paid under an award of the Workers' Compensation Commission according to its terms are amounts of "compensation recovered" by the worker within the meaning of s. 64(1) (b) of the Workers' Compensation Act, 1926 (N.S.W.), as amended ("the Act"). Consequently, I agree with the view that the trial judge was in error in reducing the amount claimed by the plaintiff in the action on the ground that he had not acted reasonably in not providing suitable employment for the worker. I also agree with my brother's reasons for that conclusion. (at p160)

3. I would add for myself what, in my opinion, is a substantial reason for concluding that the trial judge was in this respect in error. The evident purpose of s. 64(1) (b) is to ensure that where a liability under the Act has fallen upon the employer of a worker injured by the wrongful act of another, he shall be indemnified by that other for what he, the employer, is required under the Act to pay to the worker. I agree with my brother Gibbs that the indemnity extends only to what by or under the Act he is required to pay. That proposition needs neither amplification nor exposition. But a consequence of a worker suffering injury compensable under the Act is that the employer, if the injury is only partial, comes under a liability to pay him compensation as for a total incapacity unless he, the employer, is able and willing to provide the partially injured worker with suitable employment. I express the result of s. 11(2) of the Act in this form because the Act does not impose any sanction on the employer's obligation to provide suitable employment other than the liability to pay the larger amount of compensation if that employment is not provided. The receipt of the compensable injury, being partial, of itself exposes the employer to this liability to pay the larger compensation if that employment is not provided. There is no question, in my opinion, of the employer acting reasonably in relation to the provision of that employment. He is free, in my opinion, to act in his own interest: and in pursuit of that interest to submit to the liability to pay the larger compensation rather than employ a worker who is partially injured and unable to perform the duties for which he was formerly employed. Further, the case may be one in which no suitable employment is available by reason of the combined effect of the worker's injury and of the employer's staff organization: or there may be other reasons beyond an employer's control which render any suitable employment unavailable. Thus, I am of opinion that no question of the reasonableness of an employer not providing suitable employment can arise in connexion with a claim by the employer for indemnity by the tortfeasor. (at p161)

4. But it is said that compensation ceased to be payable under the award of the Commission at a time when, according to the finding of the Supreme Court, the worker ceased to be in fact incapacitated. As I have indicated, payments which were not required to be made by the Act cannot be amounts of compensation recovered by the worker under the Act. If the situation is covered by an award of the Commission, payments not required to be made by that award are not to be regarded as relevantly recovered by the worker under the Act. Thus, in order to deal with the submission that payments were made as payments of compensation after the worker was, according to the Court's finding, no longer incapacitated for work, it is necessary to determine the meaning of the award by reference to which the challenged payments of compensation were made in this case. (at p161)

5. The terms of the award of 4th August 1961, could conveniently be set out at this point:

"(a) That the respondent DO PAY the applicant weekly compensation
at the rate of -
(i) TWELVE POUNDS TEN SHILLINGS from the Twenty-fourth
day of December, 1959, to the Thirtieth day of November,
1960, on the basis of notional total incapacity;
(ii) THIRTEEN POUNDS TEN SHILLINGS from the First day of
December, 1960, on the basis of notional total incapacity,
such weekly payment to continue during the
applicant's said incapacity, or until the same be ended,
diminished, increased or redeemed in accordance with
the provisions of the abovementioned Act.
..." (at p162)

6. I am unable to agree with my brother Gibbs' conclusion that the terms of the Commission's award mean that its operation should last only so long as, in fact, the worker was incapacitated. Consequently, on that construction of the award, it is said that moneys paid in purported pursuance of it after the worker has, in fact, ceased to be incapacitated within the meaning of the Act, are not "recovered" by the worker under the Act. (at p162)

7. The Act in s. 9 provides for the payment of compensation during incapacity. Incapacity means an inability due to injury to earn salary or wages. Consequently, awards of compensation made by the Commission for total or partial incapacity must be expressed to endure during incapacity. I understand that, in practice, an award is not made to operate until further order. In the case of an employer required by the terms of s. 11(2) and the circumstances of the case to pay compensation as upon total incapacity, the order, as in the present case, is expressed to endure during "the said incapacity", i.e. the deemed total incapacity. (at p162)

8. A construction of the terms of the award which would produce such a result means that the employer must be able to determine for himself - and, in case of challenge, establish to the Commission - that at a particular date the worker ceased to be incapacitated. Such a construction would, in my opinion, endanger the stability of the system of compensation established under the Act. Section 36 of the Act gives the Commission exclusive jurisdiction to determine all matters and questions arising under the Act and expressly includes in that exclusive jurisdiction the "existence and degree of incapacity for work by reason of an injury" (s.36(4) (b)). Further, the Commission is given power to reconsider, rescind, alter and amend its award (s. 36(2)). (at p162)

9. It might be observed in passing that where an award has been made by the Commission, a certificate relating thereto issued by the Registrar of the Commission may be filed in a district court in the area where the employer resides, whereafter judgment may be entered in that district court for the amount of the certificate. Clearly, the district court in such an event could not entertain and decide the question whether or not the worker, during or in relation to whose incapacity the money was payable, remained relevantly incapacitated. (at p163)

10. In my opinion, where an award of compensation has been made, no question could arise between the tortfeasor and the employer under s. 64(1) (b) whether the injured worker was a worker within the meaning of the Act at the time of the receipt of the injury. The extensive definition of "worker" for the purposes of the Act opens up a considerable area of controversy, both in law and in fact: see s. 6(1) and s. 6(2) to (14D) inclusive. Further, no question could arise under s. 64(1) (b) as to the extent of the worker's injury or as to the propriety of the amount of compensation awarded. (at p163)

11. In the case of an award for compensation, expressed to continue during incapacity, the Commission alone, in my opinion, can determine, in case of dispute, whether the worker remains relevantly incapacitated, and the time at which his incapacity ceased, if indeed it did. It seems to me that it would introduce chaos into the system of the payment of compensation if employers had the ability, without obtaining a variation of the award and without the consent of the worker, to cease payment of compensation on their own estimation of the worker's incapacity. The receipt by the worker of compensation may be vital to his economic survival. If an employer made an erroneous judgment that incapacity had ceased, a later order or award of the Commission to rectify the situation would be poor comfort for the deprivation which the worker had suffered meantime. (at p163)

12. As we know from matters which come before this Court, partially injured workers not re-admitted to their former employ may leave the State. For this reason alone, it may be difficult, if not impossible, to trace them, let alone ascertain their particular circumstances with the requisite certainty. These considerations lead me to think that the award made in this case ought not to be read as automatically expiring so soon as the worker in fact ceases to be incapacitated. In my opinion, it endures until the Commission decides that relevant incapacity has ceased, unless the parties to it agree to its termination. (at p163)

13. But there are considerations particular to an award based on notional incapacity to which I would refer. Section 11(2) deems an injured worker for whom suitable employment is not provided to be totally incapacitated. This is a situation created by the Act and at the time of the employer's failure to provide suitable employment. It is not a situation which is, in any sense, made dependent on the existence or extent of the worker's incapacity for the future. The Commission, no doubt, in pursuance of its powers under s. 36 to which I have referred, may alter that situation: but until it does so, the deemed total incapacity remains. Section 11(2) does not say that so long as the worker is, in fact, incapacitated to any degree he shall be deemed to be totally incapacitated. It says that the incapacity which has given him the right to seek of his employer suitable employment is deemed to be total: that is to say, he is deemed to have no capacity to earn any salary or wages. It is that incapacity to which the award refers when it speaks of the "said incapacity". That notional total incapacity is not, in my opinion, to any degree dependent on the continuance of incapacity in fact. (at p164)

14. Consequently, I prefer the construction placed upon the Commission's award by Hutley J.A. to a construction which ignores the setting of the stabilizing scheme of compensation which the Act provides in which the award is made. The notional total incapacity is a fictional state of the worker derived not directly from his physical incapacity but from the operation of the statute upon the failure of the employer to provide him with suitable employment: As I understand the system of compensation and its administration, awards are made during incapacity but they are not self-terminating upon changes in the physical or economical situation of the worker. The award must be terminated by the Commission or by consent and the date as and from which it will cease or will have ceased to operate will be set by the order terminating it or by the consent of the parties. Any other course must, in my opinion, lead to undesirable results. (at p164)

15. Some play has been made in the argument of the case of the position of the tortfeasor. He, upon the hypothesis of s. 64(1) (b), is the author of the liability to which the employer becomes subject under the Act. I have already expressed what, in my opinion, is the nature of that liability in the case of partial incapacity of the worker. The tortfeasor in this case, through the injury inflicted on the worker, has caused the employer to pay compensation upon total incapacity unless he is willing and able to find him suitable employment. Having caused the employer to come under such a liability, the Act places the tortfeasor in the position of one who indemnifies. He must be taken from the time of inflicting the injury to know of his liability. He is well able, in my opinion, to protect himself by suitable action as a person in a comparable position to a guarantor. I would agree with the conclusion expressed by Kennedy J. in Thompson & Sons v. North Eastern Marine Engineering Co. Ltd. (1903) 1 KB 428, at p 437 . But, in any case, the Act has made the tortfeasor liable for all that is ordered to be paid by the employer. The obligations of s. 64(1)(b) cannot be reduced by any arguments as to inconveniences or disadvantage suffered by the tortfeasor. (at p165)

16. In my opinion, the whole amount paid by the plaintiff to the workman was money recovered by the workman under the Act. In my opinion, the appeal should be dismissed. (at p165)

GIBBS J. The respondent company was on 10th October 1958 the employer of one Peter Paul Fenech who on that day was riding his motor cycle home from work when he was run down and injured by a motor vehicle driven by the appellant. The collision was caused by the negligence of the appellant. As a result of his injuries Fenech was absent from work until April 1959, and the respondent voluntarily made payments of compensation to him during that period. In April 1959 he returned to his employment with the respondent, but performed light duties only. On 24th December 1959 the respondent dismissed him, because he could not or would not perform general labouring duties. Fenech subsequently made application to the Workers' Compensation Commission of New South Wales for workers' compensation and on 4th August 1961 an award was made in his favour. Paragraph (1) of the award set out certain findings made by the Commission, including the following:

"(b) such injuries" (i.e. those sustained on 10th October
1958) "resulted in the applicant's partial incapacity for
his pre-injury employment on the Twenty-fourth day of
December, 1959, and continuing;
(c) the respondent has failed to provide the applicant with
suitable employment during his said partial incapacity
for his pre-injury employment, and such partial incapacity
is deemed to be total."

"That the respondent DO PAY the applicant weekly compensation
at the rate of -
(i) TWELVE POUNDS TEN SHILLINGS from the Twenty-fourth
day of December, 1959, to the Thirtieth day of November,
1960, on the basis of notional total incapacity;
(ii) THIRTEEN POUNDS TEN SHILLINGS from the First day of
December, 1960, on the basis of notional total incapacity,
such weekly payment to continue during the applicant's
said incapacity, or until the same be ended, diminished,
increased or redeemed in accordance with the provisions
of the abovementioned Act."

"An employer shall provide suitable employment for his
injured worker during the worker's partial incapacity for his
pre-injury employment.
Upon any failure by such employer to provide suitable
employment as aforesaid the worker's incapacity for work
shall be deemed to be total, and he shall be compensated
accordingly."

2. On 2nd June 1965 the respondent commenced proceedings in the Supreme Court of New South Wales claiming to be indemnified by the appellant for the payments of compensation made to Fenech during the six years before the date of the commencement of the proceedings. The learned judge who tried the action disallowed the claim to be indemnified in respect of any payments made after 30th March 1962. He allowed the claim in respect of the payments made before that date, but only in part. He held that an employer who wishes to claim from a third party indemnity for compensation paid on the basis that the worker's incapacity is deemed under s. 11(2) to be total, must show that he himself had acted reasonably in failing to provide suitable employment, and that the respondent had not acted reasonably in failing to provide suitable employment for Fenech after 24th December 1959. Alternatively, he held that compensation on the basis of total incapacity was payable by the respondent not because of the initial injuries for which the appellant was liable to make indemnity, but because of the respondent's failure to observe the statutory provisions of the Act. He concluded, in effect, that the appellant should indemnify the respondent in an amount appropriate to a case of partial incapacity and he fixed that amount at fifty per cent of the total sum in fact paid. In addition he allowed the amount paid by the respondent in respect of the hospital and medical expenses of Fenech and gave judgment in favour of the respondent for a total sum of $1,766.50. The respondent appealed to the Court of Appeal which allowed the appeal and substituted a judgment for the respondent for the full amount of compensation paid during the six years preceding 2nd June 1965 (including hospital and medical expenses) - a sum of $7,829 (1975) 1 NSWLR 373 . From this decision the appellant has appealed to this Court. (at p167)

3. The respondent's claim to indemnity is brought under s. 64(1) (b) of the Act which provides as follows:

"Where the injury for which compensation is payable
under this Act was caused under circumstances creating a
legal liability in some person other than the employer to pay
damages in respect thereof -
...
(b) if the worker has recovered compensation under this
Act, the person by whom the compensation was paid
shall be entitled to be indemnified by the person so liable
to pay damages as aforesaid."

"all questions relating to matters arising under this section
shall, in default of agreement, be settled by action, or, with
the consent of the parties, by the Commission."

4. It was suggested in the judgments of the Court of Appeal, and in argument before us, that the first of these questions depended upon a further question, namely whether any compensation which is in fact paid to a worker pursuant to an award made by the Commission must be treated as compensation recovered under the Act, or whether it is permissible for a person sought to be made liable to pay indemnity under s. 64(1)(b) to go behind the award and to show that a worker entitled to payment in accordance with its terms was not in fact incapacitated. It is, however, in my opinion unnecessary to consider the latter question for the purpose of deciding the present case. It was conceded that the award was correctly made in the first instance. It may be accepted for the purposes of argument that the learned Judges of Appeal were correct in thinking that an employer would establish the relevant element of his case by proving that he had paid compensation pursuant to an award of the Commission. In other words, it may be assumed that a payment made in accordance with the provisions of an award must conclusively be taken to have been "compensation under this Act" within s. 64(1)(b). However, when the Commission has made an award of compensation it cannot be said that payment of an amount greater than that awarded is "compensation under this Act", for the Act does not oblige the employer to pay more than the Commission has awarded. For example, an employer who had been ordered by the Commission to make payments of compensation in a specified amount each week, but who had made payments at a higher rate than that specified, could not recover from a tortfeasor under s. 64(1)(b) more than the amount which he had been ordered to pay. Similarly, if the Commission ordered payment of compensation to be made for a specified period, an employer who made payments over a longer period could not recover the whole amount paid. In each case the employer could recover no more than he was obliged by the award to pay. On the same reasoning an employer who had paid his worker as compensation a greater sum than he was entitled to receive under the award governing the case, could not, if the worker subsequently recovered damages, claim under s. 64(1)(a) to be repaid by the worker more than the amount of compensation which was payable in accordance with the award. In respect of the amount which he had paid above the award he would be left to his rights, if any, under the general law. (at p169)

5. In the present case the question whether the compensation paid after 30th March 1962 was "compensation under this Act" depends upon the proper construction of the award made by the Commission on 4th August 1961. If the award did not require payment after that date the amount in fact paid thereafter would not be recoverable under s. 64(1)(b). (at p169)

6. The award provided that the payments fixed thereby were "to continue during the applicant's said incapacity, or until the same be ended, diminished, increased or redeemed in accordance with the provisions of the abovementioned Act". The provisions referred to appear to be those of s. 60 (under which, on a review by the Commission, a weekly payment may be "ended, diminished or increased") and s. 15 (under which a liability in respect of a weekly payment may be redeemed by payment of a lump sum determined by the Commission). But the award clearly did not mean that the payment was to continue until an order was made under s. 60 or s. 15. In the context of par. 2(a) of the award, it would be quite impossible to read "or" as meaning "and", because that would make the reference to "increased" in the following words quite insensible. On its plain meaning the award provides that the payment is to cease on either of two different contingencies, one of which is the cessation of the worker's incapacity. As a matter of fact, the worker's incapacity ceased on 30th March 1962. Payments made after that date were not made pursuant to the requirements of the award. (at p169)

7. In the argument presented for the respondent, emphasis was placed on s. 36(1) of the Act which provides:

"Subject to section thirty-seven of this Act, the Commission
shall have exclusive jurisdiction to examine into, hear
and determine all matters and questions arising under this
Act, and the action or decision of the Commission shall be
final."

8. In the Court of Appeal, Hutley J.A. held that the award, on its proper construction, did not terminate automatically when Fenech ceased as a matter of fact to suffer any incapacity as a result of his injuries. He took the view that "said incapacity" in the award referred to the worker's notional total incapacity. He said (1975) 1 NSWLR, at p 378 : "In my opinion, on the true construction of the award, termination of the incapacity there referred to is not something which happens merely on the recovery of the injured worker, it occurs only when the legal status of notional total incapacity is terminated by law." I agree that the incapacity during which the compensation was to continue in accordance with the provisions of the award was the notional total incapacity of Fenech. With respect, however, I cannot agree that it required any act in law to terminate that notional total incapacity. In the expression "notional total incapacity", as used in the award, the word "notional" does not simply refer to "incapacity"; what was notional was the total incapacity. By s. 11(2) of the Act, upon the failure of the employer to provide suitable employment "during the worker's partial incapacity for his pre-injury employment", the worker's "incapacity for work" was deemed to be total. The effect of the section is that if there is in fact partial incapacity, it is deemed in certain circumstances to be total. Nothing in s. 11(2), or elsewhere in the Act, requires a man who has no incapacity at all to be deemed to be totally incapacitated, or has the effect that once the incapacity of a worker is deemed to be total, that fiction must be continued until some order or award of the court is made declaring it to be at an end. On the contrary, the section shows that the notional total incapacity is deemed to exist as a matter of law only when there is a partial incapacity in fact. (at p170)

9. In my opinion the award, upon its proper construction, required payments to be made only during the notional total incapacity of Fenech. That notional total incapacity ceased when Fenech ceased in fact to be incapacitated, that is, on 30th March 1962. Payments made after that date were not payments which the award required to be made. Nor did any provision of the Act require them to be made. They were not payments of "compensation under this Act". They are not recoverable under s. 64 (1) (b). (at p170)

10. If the award had required payments to be made indefinitely, and not during incapacity, it would in my opinion have failed to conform to the provisions of s. 9(1) of the Act, under which the weekly payments to be paid as compensation are to be made "during the incapacity". It was suggested that it might detract from the practical efficiency of the working of the Act if an employer were at liberty to cease to make payments under an award without first obtaining an order from the Commission ending the payments. On the other hand, it might with equal force be said that it would be an injustice to require a third party to indemnify an employer against payments of compensation to which the worker was not entitled. Whether or not the third party has a right to apply to the Commission for an order ending the payments under an award made against an employer whom he is liable to indemnify is a question that I need not consider, but, assuming the existence of such a right, in many cases the third party could not in practice avail himself of it, since he might not become aware that he would be called upon to indemnify the employer until after the payments in question had been made. However, these matters need not be further discussed, because the words of the award are in my opinion plain and unambiguous, and cannot be given a meaning which they do not bear in order to give effect to notions of convenience or policy. (at p171)

11. The finding embodied in the award of 7th December, 1967, that Fenech ceased to be incapacitated on and after that date, is irrelevant to the matters now in issue. The court, and not the Commission, had to decide the question arising under s. 64(1)(b) whether the payments made to Fenech after 30th March 1962 were payments of compensation under the Act, i.e. whether they were made in compliance with the award of 4th August 1961. As I have already shown, that question depended upon the proper construction of the award of 4th August 1961, and upon the facts of the case which related to the continuance of the physical incapacity of Fenech. The award of 7th December 1967 did not provide for the payment of any compensation to Fenech, nor did it purport retrospectively to validate any payments already made. No doubt that award proceeded on the erroneous assumption that Fenech continued to be incapacitated up to 7th December 1967, but it created no estoppel against the appellant, who was not a party to it. If the finding of the Commission that Fenech ceased to be incapacitated on and after 7th December 1967 had any evidentiary value in the proceedings in the Supreme Court on the issue whether Fenech had ceased to be incapacitated at an earlier date (which I doubt) it certainly was not conclusive of that issue, and the finding of the Supreme Court that the incapacity ceased on 30th March 1962 is, as I have said, not challenged. The order made on 7th December 1967 that the payments be terminated as from that date did not have the effect that payments made before that date must be taken to have been made in pursuance of the earlier award. (at p172)

12. For these reasons, in my opinion, the learned trial judge was right in holding that no indemnity was payable in respect of the period after 30th March 1962. I am, however, unable to agree that the respondent was entitled only to a partial indemnity in respect of the payments made before that date. When Fenech was paid compensation for total incapacity as required by s. 11 (2) of the Act he recovered the compensation to which the Act entitled him. Section 64(1)(b) gave the respondent who paid the compensation a right to be indemnified by the appellant, as the person legally liable to pay damages in respect of the injury. According to its terms, s. 64(1)(b) requires the appellant to indemnify the respondent in respect of all the compensation the latter has paid, provided of course that it was compensation paid under the Act. It distracts attention from the real issues to inquire whether the payment of the compensation was caused by the failure of the employer to provide suitable employment rather than by the act of negligence that caused the injuries; it is enough that the compensation was paid in respect of the injuries, and that it was paid in accordance with the Act. Further, it does not seem possible to qualify the words of s. 64(1)(b) by importing the notion that the employer must, by acting reasonably in providing suitable employment, reduce as far as possible the amount of compensation payable, or by applying the principle that an employer who fails to provide suitable employment should be held disentitled to an indemnity on the ground that he has failed to perform the statutory duty cast upon him by s. 11(2). In some cases it may be impossible for an employer to provide suitable employment, and in other cases he may be able to do so only at a loss to himself. Clearly in some cases, such as those, it would accord with the scheme of the Act that an employer who has paid compensation on the basis of total incapacity under s. 11(2) should be indemnified under s. 64(1)(b) by the third party whose negligence caused the worker's injuries. Section 64(1)(b) contains no indication of any criterion which might be applied to distinguish those cases in which an employer who had paid compensation under the Act to a worker whose injuries had been caused by the negligence of a third party should be refused complete indemnity from those in which he should receive it. That circumstance supports the conclusion that no such distinction is to be drawn. Section 11(2) is a provision which has given rise to many difficulties, and it may be that when it was inserted in the Act the legislature did not clearly envisage its possible effect on the obligation of third parties to pay indemnity, particularly in cases in which the employer has unreasonably refused to provide suitable employment for a partially incapacitated employee; if that is so, the remedy lies with the legislature rather than with the courts. In the case of contracts of indemnity, there is a rule of public policy - which it is unnecessary for present purposes to attempt to formulate fully or precisely - that renders unenforceable an indemnity against criminal acts or against the consequences of tortious acts deliberately committed. It does not seem to me that the statutory right given by s. 64(1) (b) can be restricted on grounds of public policy in any way that would assist the appellant in the present case. In my opinion the respondent was entitled to be indemnified in full in respect of the compensation paid before 30th March 1962. I would only add that I do not intend it to be inferred from my remarks that I endorse the finding that the respondent acted unreasonably; I have proceeded on the assumption that this finding was correct, but there seems to me little to support it. (at p173)

13. I would allow the appeal but would vary the judgment of the learned trial judge, in accordance with these reasons for judgment. (at p173)

STEPHEN J. I agree that, for the reasons stated by the Chief Justice, this appeal should be dismissed. (at p173)

MASON J. I have read the reasons for judgment prepared by the Chief Justice and I am in agreement with them. Accordingly I would dismiss the appeal. (at p173)

JACOBS J. I agree with the conclusion of the Chief Justice and with his reasons. (at p173)

ORDER

(HIGH COURT OF AUSTRALIA.)

DEFENDANT,
AND

PLAINTIFF,
ON APPEAL FROM THE SUPREME COURT OF
NEW SOUTH WALES.