Manser v Spry [1994] HCA 50; (1994) 181 CLR 428; (1994) 124 ALR 539 (26 October 1994)

HIGH COURT OF AUSTRALIA

MANSER v SPRY AND ANOTHER [1994] HCA 50; (1994) 181 CLR 428
(1994) 124 ALR 539
F.C. 94/046
Number of pages - 9

Damages - Workers' Compensation (S.A.)

HIGH COURT OF AUSTRALIA
MASON CJ, BRENNAN, DAWSON, TOOHEY, AND McHUGH JJ

CATCHWORDS

Damages - Personal injuries - Matters to be considered in reduction of damages - Statutory compensation from third party - whether to be deducted.

CATCHWORDS

Workers' Compensation (S.A.) - Compensation - Liability of employer to pay - Right of action against third party for damages - Same disability - Right to recover amount of compensation from third party - Workers Rehabilitation and Compensation Act 1986 (S.A.), s. 54(5), (7).

HEARING

1994, ADELAIDE, August 24, 25; PERTH, October 26
26:10:1994

ORDER

Appeal allowed.

Set aside the answer of the Full Court of the Supreme Court of South Australia to Question (1) and in lieu thereof answer it as follows:

In so far as the plaintiff has received or is entitled to receive compensation under the Workers Rehabilitation and Compensation Act 1986 (S.A.) which does not have to be repaid to the WorkCover Corporation of South Australia and which is compensation for a loss or expense for which the defendant would be liable but for the receipt or entitlement, the receipt or entitlement should be taken into account in the assessment of the plaintiff's award of damages in a way which ensures that the plaintiff does not receive and retain double compensation for the same loss or expense.

The appellant to pay the costs of the respondents in this appeal.

DECISION

MASON CJ, BRENNAN, DAWSON, TOOHEY AND McHUGH JJ On 25 November
1988, a motor vehicle which the first respondent, Jeana Anna Spry,
was driving and a truck which the appellant, Graham Manser, was
driving came into collision. She sustained injuries to her neck and
back. She issued a summons out of the District Court of South
Australia claiming damages for personal injuries allegedly occasioned
by the negligence of Mr Manser. Subsequently, on 22 July 1991,
Ms Spry suffered an aggravation or exacerbation of the injuries to her
neck and back in a work accident which gave rise to a "compensable
disability" for which she was entitled to receive and has received
payments under the Workers Rehabilitation and Compensation Act 1986
(S.A.) ("the Act"). She has been unable to resume employment
following the work accident and has been receiving medical treatment.

2. The corporation which administers the Act ("Workcover") gave a
notice dated 14 January 1993 in purported pursuance of s.54(7) of the
Act claiming payment out of the damages in the common law action for
all compensation which had been paid and which might become payable
thereafter by Workcover to Ms Spry under the Act. These payments
consist of weekly payments, hospital and medical expenses and a lump
sum for non-economic loss. Workcover intervened in the District Court
proceedings to pursue its claim. The question whether Workcover
would be entitled to repayment of compensation out of Ms Spry's (the
plaintiff's) damages raised a question as to the assessment of those
damages in the common law action. Judge C. R. Lee stated a case
raising two questions for determination by the Full Court of the
Supreme Court of South Australia:
"(1) With respect to the sums paid or to be paid to or on
behalf of the plaintiff pursuant to the Workcover Act,
what impact, if any, should those sums have on the
assessment of the plaintiff's damages in the action?
(2) Does any and what liability attach to the defendant
with respect to the Notice dated 14 January 1993."
answer to Question (2). The Full Court answered Question (2) "No"
and the second respondent, Workcover, accepting that answer, did not
appear on this appeal. The other parties to the appeal in this
Court - the plaintiff and defendant - also accepted the answer to
Question (2).

3. Question (1) concerns the assessment of damages in the common law
action and the answer to that question does not affect Workcover.
That question was framed on the assumption that Mr Manser would be
liable in damages for the consequences of Ms Spry's work accident
unless the Workcover payments and entitlements preclude or diminish
her common law right to recover damages for those consequences.
Regrettably, the stated case omitted to state facts which supported
the assumption and the omission led to some confusion as to the issues
to be determined on this appeal. However, the parties were willing
to have this Court answer Question (1) on the footing that the issue
between the parties was whether damages should be assessed by taking
account of the compensation which the plaintiff had received and would
receive under the Act without any obligation to repay Workcover.
Although that question can arise only on the assumption that the
defendant would otherwise be liable in damages for the consequences
of the work injury, this Court was invited to determine the answer
to Question (1) on that assumption. The question for determination
is whether the plaintiff is entitled both to receive and retain
compensation by way of weekly payments payable during incapacity,
medical and hospital expenses and a lump sum payable for non-economic
loss under s.43 of the Act and to recover damages in the common law
action assessed without reduction on account of compensation received
or to be received. The effect of the answer given to Question (1) by
the Full Court ("None") was to hold that the plaintiff is entitled
both to compensation and to damages assessed without taking
compensation into account. The defendant submits that that answer,
taken together with the answer to Question (2), allows the plaintiff
to recover twice for the same loss or damage: once from Workcover and
again from the defendant. To determine what the plaintiff should
recover from the defendant, it is desirable first to note what she is
entitled to receive and retain from Workcover.

The obligation to repay compensation

4. In the Full Court, Workcover relied on s.54 of the Act to support
a right to repayment of the amounts paid out or to be paid out by it
to or on behalf of the plaintiff. A liability to repay is created by
s.54(5) and (7) of the Act which provide:

"(5) Where -
(a) compensation is paid or payable under this Act in
respect of a compensable disability;
(b) a right of action exists against a person other than
the employer for damages in respect of the disability,
the person by whom the compensation is paid or payable is
entitled to recover from that other person the amount of
the compensation in accordance with subsection (7).
(7) Where -
(a) compensation is paid or payable to a person ('the
injured party') under this Act;
(b) the injured party has received, or is entitled to,
damages from another person ('the wrongdoer') in
pursuance of rights arising from the same trauma as
gave rise to the rights to compensation under this
Act;
(c) the person by whom the compensation is paid or payable
under this Act ('the claimant') is entitled to recover
the amount of the compensation by virtue of subsection
(5) or (6),
then the following provisions apply:
(d) the claimant is entitled to recover the amount of
compensation paid or payable under this Act from the
wrongdoer or the injured party but subject to the
following qualifications:
(i) no amount may be recovered from the wrongdoer in
excess of the wrongdoer's unsatisfied liability
to the injured party; and
(ii) the claimant must exhaust its rights against the
wrongdoer before recovering against the injured
party; and
(iii) no amount may be recovered from the injured party
in excess of the amount of the damages received
by the injured party;
(e) the claimant shall, on giving notice to a wrongdoer
of an entitlement to recover compensation under this
section, have a first charge, to the extent of the
entitlement, on damages payable by the wrongdoer to
the injured party;
(f) any amount recovered by the claimant against a
wrongdoer under this subsection shall be deemed to
be an amount paid in or towards satisfaction of the
wrongdoer's liability to the injured party;
(g) an action for the recovery of compensation under this
subsection -
(i) may be heard and determined by the Industrial
Court; and
(ii) must be commenced within 3 years after the date
of the trauma referred to in paragraph (b)."

5. A plaintiff upon whom a defendant has tortiously inflicted an
injury has a "right of action ... for damages" within the meaning of
those words in sub-s.(5)(b) and the damages awarded must include some
damages "in respect of" a subsequent exacerbation of the injury that
is not too remote. Thus, on one reading of sub-s.(5)(b), it could be
said that a plaintiff who has a "compensable disability" as the result
of an exacerbation of an injury tortiously inflicted has "a right
of action ... against a (tortfeasor) for damages in respect of the
disability" within the meaning of those words in that sub-section.
But there is a preferable construction. The phrase "for damages in
respect of the disability" is descriptive of the nature of the right
of action against the tortfeasor when it accrues, that is, when the
plaintiff first suffers any loss or damage as a result of the
defendant's tortious conduct. On this construction, sub-s.(5)(b) does
not comprehend the case where damages are enlarged because a further
event has exacerbated the original injury.

6. The language of sub-s.(7)(b) assists in choosing the latter
construction. The event to which that provision refers is the receipt
by a plaintiff of damages from "the wrongdoer" in pursuance of those
rights which arise from the same trauma as gave rise to the rights to
compensation under the Act. The term "trauma" is defined by s.3 to
mean "an event, or series of events, out of which a compensable
disability arises". Thus sub-s.(7) operates only when the rights in
pursuance of which the damages are received arise from the event, or
series of events, out of which the right to compensation under the Act
arises. If damages are received pursuant to rights which arose from
the tortious infliction of the original injury and the right to
compensation arose out of a subsequent event which exacerbates the
original injury, sub-s.(7) does not operate. It operates only when
the tortious infliction of an injury is the event out of which the
right to compensation arises. That being so, the only right of action
referred to in sub-s.(5)(b) is a right of action for damages arising
when the infliction of an injury by the tortfeasor gives rise to a
right to compensation under the Act. So construed, sub-ss.(5) and (7)
have no application to a case where the right to compensation arises
from an event subsequent to the tort in which the original injury was
inflicted.

7. This was the construction attributed to s.54 by the Full Court
and accepted by the parties to this appeal. It means that if the
plaintiff recovers damages quantified by reference, inter alia, to an
exacerbation of her original injury caused by the subsequent work
accident, the plaintiff will be entitled to retain both the damages
and the payments made and to be made under the Act. The defendant
submits that, unless the damages are reduced by taking compensation
under the Act into account, the plaintiff will recover more than the
amount which is just compensation for the loss and damage inflicted by
the defendant's negligence. That submission is directed, of course,
to the issue under Question (1).

The general principle

8. In Haines v. Bendall ((1) [1991] HCA 15; (1991) 172 CLR 60 at 63 per Mason CJ,
Dawson, Toohey and Gaudron JJ) the majority said:

" The settled principle governing the assessment of
compensatory damages, whether in actions of tort or
contract, is that the injured party should receive
compensation in a sum which, so far as money can do, will
put that party in the same position as he or she would have
been in if the contract had been performed or the tort had
not been committed: Butler v. Egg and Egg Pulp Marketing
Board ((2) [1966] HCA 38; (1966) 114 CLR 185 at 191.); Todorovic v. Waller
((3) [1981] HCA 72; (1981) 150 CLR 402 at 412.); Redding v. Lee ((4) [1983] HCA 16; (1983) 151
CLR 117 at 133.) ; Johnson v. Perez ((5) (1988) 166 CLR 351 at
355, 386.) ; M.B.P (S.A.) Pty. Ltd. v. Gogic ((6) [1991] HCA 3; (1991) 171
CLR 657.); Livingstone v. Rawyards Coal Co. ((7) (1880) 5 App Cas
25 at 39.) ; British Transport Commission v. Gourley ((8)
[1955] UKHL 4; (1956) AC 185 at 197, 212.) . Compensation is the cardinal
concept. It is the 'one principle that is absolutely firm, and
which must control all else': Skelton v. Collins ((9) [1966] HCA 14; (1966)
115 CLR 94 at 128.) , per Windeyer J Cognate with this concept
is the rule, described by Lord Reid in Parry v. Cleaver ((10)
[1969] UKHL 2; (1970) AC 1 at 13.) , as universal, that a plaintiff cannot
recover more than he or she has lost."

9. However, as Walsh JA. pointed out in Adams v. Ascot Iron
Foundry Pty. Ltd. ((11) (1968) 72 SR(NSW) 120 at 134.), the settled
principle does not solve the problem whether a benefit to which a
plaintiff is entitled is relevant to - that is, whether it goes in
reduction of - the damages which a tortfeasor is to pay for the loss or
damage caused by the tort. That problem was addressed by Dixon CJ in
a well-known passage of his judgment in The National Insurance Co. of
New Zealand Ltd. v. Espagne ((12) [1961] HCA 15; (1961) 105 CLR 569 at 573.):

"There are certain special services, aids, benefits,
subventions and the like which in most communities are
available to injured people. Simple examples are hospital
and pharmaceutical benefits which lighten the monetary
burden of illness. If the injured plaintiff has availed
himself of these, he cannot establish or calculate his
damages on the footing that he did not do so. On the other
hand there may be advantages which accrue to the injured
plaintiff, whether as a result of legislation or of
contract or of benevolence, which have an additional
characteristic. It may be true that they are conferred
because he is intended to enjoy them in the events which
have happened. Yet they have this distinguishing
characteristic, namely they are conferred on him not only
independently of the existence in him of a right of redress
against others but so that they may be enjoyed by him
although he may enforce that right: they are the product
of a disposition in his favour intended for his enjoyment
and not provided in relief of any liability in others fully
to compensate him. This is readily seen in the case of
benevolence."

In the same case, Windeyer J said ((13) ibid. at 598.):

" The most satisfying of the reasons that have been given
for refusing to diminish damages because of voluntary gifts
is that they are given for the benefit of the sufferer and
not for the benefit of the wrongdoer. That, it may be
said, cuts across the principle that damages for negligence
are compensatory and not punitive. ... But I do not think
the two propositions necessarily come into collision. A
donor can say who is to benefit by his generosity."

Later, his Honour said ((14) ibid. at 600.):

"it is not, I think possible, to enunciate an exhaustive
rule for all parts of this vexed topic. And the questions
that arise can never be determined in the abstract. Each
must depend on the terms of the particular contract,
pension scheme, charitable benefaction or statute governing
the benefit conferred."

To ascertain whether a statutory benefit possesses the "distinguishing
characteristic" that it is to be enjoyed independently of, and
cumulatively upon, the right to damages, the court must endeavour to
discover the intention of the legislature ((15) ibid. at 573, 599-600;
Redding v. Lee [1983] HCA 16; (1983) 151 CLR 117 at 125, 142, 163; Haines v. Bendall
(1991) 172 CLR at 74-75.).

10. There are three possible indicia of a relevant legislative
intention: the financial source of the benefit, the presence of a
provision which requires a repayment of a statutory benefit out of
the damages awarded or paid and the nature of the benefit. If a
scheme for provision of a benefit be funded by contributions made by
employers and employee-beneficiaries as a kind of insurance against
misfortune, the principle in Bradburn v. Great Western Railway
Co. ((16) [1854] EngR 538; (1874) LR 10 Ex 1.) indicates that the benefit is to be
enjoyed by a beneficiary who encounters the misfortune without
reduction of the damages to which he or she is otherwise entitled.
That view has been taken of benefits paid under contributory pension
schemes created under statute ((17) Parry v. Cleaver [1969] UKHL 2; (1970) AC 1;
Smoker v. London Fire Authority (1991) 2 AC 502; and see Redding v. Lee
(1983) 151 CLR at 138.). If statute provides that a particular
benefit is to be repaid out of damages, there is a clear indication
that that benefit is not to go in reduction of the tortfeasor's
liability. When such a provision relates only to one or some of the
benefits provided under the statute, the non-repayable character of the
other benefits may imply, according to the context, either that the
legislature intended that the receipt and retention of the benefit
should not be taken into account in the assessment of damages or that
it had no such intention ((18) See Hood Construction Pty. Ltd. v.
Nicholas (1987) 9 NSWLR 60 at 72.). Whether an implication of such a
legislative intention should be drawn depends largely on the nature of
the benefit. Gibbs CJ said in Redding v. Lee ((19) (1983) 151 CLR
at 125.):

"If the statute expressly provides (as some statutes
relating to workers' compensation have done) that a
plaintiff who has recovered damages shall repay the amount
of the benefit it will be clear that the receipt of the
benefit must be disregarded in the assessment. In many
cases, however, the statute under which the benefit is
provided will give no assistance of this kind. Then it
will be necessary to consider closely the nature of the
benefit itself. The conclusion that the benefit is
intended for the plaintiff personally and not in reduction
of the damages may more readily be drawn when it is seen
that the receipt of the benefit is not dependent on the
loss of wages or earning capacity ... for which the
plaintiff claims damages (cf. Parry v. Cleaver ((20) (1970) AC
at 42.) , per Lord Wilberforce) and is not intended to replace
the lost wages or remedy the loss of earning capacity."

Finally, if all indicia of intent fail, the "settled principle
governing the assessment of compensatory damages" which the majority
stated in Haines v. Bendall must be applied. In Adams v. Ascot Iron
Foundry Pty. Ltd., Walsh JA., who described that principle as the
"dominant rule", said ((21) (1968) 72 SR(NSW) at 135.):

" The difficulty lies in ascertaining the relevant
intention from an Act, which does not expressly declare any
intention one way or the other. The difficulty ... is in
attempting to extract from the Act an actual meaning or
intention with reference to the question which has to be
resolved. The question may be one to which the Parliament
or the draftsman of the Act did not in fact advert at all.
Nevertheless, if it is possible to do so, it is necessary
to extract from the Act indications of what was intended.
If one cannot find any real indications pointing one way or
the other, or if one finds indications both ways which are
evenly balanced, it may be that the question must then be
resolved by taking the view that the dominant rule ...
should operate."

The character and incidents of compensation payments under the Act

11. Section 54 of the Act requires repayment to Workcover of
compensation benefits paid to or on behalf of a worker under the Act
if the rights to compensation arise from the same trauma as gave rise
to the right to damages. And if the worker sues a third party for
damages in tort arising from the "same trauma", s.54(4b) precludes the
third party from recovering contribution against the employer except
where the trauma is inflicted in a motor vehicle accident and the
employer was or ought to have been insured against that liability. It
can be inferred from these provisions that a purpose of the Act is to
ensure that Workcover is recouped when its liability arises from an
event for which another source of compensation is also liable. For
this reason, repayment by the plaintiff to Workcover of compensation
is made to depend on whether the "same trauma" test is satisfied. But
Div.9 of the Act (which includes s.54) contains no indication of
intention as to whether the plaintiff is to enjoy both the statutory
benefits and unreduced damages in cases other than the "same trauma"
cases. It is necessary, therefore, to examine the character of the
benefits paid and payable under the Act.

12. Compensation under the Act is payable in respect of a disability
which "arises from employment" within the meaning of that term as
expanded by s.30 of the Act. The compensation paid and to be paid to
the plaintiff in this case falls into three categories. The first
category consists of medical and hospital expenses payable under s.32.
The purpose of these payments, which may be paid either to the worker
or to the provider of the relevant service (s.32(3)), is to indemnify
the worker, wholly or in part, against health care expenses incurred
as the result of the compensable disability (s.32(1)). The second
category consists of weekly payments which, pro tanto, make up for
weekly earnings lost by reason of incapacity for work produced by the
compensable disability: s.35. Or, in the place of the weekly
payments, an actuarially calculated lump sum can be paid when the
disability is permanent: s.42. The third category consists of a lump
sum for non-economic loss for a permanent and compensable disability
under s.43. This payment is in substitution for a worker's
entitlement to damages for non-economic loss suffered in circumstances
where his or her employer would, but for s.54(1) or (4a) of the Act,
be liable or where a fellow-worker would be liable in negligence. The
lump sum payable under s.43 is thus a statutory substitute for that
component of common law damages which reflects non-economic loss for a
tortiously inflicted injury, albeit a lump sum is payable under the
Act only if a worker's injury produces a compensable disability.

13. All of these payments are made in respect of the same matters as
are taken into account in assessing damages in tort and for which the
plaintiff has claimed in her action. Since the liability for these
payments must arise from an event occurring during employment and
since the employer's common law liability is excluded except in the
case of motor vehicle accidents where an insurer is or ought to be on
risk to indemnify the employer ((22) See s.54(2).), the Act provides
a measure of protection for a worker who suffers a disability where at
least one of the causes of that disability is work related. The Act is
not designed to confer benefits to be added to the damages to which
the worker might otherwise be entitled at common law for a loss caused
by an event which is not work related. The compensation benefits paid
or payable under the Act are ordinary incidents of a worker's
employment which must be taken into account in assessing the damages of
a plaintiff-employee for loss and damage for which a tortfeasor is
liable at common law.

14. We would therefore allow the appeal, set aside the Full Court's
answer to Question (1) and answer it as follows:

In so far as the plaintiff has received or is entitled to
receive compensation under the Workers Rehabilitation and
Compensation Act 1986 (S.A.) which does not have to be
repaid to the WorkCover Corporation of South Australia
and which is compensation for a loss or expense for which
the defendant would be liable but for the receipt or
entitlement, the receipt or entitlement should be taken
into account in the assessment of the plaintiff's award of
damages in a way which ensures that the plaintiff does not
receive and retain double compensation for the same loss or
expense.

15. In accordance with the conditions on the grant of special leave to
appeal in this case, the appellant shall pay the respondents' costs of
this appeal and the orders for costs in the Courts below will not be
disturbed.