Shoalhaven City Council v Smith [2001] NSWCA 469 (13 December 2001)

Last Updated: 17 December 2001

NEW SOUTH WALES COURT OF APPEAL

CITATION: State of New South Wales v Kennelly (No 2) [2001] NSWCA 472

FILE NUMBER(S):

40259/99

HEARING DATE(S): 12 September 2001 and on the papers

JUDGMENT DATE: 12/12/2001

PARTIES:

State of New South Wales

Dorothy Shirley Kennelly

JUDGMENT OF: Meagher JA Beazley JA Young CJ in Eq

LOWER COURT JURISDICTION: District Court

LOWER COURT FILE NUMBER(S): 796/92

LOWER COURT JUDICIAL OFFICER: Goldring DCJ

COUNSEL:

Appellant: G Giagios

Respondent: L King SC/J Kernick

SOLICITORS:

Appellant: I V Knight, Crown Solicitor

Respondent: Steve Masselos & Co

CATCHWORDS:

Workers Compensation

joint and several tortfeasors

Crown tortfeasor in different capacity

Judgment

review of reasons

Orders

slip rule

Statutory Construction

workers compensation

LEGISLATION CITED:

Workers Compensation Act 1987 (NSW), s 151Z

Suitors' Fund Act 1951 (NSW)

Supreme Court Rules 1970 (NSW)

DECISION:

See para 28

JUDGMENT:

IN THE SUPREME COURT

OF NEW SOUTH WALES

COURT OF APPEAL

CA 40259/99

MEAGHER JA

BEAZLEY JA

YOUNG CJ in EQ

Wednesday, 12 December 2001

THE STATE OF NEW SOUTH WALES v DOROTHY KENNELLY

(NO 2)

JUDGMENT

1 MEAGHER JA: I have read Beazley JA's judgment in this matter. I disagree with it. I have said all I wish to say in my judgment of 10 April 2001, and am still of the same mind now as I was then. In my view the Notice of Motion dated 9 May 2001 should be dismissed with costs. I trust counsel will not continue to pester the Court with applications to revisit its judgments.

2 BEAZLEY JA: On 10 April 2001, the Court delivered its judgment in this matter and made the following orders:

(i) Appeal upheld, and verdict below set aside;

(ii) New trial ordered;

(iii) Respondent to pay the appellant's costs.

7 The claimant seeks leave to appeal against a judgment of Phelan DCJ in an action for damages for personal injuries brought by the opponent against it.

8 The action concerned injuries the opponent sustained while riding his motor cycle on an unsealed gravel section of Yalwal Road in the upper Shoalhaven region. His motor cycle struck a sandstone rock embedded in the road, careered off the road and hit a tree.

9 The rock protruded above the gravel surface of the road by about 100 millimetres. The opponent did not see the rock prior to the accident.

10 The cause of the rock being at a higher level than the surrounding gravel surface was that rain water had run along a channel in the centre of the road and scoured out gravel alongside the rock.

11 Phelan DCJ found that the claimant negligently caused the accident by failing to remove the rock or by failing to create a "better level of drainage" across the section of the road where the accident occurred.

12 It was not in dispute that, under the legislation applicable, the claimant had "the care, control, conduct and management and maintenance of the road". The essential issue was whether the claimant, in exercising its duties to maintain the road, had exercised reasonable care in all the circumstances to avoid danger to persons using the road: Miller v McKeon [1905] HCA 33; (1905) 3 CLR 50.

13 Mr Clark, an expert called by the claimant, explained that when an unsealed gravel road is first constructed surface water is shed to its sides by the effect of the longitudinal gradient and cross-fall of the road. Water flowing along the ruts and windrows or "laying on the pavement" causes scours and potholes. Mr Clark said that this was an inevitable occurrence with unsealed gravel roads. Such disturbances in the soil are corrected by grading and, sometimes, by the addition of material to replace soil losses.

14 In the course of maintaining the road, the claimant caused it to be graded once or twice a year. Grading is an operation whereby material that has been displaced from the road is recovered and redistributed over the road to provide a smoother surface.

15 Grading for such a purpose had so taken place three to four weeks before the accident on Yalwal Road in the vicinity of the sandstone rock. This was a steep section of the road and Mr Upitis, the claimant's asset maintenance manager, acknowledged that it was an area that, in the ordinary course, would "get some attention".

16 The grading had the effect that, immediately after it had been completed, the top of the rock was level with the gravel portion of the road and the rock did not constitute any danger to traffic.

17 Over the period of three to four weeks between the grading and the accident, largely through the action of water, part of the gravel adjacent to the rock was scoured away. This erosion led to the edge of the rock protruding some 100 millimetres (4 inches) above the gravel section of the road.

18 Phelan DCJ found:

"Despite a drain under the road some eight metres before the piece of sandstone, I am satisfied at the time of the accident water scarred the centre of the road exposing one side of the rock, estimated by the [opponent] to be 100 millimetres or some four inches. The left hand side of the rock was flush with the gravel on the left hand side of the road. The rock itself is irregularly shaped, on its left side being fairly straight but on its right side being indented in such a way that about half way along its length there is an irregular step of the dimension described above".

19 His Honour's reference to the left hand side of the rock is to the opponent's left hand side as he was travelling along Yalwal Road. The rock was towards the centre and right hand side of the half of the road on which the opponent was riding (that is, his correct or left hand side of the road). The indentation of the rock described by Phelan DCJ, which protruded above the gravel and constituted the 100 millimetre step, ran diagonally across that part of Yalwal Road that I have described. From the direction the opponent was riding, the raised step in the rock was difficult to discern, and, as I have mentioned, he did not see it.

20 There was expert evidenpar12 In appropriate cases the Court makes an order in respect of the Suitor's Fund Act 1951 (NSW) and usually makes an order in terms that a respondent have a certificate if so qualified. Such an order is usually made, even if not expressly sought. This is the very type of case where such an order is usually made. The omission to make the order was inadvertent and should also be rectified.

Should the Court Review its Reasons?

13 That leaves the question whether the Court should review its reasons.

14 In the affidavit in support of the respondent's Notice of Motion the respondent's solicitor stated:

"4. It had not been contended by either party or argued in the appeal that the calculation of damages under s 151Z(2)(c) was other than as laid down in Leonard v Smith (1992) 27 NSWLR 5 and Grljak v Trivan Pty Limited (unreported, Court of Appeal 19 April 1996). The suggested operation of the provision in the judgment, to the extent that this is contrary to the decisions in Leonard v Smith and Grljak would appear to be inadvertent."

15 This point is reiterated in the written submissions, the respondent contending that the interpretation given to s 151Z(2) of the Workers Compensation Act 1987 (NSW) in para 12 of Meagher JA's judgment "is so clearly wrong as to call for correction".

16 The appellant accepts that the Court has power to review the judgment under Pt 40 r 9, Supreme Court Rules 1970 (NSW). It submits in the first instance that the practical result reached in the case by Meagher JA is no different than under the approach required by the construction given to the section in Leonard v Smith and Grljak v Trivan Pty Limited. However, appropriately, it has taken the alternative position that if the Court is of the view that the judgment as it stands may cause confusion in the courts below, the appellant does not oppose a variation of or addendum to the judgment.

17 For my part, I consider there has been error in the construction given to s 151Z(2) by Meagher JA and myself and accordingly, I consider that the judgment should be reviewed.

18 I should add at this point that the approach taken by Young AJA in his judgment did not require him to consider this construction point.

19 Finally before turning to the proper construction of s 151Z(2), it should be made clear that the respondent does not, on the application that the Court review its judgment, seek to review the question of whether the decision in Haines v Tempesta (1995) 37 NSWLR 24 applies to subsection 2.

Construction of Section 151Z(2)

20 Section 151Z is contained within Part 5 of the Workers Compensation Act 1987 (NSW). It provides

"151Z Recovery against both employer and stranger

(1) If the injury for which compensation is payable under this Act was caused under circumstances creating a liability in some person other than the worker's employer to pay damages in respect of the injury, the following provisions have effect:

(a) the worker may take proceedings both against that person to recover damages and against any person liable to pay compensation under this Act for payment of that compensation, but is not entitled to retain both damages and compensation,

...

(2) If, in respect of an injury to a worker for which compensation is payable under this Act:

(a) the worker takes or is entitled to take proceedings independently of this Act to recover damages from a person other than the worker's employer, and

(b) the worker also takes or is entitled to take proceedings independently of this Act to recover damages from that employer,

the following provisions have effect:

(c) the damages that may be recovered from the person by the worker in proceedings referred to in paragraph (a) are to be reduced by the amount by which the contribution which the person would (but for this Part) be entitled to recover from the employer as joint tortfeasor or otherwise exceeds the amount of contribution recoverable ..."

21 Part 5 restricts the entitlements of a worker to recover damages from an employer or others in circumstances where there are concurrent tortfeasors. The restrictions relate to the amount of damages recoverable and determines the proportion in which concurrent tortfeasors are to bear damages.

22 In Leonard v Smith Allen J analysed the operation of the section in the following way, considering it convenient to deal with para (d) first because to make the calculation required by (c) it is necessary to apply the figure derived from para (d). He said at 11:

"What par (d) does is to apply the percentage of the employer tortfeasor's share in the responsibility for the accident not to the amount of the damages payable to the plaintiff by the other tortfeasor but to what the worker damages would have been if the plaintiff sued the employer ... (`damages ... assessed in accordance with the provisions of Division 3' of Pt 5). So the financial burden upon the employer tortfeasor is calculated as being his fault proportion applied to the damages he would have had to pay the plaintiff if sued alone - not that fault proportion applied to damages to which the other tortfeasor is liable."

23 As to para (c) his Honour concluded at 12:

"This paragraph deals with the damages which the plaintiff worker may recover from the tortfeasor other than the employer tortfeasor in the proceedings which the plaintiff has taken for damages against that tortfeasor - be that tortfeasor an ordinary tortfeasor or a motor accident tortfeasor. Paragraph (c) provides for a reduction in the damages otherwise recoverable."

24 Cole J took the same approach to the construction of the section in Grljak v Trivan Pty Limited (except for one matter not presently relevant and which only arises in circumstances where different limitation periods apply in relation to the relevant causes of action). His Honour said at 13 -14:

"Section 151Z(2) is directed to determining the amount of common law damages which a third party who has been sued must pay to the plaintiff worker. It is not addressing the amount of common law damages payable by the employer, if sued. That is dealt with by Division 3 (section 151E - 151T). It is addressing a legislative requirement that in determining the amount of common law damages which a third party sued in respect of an injury must pay, regard must be had to the circumstance that workers compensation is payable under the Act, and further that regard is to be had additionally to any entitlement, whether exercised or not, to sue the employer for common law damages.

Against that background section 151Z(2)(c) provides that in the worker's action against the third party, common law damages which the worker otherwise would recover are to be reduced. The amount of the reduction is the excess of the contribution which the third party would, except for Part 5, be entitled to recover from the employer (whether as joint tortfeasor or otherwise) over the amount of the contribution recoverable from the employer.

Subsection (2)(d) then addresses the amount of the contribution which is recoverable from the employer, whether as a joint tortfeasor or otherwise. The amount entitled to be recovered is to be determined as if the whole of the worker's common law damages were assessed in accordance with the provisions of Division 3. Subsection (2)(d), in addressing the amount that the third party `is entitled to recover' from the employer, is not addressing the first integer in subsection (2)(c), namely, the amount of the contribution which the third party `would (but for this Part) be entitled to recover from the employer', whether as joint tortfeasor or otherwise. Accordingly, one must assess the amount of contribution which, absent Part 5, the third party would have been entitled to recover from the employer, and deduct from that sum the amount which is in fact recoverable upon the basis that the contribution recoverable is calculated by reference to damages assessed in accordance with Part 5, and in particular Division 3."

25 The reference by his Honour to Part 5 and "damages assessed in accordance with Part 5" is of course, a reference to the assessment of damages under the Act which, as explained previously, are limited in amount.

26 Senior counsel for the respondent, in his helpful submissions as to the operation of the section, sought to illustrate the operation of the section in the following terms:

"For practical purposes this can be illustrated in the present case by saying that given that damages at common law were assessed at $297,588.75, had they been calculated under the Act they must have been somewhat lower. That has not been done but for the sake of illustrating the correct operation of s 151Z(2) let it be assumed that damages under the Act come in at $250,000. Then for the sake of illustration let it be assumed that the Department of Education and Government Cleaning Service were each liable as to fifty per cent upon a proper apportionment of blame between them. Section 151Z(2) would work in this way:

(i) But for Part 5 of the Act, negligence having been established against each, the plaintiff would have recovered judgment against each under the ordinary common law in the sum of $297,588.75 but of course could only have enjoyed one satisfaction of the judgments. On the cross-claims between each there would have been judgment for each for fifty per cent of $297,588.75 viz judgment for each in the sum of $148,794.37.

(ii) By the combined effect of s 151Z(2)(c), (d) and the provisions of Division 3 as to the awarding of damages, the fund of damages from which contribution to the non-employer by the employer must be made would be recalculated, coming in at the assumed figure of $250,000. The non-employer would be entitled to judgment on its cross-claim to fifty per cent of that amount viz $125,000, not to judgment of $148,794.37.

(iii) Thus the two figures are exposed, namely what the contribution would have been but for Part 5 ($148,794.37) and what the contribution actually is ($125,000). Once those two figures are exposed the difference between them is $23,794.37. That is the figure by which, in the language of s 151Z(2)(c) the respondent's (plaintiff's) damages recoverable against the non-employer are to be reduced. It is `the amount by which the contribution which the (non-employer) would (but for this Part) be entitled to recover from the employer ... exceeds the amount of contribution recoverable'.

(iv) Thus the amount of $297,588.75 as damages assessed in accordance with the ordinary common law in favour of the respondent (plaintiff) against the Department of Education should be reduced by $23,794.37. Her damages against the Crown in right of the Department of Education should be assessed at $273,794.38."

27 This analysis is in accordance with the decisions in Leonard v Smith and Grljak v Trivan Pty Limited and is the approach which should be adopted in the assessment of damages in this case.

28 Accordingly, I propose the following orders:

(i) Order (ii) of the Court of 10 April 2001 that a new trial be ordered be varied so as to order a new trial limited to the question of damages, with the District Court to assess the measure of damages under the Workers Compensation Act 1987 and the measure of blame to be apportioned to the Crown in the right of the New South Wales Government Cleaning Services.

(ii) The respondent to have a certificate under the Suitors' Fund Act if so entitled.

29 YOUNG CJ in Eq: I maintain the view I presented in my reasons of 10 April 2001.

30 However, on the assumption that the views of the majority are correct, I agree with Beazley JA that in all the circumstances the previous reasons of the majority should be reviewed.

31 I concur in the orders proposed by her Honour.

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LAST UPDATED: 14/12/2001

that the claimant should have taken steps to remove the known danger presented by the particular rock, when the cost of doing so would have been relatively low. This was the case the claimant was required to meet.

50 The claimant argued that it could not be required to remove all known rocks constituting a known danger because the danger was relatively small and the cost of removing them relatively large in relation to the claimant's budget. The merits of this argument depended to a large extent on the number of rocks that were potentially dangerous, the extent to which each was dangerous, and the cost of removing them. There was, however, no evidence of these matters. In any event, the argument did not meet the opponent's case as described in the preceding paragraph.

51 There may be force in the proposition advanced on the claimant's behalf that it would be unreasonable to remove a particular rock which constitutes a known danger when the cost of removing the rock would be excessive and out of proportion to all other relevant circumstances. But, as I have indicated, that is not this case.

52 In the present case there was a paucity of evidence concerning the specific question whether the claimant could have afforded to expend the necessary money to remove the particular rock or to do the work necessary to increase the camber and correct the cross-fall. What evidence there was indicated that the cost of removing the rock was not high (and his Honour so found) and the cost of altering the road was absorbed in the claimant's budget. These matters are material in the light of the finding that some three to four weeks before the accident the claimant knew of the danger constituted by the rock. In these circumstances, none of the broader considerations discussed in Brodie v Singleton Shire Council is called into question.

53 In my view, the case is merely one of the claimant failing to take steps to remove a known danger, when, had it carried out appropriate maintenance practices, it would have done so without making significant inroads into its budgetary constraints. I do not see any point of principle arising.

54 I would dismiss the application for leave to appeal and order the claimant to pay the opponent's costs.

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LAST UPDATED: 13/12/2001