Clout Industrial Pty Ltd (in Liquidation) v Baiada Poultry Pty Ltd [2004] NSWCA 89 (15 April 2004)

Last Updated: 16 April 2004

NEW SOUTH WALES COURT OF APPEAL

CITATION: CLOUT INDUSTRIAL PTY LTD (IN LIQUIDATION) V BAIADA POULTRY PTY LTD [2004] NSWCA 89 revised - 16/04/2004

FILE NUMBER(S):

40883/03

HEARING DATE(S): 11 March 2004

JUDGMENT DATE: 15/04/2004

PARTIES:

Clout Industrial Pty Ltd (In Liquidation) - Appellant

Baiada Poultry Pty Ltd - Respondent

JUDGMENT OF: Sheller JA Giles JA Hodgson JA

LOWER COURT JURISDICTION: District Court

LOWER COURT FILE NUMBER(S): 8239/01

LOWER COURT JUDICIAL OFFICER: Walmsley DCJ

COUNSEL:

G M Watson SC/P N Khandhar - Appellant

J A McIntyre SC - Respondent

SOLICITORS:

Sparke Helmore - Appellant

Henry Davis York - Respondent

CATCHWORDS:

Contribution between tortfeasors - between employer of injured worker and third party - amendments to Workers Compensation Act limit damages recoverable from employer - injury before amendments - proceedings brought against third party - claim for contribution from employer after amendments - and when worker's cause of action against employer statute barred - effect of amendments that no damages would be recoverable from employer - whether contribution pursuant to Law Reform (Miscellaneous Provisions) Act 1946 available - whether s151Z of Workers Compensation Act operated to preclude contribution - held yes and no.

LEGISLATION CITED:

DECISION:

Appeal dismisssed with costs.

JUDGMENT:

IN THE SUPREME COURT

OF NEW SOUTH WALES

COURT OF APPEAL

CA 40883/03

DC 8239/01

SHELLER JA

GILES JA

HODGSON JA

15 April 2004

CLOUT INDUSTRIAL PTY LTD (IN LIQUIDATION) v BAIADA POULTRY PTY LTD

Judgment

1 SHELLER JA: This is an appeal by a cross-defendant, Clout Industrial Pty Ltd (In Liquidation), (Clout) against the cross-claimant and defendant in the proceedings, Baiada Poultry Pty Ltd (Baiada). The plaintiff, Dharam Raj, was an employee of Clout when on 7 March 2000 he suffered an injury to his back and legs. This occurred while Mr Raj was performing his ordinary duties as a process worker and general hand at the premises of Baiada. Clout carried on the business of a labour hire company and provided the labour of Mr Raj to Baiada. Mr Raj was not employed by Baiada.

2 On 13 August 2001 Mr Raj began proceedings against Baiada claiming damages at common law for negligence. Baiada filed a defence to the claim and on 4 February 2003 cross-claimed against Clout for contribution pursuant to s5 of the Law Reform (Miscellaneous Provisions) Act 1946 (the Law Reform Act). The proceedings came on for hearing before Judge Walmsley SC on 10 September 2003. On that date, Mr Raj's claim against Baiada settled by consent and without admission of liability. The relevant terms of settlement were:

"1. Verdict and judgment for the plaintiff against the defendant in the sum of $380,000 inclusive of costs and workers compensation payments made.

1A. Defendant to pay plaintiff's costs agreed at $70,000."

3 Judge Walmsley went on to hear the cross-claim. The cross-claim had been complicated by the coming into force, pursuant to the Workers Compensation Legislation Further Amendment Act 2001 Schedule 1, of amendments to the Workers Compensation Act 1987, which took effect on 27 November 2001 ("the November amendments"). The November amendments severely curtailed the capacity of an employee to obtain damages from an employer but left untouched the capacity of the employee to obtain damages from a non-employer such as Baiada.

4 As a result of the November amendments, Division 3 "Modified Common Law Damages" in Part 5 "Common Law remedies" of the Workers Compensation Act applied "to an award of damages in respect of:

(a) an injury to a worker ...

being an injury caused by the negligence or other tort of the worker's employer."

5 In particular s151H in Division 3 provided:

"(1) No damages may be awarded unless the injury results in the death of the worker or in a degree of permanent impairment of the injured worker that is at least 15%."

6 However, in Schedule 6 "Savings, transitional and other provisions" of the Act, Part 18C "Provisions consequent on enactment of 2001 amending Acts", cl 9 "Amendments relating to common law damages" provided, so far as is relevant:

"(1) An amendment made by Schedule 1 to the Workers Compensation Legislation Further Amendment Act 2001 applies in respect of the recovery of damages after the commencement of the amendment (and so applies even if the injury concerned was received before the commencement of the amendment) but does not apply in respect of the recovery of damages if proceedings for their recovery were commenced in a court before the commencement of the amendment."

7 For the purposes of the cross-claim it was agreed between the parties thereto as follows:

"1. In the event the Court finds that the amendments to the Workers Compensation Act 1987 (`the 1987 Act') which took effect at 9am on 27 November 2001 do not prevent Baiada receiving contribution from Clout, the parties agree that Clout would be liable to pay contribution to Baiada in the sum of $100,000.

2. In the event that the Court finds that the 1987 Act in its form following the amendments which took effect at 9am on 27 November 2001, applies, it is agreed that:

(a) the plaintiff has not complied with the procedural requirements necessary before which he could commence proceedings against Clout; and

(b) in any event, the plaintiff would be unable to demonstrate a degree of permanent impairment of the plaintiff that is, at least 15 per cent impairment as required by section 151H."

8 On 11 September 2003, Judge Walmsley gave judgment on the cross-claim in favour of Baiada in the agreed amount. Clout now appeals from that decision claiming that the trial Judge erred in law in finding Clout liable to pay contribution to Baiada under s5 of the Law Reform Act.

9 So far as relevant s5, which is headed "Proceedings against and contribution between joint and several tortfeasors", provides:

"(1) Where damage is suffered by any person as a result of a tort (whether a crime or not):

(a) judgment recovered against any tort-feasor liable in respect of that damage shall not be a bar to an action against any other person who would, if sued, have been liable as a joint tort-feasor in respect of the same damage,

...

(c) any tort-feasor liable in respect of that damage may recover contribution from any other tort-feasor who is, or would if sued have been, liable in respect of the same damage, whether as a joint tort-feasor or otherwise, so, however, that no person shall be entitled to recover contribution under this section from any person entitled to be indemnified by that person in respect of the liability in respect of which the contribution is sought."

10 In their joint judgment in James Hardie & Coy Pty Ltd v Seltsam Pty Ltd [1998] HCA 78; (1998) 196 CLR 53, an appeal which raised an issue about the construction of s5 of the Law Reform Act, Gaudron and Gummow JJ, after noting that s5 was transcribed from the Law Reform (Married Women and Tortfeasors) Act 1935 (UK), remarked at 59-60:

"The legislation has become notorious for the conceptual and practical difficulties it engenders. It is an example of the need to keep measures of law reform under legislative review for defects and inadequacies exposed from time to time by the actual operation of such measures. Further, judicial decisions calculated to remove one anomaly by an apparent beneficent construction of the legislation have given rise to other anomalies. In some jurisdictions, including that where it originated, the legislation in question has been substantially amended or replaced. No so in New South Wales."

These proceedings provide yet another example of those difficulties.

11 In his reasons for judgment, Judge Walmsley referred to the decisions of the High Court in Brambles Constructions Pty Ltd v Helmers [1966] HCA 3; (1965) 114 CLR 213 and Unsworth v The Commissioner for Railways [1958] HCA 41; (1958) 101 CLR 73. His Honour said:

"Ultimately I am persuaded that the defendant is entitled to contribution. I cannot ignore the plain words of the Act. The cross-defendant is, as I see it, a tortfeasor who would, if sued between 7 March 2000 and 27 November 2001 have been liable in respect of the damage for which the defendant was, by its agreement, or is now, liable to the plaintiff."

His Honour referred to several cases decided in this Court, in Western Australia and in the United Kingdom and said:

"In the end, the resolution of the issue, I think, comes back to the plain words of the section of the Act as elucidated by Sir Garfield Barwick [in Brambles]. There was a time when the plaintiff could have sued his employer. Though that time has gone, it does not follow that the claim for contribution against the employer as a joint tortfeasor has also gone."

12 In Brambles Helmers was an employer which had suffered judgment on a claim by an employee for damages in respect of an injury to the employee caused by the employer's negligence. During the course of the proceedings, Helmers served a third party notice on Brambles alleging that Brambles by its tortious conduct had caused or contributed to the damage in respect of which the employer was being sued and claimed contribution pursuant to s5(1)(c) of the Law Reform Act. At the date when the employer was sued by the employee less than six years had elapsed since the occurrence of the damage in respect of which the employee sued. At the date when Helmers gave his its third party notice to Brambles, more than six years had elapsed from the date of the occurrence so that, had the employee sued Brambles at the date the third party notice was given or at any time subsequent thereto and Brambles had pleaded in that action the appropriate statute of limitations (the Limitation Act 1969 did not commence until 1 January 1971), Brambles would not have had judgment given against it in respect of the employee's claim.

13 Brambles stands for several propositions which are best stated by citing from the judgments.

· "....the claim of the tort-feasor for contribution is a cause of action apart from and independent of the cause of action which the injured party has or would have had against the tort-feasor from whom contribution is sought, and ... the failure of the injured party to take formal steps such as the giving of notice of action to the tort-feasor from whom contribution is sought is an irrelevant circumstance in the action between the one tort-feasor and the other tort-feasor for contribution." (per Barwick CJ at 218)

· "The effect of s5(1)(c), in my opinion, is that a tort-feasor who has come under an enforceable obligation to pay money for the damage caused by his tortious act may successfully recover contribution from another tort-feasor who has also come under an obligation to pay money in respect of the same damage and he may also recover contribution from any other tort-feasor who, not having been sued by the injured party, had he been sued, would have been found to have caused or contributed to the same damage by a tortious act. It seems to me that there is no need whatever to specify any point of time as at which the expression `if sued' should be applied. It can be read `if sued at any time' which, of course, does not import any temporal element into the section." (per Barwick CJ at 219)

· "It is established that a reference to the right of a tort-feasor `liable in respect of damage' to recover contribution, is to a person whose liability as a tort-feasor has been ascertained, ordinarily by judgment, perhaps in some cases in some other way. ..." (per Windeyer J at 221)

· "A person from whom contribution can be claimed is, as I read the Act, anyone who would had he been sued have been held liable for the same damage. The description, a tort-feasor who if sued would have been liable, denotes any person who would have been held liable in tort had he been sued in a competent court, by proper process, at a proper time and on evidence properly presented - that is anyone whose liability as a tort-feasor could have been ascertained in an action. I see no reason for limiting the denotation of the description by assuming that the words `if sued' refer to some particular point of time. It is enough that there was a time, before the liability of the defendant tort-feasor was actually ascertained, at which the plaintiff (the victim of the tort) could have successfully brought an action against some other person (the third party), either independently of or jointly with the defendant." (per Windeyer J at 221)

· "The result is then that if there was any time after the injured plaintiff's cause of action accrued when the third party, if he had been sued by that plaintiff, would have been held liable, he is a tort-feasor who may be required to make contribution to another tort-feasor against whom judgment has been given." (per Owen J at 225)

In summary, a tortfeasor, whose liability in respect of damage to an injured party has been ascertained, may recover contribution from any other tortfeasor liable in respect of the same damage, if, after the injured party's cause of action accrued, there was a time when the other tortfeasor, if it had been sued, would have been liable to the injured party. This is an independent cause of action.

14 McTiernan J was of the same opinion as the Chief Justice. Kitto J was of the view that the appeal should be dismissed for the reasons appearing in the judgments of Donovan J in Morgan v Ashmore, Benson, Pease & Co Ltd (1953) 1 WLR 418 and McNair J in Harvey v R G O'Dell Ltd; Galway (Third Party) [1958] 2 QB 78 at 108-110.

15 The trial Judge said that Clout was a tortfeasor who would, if sued between 7 March 2000 and 27 November 2001, have been liable in respect of the damage for which Baiada was liable to Mr Raj. That is not disputed. On its face, if it be right to say, as the High Court said in Brambles, that there was a time when, after Mr Raj's cause of action accrued, Clout, if Mr Raj had sued it, would have been held liable to him, that is sufficient. The decision appealed from was correct. It is agreed that if Mr Raj had sued Clout after the November amendments came into effect on 27 November 2002, he would have failed.

16 Mr Watson SC, who appeared for Clout, submitted that the right by either to recover contribution under s5(1)(c) did not accrue until Baiada's liability had been ascertained and that was not until Mr Raj's proceedings were settled on 10 September 2003. But if Brambles applies that does not matter. The critical starting point is the date when Mr Raj's cause of action accrued against the tortfeasors, namely the date of his injury.

17 In Unsworth v Commissioner for Railways a widow brought proceedings under Lord Campbell's Act both against the driver of a motor vehicle, in which her husband was killed when the vehicle collided at night with some unlighted railway trucks, and against the Queensland Commissioner for Railways. The Queensland Railways Act 1914 to 1955 limited the amount for which judgment could be entered against the Commissioner to £2,000. Each defendant delivered to the other a third party notice claiming contribution. The question was whether the monetary cap applied to the claim for contribution against the Commissioner. Fullagar J held that it did and said, at 87:

"But it is, in my opinion, clearly implicit in s5(c) [of the Queensland statutory equivalent to the Law Reform Act] that the amount of the liability to pay contribution cannot be greater than the amount of the primary liability. Contribution can only be recovered from one who `is, or would if sued have been, liable' to pay damages to the person injured. A person cannot be said to be so liable except to the extent to which damages can be recovered from him at law. In any case, I do not think that it could be lawfully held to be `just and equitable' within the meaning of s6 of The Law Reform Act that a person should be ordered to pay by way of contribution to another tortfeasor a larger amount than he could be compelled to pay to the person injured."

18 At 93 Taylor J said:

"The legislative provisions are difficult but on the whole I am inclined to the view that the commissioner's contentions on this point should be accepted. It is true that his liability to make a contribution does not depend upon the circumstance that he is liable to the same extent as the appellant; it is sufficient if he is `liable for the same damage'. It is true also that the language of s5(c) has been chosen without regard to the difficulty which arises in the present case. But the right to contribution is dependent upon the fact of liability and it seems reasonably clear that if the plaintiff had recovered judgment against the commissioner for the sum of £2,000 and the commissioner had thereupon paid that sum to her the appellant could not, thereafter, have succeeded in his claim to recover a contribution. In such circumstances it would then have been impossible for the appellant to contend that the commissioner was a person `who is, or would if sued have been, liable in respect of the same damage'. If this is so it would be anomalous to a degree to hold that he may now be required to contribute a sum in excess of that amount. This solution of the problem may be regarded as somewhat unsatisfactory but, if it is, it is because the language of the sub-section is obscure and incapable of ready application to the circumstances of cases such as the present. But, on the whole, the provision assumes the existence of a liability in the party from whom a contribution is sought and may fairly be taken to intend that, within the limits of that liability only, he may be called upon to make a contribution to the first tortfeasor."

19 In Unsworth the primary liability of the Commissioner at no time after the plaintiff's cause of action accrued exceeded £2,000. There was therefore no need in that decision for a determination as to whether a temporal element applied to the right to contribution. Hence Unsworth can be distinguished from Brambles, where no reference was made to Unsworth, and, from the present case.

20 Mr Watson submitted that because the primary liability of Clout after the November amendments was nil, the amount for which Clout was liable to contribute could be no higher. However this, it seems to me, ignores what was said in Brambles to the effect that there was no need to import into s5(1)(c) any temporal element and the requirement to read "if sued" as "if sued at any time". Clearly if Mr Raj had begun proceedings against Clout before 27 November 2001 he could have recovered damages against Clout.

21 As an alternative argument Mr Watson turned to the language of s151Z of the Workers Compensation Act which has remained substantially unchanged since it was introduced into the Act in 1989. That section, which is headed "Recovery against both employer and stranger" is divided into five subsections. No part of subsection (1) assists in resolution of the present dispute. Mr Watson did not rely on subs (1) but on subs (2).

22 Subsection (2) applies:

"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."

23 In Leonard v Smith (1992) 27 NSWLR 5, Allen J, after discussing the mischief to which this subsection was directed and giving examples of how it operated, said:

"The first thing to be noticed is that by par (a) and par (b) there are two conditions each of which must be fulfilled. The first is that `the worker takes [the words `or is entitled to take' were added by Schedule 1 [74] of the Workcover Legislation Amendment Act 1995] proceedings independently' of the Act `to recover damages from a person other than the worker's employer'. This simply means the taking of proceedings which do not rely in any way upon the Act. Ordinary proceedings for damages brought against an ordinary tortfeasor or motor accident tortfeasor, other than the employer, are such proceedings. The second condition is that `the worker also takes or is entitled to take proceedings independently of (the) Act to recover damages from that employer'. Ordinary proceedings for damages against an employer tortfeasor are such proceedings. There is some difficulty with the phrase `is entitled to take' such proceedings. It has been argued that this expression means that at the time the proceedings are commenced by the tortfeasor other than the employer the worker must have had the right to commence and maintain proceedings against his employer for damages. If because he had not taken some appropriate step to found such proceedings, or had lost through effluxion of time or otherwise the right to sue the employer then, so it has been argued, the condition would not be satisfied. This argument is reminiscent of the argument considered by the High Court in Brambles Constructions Pty Ltd v Helmers in respect of the similar expression in s5(1)(c) of the Law Reform (Miscellaneous Provisions) Act 1946. It is an argument unanimously rejected by the judges who constituted the court for that case and it is no more persuasive in the present case. The expression denotes a worker who by his conduct satisfies any condition precedent to being entitled to sue his employer and who sues at the appropriate time in an appropriate court. There is no temporal connotation linking his entitlement to take proceedings against his employer with the time at which he commences proceedings against the other tortfeasor."

24 The effect of what Allen J said is that Mr Raj should, for the purposes of the subsection, be treated as entitled to take proceedings independently of the Workers Compensation Act to recover damages from Clout even though he had not complied with the procedural requirements necessary before he could commence such proceedings; see also per Mahoney JA in Grljak v Trivan Pty Ltd (In liquidation) (1994) 35 NSWLR 82 at 88 in the passage cited below. That being so, the following provisions have effect under s151Z(2):

Paragraph (c) provides that the damages that the worker may recover from the non-employer in the independent proceedings are reduced by the amount by which the contribution which the non-employer (but for Part 5 of the Workers Compensation Act) would be entitled to recover from the employer as a joint tortfeasor or otherwise exceeds the amount of the contribution recoverable.

Paragraph (d) provides that the amount of the contribution the non-employer is entitled to recover from the employer as joint tortfeasor or otherwise is to be determined as if the whole of the damages were assessed in accordance with the provisions of Division 3 as to the award of damages. Section 151H is to be found in Division 3 of Part 5 of the Workers Compensation Act. If the November amendments applied, since the whole of the damages recoverable by Mr Raj from Baiada, assessed in accordance with Division 3, would be nil Baiada could recover nothing by way of contribution to the $380,000 damages it was ordered to pay Mr Raj; see Grljak v Trivan Pty Ltd at 89, in the passage cited below.

25 In Leonard v Smith at 11, Allen J said about paragraph (d):

"The reference to `joint tortfeasor' is, in the context of the statutory scheme, a reference to contribution between concurrent tortfeasors (termed `joint tortfeasors') as provided by s5 of the Law Reform (Miscellaneous Provisions) Act 1946. (It is not necessary, in this judgment, to deal with the complication of the addition of the words `or otherwise' in the expression `as a joint tortfeasor or otherwise'.) Paragraph (d) is directed to the ascertainment of the financial burden to be borne by the employer tortfeasor by way of contribution for his share of the responsibility for the accident having happened. But for par (d) the financial burden would be, in substance, his percentage of the fault applied to the damages payable by the other tortfeasor seeking the contribution. But worker damages are so much less than restitution damages or even motor accident damages (except where the employer is liable as the owner or driver of the motor vehicle) that the financial burden on the employer tortfeasor, through contribution, well might be more than what the plaintiff could have recovered as damages from the employer tortfeasor if he had sued him alone. It scarcely would make sense that the financial burden upon the employer tortfeasor is increased because someone else, for whom he is not vicariously liable, was also at fault. 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, that is, worker damages (`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."

26 Allen J went on to observe at 12 that in order to make the calculations required by para (c) one must employ the figure ascertained in accordance with para (d) which the other tortfeasor is entitled to recover from the employer. Of para (c) his Honour said:

"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. ...

To ascertain the extent of the reduction two figures form the basis for calculation of it. The first of those figures is `the contribution' which the other tortfeasor would be entitled, but for Pt 5 of the Act, which is the Part dealing with recovery of damages and containing Div 3 which limits the amount to which I have called worker damages, `to recover from the employer as a joint tortfeasor or otherwise'. That calculation simply consists of ascertaining the contribution which could be recovered (but for Pt 5) by the other tortfeasor from the employer tortfeasor as a percentage of the damages payable by the other tortfeasor to the plaintiff. Thus in the examples previously given where the employer tortfeasor was two thirds responsible for the accident the ordinary tortfeasor liable to pay $90,000 would recover $60,000 and the motor accident tortfeasor liable to pay $60,000 would recover $40,000. It is convenient to refer to that calculation as `ordinary contribution'.

The second calculation necessary to ascertain the amount to be deducted from the plaintiff's damages is `the amount of the contribution recoverable'. That amount is the amount determined as provided by par (d). The amount by which the ordinary contribution exceeds the contribution recoverable in accordance with par (d) is the amount to be deducted from the damages which the plaintiff can recover from the other tortfeasor. Thus in the example which I have taken of the ordinary tortfeasor, the ordinary contribution which he would have recovered would have been $60,000 (two thirds of $90,000). He is entitled to recover as contribution in accordance with par (d), $20,000 (being two thirds of the worker damages of $30,000). The difference is $40,000 ($60,000 less $20,000) and that is the amount which is deducted from the damages of $90,000 which otherwise would have been payable by the ordinary tortfeasor to the plaintiff. Likewise, in the example where the other tortfeasor was a motor accident tortfeasor so that the damages which he would pay to the plaintiff, apart from the provisions of the Workers Compensation Act 1987, would be $60,000, the ordinary contribution which he would be entitled to recover under the Law Reform (Miscellaneous Provisions) Act 1946 would be $40,000. Contribution recoverable in accordance with the par (d), however, would be two thirds of $30,000 namely $20,000. The difference is $20,000 ($40,000 less $20,000) and that is the amount which must be deducted from the damages of $60,000 which otherwise the worker would have recovered from the motor accident tortfeasor."

27 In Grljak v Trivan Pty Ltd (In liquidation) this Court considered the meaning of s151Z. Mr Grljak was employed by Gawa Pty Ltd, which was engaged by Trivan Pty Ltd in a building project. While working on that project, Mr Grljak was injured. At trial it was held that responsibility for the accident should be apportioned as to 90 per cent to Trivan and as to 10 per cent to Gawa. In one set of proceedings, Mr Grljak obtained a verdict in negligence against Trivan for $186,000. However, the trial Judge applied s151Z to reduce the damages by 10 per cent to $167,400. Subsequently, Trivan took proceedings against Gawa for contribution claiming that Gawa was responsible to the extent of 10 per cent or more and that it was entitled to contribution from Gawa accordingly. Mr Grljak appealed to this Court against the 10 per cent deduction of damages. The contribution proceedings were referred to this Court for decision in conjunction with the negligence proceedings.

28 At 87 Mahoney JA, with whose judgment Kirby P and Priestley JA agreed, rejected an argument on behalf of Mr Grljak that s151Z(2) did not apply. The second, and for present purposes relevant, arm of that submission his Honour dealt with at 88 in the following way:

"It was then submitted that Mr Grljak was not `entitled to take proceedings' to recover damages from Gawa because, as the events showed, the result of such a proceeding would be that no damages would be recovered. I do not think that this is the intended operation of par (b). The test which in this regard par (b) applies is `entitlement'. The entitlement is entitlement `to take proceedings' not `to recover damages'. It looks, I think, to the existence of what conventionally is described as a cause of action rather than to whether the enforcement of the cause of action will result in an award of damages. I am conscious that, in principle, a right of action in negligence or for breach of statutory duty involves the proof not merely of duty and breach of duty, but also of loss by the plaintiff. I do not think that it was the intention of the 1989 amendments to alter the nature of a proceeding of this kind at common law. The purpose and effect of the 1989 amendments was to change and, in many respects, to limit the damages which could be awarded and the way in which they were to be quantified. But that, in the relevant sense, does not go to the `entitlement' to bring the proceeding; it goes rather to the quantum of the damages which (if any) may be recoverable. Accordingly, the fact that, in the proceeding to recover damages, the assessments made by the trial judge are such that, in the event, no damages are awarded does not mean that, within par (b), the worker was not `entitled to take proceedings ... to recover damages from' the employer."

29 Next, Mahoney JA came to examine the operation of paras (c) and (d). He said at 88-89:

"The paragraphs provide for the reduction of the amount of damages which otherwise would be recoverable by a worker from a third party. The legislature has chosen to apply a formula to achieve that reduction. That formula involves, conceptually, three steps: the Court must first decide what is the amount of the contribution which the third party would (but for Div 3) be entitled to recover from the employer as a co-tortfeasor or otherwise at common law; it must then decide what is `the amount of the contribution recoverable' within par (c) and par (d); and it must then deduct the second from the first to determine the amount by which the worker's common law damages from the third party are to be reduced.

The operation of the first part of the formula is clear. The judge, acting under the Law Reform (Miscellaneous Provisions) Act 1965 concluded that as between Trivan and Gawa, as co-tortfeasors, Trivan would recover a 10 per cent contribution if sued for it. For present purposes that is not a contest. Accordingly, this amount is $18,600.

It is the second step in the formula upon which the argument of Mr Hughes QC has focused. This step requires that the Court determine `the amount of the contribution recoverable'. Paragraph (d) provides that that `is to be determined as if the whole of the damages were assessed in accordance with the provisions of Division 3 as to the award of damages'. This means, I think, that, in determining what is the contribution recoverable, the Court is to assume that the damages which the third party must pay are those damages which would have been paid `if the whole of the damages were assessed in accordance with the provisions of Division 3 as to the award of damages'. If, in this hypothetical exercise, the Court had calculated the damages recoverable in accordance with Div 3, the result would, as I have said, have been that no damages would have been payable: this would have been the result of the operation of the specific provisions of Div 3. Therefore, in determining what contribution Trivan can, under the 1965 Act, recover from Gawa, it is to be assumed that the damages payable by Trivan are reduced to nil. Accordingly, Trivan would not recover any sum by way of contribution from Gawa.

If the formula be applied in this way, then there is nothing to be deducted from $18,600 and accordingly it is the amount by which $18,600 `exceeds the amount of the contribution recoverable', viz, $18,600 which is to be deducted from the workers common law damages."

30 Mahoney JA rejected the submission that para (c) operated only where there was an amount of contribution "recoverable" and that where there was nothing to be paid there was no contribution "recoverable" and an argument based on what was said to be the policy behind the section. Mahoney JA came next to the contribution proceedings brought by Trivan against Gawa. He quoted, at 90, this part of the trial Judge's reasons for judgment:

"The 10 per cent monetary amount of that contribution has been deducted from the verdict which the plaintiff otherwise would have obtained against Trivan in consequence of section 151Z(2)(c). As the sum which Trivan must pay to the plaintiff pursuant to the judgment excludes the contributory element of damages which otherwise Trivan would have been obliged to pay to the plaintiff and in respect of which it could have sought recover from Gawa, the cross-claim based on contribution as a concurrent tortfeasor must fail'. (Emphasis added by Mahoney JA).

31 The submission was that the trial Judge, in declining to order contribution for this reason, acted on a wrong principle. Mahoney JA said at 90-91:

"In my opinion, the effect of par (d) of s151Z(2) is to provide the basis for calculation of the contribution which the third party in question may recover against a co-tortfeasor employer. Paragraph (d) is not a mere adjunct to par (c). It operates according to its terms and, by its terms, it provides that `the amount of the contribution ... is to be determined as if ...' the damages payable by the third party were assessed in accordance with Div 3. That, in my opinion, is a substantive provision limiting what otherwise would be the right under the Law Reform (Miscellaneous Provisions) Act 1965 to recover contribution from the employer. As, upon the basis provided by par (d), it is in effect deemed that no damages are recoverable against the third party, no contribution is to be ordered. I see no reason why par (d) should not, in this regard, be given its ordinary meaning.

I am inclined to think that this may have been the basis upon which the trial judge dealt with the matter. But however that be, the conclusion at which his Honour arrived is that which, in my opinion, is required by the statute. On this basis, I conclude that Trivan's claim for contribution against Gawa should fail."

32 From this judgment the following conclusions can be drawn:

1. Section 151Z(2)(b) speaks of an entitlement to take proceedings not to recover damages and looks at a cause of action rather than to whether it is enforceable in an award of damages.

2. The legislation in order to achieve the reduction of the amount of damages recoverable by a worker from a non-employer tortfeasor in determining the contribution which the non-employer can recover from the employer as a co-tortfeasor, must decide what "the amount of the contribution recoverable" is and deduct that amount from the amount of the contribution which the non-employer would be entitled to recover from the employer, to determine the amount by which the worker's common law damages from the non-employer are to be reduced.

3. If no damages would be recoverable by the non-employer, assessed in accordance with Division 3, the non-employer is not entitled to recover any contribution from the employer.

This means that if that method of calculation applies in this case, because of the November amendments, Baiada's cross-claim against Clout must fail.

33 The High Court upheld an appeal from the decision of the Court of Appeal on the basis that the Court of Appeal had failed to deal with two questions, which were referred back to the Court of Appeal (Grljak v Trivan Pty Ltd (1996) (unreported)) and were formulated as follows:

"1.1 Whether on the true construction of para 151Z(2)(c) and para 151Z(2)(d) of the Workers Compensation Act there should be any deduction from the damages for personal injury otherwise recoverable by a plaintiff from a defendant not being his employer where the plaintiff's employer, if sued by the plaintiff in respect of the same injury:

(a) would not have been liable by reason of the operation of s151G and 151H of the Act to pay any damages to the plaintiff, and

(b) was therefore not a tortfeasor who ... would if sued have been liable in respect of the same damage ...

within the meaning of s5(1)(c) of the Law Reform Act and thus not liable to make contribution under that section with respect to the plaintiff's damage.

1.2 Whether within the meaning of para 151Z(2)(b) of the Act the applicant was, on the facts found by the trial judge, entitled to take proceedings independently of the Act to recover damages from his employer."

34 As Handley JA pointed out in a judgment, with which Powell JA and I agreed, the second point was dealt with by Mahoney JA in a passage in 35 NSWLR 88, already quoted. Later in his judgment Handley JA said:

"The appellant's principal submission in para 1.1 was based on para(c) and para(d) of s151Z(2). Para (c) requires the difference between two amounts separately calculated to be ascertained and deducted from the damages otherwise recoverable from the third party tortfeasor. The first amount, which the paragraph contemplates will be the larger, is `the contribution which the person would (but for this Part) be entitled to recover from the employer'. The trial judge held that this was $18,600.

One of the appellant's submissions was directed to the second amount provided for in para(d) which is referred to in para(c) as `the amount of the contribution recoverable'. Because Division 3 operates to reduce the damages recoverable from the employer to nil it was said that the employer is under no liability to pay damages to the plaintiff (and) no contribution is recoverable from him because he is not a tortfeasor who `would, if sued, have been liable in respect of` the plaintiff's damage. It was further submitted that a nil amount could not be an amount `recoverable' for the purpose of para(c) because of the plain meaning of the words `the amount of the contribution recoverable'. In substance it was said that para (c) and para (d) only operated to reduce a plaintiffs damages in cases where the employer would have been liable if sued by the plaintiff.

...

The worker's submissions that the employer was not a tortfeasor, and that no contribution was recoverable from it, are contrary to the clear language of para(c) with its requirement that these questions be determined on the artificial hypothesis that Pt5 did not exist.

The remaining submission for the worker was that `the amount of the contribution recoverable' for the purposes of para(c), which is to be deducted from the contribution hypothetically assessed, cannot be nil because a nil amount cannot be recoverable. I reject that argument. If no amount is actually recoverable by way of contribution from the employer the full amount of the contribution hypothetically determined must be deducted from the damages. As the Court put to counsel for the worker, para(c) calls for the difference in the two amounts to be deducted from the worker's damages. If the first amount is $100, and the second $0, there is no difficulty in applying the formula and deducting $100.

The statutory scheme is clear and rational. Pt5 reduces the common law damages recoverable by a worker from his employer, but does not affect his rights against a third party tortfeasor who is solely responsible. Where the employer and the third party are concurrent tortfeasors, the worker is not to be entitled to recover more directly or indirectly from his employer than he could if the employer was solely responsible, but the nett burden on the other tortfeasor was not to be increased. No part of the total burden was to be transferred from the employer to the other tortfeasor. To achieve this purpose Parliament provided that the damages recoverable against the other tortfeasor are to be reduced to reflect the worker's reduced rights against the employer.

In my opinion para(c) and para(d) in their plain and ordinary meaning achieve this result. The scheme of s151Z and its practical operation in cases such as this, and in cases affected by the Motor Accidents Act, were lucidly explained by Allen J in Leonard v Smith. I agree with, and respectfully adopt, his Honour's reasons."

This second decision in Grljak v Trivan confirms what had been said by Mahoney JA and by Allen J in the earlier decisions.

35 In State of New South Wales v Kennelly [No 2] [2001] NSWCA 472, Beazley JA adopted what had been said by Senior Counsel for the respondent in his submissions as to the operation of s151Z(2) assuming that damages at common law were $297,588.75 and under the Workers Compensation Act $250,000:

"(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 s151Z(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."

36 The appellant submitted that s151Z(2) quantified the contribution recoverable under s5(1)(c) of the Law Reform Act and did so at the time the court was determining the amount of the contribution. On that approach the decision of the High Court in Brambles provided no guidance in determining how the amount of the contribution was to be assessed. It was acknowledged that the sum of $100,000, referred to in para (1) of the September 2003 agreement between the parties, was negotiated having regard to the application of s151Z(2) and its reference to Division 3 as in force before the November amendments.

37 The damages of $380,000 recovered by Mr Raj in the proceedings he took against Baiada had to be determined without regard to the November amendments. The November amendments did not apply in respect of the recovery of those damages because the proceedings were commenced in a court before the commencement of the amendment; Sch 6 Pt 18C cl 9. The reduction of the damages recoverable under s151Z(2)(c) must have been calculated as the excess of the amount of the contribution which Baiada would, but for Pt 5, be entitled to recover from Clout, over the amount of contribution recoverable under para (d). That calculation could only be done correctly on the basis that the November amendments, in particular the amendments to Division 3, did not apply. If the November amendments had been applied, the amount of the reduction would have been greater because the contribution which Baiada, but for Pt 5, would have been entitled to recover from the employer would have exceeded the amount of the contribution recoverable calculated in accordance with s151Z(2)(d), by a greater number.

38 As Mahoney JA observed in the passage I have quoted at para 28, paras (c) and (d) in s151Z(2) provide for the reduction of the amount of damages which otherwise would have been recoverable by a worker from a non-employer. If that object is to be achieved equitably, as one would suppose the legislature intended, it can only be achieved if what Mahoney JA described as the three steps in the calculation are all taken on the common assumption that either the November amendments do apply or, alternatively, they do not apply. To undertake the task in the way suggested by the appellant, that is to say, to determine the deduction from the damages recoverable by Mr Raj from Baiada on the basis that the November amendments did not apply but the determination of a contribution recoverable by Baiada from Clout on the basis that the November amendments did apply, would distort the calculation to the significant disadvantage of Baiada and not achieve the objects described by Handley JA in the passage I have quoted from his judgment in Grljak v Trivan Pty Ltd (1996). The worker's entitlement to recover from the employer either directly or indirectly was to be no greater than if the worker had sued the employer alone, but the net burden on the non-employer was not to be increased.

39 While the language may leave room for doubt, I am satisfied that the starting point in terms of the operation or effect of s151Z(2) is to limit in accordance with para (c) the amount of damages that may be recovered by the worker from the non-employer. That calculation in this case has to be done on the basis that the November amendments do not apply. That must mean non-application of the November amendments to all the ingredients of the calculation. One ingredient is the amount of the contribution that the non-employer is entitled to recover calculated under para (d). Accordingly, the appellant's reliance on the provisions of s151Z(2) as quantifying the amount of contribution recoverable under s5(1)(c) of the Law Reform Act, though it may be correct, does not assist it.

40 For the above reasons, I would dismiss the appeal with costs.

41 GILES JA: At common law an employee suffering a work-related injury at the hands of his employer and a third party as concurrent tortfeasors could recover damages both from the employer and from the third party. The employer and the third party had rights to contribution between them pursuant to s 5(1) of the Law Reform (Miscellaneous Provisions) Act 1946 ("the LR Act"), which relevantly provides -

"5 Proceedings against and contribution between joint and several tort-feasors

(1) Where damage is suffered by any person as a result of a tort (whether a crime or not):

(a) judgment recovered against any tort-feasor liable in respect of that damage shall not be a bar to an action against any other person who would, if sued, have been liable as a joint tort-feasor in respect of the same damage,

(b) ...

(c) any tort-feasor liable in respect of that damage may recover contribution from any other tort-feasor who is, or would if sued have been, liable in respect of the same damage, whether as a joint tort-feasor or otherwise, so, however, that no person shall be entitled to recover contribution under this section from any person entitled to be indemnified by that person in respect of the liability in respect of which the contribution is sought."

42 With the Workers Compensation Act 1987 ("the WC Act"), a worker entitled to workers' compensation benefits could not recover common law damages from his employer. With amendments made by the Workers Compensation (Benefits) Amendment Act 1989 ("the 1989 Act") the worker's common law rights against his employer were restored, but in modified form such that the worker was entitled to so-called modified common law damages. By the provisions added as Division 3 of Part 5 of the WC Act, the worker could recover damages from his employer only if his injury was substantial, and the amounts he could recover under various heads of damages were limited. With amendments made by the Workers Compensation Legislation Further Amendment Act 2001 ("the 2001 Act"), the worker's common law rights against his employer were further curtailed by changes to the provisions in Division 3 of Part 5. Damages for non-economic loss were not recoverable, and by s 151H the worker could not recover damages for economic loss unless his injury resulted in death or at least 15 per cent permanent impairment.

43 The 1989 Act also provided a scheme by which the damages recoverable from the third party and the contribution which the third party could obtain from the employer were regulated and in part made interdependent. So far as presently relevant, the added s 151Z(2) in Division 5 of the WC Act provided -

"151Z Recovery against both employer and stranger

(1) ...

(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 a joint tortfeasor or otherwise exceeds the amount of the contribution recoverable,

(d) the amount of the contribution that the person is entitled to recover from the employer as a joint tortfeasor or otherwise is to be determined as if the whole of the damages were assessed in accordance with provisions of Division 3 as to the award of damages,

... "

44 Section 151Z was not changed by the amendments made by with the 2001 Act.

45 The facts in this appeal are set out in the reasons of Sheller JA. The appeal is concerned with contribution between concurrent tortfeasors. The issue is whether a third party (Baiada) sued by a worker (Mr Raj) can obtain contribution from the worker's employer (Clout), when -

(a) Mr Raj was injured prior to the curtailment of his rights against Clout when the 2001 Act came into force;

(b) Baiada cross-claimed against Clout for contribution after the 2001 Act came into force;

(c) Mr Raj recovered damages from Baiada after the 2001 Act came into force;

(d) Mr Raj had not complied with the procedural requirements necessary before he could commence proceedings against Clout;

(e) Mr Raj was unable to demonstrate sufficient impairment to meet the s 151H threshold introduced in the 2001 Act necessary for recovery of damages from Clout; and

(f) Mr Raj's cause of action against Clout was statute barred at the time he obtained judgment against Baiada.

46 Clout made alternative submissions as to s 5(1)(c) of the LR Act and the operation of paras (c) and (d) of s 151Z(2) of the WC Act. There is an initial question whether paras (c) and (d) of s 151Z(2) had effect. If they did not have effect, in my opinion s 5(1)(c) of the LR Act applied so that Baiada could obtain contribution from Clout. If they did have effect, in my opinion their operation was such that Baiada could still obtain contribution from Clout. My reasons follow.

Whether paras (c) and (d) of s 151Z(2) had effect

47 It was common ground that compensation was payable to Mr Raj for his injury. The opening words of s 151Z(2) were satisfied.

48 Mr Raj took proceedings to recover damages from Baiada. Section 151Z(2)(a) was satisfied.

49 There had been non-compliance with the procedural requirements necessary before Mr Raj could commence proceedings against Clout, although the non-compliance was not specified. At the time Mr Raj obtained judgment against Baiada his cause of action against Clout was statute barred. Mr Raj was unable to demonstrate sufficient impairment to meet the s 151H threshold. For any of these reasons was s 151Z(2)(b), requiring that Mr Raj be entitled to take proceedings to recover damages from Clout, not satisfied?

50 The last matter is of no significance. Mr Raj was entitled to bring proceedings against Clout even if, because he could not meet the threshold, he would obtain no damages: Grljak v Trivan Pty Ltd (1994) 35 NSWLR 82 at 88.

51 As to the other matters, in Leonard v Smith (1992) 27 NSWLR 5 at 10-11 Allen J rejected the argument that a worker was not entitled to take proceedings to recover damages from his employer where he had "not taken some appropriate step to found such proceedings, or had lost through effluxion of time the right to sue the employer". His Honour said, with reference to Brambles Constructions Pty Ltd v Helmers [1966] HCA 3; (1966) 114 CLR 213, that there was no temporal connotation in the entitlement.

52 On analogous reasoning to that in Brambles Constructions Pty Ltd v Helmers, it was sufficient that Mr Raj was entitled at any time to take proceedings to recover damages from Clout. It did not matter that his cause of action had become statute barred. It is less clear that the non-compliance with procedural requirements was of no significance. Presumably the non-compliance was, or at least included, failure to give the notice required by s 151C of the WC Act, which provided that a worker "is not entitled to commence court proceedings for damages" against his employer unless six months have elapsed since notice of the injury concerned was given to the employer. The notion of entitlement is common to s 151C and s 151Z(2)(b). If the notice had not been given, at first sight Mr Raj was not entitled at any time at take proceedings to recover damages from Clout; perhaps, however, there was an inchoate future entitlement.

53 Baiada did not submit that Mr Raj was not entitled to take proceedings to recover damages from Clout. As I have said, the non-compliance was not specified. The entitlement was simply not argued. I prefer not to state a concluded view on whether paras (c) and (d) had effect. Hence the alternatives to which I now come.

The application of s 5(1)(c) of the LR Act

54 There had been non-compliance with the procedural requirements necessary before Mr Raj could commence proceedings against Clout. At the time Mr Raj obtained judgment against Baiada his cause of action against Clout was statute barred. Mr Raj was unable to demonstrate sufficient impairment to meet the s 151H threshold. By the time Baiada cross-claimed against Clout for contribution and by the time Mr Raj obtained judgment against Baiada the amendments made by the 2001 Act were in force. For any of these reasons, was Clout not a tortfeasor who "would if sued have been ... liable" in respect of the same damage as Baiada, and what were the consequences, if any, of the difference between the damages regimes pursuant to the 1989 Act and the 2001 Act?

55 It did not matter that Mr Raj had not complied with the procedural requirements, since the hypothesis of suing Clout included taking such procedural steps as were necessary in order to sue. On the authority of Brambles Constructions Pty Ltd v Helmers, it was sufficient that Mr Raj could have sued Clout at any time. It did not matter that his cause of action had become statute barred. Clout submitted that the right to contribution "crystallised" only when Mr Raj obtained judgment against Baiada, and that only then could Clout be sued because only then was there anything to which Clout could be required to contribute; so, it submitted, Clout was not a tortfeasor who would if sued have been liable because when it could be sued the cause of action against it was statute barred. The facts were materially the same in Brambles Constructions Pty Ltd v Helmers, which stands against the submission. The submission otherwise can not be accepted, because s 5(1)(c) speaks of suing, and by force of s 3 of the LR Act one tortfeasor can sue another claiming contribution before judgment is given against him (see Nickels v Parks (1949) SR 124 at 132-3).

56 Hypothetically suing Clout at any time left open whether the damages recoverable by Mr Raj from Clout would be under the 1989 damages regime or the 2001 damages regime. If they would be under the 2001 damages regime, Mr Raj would recover nothing. On one view, Clout would still have been liable if sued, because Mr Raj had a cause of action with the conventional elements of duty, breach and damage although damages could not be awarded. On another view, Clout would not have been liable if sued because damages could not be awarded. It is not necessary to decide, since hypothetically suing Clout included suing Clout after Mr Raj's injury and prior to the amendments made by the 2001 Act. As was said by Windeyer J in Brambles Constructions Pty Ltd v Helmers at 221 -

"It is enough that there was a time, before the liability of the defendant tortfeasor was actually ascertained, at which the plaintiff (the victim of the tort) could have successfully brought an action against some other person (the third party) either independently or jointly with the defendants."

57 See also per Owen J at 225 -

" ... if there was any time after the injured plaintiff's cause of action accrued when the third party, if he had been sued by the plaintiff would have been held liable, he is a tortfeasor who may be required to make contribution to another tortfeasor against whom judgment has been given."

58 The different damages regimes had no other relevant consequence. When s 5(1)(c) referred to damage, it spoke of injury, not of recoverable damages. It did not make the damages recoverable from the other tortfeasor a criterion of contribution. By s 5(2) of the LR Act, the contribution recoverable was "such amount as may be found by the court to be just and equitable having regard to the extent of [the other tortfeasor's] responsibility for the damage". That directed attention to "relative blameworthiness and the relevant causal potency of the negligence of each party" (Macquarie Pathology Services Pty Ltd v Sullivan (CA, 28 March1995, unreported per Clarke JA; see James Hardie & Co Pty Ltd v Roberts [1999] NSWCA 314; (1999) 47 NSWLR 425 and cases there referred to). The amount of the damages which would have been recovered from the other tortfeasor was immaterial, and the different damages regimes did not matter.

The operation of paras (c) and (d) of s 151Z(2)

59 Clout submitted that s 151Z(2)(d) operated "at the moment that the court deliberates on the question of contribution", when the 2001 damages regime was in force, so that no damages were recoverable by Mr Raj from Clout and Baiada was therefore not entitled to recover contribution from Clout.

60 The operation of s 151Z(2)(c) and (d) has relevantly been considered in Leonard v Smith; Grljak v Trivan Pty Ltd (1994); Grljak v Trivan Pty Ltd (CA, 19 April 1996, unreported) and State of New South Wales v Kennelly (No 2) [2001] NSWCA 472. The damages recoverable by the worker from the third party are to be reduced by an amount referable to the contribution the third party can obtain from the employer, being the difference between the contribution which the third party can obtain and the contribution the third party could have obtained but for Part 5 of the WC Act. It is necessary to determine the amounts of contribution even if no contribution claim is on foot. The scheme in this respect was explained in Grljak v Trivan Pty Ltd (1996) -

"Pt 5 reduces the common law damages recoverable by a worker from his employer, but does not affect his rights against a third party tortfeasor who is solely responsible. Where the employer and the third party are concurrent tortfeasors, the worker is not to be entitled to recover more directly or indirectly from his employer than he could if the employer was solely responsible, but the nett burden on the other tortfeasor was not to be increased. No part of the total burden was to be transferred from the employer to the other tortfeasor. To achieve this purpose Parliament provided that the damages recoverable against the other tortfeasor are to be reduced to reflect the worker's reduced rights against the employer."

61 In determining the amount of the contribution recoverable, it must be assumed that the damages the third party must pay are those damages which would have been paid if "the whole of the damages were assessed in accordance with provisions of Division 3 as to the award of damages": Grljak v Trivan Pty Ltd (1994) at 88-9. The command in this respect is substantive: as was said by Mahoney JA in Grljak v Trivan Pty Ltd (1994) at 91 -

"Paragraph (d) is not a mere adjunct to par (c). It operates according to its terms and, by its terms, it provides that `the amount of the contribution ... is to be determined as if ... the damages payable by the third party were assessed in accordance with Div 3.' That, in my opinion, is a substantive provision limiting what otherwise would be the right under the Law Reform (Miscellaneous Provisions) Act 1965 to recover contribution from the employer."

62 If paras (c) and (d) have effect, therefore, they prescribe in one respect how the contribution recoverable by the third party from the employer is to be ascertained. It is to be ascertained as if the damages payable by the third party to the worker were assessed in accordance with Division 3 of the WC Act. The scheme requires that the same provisions of Division 3 govern the damages recoverable by the worker from the third party and the damages recoverable by the worker from his employer, and the paragraphs implicitly prescribe under what damages regime the damages recoverable by the worker from his employer are to be ascertained. It would be incongruous if the damages recoverable by the worker from the third party were to be determined on the provisions of Division 3 as they stood at one date, but the damages recoverable by the worker from his employer were to be determined on the provisions of Division 3 as they stood at another date.

63 I do not think that s 151Z(2)(d) had the operation suggested by Clout. Baiada's entitlement to contribution still came from the LR Act. It was still sufficient if Mr Raj could have sued Clout at any time. If Clout were sued, its liability and the damages recoverable from it would be assessed in accordance with Division 3 of the WC Act. The effect of paras (c) and (d) was that, by stating that in determining contribution the damages recoverable from Baiada were to be assessed in accordance with Division 3 of the WC Act, the same damages regime as was used for that purpose was to be used for the hypothetical proceedings by Mr Raj against Clout.

64 What was the damages regime by which the damages recoverable from Baiada were assessed? The damages payable by Baiada were agreed, not determined, but the question can be answered. The effect of the transitional provisions upon the 2001 Act coming into force was that its amendments further curtailing the worker's common law rights did not apply if proceedings had already been commenced. Mr Raj had commenced his proceedings against Baiada. The damages recoverable from Baiada were assessed under the 1989 regime. Using the same damages regime for the hypothetical proceedings by Mr Raj against Clout, the curtailment by the 2001 Act was of no consequence and Clout would have been liable if sued.

The result

65 Clout was liable to pay contribution to Baiada, and in accordance with the parties' agreement the contribution was $100,000. The appeal should be dismissed with costs.

66 HODGSON JA: I agree with the orders proposed by Sheller JA, and generally with his reasons.

67 Mr. Watson SC for the appellant accepted that Brambles Constructions Pty. Ltd. v. Helmers [1966] HCA 3; (1965) 114 CLR 213 was authority for the proposition that s.5(1)(c) of the Law Reform (Miscellaneous Provisions) Act 1946 (the Law Reform Act) meant that a tort-feaser liable in respect of any damages could recover contribution from another tort-feaser who would if sued at any time have been liable in respect of that damage. However, he submitted, that did not mean that the quantum of the contribution was to be determined by selecting the time at which the liability of the other tort-feaser would have been greatest. Unsworth v. The Commissioner of Railways [1958] HCA 41; (1958) 101 CLR 73 was authority for the proposition that contribution under s.5(1)(c) could not exceed the maximum amount for which the other tort-feaser could have been liable if sued directly by the injured person; and Mr. Watson submitted that the quantum of contribution recoverable under s.5(1)(c) could not exceed any limit on the liability of the other tort-feaser applicable at the time when the right to contribution arose; that is, at the time when the tort-feaser seeking contribution was found liable (see Brambles 114 CLR at 221). In the present case, he submitted, the relevant limit was zero.

68 In my opinion, this submission should be rejected. The decision in Unsworth was based on the consideration that a tort-feaser's liability in respect of damage was liability only up to the extent that damages could be recovered from him or her; so that the question of quantum was inextricably linked to the question of liability. Thus if Unsworth applied to the present case to reduce contribution to zero, it would be because the appellant would not have been liable if sued; and that would be contrary to Brambles, because Brambles established that it was sufficient if the other tort-feaser would have been liable if sued at any time.

69 The parties have agreed on the quantum of contribution, so it is not necessary to consider whether varying limits to damages recoverable from the other tort-feaser at different times could have a bearing on what contribution is considered "just and equitable" within s.6 of the Law Reform Act: cf. Unsworth 101 CLR at 87.

70 Mr. Watson also relied on s.151Z(2) of the Workers' Compensation Act 1987, which so far as relevant provides as follows:

151Z Recovery against both employer and stranger

(1) ...

(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 a joint tortfeasor or otherwise exceeds the amount of the contribution recoverable,

(d) the amount of the contribution that the person is entitled to recover from the employer as a joint tortfeasor or otherwise is to be determined as if the whole of the damages were assessed in accordance with provisions of Division 3 as to the award of damages,

...

71 He submitted that s.151Z(2)(d) was worded in such a way as to indicate an intention that it apply as at the date of calculation of the damages, so that the contribution of the employer was to be determined as if the whole of the damages were assessed, as at the date of assessment of damages, in accordance with Division 3; that is, in this case, at nil.

72 Although the worker in this case had not complied with procedural requirements necessary before he could commence proceedings against his employer, in my view it is sufficient for the worker to be entitled, within s.151Z(2)(b), to take proceedings independently of this Act to recover damages from the employer, if the worker has a cause of action independently of the Act against the employer: cf Leonard v. Smith (1992) 27 NSWLR 5, Grljak v. Trivan Pty. Ltd. NSWCA 19/4/96, State of NSW v. Kennelly (No.2) [2001] NSWCA 472.

73 However, s.151Z(2) plainly proceeds on the assumption that s.5(1)(c) of the Law Reform Act is applicable, and then operates to modify its application in a limited way. In my opinion, in order that it operate consistently with s.5(1)(c), s.151Z(2)(b) is to be read as applying if the worker is at any time entitled to take proceedings independently of the Act, and s.151Z(2)(d) is to be read as involving an assessment made at whatever time is adopted for the purposes of s.5(1)(c).

74 Accordingly, in my opinion, s.151Z(2)(d) does not affect the result.

75 The appeal should be dismissed with costs.

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LAST UPDATED: 16/04/2004