Time-limitations in s151Z recovery claims

Legal Directions

United Airlines Inc v Sercel Australia Pty Ltd [2012] NSWCA 24

Background

In 2005, a NSW worker sustained injuries on a United Airlines’ aircraft in Texas, USA, in which he was travelling in the course of his employment. He made no claim against United Airlines. However, Sercel (the worker’s employer) made workers compensation payments to him.

In 2009, Sercel commenced proceedings against United Airlines seeking indemnity in respect of the workers compensation payments made to the worker pursuant to s151Z of the Workers Compensation Act 1987 (NSW) (‘WCA’).

United Airlines denied indemnity on the basis that the worker’s right to damages as well as Sercel’s right to indemnity were statute barred by s34 of the Civil Aviation (Carrier’s Liability) Act 1959 (Cth), the Act which incorporates the relevant international treaties in Australia (‘CAA’). That section provides that ‘the right of a person to damages’ is extinguished if such person’s action is not brought by within two years.

The trial judge rejected United Airlines’ argument and United Airlines appealed. The appeal was dismissed.

Sercel’s right to indemnity

Allsop P gave the leading judgment and confirmed Sercel’s rights under s151z as follows:

  • Sercel’s cause of action is one for a statutory indemnity, not for damages in tort
  • United Airlines’ liability to the worker is to be assessed at the time of the injuries, regardless of whether the proceedings were taken within any limitation period
  • The relevant limitation period is six years which runs from each payment of compensation
  • Each payment gives rise to a new cause of action
  • Compensation is payable in respect of employment that is connected with NSW. The location of the injuries is irrelevant as long as the worker’s employment is connected with NSW
  • The recovery of such payments is permitted in accordance with the NSW law, i.e. the WCA.

Does the two year limitation of the CAA apply to workers compensation recovery rights?

In addition to the two year limitation period found in s34, the CAA provides in s37 (and in s14) that the Act does not exclude the carrier’s liability to indemnify an employer in respect of workers compensation payments made by that employer.

Allsop P looked at the history behind s37 and noted that the section does not deal with ‘an action for damages’ or ‘liability for the injury’ of a passenger. Rather, s37 deals with ‘the liability to pay’ workers compensation payments, the existence of which was conditioned on the carrier’s liability in respect of the passenger’s injury.

His Honour also looked at the organic interaction between different provisions of the CAA and found s37 would be of ‘limited utility’ if the two year limitation of s34 was to apply to s37. Moreover, applying the two year limitation in s34 to the right of indemnity would produce an ‘unjust and capricious’ result as such right of indemnity does not accrue until payment of the compensation and often payments would post-date the injury beyond the two year limitation period.

Thus, His Honour concluded that s37 operates in its terms to protect the employer’s rights against the carrier and confirmed such rights were not a right to damages as in s34. Otherwise, s37 (and the relevant international treaty) could have simply said the recovery actions contemplated therein were to be taken to be actions for damages contemplated in s34.Therefore, the right of indemnity in s37 was not subject to the two year time limitation in s34.

Handley AJA added Allsop P’s reasoning was consistent with decisions in various overseas case involving claims for indemnity between carriers.

Comment

The decision confirms that the two year limitation period does not apply to recovery claims in respect of workers compensation payments involving injuries which are governed by the CAA. Although such claims are rare, the decision reminds employers and their insurers that s151Z claims are grounded upon a statutory indemnity rather than a claim for damages in tort, consistent with the decision in Westpac Banking Corporation v Tomassian (1993) 32 NSWLR 207 and a number of subsequent decisions.

Authored by David Ro, Lawyer, Sydney.


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