Negligence held to extinguish employer’s s151Z recovery
January 4, 2018
South West Helicopters Pty Ltd v Stephenson  NSWCA 312
The decision principally concerned the statutory interpretation and operation of the Civil Aviation (Carriers’ Liability) Act 1959 (Cth) and Civil Aviation (Carriers’ Liability) Act 1967 (NSW) and the operation of s151Z of the Workers Compensation Act 1987 (NSW) (the 1987 Act).
This article will consider the decision relevant to the operation of s151Z of the Workers Compensation Act 1987 only.
In February 2006 the Parkes Shire Council (the Council) engaged South West Helicopters Pty Ltd (Helicopters) to provide an aircraft and pilot for the purposes of conducting an aerial survey of noxious weeds in the areas south and east of Parkes. Two employees of the Council accompanied the pilot to undertake the survey. While conducting the survey the helicopter struck a power line owned by Essential Energy and crashed killing all three occupants.
The dependants of the Council’s employees claimed and received payment of death benefits pursuant to s25 of the 1987 Act which payments were made by the Council’s worker’s compensation insurer.
In 2009 the widow of one of the Council’s employees, Mr Stephenson, (who has received benefits under s25 of the 1987 Act) commenced proceedings against Helicopters and the Council alleging each was negligent in causing Mr Stephenson’s death. She claimed damages for nervous shock and pursuant to the Compensation to Relatives Act 1897 (NSW).
The Council commenced proceedings against Helicopters under s151Z of the 1987 Act seeking recovery of the benefits paid under s25 of the 1987 Act.
The trial judge found that both Helicopters and the Council were negligent in causing Mr Stephenson’s death and between them apportioned 20% of the liability to the Council and 80% to Helicopters.
On the s151Z point, the trial judge held that the Council was entitled to recover 80% of its workers compensation payments from Helicopters.
The Council paid and the plaintiff accepted the Council’s payment of the judgment.
Helicopters appealed asserting that the trial judge erred in the apportionment and in the construction of s151Z in allowing the Council’s claim for recovery of the worker’s compensation payments at all.
The Court of Appeal upheld Helicopter’s appeal on apportionment finding that both Helicopters and the Council were negligent and that the appropriate apportionment was one-third to the Council and two thirds to Helicopters.
On the s151Z point Helicopters argued that in order to establish an entitlement to a recovery the Council was required to satisfy the thresholds prescribed by either s151Z(1) and/or s151Z(2) of the 1987 Act and, in the circumstances of this case did not.
S151Z(1)(d) is the operative provision entitling an employer to obtain indemnity in respect of worker’s compensation payments from a negligent third party to the extent of the damages appropriately awarded against the third party. An issue arose as to whether that provision entitled an employer which was itself negligent to obtain indemnity for worker’s compensation payments at all.
Helicopters argued that the High Court decision of Public Transport Commission of NSW v J Murray-More (NSW) Pty Ltd (1975) 132 CLR 336 in relation to s64(1)(b) of the Workers Compensation Act 1926, (the equivalent provision to s151Z) that s151Z did not confer a right of indemnity in the employer in circumstances where the employer was itself negligent remained good law and applied in the circumstances of s151Z and this claim.
The Council argued that the statement in the Court of Appeal decision of J Blackwood & Son Ltd v Skilled Engineering Ltd that the ‘prima facie right of the employer under s151Z(1)(d) is one that the employer has whether or not the employer is itself a tortfeasor’ was the appropriate construction and provided the correct purposive approach.
Basten JA, who wrote the judgment with which Payne and Leeming JJA agreed, held that the statement in J Blackwood was wrong and not a necessary part of the reasoning of the Court of Appeal in that decision. Basten JA held that an employer who is itself a tortfeasor can only recover compensation payments pursuant to s151Z(1)(d) provided the employer can bring itself within the terms of s151Z(2)(e).
S151(2)(e) provides that an employer can obtain a partial indemnity from a negligent third party which is limited to the portion of compensation benefits paid in excess of the employer’s liability in negligence for damages but only if the worker takes or is entitled to take proceedings both against a negligent third party and the employer in negligence to recover damages and either does not take proceedings against that employer or, if those proceedings are taken, does not accept satisfaction of a judgment against the employer.
The plaintiff commenced proceedings against the employer Council, obtained judgment and accepted satisfaction of that judgment. Hence, the Court of Appeal held that the Council could not rely upon s151Z(2)(e).
The Court of Appeal upheld Helicopter’s appeal on the s151Z point and quashed the judgment in favour of the Council for recovery. In doing so the Court noted that the Council’s entitlement to a defence to the plaintiff’s claim arising from the worker’s compensation payments made (by operation of s151A of the 1987 Act) was not affected by the absence of an entitlement to an indemnity for the quantum of the payments made above the judgment figure payable by the Council from Helicopters. S151A generally permits an employer only to deduct weekly payments from any award of damages award. It is not entitled to deduct payments made for medical expenses nor for lump sum impairments (although the permissible deductions are broader in claims for damages) under the Law Reform (Miscellaneous Provisions) Act 1944 (actions to the benefit of the estate of a deceased worker), Compensation to Relatives Act 1897, and motor accident damage claims against the employer.
The decision of the Court of Appeal is at odds with a longstanding understanding of the operation of s151Z(2) in conferring an entitlement to an employer to obtain recovery and indemnity from a negligent third party in circumstances where it itself is also negligent.
The effect of the Court of Appeal decision is such that it will limit workers compensation insurers’ ability to pursue recovery claims pursuant to s151Z in circumstances where the employer is also negligent.
Accordingly, where a worker has sustained an injury as a consequence of the negligence of a third party and of an employer, the employer will only be entitled to obtain a partial recovery by operation of s151Z(2)(e) in circumstances being where the worker has not commenced proceedings against the employer for damages or does not accept satisfaction of a judgment for damages against the employer.
Otherwise the employer will be left with only obtaining a reimbursement of benefits from the plaintiff paid from the portion of the damages for which it is liable as permitted by s151A of the 1987 Act (in effect a defence to the extent of the weekly benefits paid in many cases).
The absence of the employer having an entitlement to recover payments of medical expenses or lump sum impairment from a negligent third party is arguably permitting double compensation in circumstances where a worker can recover damages for non-economic loss and out-of-pocket expenses from a negligent third party and at the same time retain the benefit of medical expenses and lump sum payments for whole person impairment paid to the worker by the employer. A question however arises as to whether the interrelationship of the legislation and the common law is intended to permit that to occur.
The Council is currently considering seeking leave to appeal.
Authored by Lionel Gardner, Partner and David Ro, Senior Associate, Sydney.
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