SS Family Pty Ltd v WorkCover Queensland

In this application for leave to appeal, an issue of potential significance to workers, employers and insurers concerning the proper construction of the Workers’ Compensation and Rehabilitation Act 2003 arose: does an insurer’s decision to allow an application for compensation by a person claiming to have been a worker who sustained an injury in the course of working for an employer preclude the insurer from asserting at some later time that the person was not a worker as a ground for denying that the alleged employer is entitled to an indemnity against legal liability for damages for the injury? The court held the answer to that question is “No”.

Sofronoff P and Fraser JA and Davis J

30 October 2018

In his application for compensation, the second respondent claimed that he had suffered an injury whilst working for the applicant. In making that claim, he failed to tick the box which would have identified him as a trustee at the time of the injury, (which, critically, would have meant that he did not meet the definition of “worker” under the Workers’ Compensation and Rehabilitation Act 2003). [8].

On the basis of the information supplied, WorkCover duly advised the second respondent that it had allowed his application for lump sum compensation under Ch 3. [9], [10]. Subsequently the second respondent pursued damages under Ch 5 of the Act and instigated proceedings against the applicant for personal injury for breach of duty in tort and contract. [11]. At that juncture, WorkCover disputed its obligation to indemnify the applicant in circumstances where the second respondent was not a “worker” at the material time given he performed his work under a contract of service with a trust of which he was in fact a trustee. [12].

Ultimately the applicant issued third party proceedings against WorkCover and sought to strike out allegations in its amended defence wherein it denied its obligation to indemnify the applicant against the second respondent’s claim. [13], [14]. The applicant unsuccessfully argued at first instance that due to WorkCover having accepted the second respondent’s application for compensation on the grounds that he was a “worker” who suffered “injury”; and hence paying the applicant benefits and so forth, upon the proper construction of the Act WorkCover was not left in a position to subsequently query that the second respondent was a “worker” in respect of whom the applicant was deserving of indemnity under the accident insurance. The primary judge disagreed with that construction of the Act and the application was dismissed. The applicant sought to appeal that order. [14].

In essence, relying primarily upon s 237 of the Act, the applicant posed the argument that once a plaintiff has “passed through the portal or gateway to seeking damages” in Ch 5 of the Act, it is not contestable that the plaintiff’s claim for damages concerns an injury sustained by a “worker” as defined. [22]. In considering the merits of the appeal and of that proposition, the court commented that:

1. there are significant differences between the insurer’s obligation to compensate a worker and its obligation to indemnify an employer against legal liability for damages claimed by a worker, both of which have a bearing upon the scope of liability under statutory accident insurance and the application of the definition of “worker” under the Act. [16];
2. the applicant’s argument was partly reliant upon a decision by an insurer to accept an application for compensation under s 134. That provision does not contain any indication that any determination deducible from such a decision that a person was a “worker” employed by an employer might exclude the application to s 8 of the definition of “worker” for the different purpose of deciding whether the statutory accident insurance indemnifies the alleged employer against a subsequent claim for damages by the person. [18];
3. section 168 enables an insurer to periodically “review a person’s entitlement to compensation” and following such a review, “terminate, suspend, decrease or increase an entitlement”, and s 170 enables an insurer to recover from a worker or other person the difference between the amount of a payment of compensation and the amount to which the worker or other person is entitled. Those provisions “seem difficult to reconcile with the proposition that an insurer’s decision to accept an application for compensation in any way alters the scope of the statutory accident insurance for compensation, much less for an alleged employer’s liability for damages”. [19];
4. the insurer’s decision under s 134(1) to accept a claim for compensation, or alternatively that a person is a “worker” under any of ss 237(1)(a)(ii), (c), (d) or (e), does not warrant not applying in s 8 the definition of “worker” to determine the scope of the indemnity available to the alleged employer under the statutory accident insurance against the claim for damages. [29];
5. it is not part of the purpose of s 237(1) to make an insurer’s decision under s 134(1) regarding entitlement to compensation binding upon the insurer in the separate context of the alleged employer’s entitlement to indemnity. To construe s 237(1) in the way suggested would not give effect to the statutory objects contained within s 5, and such a construction is not required by the statutory text. [30].

In view of the above, whilst permitting leave, the court dismissed the appeal and affirmed the primary judge’s construction of the Act. In disposing of the matter, these comprehensive observations were made by Fraser JA regarding the issue in dispute:

“The effect of the applicant’s construction is that an insurer is not permitted to deny indemnity against the liability of an employer to pay damages which is outside the scope of the statutory accident insurance on the ground that the claimant is not a “worker” as defined in the Act merely because the insurer earlier allowed a claim for compensation upon the basis of a mistaken determination that the applicant was a “worker” as defined in the Act. That construction of the Act is not reconcilable with the definition of “accident insurance” in s 8 read with the definitions of key terms, it does not find support in other provisions, none of which is directed to the scope of the accident insurance, and it is incompatible with the statutory purposes expressed in the Act.”  [34].

A de Jersey