29 October 2014
This is an important decision of the Supreme Court answering, at least for the moment, the question of how the liability of WorkCover is impacted by an employer’s collateral agreement to refund a third party co-tortfeasor. Pursuant to the Workers Compensation and Rehabilitation Act 2003 (Qld) (“WCRA”), WorkCover must indemnify an employer for all damages it becomes legally liable to pay a worker for an injury suffered by an employee for which it is liable. WCRA, ss 8, 10, 383(1), 384. The issue is, however, whether the employer’s subsequent indemnification of a co-tortfeasor pursuant to a contractual arrangement, is classed as damages for the purposes of the WCRA. This is a question previously lacking a clear answer -- the law in this area having been in a state of some flux, with “[e]qually tenable but conflicting, even opposite, conclusions hav[ing] been reached.” .
The facts giving rise to this matter are relatively straightforward – the plaintiff, Byrne, an employee of People Resourcing (Qld) Pty Ltd (“PRQ”) was injured whilst working for Thiess John Holland (“TJH”), and brought a worker’s compensation claim against PRQ and TJH. PRQ and TJH had a contractual indemnity agreement whereby PRQ was to compensate TJH for any damages payable by TJH under a worker’s compensation judgment. Byrne’s claim ultimately settled -- TJH and PRQ admitted liability in equal amount. In satisfaction of this judgment, TJH and WorkCover, as PRQ’s insurer, each paid 50% of the agreed common law damages. Pursuant to their agreement, PRQ then indemnified TJH for its share of the damages, and subsequently sought this sum from WorkCover. WorkCover denied liability to indemnify PRQ beyond its agreed degree of contributory negligence (50%). WorkCover argued that “the only recoverable loss within the WCRA [was] PRQ’s 50% contribution to the injury as a co-tortfeasor” and that the balance, being “an outstanding liability to TJH (as a contract debtor) rather than [to Byrne]” was not covered. . In response PRQ argued that it was entitled to be indemnified for the entire sum “because its common law liability to its worker [Byrne] as a co-tortfeasor [was] for the “full measure” of the damages,” , and the fact that this sum was paid to TJH, rather than Byrne, did not transform its liability from one for damages for injury, to one for the discharge of a debt.
In addressing this issue, Chief Justice Carmody initially looked to a line of analogous cases emanating from the New South Wales Court of Appeal. See -; Nigel Watts Fashion Agencies v GIO General Insurance (“Nigel Watts”); Multiplex Construction v Irving and Ors (“Multiplex”); Gordian Runoff v Heyday Group (“Gordian Runoff”). These cases would suggest that “notwithstanding the plaintiff worker’s formal enforcement rights against all co-defendants, the employer’s contractual obligation to indemnify the non-employer co-tortfeasor was a form of liability and loss outside the scope of the policy.” , see also -. PRQ, however, drew the Court’s attention to the High Court’s obiter statements in State Government Insurance Office (Queensland) v Brisbane Stevedoring Pty Ltd (“Brisbane Stevedoring”) – not followed by the New South Wales Court of Appeal in Nigel Watts, Multiplex or Gordian Runoff – that an “employer’s inability to reduce its own loss by calling on the co-tortfeasor for contribution (because of its contractual indemnity obligation) did not change the legal character of its liability or loss.” . Relying upon this, PRQ argued that its “legal liability to pay damages . . . including any indemnity due to TJH, is a liability for which it had become liable in damages to the worker for injury and, therefore, within the WorkCover policy. . Though the policy applied in Brisbane Stevedoring used different language – the employer’s legal liability in Brisbane Stevedoring was to pay damages “in respect of” the worker’s injury, rather than, as in the WCRA to pay damages “to” a worker “for” injury suffered in the course of employment – his Honour concluded that this was not a material difference which would alter the interpretation of the WCRA. , see also - . This conclusion was buttressed by reference to the purpose of the WCRA, being a regime expressly created to protect workers against the possibility that their workplace injury would go uncompensated because their employer was unable to pay. . Chief Justice Carmody concluded that the only means of ensuring this legislative purpose was met was to “determine the coverage of the statutory policy in line with Brisbane Stevedoring,” , his Honour also noting that there was “no textual or contextual support” for the narrower construction proposed by WorkCover. . Chief Justice Carmody concluded that he was bound by the High Court’s decision in Brisbane Stevedoring and thus, for the aforementioned reasons, ordered WorkCover indemnify PRQ for its legal liability to repay TJH.