Elhawat v Workers Compensation Nominal Insurer

1. [1]

   WARD P: I agree with Ball JA.

2. [2]

   ADAMSON JA: I agree with Ball JA.

3. [3]

   BALL JA: The issue raised by this appeal is whether an employer which has failed to serve a pre-filing defence (defined below) to a claim for “work injury damages” within 42 days after receiving a pre-filing statement (also defined below) from the worker in accordance with the regime set out in Ch 7 Pt 6 of the Workplace Injury Management and Workers Compensation Act 1998 (NSW) (the 1998 Act) is nonetheless entitled in subsequent court proceedings to raise a defence of contributory negligence to the worker’s claim.

The legislation

1. [4]

   It is convenient to begin by describing the relevant legislative framework.

2. [5]

   The rights of a worker to claim common law damages against an employer in respect of a work-related injury are preserved in a modified form by the Workers Compensation Act 1987 (NSW) (the 1987 Act) and the 1998 Act.

3. [6]

   The 1987 Act sets out the circumstances in which such a claim may be brought and a worker’s entitlements in respect of such a claim: see Pt 5 of the 1987 Act and s 60 of the 1998 Act. Section 151N(1) of the 1987 Act states that “The common law and enacted law as to contributory negligence apply to awards of damages” subject to certain exceptions set out in s 151N, none of which is presently relevant. Chapter 7 Pt 6 of the 1998 Act sets out the procedures that must be followed before a claim for “work injury damages” may be brought. “Work injury damages” is defined in s 250 of the 1998 Act to include “damages recoverable from a worker’s employer in respect of … an injury to the worker caused by the negligence or other tort of the employer”.

4. [7]

   Sections 315 and 316 (contained in Ch 7 Pt 6) of the 1998 Act provide:

5. [8]

   Section 317 of the 1998 Act sets out what is to happen if the defendant alleges that the pre‑filing statement is defective. It is not relevant for present purposes.

6. [9]

   Section 318 of the 1998 Act provides:

7. [10]

   Section 318A of the 1998 Act provides:

8. [11]

   The broad effect of these provisions is to require a worker before commencing proceedings for common law damages to provide the employer with a document providing information in relation to his or her claim (the pre-filing statement) together with supporting evidence and to require an employer which wishes to contest liability for the claim wholly or partly to serve a document setting out its defence (the pre-filing defence) together with supporting evidence. The worker must then, as a condition precedent to commencing court proceedings, refer the claim to mediation, unless the employer has failed within 42 days of receiving the claim to provide a pre-filing defence. In that case, the worker may commence court proceedings immediately. However, the worker cannot advance a claim that is materially different from his or her pre-filing statement without the leave of the court and the employer is not entitled to file a defence to that claim that “wholly or partly disputes liability for the claim”.

9. [12]

   If the employer does serve a pre-filing defence, it must participate in the mediation, unless it wholly disputes liability. Proceedings cannot be commenced while the mediation is on foot. And if the mediation fails (or never occurs because the employer has wholly disputed liability) and the worker subsequently commences proceedings, the worker cannot depart materially from the pre-filing statement and the employer cannot depart materially from the pre-filing defence, in both cases without the leave of the court, which may only be given in limited circumstances.

10. [13]

    Consequently, absent leave from the court, the parties can only litigate issues that were the subject of a mediation. There are two exceptions. First, the employer is not required to mediate if it wholly denies liability. Second, the worker is not required to mediate if the employer fails to serve a pre-filing defence within 42 days, in which case the employer is not entitled to file a defence disputing liability wholly or in part. As Hoeben JA (with whom Campbell and Barrett JJA agreed) explained in Wilkinson v Perisher Blue Pty Ltd [2012] NSWCA 250 at [11], the purpose of this regime “is to ensure full disclosure of the position of the parties so that by mediation and otherwise the prospects of settlement can be fully explored”. His Honour might have added that the purpose of the regime is also to ensure that that full exploration occur before proceedings are commenced.

Background

1. [14]

   The factual background is not in dispute.

2. [15]

   On 6 June 2019, the applicant, Mr Zackaria Elhawat, was injured in the course of his employment with Plumberz Pty Ltd, when he fell from a roof while attending to a leak.

3. [16]

   On 29 June 2023, Mr Elhawat served a pre-filing statement on Plumberz and its workers compensation insurer. Plumberz did not serve a pre-filing defence within 42 days of receiving Mr Elhawat’s pre-filing statement, although it purported to do so on 7 February 2024.

4. [17]

   On 14 August 2023, Mr Elhawat commenced proceedings in the District Court by way of statement of claim. Mr Elhawat alleged that Plumberz owed him a non-delegable duty of care which it breached in a number of respects. At the same time, he filed a statement of particulars in accordance with Uniform Civil Procedure Rules 2005 (NSW) (UCPR) r 15.12. That rule which outlines the particulars and documents that a plaintiff claiming damages for personal injuries must serve on the defendant or the defendant’s insurer or solicitor.

5. [18]

   On 7 December 2023, Plumberz filed its defence. That defence raised several defences to the claim, including a defence of contributory negligence. On or about 20 February 2024, Plumberz served a proposed amended defence by which it:

   1. (1)

      took issue with the relief claimed insofar as Mr Elhawat sought interest on damages and costs (relying on provisions of the 1987 Act and the 1998 Act);

   2. (2)

      admitted that it owed Mr Elhawat a non-delegable duty of care and that Mr Elhawat sustained injuries as a result of the accident but took issue with “the description and scope of that duty as pleaded”;

   3. (3)

      did not admit several of the allegations in the statement of claim; and

   4. (4)

      continued to rely on a defence of contributory negligence.

6. [19]

   On 25 March 2024, Mr Elhawat filed a notice of motion, para 1 of which sought the following order:

7. [20]

   On 26 March 2024, Plumberz filed an amended notice of motion seeking leave to file its amended defence.

8. [21]

   Both motions came on for hearing before the primary judge, Olsson SC DCJ, on 23 July 2024. Her Honour delivered an oral judgment the following day. She held that Plumberz should be given leave to file its amended defence. Her Honour referred to the note to s 318A(2) of the 1998 Act, although ultimately her Honour does not appear to place a great deal of weight on that note. Instead, her Honour gave the following reasons for her conclusion:

9. [22]

   Accordingly, the primary judge relevantly made the following orders:

The appeal

1. [23]

   By a summons filed on 24 October 2024, Mr Elhawat seeks leave to appeal from those three orders. Leave to appeal is required since the decision the subject of the appeal is an interlocutory one: Supreme Court Act 1970 (NSW), s 101(2)(e). The appeal was heard concurrently with the application for leave to appeal.

2. [24]

   Following institution of the appeal Plumberz was deregistered. Accordingly, by consent an order was made substituting the Nominal Insurer as the respondent.

The reasoning of the primary judge

1. [25]

   As Mr Hooke SC, who appeared for Mr Elhawat, correctly observed, the question whether the respondent is entitled to raise a defence of contributory negligence turns on whether the pleading of that defence involves the respondent “wholly or partly [disputing] liability”. If it does, then the defendant is not entitled to file a defence that includes that pleading: s 318(1)(c) of the 1998 Act.

2. [26]

   It is not easy to follow the reasoning of the primary judge. What her Honour appears to be saying is that because liability depends on findings in relation to the defendant’s conduct, a pleading that only raises issues concerning the plaintiff’s conduct and that does not challenge the findings concerning the defendant’s conduct cannot involve disputing the liability of the defendant. It merely affects the amount the plaintiff is entitled to recover. That is said to fit with the purpose of Pt 6 of Ch 7 of the 1998 Act, which is to require the plaintiff to summarise the whole of his or her case.

3. [27]

   Mr King SC, who appeared for the respondent, sought to defend the primary judge’s reasoning in slightly different terms. According to him, the reference to “liability” in s 318 of the 1998 Act must be understood as a reference to the “primary” liability of the defendant. It should not be understood as a reference to the liability of the defendant taking into account all the defences available to the defendant. That conclusion was said to be strongly supported by the note to s 318A(2) of the 1998 Act, which states that, even if the defendant fails to serve a pre-filing defence within the 42 day period, a defence may be filed outside the 42 day period dealing with “such matters as quantum of damages or contributory negligence”. Mr King also argued that the construction for which Mr Elhawat contended was “Draconian” and submitted, in effect, that the court should apply a “beneficial” construction to avoid the injustice that would arise if the defendant/respondent was shut out from filing a defence alleging contributory negligence.

Consideration

1. [28]

   There are several difficulties with the conclusion of the primary judge and the respondent’s argument.

2. [29]

   First, it is not clear what is meant by “primary liability” in this context. The primary judge’s reasoning and the respondent’s argument appear to confuse liability with one of its elements, namely, negligence on the part of the defendant. That is not what “liability” in this context means.

3. [30]

   In the context of court proceedings, the distinction between issues of liability and issues concerning the quantum of damages is reasonably clear. Issues concerning liability are all those issues that need to be decided to determine whether the plaintiff is entitled to relief. Issues relating to quantum are those issues relevant to the calculation of the damages the plaintiff is entitled to recover assuming liability has been established. The distinction can have significant practical consequences, particularly if the defendant fails to file a defence. Under UCPR r 14.13(1) “A pleading must not claim an amount for unliquidated damages”. If a defendant fails to file a defence, the plaintiff is entitled to make an application for default judgment and for the unliquidated damages to be assessed: UCPR r 16.7(1). It would be open for the defendant to appear at the assessment of damages and contest quantum. Similarly, if the defendant made admissions in its defence in relation to issues of liability, it would be open to the plaintiff to obtain judgment under UCPR r 13.1 on those admissions, again with damages to be assessed. And again, the defendant would be entitled to appear on the assessment and contest quantum.

4. [31]

   It is natural to read s 318 of the 1998 Act as picking up those distinctions, since it is concerned with what may be pleaded in court proceedings. In limiting what may be pleaded in the defence, s 318(1)(c) must be taken as intending to give the plaintiff the rights that arise when liability is not in issue – that is, the right to apply for summary judgment with damages to be assessed. That right is significant because it relieves the plaintiff of the costs and delay of having to prove the facts relevant to the question of liability.

5. [32]

   In that context, the defence of contributory negligence is relevant to the question of liability and not simply the quantum of damages that the plaintiff is entitled to recover. Under UCPR r 14.16, “A defendant who relies on contributory negligence must plead specifically the contributory negligence”. However, if a defence of contributory negligence is pleaded, the plaintiff will not be able to obtain judgment with damages to be assessed. Plainly, the plaintiff will not be able to obtain judgment pursuant to UCPR r 16.7(1), since the defendant has filed a defence. But nor will it be possible for the plaintiff to obtain summary judgment under UCPR r 13.1, with damages to be assessed. That is because it is not possible to separate out the issue of the plaintiff’s contributory negligence from the issue of the defendant’s negligence. Both are relevant to the question of causation of the plaintiff’s loss, which is concerned with the defendant’s liability.

6. [33]

   Prior to 1965, contributory negligence provided a complete defence to a claim in negligence. In New South Wales, the defence was abolished by the Law Reform (Miscellaneous Provisions) Act 1965 (NSW) (the 1965 Act), which was subsequently amended in response to the High Court’s decision in Astley v Austrust Ltd (1999) 197 CLR 1; [1999] HCA 6, where the High Court held that the section also applied to a contractual obligation to take reasonable care. In its amended form, s 9 of the 1965 Act provides:

7. [34]

   “Wrong” is defined in s 8 to mean:

8. [35]

   Section 10 contains specific provisions relating to workers compensation. None is relevant for present purposes.

9. [36]

   The apportionment permitted by s 9 requires an assessment of both the relative culpability of the tortfeasors’ conduct and the relative importance of that conduct in causing the loss or damage: Podrebersek v Australian Iron & Steel Pty Ltd [1985] HCA 34; (1985) 59 ALR 529 at 532-533. As the High Court in that case explained:

10. [37]

    In an extreme case, it remains possible that in apportioning responsibility between the plaintiff and the defendant, the whole of the responsibility may be apportioned to the plaintiff. But even if that is not the case, it is still necessary to decide on the relative responsibility of the plaintiff and the defendant. That cannot be done without looking at the responsibility of them both. As Hope JA explained in Barisic v Devenport [1978] 2 NSWLR 111 at 131:

11. [38]

    Consequently, if the defendant raises a defence of contributory negligence, it makes no sense to enter judgment for the plaintiff with damages to be assessed, since there still needs to be a hearing on the extent to which the plaintiff and the defendant caused the loss. It is for that reason that where courts order that issues concerning liability be determined separately and in advance of issues concerning damages, the question of contributory negligence is dealt with as part of the liability hearing.

12. [39]

    But if it makes no sense to order default or summary judgment where the defendant pleads a defence of contributory negligence, it makes no sense to read s 318(1)(c) as permitting the defendant to raise a defence of that type. To do so would deprive the plaintiff of the very benefit that s 318(1)(c) was intended to confer – that is, the right to apply for summary judgment.

13. [40]

    The second difficulty with the interpretation of s 318(1)(c) adopted by the primary judge is that it gives no weight to the fact that the section prevents the defendant from filing a defence that wholly or partly disputes liability. It is natural to read the words “or partly” as including a defence of contributory negligence.

14. [41]

    The third difficulty is that the trial judge’s conclusion is inconsistent with the evident purpose of Ch 7 Pt 6 of the 1998 Act. Contrary to what the primary judge said, the purpose of the regime set out in that Part of the Act is not simply to require the plaintiff to summarise the whole of his or her case. Rather, as I have explained, the purpose is to require the parties, except in certain limited situations, to identify clearly the dispute between them and to submit that dispute to mediation as a pre-condition to commencing or defending court proceedings. It does that by requiring the parties to serve pre-filing statements identifying the issues in dispute, requiring the parties to attend a mediation in relation to those issues and preventing the parties from raising issues in court proceedings that were not raised in the mediation without leave of the court. But if the respondent is correct, it is entitled to raise any defence of contributory negligence in court proceedings without first having referred the issues raised by that defence to mediation. That would seriously undermine the purpose of the legislative regime. The relative responsibilities of the plaintiff and the defendant for the losses the plaintiff has suffered is precisely the type of issue that would be expected to be the subject of a mediation.

15. [42]

    As to Mr King’s point about the “Draconian” consequences that follow if the respondent is precluded from filing a defence raising contributory negligence, that point cannot displace the clear effect of s 318(1)(c) of the 1998 Act. Moreover, it is exaggerated. Those consequences follow for other defences that the defendant might raise. Moreover, Ch 7 Pt 6 of the 1998 Act places strict time limits on both the plaintiff and the defendant. In doing so, it reflects a policy choice on the part of the legislature which is designed to reduce delay and encourage settlement of disputes concerning claims for work injury damages by imposing a timetable on the parties which must be adhered to. As I have explained that policy would be undermined if the respondent’s construction of s 318(1)(c) were accepted.

16. [43]

    The note to s 318A(2) does not alter the position.

17. [44]

    Relying on the decision in One.Tel Ltd (in liq) v Rich [2005] NSWSC 226; (2005) 190 FLR 443, Mr King submitted that the note formed part of the 1998 Act. I do not accept that submission. That case concerned amendments to the Corporations Act 2001 (Cth) introduced by the Corporate Law Economic Reform Program (Audit Reform and Corporate Disclosure) Act 2004 (Cth). Some of the amendments involved the introduction of notes at the end of existing sections of the Act, including ss 1317E, 1317H, 1317HA and 1317J(2). The amendments were referred to in the Explanatory Memorandum. Commenting on the amendments, Bergin J said (at [52]):

18. [45]

    That conclusion rested on s 13(1) of the Acts Interpretation Act 1901 (Cth), which provides:

19. [46]

    In contrast, s 35(2) of the Interpretation Act 1987 (NSW) (Interpretation Act) relevantly provides that “a marginal note, footnote or endnote in an Act or instrument … shall be taken not to be part of the Act or instrument” (emphasis added). However, a note may still be taken into account in interpreting an Act under s 34 of the Interpretation Act, which relevantly provides:

20. [47]

    It has been suggested that in some cases it may be possible to argue that a provision in the form of a note that was included at the time the Act was passed should not properly be classified as a “footnote” or “endnote” so as to fall within the exclusion contained in s 35(2) of the Interpretation Act, with the result that the note does form part of the Act: see P Herzfeld and T Prince, Interpretation, (3rd ed, 2024, Thomson Reuters) at [5.140]. See also Farkas v R [2014] NSWCCA 141; (2014) 243 A Crim R 388 at [30] (Basten JA). But accepting that that is the case, the note to s 318A(2) does not fall into that category. The note purports to set out the effect of ss 316 and 318(1)(c), although it is a note to s 318A(2). It is an explanatory note included for the assistance of readers of Ch 7 Pt 6 of the 1998 Act. It does not purport to explain the section to which it is appended and therefore cannot be treated as part of that section. Nor can it be treated as part of s 318(1)(c), since it is not included in that section.

21. [48]

    Accepting that the note to s 318A(2) is part of the extrinsic material that can be taken into account in interpreting s 318 of the 1998 Act, in my opinion it is of limited assistance in this case for several reasons, and cannot displace the correct meaning of that section absent the note.

22. [49]

    First, the note is inconsistent with the relevant Explanatory Memorandum. Sections 318 and 318A (and the note contained therein) were introduced into the 1998 Act by the Workers Compensation Legislation Further Amendment Act 2001 No 94 (NSW). The Explanatory Memorandum for that Act (the EM) does not refer to the note or the phrase “wholly or partly”. It makes no mention of contributory negligence. It relevantly states:

23. [50]

    Second, the note is inconsistent with the note to s 316. The note to s 316 states that if the defendant fails to respond within 42 days “it is prevented from filing a defence … and the claimant can proceed to obtain summary judgment”. That note is consistent with para (g) of the EM quoted above and with the context and purpose of s 318 as explained earlier. But as I have explained, the plaintiff could not “proceed to obtain summary judgment” if the defendant were permitted to raise a defence of contributory negligence.

24. [51]

    Third, for the reasons already given, the drafter of the note appears to have misunderstood the distinction between questions of liability and quantum in the context of court proceedings and the significance of that distinction for the purposes of an application for summary judgment.

Conclusion and orders

1. [52]

   It follows that Mr Elhawat is correct in his submission that the respondent was prevented from raising a defence of contributory negligence because it failed to serve a pre-filing defence within 42 days of receiving the pre-filing statement. In those circumstances, leave to appeal should be granted and the appeal allowed. Consistently with what has been said, the defence should be struck out and judgment should be entered for the plaintiff with damages to be assessed.

2. [53]

   Accordingly, the orders of the Court should be:

   1. (1)

      Grant leave to appeal;

   2. (2)

      Direct that within seven days of today’s date the applicant file a notice of appeal substantially in the form of the Draft Notice of Appeal dated 23 October 2024;

   3. (3)

      Appeal allowed;

   4. (4)

      Set aside orders 1, 3 and 4 of the orders made by Olsson SC DCJ on 24 July 2024;

   5. (5)

      In lieu thereof, order that:

   6. (6)

      The respondent pay the applicant’s costs in this Court.