Workers Compensation Nominal Insurer v Allmen Engineering Projects Pty Ltd

1. [1]

   These proceedings were commenced by Statement of Claim filed on 19 March 2018 claiming the statutory indemnity created by s 151Z(1)(d) Workers Compensation Act 1987 (NSW) (“WCA”). The amount claimed was $3,422,909.04, being the total of the payments made to, for or on behalf of Mr Taek Gyu Kim (“the worker”) under the provisions of WCA. The plaintiff, Workers Compensation Nominal Insurer (“WCNI”) claims interest under s 100 Civil Procedure Act 2005 (NSW) (“CPA”) and costs in addition to the claimed indemnity

2. [2]

   The worker received catastrophic injuries on 10 March 2014 in the course of his employment as a boilermaker. His services had been lent by his direct employer to the defendant, Allmen Engineering Projects Pty Ltd (Allmen), for him to work at Allmen’s premises at St Marys.

3. [3]

   In circumstances which are the subject of an agreed Statement of Facts (Exhibit A) set out below (at [11]), the plaintiff agreed with the worker’s tutor to accept the reduced sum of $2,965,562.76 in full satisfaction of its statutory rights to recover the total amount of compensation paid.

4. [4]

   It is an agreed fact (agreed fact 20, [11] below) that on 14 June 2018, Allmen paid that reduced sum of $2,965,562.76 to the WCNI “on behalf of Mr Kim”.

5. [5]

   The amount of interest claimed is $382,565.25. Allmen accepts that this is the maximum amount to which WCNI may be entitled for interest at the maximum rate prescribed by Rule 6.2(8) Uniform Civil Procedure Rules 2005 (NSW), calculated between the date of the first payment of compensation and Allmen’s reimbursement payment on 14 June 2018. That is to say, it accepts the accuracy of the arithematic. However, it strongly disputes that WCNI has any entitlement to interest as claimed at all (21.50 – 22.5T).

6. [6]

   In addition to the agreed facts other evidence was given by affidavit on which the deponents were not cross-examined. WCNI read two affidavits of its solicitor, Dominic Daniel Maait sworn on 21 September 2018 and 5 December 2018 respectively. Allmen read the affidavit of its solicitor Brian George Moroney, affirmed on 7 September 2018. There was no objection to any of this evidence.

Issues

1. [7]

   Exhibit A also sets out the questions, or issues, for determination as agreed by the parties. I will set them out now, rewording them slightly having regard to their refinement during the course of oral argument. As I explain below no real argument was directed to issues 2 and 3:

   1. (1)

      Whether the proceeding:

   2. (2)

      Whether the payment of $2,965,562.76 by Allmen to the WCNI is an admission of its liability to indemnify WCNI pursuant to s 151Z(1)(d) WCA;

   3. (3)

      Whether the said payment by Allmen “on behalf of the worker” (see agreed facts 19 and 20, [11] below) satisfies all entitlements (including for interest and costs) claimed by WCNI, and discharges all liability in Allmen, in the proceedings;

   4. (4)

      Whether WCNI is entitled to interest pursuant to s 100 CPA as claimed.

   5. (5)

      Whether WCNI is entitled to the costs of the proceedings.

Relevant legislation

1. [8]

   It is necessary to set out the terms of the legislation central to the resolution of the issues in the case. Section 151Z WCA is in the following terms:

2. [9]

   The relevant provisions of the Civil Procedure Act are the definition of “judgment” in s 3 CPA, and the terms of s 100 CPA. They are:

3. [10]

   Rule 6.12 UCPR makes the following provision:

The agreed facts

1. [11]

   The facts agreed by the parties are as follows:

Other evidence and factual findings

1. [12]

   From the correspondence annexed to the affidavit of Mr Maait of 21 September 2018, it is apparent that his legal practice, acting on behalf of the then scheme agent wrote to Allmen on 3 February 2015 enclosing a list of compensation payments and claiming a statutory indemnity under s 151Z(1)(d) WCA. The author suggested that the letter be forwarded to Allmen’s “Public Liability Insurer for response within 21 days or failing this, my client may commence recovery proceedings without further notice”. No response this demand being forthcoming, a further demand was made on 28 July 2015.

2. [13]

   On 17 March 2016, a partner in Mr Maait’s legal firm wrote to Mr Moroney’s legal practice stating he acted for the scheme agent who had paid compensation “the subject of a right of recovery”. He requested a copy of the pleadings from the worker’s damages proceedings. There was apparently a follow-up email of 1 August 2016. Mr Moroney responded to that communication on 3 August 2016 providing a copy of relevant pleadings and particulars and advising of the date when the matter was next before the Court for directions. On 10 October 2016, the partner sent the following email:

3. [14]

   On 7 April 2017, Mr Maait’s legal practice wrote to Mr Moroney’s legal practice seeking a copy of expert evidence exchanged and promising to provide a requested up-to-date list of payments. The expert evidence was sought in a follow-up email of 28 August 2017 and provided the same day. None of the correspondence from Mr Moroney’s legal practice acknowledged the demand for the statutory indemnity, nor did it indicate their client’s attitude to the demand.

4. [15]

   As the agreed facts state, these (recovery) proceedings were commenced on 19 March 2018. Mr Maait’s legal practice had evidently received notice that the worker’s damages proceedings were listed for hearing commencing on 3 April 2018. In a letter to Mr Moroney on 20 March 2018, Mr Maait explained that the proceedings had been commenced urgently because his client had “only become aware on Friday 19 March 2018” that a mediation was taking place in the worker’s damages proceedings. Mr Moroney had apparently, by email not in evidence, suggested that the 151Z proceedings could be heard together with the worker’s damages proceedings. To facilitate that Mr Maait sought copies of any up to date evidence and other material exchanged between the parties to the latter proceedings. An alternative suggestion about the conduct of the recovery proceedings was made by Mr Maait, but apparently not taken up by Mr Moroney.

5. [16]

   The matter was before Fagan J in his capacity as the civil list judge on 22 March 2018 when directions were made for the provision of evidence from the worker’s damages proceedings to WCNI. By letter dated 23 March 2018, an updated list of workers’ compensation payments was provided, although payments were continuing. A schedule providing a calculation of interest on the compensation payments up to 14 March 2018 was also provided and the agreement of Allmen was formally sought to the recovery proceedings and worker’s damages proceedings being heard together, commencing on 3 April 2018 with evidence in one, standing as evidence in the other.

6. [17]

   As the agreed facts indicate a settlement between the defendant and the worker’s tutor was approved by Garling J on 28 March 2018. By consent, his Honour ordered that the sum of $2,965,562.76 be paid to the relevant scheme agent. In his letter of 12 April 2018 to Mr Maait’s legal practice, Mr Moroney stated:

7. [18]

   In his letter of 14 June 2018 to Mr Maait’s legal practice forwarding the cheque, Mr Moroney stated, inter alia:

8. [19]

   On 15 June 2018, Mr Maait wrote to Mr Moroney’s legal practice, inter alia, in the following terms:

9. [20]

   On 22 August 2018, Mr Moroney wrote to Mr Maait’s legal firm including the following:

10. [21]

    Although from earlier correspondence, it may have appeared that the recovery agreement between WCNI and the worker’s representatives, and the consent orders between Allmen and the worker’s representatives were made under s 151Z(1)(b), rather than s 151Z(1)(d), the parties, by the correspondence extracted at [21] above, agreed that this was not the case. One may safely infer that this is because there could be no liability in the worker to repay WCNI under s 151Z(1)(b) until he had actually recovered the damages. The liability of the worker to make a repayment is a liability to repay compensation already received “out of those damages”: s 151Z(1)(b) (at [9] above). When Allmen paid the agreed recovery amount to WCNI by cheque dated 9 June 2018, the worker had obtained judgment, approved by the Court, in his damages proceedings but he had not recovered the damages. It may be inferred that the cheque for the net proceeds of the worker’s judgment of $10,557,074.79 was drawn at about the same time as the cheque reimbursing WCNI. As I have said, that cheque was forwarded to Mr Maait’s legal practice on 12 June 2018. The net amount due to the worker was paid into Court on 14 June 2018 (Exhibit D: Protective List Short Minutes of Order 21 June 2018) but it could not be said to have been received by the worker, or recovered by him, until the money was paid out to the appointed manager of the worker’s estate under order 16 made in the protective list on 21 June 2018. Accordingly, the payment made to WCNI on 12 June 2018 could not have been made under s 151Z(1)(b).

11. [22]

    At the same time, clearly, those representing the worker, including his tutor had an interest in agreeing, and if possible, as here, reducing, the amount to be deducted from the damages under the provisions of s 151Z(1). Only then could there be certainty about the net proceeds of any settlement of the worker’s damages proceedings. As I have emphasised at [9] above, and as Mr MJ Walsh SC for WCNI submitted, where s 151Z is set out, that by dint of s 151Z(1)(e(1), any payment made towards the s 151Z(1)(d) indemnity when, at the time of the payment, the worker has obtained judgment for damages from the person paying under the indemnity but judgment has not been satisfied, the payment, to the extent of its amount, “satisfies the judgment”. It seems to me that this is the most apposite provision to apply in determining what in substance, quite apart from the form of the arrangements the parties sought to employ, happened when their various agreements including the consent orders were given effect to by performance in June 2018.

12. [23]

    I find that Allmen’s payment to WCNI on 12 June 2018 was made under s 151Z(1)(d) WCA, WCNI having agreed to accept a reduced amount. Section 151Z(1)(e1), and not s 151Z(1)(b), governed the payment.

The arguments at the trial

1. [24]

   Although expressed as 5 issues (see [8] above). At the hearing the five issues were telescoped into 3. Issue 2 seems to have been subsumed in the agreement formed by the exchange of correspondence summarised at [21] above. Issue 5, the costs question, depends upon the outcome of the remaining issues.

2. [25]

   Those remaining issues were refined by Mr R Perla of Counsel, who appeared for Allmen, in his written submissions as follows:

The first issue

1. [26]

   Mr Walsh argued that given WCNI’s unanswered demands and the imminent date for the hearing of the worker’s damages proceedings, WCNI was justified in commencing proceedings to enforce its statutory right to indemnity under s 151Z(1)(d). Mr Perla’s point of demurrer was his reliance upon the plea of accord and satisfaction. So far as any broader question of abuse of process may arise, I am satisfied that there is no suggestion of any collateral purpose for the commencement of the proceedings by WCNI. In my judgment the proceedings were commenced for the purpose of pursuing and protecting WCNI’s statutory rights and were properly commenced on 19 March 2018. As I have said, and I emphasise, that previous demands have gone unanswered, or had been overlooked or ignored. WCNI’s forbearance from suit previously did not of itself disentitle it from taking legal action to protect, as I have said, its statutory rights.

2. [27]

   Turning then to the plea of accord and satisfaction. Mr Perla referred to the judgment of Pembroke J in Stroud v O’Connor [2016] NSWSC 629 and the authorities referred to therein. Mr Walsh referred in particular El-Mir & 1 Or v Risk [2005] NSWCA 260 at [48] and [54] and the authorities referred. Amongst the authorities referred to in those more recent cases is the judgment of Dixon J (as the Chief Justice then was) in McDermitt v Black (1940) 63 CLR 161; [1940] HCA 4 at pp 183 – 184. In that passage, his Honour said:

3. [28]

   Mr Perla argued that the recovery agreement with the worker’s representatives was a contract to accept a reduced amount from Allmen for the plaintiff’s cause of action pursuant to s 151Z(1)(d). The satisfaction provided by Allmen means that the Statement of Claim, according to Mr Perla’s argument, does not disclose a reasonable cause of action or amounts to an abuse of process. With respect, this is not correct. The contract was not made with Allmen and the doctrine of privity of contract precludes Allmen from setting up the recovery agreement in answer to WCNI’s claim.

4. [29]

   In any event, the recovery agreement was entered into after the proper commencement of the proceedings. At the time of their commencement there had been “no promise or contract”, or any “act or thing promised”, by Allmen, or the worker for that matter. In my judgment the plea does not run to defeat WCNI’s proceedings.

The second issue

1. [30]

   Mr Perla acknowledges that in previous cases, courts have awarded interest in proceedings brought to enforce the statutory indemnity where the defendant has after the commencement of the proceedings either paid the amount due under the indemnity or has discharged its liability under s 151Z(1)(d), or its predecessor s 64(1)(b) Workers’ Compensation Act 1926, by satisfying the worker’s judgment for damages: Howard Rotavator Pty Ltd v Wilson (1987) 8 NSWLR 498 at 501E; State of New South Wales (Government Cleaning Services) v Cooper (2000) 49 NSWLR 221; [2000] NSWCA 148 at [14] – [23]; Kwanchi Pty Ltd v Kocisis (1986) 40 NSWLR 270. Mr Perla submits however that those decisions depend upon the express language of s 83A District Court Act, which language is materially different from s 100 CPA.

2. [31]

   Section 83A(1A) was in the following terms before the enactment of the CPA:

3. [32]

   The language of s 100(2), set out in full at [9] above, is different. Subsection (2) provides, which I will repeat for convenience:

4. [33]

   Mr Perla argued decisions of authority demonstrate that the express terms of s 83A were important to the reasoning that supported the decisions referred to above at [31]. He referred, in particular, to the judgment of Clarke JA in Kwanchi Pty Ltd v Kocisis at 276F. His Honour said:

5. [34]

   Mr Walsh emphasised that s 100(2) CPA provides for interest where even the whole of the debt or damages has been paid after the commencement of proceedings but without judgment being given. Mr Walsh submitted that notwithstanding the change in the statutory language, there is no relevant difference in substance or principle. Learned Senior Counsel relied upon the decision of James J in Advertising Marketing Group Pty Ltd v Roads and Traffic Authority of NSW (unreported, Supreme court of New South Wales 31 March 2008, at [24] – [25]) applying the reasoning of Clarke JA Kwanchi to s 100 CPA. He also referred to the judgment of Hammerschlag J in Nine Network Australia Pty Ltd v Birketu Pty Ltd [2016] NSWSC 694.

6. [35]

   In Nine Network Australia Pty Ltd v Birketu a debtor paid the amount of a large debt one week after the commencement of proceedings and two days before the summons was returnable in the Commercial List. Hammerschlag J characterised the payment as a capitulation (at [8]). His Honour referred to s 100(2) CPA (at [10]) and said (at [12] ff):

7. [36]

   Mr Walsh also submits that, in alternative, if Allmen’s contentions as to the interpretation of s 100(2) CPA are correct, it is within the power of the Court to enter judgment for the plaintiff for the amount of $2,965,562.76 together with interest and costs, noting that the principal judgment has been satisfied.

8. [37]

   I am not satisfied that it’s necessary to accede to Mr Walsh’s alternative submission. Although the expression “may include interest in the amount for which judgment is given” may be read as meaning that interest is only allowable in the circumstances to which the sub-section applies as some lesser portion of a larger amount for which judgment is given, the language of subsection (2) read as whole makes clear that judgment may be given for interest without judgment being given for the whole or any part of the debt or damages which has been paid after the commencement of proceedings, but before judgment. Taking the text, context and purpose of the statute together, I am satisfied that the Court’s power is not restricted to including interest in a larger judgment which deals with the debt or damages for the recovery of which the proceedings were commenced. As the Advertising Marketing Group and Grima decisions demonstrate the reasoning of the Court of Appeal authorities in relation to s 83A(1A) continue to apply to s 100(2) CPA. And Hammerschlag J’s decision in Birketu is direct authority for the proposition that s 100(2) CPA supports a judgment for interest only.

9. [38]

   It should not be overlooked that CPA defines “judgment” as including any order for the payment of money.

The third issue

1. [39]

   Mr Perla submits that the Court should exercise its discretion to refuse an award of interest, or alternatively to award interest during reduced period only. The factors said to enliven the discretion were: the absence of the need to commence proceedings because the worker would be liable to repay the workers’ compensation received under s 151Z(1)(b) WCA upon recovery of damages; the sole purpose for the commencement of the proceedings was to enliven a claim for interest and costs; the delay in commencing proceedings weighs against the award as the worker’s proceedings were listed for hearing commencing 3 April 2018 only two weeks after the commencement of these proceedings; despite making demands as early as February 2015, WCNI had failed to commence proceedings which delay was “lacksadaisical”; and WCNI’s lawyers had been provided with all the material they required to make an assessment of Allmen’s liability by August 2017 at the latest.

2. [40]

   Mr Walsh argued that an award of pre-judgment interest is compensatory; that is to say to compensate the successful plaintiff for the practical loss it has suffered. Mr Walsh argued that the plaintiff’s forbearance from taking proceedings ought not be a factor which defeats its prima facie entitlement to an award of interest for this purpose. Allmen knew that WCNI was seeking to exercise its right to statutory indemnity. It had been provided with regular updates by way of the provision of schedules of payments, but had failed to answer or ignored WCNI’s demands. As Clarke JA put it in Kwanchi (at 276):

3. [41]

   I am not persuaded that the arguments put forward by Mr Perla are such as to justify depriving WCNI of its presumptive entitlement to compensatory interest under s 100 CPA. As I have said, I am persuaded that the proceedings were properly commenced in circumstances where Allmen had failed to respond to WCNI’s demands. There is nothing unjust in providing compensatory interest for the statutory workers’ compensation scheme being deprived of its money pending repayment of compensation paid to the worker by the tortfeasor as required by the statute (s 151Z(1)(d) WCA). For the same reasons I decline to exercise my discretion to reduce the period during which the interest runs.

4. [42]

   There is no reason to depart from the general rule that costs follow the event.

5. [43]

   My orders are:

   1. (1)

      Judgment for the plaintiff against the defendant in the sum of $382,565.25 in respect of interest;

   2. (2)

      The defendant to pay the plaintiff’s costs of the proceedings.