Assessing Damages Under Section 151Z: An Interaction of Schemes

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1 Assessing Damages Under Section 151Z: An Interaction of Schemes Andrew Parker Barrister Henry Parkes Chambers Ty Hickey Barrister State Chambers 1

2 Calculating damages under s 151Z(2) of the Workers Compensation Act Introduction 1. The assessment of damages involving negligent employers and third parties 1 is an arbitrary yet interesting process. Whilst it is quite common for workers to be injured due to the negligence of an employer and a third party, it is often the case that employers are not sued at common law; or, if they are, the injured worker and employer are united in defending the actions of the employer. 2. It is in those cases where injured workers claim that the third party s negligence is greater than that of his or her employer.the reason for this is simple. The assessment of damages in such matters is determined through s 151Z(2) of the Workers Compensation Act 1987 (WCA). That section dictates that the damages awarded are apportioned between the two tortfeasors in accordance with their own statutory schemes. 3. As the assessment of damages under the WCA is comparatively restrictive, an injured worker becomes actively interested in ensuring some other defendant is found to be more liable for the accident. As a general rule, the more negligent the employer, the less damages the injured worker is likely to receive. 4. This paper will attempt to explain the considerations involved for injured workers who take, or are entitled to take, proceedings against an employer and a third party tortfeasor. The paper will firstly explain the role of s 151Z(2) and the difference this section has had on common law. Secondly, an examination of the statutory schemes will take place, followed by an analysis of the apportionment of liability as between employers and occupiers. In the final sections a shorthand method of calculating damages will be provided, together with the statutory method under s 151Z(2). 1 This paper will refer to third parties as either occupiers or motor vehicle tortfeasors 2

3 Section 151Z(2)vs Common Law 5. Section 151Z states: (2) If, in respect of an injury to a worker for which compensation is payable under this Act: (a) the worker takes or is entitled to take proceedings independently of this Act to recover damages from a person other than the worker s employer, and (b) the worker also takes or is entitled to take proceedings independently of this Act to recover damages from that employer, the following provisions have effect: (c) the damages that may be recovered from the person by the worker in proceedings referred to in paragraph (a) are to be reduced by the amount by which the contribution which the person would (but for this Part) be entitled to recover from the employer as a joint tortfeasor or otherwise exceeds the amount of the contribution recoverable, (d) the amount of the contribution that the person is entitled to recover from the employer as a joint tortfeasor or otherwise is to be determined as if the whole of the damages were assessed in accordance with provisions of Division 3 as to the award of damages (Our emphasis) 6. What s 151Z(2) does is reduce the damages that an injured worker is able to recover in situations where they take, or are entitled to take, proceedings against an employer and a third party. The precise meaning of the provisions will be examined in more detail later in the paper. However, for the moment, it is important to understand that this reflects a vast shift in the assessment of damages, as compared to the common law. 7. Under the common law, when an injured worker brought an action, he or she would recover all of his or her damages, regardless of whether there was one or more tortfeasor who was responsible for the accident. It did not matter if one or more defendants were not joined. The injured worker would recover all of the damages and the defendant/s would have to seek contribution against any other liable tortfeasors. 8. S 151Z(2) in a sense reverses this. It says that the damages will be reduced by the amount by which the contribution which the person would (but for this Part) be 3

4 entitled to recover from the employer as a joint tortfeasor or otherwise exceeds the amount of the contribution recoverable. Further, the reduction is dependent on the contribution the third party could have obtained from the employer, which is assessed pursuant to Division 3 of the WCA. As the next section will demonstrate, because the WCA does not allow for various heads of damage (for example past and future treatment and gratuitous/commercial care), the difference, and hence reduction, can be significant. 9. The general rule is that if the apportionment of liability to the employer is high, damages received by the injured worker will be less, as the contribution that can be recovered in monetary terms will be less. Takes or is entitled to take 10. The phrase takes or is entitled to take in s 151Z(2)(a) and (b) has been subject to a number of judicial decisions. This is due in part to s 151H of the WCA. That section provides: no damages may be awarded unless the injury results in a death of the worker or in a degree of permanent impairment of the injured worker that is at least 15% [WPI]. 11. The court has stated that, in the above context, the entitlement concerns the cause of action, rather than the recoverability of damages 2. Accordingly, an injured worker will be entitled to take those proceedings, even if the damages that would be recovered would be nil. 12. As such, regardless of whether an injured worker has at least 15% WPI, a third party can, theoretically, commence proceedings by way of cross claim pursuant to s 5 of the Law Reform (Miscellaneous Provisions) Act The risk of course is that the court will assess the injured worker s injuries below 15% WPI (which would inhibit any contribution being awarded). 13. Two things arise from this. Firstly, if an injured worker has not been assessed pursuant to the WCA, the court must make the assessment itself 3. Secondly, if no damages can be recovered from the employer, the award of damages to the injured worker must be reduced by the amount by which the contribution which the [third 2 Grljak v Trivan Pty Ltd (In Liq) (1994) 35 NSW LR 82 at 88 (Mahoney JA, Kirby P & Priestley JA agreeing) 3 Izzard v Dunbier Marine Products (NSW) Pty Ltd [2012] NSWCA 132 4

5 party] would (but for this Part) be entitled to recover from the employer 4.In such circumstances, the whole of the employer s liabilityis deducted from the injured worker s damages 5, so that the third party is no worse off. 14. Where a worker has a less than 15% WPI,it is recommended that the Defence in s 151Z(2)(c) be specifically pleaded. A suggested form (customised to the facts) is as follows: In the event that, due to the provisions of WCA, the defendant is not entitled to obtain contribution from the plaintiff s employer at the time of the subject accident, the defendant relies on s151z(2)(c) of the WCA such that the plaintiff s damages ought to be reduced accordingly. Statutory Schemes of Damages Motor Accidents Compensation Act 1999 (NSW) 15. The recovery of common law damages in respect of injuries sustained in a faultbased motor vehicle accident is governed and modified by the provisions of the Motor Accidents Compensation Act 1999 (NSW) (the MAC Act). 16. The damages regime provided for under the MAC Act will only apply in circumstances where the provisions of s3a(1)(a)-(d) are satisfied. Chapter 5 of the MAC Act sets out the modified common law damages that are available and imposes the following restrictions: a. A ceiling limit on the calculation of damages for past and future economic loss, any amount exceeding the indexed net weekly sum is to be disregarded for the purposes of calculating economic loss: Section 125 i. $4, net per week as at 1 October b. A threshold requirement on the recovery of damages for non-economic loss (general damages) requiring the plaintiff s injuries to be assessed as giving rise to a whole person impairment of greater than 10% under the AMA IV and MAA guidelines: Section S 151Z(2)(c) of the WCA 5 Grljak v Trivan Pty Ltd (In Liq) (1994) 35 NSW LR 82 5

6 c. A ceiling limit on the maximum damages recoverable for non-economic loss where the greater than 10% threshold is reached: Section 134 i. $462,000 as at 1 October d. Both threshold and capped damages limitations on the provisions of attendant care services. The relevant section provides that no compensation is to be paid unless services were, or will be, provided for at least 6 hours per week, and for a period of at least 6 consecutive months, and that the amount of compensation awarded for attendant care services must not exceed the average weekly total earnings in NSW dependent on the number of hours provided: Section 141B e. A blanket exclusion on the damages for the damages payable for the loss of the services of a person: Section 142 f. Prescribing a discount rate of 5% on the calculation of all future economic loss as opposed to the 3% discount previously applicable under the common law: Section 127 g. Prescribing a limited statutory entitlement to interest on damages, excluding the recovery of interest on damages for attendant care services, noneconomic loss and a modified entitlement to interest in respect of other damages: Section 137 h. A blanket exclusion on the award of exemplary or punitive damages: Section 144 Civil Liability Act 2002 (NSW) 17. Section 11A of the Civil Liability Act (the CLA) confirms that the damages regime set out in Part 2 of the Act applies to and in respect of an award of personal injury damages, except an award that is excluded from the operation of the Act pursuant to section 3B. In this regard, Part 2 of the CLA applies regardless of whether the claim for damages is brought in tort, in contract, under statute or otherwise 6. 6 Civil Liability Act 2002 (NSW) s 11A(2) 6

7 18. Part 2 of the CLA provides a number of mechanisms aimed at limiting and altering common law damages for personal injury claims. The CLA limits the recovery of damages as follows: i. Providing a ceiling limit on the calculation of damages for past and future economic loss and loss of expectation of financial support. This is achieved by requiring the court to disregard the amount (if any) by which the claimant s gross weekly earnings would have exceeded an amount that is 3 times the amount of average weekly earnings: Section 12 i. As at 18 May 2012: Average weekly earnings $1,054.50, Maximum allowable amount $3, j. Prescribing a discount rate of 5% on the calculation of all future economic loss as opposed to the 3% discount previously applicable under the common law: Section 14 k. Both threshold and capped damages limitations on the provision of attendant care services. The relevant section provides that no compensation is to be paid unless services were, or will be, provided for at least 6 hours per week, and for a period of at least 6 consecutive months, and that the amount of compensation awarded for attendant care services must not exceed the average weekly total earnings in NSW dependent on the number of hours provided: Section 15 l. Both threshold and capped damages limitations on the ability to provide attendant care services. The relevant section provides that no compensation is to be paid unless services were, or will be, provided for at least 6 hours per week, and for a period of at least 6 consecutive months, and that the amount of compensation awarded for attendant care services must not exceed the average weekly total earnings in NSW dependent on the number of hours provided: Section 15B m. Providing a threshold requirement preventing the recovery of damages for non-economic loss (general damages) unless the severity of the plaintiff s non-economic loss is at least 15% of the most extreme case. A sliding scale is provided under the section and a maximum award is available. Section 16 i. Maximum recoverable was $535,000 as at 1 October

8 n. Prescribing a limited statutory entitlement to interest on damages, excluding the recovery of interest on damages for non-economic loss, gratuitous attendant care services or loss of capacity to provide gratuitous services: Section 18 o. A blanket exclusion on the award of exemplary or punitive damages: Section 21 Workers Compensation Act 1987 (NSW) 19. In addition to their entitlements under the workers compensation regimes and various legislative instruments, an injured worker may be entitled to recover modified common law damages under the Workers Compensation Act 1987 (the WCA). Much like under the MAC Act and the CLA, the WCA sets a number of threshold requirements in addition to caps on damages in order to limit the level of damages recoverable by injured workers. 20. Division 3 Part 5 of the WCA limits the recovery of damages as follows: p. The worker is prevented from recovering damages under a common law damages claim unless the worker dies or has sustained a permanent impairment of at least 15%: Section 151H i. Whole person impairment is to be assessed in accordance with the WorkCover and AMA V guidelines. q. The worker is limited to recover damages for past economic loss and future economic loss only: 151G r. Providing a ceiling limit on the calculation of damages for past and future economic loss. This is achieved by requiring the court to disregard the amount (if any) by which the claimant s gross weekly earnings would have exceeded an amount that is the maximum of weekly payments under s 34: Section 151I i. The maximum weekly compensation amount is $1,838.70: section 34 s. Prescribing a discount rate of 5% on the calculation of all future economic loss as opposed to the 3% discount previously applicable under the common law: Section 151J 8

9 t. A blanket exclusion on the award of exemplary or punitive damages: Section 151R Assessing the Damages Apportionment of Liability 21. The principle underlying the provisions contained within s 151Z(2) relates to the fact that the employer is to be liable for the proportion of damages as is required to be assessed under Part 5 of the WCA while the third party tortfeasor is liable for the proportion of damages assessed on general or other modified principles. In order to determine their respective shares, a court is first required to determine the extent to which each of the employer and the third party are responsible for causing the injury. 22. The analysis of the respective levels of fault, if any, of the employer and third party tortfeasor is undertaken in accordance with the general principles of common law. This requires an assessment of the relative culpability of each tortfeasor in accordance with negligence principles. When assessing the fault of an employer it must be borne in mind that employers owe a non-delegable duty of care to their employees. The non-delegable duty rests on the employer whether or not the employer takes any share in the conduct of the operations 7 and however the business is formed and structured 8. An employer that is the subject of a nondelegable duty cannot escape liability if the duty has been delegated and not subsequently properly performed In circumstances where workers are engaged on premises owned and operated by tortfeasors other than the employer, as occurs in labour hire arrangements, it is often submitted that an apportionment of 20% liability to the employer and 80% liability to the occupier is appropriate. There are a number of cases that reflect such an apportionment, including Maricic v DalmaFormework 10 and TNT Australia v Christie 11. However, whilst such cases may provide general guidance they should not be treated as a mathematical standard, every matter should be considered on its own 7 Wilsons and Clyde Coal Co Ltd v English [1938] AC 39 (at 84) 8 André Transport Pty Ltd v Brambles Ltd (2004) 217 CLR 424 at 34 9 Northern Sandblasting Pty Ltd v Harris (1997) 188 CLR 313 at Maricic v Dalma Formwork (Australia) Pty Limited [2006] NSWCA TNT Australia Pty Limited v Christie [2003] NSWCA 47 9

10 facts. Indeed, the need to assess the liability of the employer on the facts of each case was emphasised by Basten JA in Maricic 12. Calculating Quantum 24. Once the respective liabilities of the employer and the third party are determined, the court is able to assess damages under the corresponding applicable quantum regimes. The workers aggregate entitlement will be the total of those two recoverable amounts, subject to any contributory negligence issues. Tobias JA noted that the outcome is that: the workers right to recover damages is now to be treated on the basis that that right extends to each individual tortfeasor (whether the employer or non-employer tortfeasor) to the extent only of that tortfeasor's percentage of responsibility for the accident. 25. The result is that the previous common law principle that a plaintiff may choose to proceed against a single tortfeasor, despite the existence of two or more, and recover the full amount of damages from that tortfeasor without regard to contribution, is displaced. 26. The method of calculation has been affirmed on a number of occasions, with McColl JA s judgment in Pollard v Baulderstone Hornibrook 13 providing a concise analysis of the steps to be undertaken 14. The shorthand method 27. The shorthand method is a quick and easy way to calculate damages, provided you are in a position to assess the respective liabilities of each tortfeasor. Formula: Damages = Damages assessed against non-employer tortfeasors PLUS Damages assessed against employer tortfeasor 12 Maricic v Dalma Formwork (Australia) Pty Limited [2006] NSWCA 174 at Pollard v Baulderstone Hornibrook Engineering Pty Ltd [2008] NSWCA Ibid [2008] NSWCA 99 at 30 10

11 Example 1: 28. Injured worker brings a claim against a third party occupier and against his employer. The Court apportions liability 75% against the occupier and 25% against the employer. 29. The Court then assesses damages under the CLA at $100,000 and damages under the WCA at $50,000. No contributory negligence is found against the injured worker. 30. Damages are calculated as: 75% of $100,000 (representing the occupier s liability) plus 25% of $50,000 (representing the employer s liability). The total to the plaintiff is $87,500. Example 2: 31. Assume there is a further defendant (say a motor vehicle driver), who is also liable for the accident. If there were three tortfeasors: an occupier (50%), employer (20%), and a motor vehicle driver (30%), with damages assessed at $100,000 (CLA) $50,000 (WCA), and $60,000 (MACA) respectively, the following is the calculation: CLA tortfeasor = $50,000 (50% of $100,000) WCA employer = $10,000 (20% of $50,000) MACA tortfeasor = $18,000 (30% of $60,000) The total damages awarded to the plaintiff would be$78,000. Calculations in accordance with the s 151Z(2) formula 32. This involves multiple steps. It is best illustrated by way of examples. Example Mr Smith is a concrete agitator who is employed by Labour Hire Pty Limited (LH). Labour Hire hires the services of its employees to various companies in the building and construction industry throughout New South Wales. Smith is hired out to Construction Company Ltd (CC) to deliver concrete to a construction site at Bankstown. 34. On 1 January 2008 Smith delivers concrete to the Bankstown site. When Smith alights from the truck, he falls down an unsealed hole, which was covered by a tarpaulin. He was on his mobile phone at the time he stepped on the tarpaulin. 35. Smith proceeds against LH for compensation under the WCA. He is assessed by an AMS with a 12% WPI for injuries to his back and neck. He does not commence 11

12 proceedings against his employer as his impairment is less than 15% WPI. He instead brings a claim in negligence against CC, as occupier of the Bankstown site. 36. CC denies negligence, alleges contributory negligence, and also alleges the employer is to blame for the accident. 37. Following the hearing, the Court makes the following findings in relation to liability: CC breached a duty of care owed to Smith by failing to ensure the premises were safe for persons in a class such as Smith. LH breached its non-delegable duty of care to Smith by failing to train and prohibit Smith from using mobile phones whilst on delivery sites. Smith was also contributory negligent by using his mobile phone whilst making the delivery. 38. The court apportions liability as 80% to CC and 20% to LH. Smith s contributory negligence is assessed at 10%. 39. The court then assesses damages pursuant to the CLA at $100,000 less contributory negligence of 10%. There is no assessment pursuant to the WCA as nothing is recoverable. The calculations are as follows: Damages assessed $100,000 Less contributory negligence ($10,000) Total $90,000 Less employers contribution (20% of $90,000) ($18,000) Plaintiff s award $72,000 Shorthand method Damages assessed pursuant to the CLA less contributory negligence (as against CC)= $72,000 ($90,000x 80%). 12

13 Damages assessed pursuant to the WCA less contributory negligence (as against LH)= nil. Plaintiff s award = $72,000 Example Assume Smith was assessed as having a 15% WPI. Smith decides not to pursue the employer. CC on the other hand cross claims against LH. 41. Liability and apportionment are found by the court as follows: 80% as against CC. 20% as against LH. Contributory negligence of 10%. 42. Damages are assessed under the CLA at $90,000 (including contributory negligence) and $50,000 under the WCA (again, including contributory negligence). 43. In this case damages are assessed as follows: Step 1: Assess the contribution that CC would have been entitled to, but for s 151Z (2)(d):$18,000 (as LH is 20% responsible for the accident, its contribution is, but for s 151Z(2),20% of $90,000) Step 2:Assess the contribution that CC is actually entitled to from LH:$10,000 (20% of $50,000 as assessed under the WCA) Step 3:Calculate the deduction: $8,000 ($18,000 LESS $10,000) Step 4:Damages to Smith: $90,000 less $8,000 = $82,000. Shorthand method: CC: 80% of $90,000 (CLA damages) = $72,000 LH: 20% of $50,000 (WCA damages) = $10,000 Smith s damages: $72,000 plus $10,000 = $82,