MANUFACTURERS MUTUAL INSURANCE LIMITED v HOOPER SUPREME COURT OF NEW SOUTH WALES COURT OF APPEAL Hope, PRIESTLEY & MCHUGH JJA 14 April 1988, 6 May 1988 [1988] NSWCA 90 INSURANCE — Policy under s18 of Workers' Compensation Act — Indemnity in respect of employer's liability independently of Act for injury to worker — Worker killed by leaking gas when working in pit — Action by widow in respect of nervous shock suffered when told of husband's death — Action by Passer-by who was injured when he went to the help of the worker — Meaning of "for any injury to any such worker" in s18(1) of Workers' Compensation Act and in policy of insurance — Rheem Australia Limited v Manufacturers' Mutual Insurance Limited [1984] 2 NSWLR 370 applied — Liability "for any injury to any such worker" construed to mean liability "to any person consequent upon or in respect of injury to" a worker — Held indemnity under policy extended to both forms of liability. Hope JA The questions for decision in this appeal are whether a policy of insurance in the form prescribed for the purposes of s18 of the Workers' Compensation Act (the Act) indemnifies the employer, where a worker employed by him is injured and dies in an accident in the course of or arising out of his employment, against his common law liability to (a) the widow of the worker who suffers mental and nervous shock upon hearing of her husband's death and (b) a passer-by who was injured when he went to the help of the worker. In the decision appealed against Clarke J (as he then was) held that the employer was entitled to that indemnity in each case. The agreed facts for the purposes of the proceedings were these:- 1. On 12 February 1982 Australian Gas Light Company (AGL) was insured by the Plaintiff, Manufacturers' Mutual Insurance Limited (MMI), under an Employers' Indemnity Policy in the form prescribed pursuant to the Workers' Compensation Act 1926 as amended. 2. On 12 February 1982 Neville William Purcill, Alan Edward Hobbs and Colin Dennis Nightingale (the 'workers') were working in a governor pit at Bay and West Botany Streets, Brighton-le-Sands in the course of their employment with AGL. 3. The governor pit was approximately 6 feet deep and 6 feet square. It had iron rungs down one side of it and an aperture at the top to permit access which was approximately 3 feet square. 4. At or about 1.10 p.m. on that day, gas leaked and continued to leak into the governor pit. The leaking gas forced the air out of the pit. The workers lost consciousness due to lack of oxygen and died. 5. At or about 2.50 p.m. on that day, Maxwell Gordon Cations, a passer-by who was not a worker or a person deemed to be a worker of AGL, saw the workers in the pit. At that time the workers were either unconscious or dead. Cations believed that they were unconscious. He went into the pit. 6. While in the pit, Cations lost consciousness and claims to have received injury by way of brain damage due to lack of oxygen. 7. In proceedings No. 12133 of 1985 in the Common Law Division of this Court Cations claims damages against John Edwin Hooper, sued on behalf of AGL. 2 UNREPORTED JUDGMENTS 8. Later on the same date and after the worker Purcill had died, Merle Purcill, the worker's widow, not being a worker or a person deemed to be a worker of AGL was informed of his death, in consequence of which she claimed to have suffered mental or nervous shock. 9. In proceedings No. 10830 of 1984 in the Common Law Division of this Court, Merle Purcill claimed damages against John Edwin Hooper, sued on behalf of AGL. 10. The claim made by Merle Purcill has been settled. On 9/3/1987 judgment was entered by consent and without admission of liability pursuant to the Terms of Settlement. In addition, copies of the prescribed form of policy and of the statement of claim in each of the Common Law proceedings were annexed to the statement of agreed facts. S18(1) of the Act provides, relevantly, that - "... every employer shall obtain from an insurer... a policy of insurance or indemnity, conforming to this section, for the full amount of his liability under this Act to all workers employed by him and for an unlimited amount in respect of his liability independently of this Act for any injury to any such worker..." By s6(2) any reference to a worker who has been injured shall, where the worker is dead, include a reference to his legal personal representative or to his dependants or other person to whom or for whose benefit compensation is payable. The policy of insurance itself provides that "IF... the Employer shall be liable to pay compensation under the Act to or in respect of any person who is or is deemed by the Act to be a worker of such employer, or to pay an unlimited amount in respect of his liability independently of the Act for any injury to any such person THEN, and in every such case the Insurer will indemnify the Employer against all such sums for which the Employer shall be so liable..". It also provides that the insurer shall be "(a) directly liable to any worker and in the event of his death, to his dependants, to pay the compensation or other amount for which the Employer is liable and in respect of which the Employer is indemnified under this Policy; and (b) bound by and subject to any judgment, order, decision, or award given or made against the Employer under the provisions of the Act or in respect of his liability independently of the Act and in respect of which the Employer is indemnified under this Policy...". It will be noticed that in s18(1), while in the case of the employer's liability under the Act the indemnity the subject of the insurance is expressly limited to the liability of the employer to workers employed by him, there is no such limitation of the indemnity in the case of an employer's liability independently of the Act. That liability must merely satisfy the description "for any injury to any such worker". The absence of any limitation of the liability independently of the Act to liability to workers is of course the reason for the present proceedings. The requirement for insurance in respect of liability independently of the Act was not to be found in s18 until 1953 when subs(1) was amended by the Workers' Compensation (Amendment) Act 1953 to impose this obligation on employers. From at least 1972 there have been decisions, including reported decisions, construing the language of the sub-section and of policies of insurance in the prescribed form so as to give employers an indemnity in respect of claims by persons other than a worker, or, where he is deceased, his dependants. The most recent of these decisions was that of this Court in Rheem Australia Limited v Manufacturers' Mutual Insurance Limited [1984] 2 NSWLR 370 where it was held that the insurer under such a policy was bound to indemnify an employer in URJ MANUFACTURERS MUTUAL INSURANCE LIMITED v HOOPER (Hope JA) 3 respect of a claim by the spouse of an injured worker for loss of consortium. Notwithstanding this chain of decisions, no amendments were made to s18(1) to impose any limits to the relevant indemnity other than those which, upon the proper construction of the sub-section and of the prescribed form of policy, were already there. The Workers' Compensation Act was an Act which was under continuous review and in respect of which amendments were made annually and sometimes more than once a year. In particular there were regular amendments of the Act from 1972 until the Workers' Compensation Act 1987, significantly changing this area of the law, came into force on 30 June 1987. This absence of legislative Concern about decisions as to the extent of the indemnity is surely relevant when it is sought to limit that indemnity by reference to questions of policy to be inferred from the circumstance that the Act is a workers' compensation Act. I shall describe shortly the history of decisions in relation to the extent of the indemnity 1. As Clarke J described in his reasons, it has never been in doubt that insurers are liable to indemnify employers who are held liable to pay damages to the dependants of a deceased worker under the Compensation to Relatives Act 1897 where the worker has been injured and has died as a result of what I might shortly call an industrial accident. It has been submitted and it is correct that a condition of the right to recovery in such a case is proof of a breach of duty owed by the employer to the worker, subject to the qualification that contributory negligence is not a defence. This should indicate at once that the right to recover in such a case is quite a different right to that which the worker would have had if he had not died. As Mahoney JA pointed out in Rheem at 376-377 it is settled that the right to recover under the Compensation to Relatives Act is, of its nature, of a different kind to the right which the worker would have had and is not a mere derivative of the worker's claim, and that the worker's death is not the only thing to be established in order that liability may exist. 2. In Cuckson Textiles Pty Limited v Queensland Insurance Co Limited (1968) 88 WN (Pt1) (NSW) 474, Macfarlan J held that an employer of an injured worker was not entitled to be indemnified by the insurer under a prescribed form of policy in respect of its liability to a claim by the worker's husband for loss of consortium resulting from the injury to the worker. In arriving at his conclusion Macfarlan J distinguished the decision of the High Court in State Government Insurance Office (Queensland) v Crittenden (1966) 117 CLR 412 as being a decision upon a policy issued pursuant to the provisions of the Queens land Motor Vehicles Insurance Acts and expressed the view (at 480) that - "... a consideration of the history and scope of the provisions of the Workers' Compensation Act which (he had) quoted indicates that he Act is concerned only (so far as its insurance provisions are concerned) with the protection of the injured worker (or in case of death his dependants), and not with the rights of some other person or persons who may claim that the injury to the worker gave them a separate right of action." 3. The insurer is liable to indemnify an employer who is found liable to pay contribution pursuant to the provisions of the Law Reform (Miscellaneous Provisions) Act 1946, s5(1)(c) to a joint tortfeasor in respect of an injury suffered by his worker: Findlay v Westfield Development Corporation Ltd [1972] 1 NSWLR 422. Among the reasons relied upon by Sugerman P to arrive at this conclusion was (at 425) that the change effected in the common law by the introduction of the principle of contribution between tortfeasors by the Law 4 UNREPORTED JUDGMENTS Reform (Miscellaneous Provisions) Act 1946 was enacted before the relevant provision was inserted in s18(1) of the Act in 1953 and the "section must, therefore, be taken to have been amended on the footing that there already existed a provision for contribution between tortfeasors... and the amendment construed accordingly." 4. In Dickson Primer Industries Pty Ltd v National Employers' Mutual General Insurance Association Limited [1974] 2 NSWLR 292 Sheppard J decided that the insurer was liable, pursuant to such a policy, to indemnify an employer who was found liable to pay damages to the Nominal Defendant pursuant to s32 of the Motor Vehicles (Third Party Insurance) Act 1942 in respect of injuries suffered by his worker. In that case, although injury to the worker in the course of or arising out of his employment which, were it not for the provisions of the Motor Vehicles (Third Party Insurance) Act, would have given the worker a right to sue his employer at common law was an essential ingredient of the case against the Nominal Defendant, that Act prevented an action being brought against the employer in respect of that injury, and the right to sue the Nominal Defendant flowed from the statute. In reaching his decision Sheppard J relying on Crittenden construed the word "for" in the phrase in s18(1) of the Act "liability independently of this Act for any injury to any such worker" as meaning "in respect of'. His Honour also applied the decision of the High Court in Club Motor Insurance Agency Pty Limited v Sargent (1969) 118 CLR 658 where a person was injured in the Australian Capital Territory in an accident arising as a result of the negligence of the driver of a motor car covered by a third party policy issued by an insurer in Victoria but not covered by an insurer in the Territory. As a result of the Motor Traffic Ordinance of the Territory the proceedings by the injured person were required to be brought, and were brought, against the Territorial Nominal Defendant to whom in turn the owner of the vehicle was liable. Under the policy issued by the Victorian insurer, the owner was indemnified against liability which might be incurred by him "in respect of bodily injury... caused by or arising out of the use" of the car in Victoria or in any other State or Territory of the Commonwealth. It was held that the insurer was liable to indemnify the owner against his liability to the Nominal Defendant. 5. In Rheem this Court, overruling Cuckson, held that an insurer under a prescribed policy was bound to indemnify an employer in respect of a claim by a spouse of an injured worker for loss of consortium. At 375 Glass JA (in whose judgment Samuels JA agreed) said:- "Since 1972 when Findlay was decided by this Court the Cuckson Construction of the indemnity has been authoritatively discarded. From that time forward the phrase in the statutory indemnity 'liability... for any injury to' a worker means on its proper Construction 'liability to any Person Consequent upon or in respect of injury to' a worker. Applying that Construction to the liability here proved leads to the conclusion that it falls within that indemnity and the employer is entitled to succeed against the insurer." At 377 Mahoney JA, having discussed the position in relation to claims by dependants under the Compensation to Relatives Act and having said that the word "for" in dependants' Cases is to be read, for example, "in consequence of", said:- If this be the nature of the relationship which may exist between 'liability' and the injury to the worker within the policy, then it is, I think, wide enough to include liability for loss of consortium of the kind here in question The loss of Consortium is a Consequence of the injury to the worker but other things, eg, the loss of services, must URJ MANUFACTURERS MUTUAL INSURANCE LIMITED v HOOPER (Hope JA) 5 be established before the liability for loss of consortium accrues. But, there is, I think, no relevant distinction in this regard between a compensation to relatives claim and a claim for loss of Consortium. Mr Sperling QC, senior counsel for the plaintiff, submitted that Rheem was wrong but did not seek to re-argue it in this Court, nor did he seek to re-argue any of the other decisions to which I have referred. However he sought to limit the effect of these decisions to extend the indemnity to Cover only those cases which he described as "parasitic" in relation to the action which the worker had, or would have had if he had not died, against the employer, and which arose out of a state of affairs existing at the moment of injury and directly out of the injury. He also submitted that despite the statement of Glass JA as to the meaning of the word "for" upon which his Honour said he reached the conclusion that the employer was entitled to be indemnified in respect of a claim for loss of consortium by the worker's spouse, that was not the true ratio decidendi of the decision. I do not accept these submissions. As I have already indicated in Rheem Mahoney JA pointed out that a claim by a dependant under the Compensation to Relatives Act is not a mere derivative of a claim for negligence by the injured worker. Even more so a claim by a spouse in respect of loss of consortium is not derivative. In Curran v Young (1964-65) 112 CLR 99 the High Court held that the contributory negligence of a wife acting otherwise than as the servant or agent of her husband affords no defence to an action per quod consortium amisit brought by her husband in respect of injury occasioned to her by the negligence of the defendant. In Crittenden Windeyer J at 422 distinguished between an action by a person who has suffered bodily injury by the fault of another against that other and an action for loss of consortium. In relation to the first of these causes of action his Honour said that the damage that is of its essence is not the measured consequences of the hurt but the fact of hurt. It is this that gives rise to the right to damages. On the other hand in the case of an action in respect of loss of consortium the position, according to his Honour, was this:- On the other hand the damage that is of the essence of a cause of action for loss of the consortium of a plaintiff's wife or of the services of his servant is that loss itself. That it may be the result of a bodily injury of the wife or servant is only incidental. It is not the fact of bodily injury but its Consequence that gives rise to the right to damages. An action for loss of consortium cannot be regarded as a derivative or parasite of the action of an injured worker for damages in respect of the bodily injury occasioned to her. The loss of consortium might have been the result of any one of a number of causes, one of which was bodily injury to the wife. But the husband's right flowed from his loss which was the consequence of the relevant cause, if it were an injury to the wife, that injury. In Rheem Glass JA considered all the relevant decisions, including Crittenden, before coming to his conclusion. I have no doubt that the meaning he gave to the phrase "liability...for any injury to", a meaning which he arrived at after considering those decisions was the basis of his decision. That it was also the basis of the decision of Mahoney JA appears from the parts of his judgment to which I have already referred and also from his statement at 377:- The loss of consortium is a consequence of the injury to the worker but other things, eg, the loss of services, must be established before the liability for loss of consortium accrues. 6 UNREPORTED JUDGMENTS In the light of the decision in Rheem I have concluded that Clarke J was correct in the conclusion to which he came both in respect of the employer's liability for the widow's mental and nervous shock and for the rescuer's injury. If it be relevant, as Sugerman P thought in Findlay, in suing for damages in respect of the mental and nervous shock which she suffered, the widow was relying upon the right given to her by the provisions of the Law Reform (Miscellaneous Provisions) Act 1944, s3 and s4. These sections replaced whatever may have been the earlier Common law, and thus s18 may be taken to have been amended on the footing that there already existed a statutory provision for persons, including the wife of the person killed, to sue for damages in respect of mental or nervous shock which was the Consequence of an injury to her husband. However, and I think more importantly, the liability of the employer was a liability to the widow Consequent upon the injury to the worker. It is true that at least one other fact had to be proved, namely, the Communication of the fact of the death of the worker to the widow, as well of Course as her mental and nervous shock, but I am unable to distinguish this situation from that arising in the loss of consortium case considered in Rheem. It has been submitted that, as appears from the language of the relevant statutory provisions, the mental or nervous shock in respect of which a statutory right to sue is given may arise not only from a person being killed or injured, but also from his or her being put in peril. In the latter case there would be no occasion for indemnity because a worker would not have been killed or injured, but that does not affect the question which arises in the present case. The worker was injured and killed, that fact was pleaded in the statement of claim, and was an essential element of the widow's claim. Her claim to damages against the employer thus gave rise to a liability in the employer, independently of the Act, in respect of or consequent upon the injury to the worker. As I have indicated earlier the insurer submits that whatever meaning should be given to the word "for" in an insurance context in other types of legislation, the present context is that of workers' compensation legislation, and the word is to be limited in a way appropriate to that type of legislation It was upon the basis of this approach that Macfarlan J rejected a claim by an employer for an indemnity in respect of his liability to the spouse of an injured worker for loss of consortium, and it was the Construction resulting from this approach that was rejected in Rheem. Quite apart from any earlier decision, Rheem has taken the operation of the provision outside an area limited by reference to the employer's liability to the worker and his dependants, and established that if a third party suffers loss as a consequence of an injury to a worker in the Course of or arising out of the worker's employment giving rise to a liability in the employer to that third party, that liability of the employer is a liability for an injury to a worker within the meaning of s18(1). It has been strongly urged for the insurer that there must be a halt somewhere to the extent of the indemnity which the insurance policy provides to the employer. No doubt this is so but the determination of that limit is not a matter of discretion. The insurer is liable to indemnify the employer in respect of his liability to the extent that s18(1) and the prescribed form of policy permits and requires. Subject to any greater right given by the terms of a particular policy, the insurer's liability does not extend beyond that limit, but the limit is not at large. The course of decision may suggest that the extent of the liability has been expanding but this can only be so because it has been realised, Particularly by the legal profession, that full effect has not Previously been given to the words of s18 URJ MANUFACTURERS MUTUAL INSURANCE LIMITED v HOOPER (McHugh JA) 7 and of the policy. The need to call a halt must coincide only with the proper construction and application of the statute and the policy. In my opinion the employer was entitled to be indemnified by the insurer in respect of its liability to the worker's widow arising from the mental and nervous shock which she suffered as a Consequence of the worker's injury and death. Ihave also concluded that the employer is entitled to be indemnified in respect of his liability to the rescuer. It has been submitted for the insurer that in a rescue case (as in the case of the mental or nervous shock case) there are other elements which a plaintiff must prove in addition to those which the worker, had he survived, would have to prove in a claim against the employer, or which co-exist with the injury itself. In my opinion if the liability to the rescuer is Consequent upon the injury to the worker, these circumstances do not detract from the insurer's obligation to indemnify. Again it is submitted that a rescuer may act, and become injured, not because of an injury to a worker but because of the peril in which the worker is seen or thought to be. No doubt this is so, and if a rescuer acted only by reference to peril and not to injury, and of Course Particularly if the worker was not in fact injured, the liability to afford indemnity would not arise. However in his statement of claim the rescuer Cations alleges that the deceased employees of the employer had been Previously overcome by fumes in a governor pit in which the unfortunate workers were working when they were so overcome. The al legation is thus of an attempt to rescue workers who had Previously been overcome, and not of attempting to rescue workers who were in peril of being overcome by the fumes in the pit. It was further submitted that a person overcome by fumes has not suffered an injury. I do not understand this submission. If a person is overcome by fumes he must in some way have been Pathologically affected by those fumes and of Course ultimately the result to the workers was death. It could not be that just before death they were not injured but at death they were. Assuming that Cations establishes his case against the employer on the basis of the allegation to which I have referred, the employer would be entitled to indemnity in respect of his liability to Cations under the policy of insurance. In my opinion the appeal should be dismissed with costs. Priestley JA I agree with Hope JA. McHugh JA If the construction of the policy in issue in this case could be approached independently of the decisions upon it, I would be in favour of allowing this appeal. In its setting, the natural meaning of the indemnity seems to me to be limited to liabilities payable to the worker or his dependants in respect of injury or death to the worker. But the course of decision on the indemnity holds otherwise. Counsel for the appellant formally submitted that Rheem Australia Limited v Manufacturers' Mutual Insurance Limited [1984] 2 NSWLR 370 was wrongly decided. But he did not seek leave to re-argue its correctness. The ratio of that decision is that the policy covers any liability to any person Consequent upon or in respect of injury to a worker. If that ratio is applied to this case, then I think the "liabilities" of the appellant are covered by the indemnity. The course of decision and the process of legal reasoning in relation to this policy are familiar ones. Cases which are factually similar, but not identical with cases which are clearly covered by an expression, are held to be within the expression. Then a Concept - in this case "in Consequence of" - is invoked to explain the decisions. The leap from the original expression to the new Concept 8 UNREPORTED JUDGMENTS seems natural. But in truth it Contains the seeds for the expansion of the Content of the original expression. The denotation of the new Concept is then frequently used to embrace by analogy other factual situations which are in reality outside the original expression and often enough outside the denotation of the new Concept. In other cases, such as the present, the indeterminateness of the new Concept is used to embrace cases having a factual similarity with earlier Cases but which are outside the scope of the original expression. Then another concept even further removed from the original expression is invoked to explain the cases and the process starts again. This stage has not yet been reached with this policy. But in holding that liability to a rescuer is within the indemnity, it seems only a matter of time before other cases will require the use of a new word or phrase in substitution for "in consequence of" to explain the cases on the simple words "in respect of his liability... for any injury to any such person". There is, in my opinion, a great deal to be said for ignoring case law on the meaning of documents in Common use unless the material facts of the precedent case are identical with the material facts of the instant case. Otherwise the courts end up applying the reasoning in the decisions instead of the words of the document. However, Counsel for the appellant did not embrace such an approach, and we did not have the advantage of hearing from Counsel for the respondent on this point. I agree with the orders Proposed by Hope JA. Appeal dismissed with costs. Counsel for the Appellant - HD SPERLING QC, J HISLOP Counsel for the Respondent - AM GLEESON QC, DJ JENKINS Solicitors for the Appellant - DEXTER HEALEY & CO Solicitors for the Respondent - MICHAEL ROSSER & CO