(Re Charlton) Rolls Royce Australia Ltd v WorkCover Authority of New South Wales [2005] NSWDDT 27

Reported Decision (2005) 2 DDCR 563

Dust Diseases Tribunal of New South Wales

CITATION : (Re Charlton) Rolls Royce Australia Ltd v WorkCover Authority of New South Wales [2005] NSWDDT 27

Rolls Royce Australia Ltd (Cross Claimant) PARTIES : WorkCover Authority of New South Wales (Cross Defendant)

MATTER NUMBER(S) : 431 of 2002/2

JUDGMENT OF: Curtis J

CATCHWORDS: :- Insurance - Indemnity

Workers' Compensation Act 1987 LEGISLATION CITED: Workers' Compensation Legislation Amendment Act 2004

CASES CITED: Orica Ltd v CGU Insurance Ltd (2003) 59 NSWLR 14

DATES OF HEARING: 8 June 2005

DATE OF JUDGMENT: 06/15/2005

FOR CROSS CLAIMANT: Mr GM Watson SC with Ms D Robinson instructed by Cowley Hearne Lawyers LEGAL REPRESENTATIVES: FOR CROSS DEFENDANT: Mr GM Little SC instructed by Hunt and Hunt

JUDGMENT:

Dust Diseases Tribunal of New South Wales Matter Number DDT 431 of 2002/2 Rolls-Royce Australia Ltd (Cross Claimant) v Workcover Authority Of New South Wales (Cross Defendant) 15 June 2005 JUDGMENT CURTIS J 1. The Tribunal has ordered that, pursuant to Supreme Court Rules Pt31 r2, this question be decided separately and before any other issues in the trial: Does s151AB of the Workers' Compensation Act 1987 require NEM's policy of insurance to respond in the circumstances of this claim by Rolls-Royce? Agreed facts 2. From 1 January 1957 to 31 December 1961 ("the period of employment") Albert Charlton was employed by Rolls-Royce Australia Limited. 3. During the period of employment Rolls-Royce held a policy of insurance with NEM General Insurance Ltd ("NEM") covering liability in the form as prescribed by the Workers' Compensation Act 1926 ("NEM's policy of insurance"). 4. WorkCover Authority of New South Wales ("WorkCover") exercises rights and satisfies obligations pursuant to the Workers' Compensation Act 1987 as manager of the Insurers' Guarantee Fund. 5. On 1 November 2002 Mr Charlton commenced proceedings claiming common law damages from Delta Electricity on the basis that Delta Electricity, as the occupier of premises at which Mr Charlton was working, negligently, or by breach of statutory duty, caused him the injuries of: (a) asbestosis; (b) asbestos-related pleural disease; (c) asbestos-induced carcinoma of the lung caused by asbestos inhaled while Mr Charlton was in the employment of Rolls-Royce. 6. Mr Charlton first noticed symptoms related to his injuries in July 2002. 7. On 12 December 2002 Mr Charlton settled the proceedings against Delta Electricity upon a judgment in his favour for $225,000 inclusive of costs. 8. On 24 February 2003 Delta Electricity cross claimed against Rolls-Royce seeking statutory contribution pursuant to s. 5 of the Law Reform (Miscellaneous Provisions) Act 1946. 9. On 26 May 2003 WorkCover declined to indemnify Rolls-Royce in respect of the statutory contribution claim brought against it by Delta Electricity. 10. On 17 May 2004 Rolls-Royce settled the statutory contribution claim by agreeing to a judgment in favour of Delta Electricity in the sum of $77,500 inclusive of costs. That judgment was paid. 11. Rolls-Royce incurred costs and disbursements in defending Delta Electricity's contribution claim. Additional Facts 12. The statutory form of policy issued by NEM to Rolls Royce was in these terms: Now this policy witnesseth that in consideration of the payment by the employer to the insurer of the abovementioned premium ... if, between the .......... day of ............ and 4 o'clock in the afternoon in the day of .......... and thereafter to 4 o'clock in the afternoon of the last day of the subsequent period in respect of which the premium shall have been paid to and accepted by the insurer, the employer shall be liable to pay compensation under the Act to or in respect of any person who is deemed by the Act to be a worker of such employer or to pay any other amount .... in respect of his liability independently of the Act ... to any such person. THEN, and in every such case the insurer will indemnify the employer against all sums for which the employer shall be so liable. (emphasis added) 13. The damage suffered by Mr Charlton for which Rolls Royce was liable constituted the contraction of an occupational disease and that damage did not occur during the period of insurance cover. The Decision in Orica v CGU 14. In Orica Ltd v CGU Insurance Ltd (2003) 59 NSWLR 14 the majority held that while a worker suffers an "injury" at the time asbestos fibres are inhaled, no "damage" is sustained until an illness is contracted. Without "damage", a worker has no cause of action in negligence. Accordingly, an employer is not "liable" until damage is sustained, and if that occurs after the statutory policy of insurance expires, that policy does not respond to the risk. The amendments following Orica v CGU 15. In order to remedy the lacuna in the insurance cover of employers revealed by Orica v CGU the Workers Compensation Legislation Amendment Act 2004 amended s151AB of the Workers' Compensation Act 1987 so as to provide that; (1) If an employer is liable independently of this Act for damages for an occupational disease contracted by a worker, the following provisions have effect for the purposes of any policy of insurance obtained by the employer: (a) the liability is taken to have arisen when the worker was last employed by the employer in employment to the nature of which the disease was due …. 16. On its face this provision requires NEM's policy to respond in the circumstances of the present claim. WorkCover contends however that the amendment does not operate, because the amending legislation commenced on 3 June 2004, the date on which the bill for the Act was introduced into parliament, and a proviso in the transitional provisions precludes retrospective effect in the circumstances of this case. The Transitional Provisions 17. The Workers Compensation Legislation Amendment Act 2004 inserted Clause 4 of Part 18H of Schedule 6 in the 1987 Act in these terms: Clause 4 Pre-1995 insurance cover and occupational diseases (1) The amendments made by the 2004 amending Act that insert section 151AAA and amend section 151AB are for the removal of doubt and accordingly extend to liabilities arising before the commencement of the amendments, but not so as to affect any decision of a court, or any compromise or settlement, made before the commencement of the amendments, subject to subclause (2). [emphasis added] The Issue 18. At issue in the present case is the meaning and effect of the exclusionary words "but not as to effect any decision of a court, or any compromise or settlement, made before the commencement of the amendments". WorkCover asserts that because Rolls Royce reached a compromise and settled with the cross claimant on 17 May 2004, 16 days before the commencement of the amendments, the amended s151AB does not apply to Rolls Royce's liability to the plaintiff/cross claimant and the policy in its original terms does not respond to the risk. Discussion 19. Decisions or settlements may flow from actions brought by workers alleging the liability of an employer to pay damages, or brought by employers alleging the liability of an insurer to indemnify in respect of those damages. 20. It is clear that the draughtsman's intention in framing the proviso was to ensure that parties to such disputes as were resolved by judgment or settlement before the amendments, should not be permitted to re-agitate that dispute claiming new (declared by the Act to be old) rights said to flow from the changes, or contending that the decision or settlement in question should be set aside as it was predicated upon an erroneous view of the law. 21. A worker claiming damages from an employer of tenuous solvency may have heavily compromised his claim by settlement, before or after judgment, in the belief that his employer had no access to insurance funds. The proviso prevents him from revisiting his compromise. 22. An employer claiming against an insurer in respect of his liability to the worker may have accepted in settlement something less than full indemnity in the belief that the claim would fail. The proviso prevents that employer from revisiting his compromise. 23. Similarly, either the worker or the employer in each case may have prudently consented to judgment in favour of the employer or insurer respectively upon advantageously securing terms that each party pay his/its own costs. Again the effect of the amendments is that the judgment is to stand. 24. In the present case Rolls Royce does not wish to affect, re-visit or set aside the settlement with the plaintiff/cross claimant, which remains binding in its terms. Judgment for Rolls Royce on the present claim brought against the insurer does not "affect . . .any compromise or settlement made before the commencement of the amendments". 25. The proviso in Pt 18H Schedule 6 cl 4(1) has no application to the facts of this case. By force of the amended s151AB of the Workers' Compensation Act 1987 and the transitional provisions contained within Pt 18H Schedule 6 cl 4(1) of that act the liability of Rolls Royce to Mr Charlton arose on 31 December 1961 during the currency of the policy issued by NEM. 26. I answer the question posed in par 1 of these reasons "Yes". Mr GM Watson SC with Ms D Robinson instructed by Cowley Hearne appeared for the cross claimant. Mr GF Little SC instructed by Hunt and Hunt appeared for the cross defendant