Reported Decision : 47 NSWLR 263 New South Wales Court of Appeal CITATION : Grant v Royal Rehabilitation Centre Sydney [1999] NSWCA 250 revised - 22/07/99 FILE NUMBER(S) : CA 40395/98 HEARING DATE(S) : 28 June 1999 JUDGMENT DATE : 21 July 1999 PARTIES : Noel Grant v Royal Rehabilitation Centre Sydney JUDGMENT OF : Mason P at 1; Sheller JA at 2; Cole AJA at 3 LOWER COURT JURISDICTION : District Court LOWER COURT FILE NUMBER(S) : DC 2290/97 LOWER COURT JUDICIAL OFFICER : Christie DCJ COUNSEL : Appellant: Mr C Charteris Respondent: Mr G Watson SOLICITORS : Appellant: Dunhill Madden Butler Respondent: Hunt & Hunt CATCHWORDS : S151 (1)(d) Workers Compensation Act 1987; steps required of a trial judge; (1) determnine common law damages which would have been recovered if sued for; (2) determine amount of compensation paid; (3) deduct (2) from (1) Workers Compensation Act 1987 ACTS CITED : Motor Accidents Act 1998 Suitors Fund Act 1951 DECISION : (1) Appeal upheld; (2) Judgment and orders of Christie DCJ dated 13 May 1998 set aside; (3) The matter to be remitted to the District Court for further hearing; (4) Costs of the proceedings below before Christie DCJ be costs in the rehearing; (5) The respondent is to pay the appellant's costs of the appeal but is to have, if qualified, a certificate under the Suitors Fund Act 1951 IN THE SUPREME COURT OF NEW SOUTH WALES COURT OF APPEAL CA 40395/98 DC 2290/97 MASON P SHELLER JA COLE AJA Wednesday, 21 July 1999 NOEL GRANT v ROYAL REHABILITATION CENTRE SYDNEY JUDGMENT 1 MASON P: I agree with Cole AJA 2 SHELLER JA: I agree with Cole AJA 3 COLE AJA: The issue in this appeal involves determining the process required of a judge addressing a claim by an employer or insurer who has paid worker's compensation to an injured employee who might have, but has not, claimed damages in respect of the injury suffered by him from a third party, when such employer or insurer seeks indemnity from that third party pursuant to the provisions of s.151Z(1)(d) of the Workers Compensation Act 1987. 4 The respondent, the Royal Rehabilitation Centre, employed a Mrs Stephan who was injured on 25 September 1992 by reason of the negligence of the respondent, Mr Grant, he being the driver of a vehicle which collided with the rear of the vehicle driven by Mrs Stephan. It was not in contest that in that collision Mr Grant was at fault. 5 Mrs Stephan was paid worker's compensation by the Royal Rehabilitation Centre. The amount of compensation, at the date of trial before Christie DCJ on 13 May 1998, totalled $56,648.85 comprising $37,504 lump sum payment, $17,700 in respect of 295 weekly payments of $60 per week, and medical expenses of $1,444.85. The trial Judge held that in relation to the lump sum payment of $37,504, the employer was restricted to recovering $32,000, being the sum which would have been payable to Mrs Stephan under the Motor Accidents Act 1998 had she sued in respect of damages under that Act, Christie DCJ assessing her injuries as being equivalent to twenty-one per cent of a most serious case. With the addition of interest, Christie DCJ held that the appellant was entitled to recover from Mr Grant the sum of $64,188. 6 In reaching his decision, Christie DCJ did not determine the amount which Mrs Stephan would have been entitled to recover had she sued Mr Grant pursuant to the Motor Accidents Act. His Honour addressed the component of general damages to which I have referred, the past payments of $60 per week being representative of past economic loss, and past medical expenses. His Honour did not assess any figure for future loss of income earning capacity, nor for future medical or other expenses. Accordingly, there was no determination of the sum which Mrs Stephan would have recovered had she sued for damages. 7 Section 151Z of the Workers Compensation Act addresses the circumstances where an injured worker might recover either common law damages or workers' compensation in respect of the suffered injury. A worker may commence proceedings for both damages and compensation, but is not entitled to retain both (subs.(a)). If the worker first recovers compensation, and then damages, the amount of compensation recovered is to be repaid to the employer or insurer who made the compensation payments, and no further compensation is payable (subs.(b)). If the worker first recovers damages, he is not entitled to recover compensation (subs.(c)). Subsection (d) provides: "If the worker has recovered compensation under this Act, the person by whom the compensation was paid is entitled to be indemnified by the person so liable to pay those damages (being an indemnity limited to the amount of those damages)." "Those damages" refers to the damages payable at common law, as restricted by statute, in respect of the injury. 8 Accordingly, to determine whether the sum which has been paid as compensation is recoverable from the tortfeasor, two steps are necessary. The first is to determine the quantum of common law damages which would have been recoverable had they been sued for. The second is to determine the amount of compensation which has been paid. The amount of the indemnity provided by s.151Z(1)(d) is limited by the former determination. If the amount claimed by way of indemnity is less than the amount of damages so determined, the employer or insurer making continuing payments of compensation can further claim under the indemnity at a later point in time up to the limit of the sum determined as the amount of damages which the injured worker would have recovered at common law. 9 It is not a proper exercise of the functions required by s.151Z(1)(d) for a court to find, when an indemnity is claimed by an employer, merely that the sum so claimed is less than the amount which the worker would have recovered had he sued at common law. Subsection (d) requires a determination of "the amount of those damages" as that limits the amount of the indemnity. There is sound reason why that should be so. Were it otherwise, on each application for an indemnity which may be brought years apart, it would be necessary for different judicial officers to determine the amount of common law damages to which the injured worker would have been entitled. Apart from practical difficulties, that would lead to multiplicity of litigation which might involve different judicial officers expressing different views regarding the quantum of such damage. The legislature plainly had in mind that there would be one determination of the quantum of common law damages which the injured worker would have recovered, which determination will be binding as between the employer paying compensation to the injured worker, and the tortfeasor. Thereafter, once that limiting figure is known, both the employer and the tortfeasor, or his insurer, will know the extent to which the indemnity provided by s.151Z(1)(d) is recoverable from the tortfeasor. Certainty is introduced in the first proceeding. 10 Accordingly, it is incumbent upon the court hearing the first claim for indemnity pursuant to the section to determine the amount of "those damages" which would have been recoverable from the tortfeasor. That involves a determination of all of the constituent elements in such a damages claim including general damages, and all forms of economic loss including loss of past and future income earning capacity. This the Judge did not do. 11 Accordingly, the appeal should be upheld, the judgment and orders of Christie DCJ of 13 May 1998 set aside, and the matter remitted to the District Court for further hearing. 12 The respondent submitted that the procedure adopted by the trial Judge of finding sufficient elements of the common law damages to exceed the amount of the indemnity then claimed in respect of workers' compensation payments was a process which the appellant invited the trial Judge to follow. Accordingly, although the appellant now seeks to challenge that process, a special order should be made that the appellant pay the respondent's costs, including the costs of the application for leave to appeal. 13 It is true that the approach of the respective parties is not, from the transcript, entirely clear. However, counsel for the appellant did submit to the trial Judge in the following terms: "If I can with respect suggest that the steps that your Honour will take is firstly to assess the case under the Motor Accidents Act , secondly to assess what sum is recoverable to the workers' compensation insurer - having made the findings as to damages under the Motor Accidents Act and that involves looking at the award and working out exactly what … ." That seems to me to be an invitation to the trial Judge to follow the two step process which is the correct process, but which the trial Judge did not follow. 14 In those circumstances, in my view, the usual rule should apply. The respondent should pay the appellant's costs of the appeal but should have, if qualified, a certificate under the Suitors Fund Act 1951. The costs of the trial before Christie DCJ should be costs in the retrial. 15 I would propose the following orders: (1) Appeal upheld. (2) Judgment and orders of Christie DCJ dated 13 May 1998 set aside. (3) The matter be remitted to the District Court for further hearing. (4) Costs of the proceedings below before Christie DCJ be costs in the rehearing. (5) The respondent is to pay the appellant's costs of the appeal but is to have, if qualified, a certificate under the Suitors Fund Act 1951. ---------------------- DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated.