New South Wales Supreme Court CITATION : Ulan Coal Mines P/L v Hunter Area Health Service & Anor [1999] NSWSC 664 CURRENT JURISDICTION : Common Law FILE NUMBER(S) : 20875/94 HEARING DATE(S) : 15 June 1999 JUDGMENT DATE : 5 July 1999 PARTIES : Ulan Coal Mines Pty Limited v Hunter Area Health Service and Kim Alexander Anthony Ostinga JUDGMENT OF : Grove J at 1 COUNSEL : L. Levy SC and J. Renwick (Plaintiff) I. Harrison SC (Defendant) SOLICITORS : Charlton Shearman (Plaintiff) Corrs Chambers Westgarth (Defendant) CATCHWORDS : Negligence - Proximity of employer liable to pay workers compensation and tortfeasors who extend incapacity of employee - gap asserted in cross indemnity provisions of compensation legislation - no duty at common law - precedent - joint judgment of Court of Appeal (Victoria) should be followed by single judge in N.S.W. unless convinced decision is wrong ACTS CITED : Workers Compensation Act 1987 Jaensch v Coffey 1984 155 CLR 549 CASES CITED : Caltex Oil (Aust) v The Dredge "Willemstad" 1976 136 CLR 529 Scott v Bowyer 1998 1 V.R. 207 G.I.O. (Aust) v Robson 1997 42 NSWLR 439 DECISION : Summons dismissed THE SUPREME COURT OF NEW SOUTH WALES COMMON LAW DIVISION MICHAEL GROVE J 5 July 1999 20875/94 - ULAN COAL MINES PTY LIMITED v HUNTER AREA HEALTH SERVICE and KIM ALEXANDER ANTHONY OSTINGA JUDGMENT 1 HIS HONOUR : The plaintiff (Ulan) was the employer of John Mini (Mini) who was injured in a motor vehicle accident on 15 November 1988 in circumstances giving rise to payments to him and of expenses on his behalf pursuant to the Worker' Compensation Act 1987. The first defendant owned and managed Royal Newcastle Hospital and the second defendant was a visiting medical officer practising, inter alia, at that hospital. Mini was treated by hospital staff and the second defendant in respect of injuries sustained in the accident. It is alleged that such treatment was negligently performed thus increasing the extent of Mini's incapacity beyond what it would have been if reasonable care had been taken in treating the original injuries. Ulan alleges that the payments it was required to make pursuant to the Act to and for Mini would have been significantly reduced if his incapacity had not been extended by the negligence of the defendants. Mini sued the defendants in this Court and recovered monetary compensation from them as a result of settlement of that action. Neither Mini nor the defendants reimbursed Ulan for any payments of compensation, particularly in respect of payments referrable to the extended incapacity of Mini alleged to have been caused by the negligence of the defendants. 2 The foregoing is a synopsis of an agreed statement of facts for the purpose of determination of a separate question ordered pursuant to Part 31 rule 2 namely "whether on the facts as agreed or proved, did the defendants or either of them owe a duty of care to the plaintiff." 3 The additional evidence consisted of documentary material which I find demonstrated that both the defendants were aware that Mini was being treated by them for injuries in respect of which he had an entitlement to worker's compensation benefit and it was foreseeable that an employer would incur expense in meeting its obligation to provide such benefit and further, that if the period of Mini's incapacity were extended by negligent conduct on their part, that employer would incur inflated expense referrable to the longer period. That foresight is an essential ingredient in the foundation of a cause of action but does not alone found one. 4 Mr Harrison SC for the defendants pointed out that the terms of the plaintiff's pleading (Amended Statement of Claim filed 19 August 1996) asserted that "each of the defendants owed to the employee (Mini), and therefore to the plaintiff (Ulan), a duty of care ……. "(paragraph 18) and the assignments of negligence (paragraphs 21 and 22) were in similar terms. I agree with his contention that tort liability is not derivative or subrogative and a plaintiff can obtain damages for breach of duty owing to himself and not for breach of duty to another. It is not presently necessary to qualify my general agreement by reference to apparently anomalous actions such as damages for nervous shock and per quod servitium amisit . However the separate question, despite the pleadings, was argued in its terms of whether the defendants or either of them owed a duty of care to Ulan which, if exists, in my view must be owed directly by them to the plaintiff. It should also be mentioned that Ulan's pleading does not claim a cause of action per quod servitium amisit nor does it claim recovery pursuant to s 151Z of the Workers' Compensation Act 1987. Mr Levy SC who appeared with Mr Renwick for Ulan expressly submitted that the plaintiff's claim was not addressed by the lastmentioned provision but that "statutory silence" did not abolish right to common law action otherwise available. I agree with that generality but the essential question is whether such action is available in this case. 5 It is convenient to sketch in outline the argument by Ulan. 6 The elements of a cause of action in negligence were stated by Deane J in Jaensch v Coffey (1984) 155 CLR 549 @ 586 to be in a form appropriate to that case (which was a claim for damages for nervous shock at common law): "…(i) a relevant duty owed by the defendant to the plaintiff to take reasonable care resulting from the combination of (a) reasonable foreseeability of a real risk that injury of the kind sustained by the plaintiff would be sustained either by the plaintiff, as an identified individual, or by a member of a class which included the plaintiff, (b) existence of the requisite element of proximity in the relationship between the parties with respect to the relevant act or omission and the injury sustained, and (c) absence of any statutory provision or other common law rule (e.g., that relating to hazards inherent in a joint illegal enterprise) which operates to preclude the implication of such a duty of care to the plaintiff in the circumstances of the case; (ii) a breach of that duty of care in that the doing of the relevant act or the doing of it in the manner in which it was done was, in the light of all relevant factors, inconsistent with what a reasonable man would do by way of response to the foreseeable risk (see Wyong Shire Council v Shire (1980) 146 CLR at pp 47-48; The Wagon Mound (No 2) [1967] 1 AC at pp 641-643 and Schiller v Mulgrave Shire Council (1972) 129 CLR 116 at pp 131-132; and (iii) injury (of a kind which the law recognizes as sounding in damages) which was caused by the defendant's carelessness and which was within the limits of reasonable foreseeability." 7 It is recognized that the damage now sought to be claimed is for pure economic loss. It might be interpolated that Deane J in the foregoing definition "left to another day" the question whether all actions in negligence, including actions involving pure economic injury, can properly be accommodated within that framework structured as it is upon reasonable foreseeability. However pure economic loss does give rise to action if a defendant has knowledge or means of knowledge that a particular person, not merely a member of an unascertained class, will be likely to be injured provided there is "appropriate proximity": Caltex Oil (Australia) Pty Limited v The Dredge Willemstad 1976 136 CLR 529. 8 The fulfilment of that proviso is of course the essential focus of the present dispute. Reference was made to the adjectival trio of proximities described by Deane J in Jaensch physical, circumstantial and causal although counsel did not elect to seek to limit the current claim within any particular one of those classifying words. 9 In summary it was submitted that necessary proximity had been made out because there was no prospect of an indeterminate liability in the circumstances of the plaintiff's claim; the class of persons to whom the claimed duty was owed was readily ascertainable; the duty did not supplant or impermissibly supplement other extant legal remedies, and there would be no double recovery by the plaintiff in the circumstances. 10 Therefore, although it was acknowledged that no precedent could be found for allowing a claim in such circumstances, mere novelty was no bar and the necessary criteria for actionability had been established. A final obstacle however was perceived in the decision of the Victorian Court of Appeal (Winneke P, Brooking and Hayne JJA) in Scott v Bowyer 1998 1 VR 207. 11 Some detailed attention to that case is appropriate. A young boy (Wolstenholme) was employed by newsagents (Bowyer) to deliver newspapers. He rode a bicycle upon his rounds in the course of which he came into collision with a motor car driven by one Scott. The boy was rendered quadriplegic. Bowyer became liable to pay worker's compensation benefits to and on behalf of Wolstenholme. The expenses accumulated to more than $1.5m. Bowyer sued Scott. The initiating pleading was described by the Court of Appeal as "at best, exiguous" but it was treated as claiming an indemnity pursuant to the terms of Victorian worker's compensation legislation and, alternatively, pursuing a claim in negligence. Their Honours made these observations about those claims: "It (the claim in negligence) is, of course, a wider claim because it contemplates an assessment of damages not only for compensation payments already made but for such payments as are likely to be made in the future pursuant to the relevant workers compensation scheme. The scheme, on the other hand, contemplates only an indemnity in respect of payments made, which indemnity is reducible depending upon whether the worker has been found responsible wholly or in part for his own injuries and/or whether the employer has been found to be legally liable for such injuries. Thus the employer's statutory right of recovery is circumscribed by provisions which have as their evident purpose an adjustment of the cost burden of the compensation scheme and which do not necessarily follow strict common law principles." 12 The trial judge found both Wolstenholme and Scott negligent in their roles as cyclist and motorist and apportioned responsibility 70 percent and 30 percent respectively. This apportionment was not disturbed on appeal. 13 The trial judge was said to have appeared to have determined that Scott owed Bowyer a duty of care in respect of the damage constituted by the liability to pay medical and like expenses and weekly payments to Wolstenholme. Although in the present case Ulan had a liability to Mini in respect of what might be called the consequences of original injury in the motor vehicle accident, in respect of the extended liability as a consequence of the alleged negligence of the defendants the situation is in principle indistinguishable from the Victorian case. 14 The authorities relied upon by the judge of first instance were collated by the Court of Appeal: " Attorney-General for New South Wales v Perpetual Trustee Co Ltd (1952) 85 C.L.R 237 at 290, where Fullagar J., in reliance upon the dictum of Bayley J. in Hall v Hollander (1825) 4 B. & C. 660 at 662; 107 E.R. 1206 at 1206-7, put forward as a possible view, in a case in which personal injuries had been caused as a result of careless driving, that medical expenses should be recoverable by any person who was under a legal duty to the injured person to pay them. Blundell v Musgrave (1956) 96 C.L.R. 73 at 97-8, where Fullagar J. referred to his earlier dictum in the Perpetual Trustee case. Commissioner for Railways (N.S.W.) v Scott (1959) 102 C.L.R. 392 at 408, where Fullagar J expressed the opinion that medical, hospital and nursing expenses incurred in consequence of injuries inflicted by a negligent defendant were recoverable from that defendant by any person who was under an obligation, contractual or otherwise, to pay them and were possibly recoverable in some cases even by a plaintiff who was under no legal obligation to pay them. Attorney-General v Wilson and Horton Ltd [1973] 2 N.Z.L.R. 238, where an employer sought to recover 'make-up' or 'accident' pay from a negligent driver who had injured its employee and the Court of Appeal held that, although a per quod action lay, the amount of the 'make-up' pay was not recoverable as damages. At 257, Richmond J. expressed tentative agreement with the view of Fullagar J. in the Perpetual Trustee case and Scott's case that where a person was injured by negligence the resulting medical and like expenses were recoverable by anyone who was under a legal obligation to pay them. Griffiths v Kerkemeyer (1977) 139 C.L.R. 161 at 177, where Stephen J. referred to what Fullagar J. had said in Blundell's case and Scott's case. Smee v Tibbetts (1953) 53 S.R.(N.S.W.) 391, where a husband was held entitled to recover from a driver whose negligence had injured his wife the cost of her medical treatment. Lloyd v Lewis [1963] V.R. 277, where a parent was held entitled to recover the cost of medical treatment given to an injured infant child. Sydney City Council v Bosnich [1968] 3 N.S.W.R. 725, where an employee was injured in a motor accident and his employer sought to recover three different kinds of payment that had been made. The first was weekly payments of workers compensation ($353.78). The second was medical and hospital expenses paid pursuant to the Workers' Compensation Act ($76.25). The third was accident pay ($85.52), provided for by an industrial award. The plaintiff sought to recover all three amounts in a per quod action and alleged in addition that the weekly payments of compensation and the medical and like expenses were recoverable by reason of the express right of indemnity created by the Workers' Compensation Act. The Court of Appeal held that all three amounts were recoverable and the only difference between its members concerned the scope of the per quod claim. Asprey J.A. considered that the payments of all three kinds could be recovered in the per quod action, while Sugarman A.P. considered that only the accident pay could be recovered in the per quod claim: the workers compensation payments were in his Honour's view recoverable only under the statute, since those payments were 'the subject of a special statutory remedy under s 64(1)(b) of the Act which in my opinion excludes the common law remedy in cases to which it is applicable.' The third member of the court, Hardie A.J.A., found it unnecessary to express any opinion on this point." 15 Their Honours also recorded supplementary authority referred to in the appeal namely: "…….. Pratt & Goldsmith v Pratt [1975] V.R. 378 and Kirkham v Boughey [1958] 2 Q.B. 338. In the first of these cases Adam and Crockett JJ., at 387, referred to the Perpetual Trustee case and Scott's case and spoke of the recoverability of a loss which 'has arisen as an expense which the third party was under a legal duty to discharge'. In the second case, Diplock J., at 342, explained the right of a husband to recover the cost of his wife's medical treatment, and the parent's right to recover the cost of treating an injured infant, as lying in the legal duty to provide the treatment." 16 The Court observed that senior counsel submitted that as between Scott and Bowyer there was causal proximity and did not argue that the case could be viewed as one of physical or circumstantial proximity. It was commented that it was by no means apparent that the case should be regarded as one of causal proximity. 17 The Court concluded that no relationship of proximity should be held to exist in relation to the driving of Scott and the kind of loss sustained by Bowyer. The Court also dealt with a separate issue concerning the measurement of the scope of liability under the statutory claim for indemnity which it is unnecessary to examine in this case. 18 In written submission Ulan (at least tacitly) recognized the identity of principle to be determined in answer to the present separate question and the claim in negligence in Scott and contended that the judgment was "unconvincing and should not be followed". It was stated that the "….reasons for failing to find proximity boiled down to novelty, some equivocal contrary dicta, and unjustified 'floodgates' fear and an inappropriate view that the worker's compensation legislation indemnity provisions ought to be regarded as fair and sufficient". 19 It is true that in Scott the Court said that "having regard to the statutory right to an indemnity which existed at the relevant time in the present case, it seems to us not to be fair and reasonable to hold that a relationship of proximity existed so as to give rise to the duty of care alleged" (@ p217) and that it is arguable that the Worker's Compensation Act 1987 may have left a gap in s 151Z where the worker has obtained damages against a tortfeasor not responsible for the injury for which compensation was payable under the Act but for extending the period during which such payments had to be made, nevertheless that was but one of the reasons expressed for holding that no duty of care was owed at common law by Scott towards Bowyer. In addition my attention was drawn to the judgment of Stein JA (with whom Mason P and Handley JA agreed) in G.I.O. Australia Limited v Robson 1997 42 NSWLR 439 @ 448 where his Honour said: "In my view, s 151Z(1)(d) does not exclude any common law right to recover damages for loss of services of an employee." 20 That case was decided after Scott v Bowyer . There is reference in the judgment of Mason P. The issue was whether the action per quod servitium amisit had been impliedly abolished by the statute and the answer to that was in the negative. That conclusion was not inconsistent with Scott and nothing was said to indicate any reservation of the members of the Court about that decision otherwise. 21 I am not bound to follow a decision of the Victorian Court of Appeal but in the Australian context, particularly on an issue of common law, I consider that I should follow its decision unless I am convinced that it was wrong. I am not so convinced. 22 Senior counsel for the plaintiff forcefully referred to the perception that the plaintiff suffered loss as a result of negligent conduct of the defendants and submitted that the common law was not so sterile as to be incapable of bringing forth a remedy. I could only respond to that submission in the plaintiff's favour by declining to follow Scott v Bowyer which I have indicated is a course as a judge of first instance I am not prepared to adopt. 23 I answer the separate question whether on the facts agreed and proved the defendants or either of them owed a duty of care to the plaintiff in the negative. 24 I order the plaintiff to pay the defendants' costs of the trial of the separate issue. ********** Last Modified: 07/05/1999 DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. 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