Welcome to the December 2012 issue of the Edwards Michael Lawyers eBulletin.

High Court considers Employer’s claim for loss of Services resulting from Injury

In Barclay v Penberthy [2012] HCA40 (2 October 2012) the High Court considered a claim for damages by an employer against Defendants for loss of the services of its employees who were killed as a result of an aircraft accident during the course of their employment.

The cause of action was brought per quod servitium amisit (“per quod”), which the Court noted was designed to provide a remedy in circumstances where an employer has suffered loss of an employee as a result of the intentional or negligent actions of a Defendant, such as to deprive the services of the employee to the benefit of the employer.

These actions have particular relevance to the issue of recoveries by employers in New South Wales where Section 151Z of the Workers Compensation Act 1987 does not apply. Section 151Z only applies in circumstances where an injury for which compensation is payable was caused under circumstances creating a liability in some person other than the worker’s employer to pay damages in respect of the injury. Thus, for example, where an employer is liable to pay increased damages as a result of negligent medical treatment, Section 151Z is not applicable because the post-injury negligent act did not cause the injury for which compensation is payable. In situations of this kind, it has been attractive for employers and workers’ compensation insurers to rely on a per quod action to circumvent the scenarios where Section 151Z may not provide appropriate relief in terms of recovery.

The Court unanimously held that per quod actions continue to exist under the Common Law of Australia.

The Court then considered the question of the measure of damages in a per quod action. The majority endorsed the following statement of Kelly JA of the Ontario Court of Appeal in Genereux v. Peterson Howell and Heather (Canada) Limited [1973] 2 OR 558:

“My conclusion is that while the Canadian cases have extended the action per quod to situations other than that of the loss of service of a domestic or menial servant, they have observed caution in dealing with the scope of the recoverable damages and have disapproved any extension of the basis of assessing the amount recoverable beyond the actual value of the services lost”.

particularly in relation to working Directors, where diminished profits of a company occasioned by loss of the services may be recovered, although not in circumstances where the damage can be considered too remote.

Keifel J, delivering a minority Judgment, held that damages in per quod actions are to be measured by reference to the consequences of loss of the employee’s services and that damages do not extend to all other consequences which flow from the fact that the employee has been injured. Her Honour accepted that the market value of the services lost will generally be calculated by reference to the price of substitute labour. Her Honour rejected the notion that damages could be assessed on a wider basis, including for loss of profits.

Her Honour appears to have been primarily concerned with cases of loss of profits and did not specifically deal with the question of losses such as medical, hospital and other expenses, which have previously been held to be recoverable in New South Wales in per quod actions (see: Marinovski v. Zutti Pty Limited [1984] 2 NSWLR 571).

The Decision is encouraging in terms of the High Court’s determination that per quod actions continue to exist in Australian Common Law, however the Court has cautioned that the measure of damages ought be confined.


 Work Injury Damages—Economic Loss

The Court of Appeal recently considered the issue of how to calculate economic loss in circumstances where a Plaintiff earning limited income from employment in a cake shop suffered injury at a time when she had tendered her resignation in order to venture into business with her Husband.

In McDonald v. McAlicie [2012] NSWCA 346, Allsop P stated:

“Compensation is for loss of earning capacity, not loss of earnings, but wage rates being, and likely to be, earned afford a basis for the assessment of the computation for loss of capacity. One must identify the capacity lost and the economic consequences that will probably flow from that loss. This of course involves the assessment of possibilities and the future. The judgment is a species of discretionary judgment as to what is fair and reasonable compensation for the injuries received…”

His Honour noted that there were uncertainties in relation to whether the Plaintiff’s business venture with her Husband would succeed, however he observed that in the event of the business failing, the Plaintiff would have the option of returning to the workforce. His Honour also considered that a failure would occur within a relatively short period of time, 15 months. His Honour was also mindful of a disability of the worker’s Husband and of the worker’s need to take paid employment to support her family should the business venture not succeed. Economic loss was awarded by reference to pre-injury earnings.

His Honour recognised the uncertainty which would arise by virtue of the proposed business ventures and he thought this could be addressed by increasing vicissitudes for future economic loss from 15% to 20%.


Section 151Z Recovery

In a dispute between an employer and a supplier of a gas cylinder delivery system (a cage and ramp) which ultimately caused the Plaintiff’s injuries, the Court of Appeal overturned a Trial Judge’s apportionment, increasing the employer’s liability from 50% to 75%.

It was accepted that the integrated purpose-built ramp provided by the supplier invited a particular method of unloading which was unsafe.

The Court rejected the submission that the employer had a much higher standard of care than a supplier, however agreed that the employer had greater responsibilities for the worker’s welfare than the supplier, whose obligation was restricted to the safety cage itself. The Court held that the obligation of the employer could not be dislodged by entrusting tasks in terms of adequate plant and equipment and a safe system of work to others.

The Court found that problems with removing gas cylinders had been identified by the employer before the accident, and that on the evidence several measures were available to the employer to minimise the risk of injury which did not require any alteration to design of the cage and ramp.

The Court ultimately apportioned liability at 75% to the employer and 25% to the supplier.


WCC Considers Section 52A

In Jackson v. Cement Australia (Kandos) Limited [2012] NSWWCCPD 67 Deputy President Roche revoked an Arbitrator’s determination that a worker had failed to obtain suitable employment primarily because of the state of the labour market (Section 52A(1)(c)).

The Deputy President decided that “primarily” means “chiefly” or “principally”. It was then necessary to consider the different causes of the worker’s failure to obtain suitable employment in order to decide if the labour market was “chiefly” or “principally” responsible for that failure.

The Deputy President decided that the worker’s failure to obtain suitable employment was due to the worker’s lack of relevant recent work experience, lengthy time out of the workforce, limited training and skills, and the state of the labour market. In the circumstances, he was not satisfied that the state of the labour market was the “primary” reason for the worker’s failure to obtain suitable employment.

The insurer’s Section 52A denial was therefore overturned and the insurer was ordered to reinstate payments of compensation.


WCC Deputy President prefers Counsel for Appeals

In several recent cases, Deputy President Roche has been highly critical of the developing practice of inexperienced solicitors conducting Appeals. The Deputy President has strongly indicated a preference for Counsel to conduct Appeals (see, for example, NSW Department of Education v. Murray [2012] WCCPD 76 and Nolan v. Department of Education and Training [2012] NSWWCCPD 74).

In Nolan, the Deputy President stated that having solicitors prepare submissions on Appeal is counter-productive and unhelpful, often resulting in:

  • New arguments being presented on Appeal without regard to the fact that parties are generally bound by the conduct of their case at Arbitration.
  • Unsubstantiated arguments being presented without regard to binding authority.
  • Fundamental errors and misunderstandings about basic legal concepts with regard to the onus of proof and the fact that the Commission is bound to apply substantive rules of law.
  • Misunderstandings about elementary principles, such as the rule in Jones v. Dunkel.
  • Appeals generally being presented without properly identifying the grounds of Appeal and directing submissions to those grounds, as required by Practice Direction No.6.

The Deputy President concluded that this practice is unsatisfactory, as it does not promote the efficient resolution of Appeals and does not advance the interests of the parties involved.


WCC Costs: Communicate before proceeding to Assessment

In Carr v. NSW Women’s Refuge Movement [2012] NSWWCC C074 the Registrar’s Delegate was critical of the haste of a worker’s solicitor to file an Application for Assessment of Costs without first attempting to communicate with the insurer in order to resolve the outstanding issues:

“…the confusion arising from the payment of costs could have been more (sic) clarified by way of further negotiation and communication between the parties than by lodging the Assessment Application. This is not to say that the Assessment Application was unreasonably lodged, but there appears to be greater scope to resolve the costs dispute by active communication between the parties’ legal representatives rather than simply pursuing a costs assessment, following a single written demand”.

Accordingly, the Registrar’s Delegate only allowed a nominal amount of $137.50 for costs of the Assessment.