High Court Confirms Reduced Recovery for Contributory Negligence

In Hickson v. Goodman Fielder Limited [2009] HCA 11 (12 March 2009), the High Court considered a novel argument in relation to whether an employer was entitled to full repayment of workers compensation payments under Section 151Z(1)(b) of the Workers Compensation Act in circumstances where the worker had settled his third party proceedings, and so there was no determination in relation to contributory negligence.

The employer argued that it should be entitled to 100% repayment because, although contributory negligence had been alleged, there was no determination and it was therefore impossible to ascertain the extent of any compromise, for the purposes of the settlement, to account for the contributory negligence defence.

The worker argued that any payments should be reduced by the monetary amount that his total damages would have been reduced to account for contributory negligence.

The Court ultimately determined that the Section 151Z repayment should be reduced by the percentage amount of the worker’s contributory negligence. The Court illustrated this by stating that if a Worker is held 25% liable pursuant to a contributory negligence defence, then the workers compensation refund must be reduced by 25%.

This decision creates considerable uncertainty for employers, who have traditionally maintained a fairly passive position in order to minimise legal costs, in the expectation that in most cases a full recovery will follow any settlement of a worker’s third party claim, and on the basis that any judgment will clearly identify the percentage of a worker’s contributory negligence.

Following this decision, employers will now need to carefully consider their position at an early date, to account for the possibility that a worker’s third party claim will be settled and that there will be a subsequent argument in relation to the extent that any workers compensation payments ought be reduced to account for the worker’s contributory negligence.

Paradoxically, a worker who has strongly argued that contributory negligence has been nil or minimal for the purposes of his third party claim, will subsequently seek to argue that there has been substantial compromise to account for a significant degree of contributory negligence for the purposes of minimising repayment of workers compensation.

Employers may therefore be best served by commencing their own recovery proceedings and having those proceedings joined to the worker’s claim, so that workers are compelled to maintain a consistent position in relation to contributory negligence, with the most favourable position for the purposes of the third party claim being that there was no or minimal contributory negligence, ensuring that any reduction of the workers compensation refund is also kept to a minimum.

Such an approach would have the added benefit of preserving and advancing the employer’s entitlement to interest on workers compensation payments.

Update on Pre-Filing Statements

The NSW Court of Appeal has recently provided clarification in relation to the validity and date of service of Pre-Filing Statements in Strasburger Enterprises Pty Limited t/as Quix Food Stores v. Serna [2008] NSW CA 354 and Paper Coaters Pty Limited v. Jessop [2009] NSW CA 1 (30 January 2009).

In both cases, the date of service of the Pre-Filing Statement was at issue, because under Section 151DA of the Workers Compensation Act 1987 service of a Pre-Filing Statement stops time running for limitation purposes while it remains current.

The following principles emerge from these decisions:

  • A Pre-Filing Statement is not valid unless it contains the minimum information required by Section 315(1) of the WIM Act: setting out particulars of the claim and the evidence that the claimant will rely on to establish or in support of the claim.
  • Without such minimum information, the document cannot constitute a Pre-Filing Statement.
  • If the minimum information is provided, but the Defendant asserts that the Pre-Filing Statement is nonetheless defective, the onus is on the Defendant to notify the claimant of any alleged defects within seven days after service of the Pre-Filing Statement. The right to challenge on the basis of any defects is lost after seven days.
  • The Defendant must be able to identify with a degree of confidence the date on which a Pre-Filing Statement has been served upon it.
  • If a Pre-Filing Statement identifies further documents that are to be provided, it is not considered to have been served until those documents have been provided and the claimant has communicated to the Defendant that the Pre-Filing Statement is complete.
  • While one Pre-Filing Statement is current, a claimant cannot validly serve another Pre-Filing Statement. Any second Pre-Filing Statement will be regarded as ineffective.
  • A Pre-Filing Statement may be withdrawn, but the withdrawal must be communicated to the person on whom it has been served. However, in Jessop, Gyles AJA expressed the view that a Pre-Filing Statement cannot be withdrawn, to permit another to be served, once the initial Pre-Filing Statement has been acted upon by the proposed Defendant.

If there is any doubt in relation to whether a Pre-Filing Statement is valid, notice must be given to the claimant within seven days after the Pre-Filing Statement is served, pursuant to Section 317(1) of the 1998 Act. Any dispute may then be referred to the Registrar for determination and the Registrar may give directions as to the action necessary to cure any defect. Failure to give such notice prevents a Defendant from relying on Section 317(1) (see: John Lacey Earth Moving Pty Limited v. Campbell-Willis [2007] NSW WCC PD 197 at [29]).

Costs in Work Injury Damages Claims

n Smith v. Sydney West Area Health Service [No.2] [2009] NSW CA 62, the NSW Court of Appeal considered the question of liability for costs in circumstances where a worker recovered more than the employer’s Mediation offer, but less than the Plaintiff’s Mediation offer.

The Court determined that costs liability was to be determined on the basis of the final offers recorded at Mediation:

“In short, so far as costs are concerned (but subject to agreement between the parties), the parties to court proceedings in a claim for Work Injury Damages are fossilised in their respective positions at the conclusion of the Mediation”.

The Court decided that costs are governed solely by the WIM Act and the Workers Compensation Regulations.

Because the claimant obtained a Judgment that was less favourable than the terms of the claimant’s final offer at Mediation, the claimant was required by Regulation 91 to pay her own costs, not only of initial proceedings in the District Court but also in relation to Court of Appeal proceedings, notwithstanding the fact that a District Court verdict for the Defendant had been overturned and replaced with a substantial (but less than the claimant’s Mediation offer) award of damages.

This case highlights the importance of parties recording robust offers at Mediation in order to protect their interests regarding costs.

Back in Action

We are pleased to welcome Maryan Lee back from Maternity Leave. Maryan can be contacted at m.lee@edwardsmichael.com.au