FAI Traders Insce Co Ltd v HIH Winterthur Workers' Compensation (NSW) Pty Ltd S192/1998 [1999] HCATrans 250 (6 August 1999)

IN THE HIGH COURT OF AUSTRALIA

Office of the Registry

Sydney No S192 of 1998

B e t w e e n -

FAI TRADERS INSURANCE COMPANY LIMITED

Applicant

and

HIH WINTERTHUR WORKERS' COMPENSATION (NSW) PTY LIMITED

Respondent

Application for special leave to appeal

GUMMOW J

CALLINAN J

TRANSCRIPT OF PROCEEDINGS

AT SYDNEY ON FRIDAY, 6 AUGUST 1999, AT 11.07 AM

Copyright in the High Court of Australia

MR J.D. HISLOP, QC: May it please the Court, I appear with my learned friend, MR G.F. LITTLE, for the applicant. (instructed by Edwards Johnstone Sullivan)

MR B.W. COLLINS, QC: If your Honour please, I appear with my learned friend, MR J.P. SEWELL, for the respondent. (instructed by HIH Workers' Compensation (NSW) Pty Limited)

GUMMOW J: Yes, Mr Hislop.

MR HISLOP: Your Honours, the basic propositions for the applicant are that the decision of the Court of Appeal in this case is inconsistent with the line of authorities, some 70 years old, applied to section 151AB by the Court of Appeal in CIC v Alcan, that it is inconsistent with other authorities in the Court of Appeal and that the matter is sufficiently important to merit a grant of special leave. If I might deal - - -

GUMMOW J: It is the New South Wales Compensation Act.

MR HISLOP: Yes, it is.

GUMMOW J: Why should we ordinarily get involved in that?

MR HISLOP: Well, because it is a matter of considerable importance as it affects many, many matters - - -

GUMMOW J: Not nationally.

MR HISLOP: No, not nationally, although it does involve a phrase which is to be found, not only in section 151AB, but also in sections of the Workers' Compensation Act in New South Wales, principally sections 15 and 17, and also in the Workers' Compensation Act in Victoria, although in relation only to workers' compensation and not to common law.

GUMMOW J: But no other legislature has enacted anything precisely like 151AB, have they, of the - - -

MR HISLOP: Not in this country, no, your Honour. However, our submission is that it is a matter of very considerable importance in the State of New South Wales and that the error which has been made in the decision before this Court, is one which really is quite contrary to the longstanding authorities which were adopted in relation to 151AB, and that unless this - - -

GUMMOW J: Well, 151AB came in in 1987.

MR HISLOP: In fact, it came in in 1991, your Honour.

GUMMOW J: With an amendment in 1991 - through an amendment in 1991.

MR HISLOP: Not precisely, your Honour. It had its foundation in the 1926 Workers' Compensation Act. When the 1987 Act came in, it did not contain 151AB. That came in in 1991; was subsequently amended in 1995.

GUMMOW J: Yes, that is right. Has it been amended since?

MR HISLOP: Not since 1995, your Honour, no. So that the basic submission, in response to what your Honour is, at least, impliedly putting to me, is that the matter is one of great significance in relation to common law in relation to cases involving occupational diseases, which there are many and because of that importance, in New South Wales, it would be appropriate for the Court to consider the matter of sufficient importance to grant special leave even though, we accept, that the section is one relating to this State only.

GUMMOW J: Yes. Now, perhaps, you had better indicate to us what the flaw is in the judgment in the Court of Appeal.

MR HISLOP: Yes, your Honours. One starts with the basic proposition that in the case of an occupational disease, the liability of the defendant to the injured party is to be determined by the application of ordinary common law principles. However, for the purposes of indemnity by an insurer in the case of an occupational disease, a deemed date of liability of the employer is determined by the application of the statutory provisions in section 151AB. Now, that deemed date is determined in accordance with 151AB(1) by determining:

when the worker was last employed by that employer in an employment to the nature of which the disease was due.

GUMMOW J: But all this turned, did it not, on the way in which the plaintiff was able to limit its claim to a particular period, namely, expiring on some date; well, I think, on 30 June 1987?

MR HISLOP: Yes, your Honour. That was the basis for the decision of this Court. But going back, historically, your Honour, and it has been adopted in relation to 151AB, that the purpose of the deeming provision in subsection (1) is that one does not look at the actual cause of the injury, one rather looks to when the person was last employed in particular employment. The question of true causation is irrelevant.

GUMMOW J: We have to construe a section. We will not do it by looking at some history, and some other time. What do you say is wrong in the construction placed on the words of section 151AB?

MR HISLOP: Well, the error is that if one reads 151AB literally, what it does is impose the liability to indemnify upon the insurer who was on risk when the worker was last employed by that employer in an employment to the nature of which the disease was due. Now, that occurred after 30 June 1987. In that case, the appropriate insurer should have been someone other than the insurer who was held liable because the whole effect of the section is quite artificial. It is accepted that it may impose a liability on an insurer who was not at risk at the particular time. Once that is accepted, the literal words of 151AB apply and the corollary is that the court erred in determining the insurer, as at 30 June 1987, was responsible because it did so by having regard to true causation when the test clearly, under the section, is an artificial test, not of true causation but of deemed causation.

GUMMOW J: Is it implicit in what is being said that you would reject the reasoning in the MMI Case, Baker's Case?

MR HISLOP: Yes, in the way it was interpreted by the Court of Appeal in the present case, yes, your Honour, we would, because that implies that one looks at true causation and that is, we say, the fallacy and that is contrary to all of previous authorities which were adopted and applied by the Court of Appeal in CIC v Alcan. The problem is highlighted by having regard to Kellogg's Case, your Honours, because if the principles in this case were applied to Kellogg's Case, then the result would have been quite different.

So, one starts with basic conflict between Kellogg's Case and Baker's Case. One then adds to it the FAI Case but one also must have regard to the fact that subsequent to Baker's Case, in Manufacturers Mutual v Goodyear, a decision in line with Kellogg's Case was reached, not in line with Baker's Case, although it is fair to say Baker's Case does not appear to have been cited there.

The relevant part of the decision of Mr Justice Handley is at pages 37 and 38, and it is quite clear that his Honour there is applying a test of actual cause, when the actual liability was incurred. That can be seen in the paragraph commencing immediately below line 5, and it can be seen also on the following page at the paragraph commencing at line 25.

Now, this is quite inconsistent with the House of Lords authority in Blatchford's Case, with the decision in Smith v Mann, a decision of this Court back in 1932. In that case, as was pointed out, or was held, for example, by Justice Rich, it is not necessary that the worker should establish - - -

GUMMOW J: But what provision was the Court construing in that case?

MR HISLOP: The Court was there construing section 7(4) of the 1926 Workers' Compensation Act which, it has been held in the CIC v Alcan by the Court of Appeal in New South Wales, involved principles which were directly applicable to section 151AB.

CALLINAN J: Mr Hislop, what do you say about the second last paragraph of Justice Handley's reasons for judgment at page 38?

MR HISLOP: "If the plaintiff had persisted" - - -

CALLINAN J: The last two sentences - yes.

MR HISLOP: Yes, we say that is wrong, your Honour.

CALLINAN J: Why is that wrong?

MR HISLOP: Well, because there once again, the judge is looking at true liability, not at the deeming situation which one has regard to under 151AB. He is committing, or deciding the matter on the very basis that this Court in Smith v Mann said one did not have regard to.

CALLINAN J: But what about where his Honour says:

in all probability the plaintiff would not have recovered any damages for his noise exposure after 30 June 1987 because of the restrictions in Div 3 of Pt 5 of the Act -

is that correct?

MR HISLOP: That may well have been the case, yes.

CALLINAN J: Then what about the next sentence:

If so the only damages awarded would have been for the period up to 30 June 1987 and the appellant would have been the insurer liable.

Do you accept that to be correct too, assuming the premise that you have accepted to be correct in the previous sentence?

MR HISLOP: Yes. It may well have been the case that the only liability, if the period had not been closed, for which damages would have been awarded, was up to 30 June 1987. But that is not to determine the question as to 151AB.

CALLINAN J: But the practical effect would have been exactly the same as the....now, the result now that has been reached.

MR HISLOP: Yes, but each would be wrong, your Honour, with respect. Because one does not look at true liability of the employer. Under the section you look at a deemed liability of the employer.

CALLINAN J: That may well be so, but if what his Honour says is correct, may it not be a reason for our refusing special leave, with the practical effect if it were to be the same, leaving aside any question that your submission may be right?

MR HISLOP: Well, no, your Honour, because the practical result, even accepting what his Honour said there, which should have been reached, would have been to impose liability on an insurer after 30 June 1987 because it is after that date that the worker was employed by that employer in employment to the nature of which the disease was due. You see, his Honour still fails to apply that and that has to be applied in either situation, whether the period is closed by the plaintiff worker or whether it is left open and he fails as to part.

That was what the decision in Kellogg determined, because in Kellogg's Case - again the Court of Appeal decision as the Court is aware - in that situation the worker was employed at the date of the hearing, the trial judge found a verdict based on evidence of exposure to 1984 but the insurer who was held liable was the insurer who was on risk from 1 July 1988 to 30 June 1992. In other words, in the decision of the Court of Appeal in Kellogg's Case, the liability was held to be in relation to a period up to 1984 but an insurer, on risk four years later, was held liable.

The reason for that was because on the appropriate construction of section 151AB adopted in that case, that insurer was on risk when the worker was last employed by that employer in an employment to the nature of which the disease was due. So, there is a direct conflict, in our submission, between the Court of Appeal's decision in Kellogg and the Court of Appeal's decision in Baker, and also the Court of Appeal's decision in a case currently before the Court.

GUMMOW J: What is wrong with Justice Fitzgerald's view of it, that in the end you look to a construction which appears best to fit with the avowed expression of purpose in subsection (2)?

MR HISLOP: Well, let me say as to that, firstly, his Honour Mr Justice Fitzgerald acknowledged the inconsistency between Kellogg and Baker.

GUMMOW J: Yes.

MR HISLOP: Secondly, there is no ambiguity when one looks at section 151AB. The words, in our respectful submission, are quite clear.

GUMMOW J: No, I do not think that will work, as a matter of statutory construction, will it? It is not a case where you can simply look at a section and say "This is the literal meaning" because, in terms of the section itself, you have to read it as a whole and you have to read it, in a way, starting with subsection (2) which gives you your charter before you set out to construe the rest of it.

MR HISLOP: But, with respect, your Honour, the charter in subsection (2) is merely the existence of a number of insurers. Once there are a number of insurers, ie, more than one - - -

GUMMOW J: No, that is not quite right, is it?

MR HISLOP: Well, I am looking for words in parenthesis for that comment.

GUMMOW J: It is to identify one insurer from amongst that number, single that one out:

is to indemnify the employer for the full amount.....without any right to a contribution -

from the others.

MR HISLOP: Yes.

GUMMOW J: Contribution from others on the same risk, I suppose.

MR HISLOP: Well, it just simply says "right to a contribution". So, in our submission, subsection (2) brings it into play when simple requirements in parenthesis are met, and there is no ambiguity in 151AB. But let me assume the contrary, let me assume there is an ambiguity, so that one does not necessarily have to adopt a literal interpretation. Mr Justice Fitzgerald preferred the approach adopted in Baker. He said:

Principally such a course seems to me to satisfy better the purpose of 151AB stated in subsection (2).

His Honour does not elucidate.

GUMMOW J: A purpose of subsection (2) is to, in old-fashioned language, identify the mischief which is trying to be solved.

MR HISLOP: Well, subsection (2) is to identify the situation in which the section comes into play and it does so when there are a number of insurers, we would submit, who hold policies during the time up to when the worker was last employed by the employer in relevant employment. But let me just briefly say that it is by no means clear, in our submission, that the approach adopted in Baker satisfies better the purposes of 151AB.

Firstly, if one adopts that approach one has to examine, in relation to the insurer, the question of actual causation, a matter which would normally be irrelevant so far as the action by the injured person against the defendant employer is concerned because provided there is injury caused during any part of the period of employment, that is sufficient for the plaintiff to succeed against the employer. Secondly, if there is any tortious - - -

GUMMOW J: Where does this word "causation" get into this section?

MR HISLOP: Well, the word "causation" gets in only because I use it in relation to the determination of "liability".

GUMMOW J: Yes.

CALLINAN J: You treat the section as if the policy were a claims made policy, in effect, rather than - I mean, that is the effect of the section on your construction, is it not? Whoever is the insurer at the time that the claim is, in effect, made, has some liability or has liability in respect of the injury for which the claim is made.

MR HISLOP: Subject only to the rider imposed by the terms as to the relevant employment. That may come to an end of course.

CALLINAN J: That is a pretty unlikely result, is it not, that the legislature would have intended to equate the liability with a liability arising under a claims made policy?

MR HISLOP: Not necessarily, your Honour, because the whole of the workers' compensation circumstances or scheme is closely governed by the Act and, in particular, at the present time by the Workcover Authority. It is a case of swings and roundabouts, an insurer will lose on one occasion, because he will be made liable for a liability he would not have had on the application of ordinary common law principles. On another occasion the reverse will occur. It also means that the more recent the insurance, the higher the amount of cover which benefits the injured plaintiff and secondly, it means that the premiums taken would have been in relation to that appropriate for verdicts likely to be occasioned at the current time.

It certainly reduces the problems of finding the relevant insurer, the more recent one gets, and the amendments in 1985 really appear to have proceeded on that assumption. Bear in mind that we are only concerned with the insurer, insurers of one particular employer and the insurer, of course, is one who is found to be liable. So, we submit that when one has regard to the nature of the statutory control of workers' compensation, the fact it is and has been always held to be beneficial legislation, that what has been put forward as the appropriate interpretation of section 151AB is indeed the interpretation which should prevail. It is in accordance, as I have already said, with accepted authorities; it is in accordance with a decision of the Court of Appeal already in Kellogg's Case.

GUMMOW J: When you say the Workers' Compensation Act is beneficial legislation, beneficial to whom?

MR HISLOP: Beneficial to workers, your Honour, and that is part of what I have said in that they then get a readily identifiable, in most cases, insurer; they get cover at current rates and there is no reason at all why the legislature should not have adopted the provision and intended it to have the effect for which we contend. I see the time is up.

GUMMOW J: Yes, thank you.

MR HISLOP: Thank you, your Honours.

GUMMOW J: We will not need to call on you, Mr Collins.

The Court is of the view that the decision of the New South Wales Court of Appeal in this case, which is now reported in (1998) 45 NSWLR 257, is correct and, accordingly, the application for special leave to appeal is refused.

MR COLLINS: Costs are asked for, your Honour.

GUMMOW J: I do not think you can resist that.

MR HISLOP: No, your Honours.

GUMMOW J: Refused with costs. We will now adjourn to reconstitute.

AT 11.28 AM THE MATTER WAS CONCLUDED