Australia: Insurer´s agreement to 15% or greater whole person impairment can be restricted to s66/67 claims for lump sum compensation and is not binding for a work injury damages claim under Workers Compensation Act

Case Note: JC Equipment Hire Pty Limited -v- The Registrar Of The Workers Compensation Commission Of New South Wales [2008] NSWCA 43

31 March 2008

Tobias, Campbell and Bell JAA

In Brief

• The NSW Court of Appeal has decided that an agreement on the degree of permanent impairment suffered by a worker with respect to a claim for lump sum compensation under s 66 of the Workers Compensation Act 1987 ("the 1987 Act") has no impact on whether the 15% whole person impairment threshold for a work injury damages claim has been met, as required by s 151H of the 1987 Act.

• Therefore, even though an insurer agreed on a finding of 16% whole person impairment for lump sum compensation, the insurer was still able to dispute whether the worker had reached the 15% threshold when a claim for work injury damages was made.

Background

Claim for Lump Sum Compensation

• On 23 November 2003, Roy Lovett ("the Worker") sustained a compensable injury to his back whilst in the employment of J C Equipment Hire Pty Ltd ("the Employer"). On 31 August 2005, the Worker's solicitor made a claim upon the Employer for lump sum compensation under s 66 and compensation for pain and suffering under s 67 of the 1987 Act. In a letter dated 8 December 2005, the Employer's workers compensation insurer ("the Insurer") accepted the Worker's solicitor's claim of 16% whole person impairment calculated at $21,500.

• However, the Insurer disputed the $20,000 claimed under s 67 for compensation for pain and suffering. This dispute could not be resolved and an Application to Resolve a Dispute was lodged with the Commission. This claim was eventually agreed at $15,000 during a Teleconference.

• On 9 March 2006, Arbitrator Georgiadis issued a Certificate pursuant to s 295 of the Workplace Injury Management and Workers Compensation Act 1998 ("the 1998 Act"), noting that the parties had agreed to settle the s 66 and s 67 claims for the amounts stated above. The Certificate noted that the agreement was not a determination of the Commission. On 24 March 2006, a s 66A Agreement was registered with the Commission which reflected the agreement stated above.

Claim for Common Law Damages

• On 14 March 2006, the Worker's solicitors served on the Insurer a claim for work injury damages for past and future economic loss.

• s 151H (1) of the 1987 Act provides:

• In a letter dated 22 June 2006, the Insurer's solicitor wrote to the Worker's solicitor stating that they did not accept that the degree of permanent impairment of the Worker was at least 15%. This was supported by the medical report of Dr Machart dated 5 May 2006, who had medically examined the Worker after the work injury damages claim had been made and assessed 12% whole person impairment. The insurer then stated that, because a dispute had arisen, it would be necessary for the Worker to obtain a medical assessment certificate from the Commission in accordance with s 313 and 314(2)(b) of the 1998 Act.

• s 313 of the 1998 Act states that if there is a dispute, a Pre-Filing Statement cannot be served unless the degree of permanent impairment of a worker has been assessed by an approved medical specialist.

• s 314(1)(a) of the 1998 Act which states that a dispute will be considered to have arisen if:

• The Insurer's solicitors alleged that the agreement in relation to the lump sum compensation did not determine whether the Worker had met the 15% threshold for the purposes of work injury damages under s 314 of the 1998 Act.

• On 11 August 2006, despite the Insurer's contention, the Worker's solicitors served upon the Insurer's solicitors a Pre-Filing Statement with an attached Statement of Claim alleging that the Worker's injury was caused by the Insured's negligence and claiming past and future economic loss.

• In a letter dated 16 August 2006, the Insurer's solicitors wrote to the Worker's solicitors alleging that the Pre-Filing Statement was defective as it had been served in breach of s 313 of the 1998 Act because:

• The dispute as to whether the worker had met the 15% permanent impairment threshold was referred to the Commission for determination. On 30 August 2006, the Registrar's delegate determined that, by virtue of the s 66A Agreement, the Insurer had accepted that the Worker's degree of permanent impairment was at least 15%, and that therefore, s 314(2)(a) had been satisfied. The Registrar concluded that the Pre-Filing Statement served by the Worker's solicitors was therefore not defective.

Supreme Court decision

• The Insurer, on behalf of the Employer, filed a Summons in the Administrative Law List of the Common Law Division of the Supreme Court on 26 September 2006, seeking a declaration that the Registrar's determination was invalid, and that it be quashed or otherwise set aside.

• Associate Justice Malpass of the Supreme Court was required to consider whether an agreement by an insurer that the degree of permanent impairment of a worker was a particular percentage, being 15% or greater, for the purpose of calculating the statutory lump sum compensation under s 66 of the 1987 Act constitutes acceptance that the degree of permanent impairment of the worker resulting from the relevant injury is sufficient to satisfy the s 151H(1) threshold for an award for work injury damages.

• The primary question raised by the parties in the Supreme Court matter was whether or not there was a dispute as to the 15% threshold requirement so as to make defective the service of a Pre-Filing Statement before the commencement of proceedings in the District Court. The insurer alleged that the only way in which acceptance of the permanent impairment threshold required by s 314 of the 1998 Act could be made in respect of the claim for work injury damages was by express notification, pursuant to s 281(2B).

• On 20 April 2007, His Honour decided that, by virtue of the s 66A Agreement, there was no dispute as to whether the 15% threshold had been met and that, accordingly, the Pre-Filing Statement served by the Worker's solicitors was not defective.

Court of Appeal

Insurer's Submissions

• Upon appeal, the Insurer submitted that an acceptance that the degree of permanent impairment is sufficient for an award of damages in relation to a claim for work injury damages can only be made by express notification, after the claim for work injury damages is formally made. Further, it was submitted that in the absence of any such express notification, a dispute within the meaning of s 313 of the 1998 Act would arise. It was also submitted that a s 66 Agreement did not enjoy the status of an award of the Commission and that accordingly, any such reliance on it by the Worker was misplaced. The insurer argued that the purpose of the parties' agreement of 16% permanent impairment was solely for the purpose of resolving the Worker's claim to statutory lump sum compensation. Emphasis was placed on the Insurer not being able to accept the work injury damages threshold had been met at the time that the lump sum compensation dispute was resolved, because at that point in time, a claim for work injury damages had not been made.

• The Insurer relied on the clear distinction between "compensation" and "work injury damages" in the legislation. The Insurer alleged that, even if liability was accepted in relation to a claim for lump sum compensation, an insurer was still permitted to dispute liability in relation to a claim for work injury damages, because liability for work injury damages is dependent upon some fault on the part of the employer.

Worker's Submissions

• The Worker submitted that the present legislative situation with respect to workers compensation had been brought about by "radical" changes in 2001, and had resulted in the dichotomy between statutory compensation and work injury damages being blurred. It was submitted that a worker was now compensated by both statutory compensation and an award of past and future economic loss in an "overall compensation package". The Worker then submitted that the unified scheme required an assessment of the degree of permanent impairment of an injured worker either by agreement or a medical assessment certificate. It was submitted that there should be a consistent approach to the determination of the degree of permanent impairment such that a person will be bound by an agreement for all purposes, including whether the degree of permanent impairment is sufficient for an award of work injury damages.

• The Worker submitted that the hybrid scheme would be brought into disrepute if parties were permitted to accept a degree of permanent impairment for lump sum compensation and then change their position to assert a lower degree of impairment once a work injury damages claim has been made.

Court of Appeal Decision

• The New South Wales Court of Appeal handed down its decision on 31 March 2008. The leading judgment in the Court of Appeal was delivered by Tobias JA, with whom Campbell and Bell JAA agreed.

• Tobias JA accepted the submissions of the Insurer. Despite the Worker's submissions, His Honour decided that there was no doubt that the Insurer's acceptance of 16% whole person impairment was related only to the claim for s 66 lump sum compensation.

• This conclusion was partially based upon the fact that a finding of greater than 15% impairment had significant financial consequences for an insurer regarding a work injury damages claim, in comparison to the relatively small financial consequences in relation to a claim for s 66 lump sum compensation.

• His Honour noted that the workers' compensation legislation anticipated two different claims by the injured worker; firstly, a claim for lump sum compensation and secondly, a claim for work injury damages. His Honour rejected the Worker's submissions that the dichotomy between statutory compensation and work injury damages had been blurred by allowing a worker to retain compensation received under s 66 and s 67 and work injury damages being limited to past and present economic loss.

• His Honour was of the opinion that there was no useful purpose in:

• His Honour rejected the claim made by the Worker that there was no injustice to an insurer in holding it to its acceptance of the degree of permanent impairment in relation to lump sum compensation. His Honour was of the opinion that s 151H(1) had a broader purpose of promoting the avoidance of the costs of litigating small claims. Tobias JA believed that if an insurer was held bound by an agreement of the degree of permanent impairment for the purposes of calculating s 66 compensation, then the prospect of the subsequent work injury damages was likely to inhibit the insurer from settling the claim. It was thought that this would inevitably lead to unnecessary disputes which would involve a cost to the community, the court and the parties.

• In conclusion, Tobias JA was of the opinion that the primary judge erred in upholding the determination of the Registrar's delegate and that that determination, on its face, revealed an error of law which must be remedied.

Implications

• Insurers will no longer need to incur costs disputing s 66 claims in fear that an acceptance of a degree of permanent impairment greater than 15% will leave them exposed to a work injury damages claim.

• However, despite this decision, it would be prudent for insurers in the future in appropriate cases to specifically state that any agreement on the degree of permanent impairment in relation to a claim for lump sum compensation under s 66 is limited to that particular claim, and cannot be extended to a potential work injury damages claim.

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