Speech by Justice Richard Cavanagh at the Personal Injury Commission Mediator Conference

Personal Injury Commission Mediator Conference

Speech delivered by Justice Richard Cavanagh

Friday 30 August 2024

Thank you for inviting me to address your conference.

When I was asked to speak, I enquired as to what you might like me to speak about and was told anything of my choice. I could speak about life on the bench or my memories of being a mediator in the years prior to taking my appointment in 2019 but alas, I came to the conclusion that I was probably being asked to speak for the purposes of addressing some legal matters of substance.

I feel that I am perhaps ideally placed to talk about matters which may impact upon, in particular, work injury damages claims. I have since 2020 managed the List in the Supreme Court known as the Long Matters List, although I am now managing the Professional Negligence List.

The Long Matters List was introduced in 2020 to provide for judicial case management of matters which would take 5 days or more hearing time because there seemed to be an increasing trend of matters not being ready to proceed on the first day of a hearing including for reasons such as the parties needing to amend the pleadings or the service of new evidence.

The approach I took in establishing and managing the list was to bring the matters before me at an early stage and on a regular basis up until the time of the hearing. Further, I decided to adopt the approach, perhaps adopted in the Commercial List of the Supreme Court, of enquiring of the parties what the real issues were and trying to flush out or eliminate false issues.

The result has been (I hope) much more focus on the issues in the proceedings and an increased focus on settlement. No one gets away without attending a mediation despite their insistence on a mediation being pointless.

I am sure that as experienced mediators you have heard many times that it is pointless continuing the discussions only for the matter to settle a short time later. I spent the last 10 years of my practice both participating in and acting as mediator in many mediations, I probably acted as a mediator about 100 times which of course may pale into insignificance when compared to your numbers, but I suppose I have a fair idea of what is involved.

Having said that, I am not really here to talk about mediation other than to say that just as mediation obviously provides the mechanism by which so many cases within the Commission settle, it also provides the mechanism by which so many cases within the Supreme Court settle. Indeed, of all the personal injury cases that I manage or are managed by others, only a small percentage run to a concluded hearing in the Supreme Court.

There has been a considerable reduction, even since when I started in 2019.

As a result of my case management and indeed hearing of personal injury matters over the past few years, I have come to realise that there are some topics that regularly arise.

As I am here to talk about legal issues, I have identified three of those topics as follows:

1. Vicarious liability and non-delegable duties of care.
2. Section 151Z of the Workers Compensation Act 1987 (NSW) – why is it so hard?
3. Section 318 of the Workplace Injury Management and Workers Compensation Act 1998 (NSW) (“WIM Act”) – how is it applied?

I will start with vicarious liability.

Vicarious Liability and Non-delegable Duties of Care

These concepts are sometimes confused. They arise often in the context of multi-party litigation but there may be some confusion as to their applicability and impact on liability and apportionment. They both provide a basis of attributing responsibility.

Vicarious liability is a mechanism whereby legal responsibility is attributed to a person arising out of the conduct of another person, even though the person held to be legally responsible was not at fault.

Whether a party is vicariously liable depends on the relationship with the person actually at fault. The Court has of course long recognised the application of vicarious liability in the context of the employment relationship but there remains some uncertainty as to its application.

An employer is vicariously liable for any wrongful act committed by an employee in the course of his employment. Put generally, a person being paid to work at a worksite as part of his employment during the course of employment would be acting within the scope of his employment unless he is off on a frolic of his own.

As Gleeson CJ held in New South Wales v Lepore (2003) 212 CLR 511 (“Lepore”) at [41], “[t]he antithesis of conduct in the course of employment is sometimes expressed by saying that the employee was ‘on a frolic of his own’.”

But when is an employee off on a frolic of his own?

Whether an employee is off on a frolic of his own is a question of fact. An employer is plainly vicariously liable for authorised acts of his employee. That much is uncontroversial, but what about unauthorised acts?

The line between being off on a frolic of his own and just performing an authorised act in an unauthorised way is somewhat blurred. It may also be that an employer is vicariously liable for unauthorised acts if they are so connected with authorised acts that they may be regarded as modes, although improper modes, of doing them.

However, the employer is not responsible if the unauthorised and wrongful act is not so connected with the authorised act as to be a mode of doing it but is an independent act.

The most famous case is of course Deatons Pty Ltd v Flew (1949) 79 CLR 370 (“Deatons”). In 1946, a drunk customer (having consumed 9 or 10 beers) was haranguing the barmaid, insulting her and questioning her morals and parentage. She responded by throwing beer at him and then the glass. Alas, he lost his eye and sued the hotel. Despite the connection with her work, the employer was found not to be vicariously liable as the barmaid was found to be off on a frolic of her own. Since that time the courts have sometimes struggled to articulate a clear line between the circumstances in which an employer would be vicariously liable and when the worker would be off on a frolic of his own.

Examples of the difficulties in determining whether the employee is engaged in an unauthorised mode of undertaking an authorised act may be found in the security guard type cases, that is when security guards injure patrons through their conduct.

A good example is Starks v RSM Security Pty Ltd & Ors [2004] NSWCA 351 (“Starks”).

The employer in that case was held to be vicariously liable for the actions of a security guard who head butted a customer. The security guard had approached the customer suggesting that he was drunk and must leave. The customer (who turned out to be a licensed security guard himself) said he would not leave because everyone else in the hotel was drunk so why should he leave.

It seems that that was enough provocation for the security guard to head butt the customer, breaking his jaw and rendering him unconscious. Beazley JA, (as the Governor then was), held that the actions of the security guard were unauthorised and unprovoked but so closely connected with a task that the security guard was required to perform that the employer was vicariously liable, that is the security guard engaged in an unauthorised mode of doing an authorised act.

In Prince Alfred College Inc v ADC (2016) 258 CLR 134 (“Prince Alfred College”), a case about a 12-year-old boy being sexually abused by a house master that went to the High Court on the limitation point,  the  High  Court observed that the Courts have struggled to identify a coherent basis for identifying the circumstances in which an employer should be held vicariously liable for a negligent act of an employee and liable for intentional criminal acts (at [39]).

Although the Court went on to consider the approaches to vicarious liability internationally, it did not actually determine in what circumstances an employer might be vicariously liable for the criminal conduct of an employee (as the appeal point was the limitation point).

However, it did state (per French CJ, Kiefel, Bell, Keane and Nettle JJ) at [80]:

“Even so, as Gleeson CJ identified in New South Wales v Lepore and the Canadian cases show, the role given to the employee and the nature of the employee's responsibilities may justify the conclusion that the employment not only provided an opportunity but also was the occasion for the commission of the wrongful act. By way of example, it may be sufficient to hold an employer vicariously liable for a criminal act committed by an employee where, in the commission of that act, the employee used or took advantage of the position in which the employment placed the employee vis-à-vis the victim.”

In SR v Trustees of the De La Salle Brothers [2023] NSWSC 66, I held that the school was vicariously liable for the conduct of the employed teacher who sexually abused the plaintiff. The teacher had been employed at the school for a lengthy period and was allowed to live on the grounds in a caravan as the caretaker. Unfortunately, the abuse complained of happened to a limited extent in the classroom but also in the caravan.

I accepted that the school should be vicariously liable as:

1. the defendant placed the teacher in a position of power, trust, authority and control over the plaintiff when the plaintiff was a young boy (in Year 6);
2. the position of the teacher vis-à-vis the plaintiff provided both the opportunity and the occasion for the teacher’s abuse of the plaintiff. He used his position, that is, as the plaintiff’s school teacher, to molest and abuse him – both in the classroom and out of the classroom – but always in his capacity as his school teacher. He dealt with the plaintiff as his school teacher, in circumstances in which his requests of the plaintiff were always made in his capacity as the plaintiff’s school teacher. He was thus put in that position by the defendant, such that he could exercise complete authority and control over the plaintiff; and
3. the defendant was aware of the teacher’s propensity towards young boys before the plaintiff commenced Year 6.

There was no appeal from that decision although the High Court is currently reserved on a Victorian case which has similar issues.

Two further things should be said about vicarious liability, particularly in the employment context.

Firstly, under Australian law, perhaps differently from UK law, there is no theory of dual vicarious liability (Day v The Ocean Beach Hotel Shellharbour Pty Ltd (2013) 85 NSWLR 335 (“Day”); Mt Owen Pty Ltd v Parkes [2023] NSWCA 77).

Only one person can be vicariously liable for the conduct of another.

The other point is that despite attempts to extend the circumstances or relationships in which vicarious liability will arise, the High Court has consistently held that a principal is not vicariously liable for the conduct of an independent contractor.

In Hollis v Vabu Pty Ltd (2001) 207 CLR 21, a bicycle courier ran into a pedestrian. The issue of whether the courier company should be vicariously liable for the conduct of the courier went all the way to the High Court. The trial judge had held that the courier was an employee. However, the Court of Appeal disagreed, holding that the courier was an independent contractor and thus the company was not vicariously liable for the courier’s conduct.

The High Court disagreed, finding that the courier was an employee and thus the company was liable.  McHugh J held that the courier was an independent contractor and suggested that Australia should adopt a form of vicarious liability based on some form of representative capacity, that is, the principal would be liable for the conduct of its representatives. However, that approach has not been followed or adopted by the High Court in any other case. The law remains that the principal is not vicariously liable for the conduct of its independent contractor (unless of course the principal has directly authorised the wrongful act).

So how is the idea of a duty being non-delegable a basis for attaching liability different from vicarious liability?

It seems that the same relationships that give rise to vicarious liability also give rise to non-delegable duties of care. An employer, school authority and hospital owe a non-delegable duty of care.

The difference is that whilst vicarious liability is imposed on an employer, even in the absence of fault by the actual employer, liability based on a non-delegable duty of care remains fault based. That is the employer must have failed to have done something itself.

A non-delegable duty of care is not another way of imposing a strict liability. A strict liability is one in which liability is imposed irrespective of fault. Again, as Gleeson CJ held in Lepore at [20], to describe a duty of care as personal or non-delegable means that the person subject to the duty has a responsibility to perform the duty or see it performed and cannot discharge that responsibility by entrusting its performance to another.

Importantly, all duties of care may be discharged by the exercise of reasonable care (Roads and Traffic Authority of New South Wales v Dederer (2007) 234 CLR 330). Suggesting that a duty of care is non-delegable does not impose an added burden or higher standard of care on the employer, school or hospital. The obligation is only to exercise reasonable care. However, an employer is unable to discharge that responsibility by delegating the task to a third party. The employer has an obligation to see that the task is performed.

This was explained by Brennan CJ in Northern Sandblasting Pty Ltd v Harris (1997) 188 CLR 313 at 330, when the Chief Justice observed that if a defendant is under a personal duty of care owed to the plaintiff but engages an independent contractor to discharge the duty, a negligent failure by the independent contractor to discharge the duty leaves the defendant liable for its breach. The defendant’s liability is not a vicarious liability but based on the liability for the defendant’s failure to discharge its own duty. That is the failure of the party owing the non-delegable duty to see that the other person took care for the worker.

Two recent examples that demonstrate some difficulties or misunderstanding as to how these principles work in practice.

DAC Finance (NSW/QLD) Pty Ltd v Cox [2024] NSWCA 170 involved an appeal from Acting Judge Levy SC in the District Court. The plaintiff sustained an injury at her workplace. She suffered a jolt when the descending elevator stopped without warning. It seems two maintenance workers had turned off the power without warning. The maintenance workers were employed by the same corporate entity as the plaintiff (DPG Services). That company was related to 2 other companies DAC Finance and DAC (NSW/QLD). The plaintiff’s whole person impairment was assessed only at 8%, as such, the plaintiff could not recover damages from her employer.

Instead, she sued these other two related companies on the basis that they were the owner and occupier of the premises. She asserted that the employer was not liable. His Honour found in favour of the plaintiff against the two related companies and agreed that the employer was not liable. Alas, the Court of Appeal disagreed finding that the two related companies were not liable at all, and that the employer was the liable party.

It seems that part of the plaintiff's case in the Court below was that other related companies were liable for the conduct of the two maintenance workers even though they were not actually employed by those companies.

However, his Honour did not actually deal with why the related companies should be vicariously liable for the conduct of the maintenance workers, simply accepting that they were and that in any event they had failed to discharge their own duties of care. As Leeming JA observed at [47], not only was DPG Services (the employer) vicariously liable for the tortious conduct of the maintenance workers but no other company was vicariously liable, citing Day and other cases I have already referred.

The Court went on to find that as the employer (DPG Services) had a non-delegable duty of care to provide employers with a safe place of work, a safe system of work and a safe plant and equipment, which extends to maintenance of that equipment.

The attempt by the plaintiff to overcome the restrictions on damages payable by the employer by asserting liability on the part of related companies such as owners and finance companies as if they owed the same duty of care rather backfired. The appeal was allowed, and a judgment was entered for the defendant.

In Badra v Value Constructions Pty Ltd & Ors [2023] NSWSC 1307 (“Badra”), the plaintiff sustained injury when he fell in a hole covered by plastic on a building site. There was a significant dispute as to whether he fell in the manner alleged, with the builder giving evidence that he did not and asserting various other versions in contemporaneous documents and statements allegedly made by the plaintiff.

The hole had been created and covered up with the plastic by the employer, but the builder was on-site at the time and knew or ought to have been aware of the fact that the hole had been concealed with plastic.

Despite this, the builder, as the occupier of the premises, maintained that it was not liable because it was entitled to rely on the employer to ensure that the hole was properly covered. The Court of Appeal rejected this submission. Whilst the occupier did not owe a non-delegable duty of care, it knew of the hole and was obliged to take steps to remedy the problem. This did not mean that its duty was non-delegable but it retained its own obligation to take reasonable precaution for the safety of workers on site.

I will come back to Badra in the next topic.

Finally, I should mention that the High Court should be handing down its decision in a historical sexual abuse appeal from the Victorian Court of Appeal shortly (see Bird v DP (A Pseudonym) [2023] VSCA 66). I am hoping they will have a lot to say about these topics.

Latest developments in assessing damages having regard to s 151Z

Since enacted, s 151Z of the Workers Compensation Act has provided an endless source of work for the judiciary.   Despite many years and many cases delving into the intricacies, new problems and pronouncements continue to emerge.

Section 151Z is, relevantly, in the following terms:

151Z Recovery against both employer and stranger

(1) If the injury for which compensation is payable under this Act was caused under circumstances creating a liability in some person other than the worker's employer to pay damages in respect of the injury, the following provisions have effect—

(a) the worker may take proceedings both against that person to recover damages and against any person liable to pay compensation under this Act for payment of that compensation, but is not entitled to retain both damages and compensation,

(b) if the worker recovers firstly compensation and secondly those damages, the worker is liable to repay out of those damages the amount of compensation which a person has paid in respect of the worker's injury under this Act, and the worker is not entitled to any further compensation,

Note: See also section 151N of this Act and section 10 of the Law Reform (Miscellaneous Provisions) Act 1965 in relation to the application of other laws concerning contributory negligence.

(c) if the worker firstly recovers those damages the worker is not entitled to recover compensation under this Act,

(d) if the worker has recovered compensation under this Act, the person by whom the compensation was paid is entitled to be indemnified by the person so liable to pay those damages (being an indemnity limited to the amount of those damages),

(e) if any payment is made under the indemnity and, at the time of the payment, the worker has not obtained judgment for damages against the person paying under the indemnity, the payment is, to the extent of its amount, a defence to proceedings by the worker against that person for damages,

(e1) if any payment is made under the indemnity and, at the time of the payment, the worker has obtained judgment for damages against the person paying under the indemnity (but judgment has not been satisfied), the payment, to the extent of its amount, satisfies the judgment,

(f) all questions relating to matters arising under this section are, in default of agreement, to be settled by action or, with the consent of the parties, by the Commission.

(2) If, in respect of an injury to a worker for which compensation is payable under this Act—

(a) the worker takes or is entitled to take proceedings independently of this Act to recover damages from a person other than the worker's employer, and

(b) the worker also takes or is entitled to take proceedings independently of this Act to recover damages from that employer,

the following provisions have effect—

(c) the damages that may be recovered from the person by the worker in proceedings referred to in paragraph (a) are to be reduced by the amount by which the contribution which the person would (but for this Part) be entitled to recover from the employer as a joint tortfeasor or otherwise exceeds the amount of the contribution recoverable,

(d) the amount of the contribution that the person is entitled to recover from the employer as a joint tortfeasor or otherwise is to be determined as if the whole of the damages were assessed in accordance with provisions of Division 3 as to the award of damages,

(e) if the worker does not take proceedings against that employer or does not accept satisfaction of the judgment against that employer, subsection (1) applies as if the worker had not been entitled to recover damages from that employer, except that—

(i) if the compensation paid by that employer exceeds the amount of the contribution that could be recovered from that employer as a joint tortfeasor or otherwise--the indemnity referred to in subsection (1) (d) is for the amount of the excess only, and

(ii) if the compensation paid by that employer does not exceed the amount of that contribution--subsection (1) (d) does not apply and the employer has, to the extent of the compensation so paid, a defence to an action for such a contribution.

…

As is well-known, the statutory modifications at the Common Law level were put in place many years ago for the purposes of restricting both damages payable by an employer to an employee and damages payable by a third-party tortfeasor.

Of course, the restrictions on damages payable by an employer to an employee are much more significant than the restrictions contained in the Civil Liability Act 2002 (NSW). This means that the plaintiff recovers judgments against an employer and a third-party tortfeasor for differing amounts. The result is that when a third-party tortfeasor is seeking contribution from an employer, pursuant to s 5(1)(c) of the Law Reform (Miscellaneous Provisions Act) 1946 (NSW), the amount that the third-party tortfeasor can recover from the employer is necessarily less than the full percentage contribution that it would otherwise be able to recover at Common Law.

The determination of final judgment is further complicated in circumstances in which the plaintiff has already received workers compensation on behalf of the employer.

Two recent cases again highlight the difficulties.  Both in Badra and Synergy Scaffolding Services Pty Ltd v Alelaimat [2023] NSWCA 213 (“Synergy”), the plaintiff had sued his employer and the builder/occupier and succeeded against both.

In Badra, I assessed contribution between the builder/occupier and the employer equally.

The issue then became how to assess damages having regard to the fact that:

(1) the plaintiff had sued and obtained judgments both against the occupier and employer;

(2) the employer had paid workers compensation to the plaintiff;

(3) the employer sought to recover the payments made; and

(4) the payments included weekly payments and out of pocket expenses.

In Synergy, Simpson AJA set out a formula which explains the methodology in determining the judgment which should be entered against a third-party tortfeasor in a case such as this.

This was stated as follows at [139]-[140]:

“Expressed as an equation, the effect of s 151Z(2)(c)-(d) [of the Workers Compensation Act] is that, where the conditions in s 151Z(2)(a) and s 151Z(2)(b) are engaged (that is the worker (plaintiff) has a cause of action for damages against both the employer tortfeasor and the third party tortfeasor), the sum of damages (D) ultimately recoverable by the plaintiff worker from the third party tortfeasor is equal to the total damages which would be recoverable from the third party tortfeasor but for the operation of s 151Z(2) (T), minus the difference between the sum that the third party tortfeasor would be entitled to recover from the employer tortfeasor as contribution under s 5 of the 1946 Miscellaneous Provisions Act but for the operation of s 151Z(2)(d) (C), and the amount of contribution that is actually recoverable under s 5 once s 151Z(2)(d) is taken into account (X).

That is, D = T – (C – X), where:

D = the sum of damages ultimately recoverable by the plaintiff worker from the third party tortfeasor;

T = the sum of damages which would be recoverable by the plaintiff worker from the third party tortfeasor but for the operation of s 151Z(2);

C = the sum that the third party tortfeasor would be entitled to recover from the employer tortfeasor as contribution under s 5 of the 1946 Miscellaneous Provisions Act but for the operation of s 151Z(2)(d); and

X = the amount of contribution that is actually recoverable under s 5 of the 1946 Miscellaneous Provisions Act once s 151Z(2)(d) is taken into account.”

Put simply, the amount that the plaintiff could recover by way of a judgment against the third-party tortfeasor was reduced to the extent that the amount that the third-party tortfeasor could recover against the employer by way of contribution was reduced by virtue of the provisions of the Workers Compensation Act.

I applied that formula in Badra with the result that the shortfall of $186,637.50 was deducted from the damages assessed against the third-party tortfeasor and the judgment in favour of the plaintiff against the third-party tortfeasor was reduced by that amount.

However, the issue that arose in Badra was then what was the amount that the third-party tortfeasor could recover on its cross-claim against the employer?

This gave rise to the application of section 151Z(2)(d) and its intersection with s 151A.

Section 151A is, relevantly, in the following terms:

Effect of recovery of damages on compensation

(1) If a person recovers damages in respect of an injury from the employer liable to pay compensation under this Act then (except to the extent that subsection (2), (3), (4) or (5) covers the case)—

(a) the person ceases to be entitled to any further compensation under this Act in respect of the injury concerned (including compensation claimed but not yet paid), and

(b) the amount of any weekly payments of compensation already paid in respect of the injury concerned is to be deducted from the damages (awarded or otherwise paid as a lump sum) and is to be paid to the person who paid the compensation, and

(c) the person ceases to be entitled to participate in any injury management program provided for under this Act or the 1998 Act.

As set out in section 151A(1)(b), the amount of any weekly payments of compensation already paid in respect of the injury concerned is to be deducted from the damages and is to be paid to the person who paid the compensation.

If the employer had paid say $150,000 in workers compensation, that amount must be deducted from the judgment to be entered against it pursuant to s 151A. The result would be that the third-party tortfeasor could not recover even 50% (if that be the assessed contribution) from the employer as the employer gets a credit for workers compensation already received.

You can see that this leaves the third-party tortfeasor short on its recovery. It ends up being liable to pay more than 50% of the total damages assessed against it to the plaintiff.

This was the approach I took in Badra.

However, by the time Badra reached the Court of Appeal in April 2024, that same court had handed down its decision in Synergy Scaffolding Services Pty Ltd v Alelaimat (No 2) [2024] NSWCA 11 (“Synergy (No 2)”), that is on 7 February 2024.

The issue which arose in Synergy (No 2) was the calculation of the judgment in circumstances where the worker had received substantial payments of workers compensation.

As Simpson AJA (with whom Meagher and Kirk JJA agreed) noted at [17], there are two classes or categories of case contemplated by s 151Z:

“(i)   cases in which the injured worker is entitled to compensation under the Workers Compensation Act from the employer and to damages from the third party (but not the employer) (s 151Z(1)); and

(ii)   cases in which the injured worker is entitled to compensation under the Workers Compensation Act and is or may be entitled to receive damages from the employer and from the third party (s 151Z(2)).”

Sections 151Z(1) applies only where the third-party as distinct from the employer is the tortfeasor. It does not apply where the employer is also a tortfeasor liable to pay damages to the plaintiff.

Further, notwithstanding that s 151Z(1)(d) clearly contemplates that an employer that has paid compensation will be entitled to indemnity from the third-party tortfeasor for those payments, where section 151Z(1) is applicable, the employer will have no recourse for that indemnity, unless reference is made to s 151Z(2)(e).

In circumstances in which the worker does take proceedings against the employer it is difficult to understand how it could ever be established that the worker “does not accept satisfaction of the judgment against the employer”.

It might be suggested that the worker would only enforce a judgment against the third-party tortfeasor but until the employer could establish that the worker did not enforce judgment against it, it would have no recourse against the third-party tortfeasor.

So how does that play out in practice.  Not in a very practical or satisfying way it seems.

The amount of the judgment against the employer is not reduced by the amount of the workers compensation already received by the plaintiff.  The amount that the third-party tortfeasor recovers from the employer on its cross claim is not reduced on account of the workers compensation already paid by the employer and the plaintiff can recover full satisfaction from the third-party tortfeasor.  However, when he does, he must pay back the workers compensation to the employer.

In Badra, the workers compensation payments were $179,060.71. I wrongly deducted that amount from the judgment entered against the employer because the employer had already paid that amount to the plaintiff.

However, if and when Mr Badra accepts payment of the judgment sum against the builder, he will be liable to repay the amounts of workers compensation he has received from the employer.

As the Court also noted, it would have been open to the plaintiff to agree to orders requiring him to make that repayment in the interest of simplicity (Value Constructions Pty Ltd v Badra [2024] NSWCA 181 at [76]) but the Court indicated at [59] of Synergy (No 2) that it will not make such an order absent agreement of the claimant.

It seems to be that whatever happens, when an injured worker sues both his employer and a third-party tortfeasor any judgments against the third-party must reflect the fact that it cannot be ultimately liable to pay anymore than its assessed contribution.

As for the employer, it will be liable to pay in full 50% to the third-party tortfeasor without any deduction of the workers compensation already paid but the plaintiff will be liable to repay the workers compensation already received if he recovers the full judgment from the third-party.

The sensible thing might be to just reach agreement in advance but if the plaintiff does not, like Mr Badra, it will up to the employer to then recover those payments from the plaintiff.

Section 318 of the WIM Act

Another issue that pops up regularly relates to the application of s 318 of the WIM Act. I regularly hear employers suggesting that there may be a s 318 issue which will have to be determined.

As I am sure you will all recall, the WIM Act was enacted as part of a package of reforms introduced in response to a 1997 report into the operation of the workers compensation system in New South Wales. That report had been commissioned to investigate what could be done to reduce the cost of the scheme. The 1987 Act Workers Compensation had not been successful in reducing the costs of workers compensation litigation.

Section 318 of the WIM Act was not introduced until 2001. It was inserted by the Workers Compensation Legislation Further Amendment Act 2001 (NSW) (“the 2001 Act”) that came to reform the dispute resolution scheme established by the 1998 WIM Act by placing renewed emphasis on alternative dispute resolution. You know a lot more about that than me.

The government’s primary objective, as recorded in the second reading speech, was to “prevent disputes arising and provide a simpler, fairer and faster system for resolving disputes in the workers compensation system.”

Of course, as mediators such objectives are music to your ears.

The 2001 Act inserted part 6 into the WIM Act. Part 6 governs court proceedings for work injury damages. That part includes s 318 and provisions relating to compulsory mediation of a claim before commencement of proceedings.

Section 318 is in the following terms:

318 Parties limited to pre-filing statement and defence

(1) For the purposes of court proceedings on a claim for work injury damages-

(a) the claimant is not entitled to file a statement of claim that is materially different from the proposed statement of claim that formed part of the pre-filing statement served by the claimant, except with leave of the court, and

(b) the defendant is not entitled to file a defence that is materially different from any defence served on the claimant in response to the claimant's pre-filing statement within 42 days after service of the pre-filing statement, except with leave of the court, and

(c) the defendant is not entitled to file a defence that wholly or partly disputes liability for the claim if the defendant has failed to serve on the claimant a defence to the claim as required by this Division within 42 days after the claimant served the pre-filing statement on the defendant, and

(d) a party to the proceedings is not entitled to have any report or other evidence admitted in the proceedings on the party's behalf if the report or other evidence was not disclosed by the party in a pre-filing statement or defence served under this Division, except with leave of the court.

(2) The court is not to grant leave under this section unless satisfied that—

(a) the material concerned was not reasonably available to the party when the pre-filing statement or defence was served, and

(b) the failure to grant leave would substantially prejudice the party's case.

(3) The regulations may provide for exceptions to this section.

The effect of section 318 is that, in the absence of a grant of leave, a party will be prevented from pleading a claim or defence in a way that is materially different to that disclosed in its pre-filing statement/response.

Similarly, in the absence of leave, a party will be prevented from relying upon evidence that it has not disclosed in its pre-filing statement or defence.

Further, the Court may not grant leave to rely upon additional material unless satisfied that the material concerned was not reasonably available to the party when the pre-filing statement or defence was served and the failure to grant leave would substantially prejudice the party's case.

It is therefore imperative that parties carefully consider how their claim is pleaded and the evidence needed to be relied upon at the pre-filing stage.

In Strasburger Enterprises Pty Ltd t/a Quix Food Stores v Serna [2008] NSWCA 354 at [37], the Court observed that the pre-filing scheme is one that contains “potential traps and strategic decisions for both parties”.

I am sure you are all aware of the process. I will say something about how s 318 has been interpreted and applied.

There are really two issues to consider being:

(1)  What is the meaning of materially different?

(2)  What is the meaning of not reasonably available?

Meaning of “materially different”

I considered the first issue in Sohailee v City Projects & Developments Pty Ltd [2019] NSWSC 1452 (“Sohailee”).

In Sohailee, the plaintiff sustained injuries in an accident at work on 23 March 2015. By way of an amended statement of claim, he said that while bending down picking up some end caps, a wall panel fell on him and he sustained injury. He pleaded that the wall panel fell as a result of being improperly placed against the wall near where he was working.

He sued both the builder and developer of the building site and his employer. The employer carried on business as a contract supplier and installer of wall panels.

The matter came before the Court on the application of the employer to strike out the amended statement of claim pursuant to r 14.28 of the Uniform Civil Procedure Rules 2005 (NSW) (“UCPR”) (to the extent that the pleading related to the second defendant employer).

The employer maintained that some of the particulars of negligence as pleaded in the amended statement of claim were new or, more specifically, materially different from the proposed statement of claim that was served with the plaintiff’s pre-filing statement as part of the procedures required by s 315 of the WIM Act. The case presented as an occasion to say something about s 318.

As I said (at [22] in Sohailee), the purpose of requiring the claimant to file a pre-filing statement must be to assist in the process of resolution of the dispute prior to proceedings being pursued and to ensure that the employer/proposed defendant has proper, adequate and complete notice of the claim that is and will be pursued by the injured employee.

The expression “materially different” must be interpreted in the context in which those words appear having regard to the overall purpose of s 318(1)(a) of the Act. It is not necessary or appropriate to substitute other words to give meaning to the expression.

It is also important to emphasise that not just any difference will give rise to the application of s 318. The difference must be material. Whether there is a material difference between the two documents must depend on the facts in each case.

In my view, the pleading of a different mechanism of injury or an accident occurring in substantially different circumstances would be a materially different pleading. A pleading of a different cause of action would be a materially different statement of claim.

Further, raising a completely new allegation as to the conduct of the proposed defendant would be a materially different pleading. By that I mean that if the plaintiff asserted that the defendant did or failed to do something not raised at all, either generally or specifically, in the proposed statement of claim then that would be something which is materially different.

However,I did not accept that the addition of new particulars of negligence meant that the proposed amended statement of claim was materially different from the pre-filing statement served by the claimant.

Even though I accepted that the expressions used in the new particulars and some of the wording was new, each case turns on its facts and it did not seem to me that the new particulars were materially different from the old particulars.

At least in my view, there would need to be something more than merely the addition of new particulars of negligence to make the statement of claim materially different.

The opposite result was obtained in Hall v Ecoline Pty Ltd t/as Treetop Adventure Park [2018] NSWSC 1732 (“Hall”), another decision of the Supreme Court.  The plaintiff sustained injuries in an accident on 6 November 2009. At the time, he was employed by Mars Australia which was participating in a teambuilding exercise operated by Treetop Adventure Park, the first defendant. There was an issue in the proceedings as to how the plaintiff was injured in terms of what caused him to fall at the time he was moving from tree to tree using planks.

The plaintiff changed his description of the cause of his accident between the pre-filing statement and the statement of claim. The difference was in the description of the cause of the injury to the back.

In the pre-filing statement, the plaintiff asserted that the injury was caused by twisting his back after being required to lift and transport some wood. In the filed statement of claim, he asserted the injury was caused by a fall from the wood.

Davies J held that the statement of claim was materially different from the proposed statement of claim that formed part of the pre-filing statement.

His Honour accepted that the accident described in the statement of claim would require different investigation from that described in the statement of claim attached to the pre-filing statement.

Finally, in terms of the filed pleading, it is important to emphasise that s 318 does not require the plaintiff to file a statement of claim that is identical to the one which was filed as part of the pre-filing process. It just cannot be materially different.

It should be incumbent upon the plaintiff to ensure that the statement of claim filed in the court is properly pleaded. One of the issues I grapple with in case management is the adequacy of the pleadings.

Section 318 should not be used to prevent reliance on a properly pleaded case. Section 318 precludes a party raising new issues or changing the essential facts, but it does not prevent the filing of properly drafted pleadings. No doubt parties should endeavour to prepare their pre-filing statement in a proper and thorough way but if the document filed in the Court does not represent a proper pleading it will have to be amended to comply with the rules as to pleadings. Section 318 should not be a bar to that.

The scope of the disclosure obligation imposed under s 318(1)(d)

The effect of s 318(1)(d) is to reinforce the obligation of a party to disclose in its pre-filing statement all the evidence that it will seek to rely upon.

In Wilkinson v Perisher Blue Pty Ltd [2012] NSWCA 250 (“Wilkinson v Perisher Blue”), Hoeben JA (with whom Campbell and Barrett JJA agreed) at [219] described the obligation as not requiring a “verbatim transcript of the evidence which will be given at trial, but rather a disclosure of the nature and substance of the evidence to be given.”

Further, in Gower v State of New South Wales [2018] NSWCA 132, White JA observed at [135] that s 318(1)(d) “does not require that the disclosure of evidence take any particular form.”

Of course, in respect of evidence form witnesses, the disclosure requirements will be comfortably satisfied by attaching to the pre-filing statement or defence the relevant statement of the witness: Wilkinson v Perisher Blue at [57].

Meaning of “not reasonably available”

In terms of s 318(2), the key issue is whether the new material was reasonably available.

Section 318(2) precludes the granting of leave unless the Court is satisfied that, (a) the material concerned was not reasonably available to the party when the pre-filing statement or defence was served, and (b) the failure to grant leave would substantially prejudice the party's case.

The second hurdle may not be difficult to overcome but it is necessary for the Court to be satisfied of both.

Whether material was “reasonably available” to a party is “essentially factual”: Kubovic v HMS Management Pty Ltd [2015] NSWCA 315 at [105]. In Karzi v Toll Pty Ltd [2024] NSWCA 120, the Court of Appeal explained that the courts take a “practical approach” to determining this question.

In determining whether an expert report was reasonably available, it is necessary to determine “both whether the material forming the basis of the report, and the report itself, were available”: Ljubicic v Heat and Control Pty Ltd [2023] NSWSC 982 at [62] (“Ljubicic”).

In Ljubicic, I considered whether leave should be granted to rely upon an expert report that was not disclosed in a pre-filing statement. I observed at [65]-[69] that:

“The phrase ‘reasonably available’ must be given meaning. It does not merely mean ‘available’. ‘Reasonably available’ must be read in the context of the purposes of the WIM Act and, in particular, s 318. The party seeking to rely on the report must have taken reasonable steps to obtain it at the relevant time. The test is not simply whether the report could have been obtained. The test is whether there were reasonable steps which could have been taken, having regard to the material available in order to obtain the report.

…

[That does not mean that] the Court and the parties must undertake an exhaustive process to consider which documents referred to in an expert report were available and which documents were not. The purpose of s 318 is to ensure that the [parties] are aware of the case they have to meet as far as possible at the time of the pre-filing statement to enable sensible discussions about resolution of the matter.

There will be some cases in which the issues are complex and it is not possible to finalise an expert report prior to the pre-filing statement, despite the availability of many documents.”

In such a case the report may not be reasonably available.

I doubt that it could be generally said that simple medical reports were not reasonably available to a party. I doubt that there could be compliance with s 318 by merely referring to reports which may be obtained in the future. That would hardly be disclosing the substance of the evidence. The other party would not know anything about the content of that report.

The inquiry is fact specific but the onus would be on the party seeking to rely on the new material to demonstrate that it was not reasonably available at the earlier time.

Conclusion  

Perhaps as mediators you are not required to determine the rights and wrongs of these issues based on what can sometimes be fine distinctions, but I expect that, particularly in circumstances in which third-parties are involved and I understand they often attend these mediations, some of these issues will arise. I hope these thoughts have been of assistance.