Although a NSW employer is statutorily obliged to secure workers compensation insurance some don’t, and the uninsured liability scheme was created to protect injured workers by ensuring the availability of funds to meet entitlements to prescribed statutory compensation and work injury damages. This appeal considered whether the broader entitlement to common law damages recoverable by claimants with a dust-disease rather than a workers compensation injury could also access the scheme if the employer was uninsured. The court recognised the long-standing difference in compensation/damages pathways for claimants suffering injuries and dust diseases in deciding that the different character of the entitlements limited the scheme to claimants with workers compensation injuries only.

Key Takeaways

• A claimant suffering a dust-disease as defined by the 1942 Act cannot access the uninsured liability fund to recover damages otherwise payable by an uninsured employer
• The position is different to the situation arising if the employer was insured by a now liquidated/deregistered insurer – which is assessed by a different scheme
• A joint tortfeasor is similarly disadvantaged as no recovery is available under the uninsured liability scheme to meet a claim for contribution.

Background

Sako commenced proceedings in the Dust Diseases Tribunal against the Workers Compensation Nominal Insurer (‘WCNI’). WCNI was pursued in respect of three deregistered employers, two of which uncontroversially held workers compensation insurance underwritten by WCNI. One, ‘Harmes’, was uninsured.

Sako successfully sought leave to amend his statement of claim to allege that WCNI was responsible for the liability of Harmes in its capacity as the manager of the uninsured liability scheme created by Division 6 of Part 4 of the Workers Compensation Act 1987 (NSW) (‘the 1987 Act’) and, in those circumstances be granted leave to pursue WCNI in its capacity as an ‘insurer’ as contemplated by ss4 and 5 of the Civil Liability (Third Parties Claims Against Insurers) Act 2017 (NSW).

WCNI opposed the application saying that it was not an insurer as contemplated by the 2017 Act and consequently could not be sued as regards the Harmes interests and also that the proposed amendment to pursue it as the manager of the uninsured liability scheme ought not be granted because, at law, the proposed amendment was futile given, in the circumstances of Sako’s disease and claim, he was not entitled to access the uninsured liability scheme.

The trial judge considered that as the positions of the plaintiff and WCNI as to the operation of the relevant provisions of Division 6 of Part 4 of the 1987 Act, and in particular s140 were ‘arguable’, it was appropriate to grant the plaintiff leave.

WCNI sought leave to appeal from the decision of the trial judge.

The Law

Section 140 permits a claim upon the uninsured liability scheme in respect of a claim for compensation under the 1987 Act or ‘work injury damages’ in respect of an ‘injury’ to a worker by an uninsured employer.

‘Injury’ is defined in s4 of the 1987 Act to exclude a ‘dust disease’ as defined by the Workers Compensation (Dust Diseases) Act 1942 (NSW). The definition of ‘dust disease’ in the 1942 Act plainly includes Mr Sako’s disease, silicosis. As such, Mr Sako does not suffer an ‘injury’ as defined by the 1987 Act and accordingly is not entitled to compensation under the 1987 Act. Rather, his entitlement to statutory compensation is prescribed by the 1942 Act.

‘Work injury damages’ is defined in s250 of the Workplace Injury Management and Workers Compensation Act 1998 (NSW) which identifies that the statutory form of recovery in circumstances of a breach of a common law liability by an employer is prescribed by Division 3 of Part 5 of the 1987 Act.

The availability of ‘work injury damages’ as prescribed by the 1987 Act is dependent upon completing the procedural requirements in the 1998 Act, a threshold prescribed by s151H of the 1987 Act, and that the breach of duty of the employer has caused an ‘injury’ as defined by the 1987 Act.

Arguments and Decision on Appeal

As the appeal arose from an interlocutory rather than final order, WCNI was required to obtain a grant of leave. The Court of Appeal held that the circumstances warranted a grant of leave bearing in mind the question of whether the proposed amendment by Sako to allege an entitlement under the uninsured liability scheme was purely a matter of law and did not require determination of any factual controversy. Also, the court considered that the potential impact on the uninsured liability scheme and generally the conduct of litigation of this class warranted an expeditious determination, which determination was available in light of the character of the consideration required.

The plaintiff argued that as the intention of the legislation was to create a beneficial scheme to ‘workers’, the construction of the legislation should be to entitle a claimant such as Sako to access the uninsured liability scheme despite the fact that the common law damages he sought in the Tribunal were not ‘work injury damages’, and his disease of silicosis was not an ‘injury’ as prescribed by the 1987 Act.

WCNI identified the now more than century old dichotomy between the treatment of dust disease and non‑dust disease work‑related conditions leading to differences between the entitlement to statutory compensation under the 1942 Act as applicable to ‘dust diseases’, and the 1987 Act as applicable to ‘injuries’, and the significant differences between the entitlement to common law damages [which are unrestricted for persons suffering ‘dust disease’] by comparison to the limited statutory availability of ‘work injury damages’.

Further, WCNI submitted that on the plain words of s140 and the legislation generally, and the references to the words ‘injury’ and ‘work injury damages’, were appropriately assessed by reference to the statutory definitions of those terms contained in the 1987 and 1998 Acts such that the claim pursued by Sako for unrestricted common law damages was not ‘work injury damages’ arising from an ‘injury’ as, if Parliament had intended to permit a claimant such as Sako to access the uninsured liability scheme, it would have been simple to and necessary to plainly state it in s140.

The Court of Appeal unanimously held that the construction urged by WCNI was correct at law and that access to the uninsured liability scheme is limited to claimants who have ‘injuries’ as defined by the 1987 Act and then in respect of entitlements to statutory compensation under the 1987 Act and ‘work injury damages’ as defined under the 1998 Act.

The Court of Appeal noted the absence of any legislative reference to ‘dust diseases’ as giving rise to an entitlement to the benefit of the uninsured liability scheme in circumstances where there had been a clear distinction in treatment of ‘injuries’ and ‘dust diseases’ spoke to Parliament’s intention not to provide ‘dust diseases’ claimants access to the scheme.

Having reached that conclusion, the Court of Appeal unanimously held that the amendment of the statement of claim was bad at law, futile, and liable to be struck out. Leave to appeal was accordingly granted on that point and the appeal upheld.

Otherwise, Sako conceded that in the absence of insurance WCNI was not properly joined under the 2017 Act.

Conclusion

The decision is helpful to the uninsured liability scheme and provides clarity to litigants in dust diseases cases. In the writer’s anecdotal experience, although not frequently, a number of usually smaller employers do not comply with the statutory obligation to insure and, due to the latency period of dust‑related diseases, are commonly deregistered by the time of the onset of symptoms and the commencement of proceedings.

The decision permits certainty as to whether a claimant confronted with that situation or a joint tortfeasor contemplating a claim for contribution can pursue WCNI as the manager of the insured liability scheme. They cannot, and the clear unanimous judgment is of assistance to the scheme generally in avoiding the incurring of costs and disbursements defending proceedings of this class.

Further information / assistance regarding the issues raised in this article is available from the author, Stephen Taylor-Jones, Partner or your usual contact at Moray & Agnew.