The recent Victorian Supreme Court of Appeal decision of Primary Health Care Limited v Giakalis [2013] VSCA 75 will significantly impact recovery actions commenced under section 138 of the Accident Compensation Act 1985 (Vic) (“Accident Compensation Act”).
In this case, the Court of Appeal was required to determine a reserved question of law and statement of case made by the County Court.
Facts
An employee of Primary Health Care Limited (“PHC”) was injured in the course of her employment as a courier when the vehicle she was driving came into collision with the vehicle driven by the defendant, Mr Giakalis.
PHC was a self-insurer and made compensation payments to and on behalf of the injured worker in the amount of $214,291.07. PHC commenced recovery proceedings against Mr Giakalis under section 138 of the Accident Compensation Act.
Mr Giakalis admitted that the collision was solely caused by his negligence, but denied that PHC was entitled to recover compensation payments made by it to the injured worker.
The Defendant’s Case
The injured worker had not sought to commence common law proceedings against Mr Giakalis under section 93 of the Transport Accident Act 1986 (Vic) (“TA Act”). Accordingly, she had not accessed any of the three gateways prescribed by section 93, thereby enabling her to satisfy the required threshold to bring an action for common law damages against Mr Giakalis.
The defence argued that as the injured worker had not accessed any of the gateways to bring an action for common law damages against Mr Giakalis, there had at no time been any legal liability on behalf of Mr Giakalis to pay damages to her. Section 138(1) of the Accident Compensation Act provides that a recovery action may be brought against a third party where circumstances arise that create a liability in that third party to pay damages. The defence argued that there was no legal liability in Mr Giakalis to pay damages. Accordingly, the claim made by PHC under section 138(1) of the Accident Compensation Act could not be maintained.
Issues for Determination
The Court of Appeal identified three principal issues that they were required to determine:
“(1) Whether, on its proper construction, s 138(2) of the Accident Compensation Act has the effect that s 93 of the Transport Accident Act is to be disregarded in determining whether, for the purposes of s 138(1) of the Accident Compensation Act, a worker was injured in circumstances creating a legal liability in a third party to pay damages.
(2) If the answer to the first issue is in the negative, in a case in which a worker, injured in a transport accident, has not accessed one of the gateways in s 93 of the Transport Accident Act, whether the ‘rights’ of the worker to recover damages against a third party, and the ‘liability’ of the third party who caused that injury, are properly characterised as ‘contingent’ for the purposes of s 138(1) of the Accident Compensation Act.
(3) If such rights and liabilities are characterised as ‘contingent’, whether, nevertheless, s 138(1) encompasses such contingent liability of the third party.” 1
Decision
Kaye AJA delivered the leading judgment, with Weinberg JA and Vickery AJA agreeing. The Court concluded that:
- Section 138(2) of the Accident Compensation Act does not have the effect that section 93 of the TA Act is to be disregarded when determining whether a worker was injured in circumstances creating a legal liability in a third party to pay damages
- Where a worker has not accessed one of the gateways prescribed in section 93 of the TA Act, the common law liability of the third party who caused the injury is contingently extinguished for the purposes of section 138(1) of the Accident Compensation Act and
- Section 138(1) does not apply where the liability of the third party to an injured worker has been contingently extinguished by section 93 of the TA Act.
- Accordingly, the court held that the recovery action by PHC against Mr Giakalis could not be maintained.
Impact of the Decision
The impact of this decision is that a right of recovery against potentially negligent third parties under section 138(1) of the Accident Compensation Act does not exist until and unless a worker injured in a work-related transport accident accesses one of the gateways under section 93 of the TA Act and satisfies the thresholds to bring an action for common law damages against that third party.
Accordingly, section 138(1) only applies where a third party has accrued an actual liability to an injured worker. It will not apply in circumstances where there may be a hypothetical liability of a third party to a worker injured in a transport accident.
The Court of Appeal clearly stated that:
“…recovery provisions, such as s 138(1), are premised on the existence of a legal liability in the third party to pay damages, and are not engaged by the existence of a ‘contingent’ liability of the third party.” 2
Accordingly, the right to recovery against third parties under section 138(1) of the Accident Compensation Act is contingent upon the injured worker electing to access the gateways in section 93 of the TA Act and satisfying the applicable thresholds to bring an action for common law damages against a third party.
In the event a worker injured in a transport accident does not obtain or is denied a serious injury certificate, then the VWA will not have a right of recovery under section 138(1) of the Accident Compensation Act.
Unfortunately, the reasoning of the Court of Appeal cannot be applied to workers who are injured other than by way of a transport accident. Section 138(2) provides that in determining for the purposes of section 138(1) whether an injury or death was caused under circumstances creating a legal liability in a third party to pay damages for an injury, Divisions 8A and 9 of part IV of the Accident Compensation Act must not be taken into account. These provisions contain the gateways prescribed in section 134AB for a worker to obtain a serious injury certificate in order to claim damages.
Therefore, although significant, the decision will only have application in recovery actions where the worker is injured as a result of a transport accident.
1 [2013] VSCA 75 at para 32.
2 [2013] VSCA 75 at para 65.
