The NSW Supreme Court has recently reinforced the distinct character of an insurer’s statutory right to indemnity (recovery) under section 151Z of the Workers Compensation Act 1987 (NSW) (1987 Act) in IAG Limited trading as NRMA Insurance v Lucic  NSWSC 620.
In so doing, the Court determined that a worker was not bound by the Court’s assessment of notional damages arising from prior recovery proceedings should a claim for damages be pursued by worker.
On 31 August 2005, Mr Lucic (worker) sustained personal injury in a motor vehicle accident whilst in the course of his employment. He subsequently lodged a claim for workers compensation with his employer. The workers compensation insurer accepted liability for the claim and made payments in accordance with the provisions of the 1987 Act.
Separate to his claim for workers compensation, the worker lodged a claim for damages pursuant to the Motor Accidents Compensation Act 1999 (NSW) against Mr Yung (driver). The driver’s compulsory third party (CTP) insurer accepted liability for the worker’s claim on 14 August 2006.
The workers compensation insurer brought proceedings in the District Court of NSW against the CTP insurer to recover payments made to the worker relying on its right to a statutory indemnity pursuant to section 151Z(1)(d) of the 1987 Act. On 3 October 2007, Truss DCJ delivered judgment in favour of the workers compensation insurer and notionally assessed damages in the sum of $196,800.
Subsequently, the worker’s claim for damages against the CTP insurer proceeded to the Claims Assessment and Resolution Service (CARS) for assessment of damages. On 31 August 2018, CARS awarded the worker damages in the sum of $1,548,026.45.
By summons, the CTP insurer sought to set aside the CARS assessment. Relevant to the operation of section 151Z, the CTP insurer asserted the judgment of Truss DCJ in the recovery proceedings created a binding estoppel on the damages claimable by the worker.
Adamson J dismissed the CTP insurer’s summons on the basis that the recovery proceedings concerned a materially different cause of action to that brought by the worker. The distinction was made that the workers compensation insurer was entitled to judgment for the amount of the payments to date of judgment and any further payments made up to the limit of the ‘notional damages’. The court found res judicata bound the workers compensation insurer and the CTP insurer following the judgment and notional assessment of damages in the recovery proceedings. Notwithstanding any award for damages obtained by the worker, the indemnity sought by the workers compensation insurer was limited to the notional assessment of damages determined in the recovery proceedings.
Damages awarded to the worker were determined as at the date of judgment of his proceedings. In drawing out the distinction between the two claims, Adamson J highlighted that a worker could claim other or varied heads of damage not previously included in the ‘notional assessment’.
The court did not accept the submission that the worker was the privy of the workers compensation insurer through his involvement as a witness. It was held that such a finding could only be made if the legislation was unequivocal in its intention to remove the right to procedural fairness through express words or necessary implication. This was not found in either Act. If the CTP insurer’s submissions on the issue of privity were to be accepted, it would bind a worker to a result which he had no opportunity to be heard as a party. Accordingly, there was insufficient privity of interest in this case to give rise to an issue estoppel.
The decision of the Court serves to confirm the distinction between a statutory claim for indemnity and a claim for damages. The decision highlights that whilst an assessment of ‘notional damages’ might be instructive, such an assessment is not ultimately determinative of a worker’s entitlement to damages arising under a separate cause of action.
This article was written by Joanna Apostolopoulos, Partner and Audrey Chan, Solicitor.
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