July 2004

What a difference a day makes - worker's compensation & loss of insurance

On 6 July 2004, the Court of Appeal handed down an interesting decision on whether the loss of available insurance to a defendant was relevant "prejudice" when the Court was considering whether a limitation period should be extended in favour of an injured plaintiff.

In Delta Pty Limited v Whitefield [2004] NSWCA 220, the Court of Appeal unanimously held that loss of insurance was indeed a factor which should have been taken into account in those circumstances.

The facts

Donnie Whitefield was injured in an industrial accident which occurred on 6 December 1994. He was employed by Gillespie Crane Nominees Pty Limited, from whom he duly received payments of worker’s compensation. The primary limitation period for him to take common law proceedings against any company apart from his employer (such as Delta, one of the contractors on site, for whom Bartier Perry acted) expired on 6 December 1997.

The Limitation Act then allows a further five-year period of grace in which to lodge an application for an extension of time. On 5 December 2002, just one day before the final deadline, Whitefield filed a notice of motion in the District Court, seeking an order to allow him to sue Delta, out of time.

Legal advice given to Whitefield

Before both Judge Phegan at first instance, and in the Court of Appeal, there was a great deal of consideration given to the exact nature of the legal advice which Whitefield had been given by various solicitors and barristers over the years. There was no doubt that at least some of that advice had raised for his consideration the question of whether he should sue Delta, or whether he should only rely on continuing to receive his worker’s compensation payments. Whitefield, for his part, said that he did not understand much of the advice which was given to him.

Nevertheless, the Court of Appeal followed its own decision in Itek Graphix Pty Limited v Elliott (2002) 54 NSWLR 207. It said that it will be a highly relevant factor in determining whether to extend a limitation period to consider whether, after getting proper legal advice, the plaintiff actively decided not to take proceedings before the period expired.

Had Delta suffered "prejudice"?

There was a further similarity to Itek Graphix in that it was conceded on behalf of Delta that it would suffer no factual prejudice if it was forced to defend Whitefield’s proceedings at such a late stage. In other words, there was no suggestion that relevant witnesses had died or disappeared, or that Delta would be prevented from adequately defending the case.

Rather, Delta argued that, if Whitefield’s claim had been brought before the primary limitation period expired in December 1997, then statistics available from the District Court showed that it was overwhelmingly likely that the claim would have been resolved and finalised by the end of 2000. The significance of this date was that Delta held its public liability insurance with HIH, which went into provisional liquidation on 15 March 2001. Delta was not eligible for relief from the HIH Claims Support scheme, so therefore would be uninsured if Whitefield was allowed to continue with his proceedings against Delta.

Delta relied on a decision of the Tasmanian Supreme Court, Ashton v Benders [2002] TASSC 68, where that Court said that the disappearance of insurance could be a relevant factor to a court’s discretion. Despite that Tasmanian case, when hearing Whitefield’s notice of motion to extend the limitation period, Judge Phegan of the District Court thought that loss of insurance was not sufficient prejudice to a defendant to cause the judge to reject Whitefield’s application for an extension of time.

It was likewise submitted for Whitefield in the Court of Appeal that there was no evidence before the Court as to Delta’s financial position, and that exposure to such a claim by Whitefield (which would be in the order of some hundreds of thousands of dollars) may well have been insignificant for Delta, if it was a large enough company.

The Court of Appeal's decision

The Court of Appeal did not agree with either Judge Phegan, or Whitefield’s counsel, on that point. Cripps AJA, who delivered the judgement on behalf of the Court said that,

"In my respectful opinion the loss of public liability indemnity was highly relevant to the exercise of the Court’s discretion in the circumstances of the case."

He stated that some sub-sections of section 60E of the Limitation Act are clearly only concerned with whether a defendant can prove that it would suffer factual prejudice in preparing its case if a plaintiff is granted leave to sue out of time. On the other hand, the overall thrust of the section is to ensure that the court directs its mind to "all the circumstances of the case" – and the disappearance of insurance should have been considered significant by Judge Phegan.

Comment

The decision is clearly a very useful one for companies who were insured with HIH or any other insurer which is no longer in existence, and who are now called on to meet a case after the limitation period has expired. In days gone by, the courts have sometimes been criticised for stretching concepts of negligence, with a view to enabling a finding to be made against a defendant who has insurance against a claim. But in this decision – at least as it applies in a situation where a plaintiff needs the Court to exercise its discretion to extend the limitation period – the absence of that insurance was considered every bit as relevant.