Thinking | 24 January 2017
Statutory insurance NSW/ACT 2016 in review
Welcome to the Hall & Wilcox NSW and ACT Statutory Insurance 2016 year in review. We have seen many significant decisions in 2016, ranging from issue estoppel to procedural fairness to the reasonableness of an employer’s disciplinary action. Complex CTP, Work Injury Damages and section 151Z matters continue to find their way to the superior Courts. We have attempted to include decisions which have relevance across all statutory insurance lines.
The inexorable rise of regulation across the industry is reflected in the review of the use of surveillance in the ACT insurance industry, the major changes to the ACT asbestos claims regime and the introduction of the latest NSW CTP reform proposal.
We encourage our team to work closely with clients to develop smarter ways of doing business. Accordingly, we were pleased to develop and release our RecoverEase application in 2016 – an application that identifies recovery potential that can also be used as a training and compliance tool.
Our team continued to grow and consolidate across all lines in 2016. We would like to take this opportunity to thank all of our clients for their support in 2016 and look forward to working together in what promises to be a challenging 2017.
Motor Vehicle Accidents
The objective test for contributory negligence. What is reasonable to invest in the reasonable person?
On 9 December 2015, the High Court delivered judgment in Allen v Chadwick1 which arose from a motor vehicle accident which occurred in the early hours of 12 March 2007 outside Port Victoria, South Australia. Ms Danielle Chadwick was a rear seat passenger in a vehicle driven by Mr Allen when he lost control of the vehicle, left the roadway and struck a tree. Ms Chadwick was ejected from the vehicle and suffered serious spinal injuries.
Mr Allen and Ms Chadwick had been in an on/off relationship for a few years prior to the accident. They had been in each other’s company for the whole of the previous day, during which time Mr Allen and a friend had been drinking. It was apparent that he was intoxicated and indeed, at the time of the accident, Mr Allen’s blood alcohol concentration was 0.229g/100mL.
Between 1.30am and 2.00am on 12 March 2007, Mr Allen, Ms Chadwick and a friend decided to go for a drive - ostensibly to purchase cigarettes. At this stage, Ms Chadwick was driving. They were driving in and around the Port Victoria township for 10 to 15 minutes and were on an empty roadway when Ms Chadwick was forced to stop and answer the call of nature behind some bushes.
When she returned to the vehicle, Mr Allen had made his way into the driver’s seat. Chadwick argued with Allen and told him not to drive but he told her in no uncertain terms to get in the car.
Ms Chadwick gave evidence that she chose to get into the vehicle as it was dark and she believed she was otherwise to be left in the middle of nowhere. Against this, evidence was adduced that street lighting was observable 200 metres away and the hotel they had been drinking at was only 500 metres away.
Ms Chadwick eventually got into the rear driver’s side seat but Allen accelerated hard even before Ms Chadwick could close the door. Allen continued to drive erratically and aggressively and eventually lost control, striking 2 trees. Ms Chadwick had not fastened her seatbelt prior to the accident and was ultimately ejected from the vehicle, suffering significant spinal injuries.
In South Australia, such motor accident claims are brought pursuant to the Civil Liability Act 1936.
In a manner similar to the provisions of section 138 of the Motor Accidents Compensation Act 1999, section 47 of the Civil Liability Act 1936 (SA) creates a presumption of contributory negligence where an injured person relies on the care and skill of a person known to be intoxicated. It provides as follows:
(a) the injured person—
(i) was of or above the age of 16 years at the time of the accident; and
(ii) relied on the care and skill of a person who was intoxicated at the time of the accident; and
(iii) was aware, or ought to have been aware, that the other person was intoxicated; and
(b) the accident was caused through the negligence of the other person; and
(c) the defendant alleges contributory negligence on the part of the injured person,
contributory negligence will, subject to this section, be presumed.
Whereas in NSW there is no fixed reduction for contributory negligence (section 138(3) providing that the damages recoverable “are to be reduced by such percentage as the court thinks just and equitable in the circumstances of the case”), section 47(3) imposes a standard reduction of 25%. Relevantly for the present case, section 47(5) increases that statutory reduction to 50% where the concentration of alcohol in the driver's blood was greater than 0.15 g/100mL.
An exception is provided by s47(2) in the following terms:
“The injured person may rebut the presumption by establishing, on the balance of probabilities, that—
(a) the intoxication did not contribute to the accident; or
(b) the injured person could not reasonably be expected to have avoided the risk.”
Again, this is comparable to the caveat in s138(2)(b) which provides, “unless, in the circumstances of the case, the injured person or deceased person could not reasonably be expected to have declined to become a passenger in or on the motor vehicle”
Section 49(1)(a) of the Civil Liability Act 1936 similarly creates a presumption of contributory negligence (of 25%) where the plaintiff was not wearing a seat belt. Again, an exception to that presumption exists pursuant to section 49(2) where the plaintiff establishes, on the balance of probabilities, that they could not reasonably be expected to have avoided the risk.
Section 138(2)(c) of the Motor Accidents Compensation Act 1999 similarly provides that a finding of contributory negligence must be made “where the injured person (not being a minor) or the deceased person was, at the time of the motor accident, not wearing a seat belt when required by law to do so”. The MACA does not contain a specific exception to this provision as it does for the issue of intoxication.
In practice, the Court would likely exercise its discretion under section 138(3) to reduce any award of damages recoverable by such percentage as the court thinks just and equitable in the circumstances of the case (which may include a reduction of 0%).
District Court proceedings ran for a total of 62 sitting days before District Court Judge Tilmouth. The trial Judge found that Ms Chadwick was an unsatisfactory witness and lied profusely but did accept one key aspect of her evidence, namely that she did not know where she was when she stopped to urinate, despite the nearest street lighting being observable 200 metres away and the hotel they had been drinking at being only 500 metres away. The trial judge declined to apply the presumed 50% reduction referable to Ms Chadwick voluntarily travelling with an intoxicated driver. His Honour found that Ms Chadwick could not reasonably be expected to have avoided the risk of riding with an intoxicated driver, noting that she was a 21 year old pregnant woman with 2 older men at 2.00 am on the outskirts of a remote town she was unfamiliar with and as such, she had little choice but to enter the vehicle given the precarious situation she found herself in.
On the seatbelt issue, his Honour accepted from the available expert evidence that there were at least 2 occasions during the otherwise erratic driving of Mr Allen that the plaintiff could have fastened her seat belt. His Honour accordingly, applied the standard reduction of 25% for the plaintiff’s contributory negligence in this respect.
The Supreme Court of South Australia affirmed (by 2:1) the trial judge’s decision in respect of the reduction for intoxication but unanimously found that the trial judge erred in applying the 25% reduction in respect of failure to wear a seatbelt, finding that it was reasonable for Ms Chadwick to have not fastened her seatbelt in the context of Mr Allen’s erratic driving.
The High Court noted that section 47(2)(b) contemplates an objectively reasonable evaluation of the relative risks of riding with an intoxicated driver as against any risks of pursuing an available alternate course of action.
The relevant inputs into that evaluation are those facts, as they may reasonably be perceived, which bear upon a reasonable assessment of the relative risks or alternate courses of action.
They may include objective facts personal to the plaintiff and aspects of the external environment but does not include subjective characteristics which may reduce the plaintiff’s capacity to make a reasonable evaluation of the relative risks.
The High Court noted that the position under the common law is as stated by Justice McHugh in Joslyn v Berryman2, such that a plaintiff’s subjective, mental or emotional state is irrelevant to the reasonable choice expected of him or her.
The High Court found that nothing in the Civil Liability Act 1936 (SA) suggested a statutory purpose to alter the law to make allowance for such subjective considerations.
The High Court noted that the trial judge’s factual finding that Ms Chadwick did not know where she was had not been disturbed on appeal. Once this was accepted, the High Court identified the relevant inputs into the evaluation of a relative risk required by section 47(2)(b) were that the plaintiff was a young woman, that she was pregnant (and therefore there were more serious consequences to any assault), that she was on a dark and unfamiliar country road, an unknown distance from town in the early hours of the morning. The High Court considered that this would reasonably lead to an evaluation of a real risk of harm and that such risk was greater than the risk associated with travelling in a vehicle with an intoxicated driver, particularly in the early hours of the morning when one would expect to find less traffic on the road.
The Court excluded from consideration any subjective characteristics which may have reduced Ms Chadwick’s capacity to make a reasonable evaluation of the relative risks such as impetuosity, drunkenness, hysteria, mental illness or personality disorders.
In relation to the seatbelt issue, the High Court noted that it is not a question of whether it was reasonable or understandable to fail to fasten her seat belt but rather whether she was prevented from fastening her seat belt due to Mr Allen’s driving.
The High Court noted that this was answered by the trial judge’s finding of fact that there were at least two occasions the vehicle was driving on a straight road where she could have fastened her seat belt.
As such, the High Court confirmed the original finding of the trial judge that there would be no reduction on account of the alcohol issue but a 25% reduction on account of the seat belt issue.
The High Court’s decision was reliant in some part on the particular provisions of the South Australian legislation but does have some broader application in confirming the common law’s approach to the assessment of contributory negligence on the objective standard of a reasonable person.
The High Court’s exclusion of subjective features such as impetuosity, drunkenness, hysteria, mental illness or personality disorders creates some tension with a number of lower court decisions in which the evaluation of the standard expected of a reasonable person suffering from an intellectual disability permitted this attribute to be taken into account when assessing contributory negligence.3
The High Court did not engage with any of these lower Court cases, presumably because the issue of intellectual disability did not arise in the circumstances of this case. We would urge insurers to remain aware of the potential for further development of this line of authority by plaintiffs seeking to reduce the apportionment of contributory negligence on account of some such impairment, despite the High Court’s comments in this case and the prevailing view following the decision in Joslyn v Berryman.
Further guidance as to section 62 MAS referrals
In Insurance Australia Limited v Clewley4 the Supreme Court upheld an administrative law challenge made by IAL to a decision of the Proper Officer of the Medical Assessment Service not to refer a matter for further assessment.
The significance of the decision is to highlight that both of the following can be additional relevant information:
- Additional items of evidence which go to an issue already before MAS.
- An expert opinion which comes to the same conclusion as another which is already before MAS, but which is based on additional information (in this case reference to research papers and clinical experience).
The application for further assessment followed an assessment by the MAS review panel. The MAS review panel had before it a summary of footage taken on 9 May 2012, but not the footage itself from that date.
Once IAL obtained the footage dated 9 May 2012 from another insurer who had commissioned it, it applied to the Proper Officer of MAS on 16 July 2015 for further assessment under section 62 of the Motor Accidents Compensation Act 1999 (NSW) (Act) on the basis of “additional relevant material”, being the digital footage of Mr Clewley taken on 9 May 2012 and a report of Professor Spira dated 12 June 2015 which included a comment on it.
The Proper Officer refused the application.
His Honour found that the Proper Officer erred in applying a passage from the judgment of Justice Davies in Alavanja, which was concerned with expert medical opinions to the same effect not being additional relevant information, to the surveillance DVD of 9 May 2012, noting that the typed description of the surveillance agent’s observations was a wholly inadequate description of those aspects of Mr Clewley’s movements on that day which would be relevant to the veracity of his reportage of symptoms and the footage was, therefore, additional relevant information.
In relation to the Proper Officer’s dismissal of Professor Spira’s 12 June 2015 report as not “additional”, His Honour found that the Proper Officer erred in limiting himself to consideration of the ultimate conclusion in each of Professor Spira’s reports. Judge Fagan noted that Professor Spira’s opinion of 12 June 2015 contained three significant elements and found that the Proper Officer failed to evaluate the second and third of those elements of the report which he described as “distinct, fresh pieces of information” and commented that: ‘This involved erroneous conflation of the Professor’s ultimate conclusion with the information upon which he supported it. The conflation led to the proper officer not considering at all whether the two points of information referred to were… “additional”.’
Interpreting section 62 Motor Accidents Compensation Act 1999 – a shift away from Singh (no 2)
On 5 August 2016 the Supreme Court delivered judgment in the matter of IAL v Asaner5 which provides further guidance to insurers and practitioners in relation to the application of section 62(1)(a) Motor Accidents Compensation Act 1999 (Act) in the wake of Jubb v Insurance Australia Limited.6
His Honour Justice Campbell set aside the decision of the proper officer refusing the insurer’s application for referral for further medical assessment under section 62(1)(a) and remitted the matter to S.I.R.A for the determination of the application by its proper officer according to law.
The first defendant, Mr Asaner, claimed damages for personal injuries received in a motor accident. The first defendant’s entitlement to non economic loss pursuant to section 131 of the Act was in dispute. The matter was referred to MAS and a medical assessment was undertaken as a result of which the claimant first defendant was assessed to have a 14% permanent impairment. Among the medical material provided to MAS was a report of Dr Phillipa Harvey-Sutton.
The insurer applied for the matter to be referred for medical assessment under section 62 of the Act on the ground of ‘additional relevant information about the injury’. The additional relevant information relied upon by the insurer was a surveillance DVD and report, together with a supplementary report of Dr Harvey-Sutton, all of which post-dated the MAS assessment.
In her supplementary report, Dr Harvey-Sutton said that she had viewed and considered the surveillance report and DVD footage which ‘leads [her] to confirm [her] conclusion in [her] principal report’ inter alia, that she could not ‘identify continuing signs of injury or disability’’
On 28 August 2015 the proper officer declined the insurer’s application stating, in part:
‘I am satisfied that the surveillance material and Dr Harvey-Sutton's report are additional to the party relying on them as a ground for further assessment, as required by Singh7. However, I am not satisfied that they constitute additional relevant information about the injury. This is because Dr Harvey-Sutton's opinion does not appear to be of a different kind (i.e. dealing with different issues) than the opinions already expressed and considered as outlined in Singh. ……I note that Dr Harvey-Sutton's previous opinion was before the Assessor and was considered. As her opinion has not changed, I do not consider it to be additional relevant information.
In light of Dr Harvey-Sutton's comments above that the surveillance material does not affect her previous determination, and in the absence of any material before me to the contrary, I am not satisfied that the surveillance material is additional relevant information. This is because it does not contain an opinion of a different kind as required by Singh, and is saying the same thing but using different or greater analysis, as outlined in Alavanja’8.
Having found that the material was not ‘additional relevant information’ within the meaning of section 62(1)(a) the proper officer did not address section 62(1A). His Honour Justice Campbell found that the insurer has established constructive failure to exercise jurisdiction, a form of jurisdictional error and observed:
- The proper officer’s reasons for deciding the surveillance material was not additional relevant information seems to have reflected his view that he was constrained by authority to interpret the phrase ‘additional relevant information’ as restricted to ‘opinions’ dealing with ‘issues’ not previously considered. In Jubb the Court of Appeal rejected that construction of section 62.
- In addition, in Jubb the reasoning in Singh (No 2) was subjected to rigorous critical analysis (see  – ). As Singh (No 2) proceeded on the now recognised as erroneous basis that the s 62(1A) pre-condition was a jurisdictional fact of a type to be determined by the Court as an objective fact, the reasoning had to be treated ‘with some caution’9.
- The proposition that material held back by a party was not additional information is ‘open to doubt’ because of ‘a risk of conflating the considerations to be balanced by the proper officer in exercise of the discretion given in section 62(1) and the formation of the proper officer’s opinion required by section 62(1A).’
- The proposition that a further medical opinion cannot constitute ‘additional information’ ‘unless it is based upon a change in the claimant’s underlying symptoms and circumstances … may be doubted’ because it tends to conflate the separate grounds of ‘deterioration of the injury’ and ‘additional relevant information’. That ‘conflation’ seems to have occurred here.
- The phrase ‘additional relevant information’ is to be given its ordinary meaning. It encompasses much more than the mere expression of expert opinion even if the relevance or significance for the purpose of section 62(1A) might, as a matter of fact, depend upon an expert exposition, as may be the case with surveillance film.
- It would be wrong to assume that a revised medical opinion alone can never constitute additional relevant information. A different but cogent medical view not available at the time of the previous assessment is one example capable of satisfying the test.
- The proper officer’s reliance on the erroneous construction he derived from Singh (No 2) was central to his decision. That, properly directed, the same decision may be open is not to the point.
- The correct legal approach is that the proper officer was not precluded from evaluating Dr Harvey-Sutton’s second report as ‘additional relevant information’. The insurer argued that the surveillance material depicted the first defendant exhibiting a full range of left shoulder movement. If that submission was borne out by his viewing of the film, it was legally open to the proper officer to decide that Dr Harvey-Sutton’s restatement of her previously held opinion considered in the light of the surveillance material was ‘additional relevant information’.
- Were that the decision, the question was then whether the proper officer was satisfied that that ‘additional relevant information’ was ‘capable of having a material effect on the outcome of the previous assessment’. In this case, an affirmative answer to that second question would also have been open.
- If the proper officer in his subjective assessment decided each of those questions in favour of the insurer, a third question arises which is ‘whether or not to refer the matter for a further assessment’ in the exercise of the ‘residual discretion’ conferred by section 62(1) by use of the word ‘may’: Jubb at  – . Of the ‘residual discretion’ Judge of Appeal Gleeson said (at ):
‘… the discretion is not entirely unconstrained. The power conferred on the proper officer must be exercised in accordance with the subject matter, scope and purpose of the statute…[T]he existence of that discretion has been recognised in the authorities on section 62.’
Issue estoppel defeats personal injury claim due to property damage settlement
In a highly favourable decision for our insurer client, Genevieve Audrey Amor-Smith v Peter Ching10 highlights circumstances in which it is possible to defeat unmeritorious claims at an early interlocutory stage.
The plaintiff was involved in a scooter accident on 25 August 2011. The plaintiff suffered a fractured right ankle and a fractured left scapula. The plaintiff commenced District Court proceedings by way of summons on 31 August 2015 seeking leave to commence personal injury proceedings out of time pursuant to section 109, Motor Accidents Compensation Act 1999(MACA).
To satisfy section 109 the plaintiff needs to provide a full and satisfactory explanation for the delay and satisfy the court that total damages would likely exceed $108,000 [in this case].
The defendant also sought a summary dismissal based on estoppel per rem judicatam arising from a consent judgment in the Local Court property damage proceedings for the same accident.
Her Honour held that the plaintiff’s pre-accident psychiatric problems did not provide a basis for ‘satisfactory’ explanation especially in the circumstances where she had completed an accident notification form shortly after the accident, consulted lawyers in October 2012, completed a personal injury claim form in November 2012 all before consulting her current lawyers in July 2014 and lodging another claim form. The plaintiff was also involved in property damage and criminal proceedings against her related to this accident. Her Honour found that a reasonable person in the plaintiff’s position would not have been inactive due to pre-existing disorders particularly as she had consulted a series of health professionals who were available to assist her during this time.
The plaintiff did not tender any medical evidence supporting ongoing injuries and disabilities caused by the accident. Without medical evidence to the contrary, her Honour found that the plaintiff had completely recovered from physical injuries and that her pre‑existing psychiatric problems were continuing as before. Further, tax returns revealed an increase in income since the accident.
In settlement of the property damage proceedings, the plaintiff had signed a consent judgment for the full amount claimed by the defendant plus interest and costs but on a ‘without admission of liability’ basis. The plaintiff argued that there was no estoppel on account of the words ‘without admission of liability’ in the consent orders. The defendant submitted that the proceedings were settled for the full value without any compromise which rendered the terms ‘without admission of liability’ ineffectual for the purposes of issue estoppel.11 Her Honour found that the words ‘without admission of liability’ were “a mere legal flourish”; she accepted the words were inconsistent or repugnant to the rest of the settlement they had no effect.12
Following the judgment, the defendant applied for the Court to refer the matter to the Department of Public Prosecutions (DPP) on account of the plaintiff’s dishonest evidence. Her Honour found that there was a clear attempt by the plaintiff to mislead the Court and found this to be one of the most blatant cases she had experienced perjury. She ordered a referral to the DPP.
The defendant made a Calderbank offerdated 10 March 2016 through an application for indemnity costs was sought for the entirety of the proceedings on account of the grossly false evidence. The defendant submitted being put to significant extra costs following the plaintiff’s blatant dishonesty. Her Honour found that the plaintiff must have known the falsity of her own evidence and therefore awarded indemnity costs for the entirety of the proceedings. Her Honour found that even if there had been no Calderbank offer, she would award indemnity costs against the plaintiff as she was dishonest to the point of being fraudulent.
This is a supportive case for insurers because a generalised allegation of psychological disorders resulting in avoidant behaviour will not always justify a ‘full and satisfactory’ explanation for the delay particularly if the plaintiff is receiving treatment. In addition, when property damage claims arising from the same accident are settled for the full value of the claim even on a ‘without admission of liability’ basis, this will estop the plaintiff from bringing a personal injury claim. Furthermore, the referral to the DPP and indemnity costs order serve as a warning to potential litigants who chose to embellish their symptoms.
Procedural fairness at MAS is for insurers too
In Dominice v Allianz Insurance13 the Supreme Court found that the MAS process must afford fairness not only to the injured party but too all parties.
The claimant had been assessed at MAS by Assessor Ashwell and found to have significantly restricted range of movement of the shoulders approximately 10 months after Dr Kenna (insurer’s expert) found no restriction of movement. Despite Assessor Ashwell being “at a loss to explain why the shoulder movement has now decreased by such an amount” he never put the inconsistency to the claimant in accordance with clauses 1.42 and 1.43 of the Permanent Impairment Guidelines. Clause 1.43 in states:
“Where there are inconsistencies between the assessor’s clinical findings and information obtained through medical records and/or observations of non-clinical activities, the inconsistencies should be brought to the claimant’s attention… The claimant will then have an opportunity to confirm the history and/or respond to the inconsistent observations to ensure accuracy and procedural fairness.”
The insurer applied for review of the Certificate pursuant to section 63 of the Motor Accidents Compensation Act 1999 inter alia relying on clause 1.43. The Proper Officer allowed the review.
The Review panel ultimately found that injury to the shoulders was not caused by the subject accident.
The claimant filed a Summons in the Supreme Court seeking a declaration setting aside the Proper officer’s decision to allow a review of Assessor Ashwell’s MAS certificate.
The Summons alleged inter alia that the failure of the Assessor to put to the claimant the inconsistent findings in accordance with 1.43 of the Guidelines was an irrelevant consideration for the purposes of the medical assessment as the fundamental purpose of that clause is to only afford procedural fairness to the claimant.
Justice Fagan rejected that submission. He said at :
“I consider that cl 1.43 has at least the purposes of affording procedural fairness to both parties, the claimant and the insurer, and of achieving accuracy in assessment. I make this construction directly from the language used in the paragraph. It contains no restriction of purpose to the protection of the complainant only. The language is wide enough to permit that it might be invoked in the interests of either party.”
His Honour noted that clause 1.43 had only been invoked on behalf of the claimant in all of the cases brought to his attention during the hearing, but considered that is simply because it would usually be the claimant who would benefit from its application [at 15]:
“But there may also be cases, and I consider this to be one of them, where the assessor's certificate may possibly overstate the measure of impairment if inconsistent findings have not been resolved by the assessor's own analysis of them, yet he or she proceeds to certify a significant level of impairment without the complainant having been asked to explain. In such a case there could be, on that account, "reasonable cause to suspect that the medical assessment was incorrect in a material respect" – in the words of section 63(3).”
His Honour dismissed the Summons and ordered the claimant pay the insurer’s costs.
This case highlights the importance of clauses 1.42 and 1.43 of the Permanent Impairment Guidelines in ensuring, plausibility, accuracy and procedural fairness for both parties in MAS assessments. Consideration should always be given to whether a MAS Assessor has properly considered all the information before him or her, identified any inconsistencies, put them to the claimant and then provided an adequate analysis using his or her clinical skill and judgment to resolve the inconsistencies. If there are any deficiencies in this process, consideration should be given to applying for a review under section 63 of the Motor Accidents Compensation Act 1999.
Let’s Get To The Point. What’s It Really Worth? Exploring the section 109 monetary threshold.
In Kaihee Bawoh v Eddie Coates14 the District Court found that the assessment of damages for the purposes of the section 109 threshold required a sound evidentiary basis so that the “real chance of success” can be properly evaluated on the basis of the evidence taken at its highest.
The plaintiff was involved in a motor vehicle accident on 3 July 2009 when she suffered injury after being struck by the defendant’s vehicle whilst on a pedestrian crossing. Following the accident the claimant consulted Brydens Compensation Lawyers on 3 June 2010 and lodged the claim form on 27 August 2010. The insurer for the defendant rejected the claim on 17 September 2010, and leave to proceed with the late claim was granted on 2 February 2012.
The plaintiff’s claim was eventually assessed at CARS on 27 October 2014 and a certificate issued by the Assessor on 20 February 2015. The plaintiff did not accept the CARS award and filed a statement of claim in the District Court on 6 May 2015. The insurer argued that proceedings were commenced outside the limitation period and she required leave of the court to commence proceedings (section 109 of the Motor Accidents Compensation Act 1999).
Section 109(3) provides that leave should not be provided unless the plaintiff provides a full and satisfactory explanation for the delay and the total damages to be awarded if the claim succeeds are not less than 25% of the maximum amount that may be awarded for non-economic loss (the threshold amount). The plaintiff was put to proof regarding her explanation for the delay. The application was vigorously opposed on the question of damages.
His Honour Judge Knox found that a full and satisfactory explanation had been provided. He also undertook a useful review of the law relating to assessing damages pursuant to s 109(3). Considering relevant authorities, his Honour noted that in considering whether the plaintiff’s damages award was likely to exceed the threshold amount there needed to be a sound evidentiary basis for the claim to be made.
In this case, the plaintiff had particularised a claim amounting to almost $600,000 for the purposes of the application, which was twice as much as that claimed in her CARS submissions.
His Honour was of the view that the plaintiff’s claim at its “highest” was only $150,000. He considered that the plaintiff’s claim was “best described as ambitious” and expressed significant concern that the damages ultimately awarded could be consumed due to mounting legal costs and consequently made an order for the parties to attend a mediation.
Section 109 has an important function of limiting access to the courts with respect to small claims where there has been long delays not properly explained. The focus of section 109 applications has tended to be on delay rather than damages, probably because of an assumption that the plaintiff’s case taken at its “highest” will easily satisfy the threshold amount. This decision is a reminder to insurers that in appropriate cases a plaintiff ought to be put to proof as to whether the section 109 damages threshold has been met. Defendants are encouraged to bear in mind the damages threshold component of section 109 as strongly agitating this issue could assist in resolving otherwise difficult and potentially long running and costly claims.
Work Injury Damages
MAS assessors not bound by findings on causation by Arbitrators of the Workers Compensation Commission (now known as the Personal Injury Commission)
In Spratt v Perilya Broken Hill Ltd15 the NSW Court of Appeal recently decided that Medical Assessment Service (MAS) assessors are not bound by findings on causation made by Arbitrators of the Workers Compensation Commission (now known as the Personal Injury Commission). In making this decision, the Court of Appeal examined common law principles of issue estoppel.
Mr Spratt (the worker) was injured at work in a motor vehicle accident (MVA) on 11 October 2011.
The injury was sustained in circumstances in which the worker could claim compensation under both the Workers Compensation Act 1987 and the Motor Accidents Compensation Act 1999 (MACA).
The worker alleged that he sustained an injury to his cervical spine in the MVA and this was disputed by the employer.
As a result of an Arbitration hearing in the Workers Compensation Commission (WCC) (now known as the Personal Injury Commission) on 9 May 2015, Arbitrator Perrignon determined that the worker sustained an injury to his cervical spine in the MVA and he was referred for whole person impairment (WPI) assessment of the cervical spine.
The worker commenced proceedings against the driver and his employer claiming damages in the District Court relying on the MACA. The worker was assessed by MAS Assessor Dr Schutz for the purposes of seeing if his level of WPI was ‘greater than 10%’ as required by section 131 of the MACA to claim non economic loss (NEL) damages.
Dr Schutz found that the worker did not suffer an injury to his cervical spine in the MVA and the worker was assessed at below the NEL threshold.
The worker made an application to the MAS Proper Officer for review of Dr Schutz’s decision pursuant to section 63 of the MACA, arguing that Dr Schutz was estopped from finding that the worker did not suffer an injury to his cervical spine as determined by Arbitrator Perrignon on 9 May 2015 in the WCC.
The Application for Review was rejected by the Proper Officer. The worker filed a Notice of Motion in the District Court pursuant to section 62(1)(b) of the MACA to have the matter referred back to Assessor Schutz. The worker argued that a medical assessor making an assessment under the MACA is bound by the findings of the WCC on the issue of causation of the worker’s injury to the cervical spine. His Honour, Judge Bozic declined to refer the matter for further assessment.
The worker appealed the primary judge’s decision arguing, inter alia, that the decision was contrary to law as it found a medical assessor was not to apply the concepts of causation as they would be applied by a court. The worker sought judicial review of the decision of the Proper Officer and sought leave to appeal the interlocutory decision of His Honour Judge Bozic.
The matter proceeded to the NSW Court of Appeal on 27 July 2016 constituted by Judges of Appeal McColl, Gleeson and Leeming.
Justice Leeming delivered a judgment dismissing the worker’s appeal with costs. Justice McColl and Justice Gleeson agreed with Justice Leeming’s reasons and did not provide separate judgements.
The Court of Appeal held that the worker’s appeal must fail for two reasons:
- There was no issue estoppel as the worker’s motor accident claim was against the driver of the vehicle but his worker’s compensation proceedings were against the driver and employer, with liability for the latter being purely vicarious. The Court of Appeal held that as the driver could not be regarded as a privy of his employer, he could not be bound by issue estoppel.
- Even if an issue estoppel arose as to causation, it does not bind an assessor determining a medical dispute in accordance with Part 3.4 of the MACA. In this regard, the Court of Appeal noted that the MACA ‘makes clear’ that primacy is to be given the determination of the medical assessor on causation issues.
The Court of Appeal followed the reasoning in Motor Accidents Authority of NSW v Mills  NSWCA 82 noting that it was factually similar and at the forefront of submissions advanced on the respondent’s behalf. The Court of Appeal noted that the MACA provides for the exclusive determination by medical assessors on questions of permanent impairment and causation and abrogates common law issue estoppel to the ‘extent that it would otherwise preclude a medical assessor from performing the tasks imposed on him or her’ under the MACA.
- MAS assessors are not bound by findings on causation made by WCC Arbitrators.
- This decision is consistent with the supremacy given to MAS Assessors under part 3.4 of the MACA to determine whether injuries are causally connected to a MVA and assessing WPI to see if it is greater than the 10% threshold imposed by 131 of the MACA to claim NEL damages.
- A MAS assessor’s determination on injury causation is binding only for the purposes of a MAS assessor’s assessment of WPI. CARS assessors and judges may form a different view on causation and award damages accordingly in respect of the other heads of damages.
Section 11A ‘Reasonable action’ defence
In David Taranto v State of NSW (Police Force)16 Mr Taranto (the applicant) brought proceedings in the NSW Workers Compensation Commission (WCC) (now known as the Personal Injury Commission) claiming compensation in respect of a psychological/psychiatric injury, allegedly sustained during the course of his employment with the NSW Police Force (the respondent).
The respondent conceded that the applicant suffered a psychological/psychiatric injury but relied on section 11A(1) in defence of the claim, which provides that no compensation is payable if the applicant’s psychological injury wholly or predominately caused by reasonable action taken or proposed to be taken by or on behalf of the employer with respect to discipline within the meaning of section 11A of the 1987 Act.
In support of the section 11A(1) defence, the respondent relied, inter alia, on the fact that the ‘entirety of the medical evidence’ indicated that the ‘sole cause’ of the applicant’s psychological injury was based on the applicant reading an investigator’s report in which charges against him (relating to his handling of a matter concerning illicit drugs) were sustained.
The matter proceeded to Arbitration hearing before Arbitrator Grahame Edwards who determined that the applicant’s psychological injury was wholly or predominately caused by reasonable action taken or proposed to be taken by or on behalf of the Respondent with respect to discipline within the meaning of section 11A(1) of the 1987 Act.
In this regard, Arbitrator Edwards noted that:
- Whether an action is reasonable is a test that involves a question of fairness having regard to all the circumstances and the entirety of the conduct with respect to discipline.
- Principles to be applied in determining whether action is reasonable include.
- A broad view is to be taken of the expression ‘action with respect to discipline’. It is capable of extending to the entire process involved in disciplinary action, including the course of an investigation.
- An employer bears the burden of proving that the action with respect to discipline was reasonable.
- The test of reasonableness is objective. It is not enough that the employer believed in good faith that the action with respect to discipline that caused that psychological injury was reasonable. Nor is it necessarily enough that the employer believed that it was compelled to act as it did in the interests of discipline.
- Where the psychological injury sustained by the worker is wholly or predominantly caused by action with respect to discipline taken by the employer, it is the reasonableness of that action that must be assessed. Thus, for example, if an employee is suspended on full pay and suspension causes the relevant psychological injury, it is the reasonableness of the suspension that must be assessed, not the reasonableness of other disciplinary action taken by the employer that is not causally related to the psychological injury.
- The assessment of reasonableness should take into account the rights of the employee, but the extent to which these rights are to be given weight in particular cases depends on the circumstances.
- If an Arbitrator does not apply a wrong test, his or her decision that an action with respect to discipline is or is not reasonable is one of fact.
The implications of this decision are that section 11A is a defence that still has teeth but necessitates a clear examination of the circumstances leading up to the employer’s action/s and whether, objectively, they were reasonable. Assuming an Arbitrator has not applied an incorrect legal test, a finding that action taken by an employer was reasonable for the purposes of section 11A(1) is one of fact and consequently one that is more difficult to disturb on appeal.
The decision is consistent with leading authority on section 11A(1) including the NSW Court of Appeal’s decision in Department of Education & Training v Sinclair  NSWCA 440 (Sinclair). In this regard, we note that Arbitrator Batchelor referred to Sinclair including the Court of Appeal’s observations that:
- Matters involving discipline typically involve a series of steps.
- It is generally impossible to isolate the effect of a single step.
- The “whole or predominant cause” of the applicant’s injury requires the cumulative effect of the steps to be examined.
- The decision provides scope to employers who have well documented and reasoned disciplinary steps to rely on section 11A(1).
Section 151Z recoveries
Blameless accident provisions of MACA are not available to those bringing a section 151Z recovery claim
On 15 March 2016, District Court Judge Elkaim SC in State of New South Wales v Wenham17, found that a party who seeks to rely on the indemnity provisions provided under section 151Z of the Workers Compensation Act 1987 (NSW) cannot rely upon the blameless accident provisions contained in Chapter 1, Part 1.2 of the Motor Accidents Compensation Act 1999 (NSW).
In this case, Mrs Goddard was injured in motor vehicle accident that occurred when her vehicle was struck by a wheel assembly which somehow became disconnected from the B-Double truck she was driving behind. Mrs Goddard bought a claim for workers compensation and was paid such benefits in accordance with the legislative requirements by her employer through its workers compensation insurer.
Mrs Goddard’s employer sought to recover the workers compensation payments made to her and issued proceedings against the owner and the driver of the B-double truck.
Mrs Goddard’s employer contended firstly that the accident was caused by the negligence of the driver and the owner of the truck, and in the alternative, pleaded that the accident was a blameless accident as defined by section 7A of the Motor Accidents Compensation Act 1999 (NSW).
The owner and driver of the truck argued that the blameless accident provisions were to provide a benefit to victims of blameless accidents only and could not be applied for the benefit of other persons, such as those seeking an indemnity. They argued that by its very definition, a blameless accident involves no wrongdoing and accordingly the gateway for Section 151Z as expressed in subsection (1) does not exist.
His Honour succinctly summarised his views on the matter as follows:
The cause of action relied upon by the plaintiff is provided by section 151Z. That cause of action requires there to be a wrongdoer. The deeming provision concerning fault in section 7B of the MACA is a deeming provision only for the purposes of a claim for damages. It is there to assist the victim of a blameless accident. It does not extend, absent specific reference, to the cause of action provided by section 151Z
This decision confirms the longstanding history of claims for indemnity under 151Z of the Workers Compensation Act 1987 that for indemnity to be available, there must be a negligent third party tortfeasor, other than the employer, responsible for the injuries of the worker.
Novel argument section 151Z remitted to the District Court for re-hearing
It is case of watch this space to see what flows from a Court of Appeal decision in ISS Facility Services (NSW) Pty Ltd v State of New South Wales18 to remit the proceedings for re-hearing.
Mr John King, the plaintiff at first instance, was employed by ISS Facility Services (NSW) Pty Ltd (ISS) as a cleaner at a public school in New South Wales (State). In January 2009 Mr King sustained an injury when he and a direct employee of the school, Mr Morgan, were repairing a broken roller door. That door was located within the grounds of the school, and whilst attempting to repair it, the door unwound itself and struck Mr King on the head.
On 25 August 2015, District Court Judge Sorby (primary judge) delivered his judgment in this matter finding negligence in both the State and ISS, with an apportionment of responsibility at 75% and 25% respectively. Interestingly, the primary judge’s approach to the assessment of contributory negligence on the part of Mr King was somewhat novel in the sense that he allowed 30% in respect of Mr King’s claim against the State and 20% in respect of his claim against ISS.
In light of the findings in relation to liability between the State and ISS, as well as the two separate assessments of contributory negligence in the part of Mr King, the primary judge’s findings and his interpretation of the operation of section 151Z of the Workers Compensation Act 1987 (NSW) (WCA) were raised on appeal.
In this regard, ISS appealed the primary judge’s decision as follows:
- His Honour had erred in making two different assessments of contributory negligence in the part of Mr King.
- His Honour had misconstrued the operation of section 151Z of the WCA in respect of ISS’s entitlement to an indemnity from the State.
- His Honour had erred in dismissing ISS’s claim for interest on the amount of compensation paid by it (via its workers compensation insurer) to for, or on behalf of Mr King.
Mr King cross-appealed arguing that the primary judge erred in finding that he was guilty of any contributory negligence on the basis that His Honour had failed to make appropriate findings and to give adequate reasons as to how he had contributed to the accident. Mr King also complained about the making of two different assessments as to contributory negligence as against the State and ISS.
The State also cross-appealed arguing that the primary judge had made an error when he found that the State had breached their duty of care owed to Mr King on the basis of an argument that had not been pleaded by either the Mr King, or by ISS. The State also appealed on the basis that the primary judge had erred in his apportionment of liability between it and ISS and as a result, the primary judge had incorrectly applied s 151Z of the WCA.
In its pleadings in the lower court, ISS reportedly sought a complete indemnity (to the value of the total of the workers compensation payments it had made to Mr King) from the State in line with section 151Z(1)(d) of the WCA.
In a novel argument, with potentially significant ramifications for the broader application of section 151Z, the State argued that ISS had no entitlement to an indemnity under section 151Z(1)(d) of the WCA on the basis that it had been found negligent. The State’s contentions are summarised at paragraphs :
… 151Z(1)(d) should be construed as excluding any right of indemnity for the employer where the employer’s negligence contributes to the occurrence out of which the right to compensation arose. It contends that the object of s 151Z is to provide an indemnity for an employer who has paid compensation by the third person, who is responsible in law for the occurrence that has caused the employer to be liable to pay compensation. It contends that the provision is intended to cover the case where the only liability of the employer to the worker is the statutory liability to pay compensation.
In a comment that could have significant implications for this area if the State’s argument were accepted Acting Judge of Appeals Emmett made an observation that the State’s argument had ‘considerable substance’.
However, having regard to the fact that his decision was to remit the matter to the District Court for re-hearing on the basis that primary judge failed to provide adequate reasons, he considered it was not necessary for him to express a view on this complex question, or for that matter, the approach in making two distinct assessments of contributory negligence.
The traditional application of section 151Z (1)(d) of the WCA allows for a contribution to be obtained by an employer from a third party in circumstances where the court finds negligence in that employer. We anticipate the State will continue their novel argument in the District Court that in circumstances where negligence is found in an employer there is no right to seek an indemnity under section 151Z of the WCA.
We anticipate that, as a consequence of the arguments raised in the Court of Appeal and Acting Judge of Appeals Emmett’s obiter comments, there will be renewed focus and argument on what was has been a relatively settled area of the law.
Thorn v Kelly  NSWSC 1748 (9 December 2016)
Mr Ross Monteleone suffered injuries in a work related incident on 15 March 2014 during his employment with William Andrew, William Richard, and Margaret Kelly (Kelly parties). At the time, Mr Andrew Thorn and Thorn Transport Pty Ltd (Thorn parties) were contracted to deliver the 800 merino sheep purchased by the Kelly parties to their property at Rugby.
In the course of unloading the sheep, the Thorn parties allegedly released a ramp suspended from the deck above where Mr Monteleone was unloading the sheep, without any warning to Mr Monteleone. In turn, the ramp struck Mr Monteleone and he suffered a number of physical injuries.
As a consequence of the injuries sustained and his incapacity for work, as a result, Mr Monteleone lodged and claimed workers compensation payments from the Kelly parties’ workers compensation insurer.
Mr Monteleone also commenced proceedings out of the Supreme Court of New South Wales seeking damages for his personal injury against the Thorn parties.
The Kelly parties commenced proceedings before the District Court of New South Wales seeking indemnity from the Thorn parties in line with section 151Z of the Workers Compensation Act 1987 (NSW).
A summons was filed before the Supreme Court, interestingly by the Thorn parties, to transfer the District Court indemnity proceedings to the Supreme Court to be heard alongside Mr Monteleone’s personal injury proceedings.
It is noted that counsel for both the Thorn and Kelly parties agreed that the issues in both claims were substantially the same. That is, whether the parties were negligent, whether Mr Monteleone contributed to his injuries, any apportionment of liability between the parties and of course, the quantification of the damages.
However, there was a divergence as to whether the damages and indemnity proceedings ought to be heard together.
Counsel for the Thorn parties submitted that it was ‘against public interest to risk inconsistent verdicts if each case is decided separately in a different court1’. In this regard, counsel submitted that inconsistent verdicts would be ‘manifestly undesirable2’. Counsel also submitted that the overriding purpose of the Civil Procedure Act 2005 (NSW), as found at section 56, favoured one hearing of the claim, not two separate hearings.
Counsel for the Kelly parties submitted that there was no statutory requirement under section 151Z that required the two sets of proceedings to be heard together. Indeed, counsel argued that the indemnity claim was completely independent of the claim for damages and in his view inconsistent verdicts were ‘tolerable’ in the niche area of section 151Z3. Of interest, counsel also submitted that the Kelly parties would be prejudiced in the event that the indemnity claim was delayed, noting that Mr Monteleone’s injuries were yet to stabilise and therefore, the quantum assessment could not be completed with any accuracy.
The indemnity proceedings were ultimately transferred to the Supreme Court of New South Wales to be heard alongside Mr Monteleone’s claim for damages.
In coming to this decision, His Honour Justice Campbell considered the wide application of section 140 of the Civil Procedure Act 2005 (NSW) (transfer of proceedings to a higher court) and noted that although there was nothing before him to suggest that the indemnity claim would exceed the jurisdictional limit of the District Court, there was other ‘sufficient reason’ to transfer the matter.
In the circumstances, Justice Campbell considered that the Thorn parties demonstrated other ‘sufficient reasons’ to transfer the indemnity proceedings to the Supreme Court. Namely, that having two separate courts decide the same issues in two separate hearings was not desirable. In doing so, His Honour applied the principles enunciated in RCS Resolve FM v Serco Australia  NSWSC 1477 at :-
‘It is manifestly undesirable that the same issue (of fact or law or both) between the same parties should be considered by different judges in different courts. It leads to the risk of inconsistent verdicts. It raises the potential for estoppels to complicate one or other sets of proceedings. And it has the consequence, in terms of costs and other complexities and waste of resources...’
The overriding purpose of civil litigation is to not only facilitate, the quick, cheap and just resolution of the issues in the proceedings but also to ensure that the courts resources are not wasted by having two separate trials on the same issues. This avoids inconsistent verdicts and other consequences such as issues of estoppel.
Section 151Z liability – not limited to common law
On 15 March 2016, District Court Judge Elkaim in the State of New South Wales v Wenham  NSWDC 25 found that a party who seeks to rely on the indemnity provisions under section 151Z of the Workers Compensation Act 1987 (NSW) (section 151Z) cannot rely upon the blameless accident provisions19.
His Honour succinctly summarised his views at  of his Judgment in this matter as follows:
The cause of action relied upon by the plaintiff is provided by section 151Z. That cause of action required there to be a wrongdoer. The deeming provision concerning fault in section 7B of the MACA20 is a deeming provision only for the purposes of a claim for damages. It is there to assist the victim of a blameless accident. It does not extend, absent specific reference, to the cause of action provided by section 151Z.
The State of New South Wales were unsuccessful in their bid to call upon the indemnity provided for in section 151Z as the Court considered that there was no wrongdoer.
This decision supported the longstanding history that in claims for indemnity pursuant to section 151Z there must be a negligent wrongdoer, other than the employer.
The State of New South Wales subsequently filed an application seeking leave to appeal and to set aside the decision made by District Court Judge Elkaim.
The bench noted that this case raised important points regarding the construction of the statutory language and the interaction between the two difficult provisions, namely section 151Z and blameless accidents21.
The Court of Appeal ultimately granted the application made by the State of New South Wales with agreement by all three Justices, namely Acting Chief Justice Beazley, Justice Meagher and Justice Payne.
In coming to this decision, the Court of Appeal considered a number of aspects including the meaning of ‘wrongdoer’ and ‘liability’, as well as a review of the policy considerations related to this issue.
It was held that section 151Z does not require the liable third party under this section to be a ‘wrongdoer’ or a ‘tortfeasor’.
In coming to this conclusion, it was noted that the terms ‘wrongdoer’ and ‘tortfeasor’ do not appear in the statutory language of section 151Z.
Justice Payne reviewed the decision of Kurnell Passenger & Transport Services Pty Ltd v Randwick City Council (2009) NSWCA 5622 and noted that the terms ‘wrongdoer’ and ‘tortfeasor’ were recited for convenience, as opposed to reference to the statutory language.
Justice Payne also reviewed the decision of Workers Compensation Nominal Insurer v Nominal Defendant  NSWCA 301 and noted that there was no suggestion that the terms ‘wrongdoer’ or ‘tortfeasor’ were essential to establishing a liability within section 151Z.
The court held that the term ‘liability’ created by statute under section 151Z(1) ie ‘the circumstances creating liability’ is not limited to liability at common law.
In coming to this conclusion, the court looked at the construction of section 151Z(1), namely:
- 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…
Justice Payne noted that the circumstance which create a liability to pay damages are not concerned with why there is a liability to pay such damages, but simply that there is a liability23.
Justice Payne also considered the history of the provision, in addition to the policy considerations (outlined below) and noted that in his view there is nothing to support the constriction of section 151Z as limiting the liability to a liability at common law24.
It is noted that the provisions under MACA provide that a blameless driver or owner is liable to pay damages by deeming that driver or owner to be at fault. Turning to the case at hand, this provision would have entitled the employee of the State of New South Wales, Ms Goddard to recover damages against both the driver and owner.
With the above in mind, Justice Payne considered that the indemnity created by section 151Z is one for the purposes of, and in connection with, a claim for damages in respect of her injury25.
Justice of Appeal Payne noted that if there is a liability to pay damages for the same injury as that from which the obligation to meet workers compensation payments arises, those payments are recoverable under section 151Z26.
In the circumstances, Justice Payne concisely summarised at  that:
‘..Since the right to indemnity is derived from the availability of a claim for damages, and is otherwise closely connected with it, the fault deemed to lie in the owner or driver is effective for the purposes of s.151Z of the Act. The entitlement in the Workers Compensation Act to indemnity is conditional upon establishing a liability in some third party to pay damages to the injured worker and not proof of the commission of a tort’.
Justice Payne also held that if the liability was to be intended to be a limited to liability at common law, in his view, it was ‘surprising’ that this limitation has never been expressly made.
It is noted that the worker at the centre of the subject workers compensation claim, Ms Goddard did not sue the owner or driver under the MACA blameless provisions for damages. However, had she done so, it was noted that the worker would have succeeded.
Based on the Respondent’s submission, the argument was that if a worker, such as Ms Goddard chose not to sue, the employer such as the State of New South Wales could not recover the compensation payments made to Ms Goddard. In the circumstances, Justice Payne considered that this would strongly point against the intended construction of section 151Z.
Justice Payne considered the decision of Tickle Industries Pty Ltd v Hann (1974) 130 CLR 321 wherein Chief Justice Barwick opined ‘a sound rule of statutory construction that a meaning of the language employed by the legislature which would produce an unjust or capricious result is to be avoided’.
Turning to the subject case, Justice Payne considered that the Respondents assertion, namely that if the worker did not sue the driver, the workers compensation insurer would be prevented from seeking an indemnity, was ‘unjust or capricious’.
Justice Payne also considered the decision in Workers Compensation Nominal Insurer v Nominal Defendant  NSWCA 301 where at  it was noted that:
‘…the liability of the wrongdoer is a 'notional liability at common law [or under a statute other than the Compensation Act for pecuniary and non-pecuniary loss.''
In the circumstances, Justice Payne held that the policy considerations surrounding the construction and language of section 151Z supported the view that liability is not limited to common law liability but extends to any liability.
Justice Payne, with the agreement of Acting Chief Justice Beazley and Justice Meagher, held that the language, history and policy considerations for an action under section 151Z support the view that the employer, the State of New South Wales is entitled to rely upon the blameless provisions under MACA.
The appeal was allowed and the decision of the primary judge, District Court Judge Elkhaim was set aside.
We await the outcome of the Court of Appeal hearing.
Developments in the Australian Capital Territory
Compensation fast-tracked for fatal work-related asbestos diseases
The Australian Capital Territory Legislative Assembly has passed amendments to the Workers Compensation Act 1951 (ACT) aimed at ensuring that workers who suffer from an imminently fatal asbestos‐related disease receive timely access to compensation. For the most part these are sensible. However, the changes appear to have been introduced without considering some of the practical realities of the existing workers’ compensation regime.
The amendments will drastically modify how the Default Insurance Fund (DIF), employers and private insurers are to approach fatal asbestos-related claims from 1 July 2017:
- The legislation will differentiate between ‘asbestos-related disease’ and ‘imminently fatal asbestos-related disease’ (fatal asbestos disease). Examples of the latter definition will also be provided for in the regulations to assist doctors with their diagnoses of claimants. A worker will only be able to be diagnosed with fatal asbestos disease by a doctor who specialises in either oncology, respiratory medicine or cardio-thoracic surgery.
- Any worker diagnosed with fatal asbestos disease will be automatically entitled to receive 100% of the statutory maximum amount payable for permanent injuries (although this is in addition to any applicable weekly compensation and medical expense payments). The intention is to remove the need for the worker to seek legal advice for the purpose of negotiating a compensation amount for their permanent injuries.
- The DIF will be the relevant insurer for the purposes of all claims that relate to fatal asbestos disease. Therefore, affected workers must submit their claims directly to the DIF, not their employer or their employer’s insurer. As a consequence:
- Employers must, within 7 days of receiving a fatal asbestos disease claim, forward the claim to the DIF. The penalty for failing to do so will be approximately $25,000, which is more likely to be pursued since the DIF will be the insurer for all such claims.
- Employers will not be liable to repay the DIF three times the settlement amount between the DIF and the claimant for fatal asbestos disease claims. This is a departure from the usual rule that applies where the DIF settles claims involving uninsured employers.
- The DIF will have an unlimited amount of time to consider the claim before accepting or rejecting it. This is an exception to the usual 28 day requirement for all other claims and insurers.
- The DIF will be able to recover its payments made to the worker from current or former employers, their insurer(s) or any other entity liable in tort. Recoverable amounts must be agreed or determined by ‘arbitration’.
The amendments are important because they effectively redirect all fatal asbestos disease claims to the DIF, who then may pursue other liable parties after the claimant is compensated. However, once the amendments are considered in the light of current workers’ compensation practices it appears that the haste with which the changes were made has led to some unusual results.
How will an employer know they have received a fatal asbestos claim that should be forwarded to the DIF?
The amendments appear to assume that all fatal asbestos disease claims will be made with a valid certification from an authorised doctor. In reality, this is unlikely to be the case, and there are inevitably going to be situations where a fatal diagnosis is made after a non-fatal asbestos claim is initially made. What if an insurer has already accepted liability? Would an employer or insurer receive credit for any payments made on the claim prior to the DIF becoming involved once a fatal diagnosis is made and if the DIF pursues recovery later? The amendments cannot respond to any of these questions.
Why is the DIF not required to determine claims within 28 days?
The amendments release the DIF from any obligation to accept or reject fatal asbestos claims within the otherwise standard period of 28 days. The unconvincing reason provided by the government for this exception is that ‘the [DIF] may require additional time to obtain historical records from employers and insurers.’ It should be remembered that all other claims are deemed accepted if not determined within 28 days. This is a significant incentive to investigate and confirm liability quickly, yet the legislature has removed it for the most urgent of claims.
The exception also runs contrary to the idea that workers diagnosed with fatal asbestos disease should receive compensation first, and the DIF should investigate later. Even if historical records (including liable insurers) are identified, the new legislation clearly establishes the DIF as the default insurer. As such, the existence of other liable entities does not abrogate the DIF’s responsibility to make compensation payments, which can only be recovered by the DIF after they are paid.
The amendments do require the DIF to provide reasons if liability is still undetermined after 28 days, but there are no consequences for failing to do so.
How will the Court approach the recovery process if the DIF pursues an employer or insurer?
It is unclear how the ACT Industrial Court will determine recoverable amounts in the absence of agreement between the parties. The Industrial Court has only ever determined disputes about the payment of compensation. Until now it has not previously had to determine issues of recovery. This may also be particularly contentious where the worker is deceased at the time the DIF pursues recovery (a likely outcome given the fatal nature of the diagnosis).
Furthermore, the amendments require either agreement or ‘arbitration’ of recoverable amounts. The latter of these terms is defined by Part 3.13 of the Court Procedure Rules 2006 (ACT) (Rules), which currently only facilitates arbitration between workers and employers/insurers. It is unclear how the DIF will be able to commence arbitration proceedings against an employer or other insurer without minor amendments to the Rules and the official forms prescribed to be used by them. As the legislation currently stands the DIF does not appear to be entitled to bring a general civil action for recovery of fatal asbestos disease payments, which it can do with all other types of claims it administers.
Although there is some uncertainty in how the amendments are going to be applied by the DIF and the ACT Industrial Court, this may not ultimately cause problems. A mass of fatal asbestos disease claims may not eventuate, and even if they do it appears that the DIF may have no viable recovery options where there is no other existing and identifiable liable entity.
For employers and insurers, it is more important to remember that from 1 July 2017 all fatal asbestos disease claims must be forwarded to the DIF, but also that this does not necessarily absolve the employer or relevant workers’ compensation insurer from liability. Until 1 July 2017, employers should continue to handle any fatal asbestos claims by forwarding them to their workers’ compensation insurer.
Review foreshadows an end to insurance surveillance
On 5 May 2016, the ACT Minister for Justice and Consumer Affairs announced an independent review into the regulatory framework for non-government surveillance in the ACT. The resulting Report was released to the public for comment on 11 August 2016. The Report makes recommendations in relation to the regulation of surveillance, including a proposal for surveillance in general to be prohibited except for in very limited circumstances.
Although the Report makes a commendable effort to propose regulation of surveillance, its recommendations have some unusual practical ramifications. In addition to effects on the general public, the proposed changes have the potential to significantly prejudice the interests of insurers and self-insurers in the Territory, particularly when it comes to fraud prevention.
Overview of recommendations
In short, the Report recommends:
- A general restriction on surveillance in the ACT. Visual observation, tracking and data collection are singled out, but in fact the Report, suggests regulating any type of surveillance that does not just involve a ‘listening device’ (which is already covered by the Listening Devices Act 1992 (ACT)).
- ‘Exceptions’ to the restrictions if the surveillance is conducted to reasonably protect a person’s ‘lawful interests’ or if it is in the ‘public interest.’ The exceptions are more complicated than they appear. These are discussed below.
- The subject of surveillance gives ‘current and specific’ consent, presumably to be surveilled, but the Report does not actually clarify this.
- Tracking the geographical location of someone using a network or computer (including social media) should be prohibited where the person has not given consent for their geographical location to be shared on that network or computer system.
- An exception for ‘inadvertent’ observation, but a court order would be required for communication or publication of inadvertently obtained information.
- Courts should retain a discretion to admit evidence obtained through surveillance, whether reasonably or not, where it is used to protect a principal party’s lawful interests.
- Expanded remedies for contravention of the restrictions, including monetary compensation.
Disproportionate impact on insurers
The recommendations appear to be aimed at insurers and self-insurers who use surveillance to verify the functional status of claimants. Whether this is the intention or not may be irrelevant. However, the report clearly recommends a general prohibition upon surveillance in the ACT and the two exceptions contained in the Report are unlikely to apply to insurance companies defending civil personal injury claims.
Exception 1: surveillance in the ‘public interest’
The report relies heavily on the newly enacted South Australian Surveillance Devices Act 2016 to call for a limited exception to surveillance that is in the ‘public interest’. What the Report fails to recommend, or even identify, is that sections 3 and 5 of the South Australian legislation allow surveillance of activities that either occur in or can be viewed from a public place. Similar exceptions are also contained in the Victorian and WA legislation, yet those sections are also not mentioned in the Report. In our civil litigation experience, most if not all surveillance is undertaken by insurers occurs in public places. A minority of the surveillance captures activities on private property, but from a public place. Regrettably, these are facts that were not investigated in the process of preparing the Report, which is part of a greater problem we will return to in the conclusion.
If the ‘public interest’ exception is adopted by the legislature without the unmentioned exceptions for surveillance in public places, surveillance of claimants in ACT civil proceedings is unlikely to be considered lawful. No cases have considered such a question,1 but in Voitenko v Zurich2 an insurer attempted to use a subpoena to acquire police-obtained surveillance of a claimant. The insurer submitted that:
it is in the public interest for fraudulent claims to be investigated by insurers and for the Court to have available to it all evidence that may be relevant to determining whether the claim is fraudulent.
Although the Court decided to determine the question of public interest at a later date, the examples it provided of such cases were limited to surveillance relating to ‘a serious criminal offence’ or ‘[i]n civil proceedings… where allegations of fraud or other criminal activity are alleged’. Accordingly, it does not appear likely that an insurer, in defending a personal injury claim, would be able to persuade a court that obtaining surveillance of the claimant would be in the public interest where there are no specific allegations of fraud or criminal activity.
Exception 2: surveillance for ‘reasonably necessary’ protection of someone’s ‘lawful interests’
The Report accepts that courts have been reluctant to define ‘lawful interests’ and that whether the interest is lawful will depend on a case by case basis. It is conceivable that an insurer’s interest in defending a disputed claim could constitute a ‘lawful interest’. However, most of the Australian authorities that comment on this term do so in the context of criminal activities: see the summary in DW v R3, a recent decision not cited by the Report. Extrapolating the reasoning in those cases to civil personal injury claims would be an uncertain process.
Much will also depend on the wording of any new legislation, and the content of an explanatory memorandum. The Report uses the term ‘person’, although the Listening Devices Act 1992 (ACT) uses ‘principal party’. That term is defined as being a person capable of speaking or being spoken to. It is unlikely that this definition would include a corporation, so if the same wording is used in new surveillance legislation the exception would not apply to surveillance obtained by an insurance company. We also note that the lawful interests exception in the Listening Devices Act 1992 (ACT) only applies where the other party has given consent to be recorded. We discuss the obvious conflict of requiring consent for general surveillance below.
Impact on insurers
Surveillance is clearly used by insurers as a tool to proof allegations of incapacity in order to identify fraudulent claims or to reduce their financial exposure in compensation claims where fraud is not involved. As submitted in Voitenko:
Undetected fraudulent claims impact on and reduce the amount of funds available to pay claims by pursued by [sic] honest policyholders. In addition, insurers paying out fraudulent claims results in an increase of premiums for all policyholders.
There is some force in this submission, considering that the New South Wales government recently set up a task force to specifically tackle fraudulent Compulsory Third Party motor vehicle insurance claims.4 This was followed by a report from Insurance Australia Group finding a 30% increase in fraudulent insurance claims.5 It is somewhat surprising that the Report did not comment on, or at least consider, the role of surveillance in preventing this kind of activity.
Unusual practical ramifications
In addition to the impacts of the recommendations on insurance products in the Territory, the recommendations have the potential to impact both insurers and the general public in some unusual ways.
Consent could be a pre-condition to lawful surveillance
The Report suggests that ‘current and specific’ consent should be obtained from the subject that is to be surveilled. The recommendation is derived, without explanation, from a concept employed by the Privacy Act 1988 (Cth). That legislation applies to the collection of ‘personal information’, which usually involves a process where the person is asked to provide the information as a necessary step in the process (for example, by making an application for a drivers’ licence). It is apparent that the nature of surveillance differs from the provision of personal information in this way, and it is disappointing that the Report does not provide a better justification for the recommendation as a result.
For insurers, there is a question about whether consent could be obtained as part of issuing the insurance policy. Many entities that collect personal information do not truly provide an option not to consent to the dissemination of the information. More likely, if consent is refused the process that requires the personal information is by default refused. It is conceivable that insurers could take the same approach, declining to provide insurance coverage unless the policy holder consents to be surveilled in the event of a claim. Where insurance is taken out by a third party (for example, a workers’ compensation insurance policy), the situation would be more complex but it is still possible that an insurer could integrate a requirement for employees to provide consent before issuing policies to employers in the Territory. Regrettably, the legislature will not able to rely on the Report to find any useful ways of dealing with these kinds of issues.
Posting a video to social media could require a court order
The Report recommends that ‘communication or publication of the results of inadvertent observation… should be regulated through requiring a Court order’ (our emphasis). On this basis, any photo or video that happens to capture unknown bystanders would require a court order to share, whether it is on social media or with family. A business would also require a court order before disseminating CCTV footage that records people going about their daily life. The recommendation is apparently limited to ‘private activities’, but this term is separately defined as including being able to ‘track a person’s movement’. Since this is possible with a simple photograph, not to mention a video clip, the distinction of ‘private activity’ is effectively meaningless. The Report also attempts to provide an exception for the ‘public interest’, although interpretation of this would be fraught with difficulty and likely require the person wanting to share the material to argue the point in Court anyway.
Looking at someone’s social media page could be illegal
The Report also appears to assume that all network or computer systems that publish location data seek consent from the user to do so. Accordingly, it is suggested that surveillance of people who do not provide such consent should be prohibited. Unfortunately, it is unlikely that all social media or other network programs actively establish this kind of consent. Furthermore, it would be completely outside of the scope of ACT legislation to force social media operators to do so. Should the recommendation be accepted, it would have the result of making it illegal to merely look at a less-informed user’s social media page. It goes without saying that the prohibition would be entirely unenforceable.
Compensation might be payable, but it could be impossible to calculate how much
The report also recommends considering ‘low level monetary compensation’ as a remedy for breaches of the surveillance regulations. Neither the report nor the Australian Law Reform Commission (ALRC) report on which this recommendation is based suggests how such compensation would be calculated. The ALRC report compares the idea with the federal telecommunications legislation that grants compensation for defects in the provision of essential communication services. We note, however, that compensation payable under that regime is based on objective factors such as the number of days that a telephone line has not been installed. Ultimately, it is difficult to see how mere surveillance could result in identifiable economic loss or quantifiable pain and suffering, particularly if it is in a public space.
In our view the Report represents an idealistic plan intended to protect privacy above all else. It clearly has not considered some of the practical ramifications of its recommendations, either in the context of insurance products and fraud prevention, or how new surveillance legislation would apply to the general public.
In this regard, it is worth mentioning that the first term of reference for the Report was to consider ‘the occurrence and use of surveillance in civil litigation claims in the ACT.’ The Report in fact does not measure, estimate or even comment on how surveillance is currently being used in the ACT. It nonetheless proposes significant changes to surveillance regulation. In our view, this explains many of the unintended difficulties posed by the Report’s recommendations. There is clearly little if any connection between the Report’s recommendations and the current use (or any possible misuse) of surveillance in civil litigation claims in the ACT.
The quickest way to an adverse costs order: non-compliance with Court directions
It is fundamentally important that case management directions of the Court are recognised as being orders of the Court rather than administrative suggestions that may be disobeyed if inconvenient.
Unfortunately, this statement was necessary in the context of the ACT Supreme Court having to deliver three decisions arising out of non-compliance with case management directions within less than 12 months. All three decisions were in the context of a personal injury damages claim, and each resulted in costs orders against the plaintiff. Further, in each of the cases the Court effectively granted liberty to the defendants to pursue costs orders against the plaintiffs’ solicitor.
Hall & Wilcox acted in the most recent of these cases, and successfully defended an allegation that the non-compliance of the plaintiff was due to the defendant’s inadequate discovery.
In Monaghan v Australian Capital Territory  ACTSC 187 (Monaghan) the plaintiff had failed to pay his share of a Court-ordered mediator’s fee. The plaintiff was suffering financial difficulty but nothing was said about this until six weeks after the order to pay the mediation fee was made and eight days after the deadline to pay it. The matter was listed in relation to the non-payment and the Court ordered that the plaintiff file an affidavit disclosing the circumstances of his non-compliance.
At the hearing, no such affidavit had been provided. Associate Justice Mossop noted that he expected, at a minimum, that such an affidavit contain enough information so he could determine whether the non-compliance arose from the conduct of the solicitor or the conduct of the client. His Honour also queried why there was no evidence explaining how the plaintiff was able to retain his solicitors but not pay the mediation fee.
After the hearing, but before His Honour’s decision, the plaintiff paid the mediation fee. Noting this, His Honour did not dismiss the proceedings but granted the parties liberty to apply for an order that the plaintiff’s firm of solicitors pay the defendant’s costs on an indemnity basis.
In Crawford v Australian Capital Territory  ACTSC 282 (Crawford) the plaintiff failed to comply with directions made by the Court across 15 months to serve an expert report. As a result, the defendant moved to have the proceedings dismissed.
After outlining the extensive history of the matter, Associate Justice Mossop stated that:
‘The manner in which the solicitors for the plaintiff have addressed the plaintiff’s non-compliance with orders of the Court appears to reflect an attitude that non-compliance with the directions made by the Court is an administrative matter from which a party will be excused, that in the event of non-compliance no explanation needs to be given on oath or affirmation of the reasons for the non-compliance and that non-compliance will have few if any consequences for the defaulting party.
It is completely unsatisfactory that a party allows itself to drift casually into non-compliance with the orders of the Court then, after it is in default, to seek to explain away its non-compliance by submissions to the Court unsupported by sworn evidence.
The kind of non-compliance demonstrated in this case demonstrates a preparedness to impose upon the defendant the costs and delay associated with a failure to comply with an order of the Court rather than to run the plaintiff’s case within the framework set by the orders of the Court if that involves compromising the plaintiff’s ideal evidentiary position.’
Although his Honour did not find the conduct sufficient to warrant dismissal, the plaintiff was not permitted to serve any further evidence and was ordered to pay the defendant’s costs of its non-compliance, including every hearing that had occurred in the 15 months that had passed. His Honour also granted liberty to the defendant to apply for costs against a ‘non-party’ (likely being a reference to the plaintiff’s solicitor).
In Leonard v Northside Community Services Limited  ACTSC 90 (Leonard), Hall & Wilcox acted for one of three defendant insurers. The day before the plaintiff was directed to serve her expert evidence, the plaintiff’s solicitor sought an extension of time to do so and proposed a set of amended directions but provided no explanation for the request. The amendment had the effect of reducing the defendant’s time in which to obtain its own expert evidence. The matter was re-listed after the plaintiff refused to provide a reasonable explanation for her non-compliance and subsequently alleged the defendant’s discovery was deficient which contributed to her delay.
The matter was docketed on Hall & Wilcox’s request and after hearing the dispute, Associate Justice Mossop held that:
- The plaintiff’s attempt to reframe the issue as one of discovery only occurred in the context of her non-compliance with Court orders.
- According to the plaintiff’s own chronology, discovery, was provided nearly five months prior to the date that the plaintiff was to serve her expert evidence, and nothing was said by the plaintiff at the time those orders were made about discovery being inadequate.
- The plaintiff had not formally moved to address the alleged inadequacy of discovery but had simply relied upon the assertions of her solicitors in correspondence. Those assertions emerged after the initial extension was sought, and such correspondence is not suited to proving the facts asserted in the correspondence where those facts are contentious. An affidavit should have been provided.
In addition to making orders consistent with an amended timetable requested by Hall & Wilcox, his Honour ordered the plaintiff to pay the costs of all three insurers. He also granted liberty to apply for an order that the plaintiff’s firm of solicitors pay those costs.
The importance of compliance
Although a full reading of the cases above will reveal numerous pieces of useful guidance, the following core points can be drawn for parties and solicitors involved in litigation:
- Parties to a civil procedure are required by section 5A of the Court Procedures Act 2004 (ACT) to help the Court achieve its objectives in resolving matters quickly, inexpensively, efficiently and justly. Solicitors should ensure that they comply with practice directions of the Court that outline the obligations of solicitors in case management (including Practice Direction No 2 of 2014 in the ACT). This applies for matters where such practice directions do not apply to, as was the case in Leonard.
- If a solicitor is of the view that a proposed direction is unlikely to be capable of being complied with, this should be raised with the Court at the time the direction is made. Although this may not prevent non-compliance, it will provide a more reasonable basis upon which to explain default, should it occur, at a later date.
- One party should not acquiesce to the default of another party. It should be addressed promptly, particularly in circumstances where it is likely to delay the matter beyond the direction that has been defaulted on.
- If a party will default on an order of the Court, they should disclose this to the other parties with a ‘full and frank’ explanation of the reasons behind the default as soon as possible. Solicitors should also be prepared to provide this explanation in an affidavit which clearly establishes whether the default is due to the client’s conduct, or the solicitor’s.
Non-compliance with Court-ordered case management directions has the potential to affect the reputation of a firm and even its relationship with clients. We recommend that the utmost care and attention be paid to complying with orders of the Court and, if necessary, actively addressing any defaults if and when they occur.
In early 2016 Hall & Wilcox launched Smarter Law. Smarter Law is our response to the disruption in the legal industry. It is how we help our clients achieve their business objectives by being imaginative, agile, tech savvy, collaborative and remarkable.
An example of Smarter Law in action was the development of RecoverEase for the insurance sector to identify recovery potential on a workers compensation insurance claim. RecoverEase is a highly secure, web-based application that streamlines the identification of recovery potential in less than two minutes.
We partnered with Neota Logic, a leading provider of logic based systems, to develop RecoverEase.. Our recovery specialists, Vanessa Porter and Krisha Bennett designed this user-friendly platform which can be used by an insurance professional, employer, broker or insurance intermediary with little or no experience within the industry. RecoverEase can also be used as a training tool and to assist in meeting KPIs.
RecoverEase won the 2016 LawTech Award for 'Innovation in Legal IT' and was a Finalist at the ALMPA Innovation Awards. RecoverEase has recently been selected to appear on the Efma Accenture Innovation portal dedicated to worldwide best practices in insurance. All best practices featured on this portal will compete for the Efma Accenture Innovation in Insurance Awards. The winners will be announced in April 2017.
RecoverEase has seen terrific success with our clients facilitating the identification of recovery potential that they might not otherwise have identified. It represents a genuine innovative approach that delivers tangible results. We took a problem that our clients faced and found a way of solving it. We used advanced (and cost effective) technology, combined with decades of legal experience, to deliver a service for our clients that enhances efficiency.
We believe, the future of legal services involves combining legal knowledge with contemporary business methods (and technology) to deliver ever better ways of working with our clients. This is at the heart of our Smarter Law strategy. The success of this project is the result of the combined insightful vision of our lawyers, up to the minute technology and a focused effort to pull the entire solution together.
1Allen v Chadwick  HCA 47
2 HCA 34
3Leigh Ann Russell bhnf Julie Ann Russell v Rail Infrastructure Corporation  NSWSC 402; Town of Port Hedland v Hodder bhnf Hodder (No 2)  WASCA 212; Goldsmith bht the NSW Trustee and Guardian v Bisset (No 3) NSWSC 634.
4Insurance Australia Ltd v Clewley NSWSC 1805
5IAL v Asaner NSWSC 1078
6Jubb v Insurance Australia Limited  NSWCA 153
7Singh v Motor Accidents Authority of New South Wales (No 2)  NSWSC 1443,
8Alavanja v NRMA Insurance Limited  NSWSC 1182
9Rodger v De Gelder  NSWCA 97; 80 NSWLR 594, QBE Insurance (Australia) Limited v Miller  NSWCA 442; 67 MVR 322, and Henderson v QBE Insurance (Australia) Limited  NSWCA 480; 66 MVR 69 are authority for the proposition that the s 62(1A) pre-condition is not a jurisdictional fact of that type.
10Genevieve Audrey Amor-Smith v Peter Ching  NSWDC 89
11Isaacs v Ocean Accident & Guarantee Corp Ltd (1958) SR (NSW) 69 at 76 and Ekes v Commonwealth Bank of Australia (2014) 313 ALR 665 at -.
12Ashenden v Stewarts & Lloyds  2 NSWLR 484
13Dominice v Allianz Insurance  NSWSC 1241
14unreported judgment of Knox DCJ, 16 December 2015
15Spratt v Perilya Broken Hill Ltd  NSWCA 192
17State of New South Wales v Wenham  NSWDC 25
18ISS Facility Services (NSW) Pty Ltd v State of New South Wales  NSWCA 87
19Chapter 1, Part 1.2 of the Motor Accidents Compensation Act 1999 (NSW)
20Motor Accidents Compensation Act 1999 (NSW)
21State of New South Wales v Wenham  NSW CA 336 at 
22Kurnell Passenger & Transport Services Pty Ltd v Randwick City Council (2009) 230 FLR 336;  NSWCA 56 at 
23State of New South Wales v Wenham  NSW CA 336 at 
24State of New South Wales v Wenham  NSW CA 336 at 
25State of New South Wales v Wenham  NSW CA 336 at 
26State of New South Wales v Wenham  NSW CA 336 at 
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