Negotiated Settlement Not Sufficient to Act as a Bar to a Further Action for Damages Pursuant to s 5(1)(b) of the Law Reform (Miscellaneous Provisions) Act 1946

Judgment date: 12 July 2010. Nau v Kemp & Associates [2010] NSWCA 164, New South Wales Court of Appeal¹

In Brief

• A plaintiff brought two separate actions against different defendants in respect to the same damage suffered.
• The second action resolved by way of a negotiated settlement and the defendants in the remaining (first) action successfully argued at first instance that by virtue of s 5(1)(b) of the Law Reform (Miscellaneous Provisions) Act 1946, the plaintiff's claim should be dismissed as an abuse of process.
• The Court of Appeal overturned the trial judge's determination to dismiss the plaintiff's first action on the basis that there had been no previous "damages awarded" in the second action.
• The plaintiff was entitled to pursue the further (first) action but any damages awarded must be offset by the amount of damages already received.

Background

Cherrylle Nau (plaintiff) sustained an injury to her back during the course of her employment with the Department of Education and Training in December 1999. As a result of her injury, the plaintiff was referred to Kemp & Associates Pty Ltd t/as Active Working Solutions (first defendant) to complete a rehabilitation/gym program. Amanda Tarn (second defendant) was the person responsible for devising the gym program for the plaintiff. The plaintiff suffered subsequent injury to her right shoulder in 2004 as a result of the tasks she was required to perform.

In 2005 the plaintiff commenced an action for damages against both defendants alleging that the exercises which the defendants required her to perform were inappropriate and caused her to suffer injury to her right shoulder.

In 2007 the plaintiff commenced a separate action against her employer (the State of New South Wales) in respect to her 1999 back injury and 2004 shoulder injury.

District Court Decision

Both of the plaintiff's actions were set down for hearing in the District Court on 21 October 2008. Shortly after Mediation which took place on 10 October 2008 the 2007 action against the State of New South Wales resolved by payment to the plaintiff in the sum of $220,000 inclusive of costs.

The Terms of Settlement in the 2007 action amended the Statement of Claim to include injuries to the plaintiff's "whole body including but not limited to injury to the head, neck, back, whole spine, both upper and lower limbs in their entirety, upper and lower body, buttocks, hips, pelvis, abdomen, groin, injury by way of hernia or like condition together with industrial or other deafness and psychiatric injury."

At the hearing of the 2005 action, the defendants made an oral application to have the claim dismissed in light of the settlement of the 2007 action. Both defendants ultimately filed a Notice of Motion relying upon the judgment the plaintiff received in the 2007 action and s 5(1)(b) of the Law Reform (Miscellaneous Provisions) Act 1946 which states:

The defendants were successful in having the 2005 action dismissed as an abuse of process.

Court of Appeal Decision

Campbell JA, who delivered a comprehensive judgment on behalf of the Court of Appeal, noted that the grounds for appeal were as follows:

• The trial judge was wrong in applying s 5(1)(b) of the Law Reform (Miscellaneous Provisions) Act 1946 given that the plaintiff was not attempting to "double dip" as the compensation paid by the State was limited by the Workers Compensation Act 1987 and did not represent the full amount of compensation the plaintiff could have obtained from both defendants;
• The court should follow the decision of the Tasmanian Supreme Court in Ripper v Gatenby² .
• Section 5(1)(b) is not applicable as the requirement of s 5(1)(b) that there be "damages awarded" in the first action was not satisfied when the first action was not the subject of a judicial decision; and
• The trial judge had not determined whether any damage that the plaintiff had suffered at the hands of the defendants was the "same damage" as the State was responsible for.

In respect to the first ground of appeal, Campbell JA followed the decision of the South Australian Full Court in South Australia v Mountford³ in which it was found that the claimant was precluded from pursuing a second action in respect to the same damage suffered and for which the claimant had already received damages.

Campbell JA found that the fact that the measure of damages recoverable by the plaintiff against the State was less than that recoverable against the defendants, was of no significance for the operation of s 5(1)(b).

In respect to the second ground of appeal, the Tasmanian Supreme court decision of Ripper concerned actions brought in respect to the death of a passenger whilst in an aeroplane. The estate proceeded against the executors of the pilot of the aeroplane and with a separate action against an insurer of the Tasmanian Aero Club (the insurer action). That latter action was dismissed by consent with the estate paying the insurer's costs. The defendant in the action against the executors of the pilot argued that the dismissal of the insurer action had the effect that no damages were recoverable in the first action.

Blow J in that case found that the Tasmanian equivalent to s 5(1)(b) had no application and the estate was entitled to proceed with the first action as there had not been an "award for damages" in the insurer action.

In the present claim, Campbell JA dismissed the plaintiff's submission that the authority in Ripper should apply, on the basis that there had in fact been an amount for damages awarded as against the State.

Campbell JA upheld the appeal based upon the third ground of appeal. He found that judgment being entered by way of a negotiated settlement (as between the plaintiff and the State) could not fall within the meaning of "damages awarded" for the purposes of the application of s 5(1)(b) of the Law Reform (Miscellaneous Provisions) Act 1946.

Sackville AJA who agreed with the orders proposed by Campbell JA also acknowledged that any damages payable to the plaintiff by the defendants must be offset by the damages she had already received from the State but that did not in itself prevent the plaintiff from pursuing the action against the defendants.

Given that Campbell JA had found in favour of the plaintiff with respect to the third ground of appeal, he did not proceed to determine the validity of the fourth and final ground of appeal.

McColl JA also observed that judgment entered by consent in the action against the State was expressed to be "without admission of liability" and therefore did not establish that the State was a tortfeasor "liable" for the purposes of s 5(1)(b).

The Court of Appeal granted the plaintiff leave to appeal and set aside the orders of Robison DCJ of 20 February 2009.

Implications

The most significant aspect of this decision is the Court's strict interpretation of the phrase "damages awarded" for the purposes of s 5(1)(b) of the Law Reform (Miscellaneous Provisions) Act 1946.

The decision may be distinguished from the High Court authority in Baxter v Obacelo⁴ in which the plaintiff was allowed to maintain an action after the claim as against one of the defendants in the same action had resolved. The High Court found that the precondition of s 5(1)(b) that "if more than one action is brought" had not been met.

A defendant will not be successful in arguing that a claim against it is barred by virtue of a previous resolution for the same damage in circumstances where that separate action resolved by way of a negotiated settlement.

1. McColl JA, Campbell JA and Sackville AJA

2. [2002] TASSC 45

3. [2001] SASC 85

4. (2001) 205 CLR 635

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