Section 151Z Recovery Expansion and Uncertainty

Section 151Z (1)(d) of the Workers Compensation Act 1987 (NSW) (WCA) provides an employer with a right to indemnity from a third party. The indemnity allows the employer or its insurer to recover compensation payments from a person liable to pay damages for the same injury for which compensation was paid. The last decade has seen an increase in the importance of recovery claims as employers have become increasingly aware of the entitlement to recovery and the potential effect of successful recovery on their workers compensation insurance premiums.

Two 2012 decisions of the New South Wales (NSW) Court of Appeal, United Airlines Inc v Sercel Australia Pty Ltd [2012] NSWCA 24 (United Airlines) and Izzard v Dunbier Marine Products Pty Limited [2012] NSWCA 132 (Dunbier Marine), are of significance to recovery claims. The first has expanded the potential of employers and workers compensation insurers to claim recovery from airlines for injury to workers during flight. The second has introduced potential uncertainty into the assessment of the amount of the recovery sought under the indemnity.

RECOVERY CLAIMS SET TO TAKE OFF

In United Airlines, the NSW Court of Appeal considered whether the two-year time bar imposed by the Warsaw Convention (Convention) on claims for damages arising from international carriage by aircraft applied to a claim for recovery by an employer.

In 2005, an employee of Sercel, Mr Aurora, was a passenger on a United Airlines flight from Sydney to Houston, Texas. He sustained personal injury when the aircraft braked heavily on landing. Aurora made a claim for workers compensation in New South Wales, which was paid by Sercel. Sercel sought indemnity from United Airlines under Section 151Z (1)(d).

United Airlines argued that Sercel's claim for indemnity was out of time as it had not been brought within two years, as required by the Convention. The operation of the Convention and subsequent protocols has force of law in Australia through the operation of the Civil Liability (Carriers' Liability) Act 1959 (Cth) (CL Act).

The trial judge rejected United Airlines' submissions. United Airlines appealed.

The issues in the Court of Appeal were:

Whether the action for recovery brought under section 151Z, which is expressly recognised by section 37 of the CL Act, was time-barred by operation of Article 29 of the Convention Whether Sercel was prevented from bringing recovery proceedings in NSW as the event on which the recovery claim was based occurred in Texas, there being no cause of action available to Sercel in Texas. The Court of Appeal concluded that the two-year time bar did not apply to a claim for recovery under section 151Z. In coming to that...