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Legal Practice Briefing

Number 10

16 March 1994

COMMONWEALTH EMPLOYEES' RIGHTS OF ACTION FOR NEGLIGENCE

Georgiadis v Australian and Overseas Telecommunications Corporation
High Court 9 March 1994

The High Court handed down its decision in this matter on 9 March 1994. The Court decided, by a majority of four to three, that section 44 of the Safety Rehabilitation and Compensation Act 1988 (the SRC Act) is invalid in its application to Mr Georgiadis in so far as that section purported to prevent MrGeorgiadis pursuing a common law action for damages against AOTC (now called Telstra Corporation Limited), based upon a cause of action which arose before the commencement of the Act, and which was commenced within the relevant limitation period.

Implications for Clients

In essence, the High Court's decision means that an employee who was injured prior to 1 December 1988 and who is not entitled to compensation under sections 24, 25 or 27 of the SRC Act is able to sue the Commonwealth, a Commonwealth authority or another employee for damages, notwithstanding section 44 of the SRC Act. That action would have to be commenced within the relevant limitation period, normally 6 years. It is very doubtful whether any other class of employees can benefit from the High Court's decision.

There is, however, a grey area in relation to employees who have not commenced proceedings within the relevant limitation period and who may be able to obtain an extension of time to commence proceedings. The Commonwealth would normally oppose the granting of an extension of a 6 year time limit.

The Facts

MrGeorgiadis alleged that, during the period February 1974 to March 1986, he suffered five injuries to his back in the course of his employment. The last injury occurred on or about 4 March 1986. Weekly compensation payments in respect of those injuries were received by MrGeorgiadis pursuant to the provisions of the Compensation (Commonwealth Employees) Act 1971 (the 1971 Act).

On 17 September 1990, MrGeorgiadis commenced a common law action for damages for negligence in respect of these injuries against AOTC in the Supreme Court of New South Wales. The negligence relied on was a breach of the employer's common law duty to take reasonable care for the safety of its employees. In its statement of defence, AOTC alleged that the whole of the plaintiff's claim was barred by section 44 of the SRC Act.

MrGeorgiadis filed a reply which alleged that the SRC Act is unconstitutional because it breaches the terms of section 51(xxxi) of the Constitution, which prevents an acquisition of property by the Commonwealth or its authorities otherwise than on just terms. The Commonwealth intervened before the High Court to support the validity of its legislation.

Relevant Legislative Provisions

The SRC Act extinguishes all rights to sue the Commonwealth or a Commonwealth authority for damages for injuries sustained in the course of employment with the Commonwealth or a Commonwealth authority. In place of those rights is substituted a statutory scheme of compensation which provides for lump sums for permanent impairment, weekly payments for incapacity, medical expenses and sums for non-economic loss.

The SRC Act was assented to on 24 June 1988. By proclamation published on July 1988, the commencement date for most provisions was fixed as 1 December 1988. The Act does not apply to any action instituted before the commencement date. MrGeorgiadis commenced his action over 20 months after the SRC Act became law.

Section 44 provides:

'(1) Subject to section 45, an action or other proceeding for damages does not lie against the Commonwealth, a Commonwealth authority or an employee in respect of:

    (a) an injury sustained by an employee in the course of his or her employment, being an injury in respect of which the Commonwealth or Commonwealth authority would, but for this subsection, be liable (whether vicariously or otherwise) for damages; or

    (b) the loss of, or damage to, property used by an employee resulting from such an injury;

whether that injury, loss or damage occurred before or after the commencement of this section.

'(2) Subsection (1) does not apply in relation to an action or proceeding instituted before the commencement of this section.'

Section 45 provides for an employee to elect between compensation under the Act and damages at common law for non-economic loss. That section provides:

'(1) Where:

    (a) compensation is payable under section 24, 25 or 27 in respect of an injury to an employee; and

    (b) the Commonwealth, a Commonwealth authority or another employee would, but for subsection 44(1), be liable for damages for any non-economic loss suffered by the employee as a result of the injury;

the employee may, at any time before an amount of compensation is paid to the employee under section 24, 25 or 27 in respect of that injury, elect in writing to institute an action or proceeding against the Commonwealth, the Commonwealth authority or other employee for damages for that non-economic loss.

'(2) Where an employee makes an election:

    (a) subsection 44(1) does not apply in relation to an action or other proceeding subsequently instituted by the employee against the Commonwealth, the Commonwealth authority or the other employee for damages for the non-economic loss to which the election relates; and

    (b) compensation is not payable after the date of the election under section 24, 25 or 27 in respect of the injury.

'(3) An election is irrevocable.

'(4) In any action or proceeding instituted as a result of an election made by an employee, the court shall not award the employee damages of an amount exceeding $110,000 for any non-economic loss suffered by the employee.'

Section 124 relevantly provides:

(1) Subject to this Part, this Act applies in relation to an injury, loss or damage suffered by an employee, whether before or after the commencing day.

(3) A person is not entitled to compensation under section 24 or 25 in respect of a permanent impairment, or under section 17 in respect of the death of an employee, being an impairment or death that occurred before the commencing date, if:

    (b) the person was not entitled to receive compensation of a lump sum in respect of that impairment or death:

(iii) in any other case - under the 1971 Act as in force when the impairment or death occurred.'

The 1971 Act did not provide for a lump sum payment for permanent impairment to the back. Because Mr Georgiadis' injuries were sustained before the commencing date of the SRC Act and he was not entitled to a lump sum payment under the 1971 Act, he fell within section 124(3)(b)(iii). Thus, he had no right to sue at common law for damages for his injuries and no right to obtain a lump sum payment under the SRC Act for his disabilities. In his case, section 45 did not qualify the operation of section 44. Consequently, it appeared that he no longer had any right to sue AOTC at common law for damages in respect of his injuries. His remedies were apparently confined to weekly payments for incapacity and medical expenses under the SRC Act.

The Court's Decision

In a joint judgment, Mason CJ and Deane and Gaudron JJ held that, for the purposes of section 51(xxxi) of the Constitution, 'property' includes a cause of action arising under the general law and that 'acquisition' in section 51(xxxi) extends to the extinguishment of a cause of action which has 'vested' (arisen), at least where the extinguishment results in a direct benefit or financial gain. That direct benefit or financial gain includes a liability being brought to an end without payment or other satisfaction.

Their honours acknowledged that the position may be different where the cause of action arose under statute, because what Parliament gives, Parliament may also take away. However, the right to sue the Commonwealth and its authorities for damages for negligence, in their honours' view, arose under the general law.

Their honours also recognised that not every Commonwealth law which effects an acquisition of property must comply with section 51(xxxi) of the Constitution. It may fall squarely within another head of power, such as the taxation power or it may properly impose a penalty by way of forfeiture. However, their honours did not consider that section 44 of the SRC Act fell so clearly within another head of Commonwealth power as to fall outside the scope of section 51(xxxi). Clearly, section 44 was not a law imposing a penalty by way of forfeiture.

The Commonwealth and AOTC sought to argue that section 44 was a law modifying the limitation period for the commencement of an action. This proposition was firmly rejected by their honours, who pointed out that section 44 was a once and for all provision terminating those causes of action which fall outside the purview of section 45. Section 44 is in substance a law effecting an acquisition of property, and accordingly just terms must be provided.

The SRC Act provides no compensation with respect to causes of action which arose before the commencement of the Act and which are outside the scope of section 45 (ie. where no compensation for permanent impairment is payable under the Act). Accordingly, their honours found that section 44 of the SRC Act is invalid to that extent by reason of the fact that it effects an acquisition of property otherwise than on just terms. It is, however, implicit in their honours' decision that section 44 does validly prevent a cause of action arising after the commencement of the SRC Act and that, if a cause of action arose before the commencement of the Act but compensation is payable for the purposes of section 45 of the Act, then just terms have probably been provided for the acquisition of the property.

In a separate judgment, BrennanJ supported the decision of MasonCJ, Deane and GaudronJJ. However, his honour went further, rejecting the Commonwealth's contention that the availability of compensation under the SRC Act amounted to just terms for the acquisition of property effected by the extinguishment of causes of action which arose before the commencement of the SRC Act. In his honour's view, the statutory provision of compensation payments was not of equal value to the cause of action extinguished. He said that unless it is shown that what is gained is full compensation for what is lost, the terms cannot be found to be just. His honour was, however, the only judge to put that view.

Dawson, Toohey and McHugh JJ dissented. They accepted that a cause of action arising under the general law was 'property' for the purposes of section 51(xxxi) of the Constitution. They also accepted that an extinguishment can be an acquisition for the purposes of section 51(xxxi). However, Dawson J said that an extinguishment is not an acquisition if the benefit derived from the extinguishment is not itself property. In his honour's view, whatever benefit the Commonwealth and its authorities had derived from the operation of section 44, it was not a proprietary benefit. TooheyJ agreed that there had been no acquisition of property, noting that all that had occurred was that a right which once existed had ceased to exist.

The dissenting judgment of McHugh J was more comprehensive. His honour gave a useful exposition on the legislative history of the SRC Act and the legislative policy underlying it. He rejected the proposition that a cause of action in negligence against the Commonwealth (or any other tort) arose under the general law, noting that at common law the Crown was not liable to be sued in an action for tort. In his honour's view the cause of action extinguished by section 44 was a creation of statute (the Judiciary Act 1903) and therefore could be removed by Parliament without offending section 51(xxxi) of the Constitution. His honour also found that the Commonwealth has a plenary power to legislate with respect to the conditions of employment of its employees and that section 51(xxxi) was not relevant to such a law.

ISSN 1448-4803 (Print)
ISSN 2204-6283 (Online)

The material in this briefing is provided for general information only and should not be relied upon for the purpose of a particular matter. Please contact the Legal Practice before any action or decision is taken on the basis of any of the material in this briefing.

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