Legal Practice Briefing No. 10

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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