Normally our bulletins on Workers’ Compensation matters deal with the application of law to interesting facts; it is the factual matrix which grabs the attention. However, the recent Court of Appeal decision of Bilson v Vatsonic Communications Pty Ltd [2024] QCA 171 delivered on 13 September 2024 is one for the legal purists and is a case which any Employer, or party contracting with an Employer, ought to be aware of.
It is not uncommon for Employers to contract with a party and, due to commercial considerations or the respective bargaining power of the parties, for the Employer to offer to indemnify the other party in respect of its potential liability if an Employer’s worker is injured.
Although the Employer will be indemnified for its liability under its mandatory Workers’ Compensation Insurance, who pays the damages that the Employer has contracted with the other party to pay when that share is beyond the amount which the Workers’ Compensation Insurer would pay for the Employer’s own liability?
Rewind to 2014 when eminent, and now recently retired Supreme Court Judge, Justice Applegarth found in Byrne v People Resourcing (QLD) Pty Ltd [2014] QSC 269 that WorkCover Queensland was obliged to pay the full extent of the Employer’s contractual liability without being able to seek contribution from the party who received the benefit of that indemnity.
As I said at the time, and should reiterate now, notwithstanding that judgement, the law involving the interpretation and extent of indemnities is complex. Contractual terms and conditions which are called “indemnities”, may not always be interpreted as such.
The effect of the Bryne case was to expose Workers’ Compensation Insurers to liability under contractual indemnities far in excess of what actuaries had contemplated when calculating premiums. Parliament’s response was to reverse the position in the Bryne case by amending the Workers’ Compensation and Rehabilitation Act 2003 (QLD) to insert section 236B to limit any indemnity offered by an Employer to another party to enable the Workers’ Compensation Insurer to seek contribution from that other party, maintaining the remedy available under section 6(c) of the Law Reform Act 1995 (QLD).
Section 236B has been awaiting judicial interpretation for the last nine years. This month, a formidable Queensland Court of Appeal did just that, with Chief Justice Bowskill CJ delivering the leading judgement with whom her Court of Appeal brethren Boddice JA and Henry J succinctly agreed.
The highest Court in Queensland has ruled that not only does section 236B “operate to clarify that WorkCover is not obliged to indemnify an Insured employer for the amount of an injured worker’s damages that the employer is obliged to pay to another person (a co–tortfeasor) under an indemnity clause contained in an agreement between the employer and the other person, Section 236B(3) provides that the agreement is void to the extent it provides for the employer (or has the effect of requiring the employer) to indemnify the other person for any contribution claim made by the insurer against the other person. The plain meaning of those words is that the other person… is also prevented from enforcing the indemnity cause under the agreement.”
The effect of the judgement is that any such indemnities in contracts between employers and other parties will be found to be void when scrutinised by Queensland Courts.
A “workaround” that may give efficacy to the parties’ original intention when renegotiating contracts might be for the employer to pay the other party’s public liability insurance premium to respond to that party’s liability when an employer’s worker is injured. As with any contract, the terms of the agreement will depend on commercial considerations and the parties’ respective bargaining positions.
