One of the key issues on appeal was the application of section 236B of the Workers’ Compensation and Rehabilitation Act 2003 (the Act). The Court of Appeal ultimately found that section 236B did apply, and had the effect of not requiring the Employer/WorkCover of indemnifying a third party pursuant to a contract entered into between the Employer and the Third Party.
At trial, the trial Judge found that the Plaintiff's employer (Vatsonic) and the local Council were liable for causing injury to the Plaintiff. The trial judge apportioned liability 70% to Vatsonic, given its responsibility as the employer, and 30% to the Council, given the actions of the Council’s workers. The trial judge further found that the Council was entitled, under the relevant contractual provision, to be indemnified by Vatsonic for any damages awarded against it and that s 236B of the Workers’ Compensation and Rehabilitation Act did not operate to void the agreement in this respect.
Section 236B provides:
“236B Liability of contributors
(1) This section applies to an agreement between an employer and another person under which the employer indemnifies the other person for any legal liability of the person to pay damages for injury sustained by a worker.
(2) The agreement does not prevent the insurer from adding the other person as a contributor under section 278A in relation to the employer’s liability or the insurer’s liability for the worker’s injury.
(3) 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 claim61 made by the insurer against the other person. (4) In this section— damages includes damages under a legal liability existing independently of this Act, whether or not within the meaning of section 10.”
The critical question concerned subsection (3).
Her Honour Bowskill CJ considered the intention of the section, and referred to the explanatory memoranda to the bill inserting the new section 236B:
“Clause 31 inserts new section 236B dealing with liability of contributors in relation to damages. The amendment ensures that an agreement between an employer and a third party, under which the employer indemnifies the third party as indicated, does not prevent the insurer from adding the third party as a contributor. Further it provides that the agreement is void and that the third party cannot recover the amount of an award or settlement, made against them from the employer. The effect is to restore the common law principle that an insurer will not be liable to indemnify an employer for a liability to pay damages incurred by a third party contributor under a contractual arrangement. This principle was overturned by the Queensland Supreme Court’s decision in Byrne v People Resourcing (Qld) Pty Ltd & Anor [2014] QSC 269. It also furthers the objects of the Act by encouraging improved health and safety performance by employers, ensures reasonable cost levels for employers and provides for the protection of employers’ interests in relation to claims for damages for workers’ injuries.”
Her Honour found:
[124] As is apparent from the explanatory notes to the Bill, by which s 236B ultimately came to be introduced, the legislature expressly sought to reverse the effect of Byrne. This was considered to have a significant financial benefit for WorkCover. According to the explanatory notes (at page 4), the “amendment to reverse the effect of the Byrne decision and prohibit the contractual transfer of liability from principals to contractors will save WorkCover Queensland an estimated $40 million per annum”
[127] Although the expressed intent of s 236B was to reverse the effect of Byrne, having regard to the words used in s 236B(3) in particular, it goes further than that. Section 236B(3) does not [only] 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 (here, the Council) is also prevented from enforcing the indemnity clause under the agreement.
[128] That this was the statutory intent is reinforced by other statements in the explanatory notes, for example the reference to the effect of the amendment being to “prohibit the contractual transfer of liability from principals to contractors”. It is also consistent with the additional expressed purpose of the amendments, referred to in the final paragraph of the explanatory notes set out in paragraph [122] above (referring to furthering the objects of the Act by, among other things, “ensur[ing] reasonable cost levels for employers and provid[ing] for the protection of employers’ interests in relation to claims for damages for workers’ injuries”).
Her Honour therefore held that section 236B applied in this case, and that no further order should be made for the benefit of the Council, giving effect to clause 1.39.1 of the contract, having regard to the effect of s 236B(3). Therefore, the 'apportionment' orders reverted to the 'Law Reform Act' apportionment as assessed.
This decision appears to give effect to the statutory intent of section 236B, to avoid the statutory insurer WorkCover Queensland, being required to indemnify (in effect) third parties for their exposure to damages, by operation of contracts between employers and third parties.
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