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Australia – Damages Cap In Domestic Carriage.

10 March, 2014

 

Legal News & Analysis – Asia Pacific – Australia – Shipping, Maritime & Aviation

 

A preliminary ruling of the Supreme Court of Victoria in Victorian WorkCover Authority v Virgin Australia Airlines Pty Ltd and Paul Tzovlas [2013] VSC 720 has reinforced the view that the statutory cap on the damages recoverable for passenger injury or death in Australian domestic carriage by air applies for passengers travelling in the course of their employment, even where dual claims have been brought against the carrier by the passenger and the applicable workers’ compensation authority.

 

Background

 

On 24 August 2010, Mr Tzovlas was a passenger on a Virgin Australia flight from Sydney to Melbourne. He was travelling in the course of his employment. Prior to descent into Melbourne, a cabin crew member lost control of a portable EFTPOS machine and it dropped onto Mr Tzovlas’s head. Mr Tzovlas twisted sharply and sustained a serious back injury.

 

Mr Tzovlas received a substantial amount of workers’ compensation from the Victorian WorkCover Authority (VWA) in respect of his injuries. He also issued proceedings against Virgin Australia seeking damages pursuant to the Civil Aviation (Carriers’ Liability) Act 1959 (Cth) (CACLA). The VWA, in turn, commenced proceedings for recovery of all workers’ compensation paid to Mr Tzovlas from Virgin Australia, or alternatively, from Mr Tzovlas, pursuant to the Accident Compensation Act 1985 (Vic) (ACA). As regards Mr Tzovlas, section 85(6) of the ACA entitles the VWA to recover from an injured worker where, in addition to receiving workers’ compensation, that worker has also obtained damages for his/her injuries ‘under the law of any place outside Victoria (whether within or outside Australia)’.

 

There was no dispute that under the CACLA Mr Tzovlas was entitled to damages from Virgin Australia in respect of the incident. For domestic interstate carriage in Australia, the CACLA prescribes a cap on the damages recoverable for passenger injury or death (AUD 500,000 at the time of the incident). This was a significant factor in the case. Given that Mr Tzovlas was likely to be entitled to damages for the full AUD 500,000 in his claim against Virgin Australia based on the extent of his injuries, the VWA would then have no recourse for recovery from the airline (unless the cap did not apply in that context). The VWA’s only likely avenue for recovery was therefore from Mr Tzovlas himself pursuant to section 85(6) of the ACA. It was this latter issue that was set down in October 2013 for a pre-trial ruling.

 

Supreme Court Of Victoria Preliminary Ruling

 

The court noted at the outset that Virgin Australia’s liability for damages in respect of the incident is capped by the CACLA at AUD 500,000. Significantly, there was no suggestion that the cap does not apply in the context of worker injury claims within the scope of the ACA or that an additional AUD 500,000 cap applies where there are dual claims by the injured worker and the VWA, as in the present case (thereby increasing Virgin Australia’s exposure).

 

Mr Tzovlas argued that the VWA was not entitled to recovery under section 85(6) on the grounds that, among other things, his claim against Virgin Australia under the CACLA was not a claim under the law of any place outside Victoria because, constitutionally, Victoria is part of the Commonwealth and therefore the Commonwealth is not ‘a place outside Victoria’.

 

The Court rejected these arguments and held instead that section 85(6) was designed to encompass all non-Victorian sources of law, including Commonwealth laws.  This was consistent with the overarching principle to prevent the double payment of compensation. Accordingly, while expressing sympathy for Mr Tzovlas’s position (particularly where his injuries would ordinarily have warranted damages greatly in excess of AUD 500,000 but for the statutory cap), the court held that damages paid to Mr Tzovlas pursuant to his claim under the CACLA would constitute damages paid ‘under the law of any place outside Victoria’, thereby entitling the VWA to bring a claim under section 85(6).

 

Analysis

 

There has been some uncertainty regarding the applicability of the damages cap under the CACLA in the context of worker injury claims arising in Australian domestic carriage by air, namely, whether the cap applies to both a damages claim by an injured worker and a recovery claim by the VWA in combination. Our view has been that it does, this being consistent with the operation of the relevant sections of the CACLA and supported by earlier case authorities, The preliminary ruling in Tzovlas does not specifically address this issue. Nevertheless, the clear inference from the court’s comments is that the cap does apply in those circumstances, and the fact there are dual claims on foot does not result in any increased exposure for the carrier. If that was true, the question of any recovery by the VWA against Mr Tzovlas under section 85(6) would have been rendered redundant.

 

In cases of death or serious injury to a passenger where the level of damages obtained against the carrier is likely to be at or near the present value of the CACLA cap, the VWA will now likely approach the issue of recovery of workers’ compensation payments by pursuing the passenger under section 85(6), as opposed to claiming recovery from the carrier above the level of the cap.

 

This decision has negative consequences for those injured persons who may otherwise have obtained substantially greater damages if the injuries had been caused other than during carriage by air, and who may now be left in a situation where most of the damages obtained from the carrier are recovered from him/her by the VWA. It is, however, reinforcement for carriers and their insurers that the maximum exposure in respect of any claim for passenger injury or death arising in Australian domestic interstate carriage will be limited to the CACLA damages cap, even where dual claims have been brought against it by the passenger and the applicable workers’ compensation authority.

 

Clyde & Co

 

For further information, please contact:

 

Maurice Thompson, Partner, Clyde & Co
maurice.thompson@clydeco.com

 

James M. Cooper, Clyde & Co
james.m.cooper@clydeco.com

 

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