Employers’ Indemnity Insurance – Recovery Claim “Shunned”

A case summary of Portrange Pty Ltd v Xstrata Nickel Australasia Operations Pty Ltd [2015] WADC 118

The case of Portrange v Xstrata involved a dispute between the employer and its principal relating to the payment of apportioned common law damages and recovery of workers’ compensation payments in circumstances where the employer had a contractual obligation to indemnify the principal and was in breach of its contractual obligation to maintain an insurance policy indemnifying the principal.

A Mr Bradley Rollings, who was employed by Portrange suffered a workplace injury in July 2005 whilst an employee of the plaintiff (Portrange). Xstrata had engaged Portrange to perform electrical work at the Cosmos mine of which Xstrata was the owner and operator.

Rollings issued proceedings for personal injuries against Portrange and Xstrata in negligence and/or breach of statutory duties.

On 13 June 2012, judgment by consent was entered in which:

  •  “Negligence” as between Portrange and Xstrata was apportioned 80% against Xstrata and 20% against Portrange;
  • damages exclusive of workers’ compensation were to be paid to Rollings in the sum of $650,000, plus costs of $60,000;
  • the defendants were each to pay 50% of the damages and costs to satisfy the judgment; and
  • the final apportionment of liability as between the defendants was to be subsequently determined in the contribution proceedings.

In the contribution proceedings Xstrata claimed both the benefit of a contractual indemnity from Portrange and damages on the grounds of breach of contract whereby Portrange had agreed to extend its insurance for the benefit of Xstrata.

Portrange counterclaimed on the basis that whereas it had paid some $661,238 (including workers’ compensation) towards the settlement, pursuant to the agreement on negligence, it should have only paid 20% of that total of $1,016,238, i.e. the sum of $203,247.

Following a hearing in relation to the contribution proceedings, in a decision published on 24 April 2014, Scott DCJ upheld the claims for indemnity and breach of contract by Xstrata against Portrange and dismissed Portrange’s claim for contribution. Xstrata elected to enter judgment for relief by way of indemnity rather than for damages for breach of contract.

In a fresh action, Portrange claimed pursuant to s93 to be indemnified by Xstrata to the full extent of Portrange’s liability to pay compensation under the Act, reduced by the 20% contribution previously agreed.

Portrange’s claim was opposed by Xstrata on grounds, amongst others of res judicata and issue estoppel and that the claim for indemnity merged with the common law judgment for damages in the first action, now determined.

Counsel for Portrange submitted at trial, that the claim pursuant to s93 did no arise until Xstrata elected relief by way of indemnity and conceded that if Xstrata had elected for judgment by way of damages, Portrange’s claim for indemnity could (probably) not be maintained.

His Honour found against Xstrata in relation to the arguments raised that the causes of action merged under s92, res judicata and issue estoppel, but found that Portrange was estopped from claiming contribution on the basis of Anshun estoppel. The essence of this estoppel was that given the nature of the relief now sought by Portrange, which was so intrinsically connected with the subject matter of the contribution claim in the first action, it was unreasonable for Portrange not to have raised it at that time.

In coming to this view, His Honour rejected the argument from counsel for Portrange that the s93 claim did not arise until Xstrata had made its election.

In overview, this action involved consideration of a number of legal principles of some complexity that arise frequently in employment related personal injury claims where there are additional parties. The Anshun estoppel, which was the basis for the decision is perhaps the least technical, and certainly the less often to be seen in these actions.  Its application is a useful reminder of the risks that arise where there is a partial resolution of claims in an action.

For more information on this update please contact insurance partner Vidal Hockless or lawyer Henrik Eklund on (08) 9321 3755.

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