I. BACKGROUND

On the 9th April 1984, the NSW Law Reform Commission received a reference on Employees' Liability. It arose from the interpretation given to the Employees Liability (Indemnification of Employer) Act 1982 by the NSW Supreme Court in Fairfield Council v McGrath [1984] 2 NSWLR 247. This decision limited the operation of the Act and allowed employers to recover contribution from negligent employees, pursuant to s 5 of the Law Reform (Miscellaneous Provisions) Act 1946. The Commission's draft report was at an advanced stage when the High Court of Australia overturned the NSW decision and substantial rewriting of the draft report was required. The Commission decided at that stage that its report should be completed despite the High Court decision because a number of questions in relation to the 1982 Act remained unresolved by the decision. These were as follows:

1. Sections 64/64A Indemnity and Contribution Provisions: The operation of the 1982 Act needed to be extended to protect employees from the effects of ss 64 and 64A of the Workers Compensation Act 1926 under which they could be made liable to contribute to, or indemnify their employer in a common law action.

2. Clarification of 1982 Act: This was necessary to avoid further confusion in the interpretation of the Act and to entrench the High Court decision in McGrath's case in legislation.

3. Rights of 3rd Parties: The right of an injured party to sue a negligent employee directly was not affected by the High Court decision.

4. Action For Loss of Servant: Questions remained as to the continued relevance of the action per quod servitium amisit.

At the end of September 1986 the New South Wales Government published two papers proposing substantial changes to both the Workers' Compensation and Traffic Accident Compensation systems. These resulted in the passage of the new Workers Compensation and Transport Accidents Compensation Acts of 1987, both of which came into operation on 1 July 1987. The new Workers Compensation Act deals extensively with the concerns of the Employee's Liability reference and supersedes either directly or indirectly, most of the questions raised above and the recommendations in paragraphs 4.4-4.35 of the Commission's report. Sections 149-151 of Part 5 abolish common law actions where compensation is available under the workers' compensation legislation. This Part also contains a redrafted and combined version of ss 64 and 64A of the 1926 Act.

In summary the impact of the 1987 Act on the Commission's terms of reference is:

1. Sections 64/64A Indemnity and Contribution Provisions: These provisions have been redrafted to relieve both employers or employees from any duty to indemnify or make a contribution towards another's loss.

2. Clarification of 1982 Act: The complete reworking of the workers' compensation legislation, and the abolition of the right to sue, have superseded the 1982 Act with regard to injuries caused by a fellow employee. The problems identified by the Commission at paras 1.11 and 4.4 of the draft report have been overcome.

3. Rights of 3rd Party: This problem is not addressed specifically by the 1987 Act, and it is given only limited attention in relation to Transport Accidents in the “Transcover" Scheme. Therefore the possibility of an employee being liable in this way remains. Our comments and recommendations on the matter appear at paras 4.26-4.35.

4. Action For Loss of Servant: This topic is not addressed by the 1987 Act. The Commission's comments and recommendation appear in the draft report at paras 4.25.

As the two issues left outstanding are relatively minor, the Commission has decided to conclude this reference by way of Memorandum, supported by our draft report. We make the following recommendations:

1. Rights of a third party: The Commission recommends that this matter be dealt with as outlined in paragraphs 4.26-4.35. Draft legislation to achieve this is attached as Appendix I.

2. The Commission recommends that the action per quod servitium amisit be abolished, as discussed at paragraph 4.25. Draft legislation to this effect is attached as Appendix II.