Court of Appeal says 'No'.

In Brittain & Ors v Telecom Corporation of New Zealand Limited & Ors, the Court of Appeal decided that section 14 of the Accident Rehabilitation & Compensation Insurance Act 1992 (ARCI Act) stops employee's claims for compensatory damages for personal injury where the employees are covered by accident compensation.

While the ARCI Act has been repealed, the outcome of this case is still relevant in light of the current Accident Insurance Act 1998.

The employees alleged breaches of express and implied terms of their employment contracts. They said Telecom had breached terms requiring it to provide a safe working environment. All the employees were required to use computers. They each claimed that their employment was detrimentally affected by injury caused by OOS.

The employees said Telecom was contractually bound to provide a safe place of work, a safe system of working and to treat the employees fairly and reasonably. Telecom was also, they said, expressly bound to adequately protect its employees from any safety and health hazards arising in the workplace and to operate its workplaces in compliance with the Department of Labour Code of Practices for VDUs.

Effect of statutory bar
Generally, proceedings cannot be brought for damages arising out of personal injury covered by accident compensation (section 14(1) of the ARCI Act and section 394 of the Accident Insurance Act 1998). There has, however, for some years been a question about whether employees can claim damages for breach of contract for personal injuries. This issue was decided in favour of employees by the Employment Court in Hurst v Prudential Assurance Company NZ Limited.

On the basis of Hurst, the Employment Court in Brittain held that s 14(3)(b) of the ARCI Act allows proceedings to be brought seeking damages for personal injury, as long as the claim arises from a breach of an express term of the employment contract or agreement.

The Court of Appeal disagreed.

Tipping J summarised the general position that proceedings for damages arising out of personal injury covered by the ARCI Act or its predecessors may not be brought. He then stated that such proceedings can be brought if they relate to or arise from an express term of any contract or agreement (s 14(3)(b)).

Nevertheless, no compensation for personal injury for which the claimant is covered under the statutory regime will be awarded in proceedings based on a breach of an express term of a contract.

The outcome?
Payments due under a contract as a result of the employee suffering personal injury are not barred by s 14 (for example, 'if you break your leg we will pay $1000'). However, compensation claims for injuries resulting from a breach of contract are barred. For example, Telecom employees sought compensatory damages for Telecom's alleged breaches of the express terms in their contract, rather than payments owed under a contractual provision, and they were not entitled to the damages sought.

The fear that a new route for personal injury claims had been opened by Hurst and similar cases is now dispelled. However, there is some indication that a recent line of cases (e.g. Brickell) combined with the inclusion of stress as a hazard in the proposed new Health and Safety Amendment Bill, may mean that claims for mental injuries may not be covered by the Brittain decision.

The Telecom employees applied for leave to appeal to the Privy Council, however their application was rejected.

This is a general summary only and should not be taken as a substitute for specific advice.

For further information contact Georgia Young: georgia.young@phillipsfox.com

Web site: Phillips Fox