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Person who ‘paid’ the compensation not to be taken literally. Subtleties of 151Z

  • Newsletter Article
  • Published 17.06.2021
Kelly v Thorn; Monteleone v Thorn (No 8) (NSWSC 2021)

Key Takeaways

  • The right of a recovery under s151Z of the Workers Compensation Act 1987 (the Act) exists for the employer and the insurer, regardless of who actually paid the compensation.
  • The words ‘the person by whom the compensation was paid’, must always be considered in the context of the section as a whole and the Act as a whole.
  • The intention of s151Z is to adjust the responsibility of liability where the worker’s injury was caused by someone else other than the employer. As such, the intention of the section is to ensure the employer does not bear the final burden of paying compensation in those circumstances.
  • A ‘literal meaning’ approach which produces a result that is not consistent with the above intention and policy should not be accepted.

Brief Facts

The worker was injured whilst working at a property in Narrawa in 2013. At the time he was working for the Kelly family who operated as the Lugarno Pastoral Company (the employers). The worker was injured whilst assisting in unloading sheep from the defendant’s (Thorn) truck on the employers’ property.

At the time of the accident, the employers did not have workers compensation insurance. Following the accident, the worker sought workers compensation benefits and his claim was accepted by the Nominal Insurer. Weekly payments and medical expenses were paid on the claim.

A demand was subsequently made by the Nominal Insurer for reimbursement of the compensation paid on its behalf from the employers under s145 of the Act.

After reimbursing the Nominal Insurer, the employers sought to recover the reimbursed amount from Thorn, being the negligent third party that caused the worker’s accident under s151Z (in a separate Statement of Claim).

Thorn denied the recovery right under s151Z based on the argument that since the employers were strictly not ‘the person by whom the compensation was paid’, being the wording used in s151Z(1)(d), the employers were not entitled to the right of the indemnity. Thorn argued it was only the Nominal Insurer who had that right in the circumstances.


Justice Cavanagh rejected Thorn’s argument and found in favour of the employers. The key reasons for His Honour’s decision were:

  • The clear intention of s151Z(1)(d) is to adjust the responsibility between the party liable to pay the compensation (the employers) and the negligent third-party (in this case, Thorn) – in line with the reasoning in QBE v Dolan (NSWCA 2004)
  • The defendant’s ‘literal meaning’ approach to the interpretation of s151Z(1)(d) of the Act would lead to a result which was against the policy of the section.
  • The party that actually suffered the loss in the end (i.e. the employers), should be allowed to recover that loss from Thorn.
  • In practical terms, the compensation was paid by the employers even if it was initially paid by the Nominal Insurer on its behalf. The words ‘the person by whom the compensation was paid’ should be interpreted consistently with the balance of s151Z and the Act as a whole.


The decision of Justice Cavanagh reinforces the importance of interpreting s151Z (and any other relevant section of the Act) consistently with the intention and policy of the legislation.

A ‘literal’ interpretation approach, which would produce a result that is contrary to the spirit of the Act and its intention, will most likely not succeed.

David To

Special Counsel

P: 02 8257 5700

Email David