Court allows contractual damages for occupational injury where employer must prove contract nullity, rejecting frustration by unrelated medical conditions.

THE SUPREME COURT

Murray C.J.

Kearns J.

Finnegan J.

[402/2004]

BETWEEN

DENIS COLLINS

PLAINTIFF/APPELLANT

AND

J. RAY MCDERMOTT S.A.

DEFENDANT/RESPONDENT

JUDGMENT of Mr. Justice Kearns delivered the 29th day of March, 2007

These proceedings arise out of an accident which occurred on 17 August, 1996 on board the vessel ‘Pacific Constructor’ while the

same was berthed in Dubai. The plaintiff was a commercial diver on contract from 1983 onwards, mainly with the defendant. His work

involved saturation diving and laying pipes and involved the use of a compression chamber. In July, 1996 he was on a six week

contract in Dubai on the Pacific Constructor which had been chartered by the defendant. On the 17 August, 1996 he was due to fly

home to Ireland and was preparing to leave the boat when he fell down an internal staircase as a result of which he suffered

significant personal injuries. He spent nine days in a local hospital and was airlifted home on the 1st September, 1996. As a result of

his fall he suffered a cerebral contusion, a loss of hearing in the right ear with tinnitus and a separation of the acromio-clavicular joint

in each shoulder.

It is agreed between both sides to this appeal that among the risks or sequelae arising from the plaintiff’s head injury was a risk of

epilepsy. It was further agreed between the parties that in this case the medical evidence at trial established that this risk would

decrease progressively from 40 - 50% over a period of five years to zero, or to that very low level common to the general population

who have suffered no head injury.

That part of the plaintiff’s claim which consisted of a claim for damages for negligence arising out of the said accident was dismissed

in the High Court (Murphy J.) in a judgment delivered on 18 December, 2003. The plaintiff obtained a small award on foot of the

contractual aspect of his claim only. On the 21 February, 2007 this Court dismissed the plaintiff’s appeal from the dismissal of his

negligence claim in the High Court, but reserved its judgment on all aspects of the contractual claim in respect of which the plaintiff

had appealed and the defendant had cross-appealed in the following circumstances.

While the defendant’s employment contract purported to apply the law of Dubai, or alternatively the law of Panama, to the contract

of employment, the plaintiff was unable to give any evidence at trial in relation to the terms of such contract, particularly in so far as

the same provided for payments by way of occupational injury benefit or disability.

However, by letter dated 9 September, 1996 which was written subsequent to the accident by agents on behalf of the defendant,

the following representation was made with regard to the plaintiffs entitlements:-

“Dear Mr. Collins,

This letter is in follow up to our conversation of September 6, 1996. Based on your employment contract, you are to

receive $150 per day in workers compensation disability pay (maintenance). After two months you will receive ½ pay of

$75 per day for up to an additional ten months or until you are at maximum medical improvement.

By now you should have received your first maintenance wire transfer in the amount of $2,100 for the disability period of

8-18-96 to 8-31-96. Wire transfers will be made every two weeks.”

It is agreed between the parties that this letter contains the relevant terms of the contract between the appellant and the

respondent. At trial, the plaintiff pursued a claim for damages for breach of this contractual undertaking by the defendant because

the defendants ceased to make payments to the plaintiff on foot of the said letter in 1998.

In relation to this claim the learned trial judge found as follows:-

“In relation to the contractual claim and, notwithstanding the terms of the letter from Southern Risk Services, on behalf

of the defendant, restricting compensation to a further two months in relation to the weekly compensation, the defendant

did, in fact, compensate the plaintiff beyond the terms of that letter by paying, through SRS, a sum of $46,200. In so

doing the defendant acceded to an obligation to compensate for a period up to maximum improvement.

The Court, based on the medical evidence, absent meningitis, must take the evidence of maximum medical improvement

as being at October, 1998.

It follows that, from a contractual point of view, and having accepted that the contractual terms were not limited to two

months' full compensation and ten months' half compensation, the plaintiff is entitled to the sum calculated by the

actuary in such circumstances.

The plaintiff's actuary calculates a total figure due of $13,650 on the assumption that payments had ceased on the 7th

April, 1998.

The plaintiff accordingly succeeds with his contractual claim and fails in his claim for negligence”

The reference by the learned trail judge to meningitis requires explanation. In April, 1998, some 18 months after the accident the

plaintiff developed meningitis and had an epileptic fit. He was put on medication and was in the Mercy Hospital in Cork for 12 days. On

the hearing of the appeal brought by the defendant in respect of the award made to the plaintiff on foot of his contractual claim, Mr.

Colm Ó hOisín, Senior Counsel for the plaintiff, conceded that the meningitis and epilepsy could not be shown to have been caused by

the head injury in Dubai in 1996. He had to accept, as was found by the learned trial judge, that the episode in 1998 was a

completely unrelated supervening event, which had the effect of rendering the plaintiff permanently incapable thereafter of returning

to his employment as a diver with the defendants.

Mr. Ó hOisín contended, however, that the plaintiff was entitled to continuing disability payments as per the terms of the letter of 9

September, 1996 in respect of the occupational injury in Dubai until “maximum medical improvement”. As we have seen, the learned

trial judge inferred from the medical evidence that the date of maximum medical improvement was October, 1998 and calculated the

plaintiff’s entitlements accordingly. Mr. Ó hOisín argued, however, that as the plaintiff was at risk from epilepsy from the original head

injury which was measurable on a sliding scale decreasing from 40 - 50% in 1996 down to zero over a period of five years, the time of

maximum medical improvement should have been August, 2001, because the medical evidence established that any ongoing risk of

epilepsy from the original head injury would have only by then have disappeared.

Mr. Paul Gardiner, Senior Counsel for the defendants, argued that the supervening meningitis and epilepsy which occurred in April,

1998 effectively discharged any obligations of the defendant under the employment contract or the said letter, because from that

time onwards the plaintiff was never going to be capable of returning to work as a diver.

The issue in relation to the contractual claim, therefore, is to determine, firstly, the obligations (if any) of the defendant on foot of

the said letter from SRS of 9 September, 1996; secondly, the Court must determine the appropriate construction to be placed on the

terms of the said letter. Thirdly, if on a proper construction of the said letter, the liability of the defendants could be seen as

extending beyond 12 months, to determine whether, in the circumstances, any ongoing liability of the defendants on foot thereof

ceased in April 1998 when the plaintiff contracted meningitis/epilepsy for reasons unrelated to the accident.

In this regard, Mr. Ó hOisín on behalf of the plaintiff conceded that the maximum period in respect of which he could recover

payments on foot of the contract and letter was a period of five years, given that the medical evidence clearly established that there

was a decreasing risk of epilepsy over a five year period to the point when it could be said of the plaintiff that he would be in the

same position as any other member of the general population insofar as any risk of epilepsy was concerned.

In short, therefore, the Court must determine whether the onset of meningitis and epilepsy in 1998 had the effect of frustrating the

contractual arrangements or nullifying same, or whether the obligation on the part of the defendant to continue making the payments

continued, notwithstanding the plaintiff’s illness for reasons unconnected with his employment or the accident he sustained in Dubai.

Decision

The letter dated 9 September, 1996 was written by the respondent’s agent and it follows that the same must be construed contra

proferentum. This means that any ambiguity in the letter must be resolved in favour of the appellant and against the respondent. The

letter is undoubtedly ambiguous, because on one interpretation it could mean that the obligation of the respondent will cease at the

expiration of twelve months. However, by applying the contra proferentum rule, the alternative interpretation, namely, that payments

will continue until the appellant is at maximum medical improvement must be preferred. Mr O hOisin accepts that the term ‘maximum

medical improvement’ must be taken as meaning improvement from the occupational injury alone – it does not and could not be

deemed to include illness or incapacity otherwise arising.

In my view the liability thus arising imposes an obligation on the respondent to make payments over the said period of five years.

However that does not dispose of the matter. The respondent claims that any obligations he might have were ‘snuffed out’ because

of supervening events which, in this case, consisted of meningitis causing an epileptic fit in April, 1998. It is suggested that this

event permanently incapacitated the plaintiff from returning to work so that any obligation to make continuing payments from that

time onwards was discharged.

In trying to resolve this point, the first thing to be said is that the onus is clearly on the employer to prove that the undertaking

becomes a nullity for this reason. No authorities were cited in support of the proposition that the undertaking (as distinct from the

contract of employment) was discharged. It must be borne in mind that the letter was written subsequent to the date of the

accident when it was clearly in the contemplation of the parties that the plaintiff’s recovery might take some considerable time.

It seems to me that following the meningitis and consequent epileptic seizure in April, 1998, the appellant had two separate and

distinct risks of incurring further epileptic seizures, one being a post traumatic risk consequent upon his accident and a further risk

consequent upon the meningitis. The latter added an additional risk to that caused by the accident but did not replace the same.

Neither risk necessarily was going to fall in and, as a matter of factual history, neither did.

The respondent’s argument presupposes that payments should only continue while the appellant remains unfit to work as a diver.

There is nothing in the wording of the letter of 9 September, 1996 to justify the importation of such a term. By way of example, if the

appellant had sustained a physical injury which entailed recovery over a twelve month period but nonetheless although maximum

medical improvement had not been achieved he was fit to return to work after six months, he would still be entitled to be paid the

sum of seventy five dollars per day until he achieved maximum medical improvement, which I understand to mean his final condition of

recovery.

The respondent argues that had the appellant died rather than contracting meningitis the contract would clearly have been frustrated

because the appellant could then never return to work. The short answer to that submission lies in the wording of the letter – on

death the appellant would have achieved his maximum medical improvement as improvement beyond the point of death is, of course,

impossible. The nature of the undertaking in the instant case, entered into with full knowledge of the plaintiff’s injuries sustained in

Dubai, involved the assumption of a binding obligation to make continuing payments until such time as the plaintiff made maximum

recovery from those injuries. Despite the intervention of some other complicating medical condition, the medical evidence was clear in

this case and it was to the effect that that recovery would be complete, or the risk eliminated, after five years. I see no reason in

these circumstances why the respondents should obtain some windfall bonus because the plaintiff contracted meningitis and epilepsy

for unrelated reasons. If anything, these matters can, on one view, be seen as pushing further away the point of ‘maximum physical

recovery’ from the occupational injury though that case has not been pursued.

I conclude therefore that the plaintiff is entitled to payments under the terms of the letter for the period of five years from the date

of the accident and would accordingly allow the plaintiff’s appeal on this issue and dismiss the cross-appeal brought by the

respondents.