Allianz v Fyna [2001] NSWSC 657 | Case summary

HIS HONOUR: 1 On 21 May 1993, there was registered under the Corporations Law of New South Wales a company named "Fyna Formwork Pty Limited". It was allocated by the then Australian Securities Commission the Australian Company Number (or ACN) 060 214 762. On 23 June 1995, its name was changed to "Concrete Formwork Pty Ltd". In April 1996, there was lodged with the Commission notice of an application for compulsory winding up of this company. In May 1996, an administrator was appointed under Part 5.3A of the Corporations Law. In June 1996, the Commission received notification of dismissal of an application for winding up. In July 1996, there were lodged two notifications - one of the resignation or removal of the administrator of the company and the other of appointment of an administrator under a deed of company arrangement. Almost two years later, in May 1998, there were lodged notice of termination of the deed of company arrangement and notification of the resignation or removal of the deed administrator. In July 1998, there was lodged an application for voluntary deregistration of the company. It was deregistered on 11 November 1998 and then ceased to exist, having had a life of some five and a half years. Throughout that life, the company had an address at 53-55 Lakemba Street, Belmore. All these particulars come from an historical company extract issued by the Commission and received in evidence. 2 On 23 June 1995, there was registered under the Corporations Law of New South Wales a company named "Fyna Formwork Pty Ltd". It was allocated by the Commission the ACN 070 015 682. It thereafter remained on the register of companies. Its address was, at all material times, 53-55 Lakemba Street, Belmore. These particulars appear from another historical company extract issued by the Commission and received in evidence. 3 In the course of the hearing, the company registered on 21 May 1993 and given the ACN 060 214 762 was referred to as "Fyna 1" and the company registered on 23 June 1995 and given the ACN 070 015 682 was referred to as "Fyna 2". I shall continue with that terminology except where it is important to refer to an actual name. 4 The persons installed as directors of Fyna 1 immediately after its formation in May 1993 were James Christopher Coughlan of 62 Oxford Street Strathfield, born in Galway, Ireland on 26 May 1942 and James Soong of 31 Durham Street Concord, born in Foxton, New Zealand on 11 November 1944. They remained directors throughout the life of Fyna 1. The same persons became directors of Fyna 2 after its incorporation on 23 June 1995, with Soong alone remaining after Coughlan ceased to be a director on 1 July 1996. The shareholders of both companies appear to have been, at all material times, Coughlan together with one of Soong and Angela Karen Soong also of 31 Durham Street Concord. Again, these particulars are taken from the Commission's historical company extracts. 5 It will be clear at once that relevant individuals clothed themselves first with the corporate personality of Fyna 1 and later with the corporate personality of Fyna 2 and, in the process of so doing, organised matters so that they were able to operate in corporate form at all relevant times under the name "Fyna Formwork Pty Limited" or "Fyna Formwork Pty Ltd" even though, at a point in June 1995, that outward manifestation of identity slid across from the Fyna 1 entity to the Fyna 2 entity. 6 Also in evidence is an agreement entitled "Labour Hire Agreement" dated 1 July 1995 and made between Fyna 2 (called "Fyna") and Fyna 1 (called "Concrete") whereby, among other things: "Concrete agrees to supply labour to Fyna in such numbers and with workers possessing such necessary skills so as to enable Fyna to meet its obligations under its sub-contracts." 7 This agreement was expressed to subsist for a period of five years but there was no evidence as to what, if anything, was actually done pursuant to it in the period preceding Fyna 1's voluntary administration and deed of company arrangement or thereafter until its dissolution following voluntary deregistration, although I am asked by the defendant to infer that it employed a workforce throughout all that time. What might have been the fate of that workforce when, well before the end of the five year term, Fyna 1 was dissolved (no doubt on the basis of its own statement - or that of a director or secretary - under s.601AA(2) of the Corporations Law that it was not carrying on business and had no liabilities) was not the subject of any submission by Mr McGrath, counsel for the defendant. In any event and as will be seen presently, Fyna 2 represented itself to the plaintiff at material times as having a workforce of its own. 8 It is common ground that, in March 1994, Fyna 1 completed and submitted to the plaintiff a proposal for the insurance made mandatory by the Workers Compensation Act 1987. The plaintiff accepted the proposal and extended indemnity pursuant to the Act under policy number MWN002664301. The annual cover under that policy was for the period 28 February 1994 to 28 February 1995. Fyna 1 was given by the plaintiff a client or account number 2697640. 9 It is necessary, at this point, to say something about the system of insurance under the Workers Compensation Act. That insurance has some, but by no means all, of the features of other forms of insurance. It is contract-based, even though it arises in the particular statutory context and the parties do not enjoy full freedom of contract, various facets being mandated by or pursuant to legislation. I believe it to be common ground that a new contract arises upon each annual renewal, although the statute does not allow the insurer to decline renewal. The annual premium in relation to a particular year of cover is calculated twice. At the start of the period, the insured must provide an estimate of wages expected to be paid during the year. Based on that and other factors, an estimated annual premium is calculated by the insurer. It is payable one month after demand. After the end of the relevant year, the insured must give the insurer particulars of wages actually paid during the year. The insurer then calculates retrospectively an adjusted annual premium. A further premium payment may then become due by the insured; alternatively, there may be a credit which, in the normal course, is carried over and applied to the insured's benefit against the premium for the next year. 10 The Act regulates the quantum of premiums. Under s.168, the Governor may, by order published in the Gazette, fix the manner of premium calculation, either generally or by reference to particular factors. The premium for a particular policy must, under s.169, be calculated in accordance with the applicable order. An insured employer who claims that an insurer has, in demanding a particular premium, breached the applicable order may apply to the WorkCover Authority under s.170 for a determination of the premium. This is essentially an application for review or re-assessment. Recovery of unpaid premiums is dealt with by s.172 which, in sub-s.(1), provides that the premium may be recovered by the insurer as a debt in a court of competent jurisdiction, together with interest at the rate of 1.2% per month compounded monthly. It is also provided by s.172 that the making of an application under s.170 does not affect an insurer's right to recover a premium already determined unless the WorkCover Authority otherwise directs in a particular case. If it should happen that an insured has paid (either voluntarily or in consequence of s.172 action by the insurer) a premium which is afterwards reduced pursuant to s.170, the insured may, under s.170(4), recover the excess from the insurer as a debt. 11 These proceedings concern premiums for each of three years, being the years beginning 28 February 1996, 28 February 1997 and 28 February 1998. Each of those years occurred after the point in June 1995 when the "Fyna Formwork Pty Limited" or "Fyna Formwork Pty Ltd" name moved from Fyna 1 to Fyna 2. The plaintiff claims an aggregate sum of $3,808,040.20, plus interest under s.172(1) from 16 June 2000 to the date of judgment, by way of adjusted workers compensation premiums for those periods. Those claims are based primarily on an assertion by the plaintiff that it and the defendant were parties to a policy or contract of insurance in relation to each of those periods. The plaintiff seeks to prove the existence of such a policy and says, in the alternative, that the defendant is estopped from denying the policy's existence. A separate and further alternative claim based on s.52 of the Trade Practices Act 1974 (Cth) is also advanced by the plaintiff. The defendant, Fyna 2, denies liability. Its main contention is that the insured under the relevant contracts was the now non-existent Fyna 1. 12 The plaintiff has, since 23 June 1995, received and accepted fifteen claims in respect of injury suffered by employees of what the relevant employer's reports in evidence call "Fyna Formwork", "Fyna Formwork Pty Ltd" or "Fyna Formwork P/L". In an affidavit sworn on 30 May 2001, Mr Russell, Wage Audit Manager of the plaintiff, deposed that the plaintiff had paid to, for and on behalf of the employees the subject of those fifteen claims a total of $1,114,978.60. Payments by the plaintiff to such employees are in many cases ongoing. 13 The renewal for the year starting 28 February 1996, being the first of the periods to which the proceedings relate, was the subject of a letter dated 6 March 1996 to the plaintiff under its then name, MMI Workers' Compensation (NSW) Ltd. The text of the letter was as follows: "6th March 1996 ESP96/25 MMI Workers' Compensation (NSW) Ltd, P.O. Box 3410, SYDNEY, NSW 2001 Dear Sir, re: Policy MWN0026643 Account No. 2697640 We write with respect to the above policy and wish to advise that as at the date of writing, we are yet to receive renewal documentation. We advise that due to a downturn in our industry, we estimate our wages for 28th February, 1996 to 28th February, 1997 to be approximately $85,000. Should we win contracts during this period, we shall revise this figure and advise accordingly. Yours faithfully, (sgd) Edward Pearce, Commercial Manager " 14 The policy number MWN0026643 quoted in this letter is the number of the policy issued in 1994 to Fyna 1 and the account number 6297640 is the client or account number of Fyna 1 in the plaintiff's system. The letter is on letterhead of "Fyna Formwork Pty Ltd" and carries the ACN 070 015 682, that is, the ACN of Fyna 2. The address is 53-55 Lakemba Street Belmore. 15 It must be accepted that this was a letter of Fyna 2. As at 6 March 1996, Fyna 2 was, on the evidence, the only company which had the Fyna Formwork name. On that date, Fyna 1's name was Concrete Formwork Pty Limited. Furthermore the ACN on the letter is that of Fyna 2. 16 Various aspects of the letter of 6 March 1996 were the subject of submissions. To my mind, however, its meaning and intent are perfectly clear. The "we" referred to in the letter is not, as Mr McGrath suggested, "the Fyna Group", a concept or construct he did not seek to elaborate. It is, in ordinary commercial terminology, the company by which the letter is written, namely Fyna 2. Just as professional partnerships refer to themselves in formal correspondence by the first person plural pronoun, so too do companies and other organisations. I have on my table as I write a letter from The Australian Institute of Judicial Administration Incorporated ABN 13 063 150 739 referring to "our annual report". This is a quite normal and natural mode of expression by an incorporated body intending to refer to itself. 17 Fyna 2 represented by the letter of 6 March 1996 that it was the insured under policy number MWN0026643 on account number 2697640. By referring in that letter to "renewal documentation" as something "we are yet to receive" (thereby asserting an expectation of receipt), Fyna 2 further represented that it was the party insured under the pre-existing policy, since only that party would logically receive (and expect to receive) "renewal documentation". These representations were false, misleading and deceptive. By sending the letter containing the representations, Fyna 2 intended to cause the plaintiff to extend to it, instead of to Fyna 1, insurance cover under the pre-existing arrangement. This was another step in the process of sliding the commercial identity of Fyna 1 across to Fyna 2. 18 The letter of 6 March 1996 was signed by one Edward Pearce, described as "Commercial Manager". The same signature appears on a declaration (Form E) dated 5 May 1997 submitted to the plaintiff. That declaration, like the letter of 6 March 1996, related to the year beginning 28 February 1996. It was a declaration of the actual wages paid during that year. The declaration was generated in unsigned form by the plaintiff, with certain particulars pre-printed, including the name of the insured ("Fyna Formwork Pty Ltd"), the policy number (MWN0026643 04), the account number (A/2124536 D/2697640) and the ACN (060 214 762). The policy and account numbers refer to the original relationship with Fyna 1. The ACN is that of Fyna 1. The name, however, is that of Fyna 2. A second declaration (Form A) also dated 5 May 1997 and bearing the signature of Pearce was also submitted to the plaintiff. This was a declaration of estimated wages for the year beginning 28 February 1997. A declaration of actual wages (Form E) for that period dated 15 July 1998 signed by Pearce was received by the plaintiff. The pre-printed particulars in each of those forms were the same as those in the form already mentioned. Declarations in Form A and Form E also dated 15 July 1998 were submitted for the next annual period, being the third and final period with which these proceedings are concerned. These too were signed by Pearce and carried the same pre-printed particulars. 19 Also in evidence is further correspondence, being letters to the plaintiff dated 2 July 1997, 5 March 1998, 15 July 1998, 28 October 1998 and 13 June 2000. These mainly concern premium calculation and arrangements for payment of premiums by instalments and refer variously to "our debt to your company", "our estimated wages", "our wages figures" and "our intention to extinguish the debt". Two of these letters are signed by Pearce, one as "Commercial Manager" and the other without any designation of office. Two are signed by Karen Lee "Senior Accountant" and one by Stan Jankovic "Financial Controller". All are on the letterhead of Fyna Formwork Pty Ltd and carry the ACN of Fyna 2, together with reference to the policy number MWN0026643. 20 I have no doubt that all the letters to which I have referred - those of 6 March 1996, 2 July 1997, 5 March 1998, 15 July 1998, 28 October 1998 and 13 June 2000 - were letters of Fyna 2 and that Fyna 2 intended, by means of those letters and the various Forms A and E to which I have referred, to create and consolidate its position as a party to insurance arrangements with the plaintiff in the place of Fyna 1 but in such a way that the plaintiff was not alerted to the fact that it was dealing with a new and different entity. Fyna 2 represented by those documents, moreover, that it paid wages and therefore that it had employees. In relation to the particulars pre-printed on Forms E and A by the plaintiff before issue, it must be inferred that the defendant deliberately refrained from correcting the pre-printed ACN as that would have exposed the transposition of entities it was intent on effecting and wished to hide. 21 The intention of the plaintiff, when it received and dealt with the various letters and forms, was to do business with whichever entity made the relevant representations to it. The particular field of business is not one where insurers can pick and choose. The usual processes of risk assessment as a preliminary to a decision whether or not to accept an insurance risk and to grant insurance cover simply play no part in this field. Under s.157 of the Workers Compensation Act, a licensed insurer must not refuse to issue a policy unless it has gone to the extent of seeking and obtaining the consent of the WorkCover Authority. Nor may it refuse to renew a policy without such consent. 22 It follows that, since the representations in the forms and letters were made to the plaintiff by Fyna 2 with the intention that Fyna 2 should become substituted for Fyna 1 in the pre-existing contractual framework and that the plaintiff must be taken to have intended to contract with whichever company made the representations, there arose, in relation to each of the three periods in question, a contract of insurance between the plaintiff and Fyna 2. This, to my mind, is fully in accord with the theory of contract formation in which the determinative factor is the objective manifestation of mutual intention. That theory is exemplified by the following passage in the judgment of Blackburn J in Smith v Hughes [1871] LR 6 QB 597 said by Mason ACJ, Murphy and Deane JJ in Taylor v Johnson (1983) 151 CLR 422 to represent "the clear trend in decided cases and academic writings": "If, whatever a man's real intention may be, he so conducts himself that a reasonable man would believe that he was assenting to the terms proposed by the other party, and that other party upon that belief enters into the contract with him, the man thus conducting himself would be equally bound as if he had intended to agree to the other party's terms." 23 The present case is analogous with one in which a supplier stands ready to supply all-comers in an open market. Such a supplier pays no attention to the identity of a customer, being concerned only with the factors which are relevant to the structure and terms of the transaction the supplier is prepared to conclude with virtually anyone. The supplier does business with whomever comes forward and fulfils its requirements. Fyna 2 did so in relation to the plaintiff for the years in question. 24 I should digress to deal briefly with the further point that, on the view I take of matters, there was no process of contract formation by the traditional means of offer and acceptance as between the plaintiff and the defendant, Fyna 2. The reality that offer and acceptance, in clearly identifiable form, are not essential ingredients in the creation of a contract is well illustrated by the following passage in the judgment of Wells J in Re The Bank of Adelaide (1979) 22 SASR 481: "Such an analysis [i.e., in terms of offer and acceptance] holds good for many cases but by no means for all. Let it be supposed that A and B meet to discuss their common business interests and jointly decide that they should record their agreement on certain of those matters. It is a common practice for men in such a position to transmit heads of agreement and general instructions to a third person to draft a full agreement along the lines indicated. If, after A and B have read and discussed the draft, they agree, without more, to execute it, it would be absurd to attempt to identify, in the relevant events, a stage where A made a formal offer to B or vice versa. The truth of the matter is that A and B have agreed to adhere to a form of contract brought to their joint attention, and about which they have already held fruitful discussions. To describe what has happened in terms of offer and acceptance would be to superimpose on the true facts a framework of artificiality." 25 In Integrated Computer Services Pty Ltd v Digital Equipment Corp (Aust) Pty Ltd (1998) 5 BPR 11,110, McHugh JA, with whom Hope and Mahoney JJA agreed, noted that "a contract may be inferred from the acts and conduct of the parties as well as or in the absence of their words". McHugh JA continued: "The question in this class of case is whether the conduct of the parties viewed in the light of the surrounding circumstances shows a tacit understanding or agreement. The conduct of the parties, however, must be capable of proving all the essential elements of an express contract: cf Baltimore and Ohio RR Co v US 261 US 592 (1923); Fincke v US 675 F 2d 289 (1982). Care must also be taken not to infer anterior promises from conduct which represents no more than an adjustment of their relationship in the light of changing circumstances." 26 To the same general effect are recent statements by McMurdo P in Groves v BMW Australia Finance Pty Ltd [2001] QCA 16 that "whether parties have entered into contracts and, if so, on what terms must be determined objectively"; and by Einfeld J in SVI Systems Pty Ltd v Divergent Technologies Pty Ltd [2001] FCA 279 that "a contract or its terms may be inferred from the conduct of the parties in certain factual circumstances". 27 Implicit in the conclusion I have reached as to contract formation is acceptance that the signatures on the various documents, being those of Pearce, Lee and Jankovic, were sufficient to bind Fyna 2 to contractual representations and contractual commitments. Those documents were all signed as part of a course of dealing in which correspondence was sent by the plaintiff to "Fyna Formwork Pty Ltd" at the Belmore address. Letters came to the plaintiff ostensibly from that address on a formal letterhead of Fyna 2 carrying its name and ACN and apparently signed by persons with the titles "Commercial Manager", "Senior Accountant" and "Financial Controller". Fyna 2, as defendant, did not produce any evidence to put in issue the holding by the signatories of those positions within Fyna 2 or their authority to act for Fyna 2. Nor did Fyna 2, as defendant, submit that the persons concerned were not employed by it in the positions stated. It was content merely to make a blanket submission, unsupported by evidence, that none of those persons had actual or ostensible authority of Fyna 2 to act as they did. In the absence of any evidence from the party said to be their employer calling in question the capacity and authority of the signatories, I am prepared to accept the various documents as signed on behalf of Fyna 2. But in any event and as I have said, fifteen claim forms (or employer's report of injury forms) were lodged with the plaintiff after 23 June 1995, each referring to the employer as "Fyna Formwork", "Fyna Formwork Pty Ltd" or "Fyna Formwork P/L". On the evidence, that name was, at all such times, the name of Fyna 2 and, since no reason has been advanced as to why any other entity would submit claims in that name, I accept that Fyna 2 intended to claim, and did claim, in respect of injuries to its employees, thus affirming the contracts of insurance to which the various letters and the Forms E and A related. 28 I hold that the contract of insurance entered into by the plaintiff as insurer in respect of each of the years in question (being the years beginning 28 February 1996, 28 February 1997 and 28 February 1998) under policy number MWN002664301 and client number 2697640 was a contract with Fyna Formwork Pty Ltd ACN 070 015 682, the defendant in these proceedings. 29 Although this makes it unnecessary to consider the estoppel argument advanced by the plaintiff, I shall do so briefly, basing myself on the well-known statement by Brennan J in Waltons Stores (Interstate) Ltd v Maher (1988) 164 CLR 387: "In my opinion, to establish an equitable estoppel, it is necessary for a plaintiff to prove that (1) the plaintiff assumed that a particular legal relationship then existed between the plaintiff and the defendant or expected that a particular legal relationship would exist between them and, in the latter case, that the defendant would not be free to withdraw from the expected legal relationship; (2) the defendant has induced the plaintiff to adopt the assumption or expectation; (3) the plaintiff acts or abstains from acting in reliance on the assumption or expectation; (4) the defendant knew or intended him to do so; (5) the plaintiff's action or inaction will occasion detriment if the assumption or expectation is not fulfilled; and (6) the defendant has failed to act to avoid that detriment whether by fulfilling the assumption or expectation or otherwise." 30 Applying these criteria in the present case, it seems to me that, as to (1), the plaintiff assumed, in relation to the periods in question, that the relevant legal relationship existed between it and the entity which represented itself by the letter of 6 March 1996 and the subsequent documents to be "Fyna Formwork Pty Ltd", that entity being, on the findings I have already made, Fyna 2. 31 Moving to element (2), it is clear, on the findings I have made, that Fyna 2, by the various documents to which I have referred, induced the plaintiff to adopt that assumption. Element (3) is satisfied because the plaintiff has accepted and paid out on the fifteen claims which, on my findings, were submitted by Fyna 2. As for element (4), my finding that Fyna 2 intended to get for itself the contractual position as against the plaintiff which had originally been secured and occupied by Fyna 1 is an intention sufficient to satisfy this element. 32 Element (5) raises the question of detriment to the plaintiff if the assumption induced by the defendant is not fulfilled. That detriment is clear enough. If the plaintiff cannot look to Fyna 2 for the unpaid premiums, it will have no means at all of pursuing them, Fyna 1 now being non-existent, thanks to action taken by one or more of its officers under s.601AA of the Corporations Law. Element (6) is also satisfied because Fyna 2 has failed to act to avoid the non-payment detriment to the plaintiff, having refused to pay the outstanding premiums. 33 The defendant is accordingly estopped from denying the existence of the contracts of insurance which I have, in any event, found to have existed. In view of these findings on contract and estoppel, I will not pause to consider the plaintiff's further alternative claim based on s.52 of the Trade Practices Act, although I do note that I have already described certain representations of the defendant as false, misleading and deceptive. 34 I turn now to a matter raised in the defendant's amended defence in the following terms: "16. The Defendant says that by reason of the Plaintiff's contribution to the failure on the part of the Authority to determine the Defendant's application for a determination as to the premium to be charged, the Plaintiff is estopped from pursuing the causes of action pleaded in the Amended Statement of Claim."

Allianz v Fyna

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