GIO WORKERS COMPENSATION (NSW) LTD v RIGBY JONES PTY

The first appellant sued to recover $135,497.33 being interest pursuant to s172 of the 1987 Act up to 31 October 1996. The respondent filed cross claims claiming interest at court rates on an overpayment of workers compensation premiums for policy years 1987-88, 1985-86 and 1986-87. The trial Judge entered a verdict for the respondent on the appellants claim, a verdict for the respondent of $244.24 on its first cross claim and a verdict for the respondent of $153,698.72 on its second cross claim.

Appeal The issue on the first appellants appeal was whether the first appellant was entitled to interest on the amounts of the premium the respondent had not paid until December 1995. The respondent cross appealed against the verdict of on the first cross claim as inadequate. The second appellant appealed against the verdict against it for $153,698.72.

Held |. The trial Judge erred in holding that s172(4) of the 1987 Act denied the insurer the right to recover interest on unpaid premiums whilst there was an outstanding application to the WorkCover Authority of New South Wales (the Authority) pursuant to s170.

2. Prior to the insertion of s172(4), the insurer was not able to recover interest until any application to the Authority to determine the premium had been dealt with: GIO v Nationwide Rubber Enterprises 25 July 1998, New South Wales Supreme Court, Giles J (unreported). $172(4) therefore allows the insurer to recover the premium and interest as a debt in accordance with s172(1). The fact that s170(4) does not mention interest does not detract from this finding.

3. The trial Judge erred in holding that the first appellant would have been estopped from seeking to recover interest. S172(2) of the 1987 Act provided that payment of interest under that section might only be waived by the insurer concerned with the approval of the Authority. There was nothing in the evidence to support a finding of promissory estoppel.

4. With respect to the appeal on the first cross claim, there was nothing to suggest the overpaid premiums were anything but voluntary: David Securities Pty Ltd v Commonwealth Bank of Australia (1992) 175 CLR 353. For the reasons outlined in paraS below there was no debt due to the employer with respect to the overpaid premiums.

5. With respect to the appeal on the second cross claim, there was no evidence of operative mistake in the payment of the premiums. Prior to the operation of s172(4), until an application for determination was made under s170 the premiums were undoubtedly

payable. After the operation of s172(4) the amounts remained payable even though an application for determination had been made. There was no debt due to the employer until the Authority had made a determination that the premium paid was greater than actual premium. Authorities David Securities Pty Ltd v Commonwealth Bank of Australia Employers Mutual Indemnity (Workers Compensation) Ltd v A Donald Pty Ltd (unreported) Court of Appeal 23 October 1997 GIO v Nationwide Rubber Enterprises (unreported) 25 July 1998, New South Wales Supreme Court, Giles J The Commonwealth v SCI Operations Pty Ltd (1998) 72 ALJR 687

Since at least 1983 the respondent, Rigby Jones Pty Ltd, has carried on an engineering business in New South Wales. From 30 June 1983 the respondent obtained from the first appellant, GIO Workers Compensation (NSW) Ltd, or its predecessors, which included the second appellant, GIO General Insurance Ltd, an employers liability policy in conformity with the Workers Compensation Act 1926. The respondent renewed the policy from time to time and completed renewal wage declarations for the policy years 30 June 1989 to 30 June 1990 and 30 June 1991 to 30 June 1995 inclusive (the policy years).

On 30 June 1987 the Workers Compensation Act 1987 (the 1987 Act) came into force. It has since been amended many times. The sections quoted are in the form material to this judgment. The amendment of s172 I will deal with separately. The WorkCover Authority of New South Wales (the Authority) was constituted by the WorkCover Administration Act 1989 which came into force on 1 January 1990. The Authority replaced the Workers Compensation and Rehabilitation Authority of New South Wales which had been constituted in 1988 to replace the State Compensation Board.

$169(1) of the 1987 Act provided that the premium payable by an employer for a policy of insurance to which an insurance premiums order applied should be calculated in the manner fixed by the order. The respondent's policy was such a policy. Calculations of premiums for the policy years were made pursuant to the subsection.

The premiums were described either as deposit or estimated premiums, calculated at the beginning of each policy year, and adjustment premiums, calculated at the end of each policy year to take account, inter alia, of the actual wages paid and the cost of claims during that policy year. The adjustment premium was the amount by which the actual premium exceeded the estimated premium. From time to time, the first appellant by letter to the respondent required payment of the adjustment premium or the deposit premium in respect of the policy years. Ultimately, by a letter to the respondent dated 12 December 1995 the first appellant required payment of the sum of $303,077.88 representing:

(a) $246,911.46 for deposit and adjustment premiums for the policy years; and

(b) $56,166.42 for interest calculated to 30 November 1995 pursuant to s172 of the 1987 Act.

\RO WORKERS COMPENSATION (NSW) LTD v RIGBY JONES PTY LTD (Sheller JAB

On 15 December 1995 the respondent paid $246,911.46 representing outstanding deposit and adjustment premiums but did not pay the balance representing interest.

S170 (1) of the 1987 Act provided that if an employer claimed that an insurer had, in demanding a premium (or any part of a premium) for the issue of a policy of insurance to the employer or for the renewal of such a policy, breached an insurance premiums order, the employer might apply to the Authority for a determination as to the premium to be charged for the issue or renewal of the policy. The respondent made applications from time to time in respect of all the premiums calculated for the policy years.

$170(3) provided, relevantly, when any such application was made, that the Authority:

(i) the policy is not a policy to which the insurance premiums order applies; or

(ii) the Authority is of the opinion that the premium to which the application relates is payable by the employer in accordance with the insurance premiums order,

or shall, in any other case, determine in respect of the issue or renewal of the policy a premium which is payable by the employer in accordance with the insurance premiums order;"

S170(4) provided that where the Authority made a determination and the employer had already paid to the insurer the premium to which the application related, the employer might recover from the insurer in a court of competent jurisdiction "as a debt due to the employer, so much of the premium paid as exceeds the premium determined by the Authority." To date the Authority has neither dismissed the respondent's applications nor made any other determination of the premium payable for the policy years.

When the 1987 Act came first into force, s172, which was headed "Recovery of unpaid premiums", provided as follows:

(a) an employer has not elected under s171 to pay a premium by instalments and fails to pay the full amount of the premium within 1 month after service on the employer of a notice that payment of the premium is due;

(b) an employer who has elected under s171 to pay a premium by instalments fails to pay an instalment by the due date; or

(c) an employer has failed to pay an adjustment of premium within | month after service on the employer of a notice that payment of the amount of the adjustment is due;

the full amount of the premium (in the case referred to in para(a)), the balance of the premium unpaid or, where no instalment has been paid, the full amount of the premium (in the case referred to in para(b)) or the amount of the adjustment (in the case referred to in para(c)) bears interest until payment at the rate of 15 per cent per annum compounded quarterly (or, where some other rate of interest is prescribed, that other rate) and is recoverable with interest as a debt in a court of competent jurisdiction.

(2) The payment of interest under this section may be waived by the insurer concerned, but only with the approval of the [State Compensation] Board.

(3) In proceedings under this section for the recovery of any unpaid premium with interest, the court may, if satisfied that a notice for payment was delayed because of delay of the employer in providing returns to the insurer, for the purpose of assessing the premiums, treat the notice as having been served on an earlier date."

On 25 July 1988 in Government Insurance Office of New South Wales v Nationwide Rubber Enterprises Pty Ltd (unreported), Giles J held that, if an employer had applied for a determination under s170, the premium, which was the subject of the application, was not payable until the application had been dealt with by dismissal or determination. The insurer could not sue to recover the balance of the premium calculated in accordance with s169(1) after the expiry of the policy year because until dismissal or determination the amount of the premium was not known.

The Workers Compensation (Benefits) Amendment Act 1989 amended s172 by inserting subs(4) which was as follows:

"(4) The making of an application to the Authority under s170 (determination of premium to be charged) does not affect the entitlement of an insurer under this section to recover the premium (or part of premium) concerned except to the extent that:

(a) the Authority otherwise directs in a particular case; or (b) the regulations otherwise provide."

(i) in 1990, by omitting the words "bears interest until payment" and inserting instead the words "together with interest calculated" and by omitting the words "and is recoverable with interest" and inserting instead the words "and may be recovered" in subs(1),

(ii) in 1991, by omitting the rate of interest of "15 per cent per annum compounded quarterly" and inserting instead "1.2% per month compounded monthly" in subs(1) and,

(iii) in 1994, by adding subs(5) which was as follows:

"(5) If the rate of interest under this section changes (whether by an amendment to this section or by a regulation under this section), the new rate applies to an unpaid premium for a policy of insurance whether issued or renewed before or after the change, but only in respect of any period after the change when the premium remains unpaid."

FIRST APPELLANT'S CLAIM AND RESPONDENT'S CROSS-CLAIMS

By a statement of liquidated claim, which in its amended form was filed in the District Court on 24 December 1996, the first appellant sued to recover $135,497.33 being interest pursuant to s172 of the 1987 Act up to 31 October 1996 calculated by reference to unpaid premiums from October 1990.

The respondent filed, (i) a defence, (ii) a further amended first cross-claim (the first cross-claim) claiming interest at Court rates from the first appellant on an overpayment of workers compensation premium for the 1987-88 policy year from the date of payment to the date of refund in an amount of $20,537.46, and (iii) an amended second cross-claim (the second cross-claim) claiming interest at Court rates from the first appellant and the second appellant, GIO General Insurance Ltd, which was apparently the first appellant's predecessor, on overpayments of workers compensation premiums for the 1985-86 and 1986-87

policy years from the date of payment to the dates of refund in an amount of $126,126.03.

\RO WORKERS COMPENSATION (NSW) LTD v RIGBY JONES PTY LTD (Sheller JAB

The proceedings were heard by Gibb ADCJ in the District Court on 16, 17 and 24 June 1997. In her reasons for judgment delivered on 19 September 1997 her Honour entered a verdict for the respondent on the first appellant's claim, a verdict on the respondent's first cross-claim for the sum of $244.24 against the first appellant and on the respondent's second cross-claim for the sum of $153,698.72 apparently against the second appellant.

The appellants appealed against the verdicts on the first appellant's claim and on the second cross-claim. The respondent cross appealed against the amount of the verdict against the first appellant on the first cross-claim.

On the first appellant's appeal against the verdict against it on its claim, the issue was whether the first appellant was entitled to interest on the amounts of premium the respondent had not paid until December 1995. Acting Judge Gibb was not satisfied that the premiums demanded had been calculated accurately and did not accept that they might be presumed to be so. She said:

"As at the date of this judgment there is nothing to suggest that the premiums have been calculated correctly and the premiums for each policy year in issue are the subject of applications to the WorkCover Authority for re-determination under the Workers Compensation Act 1987. The defendant therefore cannot be said to have accepted that the plaintiffs determinations are final or otherwise to have acquiesced in the accuracy of the calculations.

The lack of certainty as to the plaintiff's calculation [of] the premiums is no impediment to the plaintiff's right to recover those premiums under s172(4) of the Workers Compensation Act 1987. But absent a presumption [of] validity (which I find there is not) or evidence of compliance that the statutory formulae (which there is not) I do not accept that the premiums have been calculated correctly.

The lack of proof of the accuracy of the calculation of the premiums similarly affects the proof of the calculation of the interest that the plaintiff claims. I note in this respect that the person Ms Hunt (the first appellant's Local Government Business Manager) said had undertaken the interest calculations did not give evidence. Ms Hunt had not confirmed that [sic] accuracy of those calculations and was unable to say whether they were correct. That would not defeat the plaintiff's claim if the insurer has a statutory right to recover interest as well as premium after an application for re-determination of the premium."

Her Honour's conclusion that there was a lack of certainty about the premium, which impeded the first appellant's right to recover, is contrary to the decision of this Court in Employers Mutual Indemnity (Workers Compensation) Ltd v A Donald Pty Ltd (unreported) 23 October 1997. In that case, the insurer sought to recover in the District Court a workers compensation policy premium calculated under the 1987 Act. The trial Judge upheld the defendant's contention that the premium so calculated was inappropriate and awarded a lesser amount. The issue on appeal was whether the District Court had jurisdiction to go behind the calculation of a premium in accordance with the 1987 Act. Cole JA, with whom Priestley and Stein JJA agreed, said:

"The provisions of the [1987] Act and regulations to which I have referred make plain, to my mind, that the legislature intended to and has established a regime whereby the quantum of an insurance premium is to be determined in the first instance by the insurer in accordance with an insurance premiums order pursuant to s169. If the employer is dissatisfied with the premium so calculated

and sought by the insurer, the employer's rights are to apply pursuant to s170, and in accordance with the regulation, to the Authority to determine the correct premium. If the premium as determined by the insurer is not so queried or challenged, or if after challenge the premium is determined by the Authority, that is the premium which the employer must pay. It is that premium which is recoverable pursuant to s172 by the insurer, or if there be an overpayment resulting from a redetermination by the Authority, recoverable by the employer pursuant to s170 (4). Whilst it may be possible, perhaps, to challenge by way of administrative review an asserted error of statutory application of the formula (a matter which it is unnecessary to decide), the legislature has, in my view, made clear that any factual determination in application of the statutory formula for premium determination is not a matter for review within the courts but is to be determined by the Authority.......

It follows, in my view that the District Court did not have jurisdiction to determine what was a proper premium payable in respect of the policy for which EMI sued."

Judge Gibb accepted the respondent's submission that the legislature's failure to refer to interest in s172(4), given the ample reference to interest in other subsections of that section, indicated a deliberate intention to deny the insurer the right to recover interest on unpaid premiums whilst there was an outstanding application to the Authority for the determination of premiums pursuant to s170. For that reason her Honour held that the first appellant's claim for interest failed.

With the greatest respect I do not think s172(4) can be so construed. The insurer's entitlement to recover the premium together with interest calculated at a prescribed rate, as a debt, was provided for in s172(1). Obviously a high rate of interest compounded monthly was prescribed to encourage prompt payment. Before subs(4) was inserted in 1989 the insurer could not avail itself of this entitlement so long as an application under s170 to the Authority to determine the premium had not been dealt with; GIO v Nationwide Rubber Enterprises.

Subs(4) was inserted to remove this constraint by providing that the making of an application to the Authority under s170 did not affect the entitlement of the insurer under s172 to recover the premium or part of premium concerned. This entitlement was subject to expressed exceptions which were not relevant in the present case. In my opinion, the words in subs(4) "under this section to recover the premium (or part of premium) concerned" were a necessary but shorthand way of describing the entitlement under the section and were not intended to limit that entitlement to principal without interest in the case where subs(4) applied. Such an intention is not to be derived from the use of the phrases "together with interest calculated" or "premium with interest" in subs(1) and subs(3). Subs(1) was directed to the rate of interest recoverable. The debt would otherwise have carried interest at Court rates. In my opinion, the legislature should not be taken to have intended, for reason that the employer had made an application for determination under s170, to limit the entitlement of the insurer under the section to the payment of principal, so that the employer would, contrary to the obvious purpose of subs(1), benefit from delay in paying the premium, which the Act obliged it to pay.

The fact that s170(4) did not mention interest did not advance the respondent's argument. Before the Authority made a determination pursuant to s170(3), the insurer was entitled to demand and recover as a debt the premium calculated in accordance with s169(1); s172(1). That entitlement continued until there was a determination which changed the premium. There was no reason why,

\RO WORKERS COMPENSATION (NSW) LTD v RIGBY JONES PTY LTD (Sheller JAY

consistently with the intention of the legislation, the debt should not have carried interest if it was not paid. S172(1) prescribed the rate of interest. The determination pursuant to s170(3) created a debt due to the employer in the amount of any overpayment; s170(4). The debt to the employer referred to in s170(4) came into existence when the determination was made. Before that there was no debt to the employer to carry interest.

In The Commonwealth v SCI Operations Pty Ltd (1998) 72 ALJR 687 the respondent had between 1 September 1987 and 3 June 1994 paid on certain goods customs duty properly assessed under a customs tariff. On 3 June 1994 a commercial tariff concession order (CTCO) declared retrospectively that the duty was lower, or that the goods concerned were free of duty. The duty overpaid was refunded. The respondents claimed interest on the duty overpaid from 1 September 1987 to the date of refund. At 690 Brennan CJ said:

In my view it is unnecessary to decide whether the claims which SCI and ACI were respectively entitled to make for the refund of the duty paid are to be classified as causes of action for the recovery of money payable under the Act or as an entitlement to a public law remedy compelling the making of a refund. Whatever be the nature of the relief to which SCI and ACI were respectively entitled, neither was entitled to a refund prior to the making of the CTCO. The effect of s269N(3) was not to deem SCI and ACI to have been entitled to a refund at the moment when duty had been paid. The effect of s269N was to deem the duty paid to have been not payable but an entitlement to a refund of that duty arose only at the time when s269N was engaged and by reason of the engagement of s269N and s163, that is, when the CTCO was made on 3 June 1994.

It follows that, if a cause of action arose on the making of the CTCO, it arose on the same date as the date on which the money paid as duty was refunded."

In the present case, the respondent's entitlement to a refund depended upon a determination of the premium by the Authority. The respondent then became entitled, pursuant to s170(4), to recover the overpayment "as a debt due to the employer" and, although it is not mentioned, I would have thought, interest, at Court not special rates, on that debt from the date it became due, namely the date of determination.

In my opinion, s172(4) enabled the first appellant to recover the unpaid premium and interest thereon as a debt in accordance with s172(1). Her Honour said that if she had construed s172(4) as allowing the first appellant to recover interest on the unpaid premium she would have been satisfied that the first appellant was estopped from seeking to do so before the applications for determination were resolved. It is not clear to me from her Honour's judgment what the basis for this conclusion was. Her Honour found that the first appellant regularly asserted a right to interest and gave as an example a notice of demand for payment of the 1989/90 adjustment premium in which the first appellant stated that:

"Tf any of the instalments are not received by our offices by the due date they will be subject to interest calculated at the rate of 15 per cent compounded quarterly."

The decisive matter in her Honour's mind appears to have been that "the plaintiff took no action to recover the premium or interest until 8 November 1995 when the plaintiff's solicitors formally demanded payment of the premiums outstanding and interest within seven (7) days."

S172(2) of the 1987 Act provided that the payment of interest under that section might be waived by the insurer concerned ''but only with the approval of the Authority." With the greatest respect, her Honour's decision effectively by-passed the operation of this subsection. There was no suggestion that the Authority had ever given such approval.

Before us Mr Grieve QC, who appeared for the respondent, submitted that there was a promissory estoppel but was unable to refer to any part of the evidence to support a finding that the first appellant ever made a promise or representation that interest would not be payable or that the respondent relied upon such a promise or suffered any detriment.

In my opinion, the first appellant's appeal against the judgment for the respondent on the statement of liquidated claim should be allowed, the orders set aside and judgment entered for the first appellant in the sum of $137,497.33 together with interest thereon in accordance with s172(1) of the Act from 30 November 1996 to 19 September 1997. Because it was not argued, I would reserve for the District Court any question about whether the rate of interest under s172(1) applies from judgment; compare Fruehauf Finance Corporation Pty Ltd v Zurich Australian Insurance Ltd (1993) 32 NSWLR 735 at 742-3.

The first appellant did not challenge the verdict on the first cross-claim. The respondent cross-appealed against the amount of the verdict as inadequate. The amount, $244.24, represented interest from the date of determination of the premium for the year 1987-88 to the date of refund of the overpayment. The premium was paid on 31 October 1988. The overpaid premium was repaid on 11 October 1995. The respondent claimed judgment in the amount of $24,352.28, which was the interest at Court rates on the overpayment from 31 October 1988 to 24 November 1995. This discrepancy in dates was not explained. It was submitted that the original payment was made under a mistake of law at a time before s172(4) of the Act came into force on 1 October 1989 and after the decision of Giles J in GIO v Nationwide Rubber Enterprises on 25 July 1988.

In its submissions, the respondent accepted that there was no evidence that the payment was made under a mistaken belief. The trial Judge inferred that Mr Ingate, who gave evidence, must have known of the decision of Giles J which was published before the payment was made. Mr Ingate, who was the respondent's corporate manager, said he was a solicitor and responsible for workers compensation matters.

In my opinion, the respondent was not entitled to interest on the overpayment between the date when the premium was paid and the date of determination. However, leaving that aside, I would not interfere with her Honour's findings of fact. There was nothing to suggest that the payment was other than a voluntary payment, in the sense that the respondent knew all the relevant circumstances and yet chose to pay the first appellant rather than withhold payment; compare David Securities Pty Ltd v Commonwealth Bank of Australia (1992) 175 CLR 353 at 371. In my opinion, the cross-appeal should be dismissed.

The second appellant's appeal relates to overpayments to it of premiums on 31 October 1986 for the 1985-86 year and on 31 October 1987 for the 1986-87 year. On 24 April 1989 applications for determinations under s170(1) of the 1987 Act

UBIO WORKERS COMPENSATION (NSW) LTD v RIGBY JONES PTY LTD (Powell JA) 9

were made in respect of both. Judge Gibb found that the payments had been made under an operative mistake, namely, the mistaken belief that before the enactment of s172(4) the insurer was entitled to recover premiums in circumstances where those premiums were the subject of s170 applications for determination.

There was no evidence of any operative mistake. Furthermore, until the application for determination was made under s170, in one case two and a half years and in the other case one and a half years after payment of the premiums, the premiums were undoubtedly payable. There was nothing in the decision of Giles J to suggest otherwise. Once the premiums had been paid there was no mechanism by which any overpayment could be recovered until there was a determination.

Before s172(4) came into force, if the premiums had not been paid, the applications for determination under s170(1) would have made the premium irrecoverable, for the reasons Giles J gave, until the Authority dismissed the applications or determined the premium. When s172(4) came into force on 1 October 1989, the amounts remained payable, even though an application for determination had been made. Until a determination was made the amount of the premium calculated by the insurer under s169(1) was a debt the insurer was entitled to recover with interest under s172(1). From the time when the Authority determined the premiums to be less than the premiums paid, the employer was entitled to recover the excess as a debt. While it may be right that from the date of such a determination, interest ran according to ordinary principles on the amount of the excess, there was no debt due to the employer on which interest could run before that date.

For these reasons, in my opinion, the second appellant's appeal against the judgment on the second cross-claim should be allowed and an order made dismissing the cross-claim with costs.

3.Set aside the orders and judgment made by her Honour Acting Judge Gibb on the amended statement of liquidated claim and the second cross-claim and in lieu thereof order:

(i) judgment in favour of the plaintiff, GIO Workers Compensation (NSW) Ltd, in the amount of $137,497.33 together with interest thereon in accordance with s172(1) of the Act from 30 November 1996 to 19 September 1997;

(iv) liberty to the plaintiff if so advised to apply in the District Court within twenty-one (21) days for interest in accordance with s172

4. The respondent to pay the appellants' costs of this appeal but to have a certificate under the Suitors Fund Act 1951 if so entitled.

3. Set aside the orders and judgment made by her Honour Acting Judge Gibb on the amended statement of liquidated claim and the second cross-claim and in lieu thereof order:

(i) judgment in favour of the plaintiff, GIO Workers Compensation (NSW) Ltd, in the amount of $137,497.33 together with interest thereon in accordance with s172(1) of the Act from 30 November 1996 to 19 September 1997;

(iv) liberty to the plaintiff if so advised to apply in the District Court within twenty-one (21) days for interest in accordance with s172(1) of the Act on the judgment.

10 4. The respondent to pay the appellants' costs of this appeal but to have a certificate under the Suitors Fund Act 1951 if so entitled.

Counsel for the appellant: S D Rares SC/J B Simpkins

Counsel for the respondent: D E Grieve QC/J B Turnbull