HIS HONOUR: On 11 June 2007 Jason Mannall ("Mannall"), a member of the NSW Police Force ("the Police Force") was injured in the course of his employment when a motor vehicle owned by his employer, in which he was travelling and which was being driven by another police officer, was involved in an accident. The accident was caused by the negligence of the driver.
The plaintiff ("QBE") was the insurer of the vehicle under a policy issued by it in the form prescribed by the Motor Accidents Compensation Act 1999 (NSW).
Mannall lodged a damages claim against the Police Force and the driver. QBE granted indemnity under the policy to the Police Force and on 3 August 2010 Mannall and QBE entered into a written settlement agreement under which QBE paid him the sum of $1,175,000. It is not in dispute that the settlement sum was reasonable.
Section 9(1) of the Workers Compensation Act 1987 (NSW) provides that a worker who has received an injury shall receive compensation from the worker's employer in accordance with the Act. Mannall was entitled to receive such compensation from his employer in respect of his injury.
Section 3(5) of the Workers Compensation Act provides:
The Crown shall, for the purposes of this Act, be treated as the employer of members of the Police Force.
The Crown was thus the employer of Mannall.
Part 7 of the Workers Compensation Act is entitled "Insurance". It requires an employer, other than a self-insurer, to obtain from a licensed insurer and maintain in force a policy of insurance for the full amount of the employer's liability under the Act in respect of all workers employed by the employer and for an unlimited amount in respect of the employer's liability independently of the Act for any injury to any such worker.
Section 3(1) defines self-insurer relevantly to mean any Government employer covered for the time being by the Government's managed fund scheme (as provided by s 211B).
Section 211B provides:
(1) Any Government employer covered for the time being by the Government's managed fund scheme is taken to be a self-insurer for the purposes of this Act.
(2) The Government's managed fund scheme is any arrangement under which the self-insurer liabilities (within the meaning of section 216) of particular Government employers covered by the arrangement are paid by the Government of the State or by the Self Insurance Corporation on its behalf.
(3) The Self Insurance Corporation may enter into an arrangement with the Authority under which the Corporation acts on behalf of Government employers for the purpose of paying contributions under this Act and for other purposes of this Act.
(4) The other provisions of this Division do not apply to self-insurers referred to in this section. However, the Authority may, with the approval of the Treasurer, impose conditions on the authority conferred by this section on such self-insurers (being conditions of a kind that the authority could impose on the licence of a self-insurer under this Division).
(5) This section does not apply to any Government employers who are separately licensed under this Division as self-insurers.
At this point it is apt to observe that the Police Force does not have separate corporate existence. It is established by s 4 of the Police Act 1990 (NSW) which provides that:
The NSW Police Force is established by this Act.
By s 212 of the Police Act, the Act binds the Crown in right of New South Wales and, in so far as the legislative power of Parliament permits, the Crown in all its other capacities.
No provision of the Police Act gives the Police Force corporate existence. The Police Force is no more than a structure within an emanation of the Crown.
The defendant is established by s 4 of the NSW Self Insurance Corporation Act 2004 (NSW) which provides:
(1) There is constituted by this Act a corporation with the corporate name of NSW Self Insurance Corporation.
(2) The Self Insurance Corporation is, for the purposes of any Act, a statutory body representing the Crown.
At the material time, s 3 of the NSW Self Insurance Corporation Act provided relevantly that:
Government managed fund scheme means an arrangement under which workers compensation, motor vehicle accident, public and other liabilities of the State or an authority of the State:
(a) are managed as a self insurance scheme (including the collection of contributions from the State or an authority of the State towards the cost of claims), and
(b) are paid, or otherwise settled, by the State or by the Self Insurance Corporation on behalf of the State or an authority of the State.
Section 8 provided relevantly that:
(1) The Self Insurance Corporation has the following functions with respect to Government managed fund schemes:
(a) to operate one or more Government managed fund schemes (including the function of establishing, reorganising, amalgamating, dividing or winding up such schemes),
(b) to enter into agreements or arrangements with other persons to provide services (as agents or otherwise) in relation to the operation of any Government managed fund scheme,
(c) to enter into insurance or other agreements or arrangements to cover the liabilities to which a Government managed fund scheme applies,
(d) to act for the State or an authority of the State in dealing with claims under a Government managed fund scheme (including the recovery of amounts payable to the State or an authority of the State in connection with such claims).
Section 11 provided relevantly that:
(1) There is to be established in the Special Deposits Account a Self Insurance Fund (the Fund) into which is to be paid:
(a) all money received by the Self Insurance Corporation as contributions from the State or an authority of the State towards the cost of claims, and
(b) all money recovered by the Self Insurance Corporation from insurers, third parties or other persons in connection with claims to which a Government managed fund scheme applies, and
(c) all money advanced to the Self Insurance Corporation by the Minister or appropriated by Parliament for the purposes of the Self Insurance Corporation, and
(d) all money directed or authorised to be paid into the Fund by or under this or any other Act, and
(e) the proceeds of the investment of money in the Fund, and
(f) all money received by the Self Insurance Corporation from any other source.
(2) The Fund is to be applied for the purpose of enabling the Self Insurance Corporation to exercise its functions, including but not limited to the following:
(a) payment of claims to which a Government managed fund scheme applies,
(b) payment of Government managed fund scheme administration expenses,
(c) payment of the costs (including disbursements) of risk management, actuarial and legal services provided in connection with Government managed fund schemes,
(d) payments to provide incentives to authorities of the State to enhance the management of liabilities,
(e) payment of contributions by the Self Insurance Corporation made in accordance with an arrangement entered into under section 211B (3) of the Workers Compensation Act 1987,
(3) All expenditure incurred by the Self Insurance Corporation is to be paid from the Fund.
Before 1989 the NSW Government owned and operated the Government Insurance Office ("GIO") which managed claims made against NSW Government agencies in respect of workers compensation and motor vehicle accidents.
In 1988 a decision was made by the Treasury to vary the scheme to manage the claims itself. According to Mr Peter English, the defendant's "manager of contract performance", this lead to the creation of the Treasury Managed Fund (or TMF), which came into operation on 1 July 1989. Mr English describes it as an indemnity scheme which provides security in relation to the liability risks of "budget dependant agencies of the NSW Government".
The definition of Government managed fund scheme requires there to be "an arrangement". QBE called on the defendant to produce the instrument embodying the arrangement described as the TMF. The proceedings were adjourned to permit time for it to be produced. Surprising as it may sound, the only document produced is the one referred to below, the legal status of which is unclear and which may be no more than advertising material. However, the parties proceeded on the footing that it embodies an arrangement and I will proceed on the basis that the TMF is a Government managed fund scheme referred to in s 8(1) of the NSW Self Insurance Corporation Act and the Government management fund scheme referred to in s 211B(2) of the Workers Compensation Act. I will refer to the document as "the instrument" although this may not be an apt description.
The instrument was apparently published by GIO General Ltd (perhaps on behalf of the NSW Government) and is entitled:
Treasury Managed Fund
Scheme Structure
incorporating the TMF Contract of Coverage March 2004
The following are extracts of passages under the headings shown:
Introduction
On 1 July 1989 the NSW Government implemented an indemnity scheme covering all the insurable risks of the participating government agencies. The scheme is known as the Treasury Managed Fund (TMF).
The structure of the Fund was independently reviewed in 1995 following significant increases in the costs of claims, particularly workers' compensation. The review clearly indicated that self-insurance in the form of a managed fund remained the preferred option for enabling participating agencies to manage their risks. The review also reinforced the principle of active adoption of risk management practices by agencies in order to control costs.
Several important new initiatives were implemented as a result of the 1995 review. It was acknowledged that it is important to maintain the TMF as an equitable fund that recognises good performance. Benchmark premiums and hindsight adjustments were introduced to ensure that good performers are rewarded.
The TMF has been a leader in the evolution of public sector pools for "insurable" risks. This is due in no small part to the close cooperation that has been built over the years between key participants. These key participants are:
the NSW Treasury, which oversees the operation of the TMF and sets the policies;
the TMF Advisory Board, a body that is representative of the broad spectrum of the TMF's membership;
participating NSW Government agencies (responsible for managing their operations so as to minimise costs); and
the Fund Manager, to which the Treasury has outsourced the management of the services provided to agencies, particularly in the areas of claims management and risk management.
It is important to understand the relationship between agencies and the TMF. The TMF provides indemnity under its Contract of Coverage and, through the Fund Manager, a set of defined services that are intended to assist and support agencies in managing risks. However, these risks remain the ultimate responsibility of participating agencies' senior management.
NSW Treasury
The Treasurer is the minister responsible for the Insurance Ministerial Corporation, the legal entity behind the TMF.
Scope of Cover
The TMF provides unlimited cover in respect of five classes of insurable risks worldwide:
workers' compensation as per NSW statute;
comprehensive motor vehicle;
property (full replacement, new for old, including consequential loss);
liability, including but not limited to public liability, products liability, professional indemnity, directors/officers liability and medical malpractice; and
miscellaneous, notably personal accident and protection for overseas travellers.
The instrument contains, as a separate section, the following:
TMF
Treasure Managed Fund
Revised Tuesday, 16 March 2004
NSW Treasury Managed Fund (TMF)
Managed by:
GIO General Ltd
ABN 22 002 861 583
Contract of Coverage
This privileged protection equals accountability.
NSW Treasury Managed Fund (Risk Management and Self Insurance Arrangements)
* Paramount Premise: Fundamental to every element of the managed fund concept is the active adoption of risk management practices by each participating entity.
A. Protected Entities: The NSW Government, being budget sector entities and those participating non-budget entities named in the schedule on file in the TMF office.
B. Attachment: Commencing 1 July 1989, until cancelled by order of the Secretary of the Treasury.
C. Losses Payable: At the direction of the Secretary of the Treasury.
D. Consideration: Administration of the TMF by GIO General Ltd, including contracted services, claims handling and consultancy, is furnished on a fee schedule agreed between GIO General Ltd and the Treasury.
E. Coverage provided worldwide to participating entities: Subject to exclusions and further qualified by Treasury Guidelines and Fund Conditions outlined herein, the coverage is as follows:
E.1 Workers' Compensation
This is provided as set forth in the NSW Workers' Compensation Act 1987 No. 70, as amended, and the Workplace Injury Management and Workers' Compensation Act 1998, included herein by reference. Each participating entity shall comply with all provisions of the acts and indemnify the Treasury against all punitive actions brought about by the participating entity's failures and/or errors and omissions in relation thereto.
Included in the instrument is Appendix 2 which contains information about the funding mechanism for the TMF. This is achieved by way of a budget for claims being allocated to a particular agency and premiums paid by the agency being set which will enable that budget to be met. Appendix 2 states that if an agency's budget allocation exceeds its premium this indicates that the agency has performed better than its benchmarks, or not as well if the premium is greater than the allocation. It states however that:
The ultimate cost of claims beyond the hindsight adjustments or the deposit premiums is at the risk of the Treasury.
On 1 July 2005 the defendant became the manager of the TMF.
QBE contends that under the TMF the defendant had a common monetary obligation with QBE to indemnify the Police Force in respect of the Police Force's liability to Mannall. QBE claims that the defendant is obliged to make contribution to QBE of half the settlement sum paid to Mannall.
QBE puts that:
1. under s 8 of the NSW Self Insurance Corporation Act, one of the defendant's functions with respect to a Government managed fund scheme (of which, TMF is one), is to act for the State or an authority of the State in respect of claims under the scheme;
2. whilst there is no contract of insurance between the defendant and the Police Force, the defendant has the function, power and a binding obligation to see to it that the Police Force has its liabilities met from a fund of money under its management; and
3. the defendant is therefore an indemnifier of the Police Force, whose liability is co-ordinate with that of the QBE.
The defendant puts that:
1. the Police Force does not have corporate existence and is merely a structure of statutory appointed officers employed by the Crown;
2. the Crown is a Government employer, covered by the TMF, and is taken to be a self-insurer for the purposes of the Workers Compensation Act;
3. a self-insurer is not an insurer, but a person liable for, and which meets, its own obligations;
4. the TMF does not itself have any corporate existence, but is merely a fund belonging to the Crown, administered by the defendant, out of which liabilities of Government agencies are met; and
5. any liability which the Crown had to Mannall was a direct and unindemnified liability of the Crown, not coordinate in any sense with that of the defendant.
The principles of contribution are designed to adjust the rights of co-obligors when one of them, voluntarily or involuntarily, discharges their common obligation. Only a community of interest will make it inequitable for the party against whom the contribution is sought to keep the benefit which arises from the claimant discharging its obligations: Burke v LFOT Pty Ltd (2002) 209 CLR 282 at [38] and [42] per McHugh J; see too HIH Claims Support Ltd v Insurance Australia Ltd (2011) 244 CLR 72 at [36] and following.
Whilst the TMF is replete with insurance terms such as "coverage" and "premiums" and is undoubtedly intended to mimic insurance, it is no such thing. There is no contract between a relevant agency (or for that matter any individual) and the defendant. So much was conceded on behalf of QBE. A contention that QBE and the defendant were co-insurers of the same risk was correctly abandoned.
There is no (or no sufficient) community of interest between QBE and the defendant so as to engage the principles of contribution. The defendant is not an indemnifier. But if it is, its obligation is not common with QBE in the sense that they have a community of interest.
Under s 11(1) of the NSW Self Insurance Corporation Act the money constituting the fund is in the Special Deposits Account.
Section 4 of the Public Finance and Audit Act 1983 (NSW) provides relevantly that:
Special Deposits Account means:
(a) an account of funds which the Treasurer is, by statutory or other authority, required to hold otherwise than for or on account of the Consolidated Fund,
(b) an account of money directed to be paid to the Special Deposits Account by or under this or any other Act, or
(c) an account of such other money, not directed by or under this or any other Act to be placed to the credit of another account, which the Treasurer directs to be carried to the Special Deposits Account.
The same section defines Consolidated Fund to mean:
...the fund formed as referred to in section 39 of the Constitution Act 1902.
Section 39 of the Constitution Act 1902 (NSW) provides as follows:
(1) Except as otherwise provided by or in accordance with any Act, all public moneys (including securities and all revenue, loans and other moneys whatsoever) collected, received or held by any person for or on behalf of the State shall form one Consolidated Fund.
(2) Without limiting the generality of subsection (1), all territorial, casual and other revenues of the Crown (including all royalties), from whatever source arising, within New South Wales, and as to the disposal of which the Crown may otherwise be entitled absolutely, conditionally or in any other way shall form part of the Consolidated Fund.
The fund which underlies the TMF has no separate legal existence. The monies in it belong to the State and are managed by the defendant on its behalf. Under s 8(1)(d) of the NSW Self Insurance Corporation Act, the defendant acts for the State, or an authority of the State, in dealing with claims. It does so out of the fund established by s 11, which is in the Special Deposits Account. By s 211B of the Workers Compensation Act, the fund is used to discharge the obligations of a Government employer as self-insurer.
The "arrangement", if it is one, does no more than establish a fund which is managed by the defendant and out of which liabilities incurred by Government agencies, in the present case an agency which is in the right of the Crown, are directly met.
The premiums for which the TMF provides are not premiums at all in the conventional sense. They come out of and go back into consolidated revenue. They are merely components of an accounting mechanism by means of which the fund is disbursed to meet claims of Government agencies, their performance is measured and improved performance is sought to be encouraged.
As disturbing as it may be for those who might think otherwise, the TMF provides no risk cover in the nature of insurance to anyone. It might aptly be described as an insurance phantasm.
The defendant's obligation is to manage the fund by meeting claims made against Government agencies. This obligation is in no way co-ordinate with that of QBE under its motor-vehicle policy which rendered it liable in respect of Mannall.
QBE and the State have no more a community of interest than an insured has with its insurer. The defendant is even one step further removed from such community.
The proceedings must be dismissed.
The exhibits are to be returned.
[3]
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Decision last updated: 09 June 2023