Savoy v Insurance and Care NSW

Supreme Court of NSW|2020-02-19|Before: Basten J, Mr P

Solicitors: V L Macri Lawyers (Plaintiff) Turks Legal (First Defendant) File Number(s): 2019/199442 Decision under appeal Court or tribunal: Local Court of NSW at Sydney Jurisdiction: Civil Date of Decision: 30 May 2019 Before: Barko LCM File Number(s): 2018/259154

Judgment

BASTEN J: In mid-November 2015, Tornado Towing Pty Ltd employed one Jaiden Somers as a driver. Mr Somers claimed he was injured on 1 December 2015 in the course of his employment, and that he was entitled to workers' compensation. Tornado Towing did not have a workers' compensation policy, with the result that the Nominal Insurer made payments pursuant to Pt 4, Div 6 of the Workers Compensation Act 1987 (NSW). Insurance and Care NSW ("ICNSW") is a body corporate established under the State Insurance and Care Governance Act 2015 (NSW), which represents the Nominal Insurer pursuant to s 154C of the Workers Compensation Act. It took steps to recover the payments made to Mr Somers, totalling some $87,000.
In February 2017 ICNSW issued a notice to Tornado Towing requiring reimbursement of the amount, pursuant to s 145 of the Workers Compensation Act. The amount was not paid by the company, and, in July 2018, demand was made upon two persons who had at the relevant date (the date of injury) been listed on ASIC records as directors of the company, namely Robert McDonald and Eve Savoy. ICNSW alleged that each was a "culpable director" of Tornado Towing pursuant to s 145A(4) of the Workers Compensation Act and therefore liable to reimburse ICNSW for the amount of the payments made to Mr Somers.

Issues on appeal

The constraint on the right of appeal to questions of law, combined with the need to seek leave to agitate grounds identifying mixed questions of fact and law, require a degree of precision in formulating grounds of appeal. There are, of course, limits to the extent to which one can be precise, given the inexact boundary between law and fact in many cases. Nevertheless, the pleading paid scant attention to the relevant distinctions. The grounds were drafted at a level of generality which resisted any sensible attempt to identify the precise errors sought to be raised.
In order to identify a question of law, it is necessary to identify a relevant finding made by a trial judge and the point at which the judge is said to have fallen into error. To the extent that the grounds in the notice of appeal allowed such an exercise, it was only when they were read together with the written submissions. A convenient approach for present purposes is to commence by identifying the issues before the magistrate, which fell into two categories. First, there were three substantive issues, namely: 1. whether ICNSW established that Ms Savoy was validly appointed a director of Tornado Towing; 2. whether ICNSW established that, if so appointed, she remained a director as at 1 December 2015, and 3. if those matters were established, whether Ms Savoy proved that she was not a "culpable director" pursuant to s 145A(5) because, 1. she did not know that the company had not obtained a policy of workers compensation covering Mr Somers; 2. she was not in a position to influence the conduct of the company in relation to its failure to obtain such a policy, or 3. if she were in a position to influence the company's conduct, whether she had used all due diligence to prevent it contravening its obligation.
Secondly, there was a procedural issue, namely: whether a statement taken by an officer of WorkCover NSW from Mr McDonald admissible against Ms Savoy in so far as it contained representations concerning her conduct.
There were two grounds of appeal: ground (1) had six limbs relating to the procedural error (admissibility of Mr McDonald's statement - ground (1)(a)) and five further paragraphs identifying errors in the reasoning of the magistrate with respect to all of the relevant factual findings. Ground (2) stated in generic terms that the magistrate had erred in failing to find that Ms Savoy had not satisfied each of the bases of exception to the definition of "culpable director" in s 145A(5), identified above as issues (3)(a)-(c). The third exception (exercising due diligence) was not pressed at the hearing of the appeal.
Before turning to address the various grounds, it is necessary to say something about the jurisdiction and powers of this Court.

(a) statutory context

The Court's jurisdiction and powers may be found in the following sections of the Local Court Act: 39 Appeals as of right (1) A party to proceedings before the Court sitting in its General Division who is dissatisfied with a judgment or order of the Court may appeal to the Supreme Court, but only on a question of law. … 40 Appeals requiring leave (1) A party to proceedings before the Court sitting in its General Division who is dissatisfied with a judgment or order of the Court on a ground that involves a question of mixed law and fact may appeal to the Supreme Court but only by leave of the Supreme Court. … 41 Determination of appeals (1) The Supreme Court may determine an appeal made under section 39 (1) or 40: (a) by varying the terms of the judgment or order, or (b) by setting aside the judgment or order, or (c) by setting aside the judgment or order and remitting the matter to the Local Court for determination in accordance with the Supreme Court's directions, or (d) by dismissing the appeal.
The distinction drawn in ss 39 and 40 between an appeal "only on a question of law" and an appeal "on a ground that involves a question of mixed law and fact" recognises that it may sometimes be difficult to determine whether a magistrate has wrongly identified a legal principle or has correctly identified the principle, but erred in applying it to the facts as found. There may be other ways of identifying a question of "mixed law and fact" but it is clear that there is no right of appeal, with leave otherwise, from a finding of fact alone. As explained by Harrison J in World Avenue Pty Ltd v Tsunashima, [1] in a passage approved by the Court of Appeal in Rose v Tunstall: [2] "This Court has no authority to engage in a fact finding process on the merits of the case, even if the appeal involves a mixed question of fact and law …"

(b) principles relevant to leave

These elements are relevant to identifying the correct approach to a request for leave pursuant to s 40(1). This constraint is an important consideration in determining whether to grant leave. In World Avenue, Harrison J approached the question of leave on the following basis: "[31] An applicant for leave must demonstrate something more than that the Court below was arguably wrong in the conclusion arrived at: Carolan v AMF Bowling Pty Ltd [1995] NSWCA 69 and Be Financial Pty Ltd as trustee for Be Financial Operations Trust v Das [2012] NSWCA 164. Where small claims are involved, it is important that there be early finality in the determination of the litigation lest the costs involved become disproportional to the amount in dispute: Young v Kruger [2012] NSWSC 628 and Ion v Danutz [2012] NSWSC 941. It is ordinarily only appropriate to grant leave to appeal in matters that involve significant or important issues of principle, questions of general public importance or an injustice which is reasonably clear, in the sense of going beyond what is merely arguable: Jaycar Pty Ltd v Lombardo [2011] NSWCA 284 at [46] and Be Financial at [33]."
Each of the considerations identified in that passage may be accepted; however, they are largely the considerations applied by the Court of Appeal in considering whether to grant leave in respect of an appeal governed by s 75A of the Supreme Court Act 1970 (NSW), that is, an appeal by way of rehearing which will extend to review of the fact finding at trial, where the Court is permitted to make its own findings of fact, and possibly on the basis of further evidence. That this Court is not able to review findings of fact, nor to make its own findings, is an important factor in determining whether to grant leave. It means that a finding of error on the part of a magistrate is likely to give rise to a remittal pursuant to s 41(1)(c) of the Local Court Act. To that extent it resembles an application for judicial review. Remittal will involve further delay in the resolution of what is likely to be a reasonably small dispute, given the financial limits of the Local Court jurisdiction, and the incurring of additional costs. This consideration may, in an appropriate case, raise an additional constraint on the grant of leave.
On the other hand, because there may be a fine line, not easy to determine in advance, between a question of law and a question of mixed law and fact, in some circumstances it will be appropriate to allow a greater willingness to grant leave than might otherwise be the case. However, it was by no means clear to what extent the arguments addressed on appeal were presented to the magistrate; counsel's submissions were not transcribed and there was no evidence of them before this Court. The court will need to be persuaded that it should grant leave as to matters not the subject of submissions at trial.
In the present case, as counsel for Ms Savoy emphasised, the amount in issue, with interest, is probably at the top of the jurisdictional limit of the Local Court ($100,000). This in turn militates in favour of a grant of leave; the amount in issue is less likely to give rise to a serious disproportion between it and the costs incurred; it is also more likely, as may be accepted in the present case, to indicate a serious prejudice to the plaintiff if it appears on an appropriate ground that the matter has been determined erroneously.
Finally, it is clear from the terms of s 40(1) that the weighing of the disparate factors must be undertaken on a ground by ground basis.

With one exception addressed below, the generic request to extend the appeal to issues of mixed fact and law should be rejected, for a number of reasons.
First, it was not explained and, subject to the exception noted, it was by no means clear what issues were to be so characterised. Secondly, Ms Savoy's case on all issues turned to a substantial degree on acceptance of her evidence. The magistrate rejected her evidence for reasons which, applying principles outlined in Fox v Percy [3] are unchallenged and indeed unchallengeable because they turned on the magistrate's assessment of her credibility.
Further, the objective evidence was all supportive of the case against her. The ASIC records showed that she was a director at the critical date, namely 1 December 2015. Her claim to have resigned in October 2015 rested wholly upon her claim to have advised the company accountant and her husband and co-director, verbally, that she wished no longer to be a director. She produced a signed paper, purporting to be a statutory declaration, to support her claim that she gave written notice of resignation. In her second affidavit she said: [4] "I walked into the study where Robert was and threw the Statutory Declaration a t him and said 'here', and then left the study."
There was no explanation as to how she still possessed the original. The following exchange took place in cross-examination: [5] "Q. …You say that you gave the original of this document to your husband? A. Correct. Q. How did you come to obtain this copy to put in your affidavit? A. Sorry? Q. How did you come to obtain this copy of the document? A. Because I asked for it back from him. Q. You had a conversation with Robert around 14 April of this year? A. No. It was - I'm trying to think. It was before that. It was at the time that this happened. It would've been around the 7th or the 8th and me just saying to him that 'When you're done with it, I want it back'. … Q. -- you gave it to Robert, then you said, 'But I want it back'? A. No. I think I said to him, 'Do what you need to do and then I want it back'. Yeah. Q. At the time you handed it to him? A. Yeah. Pretty much so, in that-- Q. Then you say he gave it back to you a couple of days later, the same day, a day later? A. Yeah. It was about a day or two later. Q. You've kept it for the last almost four years? A. It's just in with a whole bunch of other documents. So I had to look for it. Q. You have the original of this document? A. Yeah. Well my lawyer does. Yeah."
This evidence did not match her affidavit. Further, there was no evidence as to (i) why she remained a 50% shareholder in the company, (ii) the circumstances in which her ceasing to be a director was recorded by ASIC in October 2016, and (iii) the recording of the transfer of her shares to her husband at that time.
There is, therefore, nothing to displace the constraints on an appeal court interfering with credibility findings made by the magistrate who heard her give evidence. These factors militate strongly against a grant of leave under s 40(1), except with respect to an allegation that the principles in Jones v Dunkel [6] were misapplied.

Admissibility of evidence

Taking the questions raised above in the chronological order in which they were addressed by the Court, it is convenient to start with the question as to the admissibility of parts of the statement of Mr McDonald. The statement, prepared by the WorkCover investigating officer, was taken on 29 January 2016, that is, some two months after the accident. Each page was signed by both Mr McDonald and the investigating officer.
There was some uncertainty as to precisely what portions of the statement were admitted in evidence, after objection was taken to the whole. Counsel for ICNSW prepared a marked-up copy of the statement which identified in highlighter the passages on which she sought to rely. However, as the magistrate noted in giving his final judgment, sentences taken in isolation could not be understood without some reference to the context. For example, ICNSW relied upon the following statement at par 14: "Once Jaiden Somers commenced working for us Eve was making inquiries to take out a policy. I do not know which insurers she contacted." The reference to "a policy" is only understandable by reference to the earlier statements in the paragraph (not highlighted) referring to taking out "a workers compensation policy."
Further, counsel for Ms Savoy relied in his submissions on some background statements at the beginning of the document which had not been highlighted. Neither party took objection to the fact that the magistrate had had regard to contextual material, nor to reliance in this Court on the introductory paragraphs. (Their relevance will be noted below.) The ruling admitting portions of the statement should be taken as covering both highlighted passages and uncontroversial contextual material.
To be admissible against Ms Savoy, the statements made by Mr McDonald had to satisfy the requirements of s 87 of the Evidence Act 1995 (NSW), which provides: 87 Admissions made with authority (1) For the purpose of determining whether a previous representation made by a person is also taken to be an admission by a party, the court is to admit the representation if it is reasonably open to find that: (a) when the representation was made, the person had authority to make statements on behalf of the party in relation to the matter with respect to which the representation was made, or (b) when the representation was made, the person was an employee of the party, or had authority otherwise to act for the party, and the representation related to a matter within the scope of the person's employment or authority, or (c) the representation was made by the person in furtherance of a common purpose (whether lawful or not) that the person had with the party or one or more persons including the party. (2) For the purposes of this section, the hearsay rule does not apply to a previous representation made by a person that tends to prove: (a) that the person had authority to make statements on behalf of another person in relation to a matter, or (b) that the person was an employee of another person or had authority otherwise to act for another person, or (c) the scope of the person's employment or authority.
The magistrate upheld the admissibility of the parts of Mr McDonald's statement relied upon by ICNSW in terms which will be referred to shortly. Three points should be noted now: 1. Neither party understood the magistrate to have relied on par (1)(b); Ms Savoy assumed that he had relied upon par (1)(c), but ICNSW submitted that both pars (1)(a) and (c) were available bases of admissibility. 2. In order for the representations to be admissible, the magistrate need only have been satisfied that it was "reasonably open to find" that one or more conditions had been made out; to establish error of law it was therefore necessary for Ms Savoy to establish that he could not have been satisfied that it was reasonably open to be satisfied as to any of the qualifying factors. (This makes the error of law equivalent to a "no evidence" ground.) 3. The ruling was made by reference to the material then before the magistrate; it was therefore described as a ruling that the representations "are provisionally admissible", leaving open the possibility that the ruling might be revisited in the light of further evidence. Ms Savoy did not invite the magistrate to revisit the ruling.
It is necessary in this context to refer to one other provision in the Evidence Act. Section 57 provides as follows: 57 Provisional relevance (1) If the determination of the question whether evidence adduced by a party is relevant depends on the court making another finding (including a finding that the evidence is what the party claims it to be), the court may find that the evidence is relevant: (a) if it is reasonably open to make that finding, or (b) subject to further evidence being admitted at a later stage of the proceeding that will make it reasonably open to make that finding. (2) Without limiting subsection (1), if the relevance of evidence of an act done by a person depends on the court making a finding that the person and one or more other persons had, or were acting in furtherance of, a common purpose (whether to effect an unlawful conspiracy or otherwise), the court may use the evidence itself in determining whether the common purpose existed.
To the extent that s 87(1)(a) relies upon authority to make the representations on behalf of the party to the proceedings, it was open to the magistrate to rely upon the statements in the document to demonstrate that Mr McDonald in fact had such authority, pursuant to s 87(2)(a). Subsection (2), however, does not assist in proving the existence of a "common purpose". However, absent such a common purpose, the representation would not qualify as an admission against Ms Savoy and would not be relevant. Section 57(2) would allow reference to the representations to support a finding that it was reasonably open to conclude that there was a common purpose involving Mr McDonald and Ms Savoy.
Putting to one side the contents of the statement, and bearing in mind that when the magistrate ruled upon the admissibility of the evidence he did not have Ms Savoy's denials before him, he did, nevertheless, have independent evidence on which he relied to admit the evidence. The magistrate identified the issue to be determined, following an interjection by counsel for Ms Savoy whilst he was delivering reasons, in the following terms: [7] "BARHAM: Your Honour, before your Honour finally rules, that's the issue. My client says she's not a director and she wasn't an employee. HIS HONOUR: Is it reasonably open to me to find that the representations were made with authority. BARHAM: But you need evidence of that now."
The magistrate, acknowledging the dispute and identifying the evidence available, also noted: [8] "There is a real issue between the parties about the issue of whether or not [Ms Savoy] was a culpable director at the relevant time. The statement was made at a point in time where the second defendant was still, as far as ASIC was concerned, a registered director of the company. There is nothing before me to suggest, at that time, she was not still in some form of relationship with [Mr McDonald]…." He said that Mr McDonald was still married to, or a partner of, Ms Savoy. [9]
The phrase "as far as ASIC was concerned" was a reference to the records of the Australian Securities and Investment Commission (ASIC) as contained in the database held under s 1274 of the Corporations Act 2001 (Cth). Section 1274B provides: 1274B Use, in court proceedings, of information from ASIC's national database … (2) [Writing as proof] In a proceeding in a court, a writing that purports to have been prepared by ASIC is admissible as prima facie evidence of the matters stated in so much of the writing as sets out what purports to be information obtained by ASIC, by using a data processor, from the national database. In other words, the writing is proof of such a matter in the absence of evidence to the contrary. The ASIC record in evidence indicated that Ms Savoy was a director appointed on 18 July 2015 and ceasing on 3 October 2016.
There was thus independent evidence, as well as the inference to be drawn from Mr McDonald's statement, as to the manner in which he and Ms Savoy ran the company, from which it was reasonably open to find that the representations in that regard were made both with authority and in furtherance of a common purpose. The statement included the following representations: "8. I am a co-Director of Tornado Towing Pty Limited and the other Director is my wife Eve Savoy-McDonald. … 9. Eve and I are currently the only employees of the company. … … 14. …Once Jaiden Somers commenced working for us Eve was making inquiries to take out a policy. I do not know what insurers she contacted. … 19. I recall it was a Friday in October or November 2015 when Jaiden came to my home …. He asked me for the job and I told him I had to discuss it with Eve and we decided to offer Jaiden employment as a sub-contractor. … … 22. Around the 1 November 2015 Jaiden commenced subcontracting to Tornado Towing Pty Limited. Eve went on the road with Jaiden to show him what he needed to do with the customers and how to load and strap the cars. I recall Eve went out with Jaiden for two or three days and she called me to tell me he wanted to be by himself and she also said he was capable of performing the duties. … 23. Two or three weeks after Jaiden commenced subcontracting to me he had not provided his ABN or Superannuation details Eve and I discussed putting Jaiden on as a full time employee. Eve and I approached Jaiden around 13 November 2015 and offered him fulltime employment commencing 16 November 2015. We provided him with a Letter of Engagement dated 16 November 2015 and requested he provide us with an answer by the 16 November 2015. … … 24. On the 18 November 2015 Jaiden attended my home and produced the signed original Letter of Engagement to Eve." The following extracts related to the day of the accident: "32. At 10:18am Jaiden responded via Mobile text 'going under workers compensation.' 33. At 10:23am I responded 'workers compensation will take about two weeks' The reason I said that as [sic] because Eve was on the phone attempting to obtain a worker's compensation policy. … 34. I called Eve once Jaiden had reported his injury to me. … When Eve arrived home from work she found a Workers Compensation Certificate of Capacity in our letter box from Jaiden."
The evidence also contained a copy of two pages of the letter of employment addressed to Mr Somers and countersigned by Mr Somers on 16 November 2015. The letter included the following statement: "If you have any questions about the terms and conditions of employment, please don't hesitate to contact Eve & Robert McDonald on xxx." The letter concluded: "Yours sincerely, Robert & Eve McDonald Directors, Tornado Towing PTY LTD."
Two further matters may be noted with respect to the ruling on admissibility. First, the record from ASIC, indicating that Ms Savoy was a director throughout the period from 16 November 2015 to 1 December 2015, is stated by the Corporations Act, s 1274B(2) to be "admissible as prima facie evidence of the matters stated" and that "the writing is proof of such a matter in the absence of evidence to the contrary."
Secondly, to the extent that the ruling was provisional and might have been varied on application by Ms Savoy after she gave evidence denying she was a director from mid-October 2015, ICNSW submitted that it could have relied on further evidence of Ms Savoy in support of a finding that it was reasonably open to conclude that Mr McDonald acted with her authority in relation to matters arising in relation to Mr Somers' employment and injury. Counsel referred to evidence in cross-examination to the effect that she simply passed letters sent to her as a director to her husband to reply to on her behalf. [10] As Ms Savoy did not seek to reopen the ruling, the issue of admissibility is confined to the ruling itself and the material then available to the magistrate, which was in substance ICNSW's case.
Part of the Ms Savoy's argument was that no part of the representations in Mr McDonald's statement constituted evidence that - "Savoy had personally made admission to her husband about being a director. It was just a conclusory statement by him - as a witness or even as a defendant - about her role. Under the definition of 'admission' it had to have been an admission by Savoy that was adverse to Savoy's interest, not a mere statement by McDonald that was adverse to Savoy's interest unless there was authority, employment or common purpose. There was no authority, employment or common purpose."
There are two propositions in that submission, neither of which can be accepted in its terms. First, a representation does not have to be a report of an admission by the party, such as, "I am a director". There is no reason why the representation that she was a director cannot be made with knowledge of the circumstances, or inferred from conduct. The second proposition, which appears to be a qualification of the first, relies upon there being no element of authority, employment or common purpose. As already noted, employment was not relied upon; with respect to authority, Ms Savoy submitted that as a director, Mr McDonald unquestionably had authority to speak on behalf of the company, but not on behalf of a co-director. Reliance was placed on the decision in Tim Barr Pty Ltd v Narui Gold Coast Pty Ltd, [11] a case in which Barrett J held that a statement by a company secretary, in relation to a matter not covered by the functions identified in the Corporations Act as those of a company secretary, were not shown to be made with authority of the company. That finding (of mixed fact and law) does not answer the issue raised in the present case as to whether one director of a two director family business has authority to speak on behalf of both directors.
The high hurdle for Ms Savoy of establishing error of law on the part of the magistrate in being satisfied that, on the evidence, it was reasonably open to find that the representation was made by a person with authority to make statements on behalf of Ms Savoy, has not been surmounted.
To the extent that there are factual elements embedded in the finding of admissibility, I would not grant leave to consider those as mixed questions of fact and law. The finding made was provisional and might have been revisited had the evidence demonstrated that the material should be rejected. No such application was made by Ms Savoy. Had it been made it would have required a fresh exercise of evaluative judgment on the further evidence. There is no basis for finding error in an exercise which was not undertaken because not sought: it is not an exercise that can be undertaken for the first time in this Court. There is no sufficient basis to think that any factual issues were erroneously decided at the time the ruling was made, in the absence of legal error.

(a) appointment as director

Although there was some dispute as to whether it had been in issue at the trial that Ms Savoy was at any stage a director of Tornado Towing, it may be accepted for present purposes that there was a dispute in that regard and that ground 1(c), challenging the inferred finding that Ms Savoy had been "properly and validly appointed as a director of the company", was available as a matter to be raised in this Court.
Disregarding Mr McDonald's statement, there was substantial evidence supporting the conclusion that she was a director. First, the ASIC records record her appointment date as 18 July 2015. Secondly, she stated in both affidavits filed in the Local Court that she believed she was a director from July 2015 to 7 October 2015. In her second affidavit, she explained why she became a director in July 2015. She maintained that position in cross-examination: [12] it was an essential element of her claim that she resigned as a director in October 2015.
Her case in this Court (and possibly in the Local Court) was that, as a matter of law, she could not have been validly appointed as a director unless she signed a written consent, or was appointed by a general meeting of the company. The factual basis for those propositions was to be found in her second affidavit (of 21 May 2019) in which, after setting out why she had in effect demanded appointment as a director, she stated: "7. I do not recall ever signing a consent to be a director of the company, nor attending any meeting in relation to becoming a director."
The provisions for appointment of directors in the constitution of Tornado Towing were two replaceable rules drawn from the Corporations Act, ss 201G and 201H, in the following terms: "21 Company may appoint a director (s 201G) A company may appoint a person as a director by resolution passed in general meeting. 22 Directors may appoint other directors (s 201H) Appointment by other directors (1) The directors of a company may appoint a person as a director …. Proprietary company - confirmation by meeting within 2 months (2) If a person is appointed under this section as a director of a proprietary company, the company must confirm the appointment by resolution within 2 months after the appointment is made. If the appointment is not confirmed, the person ceases to be a director of the company at the end of those 2 months."
With respect to the mechanism of appointment, any departure from the company's constitution would be subject to the principle explained by Buckley J in Re Duomatic Pty Ltd, [13] and adopted by Bowen CJ in Eq in Re Compaction Systems Pty Ltd in the following passage: [14] "If all the shareholders of the company are present together in a meeting, and signify their assent to a transaction which is within the powers of the company, their decision will be effective in the same way as if a resolution to that effect had been passed at a properly constituted meeting. This may be so, notwithstanding that those at the meeting thought they were conducting a directors' meeting and the necessary formalities required for the calling of a general meeting had not been observed…."
At the time of her appointment, Mr McDonald was the sole director and sole shareholder of the company. As a matter of fact, he took the step of appointing Ms Savoy as a director. It is well established in a long line of authority that such a step would not be invalid as a matter of law, although procedural requirements of the company's constitution had not been followed. [15]
Dealing with the absence of a signed consent, the submission relied, not on the company's constitution, but on s 201D of the Corporations Act: 201D Consent to act as director (1) A company contravenes this subsection if a person does not give the company a signed consent to act as a director of the company before being appointed. (2) The company must keep the consent. (3) An offence based on subsection (1) or (2) is an offence of strict liability.
That section implicitly imposes two obligations on a company by providing that it contravenes the provision if the obligations are not complied with. The section does not provide that the appointment will be invalid if the company contravenes the provision. The caselaw generally does not support a finding of invalidity of an appointment resulting from a failure to comply with s 201D.
There is no doubt that a person cannot have the status of director imposed on her without her consent: Hedges v NSW Harness Racing Club Ltd. [16] However, it is clear that a person may be a "director" within the meaning of that term in the Corporations Act, absent a valid appointment: Corporations Act, s 9, director.
Reading s 201D in its statutory context, it is not plausible that it contains an unexpressed intention to invalidate an appointment if a company fails to carry out its obligations. The broad definition of "directors" in s 9 is inconsistent with a procedural limitation on the validity of an appointment. Further, authorities which have held appointments invalid on the basis of lack of actual consent must have ignored an evidentially simpler course, namely absence of a signed document recording consent. [17]
In Kocic v Deputy Commissioner of Taxation, [18] the Court of Appeal considered whether Mr Kocic had been a director of a company known as Zumuda. Two bases proposed for concluding that he was not a director were, first, that there was no minute of the directors of Zumuda appointing him and, secondly, that there was no signed consent. Gzell J, with whom Beazley JA and Handley AJA agreed, dismissed the first ground on the basis that informality of appointment was not conclusive because a person could be a director for the purposes of s 9 of the Corporations Act although not formally appointed: at [32]. With respect to s 201D(1), Gzell J noted that a company contravenes the section if a person does not give the company a signed consent before being appointed, but "failure to comply with that provision does not mean that Senad Kocic could not be a director for the same reason as that set out above", [19] referring to the lack of need for formality in appointing a director.
It is true that in In the Matter of Whitsunday Clean Sands Pty Ltd: [20] "[15] The case law establishes that, where a person has not consented to appointment as director or secretary, either by a written consent or by consent in fact, then his or her appointment will be invalid, not only by reason of s 201D and s 204C of the Corporations Act, but also at general law." [21]
I do not think Black J was intending in those comments to deal with a case of actual proven consent, in the absence of a signed record, so as to deny a claim by a third party against a person identified in ASIC records as a director. A literal reading would be inconsistent with Kocic.
As a matter of fact, the magistrate found that Ms Savoy did consent to, indeed demand, appointment, a finding which was not challenged and could not be challenged on this appeal. In any event, the submission now raised that Ms Savoy's appointment as director was legally ineffective must be rejected.

(b) resignation of Ms Savoy

On the basis that Ms Savoy had been appointed a director in July 2015, the next question was whether she remained a director as at 1 December 2015, the date of the accident. According to the ASIC records for Tornado Towing, she did, not ceasing to be a director until 3 October 2016. She claimed in her evidence that she had resigned on 7 October 2015. [22] Her evidence was that in late September she had told her husband and the company's accountant, Mr Hancock (referred to as Frank), in the course of a telephone call, that she wished to resign as a director. She also stated that she provided written notice of her resignation, "in the form a statutory declaration" dated 7 October 2015, given to her husband at home. She attached a document in the form of a statutory declaration signed by her and dated 7 October 2015, with the stamp of a justice of the peace, who, curiously, had not signed the document. (The transcript recorded that the original was provided in evidence: [23] how Ms Savoy had the original was explored in her cross-examination in the Local Court, set out at [21] above.)
Whether Ms Savoy gave notice of her resignation as a director in October 2015 was entirely a question of fact and there was no evidence to support Ms Savoy's claims, other than her own evidence. There was a substantial body of inferential evidence pointing to a different conclusion. The magistrate rejected her evidence as "disingenuous" and declined to accept that she gave notice to Mr McDonald or to the company's accountant. It was necessary for her to identify an error of law in reaching that finding, or at least an error with respect to a mixed question of fact and law and seek leave to extend the appeal to such a ground. A number of possible errors were identified, discursively, in the submissions.

It is convenient first to deal with the question of onus of proof, although it was not clearly raised as a ground of appeal and was but briefly addressed in the written submissions [24] under ground 1(d), which alleged "taking into account an irrelevant consideration and judicial notice of his personal knowledge of how companies operate…". The basis for the complaint was the statement in the magistrate's reasons that Ms Savoy "has failed to satisfy me, on the balance of probabilities, that she was not a director at the time of the employment of the injured worker … and/or the time of injury …."
Ms Savoy accepted, correctly, that she bore an evidentiary onus, but denied that she bore an onus of persuasion in this regard: this submission is addressed below. Her submissions on the question of onus tended to assume, without analysis or authority, that (in the terminology of s 9(2)(b) of the Evidence Act) s 1274B of the Corporations Act involved an "evidential" rather than a "legal" presumption. In my view that is not so. The purpose of the public records maintained by ASIC is to permit the world at large to rely upon the facts contained in those records in their dealings with the corporation or its officers. It would not advance that purpose if a director could, in an attempt to avoid his or her legal liabilities as a director, simply assert that he or she had resigned, leaving the other party to establish on the balance of probabilities that the person was still a director at the relevant time. A similar principle underlay the observations of Gummow J in Sycotex Pty Ltd v Baseler: [25] "The doctrine discussed in Duomatic is a function of the contractual relationship between the company and its members. ... As was said by Meagher JA in Herrman v Simon, [26] the doctrine is essentially one of waiver or acquiescence …. As such, it cannot be invoked to defend an action by a third party against, for example, a director."
In practice, the distinction between a legal and an evidential onus is by no means simple, nor does it establish a clear dichotomy. On one view, s 1274B does not impose a burden of proof at all: it gives evidential effect to a record. That effect did not cease because Ms Savoy gave evidence denying the correctness of the record; its continuing effect required it to be weighed against her evidence. The record indicated that the company had not, in October 2015, taken any step to record the resignation of a director. That inference was not challenged; what was asserted was that Ms Savoy took an effective step to resign her directorship, with the inference that the remaining director and the company's accountant, who were both informed of her intention, failed to act on it. However, unless she persuaded the magistrate as to the veracity of her evidence in this regard, the record remained unimpeached. This conclusion was open as a matter of law, as demonstrated in In the matter of Access MMS Pty Ltd, [27] where Brereton J relied upon information contained in an ASIC record as a more reliable record with respect to the shareholding in a company than a party's assertion to the contrary.
Further, with respect to the burden of proof which arose under s 1274B of the Corporations Act, Gzell J stated in Kocic: "[42] It was accepted in the court below that, in the absence of evidence to the contrary, the recording on the ASIC register was evidence of the appointment of Senad Kocic as the director of Zumuda. [43] It was no doubt to this provision and to this concession that her Honour was referring when she said that Senad Kocic had failed to establish, in accordance with the burden of proof that lay upon him, that his appointment as a director of the company was without his knowledge or consent. [44] Not only was her Honour entitled to her conclusion, but also the evidence supported positive findings that Senad Kocic was the director of Zumuda."
Secondly, it is by no means clear that the magistrate approached the matter on the basis that she bore the legal burden of persuasion. As a practical matter, there was significant evidence that she continued to act as a director after October 2015, and no evidence that she had resigned in October 2015 other than her own evidence. Unless the magistrate were persuaded to accept her evidence, her case in this respect must have been rejected. His statement that she had not persuaded him to accept her evidence merely reflected the practical realities.

(d) reliance on Jones v Dunkel

The next legal error said to arise was the magistrate's explicit reliance on the principle in Jones v Dunkel [28] in order to draw an adverse inference from the failure of Ms Savoy to call either her husband, Mr McDonald, or the company's accountant. There was no suggestion that the inference drawn was an inappropriate one if the principle were engaged, namely that their evidence would not have assisted her case. The legal error was said to arise from the finding that either or both of those persons were in Ms Savoy's "camp", whom it was reasonable to expect her to call.
In order to identify an error of law, it is necessary to consider why it is said that such an inference was not available. The drawing of an inference from accepted facts is pre-eminently a matter for the tribunal of fact. It is difficult to explain why the principle identified in this country by reference to the High Court judgments in Jones v Dunkel is a legal principle, misapplication of which involves only a question of law, rather than, at its highest, a mixed question of fact and law. However, rather than resolve that particular issue, it is convenient to give leave to Ms Savoy to rely upon this ground on the broader basis.
The challenges sought to be raised by Ms Savoy were, in effect, twofold. First it was said that it was in some sense unfair to expect her to call Mr McDonald, because, in counsel's terminology, their relationship was "fractious". There was no evidence that Mr McDonald was unavailable, although he clearly did not wish to be heard in his own defence, as a party to the proceedings. Under cross-examination, Ms Savoy said she was married to Mr McDonald in about 2008, they were still married, they resided in the same house and for a time had the same lawyers with respect to the proceedings. [29]
The inference may arise either where the party does not give evidence as to a fact, or where she fails to call a witness. That an inference may be drawn from the failure to call a witness who might be expected to know the facts in issue was accepted by Jacobs J in Australian Blue Metal Ltd v Hughes. [30] The husband was clearly such a person. According to her first affidavit, he was the person she informed that she wished to resign in September 2015 and, having told the accountant, "Frank, get me off being a director, I am fucking done" then "threw the phone back at my husband who continued to speak with Frank." [31] (Frank was the accountant.) With respect to the statutory declaration expressing a wish to cease being a director, she stated, [32] "I walked into the study where Robert was and I threw the statutory declaration at him and said 'here', and then left the study." She continued: "I believed that from that point I was not a director of the company. I have no reason to think that Robert thought any differently from what I did."
At least as a practical matter, and it appears as a matter of principle, the onus of establishing the unavailability of the witness is on the party against whom the inference might be drawn. [33] Especially is that so in litigation where the potential witness is a party on the same side of the record, as in this case.
The thrust of Ms Savoy's submission in this Court was that she could not be expected to call her husband because that would involve him giving evidence which contradicted his statement to the WorkCover investigator, par 1 of which read: "This statement made by me accurately sets out the evidence which I would be prepared, if necessary, to give in court as a witness. The statement is true to the best of my knowledge and belief and I make it knowing that, if it is tendered in evidence, I shall be liable to prosecution if I have wilfully stated anything in it which I know to be false or do not believe to be true."
The statement, together with the extracts relied on by ICNSW, thus provided the basis for the very inference which was drawn by the magistrate, namely that Mr McDonald's evidence, if he had been called, would not have assisted Ms Savoy. That part of Mr McDonald's statement which was relevant, was already in evidence and did not assist her. Once the statement was in, it was somewhat artificial to rely upon Jones v Dunkel. However, there was no material error in drawing the inference. Accordingly there was no legal error, nor error of mixed fact and law.
With respect to the company accountant, the submissions appeared to rely on the proposition that there was "no evidence" that the accountant was available, or would not have provided a statement, if asked. However, that was a matter for Ms Savoy to establish and she did not. Part of her complaint in this Court was that she was not cross-examined about the reasons for Mr McDonald not giving evidence or for the accountant not being called. That submission was not entirely correct in that she was asked questions which established a prima facie case that Mr McDonald was available. More importantly, there was no need to cross-examine her about matters on which she bore the onus of establishing unavailability, and as to which she had given no evidence. Even if she did not bear the legal onus of establishing unavailability, she bore an evidentiary onus, which was not satisfied.
Finally, it was submitted that counsel for ICNSW did not rely upon Jones v Dunkel, and therefore there was a denial of procedural fairness in so far as the magistrate did rely upon that principle. This aspect of the ground turned on a factual issue as to which there was no evidence before this Court: as noted above, there was no transcript of counsels' addresses and there was no evidence as to what was said by counsel. However, it was self-evident that Mr McDonald, who was undeniably a director and principal involved in the business of the company, must have known and understood Ms Savoy's role and relationship with the company; the accountant's role was more limited, on her evidence, but was also material because she said she spoke to him on the telephone. Their absences cannot have gone unnoted by either party. Whatever was said in submissions, it is far from clear that any claim of procedural unfairness would have been available. Further, given Mr McDonald's statement, no reliance on Jones v Dunkel was necessary in order to draw the inference in fact drawn.
It remains to note that there was evidence as to Ms Savoy's involvement, potentially as a director, after October 2015, which is considered further below with respect to her reliance upon s 145A(5) of the Workers Compensation Act.

Grounds (1)(d) and (e)

Ground (d) asserted that the magistrate erred in taking into account "irrelevant considerations and judicial notice of his personal knowledge of how companies operate in coming to his finding that the plaintiff was a director". Ground (e) stated that the magistrate erred in taking into account "an irrelevant consideration about prior conduct of [ICNSW] in the Court below in assessing the plaintiff's credibility".
The use of the term "irrelevant consideration" was apparently intended to identify a matter which, as a matter of law, the magistrate was not entitled to consider. Without knowing what the consideration was and why it was said to be beyond power to take it into account, the grounds were seriously deficient. Having regard to the written submissions, it is apparent that the term was used in different ways. In relation to par (d), it appears to have been synonymous with taking judicial notice of matters which were not proved in evidence. It also referred to other evidence (found in a statement by Ms Savoy's husband, Mr McDonald) as to the activities in which she had engaged with him in running the business. It was assumed that such statements, if properly admitted, could only be used to demonstrate that she was a "shadow director", a concept falling within the definition of "director" in s 9 of the Corporations Act. However, once one identifies the particular element relied on, a question immediately arises as to why, at least with respect to conduct undertaken after her ostensible appointment as a director, such conduct might not provide a basis for inferring that the record of her appointment was a correct reflection of reality? The drawing of inferences from primary facts is essentially an exercise in fact finding; no submission was made to identify why that kind of inference could not, as a matter of law, be drawn from the particular facts.
So far as the appointment of Ms Savoy was concerned, the relevant missing document was a written consent to act as a director. For reasons discussed below, the absence of a written consent, assuming no such document had ever existed, was not fatal to the appointment of a director.
To the extent that the magistrate relied upon his understanding of the degree of informality with which many small family businesses operate through a corporate structure, an appropriate inference may have been that there probably was no written consent, rather than that any document which had been executed was now lost. However, to assert that the magistrate was not entitled as a matter of law to have regard to how such entities operate in the real world, by identifying the observations in that regard as a form of judicial notice, was to impose a degree of constraint which required demonstration of a prohibition as a matter of law, which was absent from the submissions. It is not necessary to address this issue further because it did not ultimately result in any finding of fact material to the conclusion reached by the magistrate.
There were other allegations of "irrelevant considerations" being taken into account, which demonstrated challenges entirely limited to the fact finding exercise. For example, it was submitted that correspondence sent by ICNSW to Ms Savoy was, in effect, irrelevant to the question whether or not she was a director; rather it was merely a consequence of the fact (not in dispute) that at the relevant time she was listed as a director on ASIC records. That latter proposition may be accepted, but it does not demonstrate that the correspondence was irrelevant. The magistrate dealt with such communications because it was Ms Savoy's response from which an inference could be drawn adverse to her denial of being a director. Again, it is not necessary to address in precise detail each of the allegations to similar effect which were to be found in Ms Savoy's submissions, beyond saying that none of them purported to identify a question of law, or even a mixed question of fact and law.

Defences - s 145A(5)

Pursuant to s 145A(4) of the Workers Compensation Act, a person is a "culpable director" of a corporation if the corporation, at the time a worker was injured, failed to hold compulsory insurance and at that time the person was a director of the corporation. Section 145A(5) excludes a person from the category of "culpable director" if she establishes that (i) she had no knowledge of the contravention, or (ii) was not in a position to influence the conduct of the corporation or, (iii) being in a position to influence that conduct, used all due diligence to prevent the corporation's contravention.
Each of the three bases of exception was relied upon in the grounds of appeal, although the failure to find due diligence was not pressed. The substance of ground 2 was "failing to consider properly the evidence and submissions", presumably of Ms Savoy, and thereby failing to make findings as to lack of knowledge and not being in a position of influence. It was also alleged that, in relation to the second matter, an "irrelevant consideration" was taken into account.
With respect to lack of knowledge, the written submissions accepted that "the state of Savoy's knowledge of the contravention is at its highest a finding of mixed fact and law and maybe only a finding of fact." If the former, leave was sought, on the basis that Savoy "pleads numerous other grounds that do not require leave, if leave is required, leave should be granted." The submissions then proceeded to address why the factual finding should not have been made.
In keeping with the principles discussed above, the fact that there may be grounds which do not require leave provides no sound basis for granting leave in respect of other grounds which do require leave. Each ground must be assessed on its merits. Of course, if leave has been granted with respect to one ground which requires some assessment of the factual material, there may be merit in granting leave with respect to another ground requiring consideration of the same or related material.
The only grant of leave has been with respect to a ground dealing with Jones v Dunkel inferences resulting from the failure to call other witnesses. That fact does not support a grant of leave with respect to an assessment of Ms Savoy's own evidence, which can be the only basis for establishing her knowledge or lack thereof. Leave should be refused.
In dealing with the factual findings, the written submissions for Ms Savoy accepted that if she were a director she bore the onus establishing that she did not know of the contravention. [34] That concession should be accepted. However, it gives rise to the difficulty explained by Glass JA in Azzopardi v Tasman UEB Industries Ltd: [35] "If a respondent employer can argue a no evidence point, why cannot the applicant worker? The answer is, of course, that alleged insufficiency of evidence to prove a fact always raises a question of law but alleged sufficiency of evidence to the point of conclusiveness cannot, since it assumes that the evidence has been accepted. The party not bearing the onus puts an argument, which assumes against himself that the evidence has been accepted, but submits that it is not capable of establishing the fact. The party saddled with the onus on the other hand cannot assume in his favour that the evidence is or ought to be accepted since this trenches upon the liberty of the tribunal of fact to accept or reject any evidence."
The submissions which followed relied, with one qualification, entirely upon Ms Savoy's evidence which had been rejected. It is impossible to identify any error of law in those submissions. The qualification is to be found in the further statement: [36] "In the upshot, there was no documentary evidence that she had ever had any directorial role, as opposed to merely being a director, in the company. There is not one scrap of paper indicating that she acted in the role of a director, her evidence that she had not acted as a director and was not aware of the absence of a policy of workers compensation, was neither cross-examined on nor contradicted."
Each of the propositions in this paragraph was factually wrong, and even if correct, would not demonstrate error of law, although the allegation of lack of cross-examination might, if the issue were material, raise a mixed question of fact and law. It is appropriate to address that point. The evidence tendered by ICNSW included a document recording "call reports" prepared by WorkCover NSW. A few days after the accident, an investigator from WorkCover called Ms Savoy (referred to by her married name as Eve McDonald) and left a message for her to call back. On 8 December 2015 she returned the call. The record of the conversation included the following statements: "Eve McDonald confirmed worker only employed one week before accident, they obtained WC quote, but did not take out a WC policy." She was cross-examined as to the contents of the record and in particular as to the statement set out above. [37] Mr McDonald's statement contained the following passage: [38] "Once Jaiden Somers commenced working for us Eve was making inquiries to take out a policy. I do not know which insurers she contacted."
In short, not only did Ms Savoy fail to establish lack of knowledge of the contravention; there was direct evidence of actual knowledge of the contravention. The magistrate's rejection of her defence under s 145A(5)(a) demonstrated no error of law, mixed law and fact (nor, for that matter, error of fact).
The second ground relied upon was that the magistrate failed to find that she was not in a position to influence the conduct of the corporation in relation to the contravention. It is not necessary to deal with this ground separately: the evidence noted above indicated that she was the officer directly engaged in making inquiries about workers' compensation and the available inference was that she was herself in part responsible for the contravention.
There was other evidence as to her knowledge of and involvement in the activities of the company more generally; that was of peripheral relevance to the present question and need not be addressed.
As already noted, several of the grounds, including ground 2(c), referred to the taking account of an "irrelevant consideration". The use of this terminology was no doubt deliberate: in judicial review proceedings, it is used to identify a prohibited consideration which, if taken into account, demonstrates error of law. The submissions did not identify, in relation to this ground, any factual issue which was a prohibited consideration. It is not necessary to address the submissions further in this regard.
There is no basis upon which to challenge the magistrate's findings rejecting the availability of a defence under s 145A(5).

Conclusions

It follows from the reasons set out above that Ms Savoy's appeal must be dismissed. She must pay ICNSW's costs of the proceedings in this Court. Mr McDonald was named as a second defendant in the proceedings in this Court, but did not file a notice of appearance and played no role. No order need be made as to his costs.
The Court makes the following orders: 1. Grant leave to the applicant, to the extent necessary, to extend ground (2) to allow her to challenge the application of Jones v Dunkel in relation to her failure to call her co-director and the company's accountant. 2. Dismiss the summons filed on 27 June 2019. 3. Order that the plaintiff pay the costs of the first defendant, Insurance and Care NSW, of the proceedings in this Court.

Endnotes

[2013] NSWSC 502 at [29].
[2018] NSWCA 241 at [29], [31] (Payne JA).
(2003) 214 CLR 118; [2003] HCA 22 at [23], [28]-[29] (Gleeson CJ, Gummow and Kirby JJ).
Affidavit, 21 May 2019, par 11.
Tcpt, p 29.
(1959) 101 CLR 298; [1959] HCA 8.
Tcpt, 30/05/19, p 11(8)-(12).
Tcpt, p 9(8).
Tcpt, p 10(45).
Tcpt, p 29(15)-(30).
[2008] NSWSC 657.
Tcpt, p 20(36).
[1969] 2 Ch 365 at 373C.
[1976] 2 NSWLR 477 at 484.
See Hawcroft v Jamieson [2017] NSWSC 1478 at [234]-[239] (Gleeson JA).
(1991) 5 ACSR 291; 293 (McLelland J).
Lewis Securities Ltd (In liq) v Carter [2018] NSWCA 118; (2018) 355 ALR 703 at [160]-[176] (Emmett AJA, Leeming JA and Sackville AJA agreeing).
[2011] NSWCA 322 (Beazley JA, Handley AJA and Gzell J).
Kocic at [35].
[2017] NSWSC 1199.
Section 204C is the equivalent of s 201D, in relation to a company secretary.
Affidavit, 14 April 2019, pars 4 and 6.
Tcpt, CLD, 19/02/20, p 5(36).
Written submissions, par 52.
(1994) 13 ACSR 766 at 780(40).
(1990) 4 ACSR 81 at 83 (Samuels and Priestley JJA agreeing).
[2012] NSWSC 1199 at [6]-[7].
(1959) 101 CLR 298; [1959] HCA 8.
Tcpt, p 19(25)-(37).
(1962) 79 WN (NSW) 498 at 513, col 1-col 2.
Affidavit, 14 May 2019, par 5.
Affidavit, 21 May 2019, par 11.
JD Heydon, Cross on Evidence (LexisNexis, online edition, February 2020), [1215] fn 26.
Written submissions, par 60.
(1985) 4 NSWLR 139 at 156E.
Written submissions, par 66.
Tcpt, p 23.
Statement, par 14. DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated. Decision last updated: 27 February 2020

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