WORKCOVER AUTHORITY OF NEW SOUTH WALES v PICTON TRUCK & TRAILER REPAIRS PTY LTD

Court of Appeal (NSW)|2004-09-23|Before: Mason P, Sheller JA, Ipp JA, Gzell J

Background 4 The circumstances leading up to the making of the application began with a compensable workplace injury to a worker, Glenn Murray Hosey, on 8 May 1998. Because the worker's employer was uninsured in breach of s155 "Compulsory insurance for employers" of the Workers Compensation Act 1987 (the Act), on 4 September 1998, pursuant to Pt 4 Division 6 "Uninsured Liability & Indemnity Scheme", the worker made a claim in respect of the injury. From the WorkCover Authority Fund, WorkCover paid to the worker, for and on behalf of the employer, the amount of $27,842.33 in respect of his injury. Section 145 of the Act, which is headed "Employer or insurer to reimburse Authority", provides that the Authority may serve on a person who, in its opinion, was the employer of an injured worker to, or in respect of whom, a payment has been made under the Scheme, at the relevant time, a notice requiring that person, within a period specified in the notice, to reimburse the WorkCover Authority Fund an amount (not being an amount exceeding the amount of the payment made) specified in the notice. 5 On 12 November 1998, a Mr Croft of "Keith Truck & Trailer Repairs" made a statement in writing that Mr Hosey was employed with that "Company in the position of a first class welder". On 31 October 2001, which was after the dates of the last payments of compensation and of disbursements by WorkCover to, or in respect of, Mr Hosey pursuant to the Scheme, WorkCover served a s145 notice on Discall Holdings Pty Ltd (Discall) trading as Keith Truck & Trailer Repairs. Subsequently, WorkCover on 29 January 2002 began proceedings against Discall pursuant to s145(6) of the Act. On 7 February 2002, Discall filed a defence verified by Kathryn Aiken, who we were told was Mr Aiken's daughter and gave the same residential address as Mr Aiken, asserting: "Mr Hosey has never been an employee of [Discall Holdings Pty Ltd] at any time." On 5 June 2002, the solicitors for Discall, Dignan & Hanrahan, wrote as follows to WorkCover's solicitors: "RE: DISCALL HOLDINGS PTY LTD ATS WORK COVER AUTHORITY OF NSW We refer to the Notice to Produce served on our client in relation to the above matter and now enclose herewith copies of Group Certificates and wage cards in relation to the employment of Glenn Hosey by Picton Truck & Trailer Repairs Pty Ltd. We are instructed that Picton Truck & Trailer Repairs Pty Ltd is in voluntary Administration and all other records are held by the Taxation Office." 6 The Local Court proceedings against Discall were adjourned to enable Discall to apply to the Workers Compensation Commission for determination of its liability in terms of s145(3) of the Act. That application was not made until 2 October 2002. On 24 January 2003, the Commission determined that the worker was not employed by Discall. For reasons which are not plain, on 4 March 2003, WorkCover issued a notice under s145(1) against Mr Aiken personally. Ultimately on 8 April 2003, WorkCover's solicitors informed Mr Aiken that it did not intend to rely upon that s145 notice. 7 If WorkCover wished to proceed against Picton as the employer of the injured worker pursuant to s145(6) of the Act, it was essential that WorkCover first serve a notice under s145(1). However, Picton had been placed into voluntary administration on 5 February 2001 and a liquidator had been appointed upon the resolution of its creditors. On 24 October 2002, the liquidator presented a final account and statement which was filed with ASIC on 15 November 2002 disclosing a nil return to creditors and a nil return to contributors with total assets of $3,994.58 and remuneration owing to the liquidator of $6,514.50. On 30 January 2003, Picton was de-registered by ASIC under s601AC(2) of the Corporations Act. It was obvious that WorkCover would recover nothing from Picton. 8 Section 145A of the Act headed "Recovery from directors of corporations liable to reimburse Authority" provides relevantly as follows: "(1) If a corporation is liable to reimburse the Authority an amount for a payment made under the Scheme and the amount is not recoverable from the corporation, the Authority is entitled to recover the amount from a person who was a culpable director of the corporation at the relevant time. (2) A corporation is considered to be liable to reimburse the Authority an amount for a payment made under the Scheme if the Authority is entitled to recover the amount either under section 145 or under an order of the Commission made on application under that section, even if the corporation has ceased to exist. … (4) A person is a culpable director of a corporation at the relevant time if: (a) the corporation contravened section 155 (Compulsory insurance for employers) in respect of a policy of insurance that would have covered the corporation for the liability to which the payment made under the Scheme related (whether or not the corporation has been proceeded against or convicted of an offence for the contravention), and (b) at the time of the contravention the person was a director of the corporation." 9 Mr Aiken was at the time of the workplace accident the sole director, secretary and shareholder of Picton. 10 WorkCover decided to press for reimbursement from Mr Aiken as a culpable director of Picton at the relevant time. However, to do this it needed to serve a notice on Picton under s145(1) in order to set in train the process. This explains why WorkCover wished to have Picton reinstated.

Reasons for judgment at first instance 11 The application failed before Gzell J principally because his Honour was not persuaded that WorkCover was at the time of the application for reinstatement "a person aggrieved by the de-registration" within the meaning of s601AH(2)(a)(i) of the Corporations Act. The position was that WorkCover determined to pay compensation from the WorkCover Authority Fund to the worker under s143 of the Act. The worker's entitlement to make a claim under the Scheme and to be paid under the Scheme depended upon his employer at the time of the accident being uninsured within the meaning of s140(2) of the Act. The consequence of WorkCover making payments under the Scheme was that it was entitled under s145 to serve on the person who, in its opinion, was the employer of the injured worker at the relevant time, a notice requiring that person to reimburse it and to recover the amount specified in the notice from the person to whom the notice was given as a debt in a court of competent jurisdiction. In the ordinary course this is what would have happened. 12 What, in fact, happened was that the company went into liquidation and, ultimately, was de-registered. There was no prospect of recovering anything from Picton so WorkCover was left with the option of seeking recovery from Picton's sole director, who was a director at the time of the contravention of s155 of the Act. Section 155 required the company to obtain and maintain in force a policy of insurance for the full amount of its liability under the Act in respect of all workers employed by it and for an unlimited amount in respect of the employer's liability independently of the Act. However, this straightforward course of recovery against Mr Aiken, as director, was not possible because as long as Picton remained de-registered, no notice under s145 could be served on it because it did not exist. No recovery could be claimed from the director because the consequence of the inability to serve the s145 notice on Picton meant that the condition of recovery from a director, namely that Picton was liable to reimburse the Authority for the amount of the payment made under the Scheme, could not be established. 13 Gzell J reviewed the relevant case law. To adapt the language of McLelland J, as his Honour then was, in Northbourne Developments Pty Ltd v Reiby Chambers (1989) 19 NSWLR 434 at 438, a legal right or interest of WorkCover, namely to obtain reimbursement of payments made to Picton's employee, in consequence of Picton's failure to comply with the requirements of s155, from a culpable director was affected, indeed wholly frustrated, by the fact that the company is de-registered. Moreover, it is a matter of some concern that the obvious public interest in WorkCover making such recovery is also frustrated. It is clearly in the public interest that employers maintain the insurance contemplated by s155 of the Act and that an employer who fails to do so, or in the case of a corporate employer, its culpable director, should reimburse WorkCover for payments made in consequence of the employer's non-compliance with statutory requirements. Counsel for the respondent, Mr Cohen, submitted that, because there was delay between the date when WorkCover learned that Picton was the injured worker's employer on 4 June 2002 and the date the equity proceedings commenced on 23 July 2003, in some way WorkCover, by the time it made the application, was no longer a person aggrieved by the de-registration. The basis for this submission was not explained. I reject this argument. 14 In deference to Gzell J's review of the cases, I observe that it may well be right that the object of seeking reinstatement such as to obtain an inquiry and review of the fees and disbursements of administrators and liquidators of the company where the applicant would not benefit, whatever the result of the review, may demonstrate that the applicant is not a person aggrieved; compare GIS Electrical Pty Ltd v Melsom (2003) 43 ACSR 481. In that case, the Western Australian Court of Appeal dismissed an appeal from a master's decision dismissing an application for reinstatement. On the other hand, in Re Austral Group Investment Management Ltd [1993] 2 NZLR 692, as Gzell J pointed out, a company was reinstated for the purpose of being wound up in circumstances where it was a pre-requisite to bringing action against directors of the company that an order for its winding up be made; see p 700. Gzell J said: "29 However, these considerations only arise if the applicant for the reinstatement of registration of a company is a person aggrieved by its deregistration and that requires some interest that existed at the time of deregistration to have been adversely affected by the deregistration. In the instant circumstances no such interest existed." 15 With due respect, in my opinion, the statement in the last sentence cannot be supported. WorkCover had a plain interest in obtaining from the culpable director of Picton reimbursement for the payments it had made to Picton's employee and that interest was adversely affected by the de-registration. 16 Gzell J went on to say that, if he was wrong in his view that WorkCover was not an aggrieved person within the meaning of s601AH(2), he would exercise his discretion against the reinstatement of Picton on the basis of the unexplained delay by WorkCover in seeking to exercise its powers. His Honour prefaced this conclusion by referring to a passage in the judgment of Steytler J in GIS Electrical at 495. Steytler J at [66] outlined what he described as weighty matters in the exercise of a discretion that told against the respondents but then went on: "However, they must be considered together with all of the other circumstances of the case. These include, of course, the appellant's delay in bringing its application and the fact that it has no proprietary or pecuniary interest in the outcome of the application. They also include the fact that the only creditor which might benefit from a review of the fees charged has not joined in the application or made any complaint as regards the amounts charged by the respondents and the fact that, while the respondents gave inadequate notice of the fees to be charged by them and, in my opinion, inadequate details of those fees, they did, at least, keep the committee of creditors and the Commonwealth Bank fully informed of what they were doing, so as to enable them to make some estimate of the reasonableness of their charges. Also, as I have mentioned, the master was not persuaded that, given the complexity of the administration and liquidation, the respondents' fees were so 'inordinately high' that he should consider them unfair or unreasonable on that ground alone. While the respondents' fees were undoubtedly high, we have not been shown enough, in my opinion, to lead to the conclusion that the master was wrong in forming that opinion." 17 In his judgment, Gzell J said: "31 It was delay on the part of the plaintiff, when it was put on notice that the winding up of the defendant was a possibility, that led to its failure to establish an interest affected in a legal sense upon deregistration of the defendant. There was further unexplained delay on the plaintiff's part in bringing the current application. 32 The plaintiff is vested with powers of recovery of workers' compensation payments. Those powers may be said to be vested in it in the public interest. Those powers should, however, be exercised with expedition. It is not in the public interest to seek the reinstatement of corporate employers at a late stage in order to exercise those powers." 18 There is no dispute that, consequent upon information from Mr Croft, WorkCover proceeded on the basis that Discall was the worker's employer. The Local Court proceedings were not begun until 29 January 2002 but no particular complaint is made about that. It is no doubt explained in part by a decision only to seek reimbursement after it was known what the total of payments and disbursements would be. This was not known or at least the disbursements were not all paid until June 2001. The s145(1) notice was served on Discall on 31 October 2001. The proceedings went ahead and Discall filed a defence on 7 February 2002 asserting that the worker had never been its employee at any time. But it was not until June 2002 that Discall asserted for the first time that Picton was the employer. I do not see that any unexplained or irresponsible delay followed because time was allowed for Discall to take steps in the form of an application to the Commission on 2 October 2002 to resolve the question of whether the worker was employed by Discall. 19 On 24 January 2003, the Commission heard that dispute and determined on the balance of probabilities that Mr Hosey was not employed by Discall. A few days thereafter on 30 January 2003, Picton was de-registered. Undoubtedly a false start was made on 4 March 2003 by issuing a s145(1) notice against Mr Aiken personally but after correspondence that was withdrawn on 8 April 2003. On 11 July 2003, WorkCover wrote to ASIC and the former liquidator advising of instructions to make an application pursuant to s601AH(2). Shortly thereafter the Equity Division proceedings began. 20 At its heart, it might be said that the delay was the creature of the failure of the solicitors for Discall, who now act for Mr Aiken, to reveal before 4 June 2002 that Picton was the employer of the worker. That was only revealed when Picton was in voluntary administration. Again, with due respect to the trial Judge, I find it hard to see how, because of these delays which were described as unexplained, it was in the public interest for Picton not to be re-registered If it were not, WorkCover could not recover the payments it had made because of Picton's default. Apart from some uncertainty as to what WorkCover proposed to do, the delay had no consequence in terms of prejudice to Mr Aiken. None is claimed.

Conclusion 21 In my opinion, Gzell J erred in holding that in the circumstances WorkCover was not a person aggrieved within the meaning of s601AH(2) of the Corporations Act. His Honour's discretion miscarried as a result of a failure properly to understand the nature and reasons for the delay and an overstating of its consequences. It is arguable that under s601AH if a person aggrieved applies for reinstatement and if the Court is satisfied that it is just that the company's registration be reinstated, there is no further area in which discretion can enter to prevent the making of an order. In Finance Facilities Pty Ltd v Federal Commissioner of Taxation (1971) 127 CLR 106 the Court was concerned with a section of the Income Tax Assessment Act 1936 whereunder, subject to succeeding provisions of the section, "the Commissioner may allow a shareholder, being a company that is a private company in relation to the year of income and is a resident, a further rebate" if the Commissioner was satisfied about certain matters. At 134 Windeyer J, with whose judgment Barwick CJ agreed, said: "The question, which comes back to the words 'may allow', is not to be solved by concentrating on the word 'may' apart from its context. Still less is the question answered by saying that 'may' here means 'shall'. While Parliament uses the English language the word 'may' in a statute means may. Used of a person having an official position, it is a word of permission, an authority to do something which otherwise he could not lawfully do. If the scope of the permission be not circumscribed by context or circumstances it enables the doing, or abstaining from doing, at discretion, of the thing so authorized. But the discretion must be exercised bona fide, having regard to the policy and purpose of the statute conferring the authority and the duties of the officer to whom it was given: it may not be exercised for the promotion of some end foreign to that policy and purpose or those duties. However, that general proposition is irrelevant in this case. Here the scope of the permission or power given is circumscribed. Conditions precedent for its exercise are specified as alternatives. The question then is, must the permitted power be exercised if one of those conditions be fulfilled? This does not depend on the abstract meaning of the word 'may' but of whether the particular context of words and circumstance make it not only an empowering word but indicate circumstances in which the power is to be exercised - so that in those events the 'may' becomes a 'must'." 22 At 135 Windeyer J said that if the Commissioner, having considered the matter, was satisfied of the facts out of which the power to allow a rebate arose, he could not nevertheless refuse to allow it. 23 Gzell J did not suggest that he was not satisfied that it was just that the registration be reinstated only that as a matter of discretion on the basis of what he described as the unexplained delay he would not make an order. 24 Section 33(2A) of the Acts Interpretation Act 1901 (Cth) provides: "Where an Act assented to after the commencement of this subsection provides that a person, court or body may do a particular act or thing and the word may is used, the act or thing may be done at the discretion of the person, court or body."

The commencement date of the subsection was 18 December 1987. However arguably where the word "may" is used to invest a court with power as in s601AH(2) and indicates the circumstances in which the power is to be exercised if the circumstances are shown to exist there remains no room for the court to refuse to exercise the power at its discretion; compare Liddell v Lembke (1994) 127 ALR 342 at 359 and 367. 25 As the considerable and helpful research of Mr Pritchard, who appeared for the appellant, demonstrated in his written submissions, for the most part recent decisions in the Equity Division proceed on the basis that the court has to be satisfied that the applicant is a person aggrieved and that it is just that the company's registration be reinstated; see for example ACCC v ASIC (2000) 34 ACSR 232 at 236 [23]. However, as Austin J pointed out when addressing the question of when the court should be "satisfied that it is just that the company's registration be reinstated": "[27] The wording of the section is very broad and the cases confirm that it gives the court a wide discretion. The court takes into account the circumstances in which the company came to be dissolved, whether, if the order were made, good use could be made of it; and whether any person is likely to be prejudiced by the reinstatement: [citations omitted] [28] These matters are only factors to be weighed in the exercise of the court's discretion. They are not limits on the court's power. Here, the reinstatement is likely to lead to the company being joined in proceedings in which the ACCC will seek orders for pecuniary penalties against it. The company may therefore be prejudiced. The court may nevertheless conclude that it is just that the company's registration be reinstated, having regard (for example) to the strong public interest which is involved. It is appropriate for the court to take into account questions of public interest in exercising its discretion under s601AH. [citation omitted]" 26 Strictly speaking it is not necessary for this Court now to determine whether, beyond considering if it is just that the company's registration be reinstated, any further residual discretion remains in the Court. 27 WorkCover demonstrated that it was a person aggrieved by the de-registration. I am satisfied that it is just that Picton's registration be reinstated. There is no discretionary aspect of the matter which should lead the Court to refuse the order sought.

Orders 28 I propose the following orders: Upon the appellant through its counsel undertaking (a) to advise Mr M J M Smith, the reinstated liquidator of the first respondent, and ASIC when any proposed action of the applicant involving the company has finished; and (b) to indemnify Mr M J M Smith for any proper fees, costs and expenses associated with his reinstatement as liquidator of the company, including any subsequent de-registration of the company - 1. Appeal allowed; 2. The orders made by Gzell J on 18 September 2003 be set aside; 3. The registration of Picton Truck & Trailer Repairs Pty Ltd (De-registered) be reinstated; 4. The second respondent, Keith Richard Aiken, pay the appellant's costs of the appeal and of the proceedings below.

Last Modified: 10/20/2004 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.

Interpretation Act 1901(Cth)

CITATION : WORKCOVER AUTHORITY OF NEW SOUTH WALES v PICTON TRUCK & TRAILER REPAIRS PTY LTD (DE-REGISTERED) & ANOR [2004] NSWCA 371 HEARING DATE(S) : 23 September 2004 JUDGMENT DATE : 15 October 2004

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