Consideration
11 The defendant says that the plaintiff should pay the defendant's costs in relation to the winding up application because it was unreasonable for the plaintiff to pursue the winding up application. The defendant says that the plaintiff discontinued the winding up application and therefore r 26.12(7) of the Rules applies to require the plaintiff to pay the costs of the application unless good cause can be shown otherwise. The defendant cites Travaglini v Raccuia [2012] FCA 620 (Travaglini v Raccuia) at [23]-[26] per McKerracher J.
12 The order made by the District Registrar on 2 April 2014 was that the winding up application was "dismissed", not discontinued. However, even if the application had been dismissed by consent or discontinued it is not in a circumstance where the plaintiff effectively "surrendered" so that a costs order should be made against it. Nor do I consider that it is appropriate to apply the principles discussed in Re Minister for Immigration and Ethnic Affairs; Ex parte Lai Quin (1997) 186 CLR 622 at 624-625 per McHugh J: it is also not a case where both parties had acted reasonably in commencing and defending proceedings until the litigation was settled or its further prosecution became futile such that no order for costs is appropriate. The reasoning of Barrett J in Lavercombe v Auscott [2006] NSWSC 867 at [45]-[46] is most apposite to the circumstances of this case:
The expectation that costs should lie where they fall may be displaced if the court can see, with ease, that one party has acted unreasonably in a way which should be compensated by costs.
In the area of company winding up, an aspect of what is unreasonable is identified in a passage in the judgment of Brightman J in Re Lanaghan Bros Ltd [1977] 1 All ER 265 at p 266:
The petitioning creditor has proceeded without any fault whatever on his part. He obtained a judgment in circumstances which the company did not seek to dispute. After a generous lapse of time the petition was presented. The company then woke up and succeeded in having the judgment set aside on the terms that it paid the costs of the plaintiff in any event. Now that the petition must be dismissed it seems to me only just that the petitioning creditor, if he be a creditor, should be given his costs of the petition, which he presented with complete propriety. I propose therefore to make an order not only that the petition be dismissed but also that the company should pay the costs of the petitioner.
13 See also Cockatoo Ridge Wines Ltd v Naked Wines Direct Pty Ltd [2006] NSWSC 1074 at [5]-[16] per Barrett J.
14 In this case, the plaintiff issued a statutory demand based on judgment debts and for the reasons set out below it is my view that the true position could only be ascertained when the defendant filed the Cancellation Form dated 18 March 2014, a matter wholly within the defendant's control. The defendant, however, argued that the plaintiff was at fault for a range of reasons.
15 First, the defendant says the plaintiff should have known from undertaking an ASIC search in relation to the defendant that the defendant's registered office from May 2012 was in Melbourne. The plaintiff's solicitors undertook such a search on 21 February 2014. The defendant says the plaintiff has failed to show on what basis the Workers Compensation Act applied to the defendant in such a way as to incur liability for premiums after June 2012, since the obligation to maintain insurance relies on the defendant having employees in New South Wales under s 9AA and s 155 of the Workers Compensation Act. I reject this argument.
16 I do not accept that the plaintiff should have inferred from the mere fact of a change in the location of its registered office from Sydney to Melbourne in May 2012 that the defendant had no employees in New South Wales nor was it obliged to undertake enquiry as to the basis of the defendant's continued obligation to maintain workers compensation insurance for that reason. The defendant's principal place of business had at all times been in Melbourne yet the defendant does not dispute that it was required to maintain insurance for workers compensation up until June 2012 because it had employees in New South Wales.
17 Second, the defendant says that Mr Leahy advised QBE by telephone in July 2012 that the defendant had ceased to trade and therefore submits that the plaintiff should have known that the defendant would have no liability for workers compensation insurance premiums. The defendant says that the plaintiff should have been well aware that there was a clear possibility that the amount that it was seeking in the statutory demands would be different from the true amount payable. The insurer undertook no investigation to verify the amount of the premiums and therefore failed in the duty suggested by McKerracher J in Travaglini v Raccuia to investigate the value of the claim. The defendant submits that it is not open to the insurer to be wilfully blind to the changed circumstances of which it had been notified when it undertook calculation of premiums. This argument must also fail.
18 The plaintiff submitted that s 159 of the Workers Compensation Act requires a policy of insurance to contain provisions prescribed by the Workers Compensation Regulations 2010 (NSW) (Workers Compensation Regulations). Regulation 56(1) requires the provisions in Schedule 3 to be included in a policy of insurance. Clause 17 of Schedule 3 provides as follows:
Renewal of Policy
This Policy is renewed on the expiration of the current period of insurance to which it applies, except where:
(a) the Employer has given written notice to the Insurer (before the expiration of the current period of insurance) that renewal is not required, or
(b) the Insurer has given the Employer notice in writing not less than 14 days before the expiration of the current period of insurance that the Insurer refuses to renew the Policy, but the Insurer cannot refuse to renew this Policy unless the WorkCover Authority has given its prior consent in writing to the refusal.
The period of each renewal is 12 months, or such shorter period as the Insurer and the Employer agree to before renewal.
19 I accept the plaintiff's submission that the effect of clause 17 is that a workers compensation policy is automatically renewed except where the employer has given written notice to the insurer before the expiry of the current period that renewal is not required.
20 In the context of a scheme of insurance which the legislation requires an employer to take out for the protection of workers it is appropriate that the process for renewal of insurance policies operate in the manner contemplated by clause 17 and that a telephone notification would be insufficient to effect termination. A telephone conversation is open to misinterpretation and (in the absence of being recorded) creates no permanent record.
21 It appears that QBE's records do not support Mr Leahy's evidence. Ms Amanda Yeoman, a credit control officer at QBE, swore an affidavit dated 10 April 2014. Ms Yeoman deposed that except for the Cancellation Form dated 18 March 2014 QBE has no record indicating a request from the defendant to cancel its policy. The Cancellation Form indicates that the "Cancellation Date" was 30 June 2012.
22 It is not consistent with the scheme of the Workers Compensation Act and Regulations to impose an obligation on the insurer to undertake the sorts of enquiries to establish the correct amount of a premium suggested by the plaintiff. This submission was based on comments made by McKerracher J in Travaglini v Raccuia to the effect that a person who seeks to persuade the Court not to follow r 26.12(7) because they acted reasonably should first be able to demonstrate that they investigated the viability of the claim. Travaglini v Raccuia involved a dispute about whether certain property was held in trust for a bankrupt and valuations indicated that liabilities attached to the property exceeded its value so that the action was futile. This is a different case.
23 Regulation 150 of the Workers Compensation Regulations makes it an offence for an employer, without reasonable excuse, to fail to provide to an insurer the estimate of wages required by regulation 147; that is, an estimate of wages which will be payable by the employer during the period of insurance. The estimate must be provided within two months after making an application for an insurance policy or renewing it. Order 9(2) of Schedule 1 of the Insurance Premiums Order 2012 - 2013 provides as follows:
If at any time the employer has failed to furnish the returns in respect of any relevant period of insurance and the monetary value of the wages concerned has not been ascertained, the estimate of the monetary value of those wages is taken to be such amount as is calculated by multiplying the monetary value (or reasonable estimate) of wages for the immediately preceding equivalent period of insurance by 1.3.
24 I accept the plaintiff's submission that the effect of these provisions is to impose on the employer (that is the defendant) an obligation to provide estimates of wages to be paid. Failing that, an estimate of premium must be made based on the immediately preceding equivalent period. Ms Yeoman deposed that the defendant failed to provide actual wage declarations for the period 13 September 2011 to 30 June 2012. After receipt of the Cancellation Form, credits were given to the defendant so that the amount of the judgment debts relied upon was reduced to $1,823.88 as at March 2014. The plaintiff indicated that the defendant's actual wage declarations were received on 1 May 2014.
25 Accordingly, the judgment debts were based on calculations required by the Workers Compensation Act and Regulations and this remained the case at the time of service of the statutory demand and originating process for the winding up application. It remained the case until the Cancellation Form was received. I do not accept that in the circumstances of this case, and having regard to the statutory provisions and their purpose, the insurer had any duty (or capacity) to verify premiums; the obligation was the defendant's to provide written notification of cancellation and, failing that, returns as to wages so that premiums could be calculated accurately.
26 Third, the defendant says that the plaintiff knew that service on the registered office of the defendant was likely to be ineffective because it had ceased operations. The defendant further submits that they did not get an opportunity to make arguments concerning whether service was adequate or to rebut the presumptions under s 160 of the Evidence Act 1995 (Cth) (or, presumably, the impact of s 109X of the Corporations Act which permits service on a company by posting documents to the company's registered office) because the application for winding up was "discontinued". The defendant submitted that Mr Hogerhorst had taken all reasonable steps to receive correspondence by making arrangements (in effect for four months) with Flight Centre to forward mail and by making arrangements for calls to be redirected by Mandy Lee. Mr Hogerhorst acknowledged that later enquiries indicated that Flight Centre returned to sender any mail not intended for Flight Centre,
27 This argument must also fail. Section 142 of the Corporations Act requires a company to maintain a registered office in Australia and to obtain the consent of the occupier for that use where the company is not the occupant of the registered address. It is not clear that this consent was ever secured from Flight Centre. Nor is it clear why Mr Hogerhorst's private office across the street would not have been an appropriate registered office for the defendant. Ms Danielle Gewerc, an employee of the plaintiff's solicitor, swore an affidavit on 12 March 2014 deposing to having sent the originating process to the registered office of the defendant. On 21 February 2014, Ms Kathleen Sarre swore an affidavit of service of the statutory demand by posting the statutory demand to the defendant's registered office. Even if I were to accept that the telephone conversation to which Mr Leahy deposes occurred, I do not see any reason why the fact that the defendant has ceased to carry on business would disentitle the plaintiff from using the defendant's registered office as an appropriate address for service of a statutory demand or originating process. On one view, it makes it most appropriate that that address was used. Mr Hogerhorst's efforts to bring mail and telephone contacts to his attention were inadequate. It was his duty as an officer of the defendant to ensure that it complied with s 142 of the Corporations Act. I note that even as at 12 June 2014 (the date of the most recent ASIC search) this omission appears not to have been rectified.
28 Based on the affidavits of Ms Gewerc and Ms Sarre, I am satisfied that the statutory demand and originating process were sent to the defendant's registered office and principal place of business as disclosed by the ASIC records. Had the defendant, through its officers, taken the elementary steps of notifying ASIC of a registered address which it (or Mr Hogerhorst) occupied or even redirected mail, Mr Hogerhorst could have addressed the demand by filing a Cancellation Form so that these proceedings could have been avoided.