Workers Compensation Nominal Insurer v Dover Security Systems

Local Court Act 1982 LEGISLATION CITED : Workers Compensation Act 1987 Workplace Injury Management and Workers Compensation Act 1998

Acerose Pty Ltd v WorkCover Authority of NSW [1998] NSWSC 707 CASES CITED : Employer's Mutual Indemnity (Workers Compensation) Ltd v A Donald Pty Ltd [1997] NSWSC 102 GIO Workers Compensation (NSW) Ltd v Rigby Jones Pty Ltd [1998] NSWCA 93 Glambed v GIO Workers Comepsnation (NSW) Ltd [1999] FCA 648

PARTIES : Workers Compensation Nominal Insurer (Plaintiff) Dover Security Systems Pty Ltd (Defendant)

SOLICITORS : Prime Lawyers (Plaintiff) Submitting Appearance (Defendant)

LOWER COURT JUDICIAL OFFICER : Local Court Assessor Graham Roberts

IN THE SUPREME COURT OF NEW SOUTH WALES COMMON LAW DIVISION

10283/2008 - WORKERS COMPENSATION NOMINAL INSURER v DOVER SECURITY SYSTEMS PTY LTD

JUDGMENT (Appeal decision of Local Court Assessor - recovery of workers compensation premiums - jurisdiction) 1 HER HONOUR: By summons filed 18 January 2008, the plaintiff seeks firstly, an order setting aside the decision of the assessor, Graham Roberts, made at the Local Court, Downing Centre on 21 December 2007, in proceedings 31337/2007; and secondly, an order that there be judgment for the plaintiff in Local Court proceedings 31337/2007. 2 The plaintiff is Workers Compensation Nominal Insurer ("the Insurer"). The defendant is Dover Security Systems Pty Ltd ("Dover Security"). The Insurer relied on the affidavit of Daniel Riedstra sworn 23 April 2008. Dover Security has filed a submitting appearance. It submits to the making of all orders sought and the giving of entry of judgment in respect of all claims made, save as to costs. 3 These proceedings involve the sum of $2773.44 for unpaid workers compensation premiums for policy periods from 2 March 2006 to 2 March 2008. On 21 December 2007, Assessor Roberts entered judgment for Dover Security. 4 Section 73(2) of the Local Courts Act 1982 allows an appeal to this Court from a decision of Magistrate sitting in the Small Claims Division on the ground that the Magistrate lacked jurisdiction or denied natural justice in making their judgment. The Insurer submits that it had been denied natural justice. 5 Section 75 of the Local Courts Act provides that the Court may determine an appeal by either (a) varying the terms of the judgment or order or (b) setting the judgment or order aside or (c) setting the judgment or order aside and remitting the matter for determination in accordance with the Court's directions or (d) dismissing the appeal.

Grounds of appeal 6 The Insurer appeals from the whole of the decision of Assessor Roberts made on 21 December 2007. The grounds of appeal are firstly, that the Local Court acted ultra vires and/or outside its jurisdiction because the Local Court does not have any jurisdiction to determine what the proper premium payable in respect of the workers compensation insurance policy, the subject of the Local Court proceedings, was and/or is and acted outside its jurisdiction in holding that the plaintiff could not prove its case in quantum. Secondly, in the alternative, the Local Court denied the plaintiff natural justice and/or procedural fairness in finding that Dover Security was not an employer for the purposes of the Workers Compensation Act 1987and related legislation where no such matter was pleaded and without allowing the Insurer to be heard in relation to that finding and without allowing the Insurer an opportunity of calling witnesses, submitting evidence and cross examining witnesses in relation to that issue. For reasons given, it is not necessary to determine whether or not the Insurer was afforded procedural fairness.

The pleadings in the Local Court 7 By statement of claim dated 18 July 2007, the Insurer sought an order pursuant to the provisions of s 172 of the Workers Compensation Act seeking to recover the following in relation of CGU Workers Compensation (NSW) Limited policy number WGB060368180122 for unpaid workers compensation premiums in the sum of $2125.84 for policy periods 2 March 2006 to 2 March 2008; and late payment fees in the sum of $187.80 calculated at 1.074% compounded monthly and continuing to accrue until judgment. 8 By defence dated 16 August 2007, Dover Security pleaded firstly, that policy number WGB060368180122 was cancelled both by telephone call and followed up by fax on Dover Security Systems Pty Ltd company letterhead within a week of the initial application for the policy; secondly, there was no requirement for insurance during the period of 2 March 2006 and 2 March 2008 by Dover Security to be supplied by the Insurer after cancellation; thirdly, Dover Security did not seek to be reinsured by the Insurer; fourthly, Dover Security had not made any claims against any insurance policy for the purpose of workers compensation; fifthly, Dover Security was insured by another insurer; and sixthly, Dover Security had informed the Insurer and its representative E Credit Management through discussions via telephone. 9 It was common ground that on 2 March 2006, the Insurer issued a workers compensation policy to Dover Security. 10 It was also common ground that by fax dated 6 March 2006 Mr David Jarman managing director of Dover Security wrote to the Insurer as follows: "Subject: Cancelling Policy WGB060368180122 Dear Sarah First I would like to thank you for the service that you provided both me and my company. Unfortunately the staff member that the workers compensation insurance was to cover will no longer be starting employment with Dover Security Systems Pty Ltd. As there will no be (sic) wages paid by Dover Security Systems Pty Ltd there will be no requirements to continue with the workers compensation insurance policy number WGB060368180122. I no longer consider Dover Security Systems Pty Ltd insured in anyway with QBE Insurance. …" 11 Hence, at the time Dover Security obtained the policy anticipated that it would have an employee. 12 Under s 155 of the Workers Compensation Act, workers' compensation insurance is compulsory for all employers. An employer must obtain and maintain in force, a policy of insurance that complies with Division 1 of the Act, in respect of "all workers employed by the employer". The penalty for failure to comply with s 155 is $55,000 or 6 months' imprisonment or both. 13 The Act does not provide a relevant definition of 'employer' or 'worker'. The Assessor found the lack of definition of employer troublesome. 14 The Workers Compensation Act is to be construed with, and as if it formed part of, the Workplace Injury Management and Workers Compensation Act 1998 (NSW) - s 2A Worker Compensation Act. 15 Section 4 of the Workplace Injury Management and Workers Compensation Act provides that: "employer

includes: (a) the legal representative of a deceased employer; or

without limiting the meaning of the expression, an employer can be an individual, a corporation, a firm, an incorporated body of persons, a government agency or the Crown." 16 Likewise, s 4 states that 'worker' means a person who has entered into or works under a contract of service or a training contract with an employer (whether by way of manual labour, clerical work or otherwise, and whether the contract is expressed or implied, and whether the contract is oral or in writing). The section then goes on to list a number of exceptions. 17 The s 4 definition brings into play the common law concepts of 'contracts for service' and 'contracts of service'. 18 Schedule 1 of Workplace Injury Management and Workers Compensation Act is titled 'Deemed employment of workers', and provides further details in respect of whom workers' compensation premiums are payable. 19 A licensed insurer shall not, except with the consent of the Authority, refuse to issue a policy of insurance to any employer or to renew a policy of insurance issued to an employer - s 157(1) Workers Compensation Act. The Insurer determines the amount of the premium in accordance with s 169 of the Workers Compensation Act. 20 Once the policy has issued, there is a procedure to be followed if the insured seeks recovery of the premium. The procedure is set out in s 172(1) of the Workers Compensation Act. 21 Section 172(1) relevantly reads: "172 Recovery of unpaid premiums

(1) Where: (a) an employer has not elected under section 171 to pay a premium by instalments and fails to pay the full amount of the premium within 1 month after service on the employer of a notice that payment of the premium is due,

the full amount of the premium (in the case referred to in paragraph (a)), the balance of the premium unpaid or, where no instalment has been paid, the full amount of the premium (in the case referred to in paragraph (b)) or the amount of the adjustment (in the case referred to in paragraph (c)) together with a late payment fee calculated at the prescribed rate may be recovered as a debt in a court of competent jurisdiction." 22 In Employer's Mutual Indemnity (Workers Compensation) Ltd v A Donald Pty Ltd [1997] NSWSC 102, his Honour Cole JA, (with whom Priestley and Stein JJA agreed), held as follows: "The provisions of the Act and regulations to which I have referred make plain, to my mind, that the legislature intended to and has established a regime whereby the quantum of an insurance premium is to be determined in the first instance by the insurer in accordance with an insurance premiums order pursuant to s.169. If the employer is dissatisfied with the premium so calculated and sought by the insurer, the employer's rights are to apply pursuant to s.170, and in accordance with the regulations, to the Authority to determine the correct premium. If the premium as determined by the insurer is not so queried or challenged, or if after challenge the premium is determined by the Authority, that is the premium which the employer must pay. It is that premium which is recoverable pursuant to s.172 by the insurer, or if there be an overpayment resulting from a redetermination by the Authority, recoverable by the employer pursuant to s.170(4). Whilst it may be possible, perhaps, to challenge by way of administrative review an asserted error of statutory application of the formula (a matter which it is unnecessary to decide), the legislature has, in my view, made clear that any factual determination in application of the statutory formula for premium determination is not a matter for review within the courts but is to be determined by the Authority.

That determination is the review contemplated by the Act and regulations and referred to with reference to recovery proceedings pursuant to s.172. Section 172(4) makes clear to my mind that the insurer is entitled to recover the insurance premium claimed to be accordance with the statutory formula if not challenged or as reviewed by the WorkCover Authority if challenged… Here there are clear indicia beyond the use of the expression "recoverable as a debt" that make clear the legislative intention that subject to the possibility of judicial review by way of prerogative writ (a matter upon which I express no view), the decision of the WorkCover Authority reviewing insurance premiums is the final determination of the sum payable. Those indicia include Regulations 13 to 16B and ss.169, 170(4), 174 and 175(5). It follows, in my view, that the District Court did not have jurisdiction to determine what was the proper premium payable in respect of the policy for which EMI sued." 23 This decision has been applied in a number of subsequent decisions, see for example - see GIO Workers Compensation (NSW) Ltd v Rigby Jones Pty Ltd [1998] NSWCA 93; Glambed v GIO Workers Compensation (NSW) Ltd [1999] FCA 648; and Acerose Pty Ltd v WorkCover Authority of NSW [1998] NSWSC 707.

The Assessor's reasons 24 The Assessor stated (at t 10): "…I agree with Mr Jarman, I think the court can safely distinguish this Employees Mutual v Donald case as Mr Jarman points out it related to the reasonableness of the claims assessment and it related to various other things such as prior claims and the like. So clearly Employers Mutual is not a case at one with the notion of whether Dover Security was in fact an employer … …But as I said I could have just left it at the plaintiff has not made out it's quantum because there is clear evidence in terms of 155 the defendant did have insurance for part of the period the plaintiff claims, but I didn't want to leave it there, I'm just still perplexed that despite a considerable amount of time on the net neither the regulation nor the Act and nor any of these another act for workplace. … I just couldn't find a definition of employer, you can find definitions of what employer can include, directors, associated companies, umbrella companies and the like but you can't find a definition of whether an employer would include someone like Dover who has no employees. So the quantum issue would resolve the matter fairly concisely but I've tried to go the extra yard as I said and I do note with some interest that Dover purported to cancel, the word cancellation is used in the fax." 25 It is my view that once the policy issued the Local Court did not have jurisdiction to determine what was the amount of premium that was payable. The Assessor lacked jurisdiction to hear and determine that issue. 26 The appeal is upheld. The decision of Assessor Roberts dated 21 December 2007 is set aside. I enter judgment that Dover Security Systems Pty Ltd is to pay the Workers Compensation Nominal Insurer the sum of $2773.44. Costs are reserved. 27 If Dover Security is dissatisfied with the amount of premium payable, it has the right to apply to the Authority to determine the correct premium - s 170 of the Workers Compensation Act. The application to the Authority must be made within one month of the demand for the premium or such further time as the Authority may in special circumstances approve - s 170(2) of the Workers Compensation Act. It may be that Dover Security may chose to avail itself of this mechanism.

(1) The decision of Assessor Roberts dated 21 December 2007 is set aside.

(2) Judgment is entered that Dover Security Systems Pty Ltd pay to the Workers Compensation Nominal Insurer the sum of $2773.44.

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.