Australian and International Insurances Ltd v Workers' Compensation Commission (NSW)

[1972] HCA 30

HIGH COURT OF AUSTRALIA

Barwick C.J., McTiernan, Menzies, Owen and Walsh JJ. (THE RIGHT HONOURABLE MR JUSTICE OWEN died before the delivery of judgment in this case.)

AUSTRALIAN &INTERNATIONAL INSURANCES LTD. v. WORKERS' COMPENSATION COMMISSION (N.S.W.)

(1972) 125 CLR 470

19 May 1972

Constitutional Law

Constitutional Law (Cth)—Inconsistency between State and Commonwealth laws—Commonwealth Act providing that no State law shall require insurer to make any payment as a condition of carrying on insurance business—State law empowering Workers' Compensation Commission to terminate insurer's licence if satisfied that insurer has failed to comply with requirement of Act—Requirement that insurer contribute annual percentage of premium income to fund fund—The Constitution (63 &64 Vict. c. 12) s. 109—Insurance Act 1932-1966 (Cth), s. 7*—Workers' Compensation Act, 1926 (N.S.W.), ss. 18 (1), 27 (1), 29 (1), 41*.

Decisions

May 19.
The following written judgments were delivered: -
BARWICK C.J. The Workers' Compensation Act, 1926 as amended, (N.S.W.) (the Compensation Act), and in particular Pt III thereof, was in force in New South Wales at the time the Commonwealth Parliament enacted the Insurance Act in the year 1932. The Compensation Act, by s. 18, required every employer to insure with an insurer licensed under the Compensation Act, and provided for the licensing of insurance companies to conduct workers' compensation insurance business. It set up the Workers' Compensation Commission (the Commission) and provides that the licensed insurers should contribute to a fund out of which the cost of maintaining the Commission should be met as well as certain other liabilities. Brief reference to the relevant statutory provisions is not out of place. (at p472)

2. Section 18 (1) requires every employer to obtain from an insurer licensed under the Act to carry on business in the State, a policy of insurance or indemnity for the full amount of his liability under the Act to all workers employed by him and for a stated amount in respect of his liability independently of the Act for injury to his workers. (at p472)

3. Section 19 (1) requires every insurer carrying on the business of workers' compensation insurance to make with the Treasurer of the State a deposit related to the premium income of the insurer. (at p472)

4. Section 27 (1) empowers the Commission on application duly made and upon consideration of, amongst other things, such information as it might receive, and due inquiry, to grant either unconditionally or subject to such conditions as the Commission might see fit, a licence to carry on in New South Wales the business of insurance of employers against their liability under the Act. (at p472)

5. Section 29 (1) empowers the Commission to suspend or terminate any such licence if satisfied of one or more of a number of listed matters, events or things. Included in the list is - "(e) that the licensee has failed to comply with any provision of this Act and such failure constitutes a substantial breach of the requirements of this Act". (at p472)

6. Section 41 constitutes "the fund" from which the cost of maintaining the Commission and carrying out the provisions of the Act should be paid. (at p472)

7. It further provides that each licensed insurer should contribute annually to the fund a sum fixed by the Commission being a percentage of the premium income of the licensed insurer during the preceding calendar year in respect of workers' compensation insurance. (at p472)

8. The Insurance Act 1932-1966 (Cth) was enacted pursuant to s. 51 (xiv.) of the Constitution. To the extent to which provisions of the Compensation Act became inconsistent with the Insurance Act upon its enactment, they ceased to be operative. Inconsistency is not limited to textual inconsistency but, under the doctrines established by this Court, no State law which would otherwise operate within the area of legislation within which the Commonwealth intends its law to be the exclusive law can validly do so. (at p473)

9. Three submissions are made by the plaintiff in this case, of which the first two turn upon the proper construction of the Insurance Act. No question of Commonwealth legislative power is involved for it is, and could not be contested that, had the Parliament so intended, its law could have been made exclusive in the entire field of insurance including workers' compensation insurance. (at p473)

10. The plaintiff, having lodged with the Treasurer of the Commonwealth the amount of money by way of deposit for which s. 6 of the Insurance Act provides, at all material times carried on insurance business in New South Wales including the business of issuing policies indemnifying employers against their liability under the Compensation Act. The plaintiff is licensed by the Commission, in accordance with s. 27 of the Compensation Act, but contends that it is not bound to contribute to the said fund and that the Compensation Commission could not rightly terminate its licence to carry on workers' compensation business pursuant to s. 29 (1) (e) because of the company's failure to contribute to the fund. (at p473)

11. The plaintiff has sued in this Court for a declaration that the licensing provisions of the Compensation Act to which I have referred are inoperative because they are inconsistent with the provisions of the Insurance Act. No question arises as to s. 19 which admittedly became inoperative on the passing of the Insurance Act. The jurisdiction of the Court to entertain the suit as a matter involving interpretation of the Constitution is not contested, but the defendant Commission and, by amendment, the Attorney-General of the State of New South Wales, have each demurred to the whole of the statement of claim on the footing that there is no inconsistency as claimed and therefore no cause of action disclosed by the statement of claim. (at p473)

12. No argument has been presented as to the suitability of a demurrer in a suit for a declaration as an appropriate means of raising for decision questions such as have been argued in this case. Consequently, I say nothing on that matter. But it is clear that the demurrer can only succeed if no declaration at all ought to be made in the suit. (at p473)

13. The first submission of the plaintiff is that, upon its true construction, the Insurance Act gives to an insurance company which has complied with the Act's requirements, that is to say, has made the necessary deposit of money, a right to carry on insurance business in Australia, and that no State law may forbid the exercise by such a company of any part of the insurance business which it thus has a right to conduct. (at p474)

14. Secondly, the plaintiff submits that, upon its true construction, the Insurance Act intends that its provisions shall be exhaustive of the conditions which may be imposed upon an insurer by way of protection of the policy holders to whom the insurer may have issued or will issue policies of insurance. The plaintiff says that the exclusive method of securing policy holders is the deposit of money in accordance with the Insurance Act and no State law may make any other provision by way of protection of the policy holders of the company. The plaintiff then contends that the width of the licensing power of the Commission would permit the Commission to require conditions, including the deposit of money, designed to protect policy holders. (at p474)

15. Thirdly, it is submitted that, because the Compensation Act by s. 29 gives to the Commission the right to terminate the licence of an insurer to carry on workers' compensation insurance business for the failure of the licensed insurer to make the prescribed payments to the fund, such payments are required to be made as a condition of carrying on the said business within the meaning and operation of s. 7 of the Insurance Act. Thus, it is said that s. 7 invalidates s. 41 of the Compensation Act because of its association with s. 29 (1) (e). (at p474)

16. I shall deal with each of the submissions in the order in which I have listed them. There can be no question of the Parliament's legislative power to confer a right to carry on insurance business and exhaustively to specify the conditions upon which such a business may be carried on. The Life Insurance Act 1945-1965 (Cth) is indicative of the nature of the conditions which may be made under the legislative power. The question is whether, upon its proper construction, the Insurance Act does confer a right on those who comply with its terms to carry on the business of insurance. It if does, there could be no doubt that the attempt on the part of the State to subject the company to a licensing system, in order that it may carry on business in that State, would be invalid. (at p474)

17. The Insurance Act does not give, in express terms, a right to carry on business. Examples of the use of legislative power to do this can be seen in other of the Parliament's statutes such as the Life Insurance Act and the Banking Act 1959-1967 (Cth). Section 9 of the Insurance Act is the only provision to which the plaintiff can point as supporting or tending to support its submission that a right to carry on insurance business is found in that Act. This section provides, in part:

"A person shall not carry on insurance business in the Commonwealth unless he has lodged a deposit with the Treasurer as required by this Act."

It is not impossible, in my opinion, for a provision such as this, in an appropriate context, to be held, by implication, to grant a right to those who comply with its terms, but I am unable so to read s. 9 in the context of the Insurance Act. It seems to me that all that the Insurance Act, by ss. 6 and 9, does, is to require a person or company, having otherwise a right to carry on insurance business, to make the necessary deposits with the Treasurer of the Commonwealth. As I will point out later when discussing the terms of s. 7 of the Act, it seems to me plain that the Insurance Act contemplates that those who carry on insurance business may do so by virtue of a right or licence granted by a State and that the Insurance Act, as drafted, does not purport to occupy the whole field of the control and regulation of the business of insurance. It confines itself, so far as the right to carry on insurance business is concerned, to requiring the making of a deposit by companies which do carry on insurance business by virtue of some right derived elsewhere than from the Insurance Act itself. In my opinion, the first submission of the plaintiff is not tenable. (at p475)

18. The second submission which the plaintiff makes is of lesser extent. It assumes that the Parliament has not purported to grant a right to carry on business and has contented itself with requiring those who do, or are about to, carry on business to deposit money with the Treasurer of the Commonwealth in the amounts prescribed by the Act. The plaintiff says that the field which the Parliament intends to occupy is what might loosely be called the field of the protection of the policy holder against the possible insolvency of the insurance company. It is submitted that the Parliament indicates, by the terms of its law, that it intended that protection to be exclusively secured by money deposits of specified amounts. Consequently, it was said that any State law directed to that end must be inoperative by virtue of s. 109 of the Constitution. (at p475)

19. It is then submitted that s. 7 ought not to be regarded as definitive of the extent to which the Parliament intended to enter the legislative field: that is, the submission is that Parliament does not intend its law to be the law only with respect to deposits and money payments as conditions of the ability to carry on the business of insurance. (at p476)

20. However, I have come to the conclusion that s. 7 does indicate the full extent relevantly of the intended exercise of the legislative power. It may be granted that the making of a deposit with the Treasurer is a means of protecting policy holders and, perhaps, in the case of indemnity policies, a means to some extent of protecting those to whom the insured is obliged to pay money, as in the case of a workers' compensation policy. No doubt the Parliament has decided that as regards a particular means of protecting policy holders, namely by deposit or payment of money, as a condition of being able to carry on the business, that it alone should decide the adequacy of the amount of the deposit or other payment of money, in any particular case, as such a means of protection. If it were not for the presence of s. 7, I think there might be something to be said for the view that the Parliament also decided that this particular method of policy holder protection should be the sole means of such protection to be provided by law, though I remain far from persuaded that that would have been a proper construction of the language of the statute. I might remark in this connexion that the fact that it may be thought that the mere requirement of a deposit is clearly an inadequate provision would not necessarily mean that the extent of the field intended by the Parliament to be occupied by its law is limited to the making of deposits or the payment of money. Care must be exercised that deficiencies in the federal statute, that is, the limited nature of the provisions it makes are not taken as definitive of the extent of the power intended to be exercised. That extent is to be resolved by a consideration of the statute as a whole. (at p476)

21. However, s. 7 properly understood does indicate, in my opinion, that the Parliament only intended to provide for the making of a deposit as a means, but not the sole means, of protecting policy holders; and, to anticipate a point later to be discussed, as one condition, but not the sole condition, on which the business of insurance might lawfully be carried on. (at p476)

22. It seems to me that s. 7 contemplates that licences to carry on insurance business may be required under State laws. The exaction of a licence fee under State law is not to be effective, but a stamp duty on the licence may be imposed. Of course, such a licence may be granted as of right and be merely a means of providing a document in respect of which stamp duty may be demanded. But s. 7 cannot be read, in my opinion, as referring only to such licences. Further, the terms of s. 7 are limited to payment of money as a condition of carrying on the business of insurance. It does not extend to conditions which are not of a pecuniary nature. Thus, as I have said, the very limited nature of the terms of s. 7 tends to indicate the limited area which the Parliament intends its law exclusively to occupy. The Act as a whole pre-supposes that, but for its own provisions, the business of insurance may be lawfully carried on. It seems to me that the requirement by State law of a licence to carry on business, the grant of the licence being in the discretion of the executive, is quite consistent with that assumption of the Insurance Act. (at p477)

23. The difficulties which have arisen in this case have been largely caused by the form of the State legislation and the fact that the Compensation Act preceded in point of time the passage of the Insurance Act. It would seem to me to be quite clear that the State could do in this area all that it has done, for example, in the Motor Vehicles (Third Party Insurance) Act, 1942-1969 (N.S.W.): that is to say, authority can be given to approve those insurers whose policies may be acceptable for the purposes of the State statute. Here that course might well be thought adequate for the purpose of the Compensation Act. But approval of insurers for the purposes of the statute is not sufficient; a licence to carry on business of the particular kind at all has been required. (at p477)

24. I would add that I very much doubt whether, even on the basis that the Parliament intended its law to be the exclusive law in the field of the protection of policy holders, the provisions of the Compensation Act, properly understood, intruded into that field. I am unable to accept the submission that the provisions of s. 27 were wide enough to enable the Commission to impose pecuniary conditions as a term of its licence for the purpose of protecting policy holders. I would rather have thought that the purpose of vesting wide powers in the Commission was to enable it to secure the interests of the workers who might have awards made in their favour against insured employers. Having expressed my view as to the limited nature of the field the Parliament intended to occupy, there is no need for me further to pursue arguments which were presented by the plaintiff's counsel in support of the view that the State law did enter what he claimed to be the forbidden field. (at p477)

25. The last question is a matter of some difficulty. There is no doubt that s. 41 of the Compensation Act does not expressly make the payment which it stipulates a condition of carrying on workers' compensation insurance business. Because of the manner of its calculation, it may be that the amount to be paid by the insurer is not necessarily a payment to be made before the end of the first year of operations. That is to say, the payment is not always a payment to be made before the business can be started. However, when the Compensation Act was enacted, no doubt insurers had been carrying on workers' compensation insurance for more than twelve months. Thus, as to such insurers, the payment might have been payable sooner than the end of the year following the passage of the Compensation Act. But, in the case of an insurer commencing business after the passing of the Compensation Act, contributions to the fund would not be required till the end of its first year of operations. But, undoubtedly, the business may not be carried on unless the payment is made when it becomes due. The power to terminate the licence, it seems to me, does make the making of the payment a condition, not of the licence, but a condition on which the business may be carried on within the meaning of s. 7 (1) of the Insurance Act. That section provides that a deposit may not be required, that a licence fee may not be required, and then proceeds to speak of the making of any other payment as a condition upon which that person, who may be a licensed person, may carry on insurance business. In my opinion, s. 29, in combination with s. 41, does offend the terms of s. 7 (1) of the Insurance Act properly understood. The matter for me is a matter of substance and not of form. The purpose of the federal statute is to ensure that there are no money payments which an insurance company must pay in order to continue to carry on its business other than those prescribed by the federal Act. (at p478)

26. However, it is to my mind quite clear that the State, while the Insurance Act remains in its present form, can require the insurance company to pay the prescribed sums into a fund such as that for which s. 41 provides. It can make the payment a debt due to the Crown and, as has now happened, make it a criminal offence not to pay it. It could, of course, withdraw the approval in default of the making of the contribution for which s. 41 provides. But what, it seems to me, it cannot do, under any guise, is to make its payment a condition of carrying on the business. As I have said, much of the difficulty in this case springs from the form of the State law in seeking to license the insurer to do business rather than approve the insurer for the purposes of the statute. (at p478)

27. Thus, the present case does little more than point up the difficulties which the particular form of the State statute has created but it discloses no weakness in the State power to do as it intends to do so long as the Insurance Act remains in its present form. In my opinion, the demurrer should be overruled on the ground that a declaration could properly be made at the suit of the plaintiff. Section 29 (1) (e) in relation to a failure to comply with s. 41 is rendered inoperative by s. 7 of the Insurance Act. If it were not for my views on s. 29 (1) (e) in relation to s. 41, I would have agreed that the demurrer should be allowed. (at p479)

McTIERNAN J. I think that the demurrer should be overruled. The reasons stated by the Chief Justice require this conclusion. I have nothing to add to them. (at p479)

MENZIES J. The plaintiff carries on insurance business in New South Wales and has lodged with the Treasurer of the Commonwealth the deposit required by the Insurance Act 1932-1966 (Cth). It claims that, by virtue of this Act, it is free from certain provisions of the Workers' Compensation Acts of New South Wales which it is contended are inconsistent with the Insurance Act. To this claim the Workers' Compensation Commission and the Attorney-General of New South Wales have demurred. (at p479)

2. An examination of the Insurance Act reveals that it is a law of very limited application which does little more than make provisions relating to deposits which it requires to be made by a person carrying on, or proposing to carry on, insurance business. The principal provisions are ss. 7, 9 and 11. Section 9 forbids a person from carrying on insurance business unless he has lodged a deposit as required by s. 11. Section 7, which relates to deposits under State Acts, is as follows:

"7. (1) After the commencement of this Act, no State Act, whether passed before or after the commencement of this Act, to the extent to which it requires a person carrying on or proposing to carry on insurance business to make any deposit or to make any payment by way of licence fee or to make, as a condition upon which that person may carry on insurance business, any other payment, shall, subject to this Act, have any force or effect: Provided that this sub-section shall not affect the operation of any State Act, in force on the first day of February, One thousand nine hundred and thirty-two, in so far as the State Act imposes stamp duty upon licences issued to persons engaged in insurance business. (2) Where, at the commencement of this Act, any amount or security is, in pursuance of any enactment which upon such commencement ceases to have effect, held by a State or by any authority of a State by way of deposit on account of any person carrying on insurance business, the State or authority shall, when so required by the Treasurer, return the amount or security to the person by whom the deposit was lodged. (3) So much of any amount or security as is in the form of money or approved securities and is returned to any person under the last preceding sub-section shall, if that person continues to carry on insurance business after the commencement of this Act, to the extent of the deposit required to be lodged by that person under this Act, be lodged by that person with the Treasurer forthwith as, or as part of, the deposit so required. (4) Any person failing to comply with the requirements of the last preceding sub-section shall be deemed to have committed an offence against section nine of this Act." (at p480)

3. The first and most far-reaching contention of the plaintiff is that a person lodging a deposit, in accordance with s. 11 of the Insurance Act, obtains the authority of the Commonwealth to carry on insurance business and that, accordingly, State legislation cannot restrict his right to do so. I reject the basis of this contention. The Insurance Act, unlike the Life Insurance Act and the Banking Act, is not a law by which, or under which, the right to carry on a particular business is conferred or regulated. It is, as s. 9 shows clearly enough, merely a law to restrain persons from carrying on insurance business without making the deposits for which provision is made. Furthermore, s. 7 in terms recognizes that State Acts may provide for the granting of licences to engage in insurance business. That section does indeed impose certain limits upon the force and effect of State Acts but the limits are strictly defined. A person carrying on, or proposing to carry on, insurance business cannot be required by a State Act (1) to make any deposit, or (2) to make any payment by way of licence fee, or (3) to make any payment other than a deposit or licence fee "as a condition upon which that person may carry on insurance business". This section states explicitly the only limits upon the force and effect of State Acts which the Commonwealth Parliament seeks to impose in order to make a Commonwealth law effective. When a law such as s. 7 sets the limits within which it is intended that Commonwealth law should be exclusive and exhaustive, there is no occasion for further investigation to determine whether or not a State law is inconsistent with the particular Commonwealth law and there could be no justification for treating as inconsistent with the Commonwealth law a State law which the Commonwealth law recognizes may be made, viz. laws for the licensing of persons engaged in insurance business. (at p480)

4. The plaintiff's primary argument accordingly fails. (at p480)

5. The second argument fails for the same reason as the first. It was contended that the field of Commonwealth law is the provision of protection for policy holders of persons carrying on insurance business and that no State law can enter that field without inconsistency. The answer is that the field of the Commonwealth law is as circumscribed by s. 7, i.e. the requiring of deposits, licence fees and other payments required as a condition upon which a person may carry on an insurance business. (at p481)

6. The rejection of these arguments disposes of the attack upon the provisions of the Workers' Compensation Acts other than s. 41 in conjunction with s. 29. It is clear that no other provision, including that for the licensing of insurers to carry on the business of insurance of employers against their liability to their workers, under the Act and independently of the Act, for injuries to their workers (s. 27), is in conflict with s. 7 of the Insurance Act. It is necessary to consider, however, whether s. 41, in conjunction with s. 29, does require a person carrying on insurance business to make a payment as a condition upon which that person may carry on insurance business. (at p481)

7. Section 41 establishes a fund for the payment of the salaries of the Commission and its staff, to meet payments of compensation awarded against uninsured employers and to provide other moneys required for carrying out the provisions of the Workers' Compensation Acts. The Commissioner is required to estimate annually expenditure from the fund for each coming year and licensed insurers are required to contribute to the fund a uniform percentage of premium income of the previous year as fixed by the Commission in order to meet estimated expenditure from the fund. Annual contributions so fixed are payable quarterly and, in the event of non-payment for thirty days, liability for a penalty not exceeding $100 is imposed. There is nothing in s. 41 itself which requires the payment of contributions as a condition of carrying on insurance business. By s. 29, however, the Commission is empowered inter alia to terminate a licence which has been granted under s. 27 on certain grounds including:

"(e) that the licensee has failed to comply with any provision of this Act and such failure constitutes a substantial breach of the requirements of this Act . . .

(j) that the licensee has unreasonably failed, or unreasonably refused, to satisfy an award made by the Commission against an employer insured or indemnified by the licensee against the liability of the employer thereunder;

(k) that the conduct of the licensee, his employees, and officers, and the arrangement of his affairs have been such that, in the opinion of the Commission, he should not continue to hold a licence." (at p482)

8. The contention is that the existence of this power makes the payments required by s. 41 payments as a condition upon which the insurer may carry on insurance business. In this way it is sought to bring s. 41 in conflict with s. 7 of the Insurance Act. (at p482)

9. In considering this contention it is necessary to examine with some care the requirements of s. 41. In the first place, no contribution is required from a person proposing to carry on insurance business. No payment is required unless a person has had premium income during the preceding year. Thus the obligation to pay is a consequence of having carried on insurance business rather than a condition upon which a person may carry on such business. Secondly, it is not unlawful to carry on insurance business if the contributions imposed are not paid as required. Thirdly, non-payment of a contribution does not inevitably involve the loss of a licence to conduct insurance business; that is a possible outcome, indeed, a likely outcome once proceedings have been taken by the Registrar before the Commission for the exercise of its various powers under s. 29, including power to suspend or terminate a licence. Fourthly, the Commission is required to hear evidence and make due inquiry before deciding to exercise any power which it has in relation to a licensee and must give reasons for its decision. Fifthly, any decision adverse to an insurer is subject to appeal to the Supreme Court in its equitable jurisdiction. (at p482)

10. Taking these matters into account I have come to the conclusion that the contribution required by s. 41 to be made is not a payment which a person is required by the Workers' Compensation Act to make as a condition upon which that person may carry on insurance business. It seems to me that State Acts which s. 7 renders inoperative are Acts which, as part of their operation, make it unlawful to carry on insurance business unless the payments required thereby are made. Sections 41 and 29 together do not amount to such a law. (at p482)

11. In my opinion the demurrer should be allowed. (at p482)

WALSH J. In this action the plaintiff seeks declarations that certain provisions of the Workers' Compensation Act, 1926-1970 (N.S.W.) are invalid. It is claimed that the provisions are inconsistent with a law of the Commonwealth, namely, the Insurance Act 1932-1966 (Cth). The action was commenced in December 1971. Some of the provisions to which the claim relates took their present form in consequence of amendments to the principal Workers' Compensation Act, which were made by the amending Act No. 67 of 1970. The latter Act received assent on 24th November 1970 and as to most of its provisions it came into operation on 3rd December 1970. One provision, by which s. 41 of the principal Act was deleted and a new s. 41 substituted for it, was deemed to have commenced on 1st July 1970. See s. 18 (3) of the 1970 Act. A notice which was given to the plaintiff in 1971 referred to breaches of the provisions of the Act, which were alleged by the notice to have occurred at various specified times before the commencement of the 1970 Act. However it appears to me that no decision upon any of the questions raised by the submissions on behalf of the plaintiff is affected by any of the changes made by the Act of 1970. In any event, the declarations which the plaintiff seeks are declarations concerning certain provisions of the Act in the form that it took after the 1970 Act, No. 67, had commenced. I am of opinion, therefore, that it is not necessary to refer to the changes that were then made and I may confine my attention to the Act as so amended, which will herein be called "the Act". (at p483)

2. The defendants have demurred "to the whole of the Statement of Claim of the Plaintiff (except so far as it relates to ss. 19 (1) and (2), 21, 22, 23, 24 and 25 of the Workers' Compensatio Act) on the ground that the facts alleged do not show a cause of action to which effect can be given by the Court as against the defendants". This may be thought to indicate that the defendants concede that the plaintiff is entitled to succeed in its action to the extent of obtaining a declaration that the provisions excepted from the demurrer are inoperative, notwithstanding the fact that it does not appear that any attempt or threat has been or is being made to enforce those provisions to the detriment of the plaintiff. If the Court came to the conclusion that the plaintiff is not entitled to any declarations concerning any of the provisions not mentioned in the exceptions in the demurrer, questions might arise as to what would be the consequence, in relation to the action, of the Court's decision on the demurrer and as to how that decision should be expressed. But it is not necessary for me to pursue those questions, since I am of opinion that the plaintiff is entitled to a declaration concerning the operation of ss. 29, 29C and 41 of the Act and I am, therefore, of opinion that on that ground the demurrer should be overruled. In my opinion it is not appropriate to seek to define now the precise terms of such a declaration. It is proper to deal only with the question whether the demurrer should be overruled or allowed. (at p484)

3. I agree with the conclusion stated in the reasons for judgment of the Chief Justice that the submission that the licensing provisions of the Act are inconsistent with the Insurance Act, for the reason that the Insurance Act confers on any person who makes the necessary deposit of money a right to carry on business, should be rejected. I agree with his Honour's reasons for that conclusion. (at p484)

4. The plaintiff has submitted, also, that the Insurance Act discloses an intention to deal exhaustively with the subject of the protection of holders of policies of the kinds to which the Insurance Act relates and accordingly any provisions of the State law designed to achieve that end are inoperative, including any provision which confers power to impose conditions having that purpose upon insurers. In my opinion this submission should be rejected. In my opinion the intention which the submission attributes to the Insurance Act is not disclosed by its provisions. In particular, the terms of s. 7 of that Act do not support the submission but on the contrary are opposed to it. (at p484)

5. Section 7 (1) of the Insurance Act provides expressly that no Act of a State is to have any force or effect to the extent that it imposes the requirements specified in that subsection which is in these terms:

"After the commencement of this Act, no State Act, whether passed before or after the commencement of this Act, to the extent to which it requires a person carrying on or proposing to carry on insurance business to make any deposit or to make any payment by way of licence fee or to make, as a condition upon which that person may carry on insurance business, any other payment, shall, subject to this Act, have any force or effect: Provided that this sub-section shall not affect the operation of any State Act, in force on the first day of February, One thousand nine hundred and thirty-two, in so far as the State Act imposes stamp duty upon licences issued to persons engaged in insurance business."

Having regard to that express provision, there is no warrant, in my opinion, for resorting to implication in order to ascertain the extent to which the Insurance Act was intended to regulate the field of insurance business to the exclusion of the laws of the States. (at p484)

6. It is necessary now to consider what effect relevant to this action s. 7 has on the provisions of the Act. It is plain that s. 19 of the Act is rendered inoperative, together with other provisions which regulate the manner in which the obligation to make a deposit imposed by s. 19 is to be fulfilled. (at p484)

7. It was argued on behalf of the plaintiff that s. 27 of the Act gives an unlimited discretion to the Commission to grant or to refuse a licence and to impose upon a grant whatever conditions it thinks fit. It was submitted that this power could be used to require, as a condition of the grant of a licence, the payment of a deposit or the making of some other payment. Therefore, according to the argument, the provisions of s. 27, in so far as they confer that power, are in conflict with s. 7 of the Insurance Act and those provisions cannot be read down or treated as severable in order to escape that conflict. (at p485)

8. In considering those submissions, it should be noticed that s. 27 in its present form was enacted in 1964. In the principal Act of 1926, which was of course enacted earlier than the Insurance Act, s. 27 provided that upon application in the prescribed form "accompanied by evidence that the deposit required by this Act has been made", the Commission might grant to the applicant a licence; it did not include any reference to the imposing of conditions. Thus, under the provision as it then stood, what was required was that an applicant should have already paid the deposit required by s. 19 of the Act before applying for a licence and it seems clear that the Commission could not have attached to the grant of a licence a condition, either that some amount of money determined by it or that an amount calculated in accordance with s. 19 should be paid as a deposit. After the Insurance Act had been passed, the requirement of s. 27 of the Act that an application for a licence should be accompanied by evidence that a deposit required by the Act had been made could not have continued to be operative, since the provision of the Act requiring the deposit had ceased, by reason of s. 7 of the Insurance Act, to be operative. Having regard to that historical background, I am of opinion that in s. 27 as enacted in its new form in 1964, the power conferred to impose conditions should be construed as not including any power to stipulate, as a condition of the grant of a licence, that a deposit should be made. I am of opinion also that s. 27 should be construed as not intended to confer power to make such a grant conditional upon some other pecuniary exaction. (at p485)

9. The only other submissions which require consideration are those which relate to s. 41 of the Act. It was argued in the first place that, independently of the provisions of s. 29, the enactment by s. 41 that each insurer should contribute to the fund described in sub-s. (2) of that section an amount of money determined in accordance with the section was inconsistent with s. 7 of the Insurance Act. Alternatively, an argument was put as to the operation of s. 41 considered in conjunction with s. 29. It was pointed out that a failure to contribute to the fund does not merely make the insurer liable to a penalty and to be sued for the recovery as a debt of the amount which it fails to pay, but also exposes the insurer to the exercise by the Commission of the powers derived from ss. 29 and 29C of the Act, including the power to terminate the insurer's licence. It was submitted that by these provisions the Act requires a person carrying on or proposing to carry on insurance business to make "as a condition upon which that person may carry on insurance business" a payment, namely, the payment of the amount of the contribution and that to that extent the Act is deprived by s. 7 of the Insurance Act of any force or effect. (at p486)

10. In my opinion, the first of those submissions should be rejected. Section 7 does not operate upon every provision of a State Act which places upon a person who carries on insurance business some obligation to make a payment of money. It relates only to provisions which require, as a condition upon which a person may carry on insurance business, the making of a payment. An enactment that an insurer must contribute to the fund described in s. 41 and that it may be fined or sued upon failure to do so cannot be regarded, in my opinion, as a provision which establishes a condition upon which insurance business may be carried on. (at p486)

11. But after some hesitation I have come to the conclusion that the second of the submissions now being considered should be upheld. The provisions for the establishment and maintenance of the fund play an important part in the scheme of the Act. The insurers are required to share the burdens imposed by those provisions. If one of them should refuse to make any contribution, it can hardly be doubted that this would be properly regarded as constituting "a substantial breach" of the requirements of the Act, within the meaning of s. 29 (1) (e), or that a persistence in that refusal would warrant the exercise by the Commission of the power to terminate the licence. In those circumstances, I think that it is proper to regard the Act as requiring the making of the payment of the contribution as a condition upon which the plaintiff (and other insurers) may carry on business. I recognize that there are substantial considerations that can be urged against that view. Upon failure to contribute to the fund, there is not an automatic cancellation of the licence; and the carrying on of business after such a failure does not itself render the insurer guilty of an offence against the Act, unless and until the power to terminate the licence has been exercised. But nevertheless the right to continue to carry on business is liable to be forfeited and almost certainly will be forfeited, if an insurer refuses to contribute to the fund. It is proper, in my opinion, to describe the provisions which have that operation as provisions which require an insurer, as a condition upon which it may carry on insurance business, to pay its contribution to the fund. In my opinion, the legislative intention sufficiently disclosed by the language of s. 7 would not be carried into effect if the provisions of the Act, by which an insurer is bound to make a contribution to the fund and power is given to terminate his licence upon failure to make the payment, were held not to operate to make the payment a condition upon which the business may be carried on. I agree, therefore, with the conclusion of the Chief Justice that the plaintiff is entitled to a declaration concerning the extent to which those provisions are rendered inoperative by s. 7 of the Insurance Act. (at p487)

12. I am of opinion that the law of the State can impose effectively an obligation to contribute to the fund and can provide valid sanctions against a failure to fulfil that obligation. But because one of the sanctions provided by the Act is a power to prohibit the insurer from carrying on insurance business, the provisions are thereby made to operate, in my opinion, in a manner forbidden by s. 7 of the Insurance Act. (at p487)

13. It is not necessary for me to express an opinion as to the effect, if any, which the provisions of the Insurance Act would have if the Act of the State provided for the approval of insurers from whom policies might be obtained for the purposes of the Act instead of providing for the licensing of insurers and I refrain from stating any view on that question. (at p487)

14. In my opinion the demurrer should be overruled. (at p487)

Orders

Demurrer overruled. Defendant to pay one half of the Plaintiff's costs of the demurrer.