David John Olifent v WorkCover Corporation of South Australia No. SCGRG 95/1564 Judgment No. 5894 Number of Pages 23 Corporations Workers' Compensation

[1996] SASC 5894

COURT IN THE SUPREME COURT OF SOUTH AUSTRALIA Debelle, J

CWDS
Corporations - companies - winding up - incidents of liquidation - preferences - payment of levies to WorkCover Corporation - whether payments constituted preference - good faith - whether payments in ordinary course of business - whether levies are a tax - payments held to be preferences.

Workers' compensation - levies - statutory obligation on employer to register - registered employers obliged to pay levies - whether levies a tax - relevant principles. Workers Rehabilitation and Compensation Act, 1986ss46, 54, 105; Bankruptcy Act, 1966s122; Corporations Laws565, referred to. Spedley Securities Ltd (in liq) v Western United Ltd (in liq) (1992) 7 ACSR 271; Sheahan v Hertz Australia Pty Ltd (1995) 16 ACSR 765; Rees v Bank of New South Wales (1964) 111 CLR 210; Queensland Bacon Pty Ltd v Rees (1966) 115 CLR 266; Downs Distributing Co Pty Ltd v Associated Blue Star Stores Pty Ltd (in liq) (1948) 76 CLR 463; Taylor v White (1964) 110 CLR 129; Air Calendonie International v The Commonwealth (1988) 165 CLR 462; Logan Downs Pty Ltd (1977) 137 CLR 59; Browns Transport Pty Ltd v Kropp (1958) 100 CLR 117; Harper v Victoria (1966) 114 CLR 361; General Practitioners Society v The Commonwealth (1980) 145 CLR 532; Santos Ltd v Saunders
(1988) 49 SASR 556, applied. Air Services Australia v Ferrier (1996) 70 ALJR 655, distinguished. Parton v Milk Board (Vic) (1949) 80 CLR 229; Harper v Minister for Sea Fisheries (1989) 168 CLR 314, discussed. Sheahan v Workers Rehabilitation and Compensation Corporation (1991) 56 SASR 119; Matthews v Chicory Marketing Board (Vic) (1938) 60 CLR 263; Australian Tape Manufacturers Association Ltd v The Commonwealth (1993) 176 CLR 480; Northern Suburbs General Cemetery Reserve Trust v The Commonwealth (1993) 176 CLR 555, considered.

HRNG ADELAIDE, 5-8 Auigust 1996 #DATE 21:11:1996

Counsel for plaintiff :        Dr R J Baxter

Solicitors for plaintiff :     Johnson Winter and Slattery

Counsel for defendant:         Mr D M Quick QC with Mr G Griffin

Solicitors for defendant:     Griffins

ORDER
Judgment for plaintiff.

JUDGE1 Debelle J
1. This is an action by a liquidator to recover what he alleges were preferential payments.

2. Ceiling and Roofing Products Pty Ltd (ÒC&RP╙); was a company carrying on business in South Australia. The major part of its business was as a roofing contractor. On 4 June 1993 an application was made in this Court to wind up C&RP.; On 6 July 1993 the Court made an order winding up the company and appointing the plaintiff liquidator.

3. The WorkCover Corporation Act 1994, which came into operation on 1 July 1994, reconstituted the Workers Rehabilitation and Compensation Corporation which had been established by s7 of the Workers Rehabilitation and Compensation Act 1986 ("the Act"). The reconstituted Corporation was called WorkCover Corporation. WorkCover Corporation is the same entity as the Workers Rehabilitation and Compensation Corporation. The payments which were alleged to be preferences were made to the Workers Rehabilitation and Compensation Corporation. Nothing turns on the reconstitution of the Corporation. For convenience, I will refer to the defendant as "the Corporation".

4. Between 18 February 1993 and 24 April 1993, that is to say, in the six months prior to the winding up order, C&RP; was a creditor of the Corporation. C&RP; made six payments to the Corporation for levies and arrears of levies due under the Act. The liquidator alleges that, at the date of making the payments, C&RP; was insolvent. He says the payments have had the effect of giving the Corporation a preference or advantage over other creditors so that they are recoverable pursuant to s565 of the Corporations Law. Section 565, of course, imports s122 of the Bankruptcy Act 1966 (Cth).

5. When the pleadings closed, the issues were:
    1. Whether C&RP; was insolvent.

2. Whether the payments made by C&RP; to the Corporation constituted
    a preference.

3. Whether the Corporation as payee had acted in good faith and for
    valuable consideration in the ordinary course of business: see
    s122(2)(a) of the Bankruptcy Act.

4. The third issue involved two subsidiary issues. They were:
    (a) whether a levy paid by an employer pursuant to the Act was a
tax: see s122(4)(b) of the Bankruptcy Act; and
    (b) whether the payments were made in such circumstances as to lead
    to the inference that the Corporation knew or had reason to suspect
    that C&RP; was insolvent and that the effect of the payment would
    give the Corporation a preference or advantage over other
creditors: s122(4)(c) of the Bankruptcy Act.

6. In the course of the hearing, counsel for the Corporation conceded that C&RP; was insolvent when the payments were made. Before examining the issues further, I set out the relevant facts and the legislative scheme.

7. The Corporation called five witnesses, four of whom were employed by it. None of the CorporationÕs employees had any independent recollection of the detailed facts and had to rely on notes made at the time. They all gave the impression of doing their best to recall the events and there is no reason why I should doubt their evidence. However, for the reasons expressed below, I am unable to share the view held by Mr Smith as to the financial position of C&RP; in early 1993. The objective evidence belies the views he expressed as to the capacity of C&RP; to pay its debts in early 1993. The fifth witness was Mr Wegener, the managing director of C&RP.; His evidence concerned conversations and meetings with officers of the Corporation and was consistent with the evidence given by them. He was inclined to paint a more rosy picture of the financial position of C&RP; than the evidence indicated.

The Legislative Scheme 8. The evidence and the relevant provisions of the Act disclose the following scheme. As the long title states the object of the Act is to establish a scheme to provide for the rehabilitation and compensation of workers in respect of disabilities arising from their employment. That objective is spelled out in more detail in s2 of the Act.

9. Employees who suffer a disability which arises out of or in the course of employment are entitled to compensation in accordance with the Act. Broadly speaking, the Corporation is liable to make all payments of compensation to which any employee is entitled under the Act: s46. No liability attaches to the employer in respect of any disability which is compensable under the Act except a liability under the Act: s54. As will be seen, the liabilities of employers under the Act are quite limited and, to all intents and purposes, the employer has no liability to the worker. An employer who is registered under the Act is insured by the Corporation against any liability that may arise apart from the Act in respect of a compensable disability arising from employment by the employer: s105. The Act also establishes a fund called "the Compensation Fund". Employers are required to pay levies and those levies are paid into the Compensation Fund. The Fund is applied towards payments of compensation to employees and the costs incurred by the Corporation in performing its other functions under the Act. That is a very brief overview of the scheme of the Act. It is necessary to examine some aspects more closely.

10. Section 59 of the Act imposes an obligation on all employers to register with the Corporation unless they are exempt employers. An employer is not required to be registered if he is exempted by the regulations from that obligation: s59(2). In addition to employers exempted by regulation, the Act provides for what it calls exempt employers. Exempt employers are the Crown and any instrumentality or agency of the Crown (s61) and those employers who apply for registration with the Corporation as an exempt employer (s60). Exempt employers have delegated to them the powers and discretions of the Corporation under certain sections of the Act, which, in large part, are those sections dealing with the handling of claims for compensation: see s63.

11. All employers who are registered with the Corporation and who are not exempt employers are liable to pay a levy to the Corporation: s66. The levy is fixed by the Corporation in accordance with the Act. It is a percentage of the total remuneration paid to workers employed by that employer in each class of industry in which the employer employs them: s66(2). The Corporation is empowered to divide industries into various classes and decide in which class of industry an employer employs workers: ss66(3) and (4). The Corporation is also authorised to fix different percentages for different industries and may vary those percentages: s66(6). However, the percentage must not exceed 7.5 per cent unless the claims record in a particular industry is particularly poor and then only in accordance with s66(9) and (10). The Corporation has power to remit the whole or part of the levy in prescribed circumstances: s66(12). There is a base rate for the levy in each industry. The Corporation has different base rates for different industries.

12. In addition to its power to fix different rates of levies for different classes of industry, the Corporation is authorised to determine different rates of levies for individual employers. The Corporation may remit part or the whole of the levy payable by an employer or impose a supplementary levy on that employer: s67. That power must be exercised with regard to the factors listed in s67 which, broadly speaking, relate to the claims history of the employer, the safety measures in that employerÕs workplace, rehabilitation programs provided by the employer, and the employerÕs practices as to employment or retention of disabled workers. Once the Corporation has determined the rate payable by an employer, the levy paid by that employer is calculated by applying the rate to the wages paid by that employer in the preceding month: see ss66 and 69(1). Small employers pay a minimum levy: s66(13). The Corporation gives effect to its power to vary the rate to reflect the factors listed in s67 by allowing discounts by way of a bonus or fixing an increase by way of penalty deducted from or added to the rate. The levy is payable on the 7th day in each month and is payable in respect to the previous month: s69.

13. The Act also provides in s68 for a special levy payable by exempt employers. Section 68 of the Act requires that the levy be fixed with a view to providing a fair contribution by exempt employers to the administrative expenditure of the Corporation and the other costs therein listed. The procedures for recovery of levies are prescribed in ss69 to 76(a).

14. The levy also includes a percentage which raises funds which are applied for the purposes of the Occupational Health Safety and Welfare Act. It is a small fixed percentage. No reference was made to it in argument. I do not think that that component of the levy materially affects the result and I have had no regard to it.

15. Fines may be imposed on employees who fail to furnish monthly returns and pay monthly levies: s70. Where an employer fails to pay a levy, the employer is liable to pay penalty interest and the Corporation may impose a fine: s71. The Corporation has power to make default assessments of a levy: s70.

16. The Compensation Fund is established by s64. The Fund consists of amounts paid to the Corporation as levies, income resulting from the investment of money in the Fund, any money advanced to the Corporation for the purpose of the Fund, and any other money received by the Corporation under the Act or in the administration of the Act. The annual report of the Corporation for the year ended 30 June 1993 shows the income for that year and the previous financial year. It may be summarised in this way.
   1992         1993
   (000)         (000)
    Levy revenue            283,515 79%    254,363 73%
    Investment revenue     67,233 19%     90,907 26%
    Other   7,486 2%         448 1%
  358,234 100%    345,718 100%

17. It will be noticed that the overwhelming portion of the FundÕs annual income is derived from levies. The Fund is applied towards making payments of compensation that the Corporation is liable to make under the Act and to the costs incurred by the Corporation in performing its functions under the Act: s64(3).

18. Subject to the exceptions listed in s46, the Corporation is liable to make all payments of compensation to which any worker is entitled under the Act. The exceptions listed in s46 are, first, payments of compensation which arise from employment by an exempt employer, which are payable by the exempt employer, and, secondly, a liability of employers who are registered under the Act to pay up to one weekÕs income maintenance to a worker who suffers a compensable disability: s46(3). The effect of s46 is that the CorporationÕs liability to pay compensation under the Act continues even if an employer is not registered or an employer has not paid part or the whole of the levies payable under the Act. In addition, where an employer fails to make a payment of compensation that the employer is liable to make under the Act, the Corporation is required by the Act to make that payment and may recover the amount of that payment from the employer: s48.

19. Where an exempt employer ceases to be exempted, the Corporation may undertake the liabilities of that employer and must do so if the employer becomes insolvent or has ceased to trade and has failed to make adequate provision for meeting claims for compensation: s50. Thus, the entitlement of workers to recover compensation exists and is unaffected by a failure of an employer to comply with the Act or by the insolvency of an employer.

20. Section 54 of the Act is complementary to s46. It provides that, subject to subs(2), no liability attaches to an employer in respect of a compensable disability arising from employment by that employer except a liability under the Act. Subsection(2) preserves the liability of an employer arising out of the use of a motor vehicle which is a liability against which the employer was or ought to have been insured under the law of compulsory third party motor vehicle insurance. One of the reasons for the preservation of that liability is to enable the Corporation to recover from the insurer any compensation paid under the Act in respect of a compensable disability arising out of an accident involving the use of a motor vehicle: see s54(5) to (8). Section 105 of the Act completes the scheme indemnifying a registered employee from any liability to an injured worker which might arise apart from the Act. It provides:
    "(1) An employer who is registered under this Act, and any employer
    who is not required to be registered because of an exemption under
    the regulations, is insured by the Corporation, subject to terms
    and conditions prescribed by regulation, against any liability that
    may arise apart from this Act in respect of a compensable
    disability arising from employment (being employment to which this
    Act applies) by the employer É

(3) The insurance provided by subsection (1) does not extend to an
    exempt employer except in relation to persons of the class referred
    to in subsection (2)."

21. Thus, in addition to providing a scheme by which workers are compensated by the Corporation, the Act indemnifies registered employers, to all intents and purposes, from liability to workers for any compensable disability arising from employment.

22. I will return to examine the scheme when considering whether the levies payable under the Act are a tax.

The Corporation Conducts An Audit 23. C&RP; had registered with the Corporation as an employer.

24. In September 1992, Mr Zacharko, a field auditor employed by the Corporation, conducted an audit of C&RP; to determine whether the company was complying with its obligations under the Act. There was no suggestion that C&RP; had been guilty of any impropriety. The audit was in the nature of a random audit. The audit disclosed that C&RP; was not correctly characterising some of its labour costs and thus had not paid the full amount due for levies. There were three consequences of the audit. First, C&RP; was required to make up the difference for the levies which had been underpaid in the past three years. Secondly, it was required to pay a penalty for that underpayment. Thirdly, it was required to pay a slightly higher amount for levies in the future. The sum of the increased levy for past years and the penalty was $34,538.28. By letter dated 29 September 1992, the Corporation informed C&RP; of its liability to pay that sum.

25. The managing director of C&RP; was Mr Wegener. Mr Wegener asked for a time in which to pay the sum $34,538.28. Mr Zacharko agreed that it could be paid by instalments. I find that nothing was said to Mr Zacharko about the financial position of C&RP; and that he did not examine any financial statements to determine the companyÕs capacity to pay the debt. I find that Mr Zacharko took the view that, in all the circumstances, it was fair and reasonable to allow the company time to pay the debt. I do so notwithstanding, as Mr Zacharko acknowledged, that the amount of the debt was approximately equivalent to the sum payable by C&RP; as monthly levies and, on the face of things, it should not have been a burden for a company with the turnover of C&RP; to pay the arrears and penalty in one lump sum. Mr ZacharkoÕs attitude might have been influenced by the fact that C&RP; believed that it had correctly calculated the levy payable in past years. The arrangement as to payment was that the debt was to be paid in monthly instalments of $5,000 each. The arrangement applied only in respect of the arrears and penalty. C&RP; was required to continue to pay monthly levies on the due date, that is to say, the 7th day in each month.

Defaults in Payments 26. C&RP; paid its levy for the month of October on 7 November 1992. It paid $5,000 in reduction of the arrears on 16 November 1992. Until November 1992, it had had a good record of paying all levies on or about the due date. However, from November 1992, the company was in default in payment of both its monthly levies and the monthly payments to reduce the arrears.

27. The Corporation has a department responsible for recovering levies. Should an employer default, a recovery officer will decide what action should be taken and report to a supervisor. Supervisors have authority to commence legal proceedings and must report such a decision to a manager of the department. Managers have authority to issue demands under the Corporations Law and to give instructions to wind up a company. The supervision of the payments due by C&RP; was handed to Ms Paulin. Her duties included recovery of levies and other payments due by employers. She was responsible to a supervisor and in turn to one of the managers in the debt recovery section of the Corporation. C&RP; defaulted in payment of its levy for the month of November. The payment for that month was due on 7 December.

28. On 17 December 1992 Ms Paulin telephoned Mr Wegener and reminded him that the C&RP; had not paid its levy for November. He said that he would look into the position and called her back. On 18 December she had not heard from Mr Wegener and rang him again. She left a message for him to call. On 21 December 1992 Ms Paulin again telephoned Mr Wegener. He informed her that C&RP; had "short term cash flow problems" and it could not pay anything until after Christmas. Her recollection was that the words "short term cash flow problems" were words used by Mr Wegener. She extended the time for payment until 31 December.

29. On 7 January 1993 Ms Paulin noted that C&RP; had still not paid the levy due on 7 December and had failed to pay the monthly payment of $5,000 in reduction of the arrears due in December. She was mistaken in her belief that the monthly payment of $5,000 had not been made. That mistake was discovered in February 1993. That mistake was of no moment. It did not affect the dealings between C&RP; and the Corporation. Nor did it materially affect the CorporationÕs perception of C&RP╒s; financial position. She rang Mr Wegener who was not at the premises and left a message for him to call. On 8 January 1993 she again rang Mr Wegener and again left a message for him to call her. Her message also stated that the matter was urgent. Later that day Mr Wegener returned her call. He apologised for the companyÕs failure to honour the arrangements for payment. He said that the company did not have the financial resources to pay at that time. He also said the company was chasing debts due to it but was not having much luck in doing so as many debtors were on holidays. Ms Paulin informed him that the failure to pay the levy in December had attracted a fine and that he could appeal against the fine. In the event, C&RP; did not appeal against the imposition of the fine. Mr Wegener informed Ms Paulin that the company might be able to pay something by mid- January and he would ring her as soon as he knew if anything could be paid. He did not specify what sum might be paid.

30. Ms Paulin was prepared to accept these assurances. Until the defaults in December 1992, C&RP; had had what she regarded as an excellent record in paying its debts to the Corporation. It was also her practice to allow a little leeway to a defaulting creditor. The default had existed for no more than some four to five weeks and she was not, therefore, concerned that the Corporation might not recover the amount due to it.

31. Save for a letter dated 14 January 1993 requesting C&RP; to pay the levies for the month of December, nothing further occurred until 20 January 1993. At that stage the levies for the months of November and December had not been paid on either 7 December or 7 January. In addition, Ms Paulin believed that C&RP; had failed to pay the monthly instalments of $5,000 due in December 1992 and in January 1993. She decided to refer the matter to one of her managers, Mr Smith, who was one of the CorporationÕs senior recovery officers. He is one of the officers called in when Corporation is having difficulty in recovering payment of levies and other monies due to it. His duties included visiting employers to investigate late payments. She marked the file "Please Visit Urgently". On 20 January 1993 she handed it to Mr Smith.

32. Mr Smith read the file relating to C&RP; and in particular the notes made by Ms Paulin concerning her conversations with Mr Wegener and the defaults by C&RP; in making payment. He noted that C&RP; then owed the Corporation at least $100,000. On 21 January he telephoned Wegener and made an appointment to see him on 25 January at the premises of C&RP.; At that meeting several matters were discussed. Not all of them concerned the capacity of C&RP; to pay its debts to the Corporation. Wegener took the opportunity to express his dissatisfaction with the procedures of the Corporation including delays in reimbursing C&RP; for claims for payments of income maintenance it had paid to workers who had suffered a compensable disability. After the meeting, Smith made notes of the matters discussed. On the topic of C&RP; paying the Corporation, Wegener stated that the company was going through what Smith recorded in his notes as "a real cash flow shortage". SmithÕs evidence was that his use of the word "real" indicated a significant or substantial cash flow shortage. According to SmithÕs notes, Wegener stated that future contracts were "solid" and that both the Corporation and the Australian Tax Office ("the ATO") "have been put on ice temporarily to enable the company to continue to trade". This is a reference to the fact that, in addition to its obligation to the Corporation, C&RP; owed the ATO the sum of $150,000 for group tax which had been deducted from employeesÕ salaries but not remitted to the ATO. The ATO had allowed two years for that debt to be discharged.

33. Wegener asked Smith for the same terms as had been granted by the ATO to repay what was due by C&RP; to the Corporation. Smith informed him that the period of two years was too long particularly as the debt to the Corporation was less than that due to the ATO. He also said that the Corporation would be realistic. His evidence was that he held the view that it would exacerbate C&RP╒s; cash flow problems if the Corporation insisted on payment in full. Wegener gave Smith an overview of the financial position of C&RP,; stating that debtors owed it $1,154,000, the sum of $500,000 was due to the companyÕs creditors, and that the company had finance (loans and overdrafts) to the value of $750,000. Smith noted that the company was unable to pay anything in discharge of its obligations. His notes concluded:
    "He can pay nothing at this time. I told him the debt is enormous
    and we may effect legal action anyway to secure our position."

34. I find that Smith did not inspect any financial statements of C&RP; to verify the assertions made by Wegener. Although his notes of the amount owed to the company by its debtors reads "$1,154,000 as per books" that does not necessarily mean that Smith inspected financial statements or other records to ascertain that information. The effect of WegenerÕs evidence is that he would have been unwilling to disclose financial records of that kind. The likelihood is that Wegener said that the books disclosed debtors to the value stated.

35. Smith attended to some of the concerns expressed by Wegener. However, nothing was done to require immediate payment of the amount due to the Corporation. A further three and half weeks passed without any further payment by C&RP.; On 17 February 1993 Wegener rang Smith to inform him that the levy for January 1993 which was due and payable on 7 February was $17,962.41. Smith told him to pay one of the monthly payments of arrears for $5,000 immediately and to pay the levy for January by the end of February. He said that the arrears due to the Corporation would then be capped and arrangements made for future repayment of arrears. C&RP; paid $5,000 that day.

36. On 24 February 1993 Smith again met Wegener. They resolved some of the complaints made by Wegener on 25 January regarding the CorporationÕs procedures. Smith had ascertained that the Corporation owed C&RP; approximately $8,000 for five claims for payments of income maintenance. They agreed that the amounts due would be applied to discharge the liability to the Corporation. Smith admitted in his evidence that the arrangement was unusual and would have been unnecessary had the company been able to pay its debts. At the meeting on 24 February, Smith also reviewed the total debt then outstanding. He estimated it to be in excess of $140,000. Smith had by then ascertained that C&RP; had paid the $5,000 monthly payment due in December 1992. Wegener agreed that C&RP; would pay the levy for January 1993 in full when Smith had secured a cheque from the Corporation to pay the claim for income maintenance. On 1 March 1993 Smith personally delivered to Wegener the CorporationÕs cheque for $8,344.38 in reimbursement of payments of income maintenance. He waited while Wegener endorsed that cheque to the Corporation and handed it back to him with C&RP╒s; cheque for the balance of $9,618.03 due for the levy for January. That was the manner in which the levy for January was paid on 1 March. After that payment, SmithÕs estimate of the total debt then due to WorkCover was $128,440.35, a sum which Smith admitted in his evidence was a fairly large amount outstanding for levies by any employer registered with the Corporation.

37. On 18 March 1993, Smith again spoke to Wegener. Wegener asked to pay the arrears of levies and the other arrears over a period of 24 months, a like period to that which had been allowed by the ATO. Smith rejected the proposal and told him that he would recommend a period of twelve months. It was necessary for Smith to obtain approval to agree to the period of twelve months for repayment of the outstanding debt as the CorporationÕs internal policy was that six months was the maximum period allowed for payment of outstanding levies. After discussion with another officer employed by the Corporation, Smith told Wegener that the Corporation accepted those terms of payment but that he would not document the arrangement until C&RP; had paid the levy for February which was already overdue.

38. In the course of the conversation on 18 March, Wegener had told Smith that the levy for February was $10,464. He proposed to pay it by the companyÕs cheque for $7,598.04 and the balance would be off-set against some further claims by the company for reimbursement of income maintenance it had paid. The companyÕs cheque was received on 19 March. On 1 April 1993 a cheque for $6,755.64 payable to C&RP; for its claims for reimbursement of income maintenance payments was handed to Smith. Smith saw Wegener who endorsed it to the Corporation. It was used to pay the balance of the levies for February 1993 ($2,865.96) and the balance of $3,889.68 was applied in part payment of the sum of $5,000 due to have been paid in February. On 1 April 1993 Smith estimated that $124,580 was then due to the Corporation.

39. SmithÕs evidence was that, at that time, he was confident C&RP; would be able to trade its way out of its financial difficulties and be able to pay by instalments the amount due the Corporation. That evidence is consistent with the fact that Smith handed the file back to a recoveries officer to recover the agreed instalments. However, his confidence represented a sanguine and misplaced view of the financial position of C&RP.; For the reasons which follow, it was not consistent with the objective facts.

40. In cross-examination, Smith admitted that, having read Ms PaulinÕs notes, he knew nothing had been paid since November 1992, and that the debt to the Corporation had increased to some $134,000. He admitted that he probably thought on 20 January that C&RP; could not then pay either other creditors or the Corporation. The debt was, he said, not only substantial but also substantially higher than the debts he was usually asked to recover. He also admitted that the effect of the information given by Wegener concerning the ATO was that C&RP; had used the $150,000 which it ought to have paid the ATO to pay its creditors and so enable the company to continue to trade. He could not recall whether the information had been given to him by Wegener or whether he had formed that view himself. I find that the latter is more likely. He admitted that on 20 January 1993 it was reasonable to infer from what Wegener had told him concerning the arrangements with the ATO that C&RP; could not pay that debt in a shorter time than two years. Nothing, he admitted, changed before 17 February. He admitted that, when he recommended that the Corporation allow C&RP; twelve months in which to pay the debt of $124,000 then due, he had formed the view that not only could it not then pay that sum but also that it would not be able to pay it over a six month period.

41. The indebtedness of C&RP; and its payments may be summarised as follows:
     Date     Details     Amount Due     Payment    Balance
    16/11/92 Audit Adjustment $34,538.28            $34,538.28
    16/11/92 Payment   $5,000.00 $29,538.28
    7/12/92 Nov 1992 Levy     $37,703.55             $67,241.83
    16/12/92 Payment   $5,000.00
    7/1/93 Dec 1992 Levy     $32,899.80            $100,108.63
    7/2/93 Jan 1993 Levy     $17,962.41            $118,071.04
    Nov 1992    Fine         $10,684.72            $128,755.76
    Dec 1992    Fine         $23,310.00            $152,065.76
    Jan 1993    Fine            $4,304.50            $156,370.26
    18/2/93  $5,000.00 $151,370.26
    26/2/93  $8,334.38 $143,035.88
    2/3/93   $9,618.03 $133,417.85
    22/3/93  $7,598.04 $125,819.81
    1/4/93   $6,755.64 $119.064.17
    14/4/93   $10,200.00 $108,864.17
    23/4/93  $10,379.00 $98,485.17

The Payments were a Preference 42. The liquidatorÕs report shows that C&RP; was hopelessly insolvent in the early months of 1993. It had had a substantial deficiency of working capital since at least 30 June 1992 and had no realistic prospects of borrowing funds or raising capital in any other way. Its debts to creditors had aged to a considerable extent. It was plainly relying on being able to defer payments to creditors in order to be able to continue to trade. Payment of a levy to the Corporation thus had the effect of giving the Corporation a preference or advantage over creditors.

43. Counsel for the Corporation sought to rely on Air Services Australia v Ferrier
(1996) 70 ALJR 655. The payment of levies to the Corporation were not part of a running account or part of a wider transaction which requires regard to be had to the whole transaction. Although there was a continuing relationship between C&RP; and the Corporation in the sense that C&RP; was a registered employer, the levy payable for each month constituted a separate transaction. Payment of a levy of part thereof would not cause the Corporation to provide any goods or services to C&RP; either at the time of payment or at any future time. Each month, C&RP; had a statutory liability to pay a levy. Even if it failed to pay the levy, its injured employees would be entitled to receive whatever workersÕ compensation was due to them under the Act. In addition, notwithstanding its failure to pay a monthly levy, C&RP; would continue to be entitled to the benefit of the indemnities from liability provided by ss54 and 105 of the Act. The decision in Air Services Australia v Ferrier must, therefore, be distinguished.

Were the Payments Made in Good Faith? 44. The Corporation had the burden of proving that the payments were made in good faith: see s122(2) and (3) of the Bankruptcy Act. Section 122(4)(c) deems that a creditor shall not be a payee in good faith if payment was made under such circumstances as to lead to the inference that the creditor knew or had reason to suspect:
    (i) that the debtor was unable to pay its debts as they became due
    from his own money; and
    (ii) that the effect of the conveyance, transfer, charge, payment
    or obligation would be given a preference, priority or advantage
    over other creditors.

45. C&RP; did not have the onus of proof under s122(4)(c). The deeming effect provided by s122(4)(c) operates only if the Court finds that circumstances exist such as to lead to the inferences there described: Spedley Securities Ltd (in liq) v Western United Ltd (in liq) (1992) 7 ACSR 271, 278. It is apparent from the terms of s122(4) that "good faith" in s122(2) is not used in its ordinary meaning of honesty: Sheahan v Hertz Australia Pty Ltd (1995) 16 ACSR 765 at 770. The question is whether, when viewed objectively, the facts establish that the creditor knew or had reason to believe that the debtor was in fact solvent: Rees v Bank of New South Wales (1964) 111 CLR 210 and Queensland Bacon Pty Ltd v Rees
(1966) 115 CLR 266 per Barwick CJ at 292. The expression "reason to suspect" in subs(4) requires an actual apprehension or fear that the payer is unable to pay his debts as they become due and that the payment would give the payee a preference: Queensland Bacon Pty Ltd v Rees (supra) per Kitto J at 303-304. As Kitto J concluded at 304:
    "If the proper inference from the circumstances is that there was
    sufficient reason for the payee to form an actual suspicion - a
    real apprehension though with insufficient warrant for a positive
    conclusion - that the situation had both these features, he is
    debarred by subs(4) from being deemed a payee in good faith.
    Otherwise he is not."

46. A transaction falls within s122(4)(c), if, whatever the creditor may think or believe with respect to the circumstances of a transaction, those circumstances are such as to lead to an inference by the Court that there was reason to suspect according to the standards of an ordinary reasonable man that the debtor was unable to pay his debts as they became due, and that the effect of the transaction would be to give creditors a preference over other creditors: Downs Distributing Co Pty Ltd v Associated Blue Star Stores Pty Ltd (in liq) (1948) 76 CLR 463, 475- 6; Spedley Securities Ltd (in liq) v Western United Ltd (in liq) at 278.

47. By 18 February 1993 Smith and therefore the Corporation knew the following:
    (i) That C&RP; had been prompt in paying all levies until November
    1992.
    (ii) That C&RP; had been granted time to pay the arrears of levies
    and the fine which resulted from the audit in September 1992.
    (iii) That the arrangement for payment of the arrears and the fine
    did not in any respect result from a perception of an inability of
    C&RP; to pay its debts. C&RP; had simply requested time in which to
    pay and that had been granted on the footing that it was fair and
    reasonable to do so.
    (iv) That C&RP; had failed to pay levies in respect of the months of
    November, December 1992 and January 1993, despite promises to Ms
    Paulin to do so, and that on 18 February Wegener had paid part only
    of the January levy, the balance to be offset by reimbursement of
    income maintenance payments.
    (v) That at 20 January C&RP; owed a total sum in excess of $100,000
    to the Corporation.
    (vi) That C&RP; had negotiated an arrangement with the ATO by which
    it had to pay arrears of group tax.
    (vii) That the monies which ought to have been paid by C&RP; to the
    ATO as group tax had been applied in payment of creditors to enable
    the company to continue to trade.
    (viii) After the meeting on 25 January 1993, Smith knew that C&RP;
    had a substantial cash flow problem which was out of the ordinary,
    that C&RP; could not pay its debts as they fell due, that it was
    depending on both the ATO and the Corporation to give it time to
    pay the arrears, and that C&RP; could not pay other creditors.
    (ix) That the failure of C&RP; to pay the levies would attract fines
    which would only increase the indebtedness of the company to the
    Corporation and thus exacerbate its inability to pay its debts as
    they fell due.
    (x) That C&RP; had asked to be able to pay its indebtedness as at 25
    January 1993 over a two year period.
    (xi) That C&RP; wanted time to pay the arrears in order to be able
    to continue to trade.
    (xii) That C&RP; was owed a substantial amount by its debtors and
    had contracts for future work.

48. In short, the Corporation knew that it was dealing with a company which, until November 1992, had had an excellent record of paying its obligations but had then suddenly stopped paying its debts to the Corporation and that its indebtedness to the Corporation had steadily increased with no reasonable prospect of repayment.

49. SmithÕs evidence was that he did not know of any reason to believe that C&RP; could not trade its way out of its substantial cash flow problems. That expression of confidence is belied by the objective facts. SmithÕs admission in cross-examination that it was reasonable to infer from what Wegener had told him that C&RP; could not pay the debts within six months was inescapable. The terms of payment which C&RP; had agreed with the ATO, the fact that he had inferred that the amounts payable as group tax had been used to pay other creditors and thus enable the company to continue to trade, and the fact that C&RP; had requested two years to pay its indebtedness to the Corporation pointed irresistibly to that conclusion. Were it not for those facts, there might have been some force in the submission for the Corporation that it had no reason to suspect that C&RP; was undergoing anything more than a temporary cash flow problem. But those facts would cause ordinary and reasonable persons to conclude that C&RP; had real financial difficulties which were not temporary. The request in January 1993 for time to pay coming as it did upon an earlier request for time to pay was a further indication of something other than a temporary cash flow problem. Care must be taken not to examine the facts with the benefit of hindsight. But, heeding that caveat, I find that, viewed objectively, all of the circumstances gave rise to the inference that the Corporation had cause for an actual suspicion or apprehension of insolvency when the payments on and after 18 February 1993 were made. Standing alone, the size of the debt to the Corporation was not a significant factor since C&RP; was a relatively substantial employer. However, that fact coupled with the other facts I have mentioned should have served to increase the apprehension of insolvency. Even allowing for the fact that the indebtedness had suddenly arisen over a period of two to three months, for the Christmas shutdown, for a reduced cash flow over the Christmas holiday period, for the explanation for the cash flow problems, and for the holding out that there was future work available to the company, a creditor would have reasonable cause to suspect that the company was insolvent.

50. I do not think that the fact that Smith handed the file back to a recovery officer for collection of the indebtedness of C&RP; pursuant to the arrangements he had made assists the Corporation. It proves no more than that an arrangement had been made and that the Corporation was content with that arrangement.

51. For these reasons, I find that all of the payments made on or after 18 February 1993 were made in circumstances which led to the inference that the Corporation had reason to suspect that C&RP; was insolvent and that the payments had the effect of giving the Corporation a preference or advantage over other creditors.

52. The arrangements for payment of levies made towards the end of February 1993 gave rise to an even stronger suspicion of insolvency in respect of payments made on and after 26 February 1993. The arrangements for payment of the January levy were unusual in that Smith took to Wegener the cheque which reimbursed C&RP; for income maintenance it had paid to be endorsed in favour of the Corporation. He waited while the cheque was endorsed and then returned to the Corporation with the cheque. He was not willing to allow the cheque to be paid to C&RP; and to wait for C&RP; to pay the levy. On any view, he was making a special arrangement to ensure payment, an arrangement which was a strong indication that C&RP; had in his view serious financial problems. Further, Smith had reason to believe that C&RP╒s; financial position had not improved after 25 January in that it was unable to pay the levy for January 1993 and had to rely on being able to offset monies payable to it by the Corporation to pay the levies for February and March. These were the hallmarks of a company unable to pay its debts as they fell due, a conclusion which was reinforced by the request to pay arrears over a period as long as twelve months. SmithÕs concern as to the capacity of C&RP; to pay its debts is illustrated by his unwillingness to document the capping of the loan and time to pay until C&RP; had paid the levy for February.

53. Mr Quick QC, who appeared for the Corporation, submitted that even if the Corporation had called for and inspected the last balance sheet of C&RP,; it would have been no wiser. None of the CorporationÕs officers asked to see the balance sheet. I do not, therefore, have any regard to what the balance sheet disclosed. In passing, I note that, had the officers of the Corporation examined it, they ought to have noticed that it disclosed that C&RP; had no working capital, a firm indicator in the case of a trading company of the fact that the company is relying on the indulgence of its creditors to continue to trade.

Were the Payments in the Ordinary Course of Business? 54. As Dixon CJ said in Taylor v White (1964) 110 CLR 129 at 136: "The time honoured phrase, in the ordinary course of business, is meant to refer to transactions regularly taking place in a sustained course of activity or some usual process naturally passing without examination."

55. In Downs Distributing Co Pty Ltd v Associated Blue Star Stores Pty Ltd (in liq) (supra) at 477 Rich J said:
    "It is an additional requirement and it is cumulative upon good
    faith and valuable consideration. It is, therefore, not so much a
    question of fairness and absence of symptoms of bankruptcy as of
    the every day usual or normal character of the transaction. This
    provision does not require that the transaction shall be in the
    course of any particular trade, vocation or business. It speaks of
    the course of business in general. But it does suppose that
    according to the ordinary and common flow of transactions in
    affairs of business there is a course, an ordinary course. It
    means that the transaction must fall into place as part of the
    undistinguished common flow of business done, that it should form
    part of the ordinary course of business as carried on, calling for
    no remark and arising out of no special or particular situation."

56. As already mentioned, C&RP; entered into a special arrangement to make the payments of the levies for January and February 1993 by the payments on 26 February, 1 March, 22 March and 1 April. Those payments were not made in a manner in which C&RP; had paid levies in the past and the manner of the payment did not accord with the manner in which levies were usually paid by other employers. To use the expression of Rich J the manner of payment called for remark in that it significantly differed from the manner in which payments of levies were usually made by the company. The manner of payment had all the hallmarks of a company which was experiencing a severe cash flow problem. Section 122(2)(a) looks to the actual state of mind of the payee: re Spedley Securities Ltd (in liq) v Western United Ltd (in liq) at 278. Smith conceded that the manner of payment was unusual. Even without recourse to the burden of proof on the Corporation by reason of s122(3), I find that those payments were not, therefore, made in the ordinary course of business. Recourse to the burden of proof only confirms that conclusion.

Are the Levies a Tax? 57. Section 122(4)(b) provides:
    "(4) For the purposes of this sectionÉ
    (b) a payment of tax or municipal or other local rates under an Act
    or State Act or Ordinance of a Territory of the Commonwealth shall
    be deemed to be a payment made for valuable consideration and in
    the ordinary course of business"

58. The Corporation submitted that payment of the levies and areas of levies were payments of a tax and as such within s122(4)(b). It conceded that, as the last payment of $10,379 made on 23 April 1993 was payment of a fine or penalty, it was not a payment of a tax. That concession was properly made: see Air Caledonie International v The Commonwealth (1988) 165 CLR 462, 467.

59. At the time of the payments the subject of this action, s122(7) defined a tax in these terms:
    "In this section, ÔtaxÕ includes any amount payable as provisional
    tax and contribution or as provisional tax, in accordance with
    Division 3 of Part VI. Of the Income Tax Assessment Act 1936-1944,
    or of that Act as amended."

60. The First Schedule of the Act No 32 of 1993 amended the definition to read: "ÔtaxÕ means tax (however described) payable under a law of the Commonwealth or of a State or Territory, and includes, for example, a levy, a charge, and municipal or other rates."

61. However, the amendment came into operation after the alleged challenged payments had been made and so the new definition does not apply. Section 122(4)(g) was referred to, by the Full Court, in Sheahan v Workers Rehabilitation and Compensation Corporation (1991) 58 SASR 119 but the Court did not have to decide the issue whether levies were a tax.

62. In Matthews v Chicory Marketing Board (Vic) (1938) 60 CLR 263 at 276, Latham CJ defined a tax in these terms: "It is a compulsory exaction of money by a public authority for public purposes, enforceable by law, and is not a payment for services rendered."

63. That definition is well-recognised as a general statement of the positive and negative attributes of a tax: Browns Transport Pty Ltd v Kropp (1958) 100 CLR
117, 129. More recently, the High Court has drawn attention to other criteria, namely, that a tax is not by way of penalty and that it is not arbitrary: Air Caledonie International v The Commonwealth (supra) at 467 and the cases there cited. The statement by Latham CJ is not an exhaustive definition and other criteria have been identified by the High Court in three decisions: see Air Caledonie International v The Commonwealth, Australian Tape Manufacturers Association Ltd v The Commonwealth (1993) 176 CLR 480, and Northern Suburbs General Cemetery Reserve Trust v The Commonwealth (1993) 176 CLR 555.

64. First, a compulsory exaction of money under statutory powers may be a tax notwithstanding that the exaction is made by a non-public authority or for a purpose which could not properly be described as public: Air Caledonie International (supra) at 467. That principle was followed and applied by the majority in Australian Tape Manufacturers Association Ltd v The Commonwealth at 501-502 but Dawson and Toohey JJ, with whom McHugh J agreed, noted that the observation could not be taken too far lest it embrace all exactions enforceable by law other than penalties and fees for service. Their Honours said (at 521- 522):
    "However, that observation cannot be taken too far. Even putting
    to one side penalties and fees for services, not every exaction
    enforceable by law is a tax. If it were, there would be no need to
    point to other identifying features. Those characteristics of a
    tax which require it to be levied by a public authority for public
    purposes are important in that they reflect the general conception
    of a tax as a means of raising revenue for government (even if the
    aim of the tax is also to encourage or discourage behaviour of a
    particular kind).Ó

65. It is unnecessary to pursue this issue. The Corporation is a statutory authority which holds its property on behalf of the Crown (s7(2)(d)), is subject to the general direction and control of a Minister of the Crown (s14(1)(a)), and, generally speaking, its powers and functions affect employers throughout the State. The Corporation is, therefore, a public authority. Its functions and powers require it to provide rehabilitation and compensation in accordance with the Act for workers throughout the State who are injured in the course of employment. Statutory arrangements for the payment of workersÕ compensation in the manner provided by the Act are plainly arrangements for a public purpose. The Corporation is, therefore, a public authority which exacts a levy for public purposes.

66. Secondly, the reference to "a payment for services rendered" is a reference to services rendered at the direction or request of the person required to make the payment: Air Caledonie (supra) at 467 and 470. This comment is grounded on the observations of Gibbs J in Logan Downs Pty Ltd v Queensland (1977) 137 CLR 59. In that case, a stock levy was held to be a tax because no particular service had to be rendered to those required to pay it. The levy was payable by owners of stock in Queensland in respect of the total number of stock owned by them. The word "stock" was defined to include horses, cattle, sheep, swine, camels, dogs, cats, poultry and goats and any other animals declared to be stock for the purpose of the Act. The levies were paid into a fund at the Treasury called the "Stock Fund". The Fund could be supplemented by grants out of Consolidated Revenue at a rate nominated in the legislation. The Act provided that the Stock Fund was to be applied to the payment of all expenses incurred in the execution of the Act as well as to the provision of such husbandry services to the cattle, sheep and pig industries and to such other animal industries as the Minister might from time to time determine. The expenses incurred in the execution of the Act might have no relation whatsoever to the stock in respect of which the assessment was made. Similarly, the husbandry services provided out of the fund might not benefit a particular owner of stock who had paid the levy. Thus, notwithstanding that the Fund might be beneficial to farmers and graziers generally, it was held that it was not a fee for services rendered. Gibbs J expressed his reasons in these terms:
    "The amount levied does not purport to be, and is not in fact, a
    payment for services rendered to the person required to pay it.
    The Stock Fund is no doubt applied for purposes which are
    beneficial to farmers and graziers generally, but no particular
    service or benefit need be rendered to any owner of stock who is
    required to pay an assessment, and if, by coincidence, the person
    liable to pay an assessment has been rendered some service under
    the Act, the assessment is not payable because that service has
    been performed, and bears no necessary relation to the expenditure
    incurred in performing that service."

67. Thus, in Parton v Milk Board (Vic) (1949) 80 CLR 229, a levy payable by milk distributors in the metropolitan area of Melbourne other than owners of milk shops for the purpose of funding the operation of the Milk Board was held to be a tax. Although it was held that the administration of the Board might be regarded as beneficial to the milk industry, the Board performed no particular service for those required to pay the levy. In Air Caledonie, a fee for immigration clearance payable by airline passengers entering Australia was held to be a tax because it was held that, among other things, no service was being rendered to those passengers and the impost was intended to offset the administrative costs of the relevant Commonwealth department, including the issue of visas.

68. Examples of financial exactions which have been held to be fees for services rendered are Harper v Victoria (1966) 114 CLR 361 and General Practitioners Society v The Commonwealth (1980) 145 CLR 532. In each case, the fee was payable compulsorily. In Harper v Victoria, the legislative scheme required all the eggs sold in Victoria to be presented to a marketing board to be graded, tested and marked with the grade or quality. The Marketing Board was authorised to deduct a fee fixed by the Board of the estimated cost of grading, testing and marking. In the General Practitioners Society v The Commonwealth a fee of $10 or "of such other amount as is prescribed" was payable by a medical practitioner seeking to have his application to become an approved pathology practitioner processed by the Minister. It was held to be the price which a medical practitioner, who seeks to become an approved pathology practitioner, must face for the purpose of having his undertaking considered by the Minister and either accepted or referred for inquiry and report to a medical services committee of inquiry. The fact that it was paid into Consolidated Revenue did not prevent it from being a fee for services: see Gibbs J at 561-562. The High Court said in Air Caledonie (at 467):
    "If the person required to pay the exaction is given no choice
    about whether or not he acquires the services and the amount of the
    exaction has no discernible relationship with the value of what is
    acquired, the circumstances may be such that the exaction is, at
    least to the extent that it exceeds that value, properly to be seen
    as a tax."

69. The decisions in Harper v Victoria and General Practitioners Court v The Commonwealth in particular indicate that an exaction may be a fee for services rendered notwithstanding that the person by whom the exaction is payable does not request the service and that the fee is payable by statutory compulsion: see, especially, the General PractitionersÕ Case at 561 per Gibbs J with whom the Court agreed. What is important is whether there is a discernible relationship between the financial exaction and a form of service.

70. Although there is not, I think, express authority to this effect, commonsense indicates that it is not necessary for the whole of a financial exaction to be paid in respect of the fee for service. In all likelihood, costs will often be incurred in administering a scheme which provides a service and in some cases those costs will represent a substantial proportion of the revenue derived from the financial exaction. What, I think, is necessary is that the administrative costs are directly related to the service which is provided. In the case of the levies payable under this Act, in the financial years ending 30 June 1993, the revenue derived from levies was $254.4M and from investments $58.5M. The total paid in satisfaction of claims was $229.8M and administrative costs totalled $45.5M. Thus, monies paid on claims represented just over 90 per cent of levies received. If investment and other income is added, monies paid on claims represented just over 73 per cent of total revenue. In an organisation such as the Corporation, considerable expenditure will be incurred in registering and assessing employers and in processing and investigating claims. In addition, there is the expense incurred in providing the processes of review and appeal under the Act. Finally, there are costs associated with the provision and supervision of rehabilitation programmes. All of these costs are directly related to the provision of compensation and rehabilitation services.

71. Thirdly, the exclusion of a payment for services rendered should be seen as intended to be but an example of various special types of exaction which may not be taxes even though the positive attributes mentioned by Latham CJ are all present. Thus, a charge for the acquisition or use of property, a fee for a privilege, and a fine or penalty imposed for criminal conduct or breach of statutory obligation are other examples of special types of exactions of money which are unlikely to be characterised as a tax notwithstanding that they exhibit those positive attributes: Air Caledonie (supra) at 467. An example of a compulsory financial exaction which was held to be a tax is Harper v Minister for Sea Fisheries (1989) 168 CLR 314. In that case, a fee was payable for a licence to fish for abalone. Fishing for abalone without a licence was prohibited. The licence fee was held not to be a tax but a charge for the acquisition of property.

72. Fourthly, it is not a necessary concomitant of a tax that it should be paid into the Consolidated Revenue Fund: Australian Tape Manufacturers Association Ltd v The Commonwealth (supra) at 503.

73. The levies payable under the Act are plainly a compulsory exaction and that exaction is enforceable by law. The levies are exacted by a public authority for a public purpose. Thus, the only remaining issue is whether the levies are truly a tax. That will depend on the operation and effect of the legislative scheme prescribed by the Act.

74. The legislative intention of the present Act is to replace the previous scheme, which had imposed the liability to pay workersÕ compensation upon the employer and so required the employer to insure for the protection of workers, with a scheme by which the Corporation is responsible for providing workersÕ compensation out of the Compensation Fund: Santos Ltd v Saunders (1988) 49 SASR
556 per King CJ at 560 and per Von Doussa J at 565. The Compensation Fund is constituted in the greater part by levies paid by employers and to a lesser degree by the income earned on the levies paid by employers into the Fund. To that extent, it is a self-funded scheme. The fact that the Corporation may borrow from the South Australian Government for the purpose of meeting the liabilities of the Fund does not alter that conclusion. The Corporation is liable to repay those borrowings. In this respect, the Corporation like many other corporations is authorised to borrow monies for the purpose of funding its trading activities. The fact that the Act provides that the Government will be the lender is, in part at least, a measure to guarantee the payment of compensation which is due to workers. The levies are not paid into a fund which is then supplemented by government. Instead, the levies and the investment income earned by the levies constitute the overwhelming proportion of the income of the Fund. There is, therefore, a direct relationship between the levies paid by employers and the compensation paid by compensation out of the Fund.

75. Employers who register with the Corporation in accordance with the Act are no longer required to insure except against liability for motor vehicle accidents: s54(2). The new scheme to all intents and purposes insures registered employers against any liability for workersÕ compensation arising under the Act and against any liability for a compensable disability arising outside the Act. The scheme under the existing Act is a form of insurance for employers but it would be an over-simplification to call it an insurance scheme. Unlike a contract of insurance, where the liability of the insurer to indemnify usually depends upon the payment of a premium and the insured complying with the terms of the insurance contract, the worker is compensated notwithstanding any default by the employer in registering or in failing to pay premiums. But the scheme has a number of elements of an insurance scheme. Registered employers receive a quid pro quo or a privilege or other benefit for the levies they pay in that, to all intents and purposes, they are relieved from any liability to pay compensation under the Act to workers suffering a compensable disability. They are insured also against any other liability to those workers. The overall scheme of the Act is that employers, other than exempt employers, are not liable to pay compensation to workers employed by them. Instead, the Act imposes on the Corporation the liability to compensate injured workers out of the Fund which is constituted by the levies.

76. There is another similarity to an insurance scheme in that different employers might pay different levies. As already mentioned, a number of factors might affect the rate of levy payable by each employer. The levy is fixed by reference to the claims experience of the employer and the safety measures adopted by the employer in the workplace, as well as to other matters; the levy is fixed for each class of industry, no doubt by reference to the claims experience or the perceived claims potential in each industry; and the levy is calculated by reference to the amount paid as wages or salaries by the employer. The scheme is also similar to a contract of insurance in that a levy is payable notwithstanding that no claim might have been made in the previous year. The absence of a claim might reduce the amount of the levy but the levy is nevertheless payable. Furthermore, the fact that the computation of the levy payable by any employer might be affected by a range of factors including claims history of the employer or of the industry in which the employer is engaged distinguishes the levy from a tax, which is usually a fixed contribution or, if not fixed, is not likely to be capable of variation in the manner in which levies might be varied as between employers. The two features, that is to say, that there is a service and levies are capable of variation as between employers in a manner quite unlike a tax, point to the conclusion that the levies are not a tax.

77. The fact that workers will recover compensation despite a failure by the employer to comply with the Act is a factor which tends towards the conclusion that the levy is a tax. In other words, the service is provided notwithstanding a default by the employer. On the other side of the balance is the fact that a registered employer is relieved of any liability to pay workersÕ compensation and is insured against any liability than might arise apart from the Act. There is a direct relationship between the levies and the compensation fund. The levies recovered are the main source of revenue for the Fund. There is no other substantial source of revenue other than investment income earned by the levies in the Fund.

78. I do not think that this conclusion is affected by the special levy payable by exempt employers. The issues in this action do not concern levies paid by exempt employers. Whether they are a tax is an issue for another day.

Conclusion 79. For these reasons, I conclude that the levy is not a tax. Even if the levies were a tax, the Corporation had reason to suspect that C&RP; was unable to pay its debts as they became due and the payments should give the Corporation a preference. The liquidator is, therefore, entitled to recover payment of the amounts paid by C&RP; to the Corporation on and after 18 February 1993.