Gidlow v The Workers Compensation Nominal Insurer & Ors
[2024] NSWPIC 82
•26 February 2024
| CERTIFICATE OF DETERMINATION OF MEMBER | |
| CITATION: | Gidlow v The Workers Compensation Nominal Insurer & Ors [2024] NSWPIC 82 |
| APPLICANT: | James Christopher Gidlow |
FIRST RESPONDENT: | Jason Dean Sculli t/as Sculli Blinds and Screens |
SECOND RESPONDENT: | Workers Compensation Nominal Insurer |
| MEMBER: | Paul Sweeney |
| DATE OF DECISION: | 26 February 2024 |
| CATCHWORDS: | WORKERS COMPENSATION - Workers Compensation Act 1987; dispute between uninsured respondent and Nominal Insurer as to whether he was an “exempt employer” within section 155AA(1) at date of workers injury; Kula Systems Pty Limited v Nominal Insurer considered and applied; viewed objectively there were reasonable grounds for the uninsured to believe that his wages bill would not exceed $7,500; Held – Nominal Insurer ordered to pay the worker compensation on the basis that an exempt employer policy was in force at the date of injury. |
| DETERMINATIONS MADE: | The Commission determines: 1. The applicant suffered injury to his right shoulder in the course of his employment with the first respondent on 2 September 2016. 2. At the time of the injury the first respondent was an exempt employer as that term is used in s 155AA(1) of the Workers Compensation Act 1987 and is deemed to have an exempt employer policy with the second respondent. 3. The second respondent is to pay the applicant the sum of $5,000 in respect of the claim for weekly compensation. 4. The second respondent is to pay the applicant’s medical and hospital expenses in the sum of $16,013.84 on production of accounts/receipts/notice of charge. Otherwise and thereafter award for the respondent. |
STATEMENT OF REASONS
BACKGROUND
It is accepted by the parties that James Christopher Gidlow (the applicant) suffered injury to his right shoulder in the course of his employment with Jason Dean Sculli (the first respondent) on 2 September 2016.
It is also common ground that Mr Sculli was not insured at the time of this injury in respect of his liability to Ms Gidlow pursuant to the Workers Compensation Act 1987 (the 1987 Act).
At a preliminary conference on 23 January 2024, the Nominal Insurer (the second respondent) agreed to pay the applicant weekly compensation in respect of his periods of incapacity for work resulting from the injury and to indemnify him in respect of his medical and hospital expenses in accordance with s 60 of the 1987 Act. At the conclusion of these reasons, I will make the necessary declaration and orders to give effect to that settlement, which occurred with the concurrence of the first respondent.
PROCEDURE BEFORE THE PERSONAL INJURY COMMISSION
By the Application to Resolve a Dispute, the applicant also sought an order that Mr Sculli reimburse the Worker’s Compensation Nominal Insurer (Nominal Insurer) for the compensation moneys and the costs of these proceedings in accordance with s 142B of the 1987 Act.
Mr Sculli argues, however, that he was an exempt employer during the financial year in which the applicant was injured and, in accordance with s 155AA of the 1987 Act, is deemed to have the benefit of an exempt employer policy with the Nominal Insurer in respect of his liability under the 1987 Act.
The Nominal Insurer does not accept that Mr Sculli was an exempt employer in accordance with the statutory definition. That issue was the subject of a conciliation conference and arbitration hearing on 14 February 2024 at which Mr Sculli was represented by Mr Macken, solicitor, and the Nominal Insurer was represented by Mr Doak, of counsel. The applicant took no part in the conciliation or arbitration.
I was informed by the parties that they were unable to resolve the threshold question of whether Mr Sculli was an exempt employer. I am satisfied that the parties, who were represented by experienced lawyers, had ample opportunity to resolve the issue in dispute at the preliminary conference or during the conciliation conference prior to the commencement of the arbitration hearing.
LEGISLATION
Section 155AA of the 1987 Act, insofar as it is relevant, is as follows:
“(1) An employer is an ‘exempt employer’ during a financial year while the employer has reasonable grounds for believing that the total amount of wages that will be payable by the employer during the financial year to workers employed by the employer will be not more than the exemption limit for that financial year.
(2) An employer is not an exempt employer whenever the employer—
(a) is a member of a group constituted under Division 2A, or
(b) employs a person under a training contract (within the meaning of the Apprenticeship and Traineeship Act 2001 ).
Note: A
‘training contract’ is a contract entered into for the purpose of establishing an apprenticeship or traineeship.(3) An employer who is an exempt employer for the whole or any part of a financial year is deemed to have obtained from the Nominal Insurer (and the Nominal Insurer is deemed to have issued) a policy of insurance in compliance with section 155 (an ‘exempt employer policy’) for any period for which the employer is an exempt employer during the financial year. No premium is payable for an exempt employer policy.
(4) An exempt employer policy covers the employer for any period for which the employer is an exempt employer but does not cover the employer for any period for which the employer has actually obtained a policy of insurance under section 155.
8) In this section--
‘exemption limit’ for a financial year means $7,500 or such other amount as may be fixed by the Workers Compensation Market Practice and Premiums Guidelines as the exemption limit for that financial year.”
EVIDENCE
The documents before the Personal Injury Commission (Commission) are as follows:
(a) the Application to Resolve a Dispute and the documents attached;
(b) the Reply and the documents attached, and
(c) an Application to Admit Late Documents containing the Reply of the Nominal Insurer dated 10 January 2024 and the documents attached.
There was no objection to any of the material referred to above. However, Mr Doak sought leave to cross-examine the applicant. Mr Macken did not oppose that course of action which had been foreshadowed at the preliminary conference in the matter. Accordingly, I granted leave to Mr Doak to cross-examine Mr Sculli and leave for Mr Macken to reexamine.
SUBMISSIONS
The submissions of counsel are recorded and I do not propose to reiterate each of their arguments in these short reasons.
Both counsel referred to the reasoning of President Keating, in the Presidential Unit of the former Workers Compensation Commission, in Kula Systems Pty Limited v Nominal Insurer[1] (Kula) and to a High Court authority on which it was based: George v Rockett.[2]
[1] [2018] NSWWCCPD 10
[2] (1970) 170 CLR 140
It was common ground that the Commission should determine the issue of whether Mr Sculli had reasonable grounds for believing that his wages bill in the financial year of the injury would not exceed $7,500 on an objective basis.
Mr Doak submitted that Mr Sculli’s evidence in respect of the financial affairs of his business was unreliable. His written evidence was not consistent with the contemporaneous emails. There was also “obfuscation” in his communications with the applicant and his solicitor when a claim for compensation was belatedly made.
At the time of the injury, Mr Doak argued, the applicant had not turned his mind to the issue of the wages he might be required to pay in the future. The contemporaneous evidence was not consistent with a belief that his wages outlay would not exceed $7,500.
Mr Doak also submitted that the fact that Mr Sculli incorporated a proprietary company midway through the 2016/17 financial year suggested that he believed that his business was financially healthy and expanding. The applicant had chosen to give only brief and unsatisfactory evidence concerning the reasons for the incorporation of proprietary company.
Mr Macken relied on his client’s written evidence and he submitted that Mr Doak had not put to the applicant that he did not actually hold a belief that his wages bill would not exceed $7,500 in his cross-examination of the applicant. He emphasised the sums actually paid in wages at and after the time of the injury.
It will be necessary to return to the submissions of counsel when resolving the issue in dispute. It is first necessary to set out briefly some aspects of the evidence in the case. What follows is not intended to be a comprehensive survey of the evidence.
The applicant
By his written statement of 1 June 2022, the applicant says that he ceased full-time employment with IBM in 2014. Initially, he was not looking for work. However, eventually, he “started looking for casual jobs” to supplement his superannuation.
The applicant says that he was put in touch with Mr Sculli by an acquaintance. He rang him and told him that he was “looking for some part-time work”. He records that Mr Sculli said to him:
“Yes, I could do with some help”.
Mr Sculli gave the applicant his address and told him to “meet me here tomorrow at 7.00am”.
The applicant says he cannot recall the date he first went to work for Mr Sculli, but believed that it was in “July 2016”. However, he continued to assist Mr Sculli in the installation of blinds and shutters “about one day per week”. He says that his working hours varied each day depending on how long it took to get the job complete and how far they had to travel. The applicant says he was paid “about $100 to $150 in cash for each day I worked”. He annexes to his statements a series of text messages from Jason Sculli commencing in August 2016.
The applicant then records the circumstances of his injury on 2 September 2016 and his interaction by text message with Mr Sculli after the incident. The injury is no longer in dispute.
Following the injury, the applicant returned to work on 23 November 2016. He says that it appears from the text messages that he also worked on 24 November 2016. He was unable to continue to perform all of the duties involved in blind installation. He says that but for the injury it was his intention to “continue to work for the next few years”.
The applicant did not make a compensation claim until he spoke to Mr Sculli on 10 December 2021.
Jason Sculli
By a statement of 14 September 2016, Mr Sculli says that he is now employed by a company, Sculli Blinds and Screens Pty Ltd, which has only been operating since January 2017. He states that:
“We also have a company Sculli Blinds and Awnings, and have 3 employees, myself and my brother”.
He states that during the time that the applicant worked for him he was a “subcontractor to Bell Shutters” and “from time to time” needed a hand to lift boxes or shutters on site. He states that he did not have a personnel file for the applicant:
“because I did not start employing people until we opened Sculli Blinds and Screens and we took out a workers compensation policy”.
He continues:
“With Mr Gidlow we only used him for a few days over about 2 weeks from about the middle of August 2016 and it would probably be in total a week over 2 to 3 weeks.
We were only working short days most of the time and if it were a longer day we would eat in the van and then get the job finished.
I am not sure how many hours a week he worked because I do not have any records and I was paying him cash each day.”
By a further statement of 18 September 2023, Mr Sculli states that in 2016 he was working as a subcontractor for Bell Shutters (Bell). Curiously, he states that he “was not employing anybody at that time and nor was I intending to employ anyone.” He continues:
“The business which was later to become Sculli Blinds and Screens had barely started at that point and was certainly not in a position where it could afford to employ anyone and rather I was the only person who worked in that business. In fact in the period at the end of 2016 when I operated as a sole trader that business operated at a small loss of about $5,000. The only other time I paid anybody to assist me was my brother Matthew for a short period in July. Matthew was paid on a contract basis a total of approximately $1,500.”
In respect of employing the applicant, he says that the work available at that time was “quite limited and was being done as part of my role as sub-contracting to Bell Shutters”. He reiterates that the applicant did a few days’ work “over a period of 2-3 weeks at the most”. He says he paid no further wages in that year and had “no intention of doing so.” He states the wages that he paid were “very substantially less than $7,500”. “I did not employ anybody else in that year and nor did I intend to do so.”
By a third statement, dated 15 December 2017, Mr Sculli says that the decision to register a company to operate the blinds business from 2017 was posited on his belief that he could “grow the blinds business myself rather than operating as a contractor to others”. He also addresses the wages of $98,499 paid to 30 June 2007 by the company.
Mr Sculli states that the total wages included $61,790 to himself and $24,613.96 to his partner. The total wages paid to other persons was $12,000 and of that approximately $4,000 was paid to his brother.
Mr Sculli reiterates that it was his belief and expectation that if he continued to operate as a sole trader that his wages bill would be “less than $7,500.”
Oral evidence
Mr Doak suggested to Mr Sculli that he informed the applicant of the availability of work by text message. He acceded to this proposition. Mr Sculli agreed that the first of these text messages was 4 August 2016. Mr Doak put to him that the applicant had worked for him from time to time in August 2016. He agreed with this proposition. It was put to him that the dates stated in the text messages were a fair indication of the days that he employed the applicant during August. He accepted this proposition. Mr Doak put to Mr Sculli that the dates of employment proven by text messages were inconsistent with his statement evidence. It was put to him that this evidence was also inconsistent with his evidence of employing the applicant “for a few days(over) about 2 weeks” in an email which he sent to Mr Hall an investigator. Mr Sculli responded that he only had a vague memory of what had happened six years previously.
Mr Sculli was asked whether he considered the applicant to be an employee or a subcontractor. He responded by stating that he was just helping out “whatever that falls under”. It was put to him that he had not turned his mind to whether he required workers compensation insurance at that time. He responded “unfortunately not”. It was put to him that had the applicant not been injured, he would have continued to employ, Mr Gidlow or someone else to assist him if he had additional work. He accepted that he would employ someone to “give him a hand”.
Mr Suli was asked whether he had any records of the cash payments made in 2016. He responded by stating that his wife might have had them.
In re-examination, Mr Sculli agreed that the applicant had worked for him five or six days in August and early September and two more days in November/December. He added that they were not all full days. He would sometimes require assistance for a couple of hours in the morning or afternoon but would work the remaining hours of the day without assistance. He said that during that period he was “subcontracting” to Bell and another company, who often provided assistance in installing their product. He drew a distinction between this work, performed by him on behalf of Bell, and the work undertaken by Sculli Blinds and Screens.
DISCUSSION AND FINDING
In Kula, Keating P, in the former Compensation Commission, stated that for an employer to be found to be an “exempt employer” within s 155AA(1) there must be reasonable grounds for believing that the total amount of wages “that will be payable” by it to workers during the financial year will not exceed the exemption limit. At [166] and [167,] the President said this:
“With respect to the ascertainment of wages payable, s 155AA of the 1987 Act is expressed in future progressive tense, indicating that something will happen at some point in the future. The section is not expressed in past tense. The provision requires that in order to be classified as an ‘exempt employer’ the employer must have reasonable grounds for believing that the total amount of wages that ‘will be payable’ to workers during the financial year will be ‘not’ more than the exemption limit. That requirement cannot be satisfied only by a consideration of extant legal obligations at a given point in time.
Section 155AA of the 1987 Act does not require a determination of whether the wages paid by the employer during the relevant financial year were in fact less than the exemption limit of $7,500, even though the arbitrator found that the wages paid by the employer in the present case did not exceed $7,500 in the financial year. The amount of wages actually paid is not determinative of an assessment of what ‘will be payable’ under s 155AA of the 1987 Act. The provision does not provide for a retrospective consideration of the established evidence of wages paid. As the Arbitrator identified, the test ‘turns on whether the employer had “reasonable grounds for believing” that the total wages payable by it during the financial year in question would not exceed that limit”.
At [153], the President said that the Arbitrator stated the correct test when he said:
“I shall, however, proceed, in the absence of any submission to the contrary, on the basis that the issue is whether the applicant would have had reasonable grounds for forming such a belief, had it turned its mind to the question.” (My italics.)
I propose to apply the same test namely whether Mr Sculli had reasonable grounds for believing that he would not pay wages exceeding the exemption limit of $7,500 in the financial year of the injury if he had turned his mind to the question.
The resolution of this issue is complicated by two matters. First, the claim for compensation was made more than five years after the injury and the hearing took place more than seven years after the injury. It is a notorious fact that the recollection of witnesses of events which occurred many years previously is often flawed. Secondly, the applicant incorporated a proprietary company to conduct his business on 30 November 2016, although his uncontested evidence is that the company only conducted the business from 1 January 2017.
While Mr Macken emphasised the repeated statements from Mr Sculli that it was his expectation and belief that he would pay no more than $7,500 in the financial year the injury that does not answer the question posed by the section. He may have held He may have resolutely held that belief. But the question is whether there were reasonable grounds for such a belief. That must be determined on all of the evidence. Similarly, the wages paid by Mr Sculli prior to the injury cannot be detrminative of the wages that will be payable by him in the financial year of the injury.
An important aspect of the Nominal Insurer’s argument is that the evidence of Mr Sculli is unreliable and should not be accepted. It is no longer permissible to assess the reliability of a witness solely on the basis of his demeanour.[3] However, my impression of Mr Sculli’s evidence was that he was attempting to do his best to honestly answer the questions put by Mr Doak and to assist the Commission in resolving the dispute. His replies were responsive and seemingly spontaneous. It is true that there are inconsistencies between the text message chain tendered in evidence, which prove up to eight days over a period of some four months and his written evidence that the applicant did a “few days work” over a period of two to three weeks.
[3] See Fox v Percy (2003) 214 CLR 118.
Similarly, there may have been an element of obfuscation when the applicant’s solicitor initially approached Mr Sculli and his wife. However, the inconsistencies are trifling when one considers that five years elapsed between the injury and Mr Sculli being asked to recall the circumstances of his employment of the applicant. When he was approached by Mr Hall, the investigator, in mid-2002, he acknowledged that he took on the applicant to work for “a month or two”, although he understood the relationship to involve “subcontracting”. A layman’s conception of “contracting” is not always consistent with appellate authority. In my opinion, the attack by Mr Doak on the reliability of Mr Sculi’s written and oral evidence is not made out. The inconsistencies are readily explained by the passage of time. I find that Mr Sculli was a truthful witness.
Mr Sculli’s taxation returns for the financial years ending 2016 and 2017 were put into evidence, although no attempt was made to analyse them in detail during submissions. I have read the documents. They are difficult to understand and I am reluctant to draw any inferences from them in the absence of a submission being made by either party.
Both parties accepted that the email record was probably the best record of Mr Sculli’s employment of the applicant. During the cross examination it was not put to him that he actually employed workers other than the applicant in the truncated financial year to 31 December 2016, although he agreed with Mr Doak that at the time of the injury, he envisaged employing casual labour in the future. From 1 January 2017, the business operations that had been carried on by him in the past and, probably, some additional operations, were carried on by a discrete legal entity, the proprietary company.
Accepting Mr Macken’s analysis, which was not vigorously contested, the applicant worked for six days from 4 August 2016 to 2 September 2016 and another two days on his return to work following his injury. At least, one of the emails corroborates Mr Sculi’s evidence that the applicant did not always work a full day. I would infer that Mr Sculli probably paid the worker approximately $1,000 during his two periods of employment over a total period of some three months.
It is evident that during the six-month period that the businesses conducted by a corporation in the financial year 2017, the business paid $24,613.96 to Mr Sculli’s partner, $4,000 to his brother, Scott, and another $8,000, probably for casual labour. There are difficulties, however, in concluding that the businesses conducted by Mr Sculli and the proprietary company are the same business. Quite apart from the company being a separate legal entity, I infer from Mr Sculli’s evidence that he incorporated a company to own the business as he considered there were opportunities for it to become a retailer of screens and blinds rather than performing work as a subcontractor for Bell and another retailer for which he had worked on a subcontract basis in the past. I concede that this is not the subject of detailed evidence. However, Mr Sculli referred to deciding to “grow the business himself” rather than operating as a contractor to others on several occasions in his written and oral evidence.
Against that background, I return to the question of whether the above evidence permits a finding that at the date of the injury there were reasonable grounds for Mr Sculli to believe that his wages bill in the financial year ending 2016 would not exceed the exemption limit. In my opinion, accepting his evidence of what he paid to the applicant between 1 July 2016 and the date of injury, and between the date of the injury and the time when he incorporated Sculli Blinds and Screens Pty Ltd there were such reasonable grounds. While it cannot be determinative, if one extrapolated the approximately $1,000 paid to the applicant in the first half of the financial year through the full financial Mr Sculli’s annual wages bill would amount to some $2,000. Even if his need for casual labour trebled by reason of an expansion of his business it would not exceed the exemption limit.
Mr Doak argued, of course, that the incorporation of the company only three months after the injury is objective evidence that the applicant could not have had a belief that his wages would be less $7,500 in the financial year. He must have known that the business was increasingly profitable, which would inexorably lead to a larger wages bill. I doubt, however, that I can draw such inference from this evidence. Small businesses often rise or fall with great rapidity. Some business proprietors through insight, expertise, or luck achieve rapid profit growth while others fail. I am reluctant to impute a belief to Mr Sculli that at the time of the injury his business was about to rapidly expand on the basis of the evidence in this case.
Predicting the future with accuracy may occasionally be possible. However, generally men will look at the future and see a range of possibilities, some favourable and some inauspicious. “Reasonable grounds”’ like the reasonable man probably necessitates the discarding of each extreme. While the evidence is not entirely clear cut, I am persuaded that at the date of injury there were reasonable grounds for Mr Sculli to believe that his wages outlay as a sole trader in the financial year 2016 would not exceed $7,500. Accordingly, I find that at the date of the applicant’s injury on 2 September 2016, he was an exempt employer within the definition in s 155AA.
I propose to make the following findings:
(a) the applicant suffered injury to his right shoulder in the course of his employment with the first respondent on 2 September 2016;
(b) at the time of the injury the first respondent was an exempt employer as that term is used in s 155AA(1) of the 1987 Act and is deemed to have an exempt employer policy with the second respondent;
(c) the second respondent is to pay the applicant the sum of $5,000 in respect of the claim for weekly compensation, and
(d) the second respondent is to pay the applicant’s medical and hospital expenses in the sum of $16,013.84 on production of accounts/receipts/notice of charge. Otherwise and thereafter award for the respondent.
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