Maroochydore Black Swan Rugby League Limited v Workers' Compensation Board of Queensland

[1993] QCA 564

IN THE COURT OF APPEAL	[1993] QCA 564
SUPREME COURT OF QUEENSLAND	Appeal No. 134 of 1993
Brisbane
Before	Mr Justice Davies Mr Justice Pincus Mr Justice Mackenzie

[Maroochydore Black Swan Rugby League Limited v. The Workers'

Compensation Board of Queensland]

BETWEEN:

IAN LESLIE HUGHES (Plaintiff)

AND:

MAROOCHYDORE BLACK SWAN RUGBY

LEAGUE LIMITED (First Defendant) Appellant

AND:

JOHN ALFRED PINDER (Second Defendant)

AND:

THE WORKERS' COMPENSATION BOARD OF

QUEENSLAND (Third Party) Respondent

REASONS FOR JUDGMENT - THE COURT

Judgment delivered 21/12/1993

This is an appeal by the first defendant Club against a judgment given for the respondent Board on 29 June 1993 in third-party proceedings. The background to those proceedings is as follows. The Club had contracted with MSS Patrol Services (MSS) for MSS to provide security services for the Club's premises. MSS subcontracted the task to Mudjimba Security Services (Mudjimba). Mudjimba employed the plaintiff as a security officer. On 19 October 1988, the plaintiff was accidentally injured by one of the Club's employees while checking the Club's premises in the course of his employment with Mudjimba. The plaintiff sued the Club for common law negligence and was awarded $91,746.18 damages. The Club sought an indemnity from the Board in respect of this amount.

It was common ground between the Club and the Board that at all material times the Club held a Policy of Accident Insurance (in Form 2 of the Workers' Compensation Regulations 1987 (Qld)) with the Board pursuant to s. 8 of the Workers' Compensation Act 1916 (Qld) (the Act). The question which arises in this appeal is whether the Club was entitled to be indemnified under that policy in respect of the damages awarded to the plaintiff for his personal injury.

The policy provides that the Board is bound to indemnify the Club as employer "against all sums for which, in respect of workers ... employed by him, he may become legally liable" to pay to a worker in respect of personal injury. The Club, both before the learned trial judge and in this Court, argued that the provisions of cl. 25 of the Schedule to the Act, together with s. 3 of the Act, deemed the plaintiff to have been a worker employed by the Club for the purposes of the policy.

"Employer" is defined in s. 3(1) as including "any person deemed by this Act to be an employer for the purposes of this Act". Clause 25 provides:

"25. Contracting or sub-contracting. ... Where any person (herein called the 'principal') contracts with any other person (herein called the 'contractor') for the execution of any work by or under the contractor, and the contractor employs any worker thereon, the following provisions shall apply:-

(i) Both the principal and the contractor shall
be deemed to be employers of the worker.

(ii) In the case of sub-contracts, the expression 'principal' shall extend to and include not only the original principal, but also each contractor who constitutes himself a principal with respect to a sub-contractor by contracting with him for the execution by him of the whole or any part of the work; and the expression 'contractor' shall extend to and include not only the original contractor, but also each sub-contractor.

(iii) The regulations may declare the conditions under which any right of indemnity shall exist and be enforceable by and between any of the aforesaid persons, and may also prescribe the person or persons against whom the Board is entitled to recover any penalty or any moneys under the circumstances aforesaid."

Where there is a principal, a contractor retained by the principal and a worker employed by the contractor, sub-cl. 25(i) deems the principal to be the employer of the contractor's worker although no contract of employment exists between them. The Club submits that sub-cl. 25(ii) extends sub-cl. 25(i)'s application to a situation where there is a principal, a contractor, a subcontractor and a worker employed by the subcontractor, deeming both the principal and the contractor to be employers of the subcontractor's worker.

A difficulty with this suggested construction of cl. 25 is that the operation of sub-cll. (i) and (ii) appears to be dependent upon the existence of the facts stated in the opening paragraph of the clause, yet where the worker is employed not by the contractor but by a subcontractor, those facts would not, at least on a literal reading of the paragraph, exist. Neither the Club nor the Board adverted to this difficulty either below or before this Court, and it was not considered by the learned trial judge. Nor has the point been examined in previous authorities. In two cases where the operation of sub-cl. 25(ii) has been considered - Leplaw v. A.W. Rasmussen Pty Ltd (unreported, Supreme Court of Queensland, 29 May 1986, Ryan J.) and Wardle v. Kennedy Taylor (Qld) Pty Ltd [1992] 1 Qd.R. 331

- it was assumed that the sub-clause was effective to deem both the principal and contractor to be employers of a worker employed by a subcontractor.

The difficulty presented by the structure of cl. 25 does not inhere in cl. 25's inter-State analogues: see s. 175(6) Worker's Compensation and Rehabilitation Act 1981 (W.A.); s. 60(1)(c) Workers Compensation Act 1958 (Vic.); s. 6(3) Workers' Compensation Act 1927 (Tas.) (now repealed). However, the difficulty was inherent in cl. 25's predecessor, s. 10 of the Workers' Compensation Act 1905 (Qld). The opening paragraph of s. 10 was identical to the opening paragraph of cl. 25, and sub-s. 10(4) of the 1905 Act was in the same terms as sub-cl. 25(ii) but for the presence at the end of that sub-section of the following proviso:

"Provided that each principal's right of indemnity shall be a right over against every contractor standing between him and the contractor by whom the worker was employed at the time when the accident occurred, and including such lastmentioned contractor."

This proviso appeared to presuppose that sub-s. 10(4) deemed the principal and all contractors standing between the principal and the contractor by whom the worker was actually employed to be employers of the worker, and this in turn strongly suggested that s. 10 was intended to achieve such a result. The question then arises of whether the fact that the proviso was not reproduced in sub-cl. 25(ii) indicates that the legislature did not intend cl. 25 to effect the same result.

In our opinion this was not the case. As sub-cl. 25(iii) reveals, when the 1916 legislation was enacted it was thought appropriate that any rights of indemnity amongst the principal and the contractors be provided for in the Regulations to the Act. Because this was the very matter which had previously been dealt with by the proviso, it was no longer appropriate for the proviso to be retained in the body of the Act. In our view, this was the sole reason the proviso was not reproduced in sub-cl. 25(ii). We therefore accept the Club's submission as to the intended effect of sub-cl. 25(ii).

In our view, despite the difficulty explained earlier, cl. 25 can be given its intended effect by construing it in either of two ways. First, the opening paragraph and sub-cl. 25(i) could be read as one clause and sub-cl. 25(ii) as a separate clause.

Alternatively, for the purposes of the opening paragraph of the clause, in a case such as the present the "principal" could be regarded as the contractor (MSS) and the "contractor" as the subcontractor (Mudjimba). Either way, effect is given to the obvious intention of cl. 25 without undue violence being done to the language of the clause. In our opinion, the latter of the two possible constructions is the preferable one.

Accepting this construction of cl. 25, the Board nevertheless submitted that there were two reasons why the clause did not operate to deem the Club to be an employer of the plaintiff in the present case. First, relying on statements made in Paron v. Fry (No. 1) [1990] 1 Qd.R. 539 at 548 and Leplaw (at 15-16), the Board argued that a principal is deemed to be an employer of a worker employed by a subcontractor only "where the principal's work is executed by or through a contractor". In the Board's submission, the evidence in this case demonstrated that the Club's work was that of a football club and a licensed restaurant and clubhouse, not that of providing security services, which was the work of MSS and Mudjimba. For this reason, at the time the plaintiff was injured he was engaged in the work of MSS and Mudjimba, not the work of the Club, and cl. 25 was therefore not attracted.

Secondly, the Board argued that the Full Court's decision in Wardle stood as direct authority against the Club. Factually, Wardle is relevantly indistinguishable from this case. It concerned a principal's claim for an indemnity from the Board in respect of a damages claim against it by an employee of one of its subcontractors. For reasons which we will discuss later, the Court upheld the primary judge's dismissal of the principal's claim. The Board in the present appeal relies upon Wardle as being authority for the proposition that the primary effect of cl. 25 is not to extend the cover of a principal's existing policy with the Board, but rather to deem the principal to be an employer for the purposes of sub-ss. 8(1) and (5) of the Act, thereby imposing on the principal a duty to insure (and perhaps indemnify the Board) under the Act in respect of the subcontractor's workers.

The learned trial judge accepted both of the Board's submissions and dismissed the Club's claim. Before this Court, the Club challenged the learned trial judge's decision and, in our opinion, successfully demonstrated that neither of the Board's arguments can be sustained.

We agree with the Board's first argument in so far as it alleged that the plaintiff was not engaged in performing work which constituted a part of the Club's own trade or business.

In our opinion, the task of securing the Club's premises was one which was merely incidental to the Club's trade or business. However, we are unable to agree that the operation of cl. 25 is limited in the manner previously suggested in Leplaw and Paron.

In Paron the Full Court held that a principal was not liable in negligence to a worker employed by his contractor. However, in the course of determining the appropriate costs order, the Court concluded that, had the principal been liable, s. 8(8) of the Act would not have applied to extend to him the benefit of his contractor's right of indemnity against the Board. In construing sub-s. 8(8), Kelly S.P.J., with whom Ryan and Mackenzie JJ. agreed, approved and relied upon the construction which Ryan J. had earlier placed upon cl. 25 in Leplaw. His Honour said (at 548):

"...if A enters into a contract with B it will not on any normal use of language always be appropriate to say that A has engaged B as a contractor and also it will be a matter for decision upon the facts of the case whether an employee discharging some task at a third party's premises is engaged in 'work' for the third party, even though he is engaged in working for his employer. I would with respect agree with the view of Ryan J. in Leplaw v. A.W. Rasmussen Pty Ltd ... that cl. 25 of the Schedule applies only to a situation where the principal's work is executed for the principal by or through a contractor and as Ryan J. held that was not the situation where as in that case the contractor was carrying out its own work of supplying goods and was not doing any work on behalf of the principal ... I may say that in agreeing with the view of the law taken by Ryan J. in that case I do not do so in reliance on what was said by Griffith C.J. in Cribb v. Korn (1911) 12 C.L.R. 205, 209, as s. 10 of the Workers' Compensation Act 1905 which was there being considered, although it is the predecessor of cl. 25 of the Schedule to the present Act, contains provisions which are not included in that clause."

Although the meaning of the limitation suggested in this passage is not completely clear, the expressions "the principal's work" and work done "on behalf of the principal" seem to refer to work which is "directly a part of or a process in the trade or business of the principal". This latter expression had appeared in sub-s. 10(3) of the 1905 Act, which sub-section provided:

"The principal shall not be liable under this section except in cases where the work to be executed under the contract, and in which the worker is employed, is directly a part of or a process in the trade or business of the principal:

Provided that his liability shall be presumed until the contrary is shown"

Section 3 of the 1905 Act also provided:

"This Act shall apply only to employment by the
employer on, in or about ...

(2) any agricultural, horticultural, or pastoral work carried on by or on behalf of the employer as part of his trade or business"

In Cribb v. Korn (supra), the High Court concluded that these two provisions limited the operation of s. 10 of the 1905 Act to situations where the contractor had contracted "to execute work on behalf of the principal, and not on his own behalf":

at 209, 213, 218. The similarities between this limitation and that enunciated in Paron are obvious. However, while we agree that such a limitation clearly existed in the 1905 Act, we can discern no basis in the 1916 legislation for a similar restriction being placed upon the operation of cl. 25, there being no similar provisions in the 1916 Act or Schedule or the Regulations thereunder. The only context in which similar expressions appear in that Act is in s. 3(2), which is concerned with a quite different situation.

As regards the Board's second argument, we accept the Club's submission that the decision in Wardle does not preclude the Club's success in the present case. As earlier explained, the facts in Wardle were relevantly indistinguishable from those of this case. However, although the report of Wardle indicates that the principal there argued that its claim against the Board could be supported on either of two bases - first, that it was entitled under sub-s. 8(8) to the benefit of its contractor's policy and second, that its own policy covered the situation - the Court's decision dealt only with the first basis for the claim.

In this respect, the Court held that cl. 25, by deeming the principal to be an employer of the plaintiff, obliged the principal to insure against liability for compensation and common law damages under the Act (sub-s. 8(1)) and also exposed the principal to a potential liability to indemnify the Board under sub-s. 8(5). At the same time, the Court concluded that cl. 25 did not deem the principal to be an employer for the purposes of sub-s. 8(8), with the consequence that the principal was not entitled, pursuant to that sub-section, to the benefit of its contractor's policy with the Board. At no stage did the Court address the principal's argument that cl. 25 extended the cover offered by its own policy with the Board.

It may be that the reason for the Court's not having done so

is some circumstance not apparent in the case as reported. applies is obliged to insure under sub-s. 8(1), it offers no immediate answer to the question raised in this case: does the cover provided to a principal by its existing policy extend to the principal's liability in respect of workers deemed to have been employed by it pursuant to cl. 25?

In our opinion this question must be answered in the affirmative. The policy of insurance is expressed to be "subject to the provisions of the ... Act ... all of which shall be deemed to be incorporated in and to form part of this Policy." Its wording is virtually identical to that of sub-s. 8(1): both refer to "the employer" and "workers employed by him". Given that the cl. 25 extended meaning of "employer" applies for the purposes of s. 8(1), there appears to be no reason why that extended meaning should not also apply for the purposes of the policy. Indeed, the policy must be capable of bearing such an extended meaning if a principal to whom cl. 25 applies is ever to be able to comply with the requirement to insure under sub-s. 8(1).

We therefore accept the Club's submission that cl. 25 applied in the present case to deem the Club to be the plaintiff's employer for the purposes of the Club's policy, thus extending the Club's right of indemnity to the present situation. There appears to us to be nothing in para. 8(7)(b) or sub-s. 8(8) of the Act which is inconsistent with such a conclusion.

The final argument raised by the Board was that the Club failed to disclose its contract with MSS in the declaration of wages and contracts it lodged with the Board in respect of the 1987- 1988 financial year, and that this failure meant that the Club's policy did not cover the present situation.

Under reg. 12(1)(b) of the Regulations to the Act, an employer is obliged to lodge with the Board a declaration of wages and contracts in Form 1A prior to 31 August each year. This declaration requires details to be given of all wages paid by the employer to employees and of all contracts "let" by the employer which involved the "performance of work" in the previous financial year. On the basis of this declaration, the Board calculates the amount of the premium which was payable by the employer in respect of the period to which the declaration relates. As premiums are paid annually in advance, the employer is either entitled to a refund of any premium overpaid in respect of the previous year (or to credit the overpayment against future premiums) or is liable to make up any shortfall in the premium paid.

We cannot accept that the Club forfeited its insurance cover by failing to disclose the existence of its contract with MSS. It is true that the Club's policy is expressed to be issued "on the faith of" its application for insurance. However, it is doubtful whether a declaration of wages and contracts forms part of the application referred to. Once a policy has been taken out, no applications are made for renewal of that policy.

Rather, pursuant to reg. 8 the Board annually issues an adjustment of premium notice requiring payment of the relevant premium (calculated no doubt on the basis of the last lodged declaration of wages and contracts) and a policy renewal certificate issues if that premium is paid.

However, even if the policy's reference to the application for insurance is understood as incorporating a reference to the declaration of wages and contracts, the Board's argument nevertheless fails. When the accident occurred on 19 October 1988, the Club held a valid policy which (at most) had been issued on the faith of the declaration provided in respect of the 1987-1988 financial year. No evidence was adduced as to the contents of this declaration. The Club's 1988-1989 declaration, which the Board alleged failed to disclose the existence of the MSS contract, was not lodged until 31 August 1989. The Club's failure to disclose the existence of the contract at this time could not have had the effect of retrospectively invalidating the insurance cover which it held at the time of the accident.

For the above reasons, we conclude that the Club is entitled under its policy to be indemnified by the Board in respect of its liability to the plaintiff. Accordingly, we would allow the appeal, set aside the judgment below, enter judgment for the Club in the third-party proceedings against the Board and order that the Board indemnify the Club in respect of the plaintiff's claim and costs pursuant to the statutory policy of insurance issued by the Board to the Club. The Club seeks an order that the Board pay the Club's costs of the third-party proceedings and of the appeal to be taxed on a solicitor and own client basis. At the trial, the plaintiff was awarded costs against the Club on a solicitor and own client basis because the Club had earlier failed to accept an offer by the plaintiff to settle the action for less than $91,746.18. The Club would be entitled to have its costs against the Board taxed on a solicitor and own client basis if it had made a similar offer to the Board which the Board did not accept, but this appears to us to be the only reason we should make such an order. As there is presently no evidence to this effect before the Court, we will refrain from making any order as to the costs of the third-party proceedings and appeal until the parties have had an opportunity to make submissions on the matter.

IN THE COURT OF APPEAL

SUPREME COURT OF QUEENSLAND	Appeal No. 134 of 1993
Brisbane

[Maroochydore Black Swan Rugby League Limited v. The Workers'

Compensation Board of Queensland]

BETWEEN:

IAN LESLIE HUGHES (Plaintiff)

AND:

MAROOCHYDORE BLACK SWAN RUGBY

LEAGUE LIMITED (First Defendant) Appellant

AND:

JOHN ALFRED PINDER (Second Defendant)

AND:

THE WORKERS' COMPENSATION BOARD OF

QUEENSLAND (Third Party) Respondent

_______________________________________________________________
__

DAVIES J.A. PINCUS J.A. MACKENZIE J.

_______________________________________________________________

__

Judgment delivered 21/12/1993

REASONS FOR JUDGMENT - THE COURT

_______________________________________________________________
__

APPEAL ALLOWED. SET ASIDE THE JUDGMENT BELOW AND ENTER JUDGMENT FOR THE APPELLANT IN THE THIRD-PARTY PROCEEDINGS AGAINST THE RESPONDENT. ORDER THAT THE RESPONDENT INDEMNIFY THE APPELLANT IN RESPECT OF THE PLAINTIFF'S CLAIM AND COSTS PURSUANT TO THE STATUTORY POLICY OF INSURANCE ISSUED BY THE RESPONDENT TO THE APPELLANT.

_______________________________________________________________
__
CATCHWORDS: WORKERS' COMPENSATION - INSURANCE - Appellant

seeks indemnity from Board in respect of damages payable to employee of subcontractor - Whether entitled to indemnity under Policy - Whether appellant principal deemed to be employer of worker under Workers' Compensation Act 1916, Sched. cl. 25 - Whether cl. 25 only operates where worker engaged in principal's own work - Whether appellant failed to disclose contract with contractor

Workers' Compensation Act 1916, ss. 3, 8, Sched.

cl. 25

Workers' Compensation Regulations 1987, reg. 8,

12(1)(b), Forms 1A, 2

Cribb v. Korn (1911) 12 C.L.R. 205

Leplaw v. A.W. Rasmussen Pty Ltd (Unrep., Qld

Supreme Court, Ryan J., 29 May 1986)

Paron v. Fry (No. 1) [1990] 1 Qd.R. 539

Wardle v. Kennedy Taylor (Qld) Pty Ltd [1992] 1

Qd.R. 331

Counsel:	S. Williams Q.C. for the Appellant J. Griffin Q.C. for the Respondent
Solicitors:	Gadens Ridgway for the Appellant Anderssen & Company for the Respondent

Date(s) of Hearing: 25 October 1993