Re WorkCover Queensland

[1998] QSC 32

IN THE SUPREME COURT

OF QUEENSLAND  O.S. No. 506 of 1998

[Re WorkCover Queensland]

IN THE MATTER of the WorkCover Queensland Act

-  and -

IN THE MATTER of the Corporations Law

- and -

IN THE MATTER of an application by WORKCOVER QUEENSLAND

CATCHWORDS: STATUTORY CONSTRUCTION - meaning of “services rendered” and “debt” - application of s.443A Corporations Law - application of WorkCover Queensland Act - whether administrator of company is personally liable for payment of insurance premium - issue of policy under s.28 WorkCover Act during period of administration.

Counsel:  Mr S.L. Doyle S.C., with him Mr R.M. Derrington for the applicants.

Mr F.L. Harrison Q.C., with him Mr C.L. Francis for the respondents.

Solicitors:  Jones King for the applicants.

Mullins & Mullins for the respondents.

Hearing Date:              25 February 1998

REASONS FOR JUDGMENT - MUIR J.

Judgment delivered 18 March 1998

This is one of a number of summonses brought, and heard together, with a view to having determined certain questions of construction of the WorkCover Queensland Act (“the Act”) and the Corporations Law which have arisen between WorkCover and the respondents as administrators of Wildman Timber Industries Pty Ltd (“Wildman”) and also of Metal Made Products Pty Ltd (“Metal Made”).  There are four summonses in all.  WorkCover has instituted proceedings by originating summons against each of Wildman and Metal Made and the administrators of each of those companies, have instituted proceedings by originating summons against WorkCover.

It is common ground between the parties that the facts relating to the Wildman applications are at least as favourable to the administrators as the facts before the Court in relation to Metal Made and that, for the purposes of determining points of law relevant to all applications, the facts in relation to the Wildman applications need only be looked at.

Relevant Background Facts

1.Wildman has been in business for many years.  It operates a timber hardware plant, and truss manufacturing plant in Toowoomba.

2.The WorkCover premium notice for the year 1 July 1997 to 30 July 1998 was issued on 23 October 1997 for $26,028.55.

3.The premium was due on 15 November 1997.

4.A premium overdue notice was subsequently issued and received on 8 December 1997.

5.The Administration of Wildman commenced on 15 December 1997.

6.No part of the premium has been paid.

Principal Issues for Determination

There are two principal points which the parties seek to have determined.  They are:-

1.Whether the administrator of a company under Part 5.3A of the Corporations Law is personally liable for the payment of the premium (as defined by reg.3 of the WorkCover Queensland Regulation) payable under the company’s policy of insurance issued pursuant to the provisions of the Act if, in the course of his administration, he allows, causes or permits the company to continue to employ a worker as defined by the Act.

2.Whether an administrator of a company under Part 5.3A of the Corporations Law may be issued a policy of insurance under s.28 of the Act to “cover”, for the period of the administration, the workers employed by the company under administration.

Administrator’s Liability for Premium

The argument of Mr Doyle S.C. who, with Mr Derrington, appeared for WorkCover, proceeded as follows:-

·the administrators are to be taken as acting as agents for the company (s.437B of the Corporations Law);

·an administrator is liable for, inter alia, debts he incurs in the exercise of his functions and powers as administrator for services rendered (s.443A of the Corporations Law);

·the “debts” referred to in s.443A are those of the company which the administrator incurs; Energy Resource Conservation Co Ltd v. Abigiup Contractors Pty Ltd (Unrep., NSW SCt 18-2-97 per McClelland C.J. in Eq.);

·every amount payable as a premium or additional premium is a debt - s.526 of the Act;

·the provision of insurance cover is the provision of a service; Employers’ Mutual Indemnity Association Ltd v. FCT (1943) 68 CLR 165 and Port of Geelong Authority v. The `Bass Reefer’ (1992) 37 FCR 374. The premium under an insurance policy is payable for the provision of the cover provided;  Associated Newspapers Ltd v. Gridston (1949) 66 WN (NSW) 211 at 212;

·a company incurs a debt when, by act or omission, it is rendered liable for a debt, even one imposed by a statute;  Standard Chartered Bank of Australia v. Atico (1995) 38 NSWLR 290 at 314, 317 and Commissioner of State Taxation v. Pollock (1994) 12 ACLC 28 at 41-42;

·section 52 of the Act imposes an obligation on an employer “to remain insured” at all times;

·under s.54 the company contravenes s.52 if, having taken out a policy, it does not maintain it “while being an employer by . . paying . . every premium payable for the policy”;

·it is common ground that the administrators have chosen to cause or permit the company to be an employer during the period of administration;

·for any period during which the employer contravenes s.52 the employer is liable to pay the premium under s.61;

·by force of such contravention, WorkCover is able to recover from the company  an additional premium under ss.61 and 65;

·the policy is of no effect until the full premium is paid, s.65;

·the debt incurred by the company by operation of ss.61 and 65 is not the debt incurred before the appointment of the administrators.

The Administrators’ Arguments

Mr Harrison Q.C. who, with Mr Francis appeared for the administrators, accepted that the debts referred to in s.443A were those of the company which the administrators incurred.

It was submitted that the expression “services rendered” in s.443A(1)(a) suggests something in the nature of moneys paid for wages by a master in respect of work done by a servant: Associated Newspapers Ltd v. Grinston (1949) 66 WN (NSW) 211, 212-213; Employers’ Mutual Indemnity Association Limited v. Federal Commissioner of Taxation (1943) 68 CLR 165, 174, 177-8, 181, 185 and 187 and Revesby Credit Union Co-operative Ltd v. Commissioner of Taxation (1965) 112 CLR 564, 577-8 were cited as authorities supporting the proposition. In Associated Newspapers Street J. was concerned with the possible application of s.337(3) of the Companies Act 1936 which materially provided:-

“Any receiver . . entering into possession . . for the purpose of enforcing any charge . . shall, notwithstanding any agreement to the contrary . . be liable for debts incurred by him in the course of the receivership . . for services rendered, goods purchased, or property hired, leased, used, or occupied.”

His Honour, in dicta, observed:-

“`Services Rendered’ rather suggests the ordinary master and servant account for work done where a claim is made by the servant.”

Employers’ Mutual Indemnity Association Ltd concerned the question of whether a mutual insurance company, in issuing policies and in investigating and either resisting or paying claims, was engaged in “the rendering of services” to its policy holders.  The majority held that neither the issue of insurance policies nor the investigation, resisting or paying of claims was “the rendering of services” to the policy holders. 

In Revesby the court was required to consider whether the appellant was a `co-operative company’ within the meaning of s.17 of the Income Tax and Social Services Contribution Assessment Act 1936-1958 by virtue of having as its primary object or objects “the rendering of services to its shareholders”.  In the course of his reasons, McTiernan J. analysed the judgments in Employers’ Mutual Indemnity Association, concluding that:-

“The minority opinions of Rich J. and myself agreed that the word `services’ refers to services of the same nature as those rendered by a business enterprise in satisfying the business needs of persons having recourse to it.  It is immediately apparent that the majority judgments do not reveal a common opinion as to the nature of `the rendering of services’.  However in the light of the decision the broad meaning of the phrase cannot be adopted.  But what restriction is to be placed on it?  I consider that `the rendering of services’ should consist of the doing of an act for the benefit of another, which is more than the mere making of a contract and which goes beyond the performance of an obligation undertaken in the course of an ordinary commercial contract.  In this view I adopt the reasoning of Latham C.J.”

The following passage from the judgment of McTiernan J. (a dissentient) in Employers’ Mutual Indemnity Association Ltd (supra) attributes a wider meaning to “services”:-

“The word `services’ does not mean services, rendered pursuant to a contract of employment between master and servant.  The word refers to services which are of the same nature as those rendered by a business enterprise in satisfying the business needs of persons having recourse to it.  It is within this ordinary general meaning of the expression `the rendering of services’ to say that an insurance company renders services to its policy holders by covering them against loss or damage to their property or claims by workmen in their employment, and by performing the promises in the policies upon the happening of the loss, damages or claim insured against.”

In response to an argument along the lines of that encapsulated in the passage from McTiernan J’s judgment, Latham C.J. said at 174 in a passage referred to McTiernan J’s judgment in Revesby:-

“But the rendering of services, in the ordinary sense of that expression, does not cover any and every kind of dealing between persons.  It would not be in accordance with the ordinary use of language to say that every company which deals with another person in some way or another upon terms acceptable to that person, and therefore regarded by him as being beneficial to him, was engaged in rendering services to him.  The object of the companies in the cases mentioned is to carry on business profitably and it cannot be said, even if in a very general sense they are rendering services to, amongst others, their shareholders, that the primary object of the company is to render such services.

In my opinion the words `rendering of services to’ persons means doing work of some kind for those persons . . . But the issuing of an insurance policy to a person cannot be described as doing work for that person.  It is making a contract with him.  Work may be done for a person in pursuance of a contract with him, but the making of a contract with him does not amount to doing work for him.”

Section 443A(1) makes administrators liable for debts incurred in relation to a range of activities connected with the operation of the company in administration. The subsection provides:-

“443A(1)  The administrator of a company under administration is liable for debts he or she incurs, in the performance or exercise, or purported performance or exercise, of any of his or her functions and powers as administrator, for:

(a)services rendered; or

(b)goods bought; or

(c)property hired, leased, used or occupied.

(2)  Subsection (1) has effect despite any agreement to the contrary, but without prejudice to the administrator’s rights against the company or anyone else.”

I would be very reluctant to accept that the expression “services rendered” is so confined in meaning as the administrators submit. 

Just as there is no attempt to impose any qualification or limitation in respect of types of goods bought or circumstances in which they have been bought, the subsection does not purport to qualify or restrict the description “services rendered”. I cannot detect anything in the language or context of s.443A(1) which suggests that it should be construed in a restrictive way. The meaning of “services rendered”, grouped as it is with other general dealings of a commercial nature encompasses, at least, work done for the company which could be regarded as the “rendering of a service” in the ordinary sense of that expression.

I have sympathy with the argument that the provision of insurance cover under a policy of insurance is the rendering of a service for the purposes of s.443A(1). But it is not necessary for me to finally decide that question.

It was further submitted that even if whatever was provided under the Act could constitute the provision of services, there were nevertheless no “services rendered” as, by s.6(2)(a) of the WorkCover Queensland Regulation 1997, the policy “has no force or effect until WorkCover receives the premium”. The response of WorkCover was that the services rendered were the provision of a policy which would afford cover immediately upon payment of the premiums. The effect of s.65(3), it was submitted, was not to destroy the policy but merely to deny cover until the employer had met its obligations.

Even if the provision of cover under a policy constitutes the rendering of a service, I do not accept that any such service has been rendered here.  Section 66(3) provides:-

“Until the employer has paid WorkCover the full amount specified in the notice and any additional premium payable, the employer is not covered by a policy.”

In my view, a consequence of the operation of s.66(3) is that WorkCover renders no service to a defaulting policy holder. It provides no cover and performs no duties or obligations under any policy. The fact that it may automatically extend cover once the premiums and additional premiums have been paid does not affect that conclusion. Nor does the fact that WorkCover, notwithstanding default by an employer, makes payments to injured employees. The position remains that services can be expected to be rendered to the employer at a later date depending on compliance by the employer with its lawful obligations. In making payments to employees, WorkCover acts pursuant to its statutory obligations. In my view it involves an unjustifiable straining of the words “services rendered” to conclude that the honouring of statutory obligations in respect of injured employees is the rendering of services to the employer at a time when, by operation of statute, the employer is expressed to be not covered by a policy. Mr Harrison Q.C. argued that there was no scope for the application of s.443A(1), in any event, because any relevant “debt” had been incurred before the appointment of the administrators. He submitted that the debt was incurred when the employer company failed to pay the annual premium “at the time . . required” (s.54(b)(ii)). I accept the submission in relation to the unpaid premium. I do not consider that either s.61 (which provides that, in the event of a breach of s.52, WorkCover may recover the amount of unpaid premium together with a penalty of up to 100% of the unpaid premium) or s.64 (which provides that in the event of a contravention of s.52 the employer is liable, inter alia, to a proceeding to recover an amount of premium under ss.61 or 62) has the effect of constituting a fresh debt in respect of the unpaid premium.

“A `debt’ is a sum payable in respect of a liquidated money demand recoverable by action”.   Stroud’s Judicial Dictionary, 2nd ed., p.471 and see Geo Thompson (Australia) Pty Ltd v. Vittadello (1978) 33 FLR 465 at 481. In Hawkins v. Bank of China (1992) 26 NSWLR 562, Gleeson C.J. said at 572:-

“Dictionaries define `debt’ as a liability or obligation to pay or render something.  Such a liability may be conditional as well as present and absolute.”

The debt arising by virtue of the present obligation to pay the premium is not converted into a fresh or different debt by virtue of the specific rights of recovery given to WorkCover by ss.61 and 64.   The conventional approach is to regard a debt as having been incurred at a particular time, cf. Hawkins v. Bank of China (supra), Standard Chartered Bank v. Antico (1995) 38 NSWLR 290 at 314-315, Commissioner of Inland Review v. Mitsubishi Motors New Zealand (1996) 1 AC 315 at 323-325 and Federal Commissioner of Taxation v. James Flood Pty Ltd (1953) 88 CLR 492 at 506-7.

There is nothing in the wording of s.443A(1) which suggests that the concept of incurring a debt be given a special or extended meaning. The above observations are generally applicable to the penalty imposed by s.61(2).

For the above reasons, I conclude that the first question identified above should be answered in the negative.

I now turn to a consideration of the second question.

Whether the Administrators may be issued with a Policy of Insurance under s.28 of the Act

Section 28 provides:-

“Other persons
28.(1)  WorkCover may enter into a contract of insurance for this subdivision with a person (the `insured person’), whether or not an employer, for injury sustained by the other person.

(2)  The contract may cover a person who performs work or provides a service from which the insured person gains a benefit for the same entitlements provided to a worker under this Act.

(3)  Cover under the contract must not exceed the cover available under this Act for—

(a)compensation; or

(b)damages.”

WorkCover contends that:-

(a)the scope of s.28 is not such that WorkCover is able to issue a policy to an administrator to provide cover for workers employed by the company under administration; and

(b)the power to issue policy under s.28 is discretionary and WorkCover cannot be required to issue a policy to an administrator.

WorkCover submits that:-

·“other persons” in subs.(1) does not encompass workers in the employ of companies under administration;

·subsection (2) delimits the circumstances in which cover may be provided under s.28;

·the administrators do not “gain a benefit” from work performed or services rendered by workers and subsection (2) therefore does not apply.

Mr Doyle S.C. submits that the scheme of the Act is to create a dichotomy between the insurance of “workers” and the insurance of other person. He submits:-

“The headings found in the Act are part of the provisions to which they relate (see s.35C of the Acts Interpretation Act 1954 (Qld)). The insurance of workers is considered in Part 4 Division 2 which is headed `Division 2 - Workers’, and the insurance of other persons is provided for in Division 3 which is headed `Division 3 - Persons entitled to compensation other than workers’. Section 28 falls within Division 3. If the person to be insured is a `worker’ as defined (see s.12-13) that person will be insured as such and if the person is other than a `worker’ as defined, the person may be insured pursuant to Division 3.”

Mr Doyle further submits that if the administrators’ contention was correct, the employees of the company would be covered by two policies for compensation. 

His argument in relation to the “gains a benefit” requirement of sub-section (2) is that:-

·the benefit must flow from the performance of work or provision of services;

·the company may gain from the work but administrators do not.

I accept that the structure of the Act is generally as Mr Doyle submits. Subdivisions 1 to 5 inclusive of Division 3 of Part 4 of the Act are clearly intended, in a general way, to permit insurance in circumstances in which persons are unable to secure cover as or for “workers” under Division 2 of Part 4 and Chapter 2 of the Act. It cannot be the case though that a person who meets the description of “worker” is automatically disqualified from obtaining protection under one or more of subdivisions 1 to 5. For example, a student may work ten hours on a Friday under a contract of employment. It is scarcely arguable that a contract of insurance could not be entered into pursuant to s.24 of the Act which provided cover to the student for days of the week other than Friday. In my view, the reference to “other person” in the heading to s.28 is a reference to persons other than those described in subdivisions 1 to 4. The role of s.28 is to permit WorkCover to enter into contracts of insurance in circumstances in which the person seeking cover is not protected by the general provisions of the Act relating to “workers” and by the provisions in respect of identified classes of persons such as students, fire brigade volunteers, honorary ambulance officers and the like. It is a “catch all” provision but with the limitations imposed in subss.(2) and (3).

The section does not contemplate that an employer who is required to effect compulsory insurance under the Act in respect of certain “workers” might enter into another policy of insurance with WorkCover in respect of the same persons. There would be no point in an employer so doing. The benefits provided by any such further policy cannot exceed those provided to a worker, under the policy which the employer is requested to have by law. However, the administrators meet the literal requirements of subs.(1) as they seek to have WorkCover “enter into a contract of insurance . . . with (them) . . . for injury sustained by the other person(s).”

Section 28 is a provision of a remedial nature which confers further powers on WorkCover. In my view it would be contrary to orthodox principles of construction to confine the operation which the section has by reference to the plain meaning of the words used in it unless there is a clear indication in other parts of the statute that full effect ought not be given to the plain meaning of such words.

Having regard to the wording of the Act as a whole, I see no good reason why s.28 should be read down to prevent WorkCover extending insurance to administrators in respect of employees of the company in administration as long as there is literal compliance with the express requirements of s.28.

Mr Harrison Q.C. identified the benefit gained for the purposes of subs.(2) as the ability to conduct the business of the company and to earn fees.  As Cooke P. observed in R v. Pederson (1995) 2 NZLR 386 at 390, in ordinary usage “benefits” is a wide expression. At 390-391 Cooke P. observed:-

“The wide and residual meaning of `benefit’ has long been recognised in the common law, as in the famous definition of consideration adopted from Comyn’s Digest in Currie v. Misa (1875) LR 10 Exch 153, 162:

`A valuable consideration, in the sense of the law, may consist either in some right, interest, profit, or benefit accruing to the one party, or some forbearance, detriment, loss, or responsibility, given, suffered, or undertaken by the other:  Com Dig Action on the Case, Assumpsit, B.1-15'.’

The receipt of services can of course be a benefit:  cf  R v. Brathwaite [1983] 2 All ER 87. In determining whether there is a benefit constituting consideration for a contract, traditionally no regard is had to whether the recipient contracting party has an obligation to pay someone else.”

Section 28(2) should not be construed as if it limited the concept of gaining of a benefit to a direct benefit obtained from work done for or services rendered to the entity employing or contracting with the person or person to perform work or provide services. Section 28 contemplates that the insured and the person in respect of whom insurance is obtained may not be in a master/servant or other contractual relationship.

It is unfortunate that the question of whether the administrators gained or may gain a benefit for the purposes of s.28(2) was not squarely raised until the hearing of this matter. The evidence on the point, in consequence, is in a somewhat unsatisfactory state. I am reluctant to involve the parties in the additional expense of a trial on this limited issue, and, after some hesitation, I have concluded that there is sufficient evidence before me to enable me to decide the point. I am prepared to draw inferences from the material that:

·the applicants carry on business as chartered accountants and insolvency practitioners;

·the administration is carried on as part of that business;

·the administrators derive a “benefit” from the work or services provided by company employees in that, without the provision of such work or services, the period of administration and the potential for earning fees by the administrators would be lessened.  The administrators would also be deprived of the opportunity of exercising their professional skills and enhancing their professional reputations as persons capable of continuing the business affairs of a company in administration in a way or ways likely to recommend the administrators to other clients in the future.

Conclusion

I will hear argument as to the declarations which ought be made.  I invite the parties to attempt to agree on their wording.