SBA Foods Pty Ltd v VWA
[2001] VSC 276
•10 August 2001
| IN THE SUPREME COURT OF VICTORIA | |
| AT MELBOURNE COMMON LAW DIVISION | Not Restricted |
No. 6875 of 1999
| SBA FOODS PTY LTD | Plaintiff |
| v | |
| VICTORIAN WORKCOVER AUTHORITY | First Defendant |
| and | |
| HIH WINTERTHUR WORKERS COMPENSATION (VIC) LTD | Second Defendant |
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JUDGE: | Gillard J | |
WHERE HELD: | Melbourne | |
DATE OF HEARING: | 28 February, 1 and 2 March 2001 | |
DATE OF JUDGMENT: | 10 August 2001 | |
CASE MAY BE CITED AS: | SBA Foods Pty Ltd v Victorian WorkCover Authority and Anor | |
MEDIUM NEUTRAL CITATION: | [2001] VSC 276 | |
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Judicial Review – adjustment of premiums payable under employer's insurance
policy – power to do so – power of WorkCover Authority pursuant to statutory instruments.
Natural justice – right to be heard – party to review not seeking report – content of fair hearing rule.
Legislative scheme pursuant to Accident Compensation (WorkCover Insurance) Act 1993.
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APPEARANCES: | Counsel | Solicitors |
For the Plaintiff | Mr R. Tracey QC with | Corrs Chambers Westgarth |
| For the First Defendant | Mr A.G. Uren QC with | Gadens Lawyers |
| For the Second Defendant | Mr R. Garratt QC | Hall & Wilcox |
HIS HONOUR:
The return of a summons in a proceeding, instituted by originating motion, seeking judicial review of three decisions made in respect of premiums payable under insurance policies.
The case concerns insurance premiums payable by an employer pursuant to WorkCare Insurance Policies for the years 1996-7, 1997-8 and 1998-9. The premiums were calculated on a certain basis but, in late 1998, they were recalculated by the insurer, resulting in the employer being required to pay further premiums totalling $4,506,714.40.
The parties
The plaintiff, SBA Foods Pty Ltd ("SBA Foods"), is a company, formed by Japanese interests, to purchase some of the abattoir businesses operated by the well‑known Australian group of companies called Gilbertson.
The first defendant, Victorian WorkCover Authority ("the Authority"), is a body corporate established by the Accident Compensation Act 1985 ("A.C. Act").
The objectives of the Authority are set out in s.19 of the A.C. Act, and one of its objectives is to administer, inter alia, the Accident Compensation (WorkCover Insurance) Act 1993 ("the 1993 Act") and the A.C. Act. The functions of the Authority are set out in the A.C. Act in s.20, and its functions include administering the WorkCover Authority Fund, licensing and regulating authorised insurers and ensuring that the scheme of accident compensation is competitive and fully-funded.
By reason of s.7 of the 1993 Act, an employer who employs a worker must obtain and keep a WorkCover Insurance Policy, with an authorised insurer, in respect of all the employer's liability under the A.C. Act and the common law.
The second defendant, HIH Winterthur Workers Compensation (Vic) Ltd ("HIH"), is an insurance company which, at all relevant times, was the holder of a licence issued by the Authority and was an authorised insurer under the 1993 Act. See s.27 (now repealed).
At all relevant times, it was the insurer of the plaintiff under the 1993 Act.
History and Nature of Dispute
On 22 November 1996, SBA Foods and a number of the Gilbertson companies executed a sale of business agreement pursuant to which SBA Foods acquired a number of the Gilbertson businesses, with effect from 18 November 1996.
Pursuant to the agreement, SBA Foods acquired various equipment, plant and real estate in Kyle Road, Altona; Morrison Avenue, King Island; and Tannery Road, Longford in Tasmania. It did not acquire any of the plant, equipment or real estate of R.G. Gilbertson (Queensland) Pty Ltd or real estate owned by the Group at Caroline Springs in Victoria. The Gilbertson Group retained the Grafton Abattoir and was permitted to compete with SBA Foods in respect of that abattoir.
Prior to 18 November 1996, the Gilbertson Group carried on an abattoir business at Altona and, in accordance with the sale agreement, SBA Foods took over the plant, equipment and business, including the employees employed at Altona. However, some 20 employees remained with and were paid by Gilbertson, but worked for SBA Foods during the following three months, at the Altona premises. SBA Foods paid the Gilbertson Group for these employees. The casual observer would not have observed any change in the operation of the business between 17 and 18 November 1996. The business continued in exactly the same way on 18 November 1996 but with a different owner.
Prior to the execution of the sale agreement, discussions took place between senior employees of HIH and senior employees of Gilbertsons, who were to become the managing director and company secretary of SBA Foods. They were Malcolm Slinger, who is now managing director of SBA Foods, and Douglas Gibson, who is now the company secretary.
An issue arose, concerning the premiums which would have to be paid by SBA Foods to the insurer, for WorkCover. It was put that if SBA Foods was a new start up company and the Gilbertson Group was to continue to employ staff in the workplace for a period of 60 or more days, SBA Foods' WorkCover premium would be calculated using the "industry" premium rate. On the other hand, if SBA succeeded to the business of the Gilbertson Group, then the claims history of the Gilbertson Group would be taken into account in determining the premium. If SBA was assessed as a new business, and not in succession to Gilbertson, it would pay the industry premium rate, which at the relevant time was 7.5% of rateable remuneration, whereas if the Gilbertson Group's claims history was taken into account, SBA would pay considerably more.
After some consideration, the representatives of SBA Foods and HIH came to the conclusion that SBA Foods was not succeeding Gilbertsons, and hence the succession principle did not apply. The circumstances relied upon included the fact that SBA Foods proposed to spend a large sum of money changing the works, plant and equipment.
The premiums were calculated for the years 1996-7, 1997-8 and 1998-9 on the basis of the lower industry premium rate. The premiums were calculated pursuant to an annual Premiums Order.
Some time after 18 November 1996, and most likely at the beginning of 1997, SBA commenced a total refit of the plant's main beef processing operations at Altona, and spent approximately M$14.8 in replacing machinery and re-engineering the plant. A further M$2.6 was invested in training employees. Other works were carried out.
In June 1998, SBA was informed by Ernst & Young that it was to carry out an audit of the business, at the request of the Authority. Ernst & Young carried out an audit.
The audit commenced on the basis of checking the declarations concerning remuneration and the like, and no suggestion initially was raised concerning succession of businesses. However, on 17 September 1998, Mr Johnson from Ernst & Young forwarded a facsimile to SBA Foods raising the question of succession and indicating the issue had to be resolved.
On 5 October 1998, Ernst & Young, in a letter to SBA Foods, confirmed that the audit was complete and that the result showed that there had been an understatement of the level of remuneration for the year 1996/1997. The letter also stated, "We have recommended that succession be applied from 18 November 1996".
On 13 November 1998, the Authority wrote to HIH directing it to arrange for succession to be applied to the SBA Foods policies and to adjust the premiums for the past.
On 3 December 1998, HIH wrote to SBA Foods and informed it that in addition to the understated remuneration owing, there were additional premiums to pay. The letter stated -
"The audit firm found that succession is applicable to the SBA workplaces, from the predecessor workplaces previously registered against R.J. Gilbertson Pty Ltd (1132650) and R.J. Gilbertson (Southern) Pty Ltd (1132702).
The principles of succession have been discussed with you previously, however should you wish to discuss this further, please contact the writer.
Acting on the directions of the Victorian WorkCover Authority, HIH Workers Compensation (Vic) Limited has now applied succession with effect from November 1996 and recalculated premiums for all policy periods since that date."
There were three policy periods re‑calculated.
The letter then set out a summary, and the difference between the premiums previously assessed and the amended premiums totalled $4,506,714.40.
It is noted that HIH was acting on the directions of the Authority.
The letter went on to state that if SBA Foods objected to the findings, it could lodge a written objection with the Authority within 28 days. In fact the period was extended to 15 February 1999, and on that date, SBA Foods lodged with the authority a very detailed submission of 21 pages with 13 pages of attachments, in support of its objection to the re‑calculation of the premiums. The submission addressed the issue of succession, which was the core issue leading to the amended premiums.
In December 1998, SBA Foods requested HIH to supply a copy of the auditor's report, but HIH did not have a copy and suggested that an FOI application be made. In fact, the past experience of HIH had shown that the only way to obtain a copy of the report was through an FOI application. Surprisingly, SBA Foods did not take up the suggestion until 27 July 1999 and, even more surprisingly, it did not make any request to the Authority, between 3 December 1998 and that date, for a copy. It presented its submission without obtaining a copy of the report.
On 19 July 1999, the Authority informed SBA Foods, by letter, that the assessment of rateable remuneration had been reviewed and the Authority was not satisfied that there were any grounds to alter the assessment made in early December 1998.
The FOI application was made on 27 July 1999 for a copy of the auditor's report.
On 15 September 1999, SBA Foods filed an originating motion seeking judicial review of decisions alleged to have been made by HIH and the Authority.
On 16 September 1999, it received a bundle of documents from the Authority pursuant to the FOI request.
SBA Foods contends that decisions made by HIH and the Authority, amending and demanding payment of the premiums, were made contrary to the law and without power or authority and, further, contends that SBA Foods was denied natural justice in the decision‑making process used in re-calculating the premiums and reviewing the adjustments to the premiums.
The issues - decisions
At the outset, it is necessary to identify the decisions made by the Authority and HIH, which SBA Foods complain about, and consider whether they were decisions which adversely affected their interests.
SBA Foods contend that both the Authority and HIH did not have any power or authority to make the decisions about which they complain.
The three decisions were:
(i)A decision made by the Authority, prior to 13 November 1998, that the principles of succession were to apply to the calculation of the insurance premiums payable by SBA Foods, and a direction by the Authority to HIH to implement the decision, set out in the letter from the Authority to HIH of 13 November 1998.
The letter relevantly provided –
"In addition, the audit firm has determined that succession should have been applied when the company took over the operations of the business of R.J. Gilbertson Pty Ltd and R.J. Gilbertson (Southern) Pty Ltd on 18 November 1996.
The following tables detail the predecessor and successor workplaces:
(The tables set out the old and new workplaces with identifying numbers.)
Would you please arrange for succession to be applied, as detailed above, effective from 18 November 1996, and adjust remuneration in accordance with the audit result.
These amendments are to be made by 30 November 1998 and your advice on completion would be appreciated."
(ii)The alleged decision, made by HIH, whereby it recalculated the premiums pursuant to the direction given by the Authority in its letter of 13 November 1998, conveyed by letter to SBA Foods on 3 December 1998.
The letter relevantly provided –
"2. The audit firm found that succession is applicable to SBA Foods workplaces, from the predecessor workplaces previously registered against R.J. Gilbertson Pty Ltd (1132650) and R.J. Gilberston (Southern) Pty Ltd (1132702).
The principles of succession have been discussed with you previously, however should you wish to discuss this further, please contact the writer.
Acting on the directions of the Victorian WorkCover Authority, HIH Workers Compensation (Vic) Limited has now applied succession with effect from November 18 1996 and recalculated premiums for all policies since that date.
(A table set out the old and new premiums for the periods 1997, 1997/98 and 1998/99.)
For your assistance, we attach a summary of premium details for each individual workplace. An amended premium notice will be issued for each policy period and these will follow shortly.
If you wish to object to the audit findings, please lodge your written objection to:-
Frank Sanders, Operations Management Division
Victorian WorkCover Authority
PO 415
Melbourne 3005This objection must be made within twenty eight (28) days after the date of demand for the revised premium.
Should you have any queries or if there is any way in which HIH Workers Compensation (Vic) Limited can be of assistance to you in respect to the audit process, please do not hesitate to contact the writer on (03) 9224 2454".
The letter was signed by Miss Caterina Todarello, Premium Supervisor.
(iii)The decision made on the review which was conveyed by a letter, dated 19 July 1999, from the Authority to SBA Foods. The letter relevantly provided -
"Dear Mr Slinger
RE: REVIEW OF AUDIT REMUNERATION ASSESSMENT AND DEFAULT PENALTY
EMPLOYER: SBA FOODS PTY LTD
WEN: 6963374 VWA AUDIT REFERENCE: 20 061
I refer to your letters dated 18 December 1998 and 16 February 1999 in which a request was made for a review of the remuneration assessment, and audit default penalty imposed, against the above employer as a result of the audit conducted by Ernst & Young on behalf of the Authority. I understand that the core issues were also discussed at a meeting with the Minister held on 16 June 1999 and attended by you, and other officers of your company, together with officers of the Authority.
The Authority has reviewed the assessment of rateable remuneration and the application of Schedule 1, part 6, of the WorkCover Insurance Premiums Order, (Succession), which formed the basis for the adjusted premium notified in the Reconcilation Statement and 1993/94 Confirmed Premium Notice (Audit) issued in December 1998. Additionally the Authority has considered the consequential effect in subsequent premium years.
Following the review, the Authority is not satisfied that there are grounds for altering the assessment or the default penalty rate previously imposed. It is the view of the Authority that the operation of SBA Foods Pty Ltd attracts the application of succession according to law.
The premium adjustment and audit penalty will therefore stand. Arrangements should now be made to pay any monies that are still outstanding.
If you do not agree with the Authority's decision outlined above, you may apply to have the matter determined by a court of competent jurisdiction."
It was signed by Julianne Brennan, Manager, Business Operations of the Authority.
SBA Foods submitted that the Authority and HIH did not have any power or authority to make the decisions.
Mr Tracey QC, who appeared with Ms Tate for SBA Foods, submitted that although there must have been a decision in fact made by the Authority on the review, the decisions which adversely affected the interests of SBA Foods were the two decisions made on 13 November 1998 and 3 December 1998.
There is no doubt that the Authority, prior to 13 November 1998, did make a decision which adversely affected the financial interests of SBA Foods. It had, during the two previous insurance years, paid a premium on a certain basis, and, on or about 13 November 1998, the Authority made a decision that the principles of succession applied, which meant that SBA Foods had to pay a substantially increased premium for each of the years, including the insurance year 1998‑9.
The Authority conveyed that decision to HIH by the letter of 13 November 1998, and directed it to apply succession to SBA Foods' policies and adjust the premiums in accordance with the audit result. HIH complied with the instruction, carried out the task of adjusting the premiums and sent a letter to SBA Foods, informing it of the increase in the premiums and stating that a premium notice would be issued for each policy shortly.
There was some debate between the parties as to whether a decision had been made, who made it and the effect of same. Mr Garrett QC, on behalf of HIH, submitted that HIH did not make any decision, and that all it did was comply with a direction to adjust the premiums and make a demand on SBA Foods to pay. The submission was that, all it was doing was carrying out the directions of the Authority which had made the decision.
In my opinion, that is correct. HIH merely carried out the instructions which it was bound to do. According to the terms of the 1993 Act, the adjusted premium stood as the premium and was payable. Hence, the actions of HIH resulted in a notice being given, which affected the financial interests of SBA Foods, on 13 November 1998. But the decision was the one made by the Authority.
Whilst it is clear that a decision was in fact made on the review in 1999, namely, not to interfere with what had already been done, it was a decision which did not adversely affect the financial interests of SBA Foods. The decision under review had, and it was not altered in any way as a result of the review.
That was the submission of SBA Foods, and I did not understand the other parties to disagree with it.
Hence, the real complaint is made in respect of the decision made by the Authority, which was implemented by the authorised insurer.
The proceeding in the Court to judicially review that decision was out of time.
The originating motion was issued pursuant to Order 56 of the Rules of Court on 15 September 1999.
Under Order 56, a proceeding seeking judicial review must be commenced within 60 days after "the date when grounds for the grant of the relief or remedy claimed first arose".
Time, in respect of the decision made on 13 November, expired on or about 13 January. Hence, the period of delay is somewhat in the order of eight months.
Under Rule 56.02(3), the Court is prohibited from extending time "except in special circumstances".
Counsel for both defendants submitted that time should not be extended.
I will defer consideration of the application to extend time until I have considered the grounds relied upon by SBA Foods. This accorded with the views of Counsel for the parties.
Nature of the jurisdiction
The originating motion is a long document, somewhat repetitive and raises a number of grounds. For present purposes, the grounds can be summarised as follows. First, the decision maker did not act within the law, acted without power, took into account irrelevant matters and failed to take into account relevant matters, and denied SBA Foods natural justice, in that SBA Foods was not given all information prior to a decision being made on the review, and secondly, was guilty of pre‑judgment of the issues prior to the determination on the review.
The plaintiff, SBA Foods, invokes the common law jurisdiction of this Court to review decisions of an administrative nature. The jurisdiction is subject to the procedure set out in Order 56 of the Rules of Court. The jurisdiction of the Court to review administrative decisions is indeed limited. It is supervisory and does not entitle the Court to canvass matters that it would on an appeal. The jurisdiction is different to an appeal.
The judicial review jurisdiction is concerned with the legality of what was done by the administrative body, and is not concerned with the merits of the decision under review. This is to be contrasted with an appeal where the question usually is whether the decision is right or wrong, whereas the question on a judicial review is whether the decision is in accordance with the law. Judicial review is not concerned with whether the decision was fair or correct.
Order 56 is concerned with procedure. It abolishes the remedies in the nature of the old prerogative writs but, nevertheless, preserves the jurisdiction of the Court to make prerogative writ-type orders. It is clear the rules do not affect the common law jurisdiction, and it is equally clear that this Court has jurisdiction to make an order in the form similar to the old prerogative writ of certiorari, namely, quashing the decision under review.
The scope of the jurisdiction was discussed by the High Court in Craig v South Australia (1994) 184 CLR 163 at 175-76.
In Chief Constable of North Wales Police v Evans (1982) 1 WLR 1155, Lord Brightman, at p.1173, said –
"Judicial review is concerned, not with the decision, but with the decision making process. Unless that restriction on the power of the court is observed, the court will in my view, under the guise of preventing the abuse of power, be itself guilty of usurping power."
See also R v District Court; ex parte White (1966) 116 CLR 644 at 655.
The High Court in Craig's case, supra, at p.179, identified the most important established grounds. The Court said –
"If such an administrative tribunal falls into an error of law which causes it to identify a wrong issue, to ask itself a wrong question, to ignore relevant material, to rely on irrelevant material or, at least in some circumstances, to make an erroneous finding or to reach a mistaken conclusion, and the tribunal's exercise or purported exercise of power is thereby affect, it exceeds its authority or powers. Such an error of law is jurisdictional error which will invalidate any order or decision of the tribunal which reflects it."
However, it must be emphasised that, as a general rule, this Court is not concerned with the correctness of a decision if the tribunal complies with the law.
The point is made by Lord Reid in Anisminic Ltd v Foreign Compensation Commission (1969) 2 AC 147 at 171 –
"It may have given its decision in bad faith. It may have made a decision which it had no power to make. It may have failed in the course of the enquiry to comply with the requirements of natural justice. It may in perfect good faith have misconstrued the provisions giving it power to act so that it failed to deal with the question remitted to it and decided some question which was not remitted to it. It may have refused to take into account something which was required to be taken into account. Or it may have based its decision on some other matter which, under the provision setting it up, it had no right to take into account. I do not intend this list to be exhaustive. But if it decides the question remitted to it for decision without committing any of these errors it is as much entitled to decide that question wrongly as it is to decide it rightly."
(Emphasis added).
The main relief sought by SBA Foods is declaratory relief in relation to the three alleged decisions, and it also seeks an order in the nature of certiorari to quash the alleged decision made prior to 3 December 1998 (i.e. 13 November 1998) as well as the alleged decision made on or about 19 July 1999.
The statutory scheme
In considering the various statutes, the relevant date is 13 November 1998.
In 1914, the Victorian Parliament passed a revolutionary piece of legislation. It was the Workers' Compensation Act 1914.
This Act introduced into this State, for the first time, a no‑fault liability scheme to compensate employees who suffer injury in the course of employment. The legislation made the employer, the insurer of workmen against injury by accident. The legislation was indeed revolutionary. It was based on the English legislation of 1897.
Since then, there have been a number of statutes concerning the no‑fault scheme. The present legislation is the A.C. Act, which was passed in 1985.
A feature of the legislation, ever since 1914, is the requirement that the employer must be insured against liability to pay compensation to his employee.
In the scheme relevant to this case, insurance is the subject of the 1993 Act, the A.C. Act, WorkCover Insurance Premiums Orders and an approved WorkCover Insurance Policy.
The 1993 Act introduced into Victoria, on 30 June 1993, a new scheme which came to an end on 30 June 1999. A feature of the new scheme was the introduction of authorised insurers who were required to hold a licence under Part 3 of the 1993 Act. From 30 June 1999, insurers ceased to be authorised insurers and merely became agents for the Authority. However, during the relevant period the scheme involved an insurer, which in this case was HIH. Under the new scheme, the payment of levies, formerly paid under the A.C. Act and its regulations, was replaced by a requirement that the employer obtain and maintain a policy of insurance, with premiums to be calculated in accordance with Premiums Orders.
The 1993 Act has been amended from time to time, and it is necessary to consider the provisions of the Act at each relevant date. The insurance year is from 1 July to 30 June of the following year – see s.7 and definition in s.3.
A document which regulated the relationship between HIH, an authorised insurer licensed pursuant to Part 3 of the 1993 Act, and the Authority, was a licence agreement executed by the Authority and HIH. It was dated 27 June 1997 and was varied by a written agreement executed on 26 June 1998.
By reason of s.82 of the A.C. Act, if a worker suffers injury under certain circumstances, he is entitled to compensation under the Act and does not have to prove fault on the part of the employer.
The A.C. Act imposes the liability to pay compensation on the employer.
Section 7(1) of the 1993 Act obliged an employer to obtain and keep in force a WorkCover insurance policy, with an authorised insurer, in respect of all the employer's liability under the A.C. Act and the common law.
Unlike earlier legislation, the 1993 Act and regulations do not prescribe a statutory policy. But s.9(1) provides that the policy must only contain such provisions as are prescribed by the Act "and any other provisions that are approved by the Authority".
It was accepted by the parties that a standard form policy had been approved by the Authority, and was used by all authorised insurers.
HIH was the authorised insurer of SBA Foods, and the form of policy admitted in evidence was accepted by the parties as being the same as the policy in force between SBA Foods and HIH, at all relevant times.
Part 3 of the 1993 Act deals with licensing of WorkCover insurers. A licence, when issued, was for a period of not less than 12 months and not exceeding 24 months – see s.31(1).
Section 32 provided that a licence was subject to conditions prescribed by the Act and conditions imposed by the Authority - see s.32(1). The latter could, by notice, impose or vary conditions – see s.32(2).
Importantly, "an authorised insurer must comply with any condition to which the licence is subject". See s.32(4).
Section 33 dealt with conditions and s.33(2)(d) permitted a condition –
"(d)for the purpose of the efficiency or effectiveness of the WorkCover system generally;"
At all relevant times, HIH was a licensed insurer.
The licence agreement between the Authority and HIH provided, in condition 2.2, the following –
"2.2In carrying out its obligations, functions and powers under the licence, the insurer must comply with these conditions and with any guidelines directions or advisory notes issued by the Authority from time to time."
The Authority and HIH submit that this sub-condition gave the Authority power to require HIH to adjust the premium after the auditor's report.
Turning to the policy, which was a contract between HIH and SBA Foods and which was subject to the statutory provisions, it provided for the payment of premium which was stated in the notice appended to it. The amount of the premium was the amount calculated in accordance with the Insurance Premiums Order, in force for the relevant period. It is noted that the Authority was not a party to the contract.
The policy provided, inter alia, for interest to be paid on an overdue premium and contained terms concerning adjusted premiums, penalty for non-payment of adjusted premiums, prohibition against any act to avoid payment of premiums, and disputes concerning premiums.
As is noted on the front page of the policy, it was subject to the A.C. Act, the 1993 Act and the Regulations and Orders made under the Acts.
The 1993 Act dealt with premiums and their calculation.
Section 15 provided –
"The Governor-in-Council may on the recommendation of the Authority by Order in Council make a premiums order –
(a)specifying the methods to be used in calculating premiums payable by an employer for a WorkCover insurance policy; and
(b)prescribing or specifying any matter or thing required or permitted by this Act to be prescribed or specified by a premiums order."
Premiums Orders were made for each of the insurance years 1996/1997 (No. 4), 1997/1998 (No. 5) and 1998/1999 (No. 6). The relevant provisions are the same in each Order, and it is convenient to consider Order No. 6 for the insurance year from 30 June 1998 to 30 June 1999. It was during this year that the decision under review was made.
That order came into operation on 30 June 1998 (clause 2).
The premium was to be calculated in accordance with clauses 4-11, 14 and 15, and Schedules 1-9 (clause 3).
Clause 4 dealt with the basic formula, and clause 5 provided –
"5. WorkCover Premium
The WorkCover Premium of an employer is the sum of the premium for all periods of coverage of all workplaces of the employer where the premium payable for a period of coverage of a workplace is determined in accordance with the following formula:"
(A formula was set out.)
Clause 6(1) provided –
"6. WorkCover Premium Rate
(1)The WorkCover Premium Rate for the workplace in respect of the period of coverage is calculated –
(a)if the workplace is a startup workplace, as IR; or
(b)in all other cases,
(i)in accordance with the following formula: (formula set out) or
(ii)as 10% of IR –
whichever is the greater."
(Emphasis added).
IR is the industry rate, within the meaning of item 8 of Schedule 1, for the workplace in question.
It is noted that the formula in relation to all other cases was to include, what was described as, the E-factor, which was the "experience factor, calculated in accordance with Schedule 3".
SBA Foods' premium was calculated on the basis that it was a startup workplace and accordingly, the premium was calculated in accordance with the industry rate.
After the auditor's report, the premiums were adjusted to take into account the experience factor; that is, the experience of Gilbertsons.
Clause 11 dealt with determinations and calculations and provided –
"11. Determinations and calculations
(1)Unless otherwise expressly stated, any determination or calculation required to be made for the purposes of calculating a premium under this Order is to be made by the authorised insurer.
(2)An employer may, in accordance with the policy, apply to the Authority for review of, or the Authority may of its own volition review, a determination or calculation made by an authorised insurer under sub-clause (1) and on review the Authority may make any determination or calculation that the authorised insurer may make."
Schedule 1 dealt with, inter alia, industry classification, workplace predominant activity and industry rate. It will be necessary to refer to Schedule 1 later.
Schedule 9 dealt with WorkCover industry classification and was divided into divisions.
When the premium was first calculated for SBA Foods for the year 1996-7, division C sub-division 21 of Schedule 9 dealt with a slaughtering of animals workplace, and the Premiums Order prescribed an industry rate of 7.5%.
Schedule 7 deals with, what is called, "Revised Premium".
Item 1 provides –
"1.Where the authorised insurer or the Authority becomes aware of any new information affecting the calculation of the premium after the premium payable is calculated, the authorised insurer or the Authority may recalculate the premium in accordance with this order and the difference must be met by a further payment by the employer or by a refund to the employer, as the case requires."
SBA Foods, at the time it instituted the proceeding, was of the view that it was pursuant to item 1 of Schedule 7 that the premiums were adjusted. Its contention was that it could not apply because, at all relevant times, both the authorised insurer HIH and the Authority were aware of all information and hence, there was no information.
Section 16(1) of the 1993 Act provided that the Premiums Order applied to the policy which was in force, in respect of the policy period commencing on and after the date of the Premiums Order.
Section 17 provided that the premiums were to be calculated in accordance with the Order. Section 17(1) provided –
"(1)The premium payable by an employer for a WorkCover insurance policy must be calculated in accordance with the method specified in the relevant premiums order."
The determination of the amount of the premium commences with an estimate of the rateable remuneration that the employer will be liable to pay to workers during the policy period. Section 8 defines what is "rateable remuneration".
Section 18 sets out the procedure, whereby the insurer sends a notice to the employer stating an estimate of rateable remuneration, and that estimate is deemed to be the estimate provided by the employer unless, the employer, within 28 days of receiving the notice, provides to the insurer another estimate. Alternatively, if the employer receives a notice from the insurer, which does not include an estimate of the rateable remuneration, then the employer must, within 28 days, provide an estimate of the remuneration. Section 20 obliges the employer to inform the insurer if there is any change in the rateable remuneration.
The premium is calculated on the rateable remuneration and depends upon an accurate rateable remuneration.
Section 21 permits the adjustment of the premium by the Authority or the insurer. The power under that section is confined to the circumstances specified in s.20(1) or (2), which deal with revised estimates and rateable remuneration because of changed circumstances.
Section 22 permits an application by the employer to the insurer for the premium to be adjusted. This right is exercisable "subject to and in accordance with the premiums order".
If one goes to the Premiums Order Schedule 7, item 2 sets out the circumstances under which an employer may seek to have the premium adjusted.
Section 23 is concerned with the power of the insurer to require an employer to provide a certified statement of rateable remuneration. In addition, the Authority may require an employer to provide a certified statement of rateable remuneration. The failure to comply with the requirement is a criminal offence.
Section 24 empowers the Authority, where an employer fails to provide an estimate of rateable remuneration under s.18 or the Authority considers that the estimate is incorrect, to assess the amount of rateable remuneration, calculate the premium and serve a notice on the employer specifying the amount of premium payable.
Section 26 is concerned with payment of premiums. The heading to the section is –
"Payment of premiums."
It is noted, in sub-s.(1), that the premium is due and payable by the employer at the commencement of the policy period, and sub-ss.(2) and (3) permit an employer to elect to pay premiums due by monthly instalments or an authorised insurer may defer payment.
Section 26(4) is important in the resolution of the issues in this case. Much time and argument was spent in considering its interpretation and application.
It provides –
"26. Payment of premiums
(1) …
(2) …
(3) …
(4)The Authority or the authorised insurer may by notice in writing to the employer at any time after the commencement of a policy period adjust the amount of premium in accordance with the premiums order and the adjusted amount is the premium for the purposes of this Act."
Counsel for SBA Foods submitted that this sub-section did not authorise the adjustment of the premiums, which took place by the letter of 3 December 1998. It was submitted that the only right to adjust the premiums was to be found in Schedule 7 item 1 of the Premiums Order, and then only on becoming aware of new information affecting the calculation. If the new information came to the attention of either the insurer or the Authority during the insurance year, then the other had no power to revise the premium when it later ascertained the position. In other words, it was submitted that the clause could not have retrospective operation so as to adjust premiums for previous years. In addition, it was argued that the question of knowledge was to be determined by ascertaining which employee of the insurer or Authority first became aware of new information, and once that date was fixed, the Authority or the insurer could not thereafter adjust the premiums in respect of previous years; only in that year.
It was also submitted that s.26(4) was not a separate and distinct power or authority, in either the Authority or the insurer, to adjust premiums in respect of previous years.
The legislative scheme established by the 1993 Act was discussed by the Court of Appeal in Victorian WorkCover Authority v I.R. Cootes Pty Ltd (2001) VSCA 85.
Phillips JA, with whom Charles JA agreed, described the scheme thus –
"… as I see it, that scheme was in substance a scheme of private insurance. It is true that the scheme was overlaid with and subject to, a number of statutory requirements, but in essence, it was designed to bring the employer and an insurance company into direct contractual relations over the liability of the employer in respect of work-related injury or death."
(Emphasis added).
I refer to the underlined portion and add that the statutory provisions also placed obligations and duties on the employer, the insurer and the Authority, and, more importantly, empowered the Authority to do certain things and enforce them.
Power to make decisions
The various powers, rights, duties and obligations of the three parties before the Court are to be found in the contracts between them and the A.C. Act, the 1993 Act and the Premiums Orders. The powers, rights, duties and obligations arise out of a combination of the common law of contract and the various statutory provisions. The latter override the former if there is conflict.
No argument was put by any party that the Authority did not have the power to engage an auditor to examine the financial records of SBA Foods, to determine whether the correct premium had been paid in the past. Indeed, no argument could have been mounted by reason of s.239 of the A.C. Act.
The audit report recommended that succession applied to SBA Foods' insurance and that the premiums which had been calculated for the years commencing 30 June 1996, 1997 and 1998 be recalculated.
Some time prior to 13 November 1998, the Authority made a decision to apply succession to the premiums payable by SBA Foods in respect of those years, and on that date, directed HIH to arrange for succession to be applied, effective from 18 November 1996, and to adjust the premiums (Exhibit CT6).
It is clear, from the letter, that the Authority accepted the auditor's determination that succession applied.
The Authority's decision was made without any opportunity being given to SBA Foods to be heard on the issue of succession, although the evidence does establish that SBA Foods was aware of the auditor's investigation into the issue, and that an invitation to discuss the issue was extended and declined by SBA Foods.
The issue, at present, is the legal authority of the Authority and HIH to do what each did.
The first question for consideration and determination is, did the Authority have the authority to direct HIH to recalculate premiums payable by SBA Foods?
There are two issues in this question. First, the authority to direct HIH to recalculate the premiums. It is clear from the provisions of the licence agreement that the Authority had the power to direct HIH to perform the task. See clause 2.2.
The second and important question is, did the Authority have the power to determine that succession was to apply and to recalculate the premiums for the past? In considering this issue, it will be necessary to differentiate between previous insurance years, which had already expired, and the premium fixed for the year commencing 30 June 1998, which was to apply for the year ending on 30 June 1999. Mr Tracey QC, on behalf of SBA Foods, argued that what power there was, had to be exercised in the particular insurance year, and was not available in respect of the premiums paid in former years.
Mr Garrett QC, on behalf of HIH, submits that it made no decision when it calculated the premiums, but merely did as it was directed and issued adjusted premium notices. It makes a point that the actual amount of the recalculated premium has never been challenged.
In my opinion, HIH did not make the decision that succession was to apply or that the premiums had to be recalculated for the previous three years. Both decisions were made by the Authority, which directed HIH, pursuant to the licence, to implement the decisions.
However, what HIH did was not devoid of legal effect. Once done, assuming the power was there to adjust the premiums, the adjusted premiums were payable by SBA Foods to the insurer.
Mr Uren QC, who appeared with Mr Fleming for the Authority, submitted that the Authority had the power to make the decision and to enforce same, by directing HIH to recalculate the premiums. Their argument was supported by Mr Garrett QC, on behalf of HIH.
The premium payable under the policy must be calculated "in accordance with the methods specified in the relevant premiums order" - s.17(1) of the 1993 Act.
It is noted that the calculation is to be in accordance with the methods set out.
By reason of s.16(1) and the provisions of the Orders, a Premiums Order operates for a period of one year, and applies to the policy in respect of the period commencing on or after the date of commencement of the Order. Hence, Premiums Order No. 6 commenced on 30 June 1998 and continued until 4.00 p.m. on 30 June 1999.
Order No. 4 operated from 30 June 1996 to 30 June 1997, and Order No.5 operated from 30 June 1997 to 30 June 1998.
The Authority submitted that the power to adjust the amounts of premium for past years is found in s.26(4) of the 1993 Act, which is set out above.
Mr Uren QC submitted that the sub-section gave a general power, which could be exercised at any time and was not confined to the particular policy year operating at the time when the power was exercised. It followed that the power could be exercised at any time and in respect of premiums payable in previous years, after the expiration of the insurance periods.
Mr Tracey QC submitted that s.26(4) was not an independent head of power, but was limited in its application to the particular year in which the premium was to be adjusted, and then only to be exercised in accordance with Schedule 7 of the Premiums Order. Schedule 7 is concerned with re‑calculating the premium after the insurer or the Authority became aware of new information which affected the previous calculation. Mr Tracey QC also drew attention to s.26(1) and emphasised that it required the premium to be paid at the commencement of the policy period. He submitted that there was no power in the Authority or the insurer, under s.26(4), to adjust premiums in respect of previous years when the policy periods had expired.
Mr Tracey QC referred the Court to a decision of His Honour Judge Meagher delivered on 27 October 1999 in the case of I.R. Cootes Pty Ltd v Victorian WorkCover Authority and Anor. His Honour held that s.26(4) did not give the Authority or the insurer power to adjust premiums after the expiration of the policy year, and that the sub-section was concerned with the payment of adjusted premiums which had been adjusted pursuant to ss.21, 22 and 23(4) of the 1993 Act. The latter provisions were not relevant to the present matter.
The case went on appeal and was argued on 19 February 2001. The Court delivered its reasons on 6 June 2001, and this explains some of the delay in delivering these reasons.
The facts can be briefly summarised. The employer conducted a road freight transporting business, and had done so since 1985. The freight business was a tanker operation involving bulk loading, carrying and unloading of petroleum products. Its customers were the petroleum products suppliers, and the employer delivered to service stations and the like.
Since 1985, the employer's workers' compensation levy payments were calculated under the industry classification of F4741J – Petroleum Products Wholesaler.
As stated above, on 1 July 1993, the scheme for payment by employers changed. In accordance with the 1993 Act, the employer was required to obtain and maintain a statutory policy of insurance with an authorised insurer, and the premiums were calculated in accordance with annual Premiums Orders.
The employer appointed an authorised WorkCover insurer and it continued with the same industry classification. Each premium was calculated in accordance with that calculation.
The premiums were paid for the years 1993-4 and 1994-5.
In August 1995, the Authority appointed a firm of accountants to conduct a premium audit, and it reported to the Authority that the employer's classification was incorrect and that the correct one should have been Classification G5111J – "Long Distance Intrastate Road Transport". The change in classification resulted in a higher premium.
The insurer for the 1995-6 year issued an "initial premium" in accordance with the new classification. The insurer followed this document with a letter, which stated that the employer's classification had changed "effective from 1995-6 financial year only".
The Authority instructed the insurer to amend the classification back to 1 July 1993, and demand was made on the employer to pay a revised premium for each of those years ending 1994, 1995 and 1996. The employer paid the amounts of the adjusted premium, totalling $107,262.72, under protest. It sued for the recovery of the said sum paid under protest, pursuant to a common law money count of moneys had and received.
The facts revealed the following –
· The employer had paid annual premiums from 1985 on the same classification;
· The employer had received visits from officers of the Authority and there was no suggestion that the classification was wrong;
· The employer had not been deceptive or misleading in registering its classification;
· The employer was initially informed that the adjustment was for the year 1 July 1995 to 30 June 1996.
There were two main issues in the proceeding. First, what was the correct classification, and secondly, if the classification was incorrect, did the insurer have the power to adjust the premiums for previous years?
The trial Judge decided each issue in favour of the employer. On appeal, the Court was divided in respect of the first issue. The President held that the classification was correct, whereas Phillips and Charles JJA held it was not.
The three Judges all held that there was no power in the insurer, in the circumstances, to adjust the premiums for the years 1993-4 and 1994-5, and the majority Judges held that the insurer was entitled to adjust the premium for the year 1995-6.
Phillips JA considered the powers of the authorised insurer, and Charles JA agreed with his reasoning. I turn to his reasoning, which can be summarised as follows –
· The power issues were –
(i) Did the insurer have the power under the various Acts, including the Premiums Order and policies, to adjust the amount payable for premium for the three policy periods from 1993 to 1996?
(ii) If the insurer had the power to adjust, was it exhausted when notice was given that the re-classification was "effective from the 1995-6 financial year only"?
· That under the legislative scheme established by the 1993 Act, the scheme was, in substance, one of private insurance, i.e. a contractual relationship between the employer and the insurer.
· That the form of the policy supported this conclusion.
· That the policy was expressly subject to the A.C. Act, the 1993 Act, and the regulations and orders made under the Acts.
· That s.15 of the 1993 Act authorised the Governor-in-Council to make a Premiums Order "specifying the methods to be used in calculating premiums payable by an employer".
· A Premiums Order was published for each year.
· That clause 10 of the Premiums Order and condition 10 of the policy emphasised the nature of the scheme as private insurance, and the authorised insurer was bound to determine the rate of the premium.
· That s.17 of the 1993 Act did not permit the insurer to adjust the premiums retrospectively, and to give this construction would lead to an absurdity because the insurer could review the classification at any time and an employer would never know its obligations. The section did not provide for an adjustment.
· The right to adjust premiums depended upon the terms of the relevant policy when read and understood in the context of the legislative scheme.
· The contract of insurance is a contract and cannot be re-made without agreement by all parties. His Honour did observe that his finding was subject always to statute. Once the premium is struck and paid it cannot be altered.
· Unless there was some provision justifying it for the past, there was no basis for adjusting the premium.
· Neither Schedule 7 of the Premiums Order nor s.26(4) justified the power to revisit past years.
· Section 26(4) gave a power to adjust in accordance with the Premiums Order – one had to go to the Premiums Order.
· Schedule 7, which is headed "Revised Premium", did not authorise the insurer, well after the expiry of a policy period, to revisit the situation and adjust the premium.
· The words in Schedule 7 did not require it, and nothing in principle justified it.
I have some difficulty with the reasoning. First, because of the emphasis on the legislative scheme, resulting in a private contract between the insurer and the employer which cannot be changed. The contract is not a statutory contract. It is a contract made as required by statute, and in a form approved by the Authority. It is subject to the legislation. Statute law must override a private contract. The policy in any event is made subject to the statutes, and the legislation and the contract both expressly provide that the premium is to be determined in accordance with the Premiums Order.
Relevantly, for the present case, the Authority is not a party to the contract. Its rights do not depend upon the terms of the contract.
Secondly, the policy period is one year. Premiums Orders are made for each year. The question of adjustment of a premium for a particular year is to be determined in accordance with the policy, in so far as it binds the employer and the insurer, and the Premiums Order for that year. Hence, the premiums in the past have to be determined in accordance with the policy and statutory provisions for the particular year. There is no question of retrospective operation. The question is not only, what is the nature of the obligations between the parties for that year but, what power does the Authority have? Does the policy and the Premiums Order still have operation as a matter of law, even though the year has passed? The presence of s.26(4) and Schedule 7 shows that it was the intention of Parliament that in certain circumstances, an adjustment could be made. There are no time limits, and to deny an adjustment after the policy period has expired would, in my opinion, defeat the intention of the Parliament. Further, there are provisions of the Premiums Order for each year which show that it was to operate after the expiration of the year of the Order.
The Appeal decision establishes that s.26(4) of the 1993 Act does not empower either the insurer or the Authority to revisit prior years and re‑calculate the premiums calculated and paid. It follows that Mr Tracey QC's submission is correct and that the sub‑section did not authorise the Authority to direct a re‑calculation of the premiums paid in prior years.
In the I.R. Cootes case, the claim was a common law moneys had and received count. The case was put on the basis that the money paid to the insurer for adjusted premiums, over the three years in question, was not due and owing to the insurer and hence, it would be inequitable that the insurer, now the Authority, should retain the money as against the plaintiff. See In Re Simms (1934) 1 Ch 1 at 32.
It is important to note that the claim was against the insurer, because the money was paid to it and kept in its statutory fund. Because of the change in the law, the Authority ultimately took over the rights and obligations of the insurer – see Act No. 81 of 1998 and the decision in I.R. Cootes at paragraph 3.
The Court of Appeal held that, pursuant to the insurance contract for each year, the premium had been agreed by the parties and paid. It was no longer open to the insurer to re-open the transaction. It was said that the relationship between the parties was governed by the contract, which was subject to the legislative scheme, and that in the circumstances, the insurer did not have any legal basis for claiming an adjusted premium in respect of policy years which had expired. In that case, there was a period of some 10 years during which the premium had been calculated on a certain basis, the Authority's representatives had visited the employer's premises and never queried the classification, there was no suggestion that the employer had misled or deceived anyone in respect of the classification, and when the adjustment was made at the request of the Authority, it was initially for and during the year 1996-7. It was not until later that the adjustment was made to the previous two 12 months' periods.
The proceeding before the Court of Appeal was a common law proceeding in which the plaintiff sued the authorised insurer, seeking the payment of moneys paid under protest on a money count of moneys had and received. The Court was concerned with an appeal from a County Court decision on questions of fact and law. See s.74 of the County Court Act 1958. The issue was whether the insurer was entitled to adjust a premium paid, in circumstances where the same premium classification had been used for 10 years without question, and after the adjustment was made for one year only. The decision was not addressing the power of the Authority to re‑calculate premiums in past periods. The case concentrated on the relationship between the employer and the authorised insurer. It was a private law claim.
The present proceeding is concerned with a different issue. It is a public law proceeding. The power of the Authority to direct the adjustment of premiums is the central issue.
In the present case, the main issue is whether the Authority was empowered to adjust premiums for the years 1996-7, 1997-8 and 1998-9. And if it did have power, whether it properly exercised the power. The remedy sought is a public law one.
The facts in the present proceeding are different. Here, the employer, SBA Foods, and the insurer, HIH, discussed the issue, and SBA Foods put in place an arrangement to get around the principle of succession, which HIH accepted. The onus was on the insurer to consider the classification and determine the premium payable. The Authority was not a party to any of these steps.
In my opinion, the Authority was empowered to require the premiums to be adjusted. A legislative scheme set in place a contract between the employer and an insurer. The contract was one approved by the Authority and had to contain provisions prescribed by the 1993 Act. On the other hand, it was not a statutory policy in the sense that it was prescribed by any statutory instrument.
The contract bound the parties in respect of a period prescribed by the Act, being 1 July to 30 June each year. See ss.7 and 3 (Definition of "Policy Period"). But the contract was subject to the legislative scheme. It applied for a period of 12 months. The Authority was not a party to the contract.
The premium for that period was calculated in accordance with a Premiums Order, which was made by the Governor-in-Council. See ss.17(1) and 15.
A Premiums Order had the force of law. It took effect from, inter alia, the date of commencement specified in it – see s.16(1)(b) – and it applied to the policy in force "in respect of a policy period commencing on or after the date of the commencement of the Premiums Order" – see s.16(1)(c).
There is nothing in the legislative scheme, including the Premiums Order, which caused the legal effect of the Order to expire on 30 June the following year. On the contrary, there are provisions in the Order which show that it was to operate after the period had expired. I refer to clause 8(4)(b), clause 8(7)(a), clause 8(8), Schedule 2 item 1(c), Schedule 3 item 1(1)(c), and item 6(c).
By way of example, Schedule 8 is concerned with payment of premium and discounts. Clause 3 relevantly provides –
"3.If a premium has been discounted in accordance with item 2, for the purposes of calculating –
(a)…
(b)any adjusted premium payable after the policy period has expired where the policy period expires at 4.00 p.m. on 30 June 1997 –
the amount of premium so calculated is to be reduced by the
amount by which the premium was reduced as a result of the discount."
(Emphasis added).
The contract of insurance covered a period of up to 12 months, and ceased to operate at the end of that period. But there is nothing in the legislative scheme, including the Premiums Order or the contract itself, which brought its legal effect to an end. On the contrary, it contained provisions which showed that it was the common intention of the parties that it still bound the parties in certain respects after the period had expired. For example, the obligation to forward particulars of injury within a certain period in clause 3, and clause 4A which was concerned with the payment of weekly payments.
The policy contained a term concerning the payment of the premium which was as follows –
"Premium for Policy.
The premium for this policy or any renewal thereof is the amount fixed by the Insurance Premiums Order in force under the WorkCover Insurance Act in respect to the relevant policy period."
In the present matter, the Court is dealing with three separate periods. For each period, there is a policy and a Premiums Order which is subject to the legislative scheme. In considering and determining whether there is power to adjust the premium, it is necessary to consider the policy, the Premiums Order and the legislative scheme for that period.
None of the instruments or the statutory scheme cease to have legal effect at the end of the period. They still apply to that period. There is no question of retrospective operation. There is no question of interfering with the agreed premium. The question in this case is whether, in the circumstances, the Authority had the power to adjust the premium for that year.
Whilst the Authority is not a party to the contract of insurance, the Authority has powers under the 1993 Act and the Premiums Order, which must, of necessity, override any contractual obligations or rights of the employer and the insurer.
What the parties were concerned about was the question of the application of succession to the calculation of the premium for a particular year.
The first period was for the financial year commencing 1 July 1996 to 30 June 1997. One turns to the insurance policy, the Premiums Order and the legislative scheme for that year.
The premium is determined in accordance with the provisions of the contract and the legislative instruments.
It is to be calculated in accordance with the Premiums Order – see s.17(1).
The contract provides for the payment of premiums in accordance with the terms set out above. In other words, it is the amount fixed by the Order.
Premiums Order No. 4 for the year 1996-7 provides, in clause 2, that it is to come into operation on 30 June 1996. Under clause 3, the premium for policies "in force in respect of policy periods commencing after 4.00 p.m. on 30 June 1996 and before 4.00 p.m. on 30 June 1997" is to be calculated in accordance with clauses 4 - 10, 13 and 14, and Schedules 1 - 9 of the Order.
Clause 4 is concerned with a basic formula, and provides that the premium payable must, "subject to Schedules 5 and 6, be calculated in accordance with the following formula", and thereafter appears the formula.
Clause 6 is important because it draws a distinction between the premium rate calculation for "a start-up employer" and all other cases. In the formula in all other cases is, what is known as, the "Experience Factor (E)", which is to be calculated in accordance with Schedule 3.
Schedule 3 deals with the E factor.
Schedule 1 is concerned with, inter alia, workplaces and whether a workplace is a predecessor of another workplace. Clause 6 provides –
"6. Predecessor
A workplace is the predecessor of another workplace if the predominant activity that was being carried on in the former is being carried on, in substance, in the latter and in succession to the former, notwithstanding that, when carried on in the former, it may have been carried on by a different employer or at a different physical location or both."
This is important when one considers whether or not the employer is "a start‑up employer".
Clause 10 is important in that it deals with determinations and calculations, and puts the onus on the insurer to make the calculation.
It provides –
"10. Determinations and Calculations
(1)Unless otherwise expressly stated, any determination or calculation required to be made for the purposes of calculating a premium under this Order is to be made by the authorised insurer."
But more importantly, it emphasises the importance of the Authority's powers under the Premiums Order. It provides –
"(2)An employer may, in accordance with the policy, apply to the Authority for review of, or the Authority may of its own volition review, a determination or calculation made by an authorised insurer under sub-clause (1) and on the review the Authority may make any determination or calculation that the authorised insurer may make."
(Emphasis added).
There is no time limit on the Authority's review procedure, and the clause is obviously designed to give overriding authority to the Authority on the question of fixing a premium.
The employer and the insurer can be close, as this case demonstrates. The Legislature has provided a mechanism to enable the Authority to override the calculation.
This underlined the importance of the Authority in the legislative scheme and the powers that were given, not only by the Premiums Order, but also by the 1993 Act. The contract made between the insurer and the employer cannot in any way affect the extent of the Authority's powers.
In addition, the Authority's power was given in Schedule 7, which was concerned with revised premiums. It provided in item 1 –
"(1)Where the authorised insurer or the Authority becomes aware of any new information affecting the calculation of a premium after the premium payable is calculated, the authorised insurer or the Authority may re-calculate the premium in accordance with this order and the difference must be met by a further payment by the employer or by a refund to the employer, as the case requires."
(Emphases added).
The power cannot, in any way, be affected by any contract between the authorised insurer and the employer. The power is not confined to any period during which it may be exercised. It does not say that it cannot be exercised after the policy year. Indeed, in accordance with s.26(4) of the Act, the power is given to the Authority or the insurer, by notice in writing to the employer, at any time after the commencement of a policy period, to adjust the amount of premium in accordance with the Premiums Order.
In my opinion, the Authority does have the power, both under clause 10(2) and under Schedule 7 item 1, to adjust the premium. In my opinion, the power can be exercised at any time in respect of the particular policy year.
The provisions of the contract, the legislative scheme and the Premiums Orders for the following two years are the same, and, in my opinion, the Authority does have and did have power to adjust the premiums in respect of each of those years.
On any view, in accordance with the decision in Victorian WorkCover Authority v I.R. Cootes Pty Ltd, the Authority clearly had power in relation to the year 1998‑99.
In my opinion, the Authority did have the power to review the calculation and cause it to be adjusted, and was entitled to call upon the plaintiff to pay the premiums to the authorised insurer and now, by reason of the change in legislation to it.
The legislative scheme with respect to premiums and compensation support my conclusion.
The premiums paid by employers are paid into a statutory fund, which is the source of compensation for the successful claims by employees against the employer – see ss.43-47 of the 1993 Act. There was a statutory fund for each insurer. In the end, under the scheme, employers must provide the funds to meet the obligations on the statutory fund, and if employers fail to pay the proper premium in accordance with the Premiums Order, the burden is thrown upon other employers. Clearly, it is in the interests of all participants in the WorkCover scheme that each employer pay the premium which is payable pursuant to the Premiums Order. If the authorised insurer is unable to pay any compensation, the Authority may pay the amount out of the WorkCover Authority Fund, with a right to recover from the insurer. If the insurer is unable to reimburse the Authority, the loss falls on others – see s.32 of the A.C. Act. If errors are made, wrong facts are relied upon, decisions are made contrary to the facts, which result in the wrong premium being calculated and paid, the legislative scheme is in danger of collapsing.
The relevant Premiums Order provides the power to adjust in respect of each year. The power is given to the Authority.
I reject the submissions put by Mr Tracey QC that the power can only be exercised during the particular insurance period and in relation to it. Each Premiums Order applies to a particular year, and has effect even though the period has expired. The provisions of each Order makes that clear. There is no warrant to confine the exercise of the powers in the Orders to the year in question. To do so would be to partially emasculate it and defeat one of its purposes, namely, to correct errors.
I do not accept the argument that, by reason of s.26(1), since the premium is payable by the employer at the commencement of the policy period, it must follow that the powers found in the Order cannot be used after the expiry of the period. To so confine it may defeat the clear legislative intent found in clause 10 and Schedule 7 item 1. Clause 10 became clause 11 in the Order for the year ending 30 June 1999.
I reject the submission that the effect of adjusting the premiums for previous years gives the power a retrospective operation. The premium is adjusted in accordance with the power found in the Order, operating during the particular policy period. Once the premium is adjusted, then it becomes the proper premium which is payable under the Act and contract, and there is no question of retrospective operation.
It follows that the Authority did have the power to adjust the premium and to direct re‑calculate the authorised insurer to re‑calculate it. Both parties, in my opinion, had the necessary legal authority to carry out what was in fact done. The Authority had the power to recalculate the premium, pursuant to clause 10 (now 11) and Schedule 7 item 1, and direct the authorised insurer to give notice to SBA Foods pursuant to s.26(4).
It follows that SBA Foods has not established that the decisions made, on or about 13 November 1998 and 3 December 1998, were made without power.
Mr Tracey QC submitted that the evidence before this Court showed that Schedule 7 item 1 did not apply because there was no information which activated its operation.
Mr Tracey QC put two arguments. First, that when either the insurer or the Authority became aware of any new information, that satisfied the condition precedent to the operation of item 1 and that in the circumstances, the insurer always knew the information and therefore, the provision could not apply. The second argument was that, in any event, the information was not "new information".
As I have stated earlier, the judicial review jurisdiction of this Court is limited and is not an appeal. Both of the submissions appear to trespass into the area of the merits.
I have already held that the Authority did have the power to re-calculate the premium and accordingly, the attacks made go to the question of the exercise of the jurisdiction. It was a matter for the Authority to determine whether it had new information entitling it to re-calculate the premium. In other words, the attack is not alleging an error going to jurisdiction, nor does the attack seek to establish an error on the face of the record.
But in any event, in my opinion, both submissions are erroneous.
Item 1 of Schedule 7 is concerned with revising a premium, and comes into play when either the authorised insurer or the Authority becomes aware of new information affecting the calculation of the premium. I do not accept the argument put by Mr Tracey QC that the clause could only operate when either the insurer or the Authority became aware of the new information, and the power of the other body ceased. The word "or" makes it clear that the power can be exercised by either body, and at a time when that body first becomes aware of any new information affecting the calculation. Hence, it follows that although HIH knew the circumstances, back in November 1996, concerning the purchase by SBA Foods of the business, in my view, that did not defeat the power of the Authority to exercise the power of re‑calculation when it became aware, at a later point in time, of "new information affecting the calculation of the premium".
Further, in my opinion, there was ample evidence to show that the Authority gained new information, as a result of the audit, in that it was made aware of the true circumstances concerning the sale of the business from Gilbertsons to SBA Foods, which demonstrated that the business operated by SBA Foods was not a "start‑up workplace", and that the principle of succession applied. This meant that the E factor should have been taken into account in calculating the premium for the earlier years.
Finally, there is the question of the power of the Authority to review the determination of the premium.
Clause 10 of the contract between SBA Foods and HIH gave the right to the employer to apply "to the Victorian WorkCover Authority for a determination as to the premium to be charged. Such an application must be made within 28 days after the date of demand for the premium;".
The procedure adopted by the Authority to review the re‑calculation was carried out pursuant to that clause in the contract, and I am satisfied that SBA Foods exercised the right it had. The contract between the two parties referred the review to the Authority.
Natural justice
SBA Foods contends that it was denied natural justice in three important respects, namely, that it was not given the opportunity to be heard before the re‑calculation was made and implemented, that it did not have all the information available to it when it was given the opportunity to seek a review of the adjusted premiums and finally, that the Authority which conducted the review was guilty of bias, in that it had prejudged the issue.
The principles concerning the obligation of a decision maker, exercising statutory powers, to accord natural justice are well settled.
They have been recently summarised by the High Court in Annetts v McCann (1990) 170 CLR 596 at 598, where Mason CJ, Deane and McHugh JJ said –
"It can now be taken as settled that, when a statute confers power upon a public official to destroy, defeat or prejudice a person's rights interests or legitimate expectations, the rules of natural justice regulate the exercise of that power unless they are excluded by plain words of necessary intendment."
Although it was submitted that the decision to re‑calculate and the review process had the potential to affect adversely SBA Foods' financial interests, and SBA Foods ought to have been given the opportunity, before the decision was made, to contest it, the case for SBA Foods concentrated on the review process.
It was submitted that SBA Foods was denied procedural fairness, because it was denied access to a copy of the audit report, prepared by the auditor Ernst & Young, which recommended that succession apply and which the Authority accepted. It determined that succession should apply and directed HIH, on its behalf, to recalculate the premium. The argument proceeded on the basis that the submissions, by SBA Foods to the Authority, were made without knowing what was contained in the auditor's report.
It was submitted that, having been given the opportunity to make representations to the Authority concerning the question of the amended premiums, SBA Foods should have had all information, which included the auditor's report, and by failing to provide full access, SBA delivered its submissions in ignorance of what the report contained.
In Kioa v Attorney‑General (1985) 159 CLR 550, Mason J said, at p.582 –
"It is a fundamental rule of the common law doctrine of natural justice expressed in traditional terms that, generally speaking, when an order is to be made which will deprive a person of some right or interest or legitimate expectation of a benefit, he is entitled to know the case sought to be made against him and to be given an opportunity of replying to it."
(Emphasis added).
It is important to bear in mind that the common law rule concerning a fair hearing, is a flexible rule, which must be moulded to the particular circumstances to ensure that the party against whom the decision is made, has a fair opportunity to be heard, i.e. given a "fair go" or, as it has also been put, "given a fair crack of the whip". The circumstances will dictate what constitutes the obligation to give a fair hearing.
It is important, at the outset, to briefly summarise the relevant facts to the question of what fairness dictated in the circumstances.
Negotiations involving the sale of the Gilbertson businesses resulted in a document called "memorandum of understanding", dated 5 October 1996. The evidence revealed that consideration was given by both the vendor and purchaser to the question of costs, including WorkCover costs. This case amply demonstrates that the WorkCover premiums are a significant and substantial expense to a business. In early October 1996, discussions took place between officers of HIH and Messrs Slinger and Gibson, respectively, the then managing director and secretary of the vendor, who were to become, respectively, the managing director and secretary of the purchaser. The topic discussed was the question of the insurance premiums in the future, and the issue of whether succession would apply. It is clear, from the evidence, that it was a topic that was raised by Messrs Slinger and Gibson. After discussion, it was agreed between Messrs Slinger and Gibson and HIH that the new company to be formed, namely, SBA Foods, would be treated as a "new start‑up" company. Because extensive works were to take place and some employees were to remain with the vendor for a period, a decision was made that the principle of succession, which was well known within the WorkCover industry, would not apply. The result was that the premium would be fixed at the industry rate. It was important to the decision reached that some of the employees of the vendor should remain with the vendor for a period of at least 60 days, even though SBA Foods would actually hire these employees.
To that extent, a stratagem was used to ensure that succession did not apply.
It is very apparent from the recalculation of the premiums that the amount involved for the first year was a saving in excess of $1M.
It is clear, from at least October 1996, that representatives of the vendor, who were to be employed thereafter by the new company to be formed, had a full appreciation of the importance of succession and the effect upon the insurance premiums to be paid by the purchaser.
On 15 May 1997, a representative of the company, responsible for the Authority's computer data, informed HIH that the application of succession had been amended by the Authority "to allow the application of succession where there is a gap of up to (but not including) 12 months in operation between a ceased workplace (predecessor) and the commencement of a new workplace (successor)."
HIH, on 15 May 1997, informed Mr Slinger that the policy relating to the application of succession had been amended. Mr Slinger gave evidence that he did not believe the change would affect SBA Foods, as he believed the SBA Foods workplaces were not in succession to Gilbertson's workplaces.
SBA Foods was well aware, in June 1998, that Ernst & Young was to carry out an audit on behalf of the Authority.
On 14 September 1998, the auditor requested a meeting with SBA Foods to discuss the issue of succession, but it declined. Mr Gibson gave evidence that he did not recall the person from the auditor mentioning succession. But on any view, by late September or early October, Mr Slinger had been told by HIH of the likely application of succession.
On 17 September 1998, the auditor sent a facsimile to Mr Gibson, in which it was pointed out that "the issue of succession needs to be resolved in relation to SBA Foods".
The facsimile went on to pose the following questions –
"As discussed with Marcelle, when succession is applied, consideration is given to the following type of issues. Did SBA Foods Pty Ltd take over R.J. Gilbertson's Pty Ltd employees plant and equipment and maintain the same physical location? In essence for succession to be applied the predominant activity must be maintained from the predecessor to the successor workplaces."
The facsimile concluded by stating that the auditor was looking forward to a meeting to discuss the issue in more detail. The final sentence read –
"If you have any queries do not hesitate to contact Marcelle on 9288 8204."
On 1 October 1998, HIH wrote to Mr Slinger, enclosing documents which, it stated, may be of assistance to the addressee in relation to succession issues. An extract of the 1998/1999 Premiums Order was included. But more importantly, attached was an extract from the premium manual which dealt with succession and, in particular, a decision by the Victorian Civil and Administrative Tribunal in the case of Schreurs Growers Pty Ltd.
Also attached and provided was a copy of an issues paper, which was prepared by the Authority and which was a review of the question of succession.
The issues paper comprised some 43 pages and was concerned with "The Principles of Succession".
It is clear that the issues paper not only discussed how the scheme worked, but any criticisms of same and what could be done about it.
On 5 October, the auditor informed the Authority that it recommended that succession be applied, which caused the Authority, through Jeff Moss, to instruct HIH, on 13 November 1998, to apply succession and adjust the premiums.
Thereafter, on 3 December 1998, HIH wrote to SBA Foods, informing it of the decision and stating that the premium notices would be sent. They were sent on 11 December 1998.
On 18 December 1998, Mr Gibson, on behalf of SBA Foods, wrote to HIH to obtain advice and requested a copy of the auditor's report.
Ms Todarillo, of HIH, informed him that she did not have a copy and that he would have to make an FOI application to the Authority. At no stage did SBA Foods request of the Authority, prior to the lodgement of its submission, that the Authority provide it with a copy of the report. It did not do so until after the outcome of the review.
Further, it did not make any application, pursuant to FOI legislation, for a copy of the report until after the Authority had made a determination, on 19 July 1999.
SBA Foods actually lodged the application on 27 July 1999 and received the documents on 16 September 1999.
On 21 December 1998, the Authority, through Mr Sanders, wrote to Mr Gibson, acknowledging objection to the outcome of the re‑calculation.
Thereafter, Mr Gibson sought further time for the lodgement of the submission, and it was eventually extended until 15 February 1999. On that date, SBA Foods lodged its written submission objecting to the application of succession.
The evidence revealed that SBA Foods, prior to the lodgement of its submission, sought and obtained legal advice from senior counsel, Mr O'Loughlen QC. The written submission addresses the question of succession between Gilbertson and SBA Foods, and is a detailed document of 21 pages with some 13 pages of attachments.
It is clear, from the submission, that SBA Foods was contending that, as a matter of fact and on a proper construction of the Premiums Order, SBA Foods did not succeed the Gilbertson Group of companies and accordingly, should not be assessed for insurance premiums taking into account the claims history of Gilbertsons, i.e. that the Experience factor in Schedule 3 to the Premiums Order should not apply.
It is in those circumstances that SBA Foods contends that it was denied procedural fairness, by reason of the fact that it was denied access to a copy of the audit report prior to lodging its submission. It was submitted that the submissions were prepared and lodged "without knowing what information was contained in the auditor's report or upon what basis the auditors had arrived at their recommendation."
In submissions, Counsel referred to a copy of the audit report and highlighted statements made in it, which it contested.
SBA Foods contends that it was not given a fair opportunity to meet the case put against it, hence was not given a "fair go" or a "fair crack of the whip". Its basis for that contention was that it was denied the opportunity to peruse the auditor's report before it lodged its submission, said in a context in which SBA Foods did not request the Authority to provide a copy of the report, was well aware of the principles of succession, retained experienced lawyers to prepare its submissions, and was aware of all the facts relating to its takeover of the Gilbertson businesses. It chose not to seek a copy of the report until after the review had been decided, and the decision communicated to it. Given those circumstances, the submission lacks reality.
In mid‑1998, SBA Foods was aware that auditors were looking into the question of premiums which had been paid, and the question of succession. The company was invited to make representations concerning the issue, and declined to do so. In December 1998, it was made aware that a decision had been made to re‑calculate the premiums for the previous three years, and that it was liable to pay a substantial amount for past premiums. It had a number of options open to it. It did not take proceedings in court, alleging that the Authority and the insurer had no power, or alleging that it had been denied procedural fairness. It sought a copy of the auditor's report and was informed that it had to make an application for FOI. It did not make any such application. It did not make application to this Court to require the Authority to hand over the report or to stop the review on the ground of lack of procedural fairness. It obtained legal advice from an experienced solicitor and senior counsel in the area of WorkCover, and retained them to prepare the very lengthy submissions put on the review to the Authority.
All told, the company had in excess of ten weeks to prepare its submissions. Failure to have full access to all relevant information was due to the fact that SBA Foods did not press for a copy of the report. It was prepared to proceed without the report.
Apparently, a decision was made by SBA Foods and its legal team that it had all the information available, which it needed, to argue the issue of succession. In addition to Mr O'Loughlen QC's input, SBA Foods retained the solicitor, who normally acted for HIH, to prepare the submission on its behalf. The solicitor involved is an expert in the area of WorkCover and WorkCover insurance.
It lies ill in the mouth of SBA Foods to complain of a denial of natural justice when it was prepared to pursue the course which it did, without complaint, obtain the review decision and then complain that it should have had the auditor's report.
The law does not readily countenance parties and their legal practitioners standing by and not making any complaint, at a time when the problem could have been rectified, and then complaining after an adverse decision is received. By way of example, where counsel fails to object to a charge, in criminal or civil proceedings before a jury, and then seeks to take a point on appeal. The Appeal Court rarely permits the point to be taken. Whilst the rule is not inflexible, the courts do not often assist those who do not take the point at the relevant time.
It is in those circumstances that this Court is being asked by SBA Foods to set aside the review decision, because of a denial of natural justice.
Mr Uren QC submitted that natural justice was not a requirement of either the re‑calculation or the review decision. He submitted that if it was, it would mean that every time a premium was set, the employer was entitled to be heard. However, that is a different position to an adjustment of a premium. Once the premium is set, then the employer is obliged to pay the amount. If it is adjusted upwards, then the employer's financial interests are adversely affected and in my opinion, the employer should be given the opportunity to be heard before any decision is made.
The fixing of the initial premium is based upon information obtained from the employer concerning the estimate of rateable remuneration. The sections in the 1993 Act and also the Premiums Order provide what is to occur in order to fix the premium, and there is no doubt that the employer has some input into that step. But when it comes to the exercise of the power to adjust the premium upwards, then, in my opinion, there is the requirement to be given the opportunity to be heard. It follows that the decision made and implemented on 3 December 1998 adversely affected SBA Foods, and it was entitled to be heard in relation to it.
However, it is clear from the contract between the parties that there was a contractual right to review that decision, and SBA Foods exercised that contractual right. It elected to go down that path. The contractual right was not one that had to be followed, and clause 10(iii) of the contract made it quite clear that the review procedure did not in any way detract from the right of, inter alia, the employer to bring a proceeding in a court of law.
Mr Uren QC submitted that in those circumstances, once it elected to go down the review procedure path, that cured any defect which previously existed in relation to the procedure.
He submitted that the courts, in recent times, have taken a more practical, no‑nonsense approach to the question of what is a fair hearing, and referred to a number of cases where the courts have recognised that the review procedure may cure any defects in earlier decisions.
The Privy Council has held that, in certain circumstances, the exercise of appeal rights may cure any defects in procedure in the previous proceeding. I refer to Calvin v Carr (1979) 1 NSWLR 1. However, it is noted that there is no clear and absolute rule which can be laid down in regard to this matter. It all depends upon the circumstances, and whether the person adversely affected by the earlier decision had a fair opportunity to properly put his case.
The principles were discussed by the Federal Court in Riverside Nursing Care Pty Ltd v Bishop (2000) 100 FCR 519, and Yilmaz v Minister for Immigration and Multicultural Affairs (2000) 100 FCR 495, especially at pp.516 et seq per Gyles J.
In my opinion, in the circumstances, SBA Foods elected to proceed to a review without calling for a copy of the report or taking any other action and, by its conduct, cured any defects in the decision‑making process, up to and including 3 December 1998. In reaching this conclusion, I also take into account that the auditor sought to discuss the issue of succession, and SBA Foods declined the invitation.
It is now necessary to concentrate on the complaint that the review process denied it natural justice. This was the principal submission of Counsel for SBA Foods.
In Kioa v West (1985) 159 CLR 550 at 584, Mason J said –
"Where the decision in question is one for which provision is made by statute, the application and content of the doctrine of natural justice or the duty to act fairly depends to a large extent on the construction of the statute … What is appropriate in terms of natural justice depends on the circumstances of the case and they will include, inter alia, the nature of the enquiry, the subject matter and the rules under which the decision maker is acting …
In this respect the expression 'procedural fairness' more aptly conveys the notion of a flexible obligation to adopt fair procedures which are appropriate and adapted to the circumstances of the particular case. The statutory power must be exercised fairly, i.e., in accordance with procedures that are fair to the individual considered in the light of the statutory requirements, the interests of the individual and the interests and purposes, whether public or private, which the statute seeks to advance or protect or permits to be taken into account as legitimate considerations."
(Emphases added).
In Lloyd v McMahon (1987) AC 625 at 702, Lord Bridge of Harwich emphasised that the "so-called rules of natural justice are not engraved on tablets of stone."
What procedural fairness is, in a given set of circumstances, will depend upon those circumstances. SBA Foods knew there was a report and that the Authority relied upon it. SBA Foods elected to proceed and made a very detailed submission without obtaining a copy of the report. In so pursuing the review, it was exercising a contractual right and it chose to proceed without the report. It established the situation, of which it now complains, and chose to activate and follow the review procedure in those circumstances. In my opinion, the failure to obtain the report was not a defect in the procedure adopted by the decision maker, but in fact was the result of the actions adopted by the aggrieved party. It can hardly turn around, after the adverse review decision is made, and complain that the procedure adopted by the decision maker was a denial of natural justice.
The decision maker did not make the decision to deny the report to SBA Foods, and indeed, there is no evidence that the issue was ever raised with the decision maker to enable the decision maker to rule upon it. In those circumstances, there has not been a denial of natural justice. If there was a defect, it was of the company's making.
My conclusion is supported by the House of Lords decision of Al-Mehdawi v Secretary of State for the Home Department (1990) 1 AC 876.
In that case, the notice of a hearing of an appeal, against a decision to deport a person, was mistakenly sent by his solicitors to the old address, with the result that the appeal was heard in his absence, and dismissed. The House of Lords held that there was no breach of natural justice.
At p.898, Lord Bridge of Harwich said –
"These considerations lead me to the conclusion that the party to a dispute who has lost the opportunity to have his case heard through the default of his own advisers to whom he has entrusted the conduct of the dispute on his behalf cannot complain that he has been the victim of a procedural impropriety or that natural justice has been denied him, at all events when the subject matter of the dispute raises issues of private law between citizens. Is there any principle which can be invoked to lead to a different conclusion where the issue is one of public law where the decision taken is of an administrative character rather than the resolution of a lis inter partes? I cannot discover any such principle and none has been suggested in the course of argument."
In my opinion, those principles apply, a fortiori, when a party and its advisers decide to conduct a review on a certain basis. They can hardly complain when, having established the ground rules, an adverse decision is made. What they seek to do is change the rules. This they cannot do after the decision is made.
Finally, I am not persuaded that if the report had been made available, SBA Foods would have made any different submission or that the result would have been different.
Counsel for SBA Foods referred to the auditor's report and highlighted matters which, it was submitted, would have been responded to. The first complaint was that the report referred to s.8.5 of the working papers, which was said to be important. But, in fact, SBA Foods did have access to s.8.5 of the working papers. However, the report does not state what it was in s.8.5 which the auditors considered. It is asserted that s.8.5 apparently set out the basis for the application of succession. But the fact was, that SBA Foods had all the information they needed in respect of the application of succession.
The second complaint is that there was a reference in the report to the guidelines in the premiums manual. The fact was, SBA Foods had the premiums manual and access to the guidelines.
The third complaint is that the report referred to the agreement whereby Gilbertsons would continue to operate for up to three months. It is said that if that fact was known to it, SBA Foods could have given further evidence as to the nature of the agreement. This is unreal. The Company established the device to assist with succession. Its submission was primarily directed at showing the nature of the agreement with Gilbertson, and that succession did not apply.
The next complaint is that the report referred to the Schreurs Growers Pty Ltd case, which supported the fact that succession should be applied to SBA Foods. The complaint is that if SBA Foods had known, it could have sought a copy of Schreurs case. In fact, Schreurs case was discussed at some length in the document which was sent by HIH to it, in late 1998. It would be surprising if the lawyers for SBA Foods did not consider that case.
The final complaint is that the report stated that SBA Foods carried on, in succession, the business formerly carried on by Gilbertsons. It is said that SBA Foods could have sought to demonstrate why the continuity had been broken, by reference to other principles. Again, this is an unreal complaint. That was the very issue that was being addressed by SBA Foods, in its submission.
None of the submissions persuade me that if the report had been provided, SBA Foods would have approached the review in any other way than the way it did.
In those circumstances, I am not persuaded that it has been denied natural justice.
The other ground of complaint was that the Authority had prejudged the issue by directing a change to the final form of the auditor's report.
The evidence revealed that, on 5 October 1998, the auditor forwarded the report to Jeff Moss of the Authority.
On 22 October 1998, Mr Moss forwarded a facsimile to the auditor in which he stated –
"I refer to your letter dated 5 October 1998 regarding the audit conducted on the above named employer.
I have spoken to Steve Kolotylo concerning the succession issue. He is of the opinion that succession should apply, however he would like your letter to advise that:
1.Gilbertsons effectively became an agency providing staff to SBA.
2.SBA Foods maintained the predominant activity, previously undertaken by Gilbertsons, at each workplace.
If you agree with this could you please re-write your letter."
(Emphasis added).
In fact, the auditor did amend its report, and under the heading "summary", in the last paragraph, appears the following –
"On 18 November 1996 R.J. Gilbertson Pty Ltd effectively became an agency providing staff to SBA Foods Pty Ltd. On 18 November 1996 SBA Foods Pty Ltd maintained the predominant activity, previously undertaken by R.J. Gilbertson Pty Ltd, at each workplace."
First of all, it is observed that Mr Moss asked that if the auditor agreed with those findings, whether it would amend the report. The decision was for the auditor. Clearly, by its conduct, the auditor did agree with those findings. Secondly, Mr Gibson, of SBA Foods, was cross-examined on the last paragraph and requested to indicate what was incorrect. He said that he objected to the use of the words "an agency" because, as he put it, Gilbertsons were not the agent of SBA Foods. However, in my opinion, on a reasonable and fair reading of the paragraph, what was being said was that Gilbertsons were effectively acting as an agency providing staff. On one view of the facts, this was clearly correct. Mr Gibson did not quibble with the last sentence in the letter.
In my opinion, the changing of the report by the auditor at the suggestion of the Authority did not establish that the Authority had prejudged anything. It was a clarification which was suggested to the auditor and which the auditor said was correct. Indeed, the statements of fact in the last paragraph of the report, in my opinion, were amply supported by the facts placed before this Court. The change did not, in my view, suggest or infer prejudgment by the Authority on the review.
The review was apparently carried out by Mr Sanders, and there is no evidence of any contact between him or the other officers of the Authority, who were responsible for the suggestion to amend the report. Mr Sanders swore an affidavit in the proceeding and was not cross-examined.
It does not follow from the fact of the change in the report, at the request of the Authority, that the Authority had already prejudged the view and denied SBA Foods natural justice. In fact, the review process, laid down, entrusted the review to the Authority, which had made the decision in the first place. It is trite law that the content of the principles of natural justice will depend upon all the circumstances of the case, including the statutory or other framework in which the decision maker operates. The decision maker had already made the decision and required succession to be applied. It was the body which was to review the decision. On one view, it had already prejudged the issue but the review procedure was entrusted to it. There is no evidence to suggest that the person, or persons, involved in the review process did not approach it in a fair and proper manner. Further, in my opinion, on a proper understanding of the facts, the reasonable bystander would not perceive pre‑judgment by the Authority.
It follows that the plaintiff, SBA Foods, has failed to establish that review of the decision confirming the earlier decision was made contrary to the principles of natural justice.
Relevant and irrelevant considerations
Finally, SBA foods contended that in the decision‑making process, the Authority took into account irrelevant matters and failed to take into account relevant matters.
On the last day of the hearing, SBA Foods provided further and better particulars in answer to HIH's request concerning the alleged irrelevant matters and the failure to take into account relevant matters. The allegations are made against HIH. The matters complained of concern the decision made by HIH to adjust the premiums, in accordance with the directions given by the Authority.
The evidence clearly established that HIH did not make any decision of its own. Accordingly, the suggestion that it took into account irrelevant matters or failed to take into account relevant matters, in my opinion, is not to the point.
In the originating motion, paragraph 16 alleged that the Authority failed to have regard to relevant considerations and had regard to irrelevant considerations. The grounds of complaint asserted that the failures alleged, occurred prior to the Authority directing HIH to recalculate the premiums and HIH re‑calculating the premiums. No particulars of this complaint were given in the originating motion. The grounds alleged have not been made out.
In my opinion, SBA Foods has not established that any irrelevant matters were taken into account in the review process or that relevant matters were overlooked in the review process.
Extension of time
It follows that SBA Foods has failed to establish any grounds for setting aside the decision re‑calculating the premium, or the review. Accordingly, it is unnecessary to further consider the application for an extension of time. To make such an order, in the circumstances, would be futile. The Court will not make futile orders.
Conclusion
It follows that since SBA Foods has failed to establish any grounds for setting aside the decision made in 1998, re‑calculating the premiums or the actual re‑calculation, and the review decision, the proceeding must be dismissed against both defendants.
In the originating motion, the plaintiffs sought declaratory relief against, inter alia, the decision resulting in the re‑calculation, by HIH, of the WorkCover premiums in December 1998. However, it did not seek any order in the nature of certiorari to quash that re‑calculation.
This caused Counsel for HIH to submit that HIH was not a necessary party to the proceeding, and should not have been joined. It was submitted that the declaratory relief would achieve absolutely nothing and hence, HIH was an unnecessary party.
This comes back to the question of the legal effect of what HIH did on 3 December, in which it informed SBA Foods of the decision to apply succession, and subsequently followed up with the revised premiums.
As I have already held, the steps taken by HIH in December 1998 were not devoid of legal effect, and were as a result of actions taken by it. In my opinion, it was a necessary party to the proceeding because the re‑calculation and the giving of notice were the acts which adversely prejudiced the financial interests of SBA Foods. If it had been successful, any relief would have had an affect on the actions of HIH.
It follows that it was a necessary party. But in any event, it is entitled to its costs.
Subject to submissions of Counsel, I propose to make the following orders:
1.That the proceeding be dismissed.
2.That the plaintiff pay the costs of each defendant, including reserved costs.
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