State Insurance Regulatory Authority v Abdul-Rahman

[2016] NSWCA 210

Court of Appeal

Supreme Court

New South Wales

• Summary available
• Amendment notes

Medium Neutral Citation:	State Insurance Regulatory Authority v Abdul-Rahman [2016] NSWCA 210
Hearing dates:	10 May 2016
Decision date:	15 August 2016
Before:	Basten JA at [1]; Meagher JA [92]; Gleeson JA [93]
Decision:	(1)   Grant the Authority leave to appeal. (2)   Allow the appeal and set aside the orders made in the Common Law Division on 16 October 2015 and 17 December 2015. (3)   In place thereof, dismiss the employer’s appeal to the Common Law Division. (4)   Remit the claim to the Local Court for determination of any outstanding issues in dispute, including the costs in that Court. (5)   Order that the employer pay the costs of the Authority in the Division. (6)   Order that the respondent employer pay 50% of the Authority’s costs in this Court, other than the costs of the additional issue. (7) Grant the employer, as the respondent to the appeal in this Court, a certificate under the Suitors’ Fund Act 1951 (NSW).
Catchwords:	LIMITATION OF ACTIONS – limitation period – recovery of statutory debt – whether debt constituted a penalty – whether accrual of cause of action dependent on Authority’s state of knowledge as to employer’s liability and amount due – Limitation Act 1969 (NSW), ss 14, 18   WORKERS’ COMPENSATION – workers’ compensation insurance – failure of employer to obtain insurance – statutory entitlement of WorkCover Authority to recover debt from employer – whether penalty – whether statute-barred
Legislation Cited:	Criminal Procedure Act 1986 (NSW), s 179; Ch 4 Fines and Penalties Act 1901 (NSW), ss 4, 5, 122 Fines Act 1996 (NSW), ss 122, 129; Sch 1 Income Tax Assessment Act 1936 (Cth), ss 207, 209 Limitation Act 1969 (NSW), ss 10, 14, 18 Local Court Act 2007 (NSW), s 40 Supreme Court Act 1970 (NSW), s 101 Workcover Legislation Amendment Act 1995 (NSW), Sch 1 [92] Workers Compensation Act 1987 (NSW), ss 56, 140, 154D, 154E,155, 156, 159, 161, 163, 163A, 163B, 164, 168, 169, 172, 173, 173A, 174, 174A, 175, 183A, 224, 224C, 227, 228, 279; Pt 4, Div 6; Pt 7, Divs 1, 1A, 2, 7; Workers Compensation Amendment Act 2008 (NSW), s 2; Sch 1 [3]-[7] Workplace Injury Management and Workers Compensation Act 1998 (NSW), ss 34, 35, 39, 247
Cases Cited:	Andrews v Australia & New Zealand Banking Group Ltd (2012) 247 CLR 205; [2012] HCA 30 Deputy Commissioner of Taxation v DTR Securities Pty Ltd (1985) 1 NSWLR 653 Deputy Commissioner of Taxation v Moorebank Pty Ltd (1988) 165 CLR 55 Deputy Commissioner of Taxation v Mutton (1988) 12 NSWLR 104 Downey v Acting District Court Judge Boulton (No 5) (2010) 78 NSWLR 499; [2010] NSWCA 240 DTR Securities Pty Ltd v Deputy Commissioner of Taxation (Cth) (1987) 8 NSWLR 204 Federal Commissioner of Taxation v Trautwein (1936) 56 CLR 211 Harbutt’s Plasticine Ltd v Wayne Tank & Pump Co Ltd [1970] 1 QB 447 Re Dymond (1959) 101 CLR 11 Rich v Australian Securities and Investments Commission (2004) 220 CLR 129; [2004] HCA 42 Richardson v Federal Commissioner of Taxation (1932) 48 CLR 192 Screenco Pty Limited v R L Dew Pty Limited (2003) 58 NSWLR 720; [2003] NSWCA 319 Trade Practices Commission v Abbco Ice Works Pty Ltd (1994) 52 FCR 96
Texts Cited:	Report of the Law Reform Commission being the First Report on the Limitation of Actions (LRC 3), October 1967
Category:	Principal judgment
Parties:	State Insurance Regulatory Authority (formerly WorkCover Authority of NSW) (Applicant) Mohyeddine Abdul-Rahman (Respondent)
Representation:	Counsel: Ms M Allars SC (Applicant) Ms J D Beck (Respondent   Solicitors: Lea Armstrong, Crown Solicitor (Applicant) Brydens Lawyers (Respondent)
File Number(s):	2015/331821
Decision under appeal	Court or tribunal: Supreme Court Jurisdiction: Common Law Citation: [2015] NSWSC 1483 Date of Decision: 16 October 2015 Before: Hamill J File Number(s): 2015/140983

headnote

[This headnote is not to be read as part of the judgment]

On 28 May 2014 the WorkCover Authority of New South Wales (now the State Insurance Regulatory Authority) (“the Authority”)) commenced proceedings in the Local Court against an employer, Mohyeddine Abdul-Rahman, seeking payment of a debt, pursuant to s 156(1) Workers Compensation Act 1987 (NSW), for failing to obtain and maintain a required policy of insurance. The non-insured period fell between September 2007 and March 2012. The debt consisted an amount double the assessed premium together with a further sum for inspection costs incurred by the Authority.

The Local Court found in favour of the Authority dismissing the employer’s jurisdictional defence that the relevant limitation period had expired before the proceedings were commenced. The magistrate characterised the debt as a “penalty”, finding that the relevant limitation period was two years pursuant to s 18(1) of the Limitation Act 1969 (NSW). The magistrate found that the cause of action had accrued on the date on which the Authority had notified the employer of the assessment of the amount due, being 10 April 2014, as the date on which the Authority issued a certificate specifying the amount due, pursuant to s 156(4) of the Workers Compensation Act. An appeal was heard in the Supreme Court, Hamill J overturning the decision of the Local Court and giving judgment for the employer. The Authority brought an application for leave to appeal.

The issues for determination on appeal were:

(i) whether the amount recoverable pursuant to s 156 Workers Compensation Act constituted a penalty, for the purposes of the Limitation Act 1969 (NSW), ss 14 and 18; and

(ii)   when the cause of action accrued.

The Court (Basten JA, Meagher JA and Gleeson JA), allowing the appeal and remitting the matter to the Local Court held.

In relation to (i):

1. An enactment permitting recovery of double the premium payable for insurance, pursuant to s 156(1) of the Workers Compensation Act, was a “penalty” for the purposes of the Limitation Act, s 18. This finding depended upon the proper construction of both pieces of legislation: [44], [58], [91], [93]-[94].

2.    Relevant factors to this construction were that:

(a) The amount was not payable to an insurer as the premium on a policy available in a claim for compensation by a worker, but was paid, pursuant to s 156(3), into a fund, established under s 34 of the Workplace Injury Management and Workers Compensation Act 1998 (NSW), which together with two other funds established by statute, covered the costs of operating the scheme for workers’ compensation in New South Wales: [25], [45], [51]-[53];

(b)    the amount payable was arbitrary, taking no account of the time for which the particular premium had been unpaid: [45];

(c)    the legislation did not indicate that the amount reflected the costs to the scheme of either delay in payment or expenses incurred in recovering the amount of the premium: [45];

(d)    it may be inferred that the amount recoverable was intended to have a deterrent effect on employers against failing to pay premiums under the legislation: [45], [57];

(e)    whilst the legislation described the amount as a “debt due”, this was not determinative: [47], [95];

Rich v Australian Securities and Investments Commission (2004) 220 CLR 129; Trade Practices Commission v Abbco Iceworks Pty Ltd (1994) 52 FCR 96 discussed

In relation to (ii):

3. No cause of action arose until the Authority had determined the liability of the employer and the amount recoverable. A number of steps are required to be taken by the Authority before it can be satisfied that there has been non-compliance with the obligations of the employer under s 155(1) and the financial consequences thereof: [66], [72], [80], [91], [92].

4. Legislative requirements in respect of record keeping on the part of insurers and employers, powers of investigation allowing the Authority to determine that an employer does not have a policy of insurance (s 174), and the requirement that an employer produce relevant policies for inspection (s 161) enabled the Authority to establish the existence of a policy of insurance and assess the premium: [67]-[69], [78].

5. The circumstances envisaged by s 156 assume that the Authority is aware of the breach and the amount payable, except in circumstances where the employer has failed to provide the relevant information: [80].

Judgment

1. BASTEN JA: This case is concerned with the limitation period governing proceedings brought by the authority responsible for the regulation of worker’s compensation insurance in this State for recovery of a statutory debt from an employer who had failed to obtain and maintain a policy covering its liability under the Workers Compensation Act 1987 (NSW).

2. On 28 May 2014 the WorkCover Authority of New South Wales (now known as the State Insurance Regulatory Authority) (“the Authority”) commenced proceedings in the Local Court, General Division, against Mohyeddine Abdul-Rahman (“the employer”) seeking payment of a debt calculated as $63,315.51. The employer was said to be liable pursuant to s 156(1) of the Workers Compensation Act. The amount claimed comprised the sum of $58,515.48, certified pursuant to s 156(4) of the Workers Compensation Act, and a further sum of $4,800 for costs incurred by the Authority in undertaking an inspection of the records of wages paid by the employer during a specified period. The pleading with respect to the principal sum (which is the only amount in issue) read as follows:

“Pursuant to s 156(1) of the Act by reason of the failure to maintain in force a policy of insurance the defendant is indebted to the plaintiff for twice the amount of the premium that would have been payable for the issue of a policy of insurance for the non-insured period.” [1]

1.    Statement of claim, par 3.

3. The non-insured period was identified as the period between 30 June 2007 and 31 March 2012, although the Court was informed that the earlier date had been varied to exclude July and August 2007.

4. Both parties filed, in the Local Court, statements of facts and issues. However, for reasons which were not made clear in this Court, when the matter was listed in the Local Court on 11 March 2015, the Court was invited to consider the limited question of whether it had jurisdiction to hear and determine the claim. The basis on which jurisdiction was challenged was the expiration of the relevant limitation period which it was alleged had occurred before the proceedings were commenced.

5. The Authority contended that the cause of action on which it sued first accrued on the date on which it notified the employer of the assessment of the amount due (“or the substituted assessment”). [2] The first demand was made on 11 July 2013. The relevant period was a period of two years specified by s 18(1) of the Limitation Act 1969 (NSW). That conclusion depended upon the characterisation of the debt as a “penalty”. The magistrate, accepting that submission, found that the cause of action arose on 10 April 2014, when the Authority issued a certificate specifying the amount due, pursuant to s 156(4) of the Workers Compensation Act. He therefore dismissed the employer’s jurisdictional defence.

   2.    Local Court Judgment, 29 April 2015, par 19.

6. On 12 May 2015, the employer filed in the Common Law Division a summons seeking leave to appeal. The appeal was brought pursuant to s 40 of the Local Court Act 2007 (NSW).

7. On 16 October 2015, Hamill J (the primary judge) granted leave to appeal, allowed the appeal and set aside the decision of the Local Court. In place of the Local Court judgment, judgment was given for the employer and the Authority was ordered to pay costs. [3]

   3. Abdul-Rahman v WorkCover Authority of NSW [2015] NSWSC 1483.

8. The proceeding in this Court is brought by way of an application for leave to appeal from the judgment of the primary judge. Leave is required because the amount in issue is less than $100,000. [4]

   4. Supreme Court Act 1970 (NSW), s 101(2)(r).

9. For reasons explained below, there should be a grant of leave to appeal. Further, the appeal should be allowed. However, in order to identify and determine the issue raised on the correct legal basis, it has been necessary to take a number of procedural steps which will be identified when dealing with the question of costs.

Issues on appeal

10. Before turning to the principal provisions of the Workers Compensation Act, it is convenient to note the two issues which arose, by reference to the Limitation Act. The first issue was whether the amount recoverable by way of double premium pursuant to s 156 of the Workers Compensation Act constituted “a penalty or forfeiture, or sum by way of penalty or forfeiture” for the purposes of s 18 of the Limitation Act. If so characterised, the limitation period was two years. Otherwise, the period was six years, in accordance with the general limitation period prescribed by s 14(1)(d).

11. The second question, which arose under each of ss 14 and 18, was the commencement of the period, namely “the date on which the cause of action first accrues to the plaintiff”. The issues will ultimately be addressed in this order, because the characterisation of the debt will affect an understanding of when the cause of action accrued.

Statutory framework

12. The primary obligation underlying the present proceedings was the obligation of the employer to obtain insurance under the Workers Compensation Act. The period during which it was alleged that the employer did not hold a relevant policy of insurance ran from late 2007 until March 2012. Section 155 was amended once during that period, but in relation to a provision not presently relevant. The relevant provisions of s 155 in force during the period when the employer was said to be uninsured read as follows:

155   Compulsory insurance for employers

(1)   An employer (other than a self-insurer) shall obtain from a licensed insurer, and maintain in force, a policy of insurance that complies with this Division for the full amount of the employer’s liability under this Act in respect of all workers employed by the employer and for an unlimited amount in respect of the employer’s liability independently of this Act (but not including a liability for compensation in the nature of workers compensation arising under any Act or other law of another State, a Territory or the Commonwealth or a liability arising under the law of another country) for any injury to any such worker.

Maximum penalty: 500 penalty units or imprisonment for 6 months, or both.

…

(3)   In any proceedings for an offence against subsection (1), proof:

(a)   that an employer, not being a self-insurer, who has been served pursuant to section 161(1) with a notice requiring the employer to produce for inspection (or to supply particulars, specified in the notice, of) a policy of insurance obtained by the employer and in force at a specified date or between specified dates has not so produced (or so supplied specified particulars of) any such policy so in force, and

(b)   that the time for compliance with the notice has expired,

shall be sufficient evidence, unless the contrary is proved, that at that date or between those dates the employer had failed to comply with subsection (1).

…

(4) The Authority may undertake not to prosecute a person for an offence under this section in respect of a failure by the person to obtain or maintain in force a policy of insurance on condition that the person pays to the Authority the amount that the Authority is entitled to recover under section 156 in respect of the failure or such lesser amount as the Authority may determine to accept. If the person pays the amount in compliance with any terms and conditions of the undertaking, the person is not liable to be proceeded against or convicted for an offence under this section in respect of the failure concerned.

13. Non-compliance with s 155(1) was an offence. No criminal proceedings were brought against the employer. However, the means of proving an offence provided by subs (3) identified the difficulty which the Authority may have in establishing a failure to comply with subs (1) and the means by which that might be overcome. Further, the Authority did not seek any undertaking not to prosecute for the purposes of subs (4). That provision is relevant because it envisages a condition that the employer may pay to the Authority “the amount that the Authority is entitled to recover under section 156 … or such lesser amount as the Authority may determine to accept.”

14. The critical provision for present purposes is s 156 of the Workers Compensation Act. That provision was significantly amended in 2008. However, on the conclusion reached below, the Authority will not be able to recover amounts outstanding for more than six years, prior to the commencement of proceedings on 28 May 2014. It is also noted that, whatever the precise date upon which a relevant failure occurred, because the policies are renewed annually, there will have been separate failures with respect to each year. Accordingly, it is convenient to deal with the legislation as it existed from the commencement of the 2008 amendments, on 20 May 2008. [5]

    5. Workers Compensation Amendment Act 2008 (NSW), s 2 and Sch 1 [3]-[7].

156   Recovery of double premiums for contravention of insurance requirements

(1) If an employer fails to obtain or maintain in force a policy of insurance as required by section 155(1) in respect of any period, the Authority may recover from the employer in a court of competent jurisdiction as a debt due to the Authority a sum equal to twice the amount of the premium that would have been payable for the issue of a policy of insurance to the employer in respect of that period or such lesser amount as the Authority may agree to accept in any particular case.

(1A) If an employer maintains in force at any one time more than one policy of insurance for the purposes of section 155(1) (in contravention of section 155(1AA)), the Authority may:

(a)   determine an amount as the amount of premium that the employer has avoided by maintaining more than one policy of insurance, and

(b)   recover from the employer in a court of competent jurisdiction as a debt due to the Authority a sum equal to twice the amount determined under paragraph (a) or such lesser amount as the Authority may agree to accept in any particular case.

(2) The Authority may recover a sum from an employer under this section whether or not the employer has been proceeded against or been convicted for any relevant offence against section 155(1) or (1AA).

(3)   Any such sum recovered by the Authority shall be paid into the WorkCover Authority Fund.

(4)   A certificate executed by the Authority and certifying that a sum specified in the certificate is the sum equal to twice the amount of premium that would have been payable for the issue of a policy of insurance to an employer so specified in respect of a period so specified is (without proof of its execution by the Authority) admissible in any proceedings and is evidence of the matters specified in the certificate.

(4A) A certificate executed by the Authority and certifying that a sum specified in the certificate is the sum equal to twice the amount of premium that an employer has avoided by maintaining more than one policy of insurance in contravention of section 155(1AA) is (without proof of its execution by the Authority) admissible in any proceedings and is evidence of the matters specified in the certificate.

(5)   In the absence of information that would enable the Authority to accurately determine the premium that would have been payable for the issue of a particular policy of insurance, the following provisions have effect:

(a)   the Authority is entitled to make an estimate of that premium (based on the information available to the Authority),

(b)   the Authority’s estimate is presumed to be accurate as to the premium that would have been payable and cannot be challenged on the basis that insufficient information was available to enable the making of an accurate assessment, but can be challenged by the provision of information that enables a more accurate estimate to be made,

(c)   if the Authority’s estimate is successfully challenged and as a result a more accurate estimate is substituted, the proceedings are not open to challenge merely because of the inaccurate estimate and may continue to be heard and be determined on the basis of the substituted assessment.

(6) A court that convicts an employer of an offence under section 155 may, on the application of the Authority, order the employer to pay to the Authority the amount that the court is satisfied the Authority is entitled to recover from the employer under this section in respect of the failure to which the offence relates. Any amount paid by an employer under such an order is taken to have been recovered from the employer under subsection (1) or (1A) and is to be dealt with accordingly.

…

(7)   A Local Court cannot order the payment of an amount under subsection (6) that when added to the amount of any penalty imposed for the offence concerned would exceed an amount equivalent to 500 penalty units.

(8)   Despite any other provision of this section, if the Authority is satisfied that:

(a)   the reason for the employer not being insured against liability to pay compensation to the worker is that the employer believed on reasonable grounds that the employer could not be liable under this Act in respect of the worker because under section 9AA the worker’s employment was not connected with this State, and

(b)   the employer had workers compensation cover in respect of the worker’s employment under the law of the State or Territory with which the employer believed on reasonable grounds the worker’s employment was connected under section 9AA,

the employer is not liable under this section in respect of that liability.

15. Part 7, Div 1 of the Workers Compensation Act, entitled “Insurance policies”, includes ss 155-164. Other than the sections set out above, there are provisions relating to the contents of policies of insurance (s 159), authorising the Authority to require an employer to produce a policy for inspection (s 161), requiring insurers to keep a register of policies issued (s 163) and requiring an employer, upon request, to produce a certificate of currency issued by the insurer (s 163A). The powers of the Authority include the issue of “a stop work order” directed to an employer if the Authority “reasonably suspects that the employer does not have a policy of insurance that complies with this Division.”[6] Further, there is an obligation imposed on the employer in the following terms:

164   Employer—offences relating to policies of insurance

An employer shall not:

(a)   supply any information to a licensed insurer which the employer knows is false or misleading in a material particular with the object of procuring the issue or renewal of a policy of insurance, or

(b)   wilfully fail to observe any of the terms of a policy of insurance obtained by the employer.

Maximum penalty: 100 penalty units.

6. Workers Compensation Act, s 163B(1).

16. Part 7, Div 2 deals with “Insurance premiums” which are to be calculated in accordance with an insurance premiums order made by the Governor. [7] Section 173 provides for regulations requiring the supply of information relevant to the calculation of premiums to or by employers and insurers. Section 173A makes it an offence to supply information to an insurer relevant to the calculation of a premium that the person knows is false or misleading in a material particular.

    7. Workers Compensation Act, s 168 and s 169.

17. Prior to the amendments of 20 May 2008, s 174 required an employer to keep records of wages paid to workers and to retain those records for seven years (a period which was reduced by the 2008 amendments to five years). [8] Further, the authority may order an employer to supply it with a full and correct statement of the information required to be recorded and to make the records available for inspection. [9]

    8.    Section 174(1) and (2).

    9.    Section 174(5).

18. In addition, the Authority may order that a person make available for inspection “any records in the person’s possession relating to any contract … under which the person has made payments to any other person … for the performance of work”. [10] Such an order “may be made only for the purpose of establishing whether a person is required to obtain a policy of insurance under this Act or for the purpose of determining whether the correct premium has been paid under a policy of insurance.” [11]

    10. Section 174(6A).

    11.    Section 174(6B).

19. The next section which should be noted is s 174A, under which a claim was made in the Local Court as part of the proceedings which were dismissed by the primary judge. That provision reads as follows:

174A   Recovery of inspection costs of Authority or insurer

(1) When an inspection by an insurer or a person authorised by the Authority reveals a significant understatement of wages by an employer or that an employer has failed to obtain or maintain in force a policy of insurance as required by section 155(1), the insurer or Authority is entitled to recover from the employer the costs incurred by the Authority or insurer in connection with that inspection.

(2)   An inspection is considered to reveal a significant understatement of wages by an employer if the inspection reveals that the employer has, in connection with the calculation of the premium or balance of premium payable for the issue or renewal of a policy of insurance, understated by 25% or more the wages paid to workers employed by the employer.

(3)   The amount that the Authority or insurer is entitled to recover is recoverable in a court of competent jurisdiction as a debt due to the Authority or insurer.

(4)   A certificate issued by the Authority certifying as to the costs incurred by the Authority or an insurer in connection with such an inspection is evidence of the matters certified.

(5)   This section does not apply in respect of inspections carried out made before the commencement of this section.

(6)   In this section:

inspection means an inspection or audit of an employer’s records carried out under a provision of this Act or the regulations or of a policy of insurance.

20. Although nothing was made of the point in the course of the proceedings in this Court, there can have been no basis for dismissing the separate cause of action pleaded with respect to the amount of $4,800 claimed under s 174A(1), based on a certificate issued less than two months prior to the statement of claim.

21. The next provision, s 175, was of significance to the argument relating to the accrual of the cause of action under s 156, although no proceedings were brought under s 175. That provision was in the following form:

175   Employers evading payment of correct premiums

(1)   If the Authority finds, having regard to information obtained under section 174 or otherwise, an amount to be due and payable by an employer to an insurer as a premium or balance of premium in respect of the issue or renewal of a policy of insurance (whether or not the policy is still in force), the Authority may order the employer to pay that amount to the insurer.

(2)   A late payment fee at the rate for the time being in force under section 172 is payable in respect of an amount ordered to be paid under subsection (1) as from the date determined by the Authority as the date the premium for the issue or renewal of the policy of insurance concerned first became due and payable to the insurer.

(3)   An amount ordered to be paid under subsection (1), together with any late payment fee payable under subsection (2), may be recovered as a debt in a court of competent jurisdiction by the insurer in whose favour the order was made.

(4)   If the Authority finds that:

(a)   an employer has provided an insurer with information which was false or misleading in a material particular, and

(b)   the insurer, relying on that information, has calculated a premium for the issue or renewal of a policy of insurance which is less by a certain amount than the premium would otherwise have been,

the Authority may recover from the employer in a court of competent jurisdiction as a debt due to the Authority, a sum equal to twice that amount plus the late payment fee provided for by subsection (4A), half of which sum shall be paid by the Authority to the insurer and the other half into the WorkCover Authority Fund.

…

(4AB)   For the purposes of the application of the Limitation Act 1969 to an action on a cause of action to recover an amount under subsection (4) …, the cause of action first accrues to the Authority when the Authority makes the finding referred to in those subsections.

(4A)   The late payment fee at the rate for the time being in force under section 172 is payable:

(a)   under subsection (4) as from the date the premium for the issue or renewal of the policy of insurance concerned first became due and payable to the insurer,

…

(4B)   The Authority may waive or reduce a late payment fee payable under this section.

(5)   A certificate executed by the Authority and certifying that an amount specified in the certificate is payable under subsection (1), (2) or (4) by a person so specified is (without proof of its execution by the Authority) admissible in any proceedings and is evidence of the matters specified in the certificate.

(6)   In the absence of information that would enable the Authority to accurately determine the premium that would have been payable for the issue or renewal of a particular policy of insurance, the following provisions have effect:

(a)   the Authority is entitled to make an estimate of that premium (based on the information available to the Authority),

(b)   the Authority’s estimate is presumed to be accurate as to the premium that would have been payable and cannot be challenged on the basis that insufficient information was available to enable the making of an accurate assessment, but can be challenged by the provision of information that enables a more accurate estimate to be made,

(c)   if the Authority’s estimate is successfully challenged and as a result a more accurate estimate is substituted, the proceedings are not open to challenge merely because of the inaccurate estimate and may continue to be heard and be determined on the basis of the substituted assessment.

(7)   A court that convicts an employer of an offence under section 173A (Giving false information for premium calculation) may, on the application of the Authority, order the employer to pay to the Authority the amount that the court is satisfied the Authority is entitled to recover from the employer under this section in respect of the matter to which the offence relates. …

(7A)   Any amount paid by an employer under such an order is taken to have been recovered from the employer under subsection (1) and is to be dealt with accordingly.

(7B)   A Local Court cannot order the payment of an amount under subsection (7) that when added to the amount of any penalty imposed for the offence concerned would exceed an amount equivalent to 500 penalty units.

(8)   In this section:

insurer means a licensed insurer or a former licensed insurer.

22. Subsection 156(5) and subs 175(6) are to similar effect; subss 156(6), (6A) and (7) and subss 175(7), (7A) and (7B) are also to similar effect, although the latter provisions refer to an offence under a different section.

23. Before leaving the scheme of the worker’s compensation legislation, it is convenient to refer to s 247 of the Workplace Injury Management and Workers Compensation Act 1998 (NSW) (“the Workplace Injury Act”) which relevantly provided as follows:

247   Time for instituting proceedings

(1)   Proceedings for an offence against this Act, the 1987 Act or the regulations under those Acts may be instituted within the period of 2 years after the act or omission alleged to constitute the offence.

(2)   Any such proceedings may be instituted by (but not only by) the Authority.

(3)   Despite subsection (1), proceedings for an offence under section 144 of this Act or 155 of the 1987 Act (Compulsory insurance for employers) may be instituted by the Authority:

(a)   within 2 years after the act or omission alleged to constitute the offence, or

(b) in a case where the Authority first becomes aware of the act or omission alleged to constitute the offence because of a claim made by a worker of the employer concerned under Division 6 of Part 4 of the 1987 Act or Part 9 of Chapter 5 of this Act—within 6 months after the Authority pays compensation or makes any other payment to the worker in respect of the claim under that Division of the 1987 Act or that Part of this Act or the Commission determines the claim (whichever occurs later),

whichever provides the longer time for proceedings to be instituted.

24. The magistrate stated in his reasons for judgment in the Local Court that s 247 applied “by virtue of the combined operation of ss 155 and 156” of the Workers Compensation Act. [12] If by that statement it were intended to refer to the present proceedings, that was wrong because s 247 only deals with proceedings for an offence. It may, however, have been a general statement not intended to refer to the present proceedings, as the magistrate then went on immediately to note that s 18 of the Limitation Act applied. The relevance of s 247 for present purposes was that at least in a case that fell within s 247(3)(b), where the Authority was required to pay compensation to an injured worker, the limitation period was extended. Because, on a prosecution under s 155, the Court could, on convicting the employer, order the employer to pay the amount which the Authority was entitled to recover under s 156, pursuant to s 156(6), there was seen to be an anomaly if some shorter limitation period, without the possibility of extension, operated in relation to the civil liability under s 156. (Otherwise, s 247 had no relevance to the present proceedings.)

    12. Local Court judgment, at [18].

25. In order to determine whether a liability to pay a double premium under s 156 constitutes exposure to a penalty, it is necessary to refer to the nature of the fund into which any such sum is paid, pursuant to s 156(3). That fund, then known as the WorkCover Authority Fund, was established under s 34 of the Workplace Injury Act. It is one of three funds established under the legislation. Together they cover the expenses of operating the scheme for worker’s compensation in New South Wales, payments to uninsured workers (from the Insurance Fund[13] ) and claims against insolvent insurers (from the Insurers’ Guarantee Fund[14] ). Although each fund has specific functions and objects of expenditure, amounts and responsibilities can move between the funds. Thus, the Insurance Fund may be applied not only to meeting claims by uninsured workers, but also claims upon defaulting insurers. [15] Funds may also be paid out of the Insurance Fund directly into the Guarantee Fund,[16] and the assets of the Insurance Fund may be disbursed by way of contributions under the Workers Compensation Act to the WorkCover Authority Fund.

    13. Workers Compensation Act, ss 154D and 154E and Pt 4, Div 6 “Uninsured liabilities”.

    14. Established under Workers Compensation Act, s 227.

    15. Workers Compensation Act, s 224C.

    16. Workers Compensation Act, s 228(2C).

26. The primary source of payments to the WorkCover Authority Fund are contributions payable by each insurer and self-insurer. [17]

Is the double premium payment a penalty?

17. Workplace Injury Act, s 39(1).

(a)   legal principles

27. The concept of a “penalty or forfeiture” is one which should be approached with some caution. The language undoubtedly has an established legal meaning; however, the words, together or separately, are found in many statutes where the context bears little relationship to the principles of law and equity in which that language developed an established usage.

28. However, some indirect assistance can be derived from discussion of the concept of a “penalty” in the context of a claim for equitable relief against a stipulation in a contract which involves an obligation, in the nature of a punishment for, or a deterrent against, the breach of a primary obligation. [18] This history was seen to be relevant in a separate context, namely the privilege against exposure to a penalty or forfeiture, which is a sibling of the privilege against self-incrimination. As explained by Gummow J in Trade Practices Commission v Abbco Iceworks Pty Ltd,[19] in a passage cited with approval by the High Court in Rich v Australian Securities and Investments Commission: [20]

“The term 'penalty' was not used in courts of equity merely in the sense of an exaction pursuant to statute as a punishment for contravention thereof. It embraced the wider concept of penalty as understood in the law of relief in equity against the exaction of penal payments in contractual disputes and the forfeiture of property interests."

18. Cf Andrews v Australia & New Zealand Banking Group Ltd (2012) 247 CLR 205; [2012] HCA 30 at [10].

19. (1994) 52 FCR 96 at 143.

20. (2004) 220 CLR 129; [2004] HCA 42 at [26] (Gleeson CJ, Gummow, Hayne, Callinan and Heydon JJ).

29. In TPC v Abbco the issue was whether the privilege against exposure to a civil penalty could be relied upon by a corporation to resist production of documents. The Court held it could not. In Rich v ASIC, the question was whether directors of a corporation could rely upon the privilege to resist discovery of documents in proceedings in which they were exposed to orders disqualifying them from holding positions as directors of a corporation. The High Court held that they could. Whatever the historical background to the use of the language, there is a distinct difference between the function of the privilege and the availability of relief against payment under a contract. The context (the operation of limitation periods) in which the issue arises in the present case is divorced from both.

30. Statutory context will usually be important. In Rich v ASIC Kirby J (in dissent) considered that the outcome turned upon the meaning and application of the Corporations Act 2001 (Cth), which created a detailed regulatory scheme creating various “civil penalty provisions”, expressly so described. [21] There was common ground that “such legislative descriptions do not foreclose the classification by a court of the true character of the relief”; nevertheless, Kirby J placed emphasis upon the comparison between provisions which created offences and those which led to a “civil penalty”. [22] The majority, however, identified the focus of the debate as turning upon that provision of the Corporations Act which obliged the court to apply the rules of evidence and procedure for civil matters when hearing proceedings for a declaration of a contravention. [23] It is clear that the precise question be identified in order to determine the legal principles to be applied.

    21.    Rich v ASIC at [61] and [68].

    22.    Rich v ASIC at [68]-[69].

    23. Rich v ASIC at [25].

31. The relevant provisions of the Limitation Act are as follows:

14   General

(1)   An action on any of the following causes of action is not maintainable if brought after the expiration of a limitation period of six years running from the date on which the cause of action first accrues to the plaintiff or to a person through whom the plaintiff claims:

(a)   a cause of action founded on contract (including quasi contract) not being a cause of action founded on a deed,

(b)   a cause of action founded on tort, including a cause of action for damages for breach of statutory duty,

(c)   a cause of action to enforce a recognizance,

(d)   a cause of action to recover money recoverable by virtue of an enactment, other than a penalty or forfeiture or sum by way of penalty or forfeiture.

…

18   Penalty and forfeiture

(1)   An action on a cause of action to recover a penalty or forfeiture, or sum by way of penalty or forfeiture, recoverable by virtue of an enactment, is not maintainable if brought after the expiration of a limitation period of two years running from the date on which the cause of action first accrues to the plaintiff or to a person through whom the plaintiff claims.

(2)   In this section penalty does not include a fine to which a person is liable on conviction for a criminal offence.

32. These provisions do not directly engage the principles of contractual relief against a penalty or forfeiture provision, nor a privilege from production of documents or interrogation. When s 14(1)(d) refers to a cause of action to recover money under an enactment, other than a sum payable by way of penalty or forfeiture, it is not concerned with equitable relief, nor with a privilege against disclosure.

33. So much is confirmed by the Law Reform Commission Report which preceded the current legislation. [24] The full explanation of what was to be s 18, was as follows: [25]

“Under the statutes now in force, where the penalty or forfeiture is for the benefit of the Crown alone, the limitation period is two years, where the penalty or forfeiture is for the benefit of the Crown or for the benefit of a common informer (other than the party grieved) suing for the same the period is one year, and where the penalty or forfeiture is given to the party grieved the period is two years. This is the combined effect of section 5 of the Imperial Common Informers Act 1588, and section 39 of the Supreme Court Act 1841. Provisions for actions by informers were occasionally inserted in statutes many years ago. Such provisions are now obsolete and, indeed, the procedure has been abolished in England. However, there may be cases which, in the absence of something like section 18 of the Bill, would be without any limitation period. The safer course is to provide for some limitation period and the Bill follows section 2(5) of the Imperial Act of 1939 in fixing the period at two years.”

24.    Report of the Law Reform Commission being the First Report on the Limitation of Actions (LRC 3), October 1967.

25.    LRC 3, par 119.

34. It may be noted that this report pre-dated the Imperial Acts Application Act 1969 (NSW). However, it is curious that no reference was made to the Fines and Penalties Act 1901 (NSW), which included the following provision under the heading “Recovery”:

“4.   Any fine penalty or forfeiture imposed or authorised to be imposed by any Act may be sued and proceeded for by any person whomsoever unless by the Act imposing the same such right to sue or proceed is expressly given to any officer or person by name or designation.”

35. Under the heading “Appropriation”, the 1901 Act further provided:

“5.   Whenever any fine penalty or forfeiture is imposed or authorised to be imposed by any Act such Act shall be taken to provide that the same when recovered shall be paid one moiety to His Majesty his Heirs and Successors for the public uses of this State and in support of the Government thereof to be applied in such manner as may from time to time be directed by any Act and that the other moiety shall be paid to the informer or other person prosecuting or suing for the same unless the Act imposing the fine penalty or forfeiture otherwise directs.”

36. The Fines and Penalties Act has since been replaced by the Fines Act 1996 (NSW). [26] Although not anticipated in 1969, the concept of civil penalties imposed by enactments is now commonplace, as revealed in Rich v ASIC. Further, the concept of a “penalty” with respect to an offence now extends to a payment which may be made upon the issue of a “penalty notice”, a procedure available with respect to many minor offences, which allows for the avoidance of summary criminal proceedings. [27]

    26. Fines Act, s 129.

    27. For offences, see Fines Act, Sch 1.

37. Although we no longer speak of “common informers”, penalties are still imposed in circumstances where part can be recovered by a private prosecutor. An example may be found in the Prevention of Cruelty to Animals Act 1979 (NSW), addressed in Downey v Acting District Court Judge Boulton (No 5). [28] Thus, the Fines Act provides:

122   Payment of share of fine to prosecutor

(1)   This section applies where:

(a)   the Act imposing or authorising the imposition of a fine or other penalty does not make any provisions for its application when recovered, and

(b)   the prosecutor is not a police officer.

(2)   The court before which proceedings are taken to recover any such fine or other penalty may direct that such portion of it (not exceeding one-half) is to be paid to the prosecutor.

28. (2010) 78 NSWLR 499; [2010] NSWCA 240 at [64].

38. The application of s 18 of the Limitation Act appears to have been considered in relatively few cases. It arose, however, in DTR Securities Pty Ltd v Deputy Commissioner of Taxation(Cth),[29] a case involving proceedings brought to recover “additional tax” under the Income Tax Assessment Act 1936 (Cth), more than two years after tax had “accrued”. The case was ultimately determined in the High Court on the basis that the State Limitation Act did not apply to the Commissioner. [30] In the High Court, the matter was decided on the basis of an assumption that an action to recover additional tax would be an action to recover a penalty. [31] At trial, Lee J had stated:[32]

“The penalty which is recoverable under the cause of action presently being discussed was, in my view, correctly defined in Limitation of Actions by Preston & Newsom, 2nd ed (1943) at 60-61, as ‘a sum given by statute to the person entitled to sue for it, by way of punishment to the defendant and not by way of compensation to the person suing’ and I can see no reason why, if the additional tax under s 207 is to be regarded as in its nature penal, as in my view it is, it should not be held to be within the words ‘penalty … or sum by way of penalty … recoverable by virtue of an enactment’ in the Limitation Act, s 18(1).”

29. (1987) 8 NSWLR 204 (“DTR Securities”).

30. Deputy Commissioner of Taxation v Moorebank Pty Ltd (1988) 165 CLR 55.

31.    Moorebank at 62.

32. Deputy Commissioner of Taxation v DTR Securities Pty Ltd (1985) 1 NSWLR 653 at 661-662.

39. In this Court, the scope of s 18 was discussed only by Samuels JA, with whom Glass and McHugh JJA agreed, although Samuels JA was in dissent as to the operation of the State law in relation to proceedings brought by a Commonwealth officer. The alternative characterisations available in that case were that the additional tax was either a penalty under s 18, or involved the recovery “of a tax” by the Crown, in respect of which the Limitation Act did not apply, by virtue of s 10(3)(a). Samuels JA stated: [33]

“Section 207(1) addressed itself to unpaid tax, that is, income tax assessed under the Act (see s 6) and provided that ‘additional tax’ should be due and payable at the rate of 10 per centum per annum on the amount of tax unpaid, computed from the time when it became due and payable. The rate of 10 per cent (which is now, since 1982, 20 per cent) had been in the section since it was first introduced in 1922. I would have thought that the language of the provision yields the strong indication that its purpose is to impose punishment for failure to comply with the requirements of the Act, and that, in consequence, the subsection was intended, and can be described, as a penalty.”

33.    DTR Securities at 209.

40. In ordinary circumstances a liability to pay interest on a civil debt is viewed as a form of compensation to the creditor from whom money has been withheld. [34] However, Samuels JA obtained support for his conclusion from two decisions in the High Court dealing with an earlier provision to similar effect, which had been described as “a penal provision”. [35]

    34. See, eg, Harbutt’s Plasticine Ltd v Wayne Tank & Pump Co Ltd [1970] 1 QB 447 at 468 (Lord Denning MR), cited by Handley JA in Screenco Pty Limited v R L Dew Pty Limited (2003) 58 NSWLR 720; [2003] NSWCA 319 at [16].

    35. Richardson v Federal Commissioner of Taxation (1932) 48 CLR 192 at 195 (Starke J), 205 (Dixon J) and 215 (Evatt J); Federal Commissioner of Taxation v Trautwein (1936) 56 CLR 211 at 217 (Evatt J)

41. In Rich v ASIC, dealing with the possible disqualification of a director, the Court focused on the effect on the defendant, rather than the proper characterisation of the purpose of the payment. Thus, the joint reasons accepted that it “may be possible to characterise proceedings as having a purpose of protecting the public”, which would not be determinative because the proceedings may similarly have other purposes which are not excluded. [36] The suggested classification, based on a distinction between “punitive” and “protective” orders, denied that the proceedings would expose the defendants to penalties. The dichotomy was rejected; as the Court explained, a criminal proceeding may have both purposes and remain penal. [37]

    36. Rich v ASIC at [35].

    37.    Rich v ASIC at [31]-[32].

42. Rich involved proceedings seeking an order for disqualification; acceptance of that reasoning does not require, in all cases where a monetary exaction is provided for a contravention of the statute, that the exaction constitutes a penalty. Thus, an order requiring the payment of the premium avoided by failing to take out a policy of insurance would not constitute a penalty. Nor, it might be thought, would the addition of an amount by way of interest at variable commercial rates, or for recouping expenses incurred by the applicant for relief, constitute a penalty.

43. Deputy Commissioner of Taxation v Mutton [38] was decided after the decision of the Court of Appeal in DTR Securities and before the determination of the appeal by the High Court. The only issue in Mutton was whether the Commissioner could bring proceedings for “additional tax”, recoverable when the assessed tax was not paid when it became due and payable. The provision of the Income Tax Assessment Act 1936 (Cth) which provided for the Commissioner or a Deputy Commissioner to sue for unpaid tax stated that, in that section, “tax” included additional tax. The Court upheld the Commissioner’s power to sue for additional tax, although there was a possible anomaly in that the additional tax had been found in DTR Securities to be a penalty for the purposes of s 18 of the Limitation Act. Priestley JA stated: [39]

“It follows … that … additional tax is a penalty within the meaning of s 18 and not a tax within the meaning of s 10 [of the Limitation Act]. That does not seem to me to be inconsistent with the view that what on legal analysis is in substance a penalty can be included for descriptive and procedural purposes in s 209 [of the Income Tax Assessment Act] within the term ‘tax’ as there used.”

38. (1988) 12 NSWLR 104.

39.    Mutton at 113E.

(b)   application of principles

44. Ultimately, the question whether the double premium recoverable under s 156(1) of the Workers Compensation Act was a penalty for the purposes of the Limitation Act, s 18, depended upon the proper construction of both pieces of legislation. Both parties engaged in an historical analysis of the legislative history of the relevant provisions and addressed the available extrinsic materials. With one exception noted below, the results of the exercise were equivocal and the material may be put to one side.

(i)   factors supporting a penalty

45. Starting with the Workers Compensation Act, there are a number of factors which support the view that the double premium involves a penalty. First, the amount is not payable to an insurer as the premium on a policy which would be available to respond to a claim for compensation by a worker. Secondly, unlike the additional tax payable under the Income Tax Assessment Act, the amount payable is arbitrary in the sense that it takes no account of the time for which the particular premium had been unpaid. Thirdly, there was no indication in the legislation that the amount reflected the costs to the scheme of either the delay in payment or expenses incurred in recovering the amount of the premium; indeed some of those costs were separately recoverable. Fourthly, it might be inferred that the amount recoverable was intended to have a deterrent effect on employers who might otherwise fail to pay the premiums required under the legislation. In these circumstances, it might fairly be characterised, from the point of view of the employer, as a penal impost or exaction.

46. There is muted support for this conclusion in the explanatory note to the WorkCover Legislation Amendment Act 1995 (NSW), which introduced into s 155 new subss (4) and (5), introduced new subss (5)-(7) into s 156, and introduced the provision (now found in s 247 of the Workplace Injury Act) extending the period within which proceedings for a criminal offence could be brought under s 155. The note stated: [40]

“Procedural improvements are made to make the current civil penalty for non-insurance (twice the avoided premium recoverable by the Authority as a debt) more effective against defaulting employers.”

40.    Explanatory note, p 15.

47. As counsel for the respondent submitted, this was undoubtedly a reference to s 156(1) and characterised the sum payable as a “civil penalty”.

(ii)   countervailing considerations

48. There are factors which would support a different conclusion. First, the amount is described in the section as a “debt due to the Authority” and not as a penalty. Just as the use of the term “penalty” in the Commonwealth legislation considered in Rich v ASIC and in TPC v Abbco was not determinative, that fact is not determinative either, but it is nevertheless a relevant factor. Particularly is that so where the Act does provide for the imposition of a “civil penalty” in s 183A, where an insurer (or self-insurer) has contravened the terms of its licence or of the Act or regulations.

49. Secondly, subject to the discretion conferred on the Authority to accept a lesser sum, the debt recoverable under s 156(1) is a single sum equal to twice the amount of the premium: the two parts of the sum cannot properly be divided and, accordingly, either the whole is a penalty or no part of it is a penalty.

50. Thirdly, the Authority submitted that it is necessary to identify the purpose and effect of the payment under s 156(1). If the purpose of the provision is to ensure that the Nominal Insurer which pays claims brought against uninsured employers is funded for that purpose, at least in part by those responsible for the absence of insurance, arguably the sum should be characterised as for a “compensatory purpose” and not as a penalty.

51. The short explanation is that, being payable into the WorkCover Authority Fund, the amount will go to meet the expenses of the scheme for administering workers’ compensation in New South Wales. The longer answer requires an understanding of the various arms of the scheme, which is not straightforward. The WorkCover Authority fund (as it was then known) was established under the Workplace Injury Act, s 34. The primary source of the fund is contributions provided by each insurer and self-insurer, calculated as a percentage of the premium income of the insurer for the particular financial year. [41] Then there are moneys required to be paid into the fund under the Workplace Injury Act or other legislation, which includes the Workers Compensation Act. The payments out of the fund are identified (broadly speaking) as amounts necessary to meet the operating costs of the Authority, payments incurred in relation to the functions of the Authority and other money required by legislation to be paid from the fund. [42] Liability for payments of compensation to workers employed by uninsured employers is dealt with in Pt 4 of the Workers Compensation Act. It requires that claims be made against the Nominal Insurer. [43] The Nominal Insurer has access to the assets of the Insurance Fund established under Pt 7, Div 1A, Subdiv 2, and in particular s 154D. The Nominal Insurer may receive (and pay into that fund) premiums received by it for policies issued under the Act, including amounts paid by the Authority under s 175 and late payment fees paid by an employer. [44]

    41. Workplace Injury Act, s 35(1) and s 39.

    42. Workplace Injury Act, s 35(2).

    43. Workers Compensation Act, s 140.

    44. Workers Compensation Act, s 154E(1).

52. There is also an Insurers’ Guarantee Fund, established under Pt 7 of the Workers Compensation Act, to meet payments of compensation claimable against insolvent insurers. [45] The fund is primarily constituted by contributions paid by licensed insurers, being a proportion of the premium income payable to the WorkCover Authority Fund.

    45. Workers Compensation Act, Pt 7, Div 7.

53. From this brief outline of the scheme of the legislation, two things may be inferred. First, all of the payments received under s 156(1) by the WorkCover Authority contribute to the operation of the workers’ compensation scheme and the payment of claims for compensation. Further, although the precise amount which would satisfy the loss to that fund through the failure of an employer to take out a policy of insurance in any particular year is not readily calculable, it would appear to be an amount in excess of the premium itself. Nevertheless, a double premium is arbitrary in the sense that it is not calculated by reference to the loss to the scheme, including such costs and interest as are not otherwise recoverable.

54. In addition to the double premium payable under s 156, and the civil penalty payable under s 183A, Pt 7 of the Workers Compensation Act deals with the recovery of unpaid premiums, which may be subject to a “late payment fee”. That fee is calculated at a prescribed rate, which, if not set by the regulations or the relevant insurance premiums order, shall be 1.2% of the relevant amount or balance per month compounded monthly. [46] (1.2% compounded monthly equates to an annual percentage rate of 16.6%.)

    46. Workers Compensation Act, s 172(1) and (5).

55. The payment under s 156(1) is to be made to the WorkCover Authority; the payment (together with the late fee) recoverable under s 172 is payable to the employer’s insurer. A further payment with respect to underpaid premiums may be sought by the Authority, but the order will be that the employer pay the amount to the insurer, together with a late fee, pursuant to s 175(1)–(3).

56. Finally, there is the civil penalty provided for under s 183A which may be a sum up to $50,000 fixed by the board of directors of the Authority. The board may, by way of alternative, issue a “letter of censure”. [47] The civil penalty fixed by the Authority may be recovered by it in a court of competent jurisdiction as a “debt due to the Crown.”[48] The penalty is paid into the WorkCover Authority Fund. [49] There is no reason to doubt it is properly described as a “penalty” for the purposes of s 18 of the Limitation Act.

    47. Workers Compensation Act, s 183A(1)(b).

    48. Workers Compensation Act, s 183A(3).

    49. Workers Compensation Act, s 183A(6).

57. While there is no doubt that the amount payable by the defaulting employer goes to the cost of running the scheme, and may reduce the level of premiums otherwise required, that does not prevent the payment being, when viewed from the perspective of the payer, penal.

(c)   conclusion as to penalty

58. Other factors being equivocal, an enactment permitting recovery of an arbitrary amount of twice the premium for failure to obtain or maintain a policy of insurance should be accepted as being a “penalty”. It follows that the relevant limitation period is that provided by s 18 of the Limitation Act. The next issue is when did the cause of action arise?

Date of accrual of cause of action under s 156(1)

(a)   commencement of limitation periods

59. There are indications that the drafter of the Workers Compensation Act was conscious of the relevance of limitation periods and the need to identify the date from which a cause of action might accrue.

60. First, there is a penalty attached to non-compliance with s 155, permitting proceedings to be brought for an offence. The offence is one which may be dealt with summarily pursuant to Ch 4 of the Criminal Procedure Act 1986 (NSW) under which there is a general time limit for the commencement of summary proceedings of six months. [50] However, that provision does not apply to an offence for which another Act specifies a different period. Section 247 of the Workplace Injury Act specifies the period of two years from “the act or omission alleged to constitute the offence.” With respect to an offence under s 155, the period is extended where “the Authority first becomes aware of the act or omission … because of a claim made by a worker”. In that circumstance, a period of six months is specified, to run from the time the Authority pays compensation to the worker, or two years from the act or omission, whichever is the longer period. [51]

    50. Criminal Procedure Act, s 179(1).

    51. Workplace Injury Act, s 247(3); this provision was originally introduced as s 279(3) of the Workers Compensation Act by the Workcover Legislation Amendment Act 1995 (NSW), Sch 1 [92].

59. Further, pursuant to s 156(6), upon conviction for such an offence the court may order the employer to pay to the Authority the amount recoverable under s 156(1). It might seem anomalous that civil recovery could not occur in the circumstances provided for in s 247(3) unless the court proceeded to a conviction. That is, there is no extension of the two year limitation period imposed by s 18 of the Limitation Act even in the circumstances envisaged in s 247(3).

60. There is no doubt that the financial exaction provided for in s 183A is a penalty. It applies where an insurer has contravened its licence or the Act or the regulations. The penalty is to be fixed by the board of the Authority. There is no debt due to the Crown which can be recovered in a court of competent jurisdiction until the civil penalty has been imposed by the board of the Authority.

61. With respect to the recovery of unpaid premiums under s 172, the non-compliance does not arise until the employer has been served with a notice that payment of the premium is due. The precise date of non-compliance will be known to the employer, where the notice has been duly served.

62. Section 175 deals with an amount found to be payable by an employer to an insurer, the finding being made by the Authority, which is then empowered to order the employer to pay the amount. [52] A late payment fee is also payable, to be calculated from the date determined by the Authority as the date the relevant premium first became due and payable to the insurer. A cause of action arises only in relation to the amount ordered to be paid by the Authority in respect of the premium and, in respect of the late payment fee, depends on a determination by the Authority as to the date from which the premium was payable.

    52. Workers Compensation Act, s 175(1).

63. In each of these circumstances, it will be seen that, even if the payment required is or includes a penalty, no cause of action for recovery of the relevant amount will arise on a date unknown to the relevant claimant, whether it be the insurer or the Authority.

(b)   the relevant date under s 156

66. As has been noted with respect to ss 172, 175 and 183A, discussed above, each creates a cause of action which can only arise where either the insurer or the Authority has actual knowledge of the non-compliance with the legislation. The Authority argued that the same view should be taken of s 156(1), submitting that the cause of action did not arise until the Authority had determined the extent of the payment due. That argument depended upon the proposition that there are a number of steps to be taken by the Authority before it can be satisfied that there has been non-compliance with the obligation of the employer under s 155(1) and the financial consequences thereof.

67. There are the provisions in s 174 requiring an employer to keep records of wages paid to workers employed by the employer for at least five years (originally seven years). There is power in s 174(5) for the Authority to order the employer to supply it with the information required to be contained in the records. There is also a power to require production for inspection of any records relating to any contract under which a person has made payments to any other person for the performance of work. [53] These are powers of investigation which may allow the Authority to determine that an employer does not have a policy of insurance.

    53. Workers Compensation Act, s 174(6A).

68. There are also a number of specific requirements in s 161. Thus, pursuant to s 161(4), an employer who “obtains a policy of insurance” shall retain the policy until there are no longer any workers in respect of whom the policy is in force or until the policy is at least seven years old, whichever occurs later. [54] The Authority may give notice to an employer to produce the policy for inspection. [55] Furthermore, a worker who has a claim for compensation, may also require the employer to make the policy of insurance available for inspection. [56] Failure to comply with such a notice is itself an offence, although the person cannot be prosecuted both for an offence under s 155 and an offence under s 161. [57] On the other hand, proof of service of a notice under s 161(1) together with a failure to comply within the time prescribed is sufficient evidence (absent proof to the contrary) that there has been an offence under s 155(1). [58] It is a curiosity that no such prima facie proof is provided for in s 156, although it may be that, in a civil proceeding, the availability of such evidence is assumed.

    54. Workers Compensation Act, s 161(4).

    55. Workers Compensation Act, s 161(1)(a).

    56. Workers Compensation Act, s 161(2).

    57. Workers Compensation Act, s 161(3A).

    58. Workers Compensation Act, s 155(3).

69. The existence of these powers, and the record keeping required of an employer, provide a background for specific aspects of s 156. Thus, under s 155(4), [59] the Authority may undertake not to prosecute for an offence under s 156 on condition that the employer pay to the Authority “the amount that the Authority is entitled to recover under s 156 … or such lesser amount as the Authority may determine to accept.” This language reveals two implicit assumptions. One is that the amount (presumably the sum equal to twice the premium that would have been payable) has been determined; the second is that the Authority has considered and determined whether or not to accept a lesser amount. That language mirrors the description of the “debt due” in s 156(1), except that the lesser amount is described in that provision as an amount that the Authority “may agree to accept”. (Nothing would seem to turn on that difference in language for present purposes.) It is also true that s 156(5) envisages that the calculation can only be an estimate, because of the absence of information in the hands of the Authority permitting an accurate determination.

    59. Set out at [12] above.

70. Then there is the quantum of the payment. Section 156(1) identifies the non-compliance as a relevant contingency and then confers on the Authority power to recover the debt due in a court of competent jurisdiction. It does not in terms authorise the court to assess the amount of the payment required.

71. There is also the nature of the defence where the employer “believed on reasonable grounds”, that it could not be liable under the Act because the worker’s employment was not connected with New South Wales and it had worker’s compensation cover in another jurisdiction. [60] In a prosecution, the defence is made good, “if the court is satisfied” as to the specified factors. By contrast, in respect of the civil liability under s 156(1), s 156(8) says that the employer is not liable “if the Authority is satisfied” as to the reasonable belief of the employer. The state of satisfaction of the Authority is identified as a contingency qualifying liability, not as a defence.

    60. Workers Compensation Act, 155(3A).

72. These elements of the statutory scheme are inconsistent with the conclusion that the right of recovery of the double premium under s 156(1) arises absent any knowledge on the part of the Authority of the non-compliance under s 155(1). Thus, the amount recoverable is to be determined by the Authority (in accordance with the Act) and the liability of the employer in a particular respect (not described as a defence) depends on the satisfaction of the Authority as to the facts. The clear inference is that no cause of action arises until the Authority at least has the facts to allow it to form the relevant opinions.

73. The provisions which give rise to this inference are peremptory in form. There may well be matters as to which the Authority must satisfy the court, before it will obtain the relevant order. Accepting that to be so is not to deny the inference that the right to recover the debt due does not arise at some point in time when the Authority is ignorant of the factors giving rise to the debt.

74. The magistrate concluded that the cause of action first accrued on the date that the employer was “notified of the assessment” made by the Authority. The primary judge stated that there was nothing in the legislation which justified that finding and that the Authority had accepted before him that the conclusion of the magistrate was wrong in this regard. [61]

    61. Judgment at [31].

75. The Authority contended before the primary judge (as in this Court) that the cause of action accrued on the date the Authority “determined” that an amount was due and payable under s 156. As the primary judge correctly noted, s 156 did not in terms provide for such a “determination”. [62] The judge also noted the specific provision in s 175 for the making of a “finding”, with the express conclusion that the cause of action under that section accrued when the Authority made the specified finding. That express provision, contrasted with the absence of any similar provision in s 156, militated against any implied power arising in s 156. [63]

    62. Judgment at [34].

    63. Judgment at [55].

76. On the other hand, whilst acknowledging that it was not necessary for a debt to be quantified before a cause of action can arise, the judge accepted that “the structure of the relevant provisions of the 1987 Act appear[s] to contemplate that the Authority will make a determination both as to the amount it will seek to recover and also whether there has been a breach at all.”[64] Nevertheless, his final conclusion rejected the Authority’s submissions because (a) s 156 exposed the employer to a penalty; (b) the action could be brought many years after the breach occurred, and (c) the requirement for a determination by the Authority introduced a degree of uncertainty. [65] The alternative approach, accepted by the primary judge, was that the cause of action arose when the employer committed the breach of s 155(1). [66]

    64. Judgment at [50].

    65. Judgment at [57].

    66. Judgment at [60].

77. It is true that reliance upon a determination by the Authority may give rise to uncertainty on the part of an employer as to its potential liability with respect to a civil penalty. Further, there is a potential risk of abuse, in the sense that the Authority may be dilatory in its identification of a relevant breach and quantification of the premium payable.

78. However, these factors can be over-emphasised. That which must be known to establish a prima facie liability is factually straightforward: it is the existence or otherwise of a policy of insurance, together with an assessment of the premium. Given the statutory requirements in respect of record keeping on the part of both insurers and employers, and the powers of the Authority in that regard, these matters are capable of being established with a degree of precision. There may, of course, be elements of evaluative judgment in determining whether a particular person was a worker for the purposes of the workers’ compensation legislation and there may be room for uncertainty as to the precise period of his or her employment. These are factors which are recognised in s 156(5).

79. So far as lack of notice to the employer is concerned, similar difficulties may arise under provisions such as s 175. Importantly, to ignore the state of knowledge of the Authority with regard to a breach of s 155 would be to create an anomaly having regard to the extension of the limitation period with respect to recovery resulting from a prosecution under s 247(3) of the Workplace Injury Act. It would be unfortunate if the only means of recovery of the civil debt were by institution of a prosecution, in circumstances where there might be sound reasons for not prosecuting.

80. The Authority submitted that such an anomaly would be avoided by construing s 156(1) as impliedly requiring the Authority to make a determination as to the existence of liability and the amount of the premium. Such an implication gains support from the terms of s 155(4) which assume the ability of the Authority to make a determination as to the amount recoverable under s 156, as the basis for an undertaking not to prosecute. Further, s 156(1) itself assumes that one of two circumstances may exist, namely that a debt is due and quantifiable or that, if accurate quantification is not possible, then the Authority may make an estimate which is presumed to be accurate in the absence of the provision of relevant information. Furthermore, s 156(1A), dealing with an amount of premium avoided by maintaining more than one policy of insurance, does provide for the Authority to make a determination as to the amount of the reduction in premium. Further, in all other cases the Authority can issue a certificate as to the amount due and payable. All of these circumstances assume that the Authority is aware of the breach and the amount payable, except in circumstances where the employer has failed to provide the relevant information. In these circumstances, the Authority’s submission as to the accrual of the cause of action should be accepted.

81. As a matter of fact, there remained an issue as to when the relevant determination was made. Three dates circumscribed the range of possibilities. First, the Authority received an audit report on the wages paid by the employer on 21 June 2013. Based on that report, it issued a “final demand” to the employer for double the assessed premium, on 25 February 2014. On 10 April 2014 the Authority executed a certificate under s 156(4) certifying the amount of the debt due. Based on this material, the earliest date on which the Authority could have made the relevant determination was on or shortly after 21 June 2013. As proceedings were commenced within two years of that date, it is sufficient to conclude that the cause of action first accrued when the relevant determination was made.

82. There was no allegation that, deliberately or otherwise, the Authority was dilatory either in its investigation of the employer, or in its determination. Accordingly, it is not necessary to consider whether, and if so in what circumstances, such factors might affect the assessment of the first accrual of a cause of action.

Orders

83. On 16 October 2015 the primary judge made orders allowing the appeal from the Local Court and setting aside the decision of the Local Court. Judgment was given for the employer in the Local Court, the Authority being ordered to pay the costs of the employer both in the Supreme Court and in the Local Court.

84. Following an application by the employer for variation of that costs order and a further hearing, the primary judge made orders on 17 December 2015 revoking the order for costs made on 16 October. The order that the Authority pay the employer’s costs in the Local Court was repeated, with an additional order that the Authority pay interest on those costs. The order with respect to the costs in the Supreme Court was replaced with an order that the Authority pay 75% of the employer’s costs. The employer’s application for interest on the costs in the Supreme Court was refused, as was the employer’s application for indemnity costs and for a special gross sum costs order. Each party was ordered to pay his or its own costs of the application to vary the costs order.

85. The appeal should be allowed and the matter returned to the Local Court so that other issues (if any) in dispute between the parties can be resolved and a final judgment given. To that end, rather than select amongst those orders which may remain and those which should be replaced, it is convenient to set aside all of the orders made in the Common Law Division on 16 October 2015 and on 17 December 2015. In their place, the substantive order should be to dismiss the appeal from the Local Court.

86. There is then a question as to the appropriate order as to costs. As the magistrate made no order as to costs, nor indeed any other order beyond determining that the objection to jurisdiction be dismissed, the question of costs in the Local Court should be left for determination by that Court in due course.

87. With respect to the costs in the Common Law Division, the primary judge, whilst awarding them to the employer, was persuaded that there should be a reduction due to the fact that the employer had succeeded on a different basis from that pursued before the magistrate. That factor may be put to one side in circumstances where the Authority has ultimately been successful. The proper course is to award the Authority its costs in the Common Law Division.

88. As to the costs in this Court, the Authority having succeeded, the usual order would be that the employer pay its costs of the appeal. The real issue is whether there should be some variation from that general order because some significant costs would have been incurred by both parties in preparing written submissions after oral argument in relation to the question whether the double premium constituted a penalty. As the primary judge noted, that had not been an issue raised before him.

89. In this Court, the Authority considered that it was bound by the way it had run the case below and did not initially seek to challenge that characterisation of the payment. The possibility that the assumption might be wrong was a factor militating against the grant of leave to appeal. The Authority accepted that, given an opportunity to pursue the matter, it would wish to reagitate the assumption. It was granted leave to raise what was a question of law alone and directions were given for written submissions to be filed by both parties following completion of the oral argument.

90. It was in the interests of the Authority to have this Court determine a matter of some public importance as to the operation of its statute. The result, however, was to impose a burden on the employer which was then required to address an additional question of law which had not been raised below. In the result, the Authority has been successful on the appeal, but unsuccessful on the additional issue. It is an appropriate case to differentiate between these issues in formulating a costs order. Making appropriate allowance for the issues raised initially on the appeal and the success of the employer with respect to the additional issue, the Authority should be limited to recovering 50% of its costs of the appeal, other than those involving the additional issue.

91. To give effect to these considerations, the Court should make the following orders:

1. Grant the Authority leave to appeal.

2. Allow the appeal and set aside the orders made in the Common Law Division on 16 October 2015 and 17 December 2015.

3. In place thereof, dismiss the employer’s appeal to the Common Law Division.

4. Remit the claim to the Local Court for determination of any outstanding issues in dispute, including the costs in that Court.

5. Order that the employer pay the costs of the Authority in the Division.

6. Order that the respondent employer pay 50% of the Authority’s costs in this Court, other than the costs of the additional issue.

7. Grant the employer, as the respondent to the appeal in this Court, a certificate under the Suitors’ Fund Act 1951 (NSW).

92. MEAGHER JA: The orders proposed by Basten JA should be made for the reasons his Honour gives qualified by Gleeson JA’s additional comments, with which I also agree.

93. GLEESON JA: I agree with the orders proposed by Basten JA and, subject to the following comments on the first issue, I agree with his Honour’s reasons.

94. The first issue raised by the Authority’s appeal is whether the double premium recoverable by the Authority under s 156(1) of the Workers Compensation Act 1987 (NSW) is a penalty for the purposes of s 18 of the Limitation Act 1969 (NSW) (the terms of which are set out at [31] above). At [45]-[57], Basten JA sets out various factors respectively supporting and suggesting against the characterisation of the double premium as a penalty for relevant purposes. At [58], his Honour concludes that other factors being equivocal, an enactment permitting recovery of twice the amount of a premium for failure to obtain or maintain a policy of insurance should be accepted to be a “penalty”.

92. In my view, each of the four factors identified by Basten JA at [45] provides strong support for the conclusion that sum recoverable under s 156(1) involves a penalty for relevant purposes. Against this, I regard the countervailing factors identified by his Honour at [48]-[50] as relatively weak indicators of the contrary. The following observations can be made in relation to the countervailing factors.

93. First, the double premium recoverable under s 156(1) being, in substance, a penalty within the meaning of s 18 of the Limitation Act is not inconsistent with its description for procedural purposes in s 156(1) as a “debt due to the Authority”. That machinery provision does not affect the penal nature of the liability imposed: see Re Dymond [67] . See also the observations of Priestley JA in Deputy Commissioner of Taxation v Mutton [68] (set out at [43] above) that an action to recover “tax unpaid” under s 209 of the Income Tax Assessment Act 1936 (Cth) includes “additional tax” due and payable under s 207, notwithstanding that the latter is a penalty within the meaning of s 18 of the Limitation Act.

    67. (1959) 101 CLR 11 at 21.

    68. (1988) 12 NSWLR 104 at 113E-F.

94. Importantly, the liability is imposed by s 156(1) of the Workers Compensation Act not as a consequence of any contractual obligation owed by the defaulting employer to the Authority, but as a consequence of a failure by the employer to obtain and maintain a policy of insurance. The action to recover the double premium under s 156(1) can be fairly described as one to recover a pecuniary sanction, as a civil debt, for failure to do something prescribed by a statute. This is consistent with the observation by Samuels JA in DTR Securities Pty Ltd v Deputy Commissioner of Taxation (Cth) [69] , that the words “penalties and forfeitures” have traditionally been used to describe the imposts extracted for transgressing the provisions of statutes, and recoverable at the suit of the Crown or common informers.

    69. (1987) 8 NSWLR 204 at 210G.

95. Secondly, although the sum recoverable under s 156(1), as a single sum equal to twice the premium that should have been paid by the defaulting employer cannot properly be divided, resulting in either the whole or no part of it being a penalty, this is a neutral factor. What is important is the nature of that recoverable sum.

96. Thirdly, that any sum recovered by the Authority under s 156(1) can be seen to have a “compensatory” aspect because it is to be paid into the WorkCover Authority fund (now the WorkCover Operational Fund [70] ), and is to be applied to the expenses of the scheme for administering workers compensation in New South Wales, [71] is not inconsistent with the double premium being characterised as a penalty. It is the penal nature of the liability imposed that is determinative, not the indirect fiscal consequences for the Authority. To adapt the words of Fullagar J in Re Dymond [72] , the double premium recoverable under s 156(1) is “directly punitive and only indirectly fiscal. It is imposed … as a sanction and not for the sake of revenue as such”.

    70. Established under the Workplace Injury Management and Workers Compensation Act 1998 (NSW), s 35.

    71. ibid, s 35(2).

    72. (1959) 101 CLR 11 at 22.

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Endnotes

Amendments

23 May 2017 - [58] Adding "of" after "recovery"

17 August 2016 - [95] Inserting "by" after "identified".

[99] Correcting spelling of "Fullagar J".

Decision last updated: 23 May 2017