Watts v BKFY Pty Limited ATF BKFY Trust

CERTIFICATE OF DETERMINATION OF MEMBER
Citation:	Watts v BKFY Pty Limited ATF BKFY Trust [2022] NSWPIC 719
APPLICANT:	Marie Jenny Watts
RESPONDENT:	BKFY Pty Ltd
principal Member:	John Harris
DATE OF DECISION:	13 December 2022
CATCHWORDS:	WORKERS COMPENSATION - The applicant is a resident of Victoria and allegedly suffered injuries giving rise to a claim of permanent impairment; the respondent is a private company with insurance under the NSW compulsory workers compensation scheme; a Tribunal cannot decide whether the determination involves an exercise of federal jurisdiction and should express a view consistent with the test set out in Citta Hobart Pty Ltd v Cawthorn; there are three requirements in determining whether a claim is potentially federally impacted, they are: jurisdiction can only be exercised by a court of a State; the resolution of the dispute requires the exercise of judicial power (“judicial” as understood in the constitutional sense) and the matter is between residents of different States or between a State and a resident of another State; observations made that the Commission is arguably not a court of a State; Orellana-Fuentes v Standard Knitting Mill Pty Ltd and Attorney-General for New South Wales v Gatsby referred to; observations made that, whilst unclear, the matter may involve the exercise of judicial power; Searle v McGregor and Tomlinson v Ramsay Food Processing Pty Ltd referred to; the respondent is a private company engaged in a cleaning business; the claim is brought against the employer pursuant to section 9 of the Workers Compensation Act 1987; whilst the insurer exercises a statutory right of subrogation, that does not alter the identity of the parties to the proceedings; accordingly, in the action between the applicant and the respondent there is no arguable defence that the respondent is considered a State for the purposes of the Constitution; observations made about whether “self-insurers” are considered a State; Held – opinion expressed to the defence that the application is federally impacted is unarguable.
determinations made:	Opinion 1. The respondent’s defence that the determination of the application is federally impacted is rejected as being unarguable. Order 2. The date for the conciliation and arbitration hearing before Member Snell is confirmed.

STATEMENT OF REASONS

BACKGROUND

Ms Marie Watts (the applicant) was employed by BKFY Pty Ltd (the respondent) and suffered injury on 16 October 2015 whilst pushing a trolley containing cleaning equipment estimated to weigh 50 kilograms and carrying out other repetitive work as a cleaner. It is alleged that Ms Watts developed severe pain in the interscapular area radiating to the chest wall and right axillary region, pain in the spine and right upper extremity.
The applicant alleges that she developed complex regional pain syndrome as a consequence of the injury sustained on 16 October 2015.
The present application is for compensation pursuant to s 66 of the Workers Compensation Act, 1987 (the 1987 Act).
The respondent denies various matters including the extent of any injury sustained and the extent of any impairment. This short summary is not intended to be an exhaustive statement of the issues in dispute.
The respondent initially submitted that the matter is potentially federally impacted and should be dismissed with proceedings being commenced in the District Court.
It is common ground that at the date of the filing of the application, Ms Watts was a resident of Victoria.

LEGISLATION

Section 75(iv) of the Commonwealth of Australia Constitution (the Constitution) provides:
“In all matters--
…
(iv.) Between States, or between residents of different States, or between a State and a resident of another State:

…
the High Court shall have original jurisdiction.”

Section 77(iii) of the Constitution provides that Parliament may invest any court of a State with federal jurisdiction.
Matters between residents of different States or between a State and a resident of another State can be heard by a court of a State through the combined operation of ss 38 and 39 of the Judiciary Act 1903.

Federally impacted matters

Division 3.2 of the Personal Injury Commission Act 2020 (the PIC Act) provides for matters to be heard in the District Court if the determination of the matter by the Personal Injury Commission (the Commission) “would involve an exercise of federal jurisdiction”. The application must first be made to the President or the Commission.[1]
[1] Section 26(3)(a) of the PIC Act.
There are three requirements in determining whether a claim is potentially federally impacted. They are:
(a)    jurisdiction can only be exercised by a court of a State;
(b)    the resolution of the dispute requires the exercise of judicial power (“judicial” as understood in the constitutional sense), and
(c)    the matter is between residents of different States, or between a State and a resident of another State.
A Tribunal cannot decide whether the determination involves an exercise of federal jurisdiction and should express a view consistent with the test set out in Citta Hobart Pty Ltd v Cawthorn.[2] If the matter is potentially federally impacted then a court of a State will decide whether the determination does in fact involve such an exercise.
[2] [2022] HCA 16 (Cawthorn) at [35]-[37] per Kiefel CJ, Gageler, Keane, Gordon, Steward and Gleeson JJ.
The plurality in Cawthorn stated:
“35. The resolution in principle is that for a claim or defence in reliance on a Commonwealth law or in reliance on the Constitution to give rise to a matter of a description in s 76(i) or s 76(ii) of the Constitution, it is enough that the claim or defence be genuinely in controversy and that it give rise to an issue capable of judicial determination. That is to say, it is enough that the claim or defence be genuinely raised and not incapable on its face of legal argument.
36. That is what should be taken to have been meant by repeated acknowledgements that the assertion of a claim or defence will not give rise to a matter within the description in s 76(i) or s 76(ii) of the Constitutionif the claim or defence is ‘unarguable’ or if the claim or defence is ‘colourable’ in that it is made for the purpose of ‘fabricating’ jurisdiction.
37. Thus, the State jurisdiction of a State tribunal that is not a court of the State within the meaning of s 77(ii) and s 77(iii) of the Constitution is not denied, just as the federal jurisdiction of this Court under s 76(i) or s 76 (ii) or of another court under s 77(i) or s 77(iii) of the Constitutionis not engaged, by the assertion of a claim or defence that amounts to ‘constitutional nonsense’ or any other form of legal nonsense. But examination of what the prospects of success of a legally coherent claim or defence might be, were that claim or defence to be judicially determined on its merits, forms no part of the requisite assessment.” (footnotes omitted)
Accordingly, it is for a Member to decide whether the defence that federal jurisdiction exists is arguable, colourable or the argument amounts to judicial nonsense. It is not an error by a Member to decide that the application may be federally impacted and for the District Court to determine that it is not.
The parties submitted or otherwise assumed that criteria (a) and (b) were established.

Criterion (a): Court of a state

It is clearly arguable that the Commission is not a court of a State within the meaning of s 77 of the Constitution so that all matters before it may be federally impacted (subject to the satisfaction of the other two criteria).
In Orellana-Fuentes v Standard Knitting Mill Pty Ltd[3] the Court of Appeal held that the former Workers Compensation Commission was not a Court. In Attorney-General for New South Wales v Gatsby the Court made a similar finding with respect to NCAT.[4]
[3] [2003] NSWCA 146 (Orellana-Fuentes).
[4] [2018] NSWCA 254 (Gatsby).
The Commission is not comprised of judges and Members do not have the same independence held by members of the judiciary.[5] Members do not have security of tenure as they are appointed for a “term”,[6] may be removed by the Minister on advice of the President[7] and the PIC Act does not require that Members be legally qualified.[8] All of these matters were considered relevant and discussed in Orellana-Fuentes[9] and Gatsby.[10]
[5] Orellana-Fuentes at [48].
[6] Section 9(3)(b) of the PIC Act.
[7] Section 16(f) of the PIC Act.
[8] Section 10 of the PIC Act.
[9] At [43].
[10] At [187], [202]–[203].
In Orellana-Fuentes the Court considered other matters such as the binding nature of decisions made under the workers compensation legislation. As a generalisation, there have not been any material changes between the operation of the Commission and the functioning of the Workers Compensation Commission which would suggest a different result.
This is obviously not the limit of matters that would be identified if this issue is eventually determined. However, in my view, no rational argument could be made for keeping a potentially federally impacted matter within the Commission based on this criterion.

Criterion (b): Exercise of judicial power

The parties assumed that the determination of this claim involves the exercise of judicial power. That assumption is far from clear.
In Searle v McGregor[11] Kirk JA considered whether the determination of a claim for statutory benefits in the Commission is an exercise of judicial power and noted that this was “open to substantial doubt”.[12] His Honour ultimately left that question open.
[11] [2022] NSWCA 213 (Searle).
[12] Searle at [21].
Damages assessments under the motor accidents legislation by the Commission are an “advisory opinion” (Searle at [36]). It is incorrect to say that the Commission “determines” damages (Searle at [92]). Under both the Motor Accident Injuries Act, 2017 (the MAI Act) and the workers compensation legislation, “it is for courts ultimately to determine the damages claim” (Searle at [44]).
In Rafiqul Islam v Transport Accident Commission of Victoria and Heather Worldon v Transport Accident Commission of Victoria,[13] the District Court recently held that the Commission does not exercise judicial power in assessing a claim for damages under the MAI Act.
[13] [2022] NSWDC 582 (Islam and Worldon).
The suggestion that medical assessments, including reviews and appeals, involve an exercise of judicial power is “counter-intuitive” (Searle at [80]). This observation is consistent with authority that the nature of the function may be judicial or administrative depending by whom it is exercised (the chameleon doctrine[14]). Indeed, the process in which medical assessments are exercised involving an examination without the presence of the parties’ legal practitioners is far removed from the notion that it involves the exercise of judicial power.
[14] See Thomas v Mowbray [2007] HCA 33.
In Campbelltown City Council v Vegan, Basten JA observed that appeal panels constituted under the Workplace Injury Management and Workers Compensation Act, 1998 (the 1998 Act) “might not constitute an exercise of judicial power for the purposes of the federal Constitution, but they are functions properly characterised as judicial in nature, for the purposes of determining their incidents.”[15] In Islam and Worldon, the District Court also held that a medical assessor under the MAI Act does not exercise judicial power.
[15] [2006] NSWCA 284; 67 NSWLR 372 at [117].
The observations by Basten JA are consistent with the distinction between a determination which is final and binding in adversarial proceedings without that determination being considered an exercise of judicial power: Tomlinson v Ramsay Food Processing Pty Ltd.[16]
[16] [2015] HCA 28 at [21] (Tomlinson)
It is likely that the finding that medical assessors in the Motor Accidents Division do not exercise judicial power (and determinations by review and appeal panels) would apply in both divisions of the Commission.
In Searle, Kirk JA discussed other types of disputes where the Commission was not exercising judicial power.
The exercise of a power to exempt a claim for assessment under the motor accidents legislation because it falls within a mandatory exemption could not be characterised as judicial.[17]
[17] Searle at [81].
State tribunals are not forbidden from taking steps or resolving issues which do not involve the exercise of judicial power, even if the dispute might otherwise be seen to fall within the scope of what is federal jurisdiction: Searle at [14]. Examples include attempts at conciliation (Searle at [20] applying Gaynor v Attorney-General of New South Wales [2020] NSWCA 48 at [94]–[99], [124], [138]).
I accept that this criterion is arguable until a Court definitively rules on the issue. No doubt consideration of this issue with respect to the Workers Compensation Division will include the exclusive jurisdiction of the Commission to hear and determine all matters under the 1987 Act and the 1998 Act[18] and the finality of the decision subject to appeal based on error of law, fact or discretion.[19] Issue estoppel[20] and Anshan estoppel[21] applies to decisions in the Workers Compensation Division of the Commission.
[18] See s 105 of the 1998 Act.
[19] See s 352 of the 1998 Act.
[20] Trustees for the Roman Catholic Church for the Diocese of Bathurst v Hine [2016] NSWCA 213 at [27].
[21] Miller v Secretary, Department of Communities and Justice [2022] NSWCA 190. The Court then referred to the Commission’s power in the Workers Compensation Division to make final and binding decisions and left open whether that involved an exercise of judicial power (at [124]).
Indeed, some disputes such as claims for the payment of death benefits involve significant amounts of compensation and may be suggestive of an exercise of judicial power. Lump sum payments under s 66 of the 1987 Act can also be significant and provide the gateway to an entitlement to bring a claim for damages.

Criterion (c): State and a resident of another State

The issue in this case is whether this is a matter between a State and a resident of another State.
In Bank of NSW v The Commonwealth[22] Dixon J (as his Honour then was) stated:[23]
“[F]rom beginning to end (the Constitution) treats the Commonwealth and States as organizations or institutions of government possessing distinct individualities. Formally they may not be juristic persons, but they are conceived as politically organized bodies having mutual legal relations and amenable to the jurisdiction of courts upon which the responsibility of enforcing the Constitution exists.”
[22] [1948] HCA 77; (1948) 76 CLR 1.
[23] (1948) 76 CLR 1 at 363.
These observations were cited with approval by Gibbs CJ in Crouch[24] and by a unanimous full bench in Deputy Federal Commissioner of Taxation v State Bank of New South Wales[25] which accepted that the reference in the Constitution to the Commonwealth or States must include “references [that] are wide enough to denote a corporation which is an agency or instrumentality of the Commonwealth or the State as the case may be”.[26]
[24] (1985) 159 CLR 22 at 28-29.
[25] [1992] HCA 6 (State Bank) at [17].
[26] At [20].
The Court then stated:[27]
“The activities of government are carried on not only through the departments of government but also through corporations which are agencies or instrumentalities of government.”
[27] State Bank at [20].
The respondent noted that the employer had obtained workers compensation through the statutory scheme and obtained insurance from Icare workers insurance. It submitted that Insurance and Care NSW (ICNSW) is incorporated by s 4 of the State Insurance Care Governance Act 2015 and is a government agency. ICNSW appoints agents to manage workers compensation claims.
The applicant relevantly submitted:[28]
“The Respondent is not the State of New South Wales but an independent entity subject to workers compensation scheme run by the State. The liability for the injury lies with the employer and not with the insurer. The insurer pays the compensation, but the suit, the matter, is against the employer.”
[28] Applicant’s submissions, [14].
The respondent filed a supplementary submission dated 13 December 2022. It submitted that if “the correct approach is to look to the insurer of the respondent” then ICNSW is relevantly a State. In these circumstances, it submitted that it is a matter for the Division Head of the Workers Compensation Division of the Commission to determine the issue.
In my view the respondent’s contention is “unarguable” and is rejected for the following short reasons.
The claim is brought by the worker against the employer, not the insurer. Section 9 of the 1987 Act provides:
“A worker who has received an injury … shall receive compensation from the worker’s employer in accordance with the Act.”
The clear words of the section is that the worker receives compensation from the employer.
This view is consistent with the observations of Kirk JA in Searle that the appropriate party should be identified when this issue is considered. His Honour stated:[29]
“There is a wide range of disputes that may arise under statutory schemes such as the MAI Act and the workers compensation legislation. For some disputes the relevant disputants may be the claimant and the insurer of the other person involved (ie the other driver or the employer).”
[29] Searle at [24].
This observation is consistent with s 59(2) of the PIC Act which provides that a certificate for the recovery of the amounts ordered to be paid must identify “the person liable to pay the certified amount”.
In the present matter, the action is brought against a private company and not the insurer. It is not submitted that the respondent employer is a “State” but rather that the insurer may be a State. The applicant was employed by the respondent to clean apartments. The respondent clearly is a private company engaged in a cleaning business.
Whilst the insurer exercises a statutory right of subrogation, that does not alter the identity of the parties to the proceedings. Accordingly, in the action between the applicant and the respondent, there is no arguable defence that the respondent is considered a State for the purposes of the Constitution.
I note that there is no legislation requiring that the Commission’s opinion is provided by the Division Head. The respondent’s submission that the matter be remitted to the Division Head is rejected.
The parties referred to my previous decision of Ritson v Sate of New South Wales[30] where I expressed the opinion that the NSW Self-Insurance Corporation was a statutory body representing the Crown and is properly considered a State in accordance with the Constitution.
[30] [2021] NSWPIC 409 (Ritson).
That decision has been taken out of context. In Ritson the State of New South Wales was the respondent and is obviously a State for the purposes of the Constitution. After its alternative arguments were rejected, the State sought to have the insurer joined as a party and relief sought directly against it.[31] It was in the context of the alternative application to join the insurer that I held that it had no utility because the insurer “is properly characterised as the State consistent with the above authorities”.[32]
[31] Ritson at [44].
[32] Ritson at [54].
The case does not stand for the proposition, as the parties suggested, that I determined that all self-insurers “are clearly statutory bodies representing the Crown”. Nor do I agree with that as a general proposition.
The applicant’s submission that all self-insurers are entities of the State is said to have arisen from Ritson and the decision of Fletcher International Exports Pty Ltd v Lee.[33] That proposition is not self-evident.
[33] [2022] NSWPICPD 39 (Fletcher Exports).
A decision of any Member of the Commission, like this one, does not create binding precedent because a Tribunal cannot pronounce judicially upon the limits of its of authority concerning federal jurisdiction. It is entitled to express an opinion as to the limits of that authority which “produces no legal effect”.[34]
[34] Gatsby at [281] per Leeming JA (Beazley P agreeing at [197]) applying Brennan J in Re Adams and the Tax Agents Board (1976) 12 ALR 239 at 242.

A self-insurer may or may not fall within the meaning of a “State”. Actual evidence about the corporate structure of the employer such as a securities commission search would show the corporate identity. The provisions concerning self-insurance, such as s 178(2) of the 1987 Act, provide that the regulator considers the paid-up capital of a corporation and its memorandum and articles when deciding to issue a license of insurance.
A private corporation that has the right to hold a license of self-insurance because private funds are secured against potential claims, in circumstances where that company is operating a private business, does not suggest that it is a State. In my view, the bare suggestion that because a company is a self-insurer does not, without more evidence, form an arguable basis that a private company is a State as defined in the Constitution.

CONCLUSION

There is no arguable basis that the respondent is a State as defined in the Constitution.

FINDING AND ORDER

The opinion is set out in the Certificate of Determination.

[2022] NSWPIC 719

13 December 2022