the Nominal Insurer v Sanchai Isarabhakdi [1987] ACTSC 23 (1 April 1987)

SUPREME COURT OF THE ACT

THE NOMINAL INSURER v. SANCHAI ISARABHAKDI
S.C. No. 1438 of 1986
Workmen's Compensation

COURT

IN THE SUPREME COURT OF THE AUSTRALIAN CAPITAL TERRITORY
Kelly J.(1)

CATCHWORDS

Workmen's Compensation - Workmen's Compensation Ordinance 1951 - Claim against nominal insurer in respect of unpaid compensation - Costs incurred by nominal insurer in investigation of claim and in intervention in arbitration - Whether those costs recoverable from defaulting uninsured employer - Interest - Rate of interest applicable before judgment.

Workmen's Compensation Ordinance 1951 - Ss.7, 8, 9, 11, 18C, 18D, 18E, 18EA, 18F, 18G.

Workmen's Compensation Rules - Rr.26 and 59.

Australian Capital Territory Supreme Court Act 1933 - S.53A.

Magistrates Court Ordinance 1930 - S.244.

HEARING

CANBERRA
1:4:1987

ORDER

There be judgment for the plaintiff in the sum of $8,566.38, made up of $7,499.23 for debt and $1,067.15 for interest.

DECISION

The plaintiff is the Nominal Insurer appointed pursuant to s.18B(1) of the Workmen's Compensation Ordinance 1951 (the Ordinance).

2. By an award dated 9 December 1985 made in the then Court of Petty Sessions an Arbitrator who must have been one of the learned Magistrates or Special Magistrates of that Court found that the liability of the defendant to pay compensation in accordance with the Ordinance to a workman had been established. That liability was not covered by a policy of insurance as required by the Ordinance.

3. The plaintiff, no doubt in exercise of his right to intervene in the proceedings as a party (s.18F(2)(a) of the Ordinance), conducted the arbitration. The defendant did not pay the compensation found by the Arbitrator to be payable by him. By letter dated 12 March 1986 the workman made demand on the plaintiff for compensation due him under the said award.

4. The plaintiff paid the workman compensation due to him in accordance with the Ordinance and incurred expense in relation to the claim for compensation and in the conduct of the arbitration. The amount of compensation in respect of the period from 30 November 1983 to 30 May 1984 totalled $6,609.48 while the workman's medical expenses amounted to $889,75. The plaintiff paid the total of $7,499.23 to or on behalf of the workman on 26 March 1986. There is no dispute that that amount is payable by the defendant to the plaintiff nor is there any dispute that the plaintiff is entitled to interest on it in accordance with the provisions of s.53A of the Australian Capital Territory Supreme Court Act 1933 (the Act).

5. What gave rise to the claim by the workman does not appear from the material before me but whether his incapacity was due to personal injury by accident arising out of or in the course of his employment by the defendant or happening when travelling in any of the circumstances set out in s.8 of the Ordinance or to a disease due to the nature of his employment by the defendant does not matter. It is clear that his entitlement to compensation was under one or other of ss.7, 8 or 9 of the Ordinance. He was also entitled, under s.11 of the Ordinance, to compensation in respect of the cost of medical treatment obtained in relation to the injury or disease and to recoupment, under sub-paragraph (c) of s.18C(5), of costs payable to him by the defendant in relation to his claim for compensation. As I understand the situation, any such costs have not been quantified and so have not been demanded of the defendant or plaintiff.

6. In the circumstances of this case the liability of the defendant to pay compensation, under any of ss.7, 8 or 9 of the Ordinance, is equated to his liability to pay compensation as if the workman's incapacity was caused by an accident arising out of or in the course of his employment. This appears from the provisions of ss.8(1) and 9(1) which in turn obviously refer back to s.7(1) of the Ordinance. Section 8(1) is as follows:-

"Where personal injury by accident is caused

to a workman while he is travelling to or
from -

(a) his employment or any school in relation
to which sub-section (2) of the last
preceding section (a provision to which
I need make no further reference)
applies; or

(b) any place which it is necessary for him
to attend to obtain a medical
certificate or to receive medical
treatment or compensation in respect of
a previous injury,

his employer shall, subject this Ordinance,
be liable to pay compensation in accordance
with this Ordinance as if the accident were
an accident arising out of or in the course
of his employment."

The relevant part of s.9(1) is as follows:-

"Where -

(a) a workman is suffering from a disease
and is thereby incapacitated for work;
. . .
and the disease is due to the nature of the
employment in which the workman was employed,
his employer shall, subject to this
Ordinance, be liable to pay compensation in
accordance with this Ordinance as if the
disease were a personal injury by accident
arising out of or in the course of his
employment."

Section 7(1) deals with the liability of an employer to pay compensation if personal injury by accident arising out of or in the course of his employment by the employer is caused to a workman. It provides:-

"If personal injury by accident arising out
of or in the course of his employment by his
employer is caused to a workman, his employer
shall, subject to this Ordinance, be liable
to pay compensation in accordance with the
First Schedule to this Ordinance."

7. As I have already indicated, the employer is also liable to pay compensation for medical treatment in accordance with the provisions of s.11 of the Ordinance.

8. The only provisions in the Ordinance relating to costs are those in sub-paragraph (c) of s.18C(5), in s. 18EA (5) and in paragraph 7 of the Fourth Schedule which is as follows:-

"The costs of and incidental to the
arbitration and proceedings connected
therewith shall be in the discretion of the
committee or Court, subject, as respects the
Court, to Rules of Court. The costs, whether
before a committee or in the Court, shall not
exceed the limit prescribed by those Rules,
shall be taxed in manner prescribed by those
Rules, and the taxation may be reviewed by
the Court."

9. Rule 26 of the Workmen's Compensation Rules (the Rules) provides that -

"The Court may decide all questions of costs
as between a third party and the other
parties to the arbitration, and may order any
one or more to pay the costs of any other or
others, or give such directions as to costs
as the justice of the case requires."

The third party referred to in the Rule is a person not originally a party to the arbitration (Rule 22) against whom a respondent employer claims to be entitled to indemnity, under s.11 of the Ordinance.

10. The only other relevant Rule is Rule 59 (1) which, subject to an immaterial proviso, is as follows:-

"In any proceedings, whether before a
committee or an arbitrator or in the Court,
in which a solicitor or a solicitor and
counsel are employed by any party to
proceedings under the Ordinance, the costs
incurred by any party to such proceedings in
employing a solicitor or a solicitor and
counsel to be included in the costs to be
paid to that party by another party shall not
exceed the sums respectively specified in the
Second Schedule to these Rules: . . . "

11. There being no other enabling provisions in relation to costs under the Ordinance or the Rules, it seems clear that, subject to ss.18C (5) (c) and 18EA (5) to which I will refer shortly, the only costs in respect of which an employer may be made liable under the Ordinance or under the Rules are costs in relation to an arbitration and proceedings connected therewith.

12. I turn to the other relevant provisions of the Ordinance relating to the nominal insurer.

13. Section 18C(1) provides, so far as is relevant to the matter I am considering, that, where an employer is liable to pay compensation to a workman in respect of an injury and either has agreed to pay the compensation or has had his liability to pay it established in accordance with the Ordinance, but is not insured and defaults in payment of any amount of compensation for a period of one month, the workman may make a claim against the nominal insurer for payment of the amount of compensation payable or to become payable.

14. Section 18D(1) provides, inter alia, that, subject to the Ordinance, where a workman makes a claim against the nominal insurer under s. 18C(1) the nominal insurer shall pay to the workman the compensation payable at the date of the claim or becoming payable thereafter.

15. Section 18E provides for the reopening, on application by the nominal insurer, of agreements or awards made between a workman and his employer for compensation to the Magistrates Court. Although I make no final decision in the matter, it seems probable that, despite s.24 of the Ordinance, such an application is not to be made in an arbitration and, no doubt, costs in relation to it would be in the discretion of the Court under s.244 of the Magistrates Ordinance 1930. If it is to be made by way of arbitration, costs are payable as in any ordinary arbitration under the Ordinance. The section provides further that where a court makes an order reopening an agreement or award it shall determine or redetermine the claim for compensation by arbitration.

16. Although not applicable to the circumstances which I am considering, s.18EA makes provision for an application to set aside an agreement made pursuant to s.18C(3) of the Ordinance. Such an application is to be made to this Court which may set the agreement aside. If it does, by sub-section (5), the costs of the respondent of and incidental to the application shall, unless the Court directs, be paid by the nominal insurer.

17. I set out s.18F in full:-

"(1) Where a claim for compensation is made
against an employer (not being an employer in
respect of whom an exemption under
sub-section (2) of section eighteen of this
Ordinance was in force at the relevant time),
and there is not in force a policy or
policies of insurance or indemnity in
accordance with the requirements of section
eighteen of this Ordinance and applicable to
the claim, the employer -

(a) shall forthwith furnish to the nominal
insurer full particulars of the claim;
and

(b) shall not make any agreement or
admission in relation to the claim, or
in relation to arbitration in respect of
the claim, except with the consent of
the nominal insurer.

Penalty: Two hundred dollars.

(2) In relation to a claim referred to in the
last preceding sub-section

(a) the nominal insurer is entitled to
intervene in any arbitration proceedings
as a party; and

(b) the nominal insurer has the same right
of objection to arbitration by a
committee as has the employer under the
rules in the Fourth Schedule to this
Ordinance."

18. The scheme of the provisions relating to the nominal insurer seems therefore to be as follows:-

1. When -

(a) an agreement or award for payment of
compensation is made,

(b) the nominal insurer has no reason to doubt
the bona fides of the parties to the
agreement or award,

(c) the employer is not insured against liability
to pay the compensation agreed to or awarded,

(d) the employer defaults in payment of any
amount of compensation for a period exceeding
one month, and

(e) a claim is made against the nominal insurer
in respect of the compensation not paid
the nominal insurer is to pay on the claim.

There is no express provision that the nominal insurer is entitled to recover costs in respect of the claim. In this he would seem to be in no different position from that of the ordinary insurer who receives a claim, investigates it sufficiently for its purpose, and pays compensation on behalf of the employer.

2. (a) The nominal insurer may apply to the
Magistrates Court for the reopening of an
agreement or award made on arbitration where
he has reason to believe that the employer
has not acted in good faith.

(b) Upon such an application the costs would
appear to be within the discretion of the
Magistrates Court under s.244 of the
Magistrates Court Ordinance 1933.

(c) In any arbitration subsequent to the
reopening of the agreement or award the
nominal insurer is to be a party and entitled
to recover such costs of and incidental to
the arbitration as the learned Arbitrator in
his discretion awards (Paragraph 7 of the
Fourth Schedule to the Ordinance).

3. Where an employer -

(a) has entered into an agreement to pay a lump
sum in discharge of his liability
independently of the Ordinance in respect of
injury to or the death of a workman employed
by him,

(b) is not indemnified against that liability in
whole or in part by a policy or policies of
insurance or indemnity, and

(c) fails to pay the whole or part of the sum of
money payable under the agreement so that on
a claim made to him by the person to whom the
sum of money is payable under the agreement
the nominal insurer is required under
s. 18C(3) to pay that amount,

the nominal insurer may apply to this Court for an
order setting aside the agreement on the basis
that there are reasonable grounds for believing
that the agreement was not entered into in good
faith by the employer endeavouring to protect his
own interests and taking all reasonable steps to
that end. In those circumstances the costs of
the respondent of and incidental to the
application shall, unless the Court otherwise
directs, be paid by the nominal insurer.

4. Under s.18F the nominal insurer, after notice duly
given him by an uninsured employer, has control
over agreements between the employer and workman.
If he chooses he may become a party to any
arbitration between the workman and employer and
will be entitled, under paragraph 7 of the Fourth
Schedule to the Ordinance, if the Magistrate in
the exercise of his discretion so decides, to his
costs of and incidental to the arbitration.

19. Despite the careful submissions put by Mr Richardson of counsel for the plaintiff it seems to me clear that the scheme of the relevant sections is such that the legislature sought to deal specifically with costs in respect of a number of situations. It did not provide expressly for the payment of costs incurred in respect of the investigation of a claim when s.18F is not availed of by the nominal insurer. One can readily perceive why this should be so. In the normal course of events one would expect an experienced nominal insurer to investigate a claim promptly and pay promptly the debt due by him pursuant to the relevant provisions. When he has reason to believe that bona fides is lacking and his suspicions are borne out he is entitled to recover his costs in the ways indicated above or, in one case, may generally be required to pay the costs of a respondent to an application for the setting aside of an agreement.

20. It seems to me to be inappropriate to seek to imply into s.18G a requirement that the nominal insurer's costs of settling a claim not the subject of proceedings under ss.18E, 18EA or 18F should be paid by the employer referred to in that section. When the legislature wished to deal with costs under the nominal insurer provisions it did so expressly or by undoubtedly necessary implication.

21. But there is another reason, in my opinion, why the nominal insurer's costs in respect of investigating a claim not the subject of such proceedings ought not to be paid. Any payment made under s.18G of the Ordinance operates to the extent of the payment to discharge the liability of the employer. A payment made to discharge a debt due by the nominal insurer in respect of the investigation of a claim which is paid without any proceedings under ss.18E and 18EA does not discharge any liability of the employer. His liability is to be ascertained by reference to ss.7, 11, sub-paragraph (b) of s.18C(5), s.18EA(5), paragraph 7 of the Fourth Schedule to the Ordinance and Rules 26 and 59 of the Rules. That being the case, there seems to me to be no room for an implication such as that contended for by counsel for the plaintiff so far as it relates to legal costs outside the ambit of the arbitration.

22. Consideration of s.18F of the Ordinance makes it plain, I think, that any arbitration in which the nominal insurer may intervene is one already commenced since the expression "entitled to intervene in any arbitration proceedings as a party" postulates existing arbitration proceedings.

23. It follows, therefore, in my opinion, that the proceedings must have been instituted by the workman against his employer before the nominal insurer intervenes. It seems to me that the nominal insurer could not at that stage be ordered to pay any compensation pursuant to the award (that depends upon failure by the workman to pay within the period allowed by the Ordinance), but that seems to me to be no reason why he could not seek and be granted an order for his costs of the arbitration. It is the failure of the employer, not being one in respect of whom an exemption under s.18(2) of the Ordinance was in force at the relevant time, to have in force a policy or policies of insurance or indemnity in accordance with the requirements of the Ordinance and applicable to the claim which of necessity founds the intervention by the nominal insurer. Once he intervenes in those circumstances, I can see no reason why he should not have his costs in an appropriate case against the employer.

24. Again, as it seems to me, payment by the nominal insurer of his costs effects no discharge of any liability of the employer. Lacking any detailed knowledge of the course of proceedings before the learned arbitrator, I am not able to say whether an application that he should order the nominal insurer's costs to be paid by the defendant was made or whether the matter was simply not dealt with. I am unable, nor is it necessary, to decide whether the arbitrator is to be considered functus officio. But whatever be the case I am satisfied that the plaintiff's costs of intervention in the arbitration ought to have been dealt with by the arbitrator and that they may not be recovered in an action under s.18G of the Ordinance unless ordered by the arbitrator.

25. Accordingly I reject the claim for costs in the amount of $3,681.82.

26. So far as the rate of interest to be allowed under s.53A of the Supreme Court Act 1933 is concerned, I have, since the hearing of this matter, received a schedule of interest rates in respect of deposits of amounts of approximately $11,500 as at 1 December 1986. The schedule was signed by the solicitors for both parties. It indicates that the rates of interest payable on short term (up to six months) deposits of that amount range from 13.5% on call to a maximum of 15.5% for a term deposit from three to six months. There is an exceptional case where, on an executor's and trustee's account with one bank, 15.75% is payable on 24 hours notice of withdrawal but this can hardly be applicable. The Court has adopted the view that a broad practical approach to the question of interest should be taken and, taking that approach, has generally used 14% as the interest rate applicable. It seems to me to be inappropriate generally to attempt to assess an appropriate interest rate on the basis of what a borrower might pay. What he loses by delay would seem, in general, to be interest on an amount which but for the defendant's fault he would have been able to invest at an appropriate rate. There may be some ground for saying that the rate of interest should be a little higher than 14% but I see no reason which would at this stage compel any departure from the broad general approach which has been taken now for some time. I note the rates payable in New South Wales but I do not know what evidence or argument was placed before the rule making authorities of the courts in that State.

27. Accordingly, I think the proper rate of interest to fix is 14%.

28. There will be judgment for the plaintiff for $7,499.23, plus interest in an amount of $1,067.15, a total of $8,566.38.

29. I will hear argument on the question of costs.