Tomlin v Ppg Industries Australia Pty Ltd; Allianz Australia Workers Compensation Pty Ltd [2004] ACTSC 22 (16 April 2004)

Last Updated: 23 April 2004

KEVIN RICHARD TOMLIN v PPG INDUSTRIES AUSTRALIA PTY LIMITED; ALLIANZ AUSTRALIA WORKERS COMPENSATION PTY LIMITED

[2004] ACTSC 22 (16 April 2004)

INSURANCE - workers' compensation - "common law" extension - construction of policy - incorporation of proposal - whether geographic limitation

Workers Compensation Act 1951

Workers Compensation Act 1987, s159(1) (NSW)

Workers Compensation Regulation, cl 49 (NSW)

Workers Compensation (General) Regulation 1987 (NSW)

Workplace Injury Management and Workers Compensation Act 1998, s 4 (NSW)

Burton Lommers Contractors Pty Limited v Manufacturers Mutual Insurance Ltd (Supreme Court of New South Wales, Cole J, 10 August 1990, unreported)

No SC 610 of 2001

Coram: Master Harper

Supreme Court of the ACT

Date: 16 April 2004

IN THE SUPREME COURT OF THE )

) No SC 610 of 2001

AUSTRALIAN CAPITAL TERRITORY )

BETWEEN: KEVIN RICHARD TOMLIN

Plaintiff

AND: PPG INDUSTRIES AUSTRALIA PTY LIMITED

Defendant

AND: ALLIANZ AUSTRALIA WORKERS COMPENSATION PTY LIMITED

Third Party

ORDER

Coram: Master Harper

Date: 16 April 2004

Place: Canberra

THE COURT ORDERS THAT:

1. Judgment be entered for the defendant against the third party in the sum of $400,000.00.

1. This action was brought by the plaintiff against the defendant claming damages in relation to an injury in the course of his employment on 25 or 26 May 1999 at the premises of a customer in Fyshwick. The defendant claims to be entitled to indemnity by the third party pursuant to a workers' compensation insurance policy. After the commencement of the hearing, the plaintiff's claim against the defendant was settled for $400,000.00 inclusive of costs, and I entered judgment by consent accordingly. The third party accepts that the settlement was a reasonable one.

2. The plaintiff worked as a spray-painter for panel-beating firms in Canberra and Queanbeyan before commencing employment with the defendant on 31 March 1999 as a technical sales representative. He lived, and continues to live, in Queanbeyan. The defendant is a national company with its head office in Victoria and sales offices in the state capitals, including Sydney. The company manufactures and sells automotive paint, and its customers are, or include, panel-beaters and smash repairers. For sales purposes the company divides the State of New South Wales into a number of geographic areas. The plaintiff was appointed to carry out responsibilities in the south-western New South Wales region. The Australian Capital Territory is not treated as a separate area, but as a part of south-western New South Wales. The company has three distributors in the south-western New South Wales area, located at Griffith and Wagga Wagga in New South Wales and at Phillip in the Australian Capital Territory. The company also does business direct with panel-beaters in the geographic area. The company has no premises of its own in the area: sales representatives operate out of their cars and also, presumably, from their homes. In 1999 the company had some 128 customers in the south-western New South Wales area, of whom about 54 were located in the Australian Capital Territory. The plaintiff estimated, when giving evidence in the Magistrates Court in November 2001, that he spent about 75% of his time in the Australian Capital Territory and the rest in New South Wales. Mr CG Davis, the NSW state manager for the defendant, who gave evidence on the hearing of the third party proceedings, expressed surprise at this estimate, which is disproportionate to the customer numbers. It is possible that the discrepancy arises from the fact that some customer businesses are larger than others; and that Canberra has a greater population than any of the other cities and towns in the south-western New South Wales area. It may also be relevant that the plaintiff had been in the position for less than two months at the time of his injury, and this may have been too short a period to give rise to reliable longer-term figures.

3. The plaintiff's injury happened at the premises of a customer in the Australian Capital Territory, while the plaintiff was in the process of replacing an electric motor and gearbox at the rear of a piece of equipment known as a paint machine.

4. The plaintiff brought proceedings in the Magistrates Court in Canberra against the defendant, seeking an award of workers' compensation. Magistrate Burns held that the plaintiff was entitled to compensation under the Workers Compensation Act 1951 of the Territory.

5. The defendant at the relevant time had no workers' compensation insurance in the Australian Capital Territory. The company had purchased an existing automotive paint business in 1998, and sought cover from the third party (then MMI Workers Compensation (NSW) Limited) in the various Australian jurisdictions where it intended to carry on business. The third party sent the defendant proposal forms for the various Australian jurisdictions, including a form for the Australian Capital Territory. The defendant completed forms for New South Wales, Victoria, Tasmania, Western Australia and the Northern Territory. Cover in Queensland and South Australia was provided under state government monopoly arrangements which excluded the third party. The company did not complete or return the ACT form. Premiums were calculated by reference to wages paid in the various jurisdictions, and the company treated the plaintiff as a New South Wales-based employee. I am satisfied that his wages were included in the NSW figures for premium calculation purposes.

6. The NSW proposal form asked for details of worksite locations. The defendant listed two locations, both in suburbs of Sydney. The form also included the following:

Do you have employees who are likely to perform work in another state or territory of Australia?

No

Yes If yes, advise states or territories

Please note that you will need to arrange separate cover for these employees. Please contact your insurance adviser or MMI for assistance.

The proposal was completed by placing a tick in the "No" space.

7. If one takes the question literally, the answer was clearly incorrect, to the knowledge of the defendant and the third party. It was clear from the proposals for the other states and the Northern Territory that the company had many employees performing work in other states and territories. Counsel for the third party submits that I should not read the question literally but as though it asked the company whether it had employees based in New South Wales who were likely to perform some of their work in another part of Australia.

8. By way of comparison, I note that the proposal for Western Australia expressed a similar question in somewhat different terms:

Have you engaged any employees in Western Australia who are likely to perform work elsewhere in Australia or overseas? Yes No

If yes, name the state or territory of Australia and/or overseas country and number of employees.

It seems to me that this question is quite clear. The question in the New South Wales proposal is not. The proposal form was prepared by the third party, who required that it be completed by applicants for insurance. Its importance was well known to the third party: the form of policy prescribed under the Workers Compensation Act 1987 of New South Wales included a provision in the following terms:

The Proposal is the basis of this contract of insurance. Both the Proposal and the Schedule of Employer Particulars are considered to form part of this Policy.

9. Effectively, neither the insurer nor the employer had any say in the wording of the policy. Subsection 159(1) of the NSW Workers Compensation Act 1987 provided as follows:

A policy of insurance shall, in so far as it relates to any liability under this Act, contain only such provisions as are prescribed by the regulations but (subject to the regulations) may contain such other provisions relating to any liability at common law or under any Act or Commonwealth Act as are appropriate to any particular case.

10. The relevant regulation is now found at clause 49 of the Workers Compensation Regulation 2003. It is common ground that this clause is in identical terms to the provisions of the then Workers Compensation (General) Regulation 1987 which was in force at the time the policy was issued. The clause is as follows:

For the purposes of s 159 of the Act, a policy of insurance . . . :

a) must contain the provisions specified in Form 3, and

b) may contain any other provisions, but only if those provisions have been agreed on by the insurer and employer concerned and approved by the Authority.

The policy issued by the third party was in identical terms to Form 3 in schedule 1 to the Regulation.

11. Under the heading "Cover provided by policy" and subheading "What the insurer is liable for", clause 3 of the policy included the following:

The Insurer will indemnify the Employer against all of the following sums for which the employer becomes liable during or in respect of the period of insurance:

a) compensation that the Employer becomes liable to pay under the Act to or in respect of any person who is a worker of the Employer . . .;

b) any other amount that the Employer becomes liable to pay independently of the 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 person . . .;

c) costs and expenses incurred with the written consent of the Insurer in connection with the defence of any legal proceeding in which any such liability is alleged.

12. Counsel for the employer argues that the amount for which consent judgment has been entered in the plaintiff's favour against it is an "other amount" which the employer has become liable to pay independently of the NSW Workers Compensation Act, and that it is not within the exclusionary words in parenthesis in subclause 3(b) of the policy: that is, it is not a liability for compensation in the nature of workers compensation arising under ACT law. This being so, the amount falls within the ambit of clause 3 of the policy, and the insurer is obliged to indemnify the employer against it.

13. The insurer does not argue with this interpretation of clause 3 of the policy, but submits that the policy does not indemnify the employer against a liability to a worker in respect of an injury suffered outside the borders of the State of New South Wales. This is because, under clause 2 of the policy, the Proposal forms part of the policy, and the insurer in the proposal made it clear to the employer that it would not be covered in respect of employees who performed work in another state or territory of Australia: separate cover would need to be arranged for such employees.

14. Ms L P Armour, a technical and compliance specialist employed by the insurer, explained in evidence that, in accordance with general practice in the industry, the insurer normally calculates premiums by reference to wages paid by an employer in each jurisdiction. Where an insurer applies for the issue of a policy of workers compensation insurance in a jurisdiction in whose geographic area no employees are based, but which some staff enter to carry out work intermittently, a policy is made available at a nominal premium, presently about $250 in respect of the Australian Capital Territory. Ms Armour also gave evidence that premium levels can vary from jurisdiction to jurisdiction in respect of an identical payroll, either because of claims experience or a difference in amounts recoverable under local legislation.

15. There is nothing in the policy which restricts its operation to injuries suffered within the geographic area of the State of New South Wales. Nor is there any such provision in the NSW Workers Compensation Act. On the contrary, s 13 of that Act includes the following:

13(1) If:

a) an employer has a place of employment in New South Wales, or is for the time being present in New South Wales, and there employs a worker; and

b) any such worker while outside New South Wales receives an injury under circumstances which, had the injury being received in New South Wales, would entitle the worker to compensation in accordance with this Act,

the injury is an injury to which this Act applies and compensation is payable accordingly.

It is unnecessary for me to determine for the purposes of the present action whether, if the plaintiff had brought proceedings seeking compensation under the Act in New South Wales, he would have been entitled to an award in his favour. It is enough for present purposes for me to say that it seems to me that he would have satisfied the requirements of the subsection.

16. Counsel for the insurer relies upon an unreported decision of Cole J sitting in the commercial division of the Supreme Court of New South Wales, Burton Lommers Contractors Pty Limited v Manufacturers Mutual Insurance Ltd (10 August 1990) in which his honour held that an employer was not entitled to indemnity under a NSW policy of workers compensation insurance. An employee had been injured in the Australian Capital Territory. The proposal for insurance had included an item, which had been completed by the employer, as follows:

4. Situation of works, factory, or premises where business, trade or work is carried on (all situations must be shown, including operation outside New South Wales): within New South Wales

A policy had then issued which had included a schedule stating the following:

Situation for covers shown below: anywhere in New South Wales common law unlimited.

In these circumstances, Cole J held that there was no ambiguity in the question in the proposal, and that by completing the proposal form in response to a specific invitation to specify work situations outside New South Wales, the insured was delimiting the ambit of the location of work which he wished to insure. There was thus, as a matter of construction of the proposal and policy, no cover given in respect of injury suffered during work performed outside New South Wales. The parties had agreed to limit the operation of the policy to work within the geographic area of New South Wales.

17. Counsel for the insurer argues that the item in the proposal in the present case set out in paragraph 8 above, has the same effect as the item in Burton Lommers. I am not satisfied that this is so. The proposal was not in a prescribed form. It was drafted by or on behalf of the insurer. It was open to the insurer to use clearer language as was used in the proposal form for Western Australia. The question in the NSW proposal form was imprecise and unclear. It is readily apparent that neither the employer nor the insurer took the question literally. Both were well aware that the employer had employees who were likely to perform work in other states or territories of Australia: applications were made contemporaneously for equivalent insurance in a number of other jurisdictions. The note following the question and answer informed the employer that it would need to arrange separate cover for "these employees" and asked the employer to contact its insurance adviser or the insurer for assistance. The employer had already done this and knew that all its employees were included in the applications which had been made. The employer had no employees in Australia who were not covered under one or another of the policies sought: the total of the number of employees and estimated wages in the various application forms equated to the employer's total national staff numbers and payroll. If the insurer, in its own document, wished to bind the employer to an agreement which restricted the insurance cover to injuries sustained within the borders of the State of New South Wales, it should have done so in clear terms. It is far from clear that the question and note were intended, or understood, to have that effect. I am satisfied that the parties to the policy did not, by reason of anything contained in the wording of the proposal, agree to restrict its operation to injuries to employees within the geographic boundaries of the State of New South Wales.

18. The insurer pleads that it is not liable to indemnify the employer because the plaintiff is not a worker within the meaning of the NSW Workers Compensation Act. Clause 3 of the policy, set out above, limits cover for present purposes to injury to a person who is a worker of the employer. "Worker" is defined in clause 1 of the policy to have the same meaning as in the Act. The applicable definition is now found in s 4 of the Workplace Injury Management and Workers Compensation Act 1998 (NSW). It seems to me that the plaintiff was at the time of the injury "a person who has entered into or works under a contact of service . . . with an employer". The plaintiff was interviewed for the position in Sydney, and signed in Sydney an acceptance of the terms of the offer of appointment. The company's office was in Sydney and the plaintiff was to report to Mr Davis, the State sales manager, who worked at the Sydney office. The plaintiff lived in New South Wales, and most of the south-western NSW area, in which he was to work as technical sales representative, was geographically located in New South Wales. He spent a significant part of his time, though probably not the majority of it, attending the premises of distributors and customers in New South Wales. I am satisfied that the plaintiff was a worker for the purposes of the policy.

19. I should add for the sake of completeness that the pleadings raised estoppel arguments against both parties. The insurer pleaded that the employer was estopped from asserting that the plaintiff was a worker by a finding made in the Magistrates Court in Canberra on 9 November 2001 that the plaintiff was a worker for the purposes of the Workers' Compensation Act 1951 of the Territory. The employer for its part pleaded that the insurer, having accepted a workers' compensation claim made pursuant to the NSW legislation, and having made a number of payments pursuant to that claim, was estopped from denying that the employer was entitled to indemnity under the policy. In the event, neither party pressed the estoppel arguments with any vigour, and I am not persuaded that either of the pleaded estoppels is made out.

20. It follows that I am satisfied that the defendant is entitled to indemnity from the third party as sought. There will be judgment for the defendant against the third party in the sum of $400,000.00. In the normal course, costs would be expected to follow the event, but I shall provide the parties with an opportunity to make submissions as to costs and any other matters, in case there are factors to be taken into account of which I am unaware.

I certify that the preceding twenty (20) numbered paragraphs are a true copy of the Reasons for Decision herein of Master Harper.

Associate:

Date: 16 April 2004

Counsel for the plaintiff Mr F J Purnell SC

Solicitor for the plaintiff Porters

Counsel for the defendant Mr G J Lunney

Solicitor for the defendant Ken Cush and Associates

Counsel for the third party Mr M J Cranitch SC

Solicitor for the third party Hicksons

Date of hearing 6-7 April 2004

Date of decision 16 April 2004