Workers Compensation Nominal Insurer v Fischer & Anor [2010] FMCA 239 (11 May 2010)

Last Updated: 12 May 2010

FEDERAL MAGISTRATES COURT OF AUSTRALIA

WORKERS COMPENSATION NOMINAL INSURER v FISCHER & ANOR

[2010] FMCA 239

BANKRUPTCY – Review of sequestration order – creditor’s petition – grounds of opposition – whether there is in fact a debt considered – whether the debtors are solvent considered – re-assessment of debt by the creditor – substantial funds held by trustee.

Federal Magistrates Court (Bankruptcy) Rules 2006 (Cth) Workers Compensation Act 1987 (NSW), ss.157, 159, 1668, 169, 170, 172, 173B Workers Compensation Regulations 2003 (NSW)

Employer’s Mutual Indemnity (Workers Compensation) Ltd v A Donald Pty Ltd [1997] NSWSC 102

Applicant:

WORKERS COMPENSATION NOMINAL INSURER

First Respondent:

GRANT CRAIG FISCHER

Second Respondent:

SANDRA L ABRAHAMS

File Number:

SYG 2819 of 2009

Judgment of:

Driver FM

Hearing date:

6 April 2010

Delivered at:

Sydney

Delivered on:

11 May 2010

REPRESENTATION

Counsel for the Applicant:

Mr M J Cohen

Solicitors for the Applicant:

Shaw McDonald Lawyers

Counsel for the Respondent:

Mr J Baird

Solicitors for the Respondent:

Clark McNamara Lawyers

Counsel for the Trustee:

Mr D Eardley

ORDERS

(1) The creditor’s petition filed on 18 November 2009 is dismissed.
(2) The applicant debtors are to pay the respondent creditor’s reasonable costs of the creditor’s petition which, if not agreed, shall be assessed and, if necessary, taxed in accordance with the Federal Court scale of costs.

FEDERAL MAGISTRATES COURT OF AUSTRALIA AT SYDNEY

SYG 2819 of 2009

WORKERS COMPENSATION NOMINAL INSURER

Applicant

And

GRANT CRAIG FISCHER

First Respondent

S L ABRAHAMS
Second Respondent

REASONS FOR JUDGMENT

Introduction and background

1. The applicant debtors (Grant Craig Fischer and Sandra L Abrahams) have applied for review of a sequestration order made on 27 January 2010. The application was filed out of time but at the trial of the matter on 6 April 2010 I granted an extension of time. The application is opposed by the petitioning creditor (Workers Compensation Nominal Insurer). The trustee in bankruptcy was represented in the proceedings in order to assist the Court.
2. The following statement of background facts is derived from the petitioning creditor’s outline of submissions filed on 6 April 2010 and the affidavit evidence.
3. On 12 January 2007 a workers compensation policy of insurance number WFE007396GWC154 was issued by the insurer, QBE Workers Compensation (NSW) Ltd (“the insurer”) at the request of the applicants operating in partnership.
4. On 1 February 2007, the applicants lodged a completed proposal form with the insurer for the policy. On 13 February 2007, the insurer sent particulars of the policy and premium payable to the applicants.
5. On 21 March 2007, the insurer received $1,725.38 from the applicants as part of the premium due under the policy. On 11 April 2007, the insurer notified the applicants that premium in the amount of $121.12 remained outstanding. On 26 April 2007, the insurer received $122.42 (inclusive of late fees) as the balance of the premium then due under the policy.
6. On 11 February 2008, the insurer received from the applicants:
   1. a policy cancellation and alternative policy request;
   2. an authority to direct premium to the alternative policy; and
   100. a completed declaration of wages for the past year.
7. On 19 March 2008, the applicants paid the renewal premium of $461.63 for the first quarter of the policy renewal year. On 14 April 2008, the policy was renewed for a further term of 1 year.
8. On 15 May 2008, the insurer processed the applicants’ request for cancellation and their declaration of wages for the previous year and served an adjusted premium notice on the applicants in the sum of $3,552.80 in respect of a NSW workers compensation insurance policy
9. On 23 June 2008, the insurer sought payment by the applicants of unpaid premiums attributable to the policy. On 30 June 2008, the insurer sent a further letter.
10. On 8 August 2008, an employee of the insurer informed the applicants orally that an amount of $3,552.80 remained outstanding and unpaid, and was informed that it would not be paid.
11. On 19 August 2008, in default of receipt of the premium, the respondent filed a statement of claim in the Local Court of NSW at North Sydney, in proceeding 31413 of 2008. On 1 October 2008, the statement of claim was served upon the applicants personally.
12. On 19 November 2008, an employee of the insurer discussed with Mr Fischer the method by which an alteration to the wages declared under the policy might be made by the applicants.
13. On 20 November 2008, the applicants were sent a letter from the insurer requesting amended particulars of wages paid. On 3 December 2008, the applicants were requested to expedite provision of declaration of wages under the policy. On 12 January 2009, the insurer sent a further letter requesting particulars of wages paid.
14. On 4 February 2009, in default of the filing and service of a defence to the statement of claim, default judgment was entered in the Local Court in favour of the respondent, by which a debt in the amount of $4,535.60 became due by the applicants to the respondent.
15. On 2 March 2009, a further request is made by the insurer for the provision of particulars of wages paid.
16. On 11 June 2009, Bankruptcy Notice NN 2377/09 was issued. On 24 June 2009, the respondent served the Bankruptcy Notice on the applicants.
17. On 15 July 2009, on expiry of the period for compliance with the Bankruptcy Notice, and in the absence of any application to set aside the Bankruptcy Notice, the applicants each committed an act of bankruptcy.
18. On 19 August 2009, the applicants provided a cheque for the sum of $4,677.76 to the solicitors for the respondent.
19. On 1 September 2009, the insurer sought a replacement cheque for the premium due from the applicants in respect of the policy. Subsequently, instructions were provided to the solicitors for the respondent to file and serve a creditor’s petition consequent upon the dishonouring of the cheque supplied by the applicants.
20. On 18 November 2009, the creditor’s petition was filed in this proceeding. On 12 December 2009, the creditor’s petition was served personally upon the applicants.
21. On 27 January 2010, in the absence of any appearance or grounds of opposition to the creditor’s petition being filed or served by the applicants, the Court made the sequestration order the subject of the Application for Review.
22. On 1 February 2010, the applicants served a further Declaration of Wages for a past year on the insurer in a form inconsistent with that served on 11 February 2008. An accompanying cheque in the amount of $2,000 was dishonoured on presentation.
23. On 18 February 2010, the time prescribed by operation of rule 2.03 of the Federal Magistrates Court (Bankruptcy) Rules 2006 (Cth), expired without any application for review of the sequestration orders being filed.
24. On 26 February 2010, the Application for Review was filed by the applicants.
25. On 1 March 2010, the Application for Review was served on the respondent.
26. On 9 March 2010, the Application for Review was the subject of directions before the registrar, with the intention of it being stood over for further directions for the purpose of referral to a Federal Magistrate on 6 April 2010. On that day I granted an extension of time, reheard the petition and reserved judgment on it, after setting aside the orders made by the registrar.

The evidence and submissions

27. The respondent relies upon the creditor’s petition presented on 18 November 2009 and the verifying affidavits within it. The petition is further supported by the affidavits of service made by Graham Charles Gehrig on 26 June 2009 and 14 December 2009. Affidavits of search and debt were also before the registrar at the time the sequestration order was made. For the purposes of the review application, the respondent relies upon the affidavits of Peter Park, Maree Wellings, Cheryl Lowe and Natalie Markovski, all made on 1 April 2010. None of those deponents was required for cross-examination.
28. The applicants rely upon Mr Fischer’s affidavit made on 25 February 2010. He was examined on that affidavit. They submit that, following a reassessment of their policy liability by the insurer, there is in fact no debt. They further submit that they are otherwise solvent and successfully running a small trucking business. They have offered to pay the reasonable costs of the respondent and the trustee.
29. The respondent submits that the judgment supporting the bankruptcy notice and creditor’s petition was not opposed and no application has been made to set it aside. The judgment was a default judgment but the respondent submits that no basis has been advanced to go behind it. It submits that, at all material times, the debt due from the applicants to the insurer has remained above the statutory minimum amount necessary to found the issue of bankruptcy notice and no tender of the debt has occurred. They submit that a sequestration order was properly made in circumstances where neither the proceedings leading to the judgment debt nor the bankruptcy notice nor the petition were defended or opposed. They further submit that on 1 February 2010 a cheque in the amount of $2,000 received from the debtors was dishonoured upon presentation. The respondent further submits that the applicants lack a bona fide defence to the claim in debt.

Consideration

30. Mr Fischer and Ms Abrahams run a trucking business. It may be a good trucking business but, at least in the case of Mr Fischer, he is not an efficient administrator of the business. He did not pay close attention to documents required by the insurer for the purposes of issuing a compulsory workers compensation policy. For part of the time the trucking business operated as a partnership and for the part of the time Mr Fischer traded in his own capacity as a sole trader. The applicants also provided conflicting information to the insurer about wages paid. This confused the issue of the premium for the workers compensation insurance policy. Mr Fischer conceded in cross-examination that he did not provide timely, accurate or complete information to the insurer. He did not believe he should pay the premium demanded of him, on the basis of the information he provided, and did not pay it. Neither did he take steps to resist recovery action. When, this year, Mr Fischer finally provided more complete information to the insurer, its reassessment of the premium resulted in a credit of $5,685.93 being applied to his account. I accept from the affidavit of Ms Lowe that, following that credit, the applicants owed the insurer only $2,851.65. It is reasonable to conclude that if Mr Fischer had acted in a more timely and efficient manner, the debt pursued by the Nominal Insurer would not have been raised and there would have been only a small amount if anything to pay. However, at the time the premium was levied and the debt pursued, it was a real debt. In that regard, I accept the respondent’s submissions as to the legislative scheme under which the policy was issued.
31. The policy the subject of this application is governed by the provisions of the Workers Compensation Act 1987 (NSW) (“the Workers Compensation Act”), which by Part 7 enacts the machinery for the operation of a statutory scheme of such insurance.
32. The effect of ss.157 and 159 of the Workers Compensation Act, and the Workers Compensation Regulations 2003 (NSW) (the “Regulations”) made under it, is to remove any room for any negotiations as to the terms and conditions governing the policy, or the premium to be paid in respect of it, with the premium to be payable resulting solely from the operation of the mechanism within ss.168 and 169 of the Workers Compensation Act.
33. Further, where the employer is dissatisfied with the premium the subject of the charge made by the insurer, any re-determination of the premium is only by way of application to the Workcover Authority pursuant to the provisions of s.170 of the Workers Compensation Act and the Regulations. Any factual determination in application of the statutory formula for premium determination is not a matter for review within the courts but is to be determined by the Authority alone. Thereafter, such amount as is determined is recoverable pursuant to s.172 of the Workers Compensation Act: see Employer’s Mutual Indemnity (Workers Compensation) Ltd v A Donald Pty Ltd [1997] NSWSC 102, per Cole JA.
34. The corollary of this construction of the Workers Compensation Act, supported by the persuasive authority of the Court of Appeal of the Supreme Court of NSW, is that there could never be a reasonable ground of defence to the claim propounded by the respondent on the Statement of Claim filed in the Local Court of NSW. It follows, in my view, that even if the applicants had bothered to defend those proceedings, it would have been a futile exercise.
35. The circumstances about which the applicants complain in their Application for Review, relating to a re-determination of their premium, are provided for by s.173B of the Workers Compensation Act, and Regulation 130 of the Regulations.
36. Regulation 130(2) provides that actual wages paid during the subsistence of the policy must be provided by the insured party no later than two months after the end of the relevant period. The applicants were tardy in that regard.
37. It is clear that the applicants only provided the particulars in compliance with Regulation 130(2) on 11 February 2008, or possibly as late as 28 April 2008, after which time the determination of the premium payable for the policy was made and the notice served by the insurer on the applicants on 15 May 2008.
38. At no time thereafter did the applicants invoke the mechanism under s.170 of the Workers Compensation Act.
39. It follows in my view that, by operation of s.172 of the Workers Compensation Act, the respondent was entitled to recover the premium that had been calculated and served upon the applicants, as a debt due to it.
40. The consequence is that, under s.172(4) of the Workers Compensation Act, even had there been an application to Workcover by the applicants under s.170 in respect of the premium determined by the insurer (which in any event there was not), it would have had no effect upon the right of the insurer to seek the premium, using the respondent as the Nominal Insurer with standing under the Workers Compensation Act to bring the proceeding.
41. I conclude that at no time did the applicants have a defence to the premium established under the Workers Compensation Act, and served upon them on 15 May 2008. It is unsurprising, therefore, that no grounds of defence were advanced in answer to the statement of claim.
42. It might be said that, in light of the foregoing analysis, there is no basis for the Court to look behind the judgment debt. I accept that, but at the same time, there was no real point in the debtors resisting recovery of the debt. Their only available course was to seek a reassessment of the premium, which Mr Fischer has now belatedly done. The statutory scheme under which the insurer operates leaves it reliant upon the information provided by the insured for the purposes of assessing the appropriate premium. The insurer did the best it could with the information available at the time but has now reviewed that assessment in the light of the additional information provided by Mr Fischer. There is no basis for me to conclude that the reassessment of the premium resulting in a credit was wrong. It follows that while the debt was properly pursued at the time, it has now, in effect, been erased, or at least cut in half, so that it barely exceeds the minimum amount to found bankruptcy proceedings.
43. At the conclusion of the trial of this matter, I formed the view that there was a bona fide dispute over the existence of the debt upon which the sequestration order was made, and that if the facts as presented to me had been presented to the registrar, he would not have made a sequestration order on 27 January 2010. I also heard from counsel for the trustee, who informed the Court that the trustee holds in excess of $27,000 in trust and that further funds of approximately $12,000 have been identified. The trustee’s fees to the date of the trial were $17,015. The debt now due to the insurer is only $2,851.65. In the light of those considerations I ordered, on 6 April 2010, that orders 1 and 2 made by the registrar on 27 January 2010 be set aside and that the trustee in bankruptcy pay to the solicitors for the applicant debtors the funds held in trust by the trustee, after deducting the sum of $17,015 in respect of the trustee’s expenses in the administration of the estate to date.
44. Having considered the matter further, I have come to the view that the petition should be dismissed. While the debt pursued by the respondent was based on a lawful assessment of insurance premium and the debt was properly pursued, the additional information provided this year by Mr Fischer has altered the factual basis upon which the premium was assessed and the practical effect was to fundamentally alter the debt. Further, I am satisfied that the debtors are solvent. The debt is a very small one. Mr Fischer attempted to pay the debt shortly after the due date on the bankruptcy notice but the cheque he provided for the full amount sought was dishonoured upon presentation. That is more reflective of his inefficiency rather than insolvency. A further cheque for $2,000 presented after the sequestration order was made was also dishonoured but that reflected the action of the debtors’ bank, rather than an inability to pay the debt. The trustee has succeeded in getting in substantially more than would have been required to discharge the debt and his significant expenses in administering the estate (more than four times the debt pursued by the respondent) have been met. Mr Fischer has paid dearly for his tardiness and his inefficiency. He is fundamentally a decent and honest small businessman who, if he attended more closely to his affairs, should be able to conduct his business and pay his debts. I find that the debtors are solvent.
45. I will order that the petition be dismissed. I will further order that the applicant debtors pay the respondent creditor’s reasonable costs of the petition which, if not agreed, shall be assessed and, if necessary, taxed in accordance with the Federal Court scale of costs.

I certify that the preceding forty-five (45) paragraphs are a true copy of the reasons for judgment of Driver FM

Associate:

Date: 11 May 2010