Accident Compensation Commission v CE Heath Underwriting & Insurance (Australia) Pty Ltd [1994] HCA 68; (1994) 121 ALR 417 (8 June 1994)

HIGH COURT OF AUSTRALIA

ACCIDENT COMPENSATION COMMISSION AND ORS v. C.E. HEATH UNDERWRITING AND INSURANCE (AUSTRALIA) PTY. LTD. AND ORS (Matter No. M29 of 1993)
ACCIDENT COMPENSATION COMMISSION AND ORS v. BALTICA GENERAL INSURANCE CO. LTD. (Matter No. M30 of 1993)
F.C. 94/026
Number of pages - 18
(1994) 121 ALR 417

HIGH COURT OF AUSTRALIA
MASON CJ(1), BRENNAN(2), DEANE(3), DAWSON(4), TOOHEY(5) JJ

CATCHWORDS

HEARING

CANBERRA, 8 and 9 September 1993
8:6:1994

ORDER

Appeals allowed with costs.

Set aside the judgment of the Full Court of the Supreme Court of Victoria and in lieu thereof allow the appeals to that Court with costs.

In the Senzo Matter (No. M29 of 1993) and the Carter Matter (No. M30 of 1993), quash the first and second orders made by Tadgell J on 1 February 1991 and in lieu thereof:

(1) declare that, in the Senzo Matter, none of the defendants
were entitled to receive supplementation payments;
(2) declare that, in the Carter Matter, the defendant was not
entitled to receive supplementation payments in respect of the
contribution supplementation claim;
(3) order that the defendants in the Senzo Matter pay the
plaintiffs' costs in that matter, including costs reserved;
(4) order that the defendant in the Carter Matter pay the
plaintiffs' costs in that matter, including costs reserved.

DECISION

MASON CJ I would allow these appeals for the reasons given by Brennan J.

BRENNAN J The issue in these appeals is whether the respondent insurers are entitled under the provisions of the Workers Compensation Act 1958 (Vic.) ("the Act") to be recompensed from a statutory fund for payments of compensation made on behalf of an employer to an injured worker or payments made by way of contribution to the insurer which paid the worker. In each case, compensation was paid to the worker as a lump sum pursuant to an award made by the Workers Compensation Board ("the Board") in redemption of the employer's liability for future weekly payments to the worker during a period of incapacity resulting from a series of injuries. The injuries in the series were sustained at different times during the term of the worker's employment. During that term, the employer changed insurers from time to time but the whole of the amount awarded to the worker was paid by the last insurer on risk. However, the prior insurers agreed to contribute to the payment of the amount awarded on a "time on risk" basis. The respondents are the insurers which made the payments and, with some immaterial exceptions, the prior insurers. Claims by insurers for recompense from the relevant statutory funds were paid by the Accident Compensation Commission, but it subsequently commenced proceedings to recover the amounts so paid, contending that the payments were made under a misrepresentation or a mistake. The questions for determination are whether the respondent insurers or any of them were entitled to recompense from the funds under the relevant provisions of the Act.

The elements of the problem
2. In describing these elements, brevity precludes precision in mentioning qualifications that are immaterial to the issues for determination. There is, of course, no substitute for the statutory text.

1. Injury.
3. A worker who sustains an injury in the course of his employment is entitled, subject to the Act, to the payment of compensation: s.5(1) (1) "If in any employment personal injury arising out of or in the course of the employment is caused to a worker his employer shall subject as hereinafter mentioned be liable to pay compensation in accordance with the provisions of this Act."). "Injury" includes a disease, any aggravation of a prior injury and an acceleration of a disease: s.3(1) (2) "'Injury' means any physical or mental injury, and without limiting the generality of the foregoing includes -

(a) a disease contracted by a worker in the course of his
employment whether at or away from his place of
employment and to which the employment was a
contributing factor and contributed to a recognizable
degree; and
(b) the recurrence, aggravation, acceleration, exacerbation or
deterioration of any pre-existing injury or disease
where the employment was a contributing factor and
contributed to a recognizable degree to that
recurrence, aggravation, acceleration, exacerbation or
deterioration -
and for the purposes of this interpretation the employment
of a worker shall be taken to include any travelling
referred to in section 8 (2).").

2. Incapacity.
4. When an injury or a series of injuries results in a total or partial incapacity for work, the worker is entitled to a weekly payment "during the incapacity" and, it may be, a lump sum awarded in redemption of the employer's liability for future weekly payments: s.9(2) (3) "Except as is provided in section eleven of this Act, where the worker's total or partial incapacity for work results from or is materially contributed to by the injury the compensation shall be a weekly payment during the incapacity in accordance with the provisions of the said clauses unless the Board in its absolute discretion, upon the application of either party in any proceedings before the Board relating to the compensation, awards a lump sum in redemption of the employer's liability for future weekly payments, and any lump sum so awarded shall be of such amount as appears to the Board to be just and reasonable having regard to the probable duration of the incapacity and to such other factors as the Board thinks relevant."). Although the worker's entitlement to compensation accrues when an injury is suffered (4) Kraljevich v. Lake View and Star Ltd. [1945] HCA 29; (1945) 70 CLR 647 at 650.), an employer's liability to make weekly payments or to pay a lump sum in redemption does not arise until incapacity supervenes on the injury or injuries that caused or materially contributed to it: Fisher v. Hebburn Ltd. (5) [1960] HCA 80; (1960) 105 CLR 188 at 202-203; Borg Warner v. Switzerland General Insurance (1989) 16 NSWLR 421 at 426-427.). The insurer on risk at the time of the relevant injury is the insurer liable to indemnify the employer against liability once incapacity supervenes (6) See Manufacturers Mutual Insurance Ltd. v. National Employers' Mutual General Insurance Association Ltd. (1991) 6 ANZ Ins Cas 61-038 at 76,964.).

3. Liability to make weekly payments or to pay a lump sum.
5. Liability to make weekly payments or to pay a lump sum is imposed on any employer liable in respect of any injury which caused or materially contributed to the incapacity. In Bushby v. Morris (7) (1980) 1 NSWLR 81 at 87.) the Privy Council said in reference to the New South Wales Workers' Compensation Act 1926:

" It is well established in common law contexts that an
injury or incapacity may be attributable to more than one
cause, in the legal sense, operating concurrently. ...
There is no room for an artificial rule of law that, in
such a situation, one or other accident must necessarily be
selected as the cause of the incapacity, apparently on an
entirely arbitrary or capricious basis."

And in Australian Eagle Insurance Co. Ltd. v. Federation Insurance Ltd. (8) (1976) 15 SASR 282 at 289.), King J said in reference to the South Australian Workmen's Compensation Act 1971:

"If the incapacity results in a true sense from more
than one accident, a workman must be entitled to claim
compensation in respect of all or any of the relevant
accidents. If the accidents occur in the employment
of different employers, he must be entitled to claim
compensation against each employer. If the accidents occur
in the employment of the same employer, he is nevertheless
entitled to base his claim upon all or any of the
accidents."

Similarly, liability under the Act to make weekly payments during incapacity or to pay a lump sum in redemption of that liability arises from each of the injuries which caused or materially contributed to the incapacity. Any employment in the course of which the worker sustained an injury causing or materially contributing to his incapacity attracts liability to the employer and to the insurer on risk at the time of the injury (9) Manufacturers Mutual Insurance Ltd. v. National Employers' Mutual General Insurance Association Ltd. (1991) 6 ANZ Ins Cas at 76,965 per Priestley JA Samuels JA seems to take a different view which is inconsistent with Bushby v. Morris and Australian Eagle Insurance Co. Ltd. v. Federation Insurance Ltd.), whether the employment be the last in the course of which an injury was sustained or some earlier employment ((10) The case is thus distinguishable from National and General Insurance Co. Ltd. v. South British Insurance Co. Ltd. (1982) 149 CLR 327 at 335 where the notional total incapacity was attributable only to the last causative injury.).

4. Amounts of weekly payments and lump sum.
6. These amounts are ascertained in accordance with the clauses appended to s.9 of the Act. For present purposes, the ceilings prescribed by cl.1(b)(i) and (iii) are relevant. Immediately prior to the enactment of the Workers Compensation (Amendment) Act 1975 (Vic.) (No.8733) ("the 1975 Amendment") cl.1(b)(i) ((11) The opening provision of cl.1(b)(i) read as follows:

"Where incapacity for work results from or is
materially contributed to by the injury:-
(i) In the case of total incapacity for work, the
compensation shall be a weekly payment during
the incapacity of an amount equal to the
aggregate of the following sums:-
the sum of $43 in respect of the worker;
and
...") prescribed a

ceiling of $43 plus a loading for dependants on the amount of weekly payments in the case of total incapacity and cl.1(b)(ii) prescribed a proportion of that amount as the ceiling in the case of partial incapacity. Clause 1(b)(iii) ((12) The opening provision of cl.1(b)(iii) read as follows:

"The total liability of an employer in respect of
compensation under either or both of the last two
preceding sub-paragraphs (i) and (ii) of this
paragraph (b) shall not exceed $15,260 except in the
case of a worker whose injury, in the judgment of
the Board, results in -
permanent and total disablement for work; or
...") prescribed a ceiling of $15,260 on

the total liability of an employer except where the worker had been permanently and totally disabled. This ceiling affected the measure of compensation payable as a lump sum redemption of liability to make weekly payments. Further provision was made in respect of partial disablement for work to a major degree. The ceilings of $43 and $15,260 were raised by successive amendments as follows:

Amendment Weekly payment Total liability
Act ceiling ceiling
Workers Compensation
(Amendment) Act 1975 $73((13) s.6(c)) $25,930 ((14) s.6(e))
Workers Compensation
(Miscellaneous $105 ((15) s.6(1)(c)(i))
$36,960 ((16) s.6(1)(d))
Provisions) Act 1979
(Vic.) (No.9297)
("the 1979 Amendment")

The 1979 Amendment amended s.9 of the Act to provide for indexation on 1 July in successive years of the ceilings which that Act had prescribed ((17) Sub-sections (3), (4), (5) and (6) of s.9, inserted by s.6(2) of the 1979 Amendment.).

5. Effective date of amendments to ceilings.
7. The links in the chain of an employer's liability to make a weekly payment or to pay a lump sum may stretch over a period of time: from the date of the initial injury through the onset of incapacity to the date on which a payment is to be made. If it were not for s.2(4) of the Act ((18) Inserted by s.2 of the Workers Compensation Act 1973 (Vic.) (No.8417), following a precedent established when the Workers Compensation Act 1951 (Vic.) was amended in 1953: see s.15 of the Workers Compensation Act 1953 (Vic.) (No.5676).), it might have been arguable that increases in the ceilings did not apply if the relevant injury occurred before the legislative amendment came into operation: see Kraljevich v. Lake View and Star Ltd. ((19) [1945] HCA 29; (1945) 70 CLR 647.). However, s.2(4) ((20) "Notwithstanding anything to the contrary in any rule of law or construction the provisions of this Act, as in force immediately before the commencement of the Workers Compensation Act 1973 so far as they relate to rates or amounts of compensation, shall apply with respect to every payment of compensation made on or after the 6th March, 1973 irrespective of the date of occurrence or origin of the injury or disease giving rise to the right to compensation and -

(a) notwithstanding that an award for a lesser rate or amount
may have been made by the Board before the
commencement of the Workers Compensation Act 1973; and
(b) notwithstanding that payments at a lesser rate or of a
lesser amount may have been made before the
commencement of the Workers Compensation Act 1973 -

and every policy of accident insurance or indemnity which operated to indemnify an employer against claims which arose under the Act before the commencement of the Workers Compensation Act 1973 shall notwithstanding anything to the contrary therein be read and construed as fully insuring or indemnifying the employer against the increased liability incurred by reason of the provision made by the Workers Compensation Act 1973.") applies the rates and amounts of compensation prescribed from time to time to all payments of compensation made on or after 6 March 1973, irrespective of the date of the injury which caused or materially contributed to the incapacity or the date of the onset of the incapacity.

6. Insurance problems.
8. An employer whose employee was injured may be liable to make weekly payments or to pay a lump sum to the worker, whether or not the employment has ceased. The amounts which the employer is liable to pay may thus be greater than the amounts payable at the time of the injury or the onset of incapacity. Section 2(4) ensures that payments are made at the statutory rate prescribed at the time of payment. The amounts payable may exceed the amounts for which the insurer under the workers compensation policy in force at the time of the injury was, or was expected, to indemnify the employer.

9. The extent of an insurer's liability to an employer was governed at first solely by the terms of the statutory policy. The policy defined the liability of an insurer to indemnify an employer as the liability of the employer (inter alia) "to pay compensation under the Act", the "Act" being taken to be the Workers Compensation Act 1958 (Vic.) in force "at the commencement of this indemnity or any renewal thereof". As the amount prescribed at the time of the commencement of a period of insurance as the compensation to be paid in respect of an injury marked the limit of the employer's indemnity, the employer's indemnity could fall short of his liability if his liability under the Act was increased during a term of insurance. However, until the 1975 Amendment, an employer was fully covered by insurance taken out in accordance with s.72(1)(a) of the Act which provided:

" Save as provided in this Act as to schemes of
compensation it shall be obligatory for every employer to
obtain either from the Insurance Commissioner or from an
insurer approved by the Governor in Council a policy of
accident insurance or indemnity for the full amount of his
liability to pay compensation under this Act to any worker
or workers."

Subject to a minor amendment, s.72(1)(a) ((21) Repealed by s.264(5) of the Accident Compensation Act 1985 (Vic.) (No.10191).) preserved the obligation of an employer to obtain a policy of accident insurance affording full cover for the employer's liability. Policies indemnifying employers against their liabilities under the Act or at common law were required to be in conformity with regulations made under the Act ((22) s.64 renumbered as s.71 by s.6 of the Workers Compensation (Actions) Act 1981 (Vic.) (No.9683); see also s.72(1A) inserted by s.2(1)(e) of the Workers Compensation (Amendment) Act 1978 (No.9136)). Thus s.2(4) and s.72(1)(a) ensured that an employer was fully covered by a workers compensation policy for any liability under the Act to pay compensation in respect of an injury whenever the injury had occurred. That position was changed in 1975.

10. The 1975 Amendment substantially increased the rates and amounts of compensation payable under the Act. Of course, the statutory policies of insurance covered an employer's liability to meet the 1975 increases when the relevant injury occurred after the 1975 increases came into force. Presumably the premiums were sufficient to provide that cover. But special provisions were made to fund increases in rates or amounts of compensation payable in respect of injuries suffered before the 1975 increases came into force. The scheme adopted was to impose a surcharge on current premiums, pay what was raised by the surcharge into a fund and to recompense the employer or insurer which paid increased compensation in respect of injuries suffered before the 1975 increases came into force. The 1975 Amendment inserted Pt V into the Act ((23) s.24(1) of the 1975 Amendment.). The Insurers Guarantee and Compensation Supplementation Fund ("the IGCSF") was created ((24) s.96 of the Act.) by levying and collecting a surcharge on premiums "for and on behalf of Her Majesty" ((25) s.92(4) of the Act.). The moneys which, under the Act as amended, are authorized to be paid out of the IGCSF include the amount of "any claim award or judgment" by which the sum payable as compensation in respect of an injury suffered before the 1975 Amendment came into force is increased by virtue of that Act ((26) ss.2A, 2B(3), 98(1)(a) and 101 of the Act.), being an amount which answers the description of an "additional amount" as defined in s.2B(5).

11. The 1979 Amendment provided for further substantial increases in the rates and amounts of compensation; further special provisions were made to fund the increases. Again the current statutory policies covered an employer's liability to meet the 1979 increases when the relevant injury was suffered after the 1979 increases came into force. But the substance of the 1975 scheme was adopted to cover liability to pay the increases in rates or amounts prescribed by the 1979 Amendment arising from injuries suffered before the 1979 increases came into force. The 1979 Amendment inserted Pt VI into the Act ((27) s.10(1) of the 1979 Amendment.). The Workers Supplementation Fund ("the WSF") was created ((28) s.110 of the Act.) by levying and collecting a "prescribed contribution", being a percentage of premiums "for and on behalf of Her Majesty" ((29) s.106 of the Act.). The moneys which are authorized to be paid out of the WSF include the amount ((30) s.112(c).) for which an employer is liable in respect of an injury suffered before the 1979 Amendment came into force to the extent that that amount is increased by virtue of that Act ((31) ss.2D(1) and (2), 2F.), being an amount which answers the description of an "additional amount" as defined in s.2L.

12. It is necessary to set out in some detail the statutory provisions governing the right to recover payments of compensation from the IGCSF and WSF. These provisions are for the most part to be found in ss.2A to 2G of the Act. Section 2A(1) relates to the 1975 increases in the table of injuries irrespective of the date of the relevant injury or the onset of incapacity. Section 2A(2) relates to the 1975 increases in compensation payable in respect of a death where the death occurred on or after 1 July 1975. Section 2A(3) relates, inter alia, to weekly payments for incapacity. That sub-section provides:

" Notwithstanding anything to the contrary in any rule of
law or construction, the provisions of this Act as amended
by the Workers Compensation (Amendment) Act 1975, so far as
they relate to rates or amounts of compensation payable ...
shall apply with respect to every payment of compensation
made on or after the 1st day of July, 1975 irrespective of
the date of occurrence or origin of the injury or disease
giving rise to the right to compensation and
notwithstanding that compensation had accrued or was
payable before the 1st day of July, 1975 but was unpaid
before that date or that -
(a) an award for a lesser rate or amount may have been
made by the Board before the said day; or
(b) payment at a lesser rate or of a lesser amount may
have been made before the said day."

Sections 2B and 2C provide, inter alia, as follows ((32) as amended and replaced by the 1979 Amendment, s.2.):

" 2B. (1) This section applies to a policy of accident
insurance or indemnity operating to insure or indemnify an
employer against claims under this Act.
(2) Subject to sub-sections (3) and (4), a policy shall
not insure or indemnify the employer against any additional
amount payable by him by virtue of the provisions of the
Workers Compensation (Amendment) Act 1975.
(3) Where the employer is not entitled to be recompensed
from the Fund for any additional amount payable by him the
policy shall insure or indemnify the employer for that
amount.
...
2C. (1) Where an additional amount is payable by an
employer as compensation by virtue of section 2A (3), so
far as it relates to rates of compensation, the employer
shall, subject to sub-sections (2), (3) and (4), be
entitled to be recompensed from the Fund for that
additional amount.
...
(5) An insurer may, and shall if required by the
Treasurer of Victoria to do so, pay on behalf of an
employer any additional amount payable as compensation by
virtue of section 2A (3), so far as it relates to rates of
compensation.
...
(7) Subject to sub-sections (8) and (9), where an
insurer pays or is required to pay an amount under
sub-section (5), the insurer shall be entitled to be
recompensed from the Fund for that additional amount."

In each of these sections, "additional amount" is defined by s.2B(5) to mean -

"an amount by which the sum payable as compensation under
this Act as in force immediately before 1 July 1975 in
respect of an injury of a worker arising out of or in the
course of the employment of the worker before 1 July 1975
is increased by virtue of a provision of the Workers
Compensation (Amendment) Act 1975".

13. The liability to pay the increases prescribed by the 1979 Amendment is imposed by s.2D(1), irrespective of the date of the relevant injury or the onset of incapacity. Section 2D(2) then provides for an annual indexation of those increased amounts, the liability being imposed irrespective of the date of the relevant injury or the onset of incapacity. The provisions of s.2E in relation to the increased liabilities effected by the 1979 Amendment reproduced mutatis mutandis the provisions which s.2B prescribes in relation to the increased liabilities effected by the 1975 Amendment. Then, s.2F provides, inter alia:

" (1) Where an additional amount is payable by an employer
as compensation by virtue of section 2D (1) or section 2D
(2) so far as it relates to rates of compensation the
employer shall, subject to sub-sections (1A), (2), (3) and
(4), be entitled to be recompensed from the Fund for that
additional amount.
(1A) An employer shall not be entitled to be recompensed
from the Fund for an additional amount in respect of an
injury of a worker occurring after 1 July 1982." ((33) This

sub-section was inserted into the Act by s.4 of the Workers Compensation (Amendment) Act 1981 (Vic.) (No.9613).) In practice, the insurer rather than the employer made the payments which attracted the refund. Section 2G and a Treasurer's direction gave the requisite authority. Section 2G provided, inter alia -

" (1) An insurer may, and shall, if required by the
Treasurer of Victoria to do so, pay on behalf of an
employer any additional amount payable as compensation by
virtue of section 2D (1) or section 2D (2), so far as it
relates to rates of compensation.
...
(3) Subject to sub-sections (3A), (4) and (5), where
an insurer pays or is required to pay an amount under
sub-section (1), the insurer shall be entitled to be
recompensed for that additional amount from the Fund.
(3A) An insurer shall not be entitled to be recompensed
from the Fund for an amount paid or required to be paid
under sub-section (1) on behalf of an employer which
relates to any additional amount payable in respect of an
injury of a worker occurring after 1 July 1982." ((34) ibid. by

s.5.) For the purposes of sections 2E, 2F and 2G, an "additional amount" was defined by s.2L to mean:

"(a) in relation to any increase in the rates or amounts of
compensation by virtue of the provisions of section
2D (1) - an amount by which the sum payable as
compensation under this Act as in force immediately
before the commencement of this section in respect of
an injury of a worker arising out of or in the course
of the employment of the worker before the said
commencement is increased by virtue of the provisions
of section 2D (1); and
(b) in relation to any increase in the rates or amounts of
compensation by virtue of the provisions of section
2D (2) - an amount by which the sum payable as
compensation under this Act as in force immediately
before the date of the increase in respect of an
injury of a worker arising out of or in the course
of the employment of the worker before that date is
increased by virtue of the provisions of section 2D
(2)."

14. It should be noted that an amount can be claimed from the relevant statutory Fund only if it was payable by the employer or insurer "as compensation" ((35) ss.2C(1), (5) and (7); 2F(1); 2G(1) and (3).). Section 28(1) of the Act provides:

" 28. (1) No payment (other than a weekly payment to
a worker ...) shall be deemed to be a payment of
compensation, or in valid compromise of any claim, under
this Act unless -
(a) the payment is made pursuant to an award of the
Board; or
(b) the Board orders that the payment is to be deemed a
payment of compensation, or in valid compromise
of a claim, under this Act."

Thus, in general no portion of a lump sum paid by an employer or an insurer may be claimed from either of the statutory Funds unless the amount has been paid pursuant to an award or order of the Board.

15. The effect of this complex of provisions was stated in brief terms by the Full Court of the Supreme Court as follows:

" Leaving aside questions of indexation and treating the
1975 and 1979 amendments as substantially identical, the
provisions have the following elements:
- rates of compensation are changed (s.2A(1) and (2);
s.2D(1) and (2));
- the changed rates are to apply to every payment of
compensation made on or after a particular date
irrespective of the date of injury (s.2A(3); s.2D(1)
and (2));
- the amount by which the sum payable as compensation
in respect of a pre-amendment injury is increased is
called an 'additional amount' (s.2B(5); s.2L);
- if an additional amount is payable by an employer it
can obtain recompense (s.2C(1); s.2F(1));
- the statutory policy does not insure an employer
against 'any additional amount payable by him by
virtue of' the amending Act (s.2B(2); s.2E(2)) unless
the employer is not entitled to be recompensed from
the relevant fund (s.2B(3); s.2E(3));
- an insurer may and, if the Treasurer gives a direction
(which he did) shall pay on behalf of an employer any
additional amount payable as compensation by virtue of
the amendment (s.2C(5); s.2G(1));
- where an insurer pays or is required to pay an
additional amount on behalf of an employer it is
entitled to recompense (s.2C(7); s.2G(3))."

16. In summary, the IGCSF and the WSF were established to provide recompense to employers or their insurers for increases in liability to make payments of compensation in respect of injuries which occurred before the relevant increase took effect. Such increases were effected as from 1 July 1975 ((36) Under the 1975 Amendment.), as from 1 December 1979 ((37) Under the 1979 Amendment.), and annually on 1 July of each subsequent year ((38) Under s.2D(2) of the Act as inserted by s.2 of the 1979 Amendment, unless the injury occurred after 1 July 1982.). In order to be entitled to claim recompense from either or both of the IGCSF or the WSF, the respondent insurers must establish that payment was made on behalf of the employer of an "additional amount payable as compensation by virtue of" s.2A(3) (the 1975 increases), s.2D(1) (the 1979 increases) or s.2D(2) (the annual indexation) ((39) ss.2C(5) and (7); 2G(1) and (3).). For there to be an "additional amount", the payment of compensation must be in respect of an injury occurring before the relevant increase took effect. In such a case, the "additional amount" which can be claimed from the relevant statutory Fund is the difference between the sum payable at the rates and amounts of compensation applicable after the relevant increase took effect and the sum payable at the rates and amounts immediately before the relevant increase took effect. In the case of an injury occurring before 1 July 1975 in respect of which a payment of compensation is made after December 1979, the insurer may be able to claim recompense in respect of several increases to the rates and amounts of compensation since the date of injury. No recompense is available if the payment of compensation is made in respect of an injury occurring after 1 July 1982.

The purpose of creating the Funds
17. Although the long-standing practice - since 1953 - under the Victorian workers compensation legislation was to require an insurer to bear the ultimate liability for legislative increases in the rates or amounts of compensation introduced after the policy was issued, the 1975 Amendment and the 1979 Amendment provided for increases of such magnitude that past premium income was thought to require supplementation out of the Funds created by the respective Amendments. The supplementation was to cover the whole of any "additional amount" paid in respect of a pre-increase injury. The purpose of the fund provisions of the respective Amendments was to recompense an insurer which was obliged by its statutory policy to bear an increased liability to pay compensation in respect of injuries incurred while it was on risk when the premium paid for the policy had not been calculated by taking account of the increases now prescribed. Unfortunately, neither the 1975 Amendment nor the 1979 Amendment addressed the case where two or more "injuries" caused or materially contributed to the same incapacity and one or more of the injuries occurred before a relevant increase came into effect and one or more of the injuries occurred after. The facts in the present appeals
The Senzo matter: Accident Compensation Commission and Ors

v. C.E Heath Underwriting and Insurance (Australia)
Pty. Ltd. and Ors

18. In this matter the injured worker, Mr Peter Senzo, was employed by Australport Services (Vic.) Pty. Ltd. ("the employer") between 16 September 1968 and 1 May 1983. Over the period of Mr Senzo's employment, he suffered various injuries to his lower back caused by heavy lifting. The parties were agreed that, for the purposes of the Act, Mr Senzo sustained, on each day of his employment, an injury materially contributing to the incapacity in respect of which an award was eventually made by the Board.

19. The employer was insured against workers compensation liability by five different insurers during the period of Mr Senzo's employment ((40) The insurers were Royal Insurance Australia Limited (1 May 1973 to 30 June 1974), Bishopsgate Insurance Ltd. (30 June 1974 to 30 June 1975), Mercantile Mutual Insurance (Workers Compensation) Ltd. (30 June 1975 to 31 December 1980), National Employers' Mutual General Insurance Association Ltd. (31 December 1980 to 31 December 1982) and C.E. Heath Underwriting and Insurance (Australia) Pty. Ltd. ("C.E. Heath") (31 December 1982 until after Mr Senzo ceased employment).), each issuing a statutory policy in accordance with the Act. These insurers, with the exception of Bishopsgate Insurance Ltd. (which went into liquidation) are the respondents to the appeal in this matter.

20. After his employment had ceased, Mr Senzo applied to the Board for compensation in respect of his incapacity. On 14 June 1985, an award was made by the Board with the consent of Mr Senzo and C.E. Heath (as the employer's insurer) for the payment to Mr Senzo of reasonable past medical expenses, and a lump sum of $20,000 "in settlement of all other forms of future compensation in respect of all injuries arising out of or in the course of (Mr Senzo's) employment with (the employer)". C.E. Heath paid the sum of $20,000 to Mr Senzo pursuant to the award.

21. Each of the five insurers had entered into a Settlement and Contribution Agreement ("the Agreement"). Under the Agreement, the insurer of the employer at the date of the injury latest in time was to meet any legitimate claim in full, but without prejudice to its right to claim contribution from any previous insurers. C.E. Heath claimed contribution from each of the previous insurers, which agreed to contribute an amount proportionate to the time for which each of them had insured the employer. While the Agreement provides for contribution to the net amount of the award after any recompense has been recovered by the last insurer, in the present case C.E. Heath claimed contribution in relation to the gross amount of the award. This may have been because, at the time that contribution was sought, no claim for recompense from the statutory Funds was anticipated.

22. However, C.E. Heath did make an application for recompense from the statutory Funds, claiming that the lump sum was paid in respect of an injury occurring on 25 January 1973, the earliest date of injury alleged by Mr Senzo. C.E. Heath claimed that the liability in respect of that injury was increased by $2,888 by virtue of the 1975 Amendment, and by $10,124 under the 1979 Amendment. It claimed each of these amounts from the Accident Compensation Fund (of which the IGCSF and the WSF had become part ((41) Pursuant to ss.3, 91, 92, 105 and 110 of the Act as amended by the Accident Compensation Act 1985 (Vic.) (No.10191).)) as "additional amounts" payable by virtue of the relevant provisions of the 1975 Amendment and the 1979 Amendment. Each of the other respondent insurers also claimed recompense from the statutory Funds. Each of these claims alleged that the date of injury was a date during or prior to the period of cover provided by that respondent and prior to the date of an increase or increases in the rates and amounts of compensation under the 1975 Amendment or the 1979 Amendment. Each of these claims was paid from the statutory Funds. The respondents concede that there can be no duplication of the amounts paid as recompense to two or more insurers. Senzo's case thus raises the questions whether C.E. Heath and whether any of the prior insurers is entitled to recompense on the footing that the payment to Senzo was made in respect of an injury which occurred before the 1975 Amendment or the 1979 Amendment (as the case may be) came into operation.

23. In March 1989, the appellants commenced proceedings to recover the amounts paid from the statutory Funds.

The Carter matter: Accident Compensation Commission and Ors v. Baltica

General Insurance Co. Ltd.

24. The facts in this matter are similar to those in the Senzo matter. The injured worker, Mr Alan Carter, was employed by Trend Hicks Pty. Ltd. ("the employer") from 12 September 1977 until 28 March 1981. Throughout the period of his employment, Mr Carter was exposed to wood dust from the sawing and working of Western Red cedar timber, giving rise to respiratory difficulties and bronchitis which led to his incapacity after he ceased employment. During the relevant period, the employer was insured by three insurers: Baltica General Insurance Co. Ltd. ("Baltica") (prior to 30 June 1979), Palmdale Insurance Ltd. (from 1 July 1979 to 30 June 1980) and AMP Fire and General Insurance Co. Ltd. ("AMP") (from 1 July 1980 until after Mr Carter ceased employment).

25. On 11 December 1981 Mr Carter made an application to the Board for an award of compensation against the employer. On 20 September 1983 the Board made a consent award providing for the payment to Mr Carter of reasonable past medical expenses and a lump sum of $8,000 "in full settlement of all other forms of future compensation in respect of all injuries arising out of or in the course of (Mr Carter's) employment with (the employer)". The lump sum was paid to Mr Carter by AMP (the last insurer on risk), which claimed contribution from the prior insurers under the Settlement and Contribution Agreement. The respondent in this matter, Baltica, agreed to contribute 50% to the award.

26. Each of the insurers ((42) with the exception of Palmdale Insurance Ltd which was then in liquidation: its claim against the WSF was made by the IGCSF in its capacity of guarantor.) made a claim on, and was recompensed from, the Accident Compensation Fund. It is not disputed that AMP was entitled to be recompensed under the Act; its claim related to the increase in liability after Mr Carter had ceased employment. Therefore any relevant injury must have occurred before the date of that increase. The payment was made to the worker on behalf of the employer under an award made by the Board. This appeal thus concerns only the entitlement to recompense of Baltica, the earliest insurer during the period of Mr Carter's employment. In making its claim against the WSF, Baltica gave the date of injury in respect of which the payment of compensation had been made as 12 September 1977, the first day on which Mr Carter had been employed by the employer.

The issues for determination
27. The Senzo and Carter matters raise for determination the following questions:
1. Is an insurer (C.E. Heath) entitled to recompense out of the

statutory Funds if it pays compensation to an employee on behalf
of an employer at the rates or in the amounts increased by or in
accordance with the 1975 Amendment and the 1979 Amendment and the
incapacity which entitles the employee to the payment has been
caused or materially contributed to by injuries some of which were
suffered before and others of which were suffered after the
relevant increases came into effect?

2. Is an earlier insurer of an employer who contributes to a payment

of compensation to a worker made by the last insurer at the rates
or in the amounts increased by or in accordance with the 1975
Amendment and the 1979 Amendment entitled to recompense out of the
statutory Funds if the incapacity which entitles the employee to
the payment has been caused or materially contributed to by
injuries some of which were suffered before and others of which
were suffered after the relevant increases came into effect?

Assuming that the 1982 cut-off date has no application, the statutory conditions of an insurer's entitlement to recompense are:
1. The employer must be liable to make the payment "by virtue of"

s.2A(3), s.2D(1) or s.2D(2) - as the case may be - "so far as it
relates to rates of compensation": ss.2C(1) and (5), 2F(1), 2G(1).

2. The payment must be "in respect of" an injury suffered before

the date when the relevant increase came into effect: see the
definitions of "additional amount" in s.2B(5) and s.2L.

3. The payment to the worker must be made by the insurer "on behalf of

an employer": ss.2C(5) and (7), 2G(1) and (3).

Do any, and which, of the payments made by the respondent insurers satisfy these conditions?

28. Consider first a case where, throughout a period of a worker's employment by the same employer, the employer's liability was covered by a statutory policy issued by the same insurer and the worker's incapacity was caused or materially contributed to by injuries occurring both before and after a relevant increase came into effect. The payment of compensation pursuant to an award for that incapacity is not made "by virtue of" s.2A(3), s.2D(1) or s.2D(2) unless it is made "in respect of" an injury suffered before the relevant increase came into effect. If material injuries (that is, injuries causing or materially contributing to an incapacity) were suffered both before and after a relevant increase came into effect, are the first two conditions in the preceding paragraph satisfied? The statute is silent on this question but the answer, I think, can be derived from a consideration of the general scheme of the provisions introduced to ensure that an employer would be fully covered in meeting the increased payments prescribed by or in accordance with the 1975 Amendment and the 1979 Amendment. The cover was to be provided either by the current policy of insurance or the relevant Fund: one was exclusive of the other ((43) see s.2B(3), s.2E(3).). In the postulated case, the employer is either indemnified under the current policy or recompensed from the relevant Fund.

29. The statutory Funds were created to ensure that insurers which would otherwise be liable to indemnify the employer against whatever liability the Act imposed upon him could be recompensed to the extent that that liability was unfunded by premiums. When a liability arising from a material injury suffered while the insurer was on risk is retrospectively increased in rates or amounts above the rates and amounts applicable when the premiums were fixed, the increase can be covered, if at all, only by erosion of the insurer's expected profit or by recompense from another fund. The 1975 and 1979 increases in rates and amounts were funded by providing for recompense out of the IGCSF and WSF. The IGCSF and the WSF are the Funds which were to bear the additional costs of the 1975 and 1979 increases arising from the pre-increase suffering of a material injury. The supplementation was provided in relief of liability that would otherwise have had to be borne under the statutory policies by insurers which had been on risk before the respective increases. But if a current policy obliges an insurer to indemnify the employer against liability to an injured worker in respect of an injury suffered during the policy period, there is no erosion of the insurer's expected profits. The premiums paid to secure current policies that afford cover at the current rates are justly burdened by liability to indemnify employers against claims arising from current injuries. The insurer cannot look to a fund for recompense merely because a liability to pay the same amount was imposed in respect of a different injury suffered during an earlier, pre-increase, policy period. The statutory Funds were not created to fund liabilities to meet claims arising from injuries suffered post-increase during the period of a current policy. As liability to indemnify an employer under a current policy extends to the full amount awarded, it is not right to treat a payment made in discharge of that liability as a payment of compensation in respect of material injury suffered before an increase became effective and, on that account, to constitute a payment of an "additional amount" for the purposes of s.2B(5) and s.2L.

30. An employer is liable to pay compensation at the post-increase rate for a worker's incapacity and that rate is payable in respect of the postulated post-increase injury, albeit the same rate is payable in respect of any postulated pre-increase injury. As a payment made in discharge of that liability is made in respect of the post-increase injury, the payment is not a payment of an "additional amount" as defined by s.2B(5) and s.2L. And if no amount so paid "on behalf of" the employer is an "additional amount", s.2C(5) and s.2G(1) - which provide for an insurer to pay "on behalf of an employer any additional amount payable" - do not apply and, in consequence, an insurer has no entitlement to be recompensed from a statutory Fund under s.2C(7) or s.2G(3).

31. This is the position whether or not the employer was insured by the same or by different insurers at the times when the worker suffered the postulated pre-increase and post-increase injuries that materially contributed to his incapacity. The employer's liability is the same, whichever insurer provides his indemnity and whatever be the injury in respect of which the compensation is paid. Therefore, no insurer can be required to pay, and none is entitled to be recompensed for paying, an "additional amount". That is not because of any limitation which s.2C or s.2G imposes on the insurer's liability to indemnify the employer; it is because the subject of indemnity - the employer's liability to the worker - does not engage the relevant provisions of those sections. The first question should therefore be answered: no.

32. The answer to the second question as to the entitlement to recompense of an earlier insurer which contributes to a payment of compensation also depends on satisfaction of the statutory conditions of entitlement. In particular, it is critical to ascertain the character of the contribution made by the earlier insurer. As an insurer is obliged to provide indemnity only in respect of an employer's liability in respect of injuries suffered while the insurer is on risk, an earlier insurer is obliged to pay only in respect of an earlier injury; a later insurer only in respect of a later injury. Where an insurer is liable to pay and makes a payment on behalf of an employer to an incapacitated employee who has suffered a material injury after the relevant increase became effective, the payment is made in discharge of the insurer's obligations under its policy. It is not a payment made "in respect of" a material injury suffered before that insurer came on risk or after that insurer ceased to be on risk.

33. An insurer is entitled to recompense only if the payment of compensation to the worker is made (i) by the insurer (ii) on behalf of the employer. An insurer which makes a payment of compensation on behalf of an employer may have a right to contribution against prior insurers either on general principles ((44) see Albion Insurance Co. Ltd. v. Government Insurance Office (N.S.W.) [1969] HCA 55; (1969) 121 CLR 342 at 346, 349-350, 352; Commercial and General Insurance Co. Ltd. v. Government Insurance Office (N.S.W.) [1973] HCA 51; (1973) 129 CLR 374 at 379-381; Australian Eagle Insurance Co. Ltd. v. Federation Insurance Ltd. (1976) 15 SASR 282 and Australian Eagle Insurance Co. Ltd. v. Mutual Acceptance (Insurance) Pty. Ltd. (1983) 3 NSWLR 59 at 64; cf. Manufacturers Mutual Insurance Ltd. v. National Employers' Mutual General Insurance Association Ltd. (1991) 6 ANZ Ins Cas at 76,964.) or under a contribution agreement between them. But an insurer which contributes to another insurer's payment in discharge of the first insurer's contractual or equitable obligation to the other insurer is not making a payment to a worker on behalf of the employer.

34. It may be said that an insurer which pays the worker makes the payment as agent for the insurers which are bound to contribute. If that be so, entitlement to recompense nevertheless depends on the payment being made on behalf of the employer and, if the employer is not liable to pay an 'additional amount', the payment creates no entitlement in any insurer to be recompensed by a statutory Fund. Where a worker's incapacity is materially contributed to by pre-increase and post-increase injuries suffered while in the employment of the same employer, no insurer is entitled to recompense.

35. There is a disparity between the position of a single employer who is insured by a succession of insurers at the respective times when the injuries were suffered and a succession of employers at the respective times when the injuries were suffered, each being insured under a different policy. In the latter case, it is possible, at least in theory, for the worker to recover compensation at the post-increase rate from an employer of the pre-increase period so that that employer's liability includes a liability to pay an additional amount at the post-increase rate. And that is so even though the concurrent liability of the last employer, who is liable to pay at the same rate, is not to pay an additional amount. The single employer, in the former case, like the last employer in the latter case, is not liable to pay the post-increase rate "by virtue of" s.2A(3), s.2D(1) or s.2D(2).

36. The disparity between the positions creates an anomaly in the latter case. If the payment be made by the insurer of the last employer on behalf of that employer, no recompense from the statutory Funds can be claimed: no "additional amount" was payable by the employer. But if the payment be made by the insurer of a pre-increase employer on behalf of that employer in respect of a pre-increase injury, that insurer pays an "additional amount" and is entitled to recompense from the relevant statutory Fund. If that insurer be entitled also to contribution from subsequent insurers which would be liable to make the same payment - a question that it is unnecessary to determine ((45) But cf. Eagle Star Ltd. v. Provincial Insurance Plc. (1994) 1 AC 130.) - the earlier insurer may acquire a windfall benefit. The anomaly may be removed or diminished if Her Majesty or the Treasurer, in whom is vested the Fund out of which the recompense is paid, be subrogated to the rights of the claimant insurer to contribution from other insurers. However that may be, such anomaly as there is results from the conferring of a statutory right to recompense only upon the insurer of a pre-increase employer who is liable to pay an additional amount and the absence of a right to recompense in the insurer of the post-increase employer who is concurrently liable to pay compensation at the same rate. The statute is not concerned with the adjustment of the liabilities of insurers inter se. But it would be unusual, one imagines, that compensation would be paid to an incapacitated worker by any insurer other than the insurer on risk when the last contributing injury was suffered. If that injury was suffered post-increase, the payment made on behalf of the employer (whether the only or the last relevant employer) does not include a payment of an additional amount. The second question must be answered: no.

37. It follows that:

(i) C.E. Heath was not entitled to recompense from the statutory
Funds, for its payment to Mr Senzo must be taken to have
been made in discharge of its policy obligations on behalf
of Mr Senzo's only employer whose liability to pay at the
post-increase rate of compensation was not by virtue of
s.2A(3), s.2D(1) or s.2D(2). Therefore C.E. Heath's payment
did not include an additional amount payable by Mr Senzo's
employer.
(ii) None of the prior insurers of Mr Senzo's employer is
entitled to recompense for none of them paid Mr Senzo any
amount on behalf of the employer.
(iii) Baltica is not entitled to recompense for it did not pay
Mr Carter any amount on behalf of his employer and the
payment to Mr Carter by AMP on behalf of his employer must
be taken to have been a payment made in respect of an injury
suffered when AMP was on risk.

38. The appeals must therefore be allowed with costs, the judgment of the Full Court of the Supreme Court of Victoria set aside and in lieu thereof the appeals to that Court should be allowed with costs, the orders 1 and 2 made by Tadgell J be quashed and in lieu thereof in each case:

1. It be declared that no defendant was entitled to receive
supplementation payments.
2. The costs of the plaintiff of the proceeding up to the date
of this order, including costs reserved, be paid by the
defendants.

DEANE J I agree with the judgment of Brennan J.

DAWSON J I agree with the judgment of Brennan J and with the orders which he proposes.

TOOHEY J I agree with the judgment of Brennan J and with the orders his Honour proposes.