Nohil Pty Ltd v Gre Workers' Compensation Insurance (NSW) Ltd and Others [1995] NSWCC 9; (1995) 11 NSWCCR 69 (24 March 1995)

[1995] NSWCC 9; (1995) 11 NSWCCR 69 (Matter No. 16477/93)

NOHIL PTY LTD V. GRE WORKERS' COMPENSATION INSURANCE (NSW) LTD AND OTHERS

Compensation Court of New South Wales: Manser J

28 February, 1 March 1995 (H)

28 February, 24 March 1995 (J)

Insurance - Jurisdiction - Exclusive jurisdiction of Compensation Court to determine matters arising under Act - Whether includes a declaration that employer entitled to indemnity from insurer - Workers Compensation Act 1987, section 107

Insurance - Uninsured Liability and Indemnity Scheme - Jurisdiction of Compensation Court to declare that employer is not liable to reimburse WorkCover - Workers Compensation Act 1987, section 145(3) and (4)

Insurance - Liability of insurer - Scope of risk - "Business" in respect of which employer indemnified - Business described as "Dry cleaning and Directors" - Worker engaged in work of "handyman" - Injured on site of future registered office of employer - Workers Compensation Act 1987, section 159(4)

Words, phrases and maxims - "Business" - Workers Compensation Act 1987, Section 159(4)

G.R.Graham, for the applicant

P.M. Donohoe QC and C.R.R. Hoeben, for first respondent

D.R. Benson, for second respondent

C.E. O'Connor QC, appeared for third respondent

28 February 1995

Ex tempore

MANSER J: This is an unusual application. It is an application by an employer for the determination of its liability to pay compensation to a worker. In the alternative, the employer seeks a declaration that it is entitled to indemnity from an insurer in respect of any compensation which the employer is liable to pay to the worker and, as a further alternative, for a declaration that the employer is not liable to reimburse any sum to the WorkCover Authority in respect of payments made by it to the worker.

As I understand the factual background, the applicant, Nohil Pty Ltd (Nohil), is engaged in the trade or industry of dry cleaning and it entered into a contract of insurance with GRE Workers' Compensation (NSW) Ltd (GRE), the first respondent in these proceedings, under which it declared that it was engaged in the industry aforementioned and in that of "directors".

As part of its operation, the applicant, Nohil, established a number of dry cleaning premises in the western suburbs of Sydney, which it administered from a room set up at the home of the directors and principals of Nohil, Mr and Mrs Thornton. At some stage, which has not yet been made clear, the Thorntons proposed the erection of a new home at Penrith, their then current home being at St Marys.

The worker, Mr Kojta was, as I understand it, an employee of Nohil at all material times and it was part of his duties to be a roustabout at one or more of the dry cleaning establishments and, when he could not be usefully employed there, to work in and around the St. Marys establishment which was the site of the administrative headquarters.

On the day of his injury, he was however at the Penrith site and was there assisting in picking up around the site where construction work was being carried on. During the operation of moving a caravan from the site, an accident occurred which I gather involved the caravan falling on Mr Kojta when he was attempting to perform some work under it.

The worker made an application to the WorkCover Authority (the Authority), the third respondent in the proceedings, to recover compensation from the Uninsured Liability and Indemnity Scheme, the Authority being, by the statute, the administrators of that scheme.

The Authority, I am informed, complied with section 142 of the Workers Compensation Act 1987 (the Act), and received, during the course of correspondence, a denial of liability to indemnify the employer from the first respondent, GRE.

The Authority then processed the claim made on the WorkCover Authority Fund and, as I understand it, is making payments to Mr Kojta at the present time. He is, although this is not relevant at the moment, a paraplegic.

The Authority then, pursuant to section 145(1), served upon the employer, Nohil, a notice requiring it to reimburse the Authority for moneys which it had paid to Mr Kojta and presumably moneys which it is currently paying.

It was always in contemplation, as I remember the way in which these matters worked under the 1926 Act, that the amount declared to be reimbursed was always a floating amount and was, subject to proper observance of procedures, regularly adjusted, having regard for the nature of continuing payments made under the workers compensation legislation.

The employer, Nohil, has joined to these proceedings GRE, upon whom it is conceded no notice has been served by the Authority.

GRE attends before me in the person of Mr Donohoe QC, with Mr Hoeben, to argue that the Court has no jurisdiction to hear and determine any issue which might arise between it and Nohil about the construction of the contract of insurance between them.

Mr Donohoe relies, inter alia, upon the decision of the Court of Appeal in the matter of Miltenburg v. AMP Fire & General Insurance Co Ltd, a decision of the Court given on 22 June 1981 and which was subsequently affirmed by the Privy Council some nine months later [see AMP Fire & General Insurance Co Ltd v. Miltenburg (1982) 56 ALJR 703] .

The questions which clearly arise in the arguments so far before me, are questions which should be resolved at the commencement of the proceedings, so that parties before me may adjust their positions to deal with the matters which my judgment will raise.

It will, I think, be of some value to briefly describe the statutory framework in which the Court exercises its jurisdiction, if jurisdiction it indeed has, so that others may have the benefit of the whole of the Court's reasoning processes.

The Uninsured Liability and Indemnity Scheme is no novel facility. It was established under the 1926 Act and so far as here relevant, provided more or less the same rights and obligations as does section 138 et seq of the 1987 Act.

However, it ought to be remembered that in addition to the Uninsured Liability and Indemnity Scheme, the Act of 1926 and the 1987 Act, provide for a system of compulsory insurance for workers in industry.

Dealing only with the current Act, the obligation is imposed on employers under section 155, in the following terms:

"(1) An employer (other than a self-insurer) shall obtain from a licensed insurer, and maintain in force, a policy of insurance that complies with this Division for the full amount of the employer's liability under this Act in respect of all workers employed by the employer and for an unlimited amount in respect of the employer's liability independently of this Act (being a liability under a law of New South Wales) for any injury to any such worker."

The succeeding sections deal with various aspects of insurance but then section 159 makes provision for the form of a policy of insurance to be only such as may be determined by regulation and prohibits the inclusion of matters within the policy of insurance which the regulations do not provide for.

One of the important matters which is to be included in the statutory form of policy, is found in section 159:

" (2) A policy of insurance shall provide that:

(a) ...

(b) the insurer is bound by and subject to any judgment, order, decision or award given or made against the employer of any such worker in respect of the injury for which the compensation or amount is payable.

(3)-(4) ...

(5) A liability, under a policy of insurance, of an insurer to a worker under a provision inserted in the policy under subsection (2) or (3) is enforceable as if the worker were a party to the policy."

It has been accepted over time that a worker may proceed directly against an insurer for recovery of compensation, although I must confess I have not seen an example of that in this Court in the time that I have been on the bench and I know of no other proceeding in another Court in which such a right was attempted to be enforced, in that period.

However, the right is nevertheless there and it is a right which arguably at least, is one which arises under the Act and not strictly under the contract of insurance between an employer and an insurer. However, the relevance of that will become clearer as this judgment proceeds.

The present case involves the invoking of the jurisdiction of the Court under section 145(3).

That subsection is in these terms:

" (3) A person on whom a notice has been served under subsection (1) in respect of an injured worker may, within the period specified in the notice, apply to the Compensation Court for a determination as to the person's liability under this Act."

Subsection (4) then deals with the specific powers of the Court in relation to such an application. It says:

" (4) The Compensation Court may hear any such application and may:

(a) make such determination in relation to the application; and

(b) make such award or orders as to the payment of compensation under this Act to or in respect of the injured worker concerned,

as the Compensation Court thinks fit."

Consequently, it seems clear that the jurisdiction of the Court is invoked by an application by a person in respect of whom a notice has been served under section 145(1) by the WorkCover Authority. That is the mechanism which has been employed here.

It seems to me that once invoked, the jurisdiction is such as to permit the Court, irrespective of the identity of the originating party, to make such awards or orders as to the payment of compensation under this Act to or in respect of the injured worker concerned, as the Court thinks fit.

It has been argued that in order for the jurisdiction to be invoked in respect of the determination of the issue between the insurer and the insured, it would be necessary, inter alia, for a notice to have been served upon the insurer by the WorkCover Authority.

Had that been done, it seems to me that there could be no question arising as to the participation of the insurer. It would then be a person who, in the event that it was anxious to have determined its liability under the Act, would have been the party moving the Court to make such a determination.

It seems to me to be a curious state of affairs that the jurisdiction of the Court to make a determination in relation to an application and to make such awards or orders as to payment of compensation as it thinks fit, should depend upon the identity of the recipient of the notice to reimburse the WorkCover Authority.

If the argument be correct, it would seem to me to not necessarily raise the question at issue here as a primary consideration. For example, if the employer, as I anticipate it, will say in this application that it is not liable to reimburse the Authority because it was at the relevant time clothed with the benefit of a policy of indemnity issued by GRE, then it would be within the power of the Court, in my view, to order that the insurer pay compensation to the worker and to reimburse the Authority provided that the Authority was able to discharge the obligation that rests upon it to specify the appropriate amount which would be the subject of an award.

Consequently, although there is high authority for the proposition that the simple question of the construction of a contract of insurance is one which is not within the exclusive jurisdiction of this Court, and by necessary implication within the jurisdiction of the Supreme Court of New South Wales, such a general proposition must give way to the clear intention of the statute which confers upon this Court exclusive jurisdiction to hear and determine matters which arise under this statute.

Such has been the considered view of members of the Supreme Court since Liverpool & London & Globe Insurance Co Ltd v. J W Deaves Pty Ltd [1971] 45 WCR (NSW)172.

In my view Miltenburg does not establish a principle that under no circumstances can the Court deal with an issue which may exist between an insurer and an insured if that issue arises as a necessary component of a matter which properly arises under the statute and is within the exclusive jurisdiction of this Court. After all, Miltenburg itself makes it clear that the matter which the Courts were there dealing with was not an attempt by Miltenburg to exercise any right which arose under the statute. Indeed, it could be said that he positively eschewed his rights under the Workers Compensation Act 1926. Had it been the case that Mr Miltenburg had attempted to exercise them under section 18(3)(a) of the 1926 Act, the Supreme Court would have been excluded from the field in the way in which it was considered appropriately excluded in the Liverpool & London & Globe Insurance Co Ltd case.

Consequently, I find that the Court has jurisdiction to deal with this application and to consider the matters raised in the application for determination in paragraphs 1 and 3.

So far as paragraph 2 is concerned, I express no view as to whether that matter on its own would found jurisdiction, but my present inclination is that it would not, as an issue solely to be determined.

24 March 1995

Reserved

MANSER J: This is an application by an employer, Nohil Pty Ltd, which disputes a demand made upon it by the WorkCover Authority pursuant to section 145 of the Workers Compensation Act 1987 (the Act).

The applicant company, when originally formed, or when it began trading, in about 1976, was a builder/developer. Because of some difficulties which it had with cash flow, it bought a dry cleaning operation described as Jet 60 Dry Cleaners Pty Ltd in 1982. Subsequently Jet 60 Dry Cleaners Pty Ltd was re-named Tyne Pty Ltd and Nohil Pty Ltd conducted the dry cleaning operations under the name of Jet 60 Minute Cleaners.

Prior to 1 July 1991, Nohil Pty Ltd (Nohil), or its predecessor Jet 60 Dry Cleaners Pty Ltd, had been insured for workers compensation purposes by Mercantile Mutual Insurance Ltd, one assumes by its pre- and post-30 June 1987 styles and titles. Because of some payment instalment dispute, Nohil decided to change its insurer and, as I understand it, spent some period with the FAI Insurance Co before seeking insurance cover from GRE Workers' Compensation Insurance (NSW) Ltd (GRE).

A proposal for insurance was completed by Nohil and signed by the Managing director, Mr Noel Thornton on 23 July 1991 in respect of a period of insurance from 1 July 1991 to 30 June 1992.

In response to Question 3: "Nature of Business, Trade or Work in respect of which indemnity is required", the words "Dry Cleaning and Directors" have been written on the form of proposal.

In answer to the Question 4 "Nature of Works, Factory, Property of Premises where Business, Trade or Work is carried on", the words "6 retail shops/factories plus office" have been written on the form.

On the proposal no addresses have been included for the six retail shops/factories nor has an address been given for the "office". However it was said by the Managing director, Mr Thornton, who gave evidence, that the retail shops were located in various suburbs in the western part of Sydney from Parramatta to Penrith and including both cities. It also transpired that the office of Nohil was located in a garage extension of the home of Mr and Mrs Thornton at 22 Mamre Road, St Marys. This address was also the registered office of Nohil.

In the office at St Marys there were a number of desks occupied by Mr Thornton, Mr Ford (who is described by Mr Thornton as "our son") and a woman "Jane" who was the Secretary or a secretary. From these premises the business of Jet 60 Minute Cleaners was conducted.

In addition to the retail shops there was a storeroom located in St Marys in which was located the various consumable items used in the business, such as solvents, plastic bags, etc. and various items of spare equipment and machinery which could be pressed into service in the event of a breakdown occurring at one of the retail shops.

At some time in 1988, Mr & Mrs Thornton acquired a property at 53 Nepean Avenue, Penrith, upon which was situated a small cottage of fibro construction. This property would seem to have been more valuable than the nature of the humble cottage would suggest because it was located on the banks of the Nepean River.

At all events, between the time of acquiring the property and the time when the cottage was finally demolished at some time prior to about August or September 1991, but including the financial year ending 30 June 1992, the cottage was let and the Thorntons derived income, which Mr Thornton, at least, declared in his tax return for that financial year.

At a time which is not clear, the Thorntons engaged a local architect, Robyn McKay to draw plans of a new house to be erected at Nepean Avenue and these were submitted to the local council for approval. Included in those plans were spaces described as "study" and "library" which Mr Thornton said were intended to be the new offices of Nohil for the conduct of the Jet 60 Minute Cleaners operation. Mr Thornton assumed the status of an owner builder. He had engaged, presumably among others, a Mr Hale and his partner to perform work on the building project. Mr Hale was called to give evidence by GRE and he said that he had been on the site for about 2 months before an incident occurred in December 1991 involving one Daniel Kojta.

The worker Kojta was an acquaintance of a friend of Mr Thornton's and this friend had suggested that Kojta would be worthy of employment by Nohil. Kojta was interviewed and Thornton formed a favourable impression of him and subsequently employed Kojta for a couple of days at Nepean Avenue cleaning up some blue metal that had been delivered to the site. As a result of that experience, Thornton offered Kojta employment with Nohil as a "handyman". The duties which he was to perform from the time he commenced in August 1991, were to deliver chemicals and other items to the various stores, do gardening around the premises at Mamre Road and generally be available for a variety of duties associated with the dry cleaning operation.

Mr Thornton gave evidence that the dry cleaning trade is cyclical in nature and from about September or so, the business fell away until about March or April when it would start to pick up reaching its peak in June, July, August.

According to Mr Thornton, because Kojta had been employed in August his time was, at first, taken up with a fairly constant commitment to the dry cleaning operations and looking after the property at Mamre Road. With the decline in business in the later months of 1991, it became more difficult for Nohil to keep Mr Kojta occupied so he was directed to work at the Nepean Avenue site, keeping the site tidy, mowing the lawns which had been laid, cleaning the area which was intended to be occupied by Nohil as its office and ensuring that the driveway was kept clear of sharp objects, such as nails, which could puncture the tyres of Mr Thornton and others.

Mr Hale, the carpenter, said that for the time that he was on the site prior to Mr Kojta's injury, a period of some two months, Kojta was also there for most of the time. There was one occasion that Mr Hale recalled where Kojta was absent and when he enquired as to his whereabouts on the previous day, he was informed that Kojta had been attending to dry cleaning business.

Mr Thornton conceded to Mr Donohoe QC, that it could have been the fact that Kojta had spent most of his time at the Nepean Avenue site in the months of November and December, up to the time of his injury. Consequently, whatever may be said of Mr Kojta's activities in the few months following his employment by Nohil, it seems apparent that in the last six weeks or so he was engaged almost exclusively at the Nepean Avenue site, with only occasional forays into the other world of Nohil's dry cleaning operations. There is no dispute that Mr Kojta was employed and paid by Nohil and that he carried out his duties at Nepean Avenue at the direction of Mr Thornton, the managing director of Nohil.

It was also said, although given the evidence it is hard to be precise as to when this happened, that Kojta had performed work at Yarramundi where Mr Ford's home was located. Clearly, given the concession by Mr Thornton and the evidence of Mr Hale, this could only have been prior to November or on the one day when Mr Kojta was missing, apparently attending to dry cleaning business.

The Court has not been given the full detail of Mr Kojta's injuries, suffice to say that he was carrying out some work under a trailer which had been loaned to Mr Thornton by a friend (and apparently the friend who had introduced Kojta), which had a flat tyre. The caravan fell onto him and as a result of his injuries he has been rendered a paraplegic.

Mr Kojta lodged a claim for compensation with his employer. A claim form was completed by him, apparently while he was an in-patient at the Prince Henry Hospital on 2 January 1992. Mr Kojta's signature was witnessed by Mr Thornton and he also completed the section of the form which was set aside for completing by the employer.

By Exhibit K, GRE informed Nohil, that is to say Jet 60 Minute Cleaners, that it was investigating the claim and had referred the matter to the WorkCover Authority.

Exhibit N is a collection of documents which evidence the resistance of GRE to the worker's claim from, at least, 9 January 1992. In a letter to the Conciliation Officer, WorkCover Authority dated 9 April 1992, GRE conceded, based on the information contained in its assessor's report, that Mr Kojta was a worker within the meaning of the Act because "there is no evidence to suggest otherwise". The evidence before me and the position adopted by GRE in the trial would not suggest otherwise either.

The letter continues that: "The real question to be decided is whether the policy of insurance issued to the insured has application". That is, as the author of the letter, Mr D.H. Eade, Claims Manager correctly observes, the issue which is before the Court.

GRE stated its position quite clearly that: "In this case the business of the insured is that of dry cleaning and in our view we consider that the policy of insurance does not operate to indemnify the insured in the subject circumstances".

The letter concludes with an expression by GRE that it looks forward to receiving the advice of the Conciliation Officer and directions on the claim in the near future.

It is clear therefore that GRE had stated its opposition as early as the day after it received notification of the claim, 9 January 1992, and had made firm its position by 9 April 1992.

No doubt in the face of this stance by GRE, a claim was made by the worker on the WorkCover Authority Fund (the Fund) established under the Uninsured Liability and Indemnity Scheme (the Scheme) and this was duly considered and paid by the WorkCover Authority as the administrators of the Fund. Pursuant to its powers under section 145(1) of the Act, the Authority served upon the applicant Nohil a notice demanding payment to it of the moneys which it had paid out of the Fund to or on behalf of the worker.

The Notice is Exhibit A, dated 18 November 1993 and signed by Mr A.N. Kimber, Manager Claims. Attached to the notice is a schedule particularising the claim under the Scheme which also draws attention to the statutory provisions under which the notice is authorised, as is the subsection relating to making application to this Court for a determination of its liability under the Act.

In a matter of days after receiving the notice under section 145(1), Nohil filed with the Court an application for determination under section 145(3). The application was in the following terms.

"Application is hereby made:

1. For the determination of the liability, if any, of an amount for compensation payable by the application [sic] to the second respondent.

2. For a declaration that the applicant [Nohil] is entitled to indemnity from the first respondent [GRE] in respect of any compensation which the applicant is liable to pay to the second respondent [Kojta].

3. For a declaration that the applicant is not liable to reimburse any sum to the third respondent [WorkCover Authority] in respect of payments made to the second respondent.

4. For an award:

(a) Declaring that the applicant is entitled to indemnity from the first respondent in respect of any compensation that the applicant is liable to pay to the second respondent."

The particulars supplied with the application for determination contain the following relevant matters.

2.

Name, Place of Business and nature of business of applicant.

Nohil Pty Ltd, P.O. Box 285, St Marys, dry cleaning and directors.

3.

Particulars of insurance.

The applicant held a policy of insurance with the first respondent at the relevant times and claims indemnity pursuant to that policy.

4.

Nature of employment of work at time of injury.

Handyman

5(b)

Place of injury.

(b) Nepean Avenue, Penrith

(c)

Nature of work at time of injury

Handyman

(d)

Cause of injury

Whilst endeavouring to secure a chain to an axle of a caravan, the caravan overbalanced on top of him

From the chronology of events so far recounted, it can safely be assumed that the Authority acted at all times in accordance with the dictates of the statute in repectr of its dealings with GRE and its handling of the claim by the worker upon the Fund. There has been no claim made by any party before me that this was not so.

In response to the application by Nohil, GRE filed an answer which was subsequently amended. The amended answer was that which GRE relied upon in these proceedings. The answer reads, omitting formal parts, as follows:

"That the first respondent is not liable to indemnify the applicant in respect of any compensation paid by the applicant or the third respondent to the second respondent.

That the Compensation Court of New South Wales has no jurisdiction to deal with the matters raised in the Application since those matters are not matters arising under the Workers Compensation Act, 1987 nor under the Compensation Court Act 1984.

PARTICULARS

The claim made by the applicant involves the construction of the terms of the statutory workers compensation policy and the constructions of the insurance proposal."

The Authority filed an answer which, having regard for its dealing with the worker's claim, raises issues which would have been appropriate to raise in resisting the worker's claim. The answer is as follows:

"1. That the said third respondent denies the second respondent was employed by the applicant and was not a worker for purposes of the Act.

2. Further, or in the alternative, if the second respondent was a worker within the meaning of the Act, which is denied, the injury to the second respondent did not arise out of the employment of the second respondent by the applicant.

3. Further, or in the alternative, if the injury arose out of the course of the second respondent's employment by the applicant, the applicant is entitled to indemnity from the first respondent.

4. Further, or in the alternative, if the applicant is not entitled to indemnity from the first respondent for the second respondent's injury, the third respondent is entitled to recover any payments made to the second respondent from the applicant pursuant to section 145(1) of the Workers Compensation Act."

The relevant section of the Workers Compensation Act (section 145) reads as follows:

" (1) The Authority may serve on a person who, in the opinion of the Authority, was:

(a) in respect of an injured worker to or in respect of whom a payment has been made under the Scheme, an employer at the relevant time; or

(b) an insurer under this Act of such an employer,

a notice requiring that person, within a period specified in the notice, to reimburse the WorkCover Authority Fund an amount (not being an amount exceeding the amount of the payment made) specified in the notice.

(2) The Authority may, by instrument in writing, waive the liability of an employer under subsection (1) to reimburse the WorkCover Authority Fund an amount, if the Authority, in respect of the amount, is satisfied that:

(a) the amount is beyond the capacity of the employer to pay;

(b) the employer could not reasonably have been expected to regard himself or herself as an employer at the relevant time;

(c) the employer, not being a corporation, is bankrupt and the liability under this section is not provable in bankruptcy;

(d) the employer, being a corporation, is being wound up and the liability under this section is not provable in the winding up;

(e) the employer, being a corporation, has been dissolved; or

(f) it would not be commercially feasible for the Authority to attempt to recover the amount.

(3) A person on whom a notice has been served under subsection (1) in respect of an injured worker may, within the period specified in the notice, apply to the Compensation Court for a determination as to the person's liability under this Act.

(4) The Compensation Court may hear any such application and may:

(a) make such determination in relation to the application; and

(b) make such awards or orders as to the payment of compensation under this Act to or in respect of the injured worker concerned,

as the Compensation Court thinks fit.

(5)-(6) ...

(7) An order by the Compensation Court that the Authority is to be reimbursed by a person named in the determination concerned, may be enforced under section 23 of the Compensation Court Act 1984."

By agreement between the parties, the jurisdictional question raised by GRE's answer was argued as a preliminary point. It was resolved against GRE for reasons which were given in the judgment which forms the earlier part of this document. The Court then proceeded to deal with the substantiative application by Nohil. In addition to the factual matters to which I have already referred, some additional facts should be mentioned.

Although there was some disagreement about the stage to which the works at Nepean Avenue had progressed at the time that Mr Kojta was injured or at the later time when Mr Hale and his partner left the site, perhaps just before Christmas 1991, the photographs which were taken on the day of Kojta's injury, establish that the building works had still a long way to go before Nohil's expectation that it would move its office to Nepean Avenue would be realised.

Although there may have been some confusion as to the exact date upon which Nohil moved into the premises at Nepean Avenue, there is no doubt that it did so in the latter part of 1992.

Exhibit H, which includes a plan of the office at Nepean Avenue and a series of photographs of the office, establishes that the administrative office of Nohil has been, as had been intended, located at Nepean Avenue.

Exhibit E establishes that the registered office of Nohil and other companies including Kyne Pty Ltd, was changed to the Nepean Avenue address on 23 February 1993.

In contrast to the situation which applied at Mamre Road where rent was not charged by the Thorntons, at Nepean Avenue the Thorntons charged, and Nohil paid, rent for the space which it occupied in the Thornton's home. However, unless my recollection of the evidence is defective, there was no evidence that it was intended, in 1991, that Nohil would pay rent to the Thorntons when it moved in upon completion of the building or that part of it which it was intended Nohil would occupy.

After the evidence was completed, but before addresses commenced, the Court was referred to the various authorities upon which the parties would rely, and I indicated a preliminary view about the issues which were concerning me at the time. I thought this would be of assistance to counsel in that it would enable them to address these specific matters of concern to me whilst being free to develop their own arguments. It subsequently became clear that the case for GRE embraced many of the points which were of concern to me at that time.

Central to my concerns was that the activity at Nepean Avenue upon which the injured worker Kojta was engaged, formed no part of Nohil's business but was an incident of the activity of Mr Thornton as an owner builder of a house at 53 Nepean Avenue, Penrith. Mr Donohoe kindly made available to the Court the points of his case which he elaborated on in submissions. For the sake of convenience I set out Mr Donohoe's points hereunder:

1. Nohil had no business other than dry cleaning.

2. The building construction work was the business of Mr Thornton.

3. This was work done by him not as a business but for his home.

4. It cannot be said that because he was also building to accommodate the administrative office of Nohil that Nohil was carrying on a business.

5. The words "and Directors" were wrongly inserted there. That is in the proposal for the insurance (my emphasis). They were inserted because of the words "general employees" in the heading of the policy.

6. If one asks what meaning can be given to the words where they do appear, then the possibilities include Nohil's business of:

(a) providing Directors

(b) serving Directors

(c) being itself a Director.

7. These businesses may have been in contemplation at the time of proposal but they were not carried on at the time of injury.

Mr O'Connor QC, appeared for the Authority, Mr Benson appeared for the injured worker and Mr Graham for Nohil. All submitted, in one form or another, that the business of Nohil, as Mr Donohoe conceded, was at all times that of dry cleaning.

All counsel appeared to have no deeply felt explanation for the appearance of the words "and Directors" in the proposal for insurance form but in my opinion those words were intended to convey to the insurer that it was the requirement of Nohil that cover was to be extended to working directors. However, although the question of the status of working directors, per se, does not arise in these proceedings, an attempt was made by Mr Graham to imply, as I understood his submission, that the insurer was being put on notice that Nohil was intending to provide services to its directors. He went further to say that the time for the insurers to have sought clarification of Nohil's intentions including "and Directors" in the proposal was at the time the proposal was submitted. The failure of the insurer to raise a query at the time meant, according to Mr Graham, that it was estopped from denying indemnity where an injury had occurred in circumstances where Nohil had intended that coverage be effected.

Before turning to the resolution of this application, I think that I should state my views as to the powers of the Court to act when its jurisdiction under section 145 is invoked. It seems to me clear that the Authority has power to make a demand upon either or both an employer and an insurer. Section 145(1) says so.

Further, section 145(3) empowers "a person on whom a notice has been served under subsection (1)" to make application to the Court "for a determination as to the person's liability under this Act". Subsection (4), whilst empowering the Court to "make such a determination in relation to the application", does not suggest that the Court's powers to make awards or orders as to the payment of compensation under this Act to or in respect of the injured worker concerned, is confined to the person who makes an application to the Court for a determination of the person's liability under the Act.

In other words, once the jurisdiction of the Court has been invoked by "a person on whom a notice has been served under sub-section (1)", the Court is free to make such awards or orders in relation to the application as it thinks fit and is not confined to "a determination as to the person's liability under this Act".

In addition, the Court may make such awards or orders as to the payment of compensation to or in respect of the injured worker concerned as the Court thinks fit without being restricted to the making of such awards or orders against the person who had made the application.

Thus, if an application was made by an uninsured employer who disputed the worker's entitlement to compensation, the Court could determine the employer's liability to pay compensation but order the WorkCover Authority to make or continue to make payments to the worker concerned.

If, on the other hand, the person who had applied under section 145(3) for a determination "as to the person's liability under this Act", was an insurer who disputed the worker's entitlement to compensation in the circumstances, the Court would be equally free to make such awards or orders as to the payment of compensation to or in respect of the injured worker concerned against that insurer. This would be so because, although the employer is the person who is liable to pay the injured worker compensation, the Act provides that, according to Section 159(2):

" (2) A policy of insurance shall provide that:

(a) the insurer as well as the employer is directly liable to any worker insured under the policy and, in the event of the worker's death, to the dependants or other persons to pay the compensation under this Act or other amount independently of this Act for which the employer is liable; and

(b) the insurer is bound by and subject to any judgment, order, decision or award given or made against the employer of any such worker in respect of the injury for which the compensation or amount is payable."

Thus in the case here postulated, the Court would determine the liability of the employer, award compensation and order the insurer to make payment.

There would appear to be no difference in the powers of the Court exercisable under section 145 between the two examples given and that which arises in the instant case. For example, if the notice under section 145(1) had been served by the Authority on GRE and not Nohil and the defence raised against that notice was that the insurer was not liable to indemnify Nohil under the policy, then, if the Court decided against GRE, it would determine its liability under the Act and be entitled to make such awards or orders as to the payment of compensation to or in respect of the injured worker concerned, as it thought fit, against GRE. Although this course of reasoning appears to be directed to the question of jurisdiction and repeats some of the reasoning employed in deciding the issue of jurisdiction, it nevertheless has a bearing upon what the Court can do, if it were so disposed, in resolving the substantiative issues in this case.

In other words, if the Court came to the view that Nohil was liable to pay compensation to Kojta, that it had obtained and was maintaining in force a policy of insurance as required by the Act and was, therefore, not liable to make payment to the Authority as demanded in the notice, then the Court would be free to order GRE to make payment to or in respect of Kojta and to order that part of that compensation be paid to the Authority.

The power to order that part of the payment of compensation be made to the Authority, is a plenary power under section 145(1) and (3) or incidental to the exercise of the Court's power under those subsections by subsections (3) and (4).

I turn now to deal with the central issue in this case.

Disputes between insurers and employers about whether particular activities are embraced within the description of the employer's business or trade are not new. An interesting starting point, but by no means the earliest example of such a dispute, is the matter of National Insurance Co of New Zealand v. Watts [1971] 45 WCR (NSW) 331. That was an appeal by the insurer against an award of the then Workers' Compensation Commission which was grounded upon findings inter alia that the employer was insured in respect of the worker's injury and that the insurer was liable to indemnify the employer accordingly.

Briefly the facts were that the employer's business was described as "the business of a scrap metal dealer and no other". The employer, Perry, employed the worker Watts on the occasion in question. Watts had gone to some premises which contained a large number of metal items which the owners were selling at one of its colliery operations. In order to get to the scrap metal, a good deal of demolition work was required and certain arrangements were entered into by Perry with others for that work to be carried out. Watts was injured when he fell to the ground from the top of a boiler which he was in the process of cutting up with an oxy torch, so that pieces of the boiler could be carried away by Perry's trucks operated by Perry's drivers, for sale by Perry.

The defence raised by the insurer was that at the time of Watts' injury the employer Perry was not conducting the business of a scrap metal dealer but that of a building demolisher and thus the indemnity afforded Perry by the policy was not within "the limitation of the risk" (my emphasis). Part of the defence involved a reference to the arrangements between Perry and the others but the central issue in the case, as Aspery and Holmes JJA in their judgments described it, was "Whether the operation is being performed by Watts on behalf of Perry fell within the scope of the business of a scrap metal dealer".

The principal judgment is that of Aspery JA and the important passages in his Honour's judgment of relevance to this matter can be found at 339 where his Honour said:

"The circumstances that a person engaged in the business of a scrap metal dealer as an incident to that business does work which can also be performed in the course of carrying on a business of another description does not of itself change the essential nature of his business. For example, a restaurateur sells to his customers cigars and cigarettes and wines and spirits but no one would describe him as carrying on the business of a tobacconist or a wine and spirit merchant [authorities cited]. The sale of the cigars and cigarettes, the wines and spirits is merely incidental to the primary purpose of his profit-making enterprise as restaurateur. It would serve no useful purpose to multiply examples which immediately spring to mind for in so many instances a person incidentally pursues some activities in his business which another also undertakes as the chief purpose in a business of a different description. This is not affected by the addition of the words "and no other" to the description of the business. If the dismantling or the demolition of the boiler house removed Perry from the category of a scrap metal dealer into the category of a building demolisher, then the transport in his trucks of the metal, either to his yard at Regents Park or direct to his customers, would place him in the category of a carrier so that no indemnity could be claimed by him in the event of injury to his truck drivers. But this is merely an incidental, albeit a necessary, activity of a dealer in scrap metal.

Perry at all relevant times was a duly licensed scrap metal dealer and in the business of a scrap metal dealer it was necessary for him to obtain his scrap metal, his stock in trade, from installations upon the premises of third parties who, because of its condition, were unable to dispose of it as useable second-hand machinery and equipment. It would only be common sense to acknowledge that frequently bulky machinery and equipment which would provide scrap metal in a substantial quantity would be affixed more or less permanently to those premises and to remove it for sale would not only require it to be cut up into pieces but also necessitate its separation from the premises to which it had been affixed. In the present case except for the brick lagging around the four boilers as an integral part thereof and some sheets of corrugated fibro the whole of the boiler house was convertible to scrap metal. To dismantle the boilers and to cut them into pieces for transport involved the removal of the bricks. Of course, illustrations can be given to show that it is always a matter of degree. If Perry understood to pull to the ground a multi-storeyed brick building to obtain a trivial quantity of scrap metal, a different answer would doubtless be accorded. In the instant case no such case can be established on the evidence."

The presiding judge, Jacobs JA, agreed with Aspery JA as did Holmes JA but the latter gave a short separate judgment in which he said, at 340:

"What he was doing was cutting the metal part of a boiler with an oxy torch so that it could be carried by his employer's trucks to the employer's place of business. Of itself that must be part of the employer's business of scrap metal dealing. It is nothing to the point that around the metal there was brick lagging and RSJs. There was evidence that all that was part of a boiler. The contention that the employer was engaged as demolition work simply does not get any support from the facts - at any rate so far as the work had gone. Demolition was only subsidiary to the main task of dismantling the boiler for sale as scrap metal."

The facts in the aforementioned case so clearly support the ultimate decision that one wonders why the appeal was ever brought. However that case is, as I have said, a convenient starting point to consider the principles which ought to be applied in this case. Clearly the activity that Watts was engaged in at the time of his injury was incidental to Perry's business as a scrap metal dealer in the narrowest way. That is to say, if the business of a scrap metal dealer necessarily involved the dealer in locating, collecting and transporting, either to a depot or to a customer, the objects which were the subject of his business, then removing impediments to the collection of the metal has such an intimate relationship to the activity of collecting the scrap metal as to be almost indistinguishable from that activity. In other words, its relationship to the activity of collection is so intimate that to describe the removal of an impediment to collection as incidental to collection necessitates a stretch in the normal meaning of the language.

But Watts' case is useful in establishing the nearest limit of "incidental to a trade or business" as one can find in the authorities.

Of more recent vintage however, are two cases, the first delivered by Gallop J in the Supreme Court of the Australian Capital Territory on 27 August 1992 and the second delivered by the Court of Appeal on 19 May 1994.

The first of those cases, Hanley v. Hanley Pty Ltd (1992) 111 FLR 16, involved an action for damages by an injured worker against his employer. The facts which are relevant to the issue with which this Court has to deal are to be found at 19:

"Prior to 12 November 1986, when the defendant was incorporated in the Australian Capital Territory, the father of the plaintiff, Raymond James Hanley, carried on various occupations. The defendant was incorporated on 12 November 1986 and thereafter carried on various businesses and caused various business names to be registered. The businesses included selling wood, cutting concrete, sign writing and demolition. The demolition business commenced when the plaintiff's father took over a particular contract at the Quean-B Shopping Centre in Queanbeyan. It appears that the contractor, Noel Shepherd, was engaged in demolition work and the contract work at the shopping centre was mostly painting. Shepherd was not interested in that sort of work.

In March 1986 the defendant completed a proposal for workers compensation insurance in respect of the shopping centre contract with the first third party (Exhibit A) and in due course a policy substantially in the form required under the Workers Compensation Act 1926 (NSW) was issued on 8 April 1986 (Exhibit B). The business of the defendant was described in both the proposal and policy as "painters". The policy was renewed from month to month on payment of monthly premiums and endured until November 1987, which is, of course, well after the plaintiff's accident on 8 July 1987.

I repeat that the first third party did not deny that there was current at the time of the subject accident a policy of insurance issued by it extending to indemnify the defendant against, inter alia, any liability to pay damages for injuries received in the course of employment with the defendant. The basis upon which the first third party denied its liability to indemnify the defendant related solely to the contention that the policy extended to the business of painting and not to demolition.

Returning to the facts, I find that the defendant took out that insurance to cover the painting job at the Quean-B Shopping Centre and did not engage in any other painting work after taking out that policy. By the end of 1986 the defendant was engaged virtually solely in demolition work and a food van business, but not painting.

The plaintiff was employed by the defendant from August 1986, although he did not appear in the books of the defendant as an employee until May 1987. However, he was never employed as a painter. He was only ever employed on demolition work. The defendant never insured itself in respect of the demolition business with the first third party for workers compensation or common law damages."

At page 20 his Honour dealt with the relevant authorities, including State Mines Control Authority v. Government Insurance Office (NSW) (1964-1965) NSWR 1075 and National Insurance Co of New Zealand Ltd v. Watts (1971) 45 WCR (NSW) 331, before turning to consider the decision of the High Court in Registrar of the Workers'

Compensation Commission (NSW) v. National Employers' Mutual General Insurance Association Ltd [1978] HCA 57; (1978) 141 CLR 462.

That [last] was a case in which the worker had died as a result of a decompression illness contracted when diving for abalone in the course of his employment. The policy of insurance held by the employer described the business as "the business of fishing - vessel 'Nelly Ruth'". In a subsidiary question relating to the use of machinery, the employer had stated "usual to fishing trawler". The Workers' Compensation Commission found that the insurer was not liable to indemnify the employer against its liability on the grounds that the machinery involved was not usual to a fishing trawler. On appeal to the Supreme Court of New South Wales by the Registrar of the Workers' Compensation Commission, a majority - Glass and Samuels JJA, Mahoney JA dissenting - dismissed the appeal. The passages in the judgment of the High Court relied upon by Gallop J were those of Gibbs A-CJ and Jacobs J, with whom Stephen and Murphy JJ agreed.

The judgments of Gibbs A-CJ and Jacobs J emphasised the distinction to be drawn between the description of the business on the one hand and the description of the risk on the other. Such a distinction was crucial to the reasoning of Mahoney JA in his dissenting judgment in the Court of Appeal and to the decisions in the High Court. By drawing such a distinction, the High Court was able to demonstrate that the description of the business in respect of which indemnity was required, could not be qualified by answers given to questions in the proposal form which might go to the risk involved (my emphasis). Thus in that case the words "usual to fishing trawler" did not qualify the description of the business, "fishing", so as to read down that description.

As Gibbs A-CJ said at 468:

"The business or occupation in which a person is engaged is not determined by the equipment which he uses to carry out his task. A fisherman does not change his occupation because he uses a hand line instead of a net, or a spear gun instead of a trap, or because the trawler in which he happens to be working is equipped with a motor not usually found in fishing trawlers. The answer given to Question 8 in the proposal was no doubt intended to effect the nature of the risk covered by the insurance, but it does not describe a business or occupation - the very words of the question show that it was not intended to do so. The dicta in Air's case (supra) as to the effect of a similar question in a proposal have proved misleading.

Section 18(3A) is obviously a remedial provision and should not be

given a restricted operation. Its apparent intention would be defeated if words in a proposal, which according to their natural meaning did no more than state whether or not mechanical power was used in a business, were regarded as descriptive of the business itself. In the present case, the business described in the policy was fishing, and once the misconception engendered by Air's case is dispelled it is seen that there is no reason to describe the business as a fishing business which used only such mechanical power as is usual to a fishing trawler."

The judgment of Jacobs J on this issue is to a similar effect. Aiken J, on the other hand, took a somewhat different view which, although not supported by the majority and not specifically referred to by the Court of Appeal in Smith's case [Commercial Union Workers' Compensation NSW Ltd v. Smith (1994) 10 NSWCCR 267] to which I will shortly turn, seems to be, if not implicit in the later judgment, certainly consistent with it. His Honour said at 490:

"In my opinion the provisions of section 18 make a liability of the insurer to the employer match the liability of the employer to the worker or his dependents and that is a fundamental feature of the scheme. That scheme likewise makes a liability of the insurer to the worker match the liability of the employer to the worker. It is clear that the liability of the employer depends on the relationship of employer and worker (as defined) and not on the description of the business in respect of which he is so insured. It is that liability against which the Act requires the employer to insure, and in respect of which the Act requires the insurer to issue a policy of insurance or indemnity, save only where the Commission relieves the insurer of that obligation. It is that same liability which the insurer is required to bear to the worker and in respect of which the insurer is bound by a judgment in favour of the worker against the employer."

Gallop J also referred to Wesfarmers Insurance Ltd v. Cotter (1990) 1 WAR 493. That was a case in which the employer had entered into a policy of insurance in which the employer's business had been described as "retailing and servicing swimming pools". The employer subsequently entered into a contract for the laying of a tram line. The employee was injured whilst laying a tram line and made a claim for compensation against his employer. The insured declined to indemnify the employer in respect of the worker's claim and at first instance it was found that the insurer was obliged to indemnify the employer under the terms of the policy when construed in accordance with the provisions of section 160 of the local legislation.

In allowing the appeal the Full Court held that section 160 of the Workers' Compensation and Assistance Act 1981 (WA) does not impose an obligation on an insurer to provide a policy of insurance to an employer other than the one requested by the employer and, therefore, the insurer's obligation to indemnity is determined by the

contract of insurance. It held further that the employer's request for insurance was only in respect of the business of retailing and servicing of swimming pools and as the injured worker was not employed in that business and there was no evidence of any other request for insurance, the insurer was not obliged to indemnify the employer.

The consequence was that the employer had not insured for his liability to pay compensation to the employee engaged in any business other than his swimming pool business. Roland J observed that the employer was no doubt in breach of his obligations under the Act, but that had no impact on the liability of the insurer to indemnify.

Gallop J rejected a submission based upon the judgment of Aicken J in Registrar of the Workers' Compensation Commission (supra). In doing so his Honour said:

"The observations of Aicken J are against the preponderance of authority in that case, although he came to the same conclusion on the particular issue as the other Judges of the Court."

His decision was therefore that the employer was not entitled to indemnity under the policy held with the insurer.

The second of the cases [Commercial Union Workers' Compensation NSW Ltd v. Smith supra] referred arose in these circumstances. Mr and Mrs Miller were the owners of two properties at 46 and 48 Flinders Street, Wollongong in New South Wales. Number 48 had been owned by them for some time and No. 46 had been acquired on or about 16 June 1988.

Jeff Miller Motors Pty Ltd was a company whose sole share-holders and directors were Jeffrey Miller and Robyn Miller, the Mr and Mrs Miller who were the owners of the properties aforementioned. Jeff Miller Motors Pty Ltd was found by the primary judge to be the occupier of both premises and the tenant of both. It paid all the outgoings in respect of both premises and that was treated by Mr and Mrs Miller, the landlords, as the payment of rent.

Jeff Miller Motors Pty Ltd carried on the business of selling motor cars at No. 48 Flinders Street. Number 46 was acquired by the Millers so that the existing building on it could be demolished, a new building erected and the new building used as an office for Jeff Miller Motors Pty Ltd. The builder in charge of the demolition of the existing building was a friend of Mr Millers, Mr Walton, who apparently was supplying his services free of charge.

In its pleadings the respondent, Jeff Miller Motors Pty Ltd denied that Smith was its worker and denied that Smith was a worker within the meaning of the Workers Compensation Act. However, at the hearing of the matter before Moroney J in this Court, Jeff Miller Motors Pty Ltd conceded that Smith was employed by it and hence that he was a "worker".

The insurer, Commercial Union Workers' Compensation NSW Ltd maintained that the deceased Smith was not a worker within the Act and that therefore his death would not be an event which required that it indemnify Jeff Miller Motors Pty Ltd under the terms of its policy.

In respect of this contention Meagher JA with whom Priestley JA agreed, said at 277:

"The logical possibilities concerning Mr Smith are (a) that he was a mere volunteer, not an employee of anyone; (b) that he was employed by Jeff Miller Motors Pty Ltd; (c) that he was an employee of Mr and Mrs Miller; (d) that he was employed by Mr Walton. His Honour came down in favour of possibility (b), and I think he was correct, although the relevant evidence is thin to the point of being anorexic."

His Honour dismissed in turn possibilities (a), (c) and (d), the first on the basis that it would be unlikely that any person would perform extended physical labour without remuneration particularly in circumstances where he was both destitute and in need of money; and the other two on the basis that there was no evidence to support those possibilities except, in the case of employment by Mr and Mrs Miller, that they were the owners in fact of No. 46 and were the landlords.

Of this His Honour said (ibid):

"This is insufficient, particularly as Mrs Miller gave evidence and did not embrace any suggestion that she and her husband were Mr Smith's employers."

His Honour then went on to deal (at 278) with possibility (b), that is the one accepted by Moroney J:

"As to possibility (b); it is, in the circumstances, the most rational possibility; it is supported by the evidence that Smith told his neighbour Mrs Thurbon that he was to be employed by the company; by Mrs Miller's evidence that she and her husband had decided that the company would employ him and pay him out of its money along with its other employees; and by the company's admission that it was in fact Mr Smith's employer. As Mr Adams QC, learned senior counsel for the company, said, any conclusion other than that the company employed

Mr Smith was 'quite absurd'. Almost the only submission which was put by Mr McConachie QC, the senior counsel for the appellant insurance company, was that the ruling Jones v. Dunkel [1959] HCA 8; (1959) 101 CLR 298 had been infringed, as Mr Miller was available to give evidence although no party called him."

Meagher JA having supported the factual finding of the primary judge as to employment then turned to consider the defence raised by the insurer that it was not liable to indemnify the employer under the policy. The argument advanced is the usual argument found in such cases and to which reference has already been made in the cases which I have cited. In the instant case the business of the employer was described as "motor car sales". It was submitted by the insurer's Counsel that in the circumstances the activities being performed by Smith, namely, work on the demolition of the building No. 46, were not activities comprehended by the policy because Smith was employed in the business of demolition and not in the business of selling motor cars. Mr McConachie was said to have taken the Court to section 159 of the Workers Compensation Act 1987 which includes, one assumes because his Honour makes no reference to any particular provisions of that section, subsection (4) which is in these terms.

" (4) a policy of insurance obtained by an employer in respect of workers in any trade or business shall, notwithstanding anything contained in that policy, apply to and have effect in respect of all workers employed by the employer in that trade or business."

Mr McConachie referred the Court to various cases which, similarly, are not referred to by his Honour. However his Honour says that in respect of these matters: "I cannot understand why either the Act or the curial authorities are of assistance or relevance". He formed the view that the submission of Mr Deakin QC for the WorkCover Authority should be accepted.

Although his Honour does not make it clear, it would seem from the context that the following passage (at 279) represents the submission of Mr Deakin or, at the least, the substance of it which Meagher JA was prepared to accept:

"The company's workers compensation liability to the workers in its business is the subject of the insurance [my emphasis]. Its business is the business of selling motor cars. There is no suggestion it was carrying on any other business. That business was being carried on at 46-48 Flinders Street, Wollongong. Mr Smith was employed in that business. He was so employed notwithstanding the fact he did not personally sell any motor cars. Likewise, the tea lady and the gardeners employed by the company were employees of the "business". The only relevant question is whether Mr Smith was employed in the only business which the company carried on, and it clearly was."

As I have already said Meagher JA's judgment was the subject of agreement by Priestley JA who in agreeing with Meagher JA, said at 275:

"Substantially for the reasons given by Meagher JA, it is my opinion that what was being done by Mr Smith when he suffered the injuries from which he died was comprehended by the insurance policy."

The President also agreed with Meagher JA after he had satisfied himself that the appellant's appeal was limited to a grievance upon a point of law or in respect of the admission of evidence but he did not, as I read his judgment, deal specifically with the issues raised by the appellant about the adequacy of the policy unless such consideration is to be found in the words at 275:

"In case I am wrong on this conclusion, and it is proper to consider the factual (but so-called legal) arguments of the appellant, I agree with what Meagher JA has written about them. However, with respect, I consider that Meagher JA has demonstrated conclusively that all that is involved in the appeal are disputes of fact. And at the relevant time they could not, in my view, be ventilated in this Court."

In the present application Mr O'Connor QC for the Authority advances the same sort of arguments that were advanced by his learned colleague, Mr Deakin QC in Smith's case.

So, what are the "facts" which have been established in this case?

1. Firstly, the business of Nohil was, at all times relevant, that of dry cleaners.

2. The registered office and the administrative centre of Nohil at 22 Mamre Road, St Marys was intended to be and did become 53 Nepean Avenue, Penrith.

3. The worker Kojta was at all times employed by Nohil. There is no evidence, although it was within reach by the calling of Mr Hale, that Kojta was at any time the subject of directions by Hale or his partner or that at any time he assisted in the construction of the building at Nepean Avenue.

4. The building works at Nepean Avenue were always the activity of Mr Thornton the owner builder who at no time embraced a suggestion that he was the employer of Kojta.

5. The business of Nohil was cyclical in character and in the down time it was necessary for it to find things for Mr Kojta to do in order to justify his continued employment. There is nothing unlawful in employees of a private company being required, as part of their duties, to perform work at the homes of directors of the company upon instructions of a director apparently having that authority.

6. So far as it might be relevant, there is no evidence that Kojta was engaged in any activity which could not be embraced by the general description of "handyman". He was employed at all times by Nohil in the capacity of a handyman.

When I turned to the decided cases for guidance in this matter, it may easily be distinguished from Hanley's case in that the employer here at no time carried on a business other than the business which it declared on the proposal for insurance.

If the earlier case of Watts establishes any principle or criteria by which to judge these matters of fact, then, the employment of a handyman around the premises of a director which premises are intended to be the future site of the administrative offices of the employer, could be said to be incidental to the business of that employer. Indeed, one can readily conceive of an argument in favour of the view that the construction of at least so much of the building as would be subsequently required by the employer, could be incidental to that business.

The most compelling authority however is the decision of the Court of Appeal in Smith's case. It is perhaps with that case that the full flowering of the distinction between description of business and description of risk is to be found.

If one were to approach the issue in this case as a lay person, without the benefit of the application of great minds to the issue, one would, I think, be unable to distinguish between a description of a trade or business in which the employer is engaged and a description of the risk against which the insurer is indemnifying. The lay person would, I think, conclude that the insurer in this case had not agreed to indemnify the employer for the risk arising from the engagement of Mr Kojta in and around the building site. That is not to say that the particular circumstances of Kojta's injuries were or could be anticipated but the lay person might reasonably expect that there was a higher degree of risk involved in work in and around a building site than there would be in working in and around dry cleaning premises. However, Smith's case illustrates that the lay person's approach, if I have accurately assumed it, can be significantly different from the approach of the judicial officer.

Smith's case, although its judgment rests upon traditional considerations, goes a great deal towards the view taken by Aicken J in Registrar of the Workers' Compensation Commission (supra). It is certainly a long way from Watts case.

Before concluding this judgment, I shall return briefly to what was said by Aicken J in Registrar of the Workers' Compensation Commission (supra). His Honour's judgment commences at 476 and after referring to the nature of the appeal, the facts of the case, the form of the proposal for insurance, the statutory form of policy and certain provisions of the Workers Compensation Act 1926 and the statutory foundation for the Uninsured Liability and Indemnity Scheme, his Honour said at 484:

"It is necessary, however, to consider the fundamental question of the nature of the relationship between the employer, the worker and the insurer as established under the Act in order to arrive at a decision whether in the present circumstances the worker or his dependent has a claim direct against the insurer.

The form of the proposal is not prescribed under the Act, but under this statutory scheme it cannot, in my opinion, have the same significance as it has in the field of general insurance. There its most important functions are to define the risk, either alone or in conjunction with the policy, and to provide information to the underwriter to assist him in deciding whether to accept the risk and in fixing the premium. Under the Act the insurer is precluded by section 18(2) from refusing to issue a policy, save in the exceptional circumstances there set out. The extent of the risk is defined by the Act and incorporated in the prescribed form of policy. As to premiums section 30A sets up a premiums committee and provides for that committee to prepare a scheme for the fixing of premiums and their adjustment from time to time. That scheme provides for a "maximum rate", which cannot be exceeded by the underwriters, though they may charge less if they wish. The rates are published in the Government Gazette and the pages possibly relevant to the present proceeding were put in evidence.

The Gazette sets out a description, called a "classification", of various business or activities to each of which a "maximum insurance premium rate" is attributed. The possibly relevant ones for present purposes are "divers (see Marine Salvors)" with no rate attributed to that heading. "Marine Salvors (a) within Port Jackson and other inland waters" with a rate of 1.40 per cent specified and "(b) others" with a rate of 15 per cent specified. It also sets out "fishing industry - (a) Vessel risk (see Vessels); (b) Penning and landwork risk" at a rate of 2.2 per cent , and in addition "Fishing vessels - not Whaling" with a rate of 3.05 per cent and "Trawlers - not Whaling" with a rate of 3.5 per cent . In fact the rate used in the calculation of the premium in the present case was 3.05 per cent with some additions, apparently of a further 22.5 per cent of the figure calculated, and a further addition over and above that, none of which were explained, but in the end this does not appear to matter.

It is somewhat curious in these circumstances to find that the regulation should prescribe a form of policy and the insurer should use a form of proposal which are copied from the field of general insurance. It seems at least doubtful whether liability under the statutory form of policy could be avoided by reliance upon an incorrect statement in the proposal, whether material or not. The point has not been dealt with in any decided case and it was not relied on by the insurer in the present case. Notwithstanding that, it is in my opinion, necessary to consider that question, which involves also reconsideration of the decision in Air's case. The issue argued related to a derivative point, namely, the extent of the definition of the risk and the use to which the proposal may be put for that purpose under the statutory scheme. The trial judge proceeded, by using the findings to which I have referred above, to say that the risk covered did not include the use of the fishing trawler when using a compressor and an associated engine (a unit referred to in the evidence and in the Commission, somewhat inadequately, as simply a "compressor") because such equipment was not "usual to a fishing trawler" on the unexpressed basis that it constituted a use of "mechanical power".

His Honour then went on to consider the question of what the evidence had to say about the use of machinery on fishing vessels in the area in which the particular vessel here was operating before his Honour said at 486:

"The basis upon which the trial judge, and the majority of the Court of Appeal, concluded that the policy did not cover the accident which had occurred was that the description of the business was that of fishing without the use of any mechanical power other than that which was "usual for a fishing trawler" and that the use of an "air compressor" was not usual for fishing trawlers, in the sense that not more than 25 per cent of the trawlers based on Eden fished for abalone and therefore had compressor units. This view treats the answer to question 8 in the proposal form as forming part of the description or definition of the business. For this basis reliance was placed upon the decision of the Full Court of the Supreme Court in Air's case."

His Honour then went on to cite passages from the judgments of Jordan CJ and Halse Rogers J in Air's case [Licenses & Federal Insurances Co Ltd v. Air (1935) 52 WN (NSW) 142] before returning to the statutory scheme at 488:

"It is of some importance to note that in section 18(1),(2) & (3) the insurance required is expressed to be simply in relation to "all workers employed by him (i.e. the employer)" and not by reference to employment in a particular business. It is only in subsection (3A) and in the policy scheduled to the regulations that reference is made to the business or occupation of the employer."

It should be noted at this point that that statutory scheme has been repeated in the 1987 Act in section 155(1) which corresponds with section 18(1); section 157(1) which corresponds with section 18(2) and section 159 which corresponds with section 18(3).

The subsection (3A) referred to by his Honour finds its current expression in section 159(4).

His Honour continued:

"No doubt it is a matter about which an insurer may properly require to be informed in order that he may ascertain the premium in accordance with the schedules of "maximum rates" as fixed under section 30A. It is, however, a very different matter to say that the business or occupation of the employer as stated in the proposal defines the risk. It is, in my opinion, very difficult to treat an answer to a question such as question 8 in the context of questions 6 to 14 as having that operation. Those questions appear to have little, if anything to do with defining the risk assumed by the insurer. With due respect to those who have decided otherwise, the notion that a business described as being "butcher not using mechanical power" can be a different business from "butcher using mechanical power" seems extremely odd. Again it seems odd that a business in which relatives are employed should be regarded as a different business from one in which relatives are not employed. Such expressions would not readily be recognised as being descriptions of different businesses. The history of cases shows, however, that at least since the decision in Air's case in 1935 this view has been taken."

After dealing briefly with Air's case (supra) his Honour then continued, at 489:

"The critical provisions of the statutory scheme are sections 7(1) and 18(1), (2) and (3). Section 7(1) places an obligation upon an employer to pay compensation to a worker who has received an injury and to the dependents of such a worker. Section 18(1) places an obligation upon every employer to obtain from the licensed insurer a policy of insurance or indemnity conforming to the section for the full amount of his liability under the Act to all workers employed by him, and section 18(2) provides that no insurer shall, except with the consent of the Commission, refuse to issue such a policy of insurance or indemnity to any employer who has complied with the prescribed conditions. Section 18(3) provides that every policy shall contain only such conditions as are prescribed and that 'every such policy shall provide that the insurer shall as well as the employer be directly liable to any worker insured under such policy and in the event of his death, to his dependants, to pay the compensation or other amount for which the employer is liable, and that the insurer shall be bound by and subject to any judgment order decision or award given or made against the employer of such work [sic] in respect of the injury for which such compensation or amount is payable'."

His Honour then proceeded in the passage which has already been cited. At 491 his Honour turned to the effect of subsection (3A):

"It remains to consider the effect of subsection (3A) which was not in force at the time of Air's case that has operated only since 1967. The section is cast in terms appropriate to an extension of, rather than as a restriction upon, such liability. It appears to contemplate that there may be provisions contained in the prescribed form of policy, or imported therein by cross reference to a proposal, which would limit the extent of the insurer's liability to the employer, and its direct corresponding liability to the worker. It was suggested in argument that it was a belated statutory rejection of the decision in Campbell v. Royal Exchange Insurance of London [1937] 11 WCR (NSW) 342 to which I have referred above. It was then sought to limit the operation of subsection (3A) to cases relating to that particular question in a proposal. I do not myself regard that explanation as correct because the new subsection speaks of 'all workers employed by the employer in that business or occupation'. The basis of Air's case was that the worker in question was not employed 'in that business or occupation' because of the importation in the description of the business or occupation of the answers to the questions in the proposal form. If Air's case and Campbell's case were right, subsection (3A) could not possibly cure the defect or affect the result in either case. In Campbell's case the reasons are less clear, though the trial judge did rely on Air's case. However, it is clear that this subsection could not of itself operate to alter the description of the business of the employer. It may be that the draftsman was endeavouring to overcome the decision in Campbell's case but, if so, I do not think he succeeded in that task. It does not appear to matter for present purposes, because it is, in my opinion, clear that subsection (3A) does not restrict the operation of subsection (3) as I have outlined it above."

Again, although the recent decision in Smith's case does not specifically refer to the statutory basis upon which liability to pay compensation to injured workers is visited upon an employer nor to the compulsion upon the employer to insure its liability to pay compensation to its injured worker nor to the imposition upon the insurer of a liability direct to the injured worker to pay compensation, it nevertheless recognises, as Aicken J's judgment makes clear, that the real factor which determines the question of liability of the insurer to indemnify is not the niceties of a description of trade or business but the fact of employment between the employer and the worker.

The reasoning of the whole of the High Court in Registrar of the Workers' Compensation Commission (supra) makes the description of the employers trade or business a redundant inquiry. This is because the description of the trade or business of the employer cannot be relevant to any consideration by the insurer about the acceptance or otherwise of the risk involved. As Aicken J so elegantly argues, the description of the trade or business has relevance to the insurer only for the determination by the insurer of the premium to be charged. If, as a result of a misdescription of a trade or business or the conduct of a trade or business which may more aptly be described in some other way than that described on the proposal form is carried on by the employer, then, upon becoming aware of the changed circumstances the only recourse available to the insurer is not a denial of indemnity, which is a refusal to insure the employer against its liability to its injured worker, but a claim for additional premium if additional premium be chargeable.

Once the distinction between a description of trade or business and a description of risk was made by the majority and the statutory conditions are applied, that is to say the compulsive provisions of the Act, as Aicken J would have done, then, as I have said, the description of the trade or business is irrelevant to the question of indemnity.

Even if, contrary to the views which have been expressed by Aicken J and reiterated here in a humble way by myself, the view is taken that under the 1926 Act the expression of the trade or business in which the employer was engaged was somehow determinative of the indemnity which the insurer was providing because the insurer was required to make some judgment before providing indemnity, as some sort of business exercise, how can it be said that such a consideration can arise under the 1987 Act when the licensed insurers are fund managers.

Even if one took the view that the words describing the trade or business of the employer were, by some mechanism unexplained by the authorities, words of limitation which determined the question of whether or not the employer had, as it was required to do, obtained or was maintaining in force a policy of insurance against its liability to injured workers employed by it with the result that if the employer was operating in a trade or business other than that declared on the proposal for insurance, the conclusion could be reached that the employer had not satisfied its statutory obligations, the only result was that the employer's liability to its workers was indemnified by the "statutory insurer of last resort" (to use Meagher JA's words in Smith), how can that result be repeated in the context of the 1987 Act.

In other words if the rationale of the decisions on this issue, leaving aside the High Court's decision in Registrar of the Workers' Compensation Commission (supra), is that the insurer should not be required to indemnify an employer who operates outside of the description of its trade or business as disclosed in the proposal for insurance, then how can that principle or some similar principle be applied in circumstances where the insurer now operates as a virtual manager of a statutory fund.

Part 7 of the Workers Compensation Act 1987 makes clear the extent to which the freedom and independence of insurers has been eroded. That is not to say that licensed insurers under the 1926 Act were free agents. They were, as is well known, subject not only to statutory regulation but also the supervision of the Workers' Compensation Commission. However, they were not subject to the same detailed regulation as they are under the 1987 Act, nor do they enjoy the same freedom in relation to the disposition of premium income and nor were they the subject of such detailed direction and control in the day-to-day operations of their businesses as they are now. Without going into questions of the powers of the Authority to issue such directions, Part 7 makes it quite clear that they are no longer risk bearers.

The statutory funds which the insurers are required to establish and into which premium income is paid is subject to being reduced by transfer, at the behest of the Authority, into the Premiums Adjustment Fund to meet future liabilities. Similarly, if the statutory funds of a licensed insurer are insufficient to meet its obligations under the policies, then, those liabilities may be assumed by the Authority out of the Premiums Adjustment Fund. When that happens the insurer must reimburse the Authority when its statutory funds become sufficient.

However, if one assumes that licensed insurers still have to make a profit to stay in business, and that this profit is somehow represented by the difference between what is received by way of premium income and what is paid out by way of claims, then the principle which the earlier authorities establish, which is relevant to a consideration of a case like that currently before me, is that a policy of insurance which is issued to an employer pursuant to the Act in respect of the employer's liability to pay compensation to its employees is limited by the words describing the employer's trade or business.

As Registrar of the Workers' Compensation Commission (supra) clearly establishes, such a description cannot go to a question of the assessment of the risk to be borne by the insurer.

Consequently if one excludes considerations of risk assessment by an insurer going to the question of whether the insurer would accept the risk or not, then it is difficult to see how an insurer can say that it has not insured an employer when the employer operates out of the description of its trade or business.

To support the principle to which I have referred, one has to find in the statute some authority for the proposition that the policy which is issued by a licensed insurer indemnifying an employer against its liability to pay compensation to its workers is limited to the employer operating in a described trade or business.

The majority of the High Court in Registrar of the Workers' Compensation Commission did not turn their minds to the question raised by Aicken J but, in my respectful opinion, whatever may be the general principles of the law of insurance, those principles cannot override the statute, particularly in the post-1987 context where insurers have no real independence to bear risk in a general insurance sense.

Indeed, even those licensed insurers who would on the abovementioned formulation suffer a loss because its liabilities exceeded its income, may be relieved by the Authority meeting those excess liabilities. Consequently licensed insurers neither enjoy the prospect of enjoying uncontrolled profits nor suffer the prospect of uncontrolled losses.

It cannot have been the intention of the drafters of the 1987 Act to allow insurers to protect the statutory funds of which they were the managers by the expedient of transferring a liability which the insurer would otherwise bear to another statutory fund administered by the Authority. If, the Authority believed that that was the statutory intention then it would not have appeared in Smith's case nor in this case to oppose the licensed insurer. In my respectful opinion the opposition is well founded.

The Court of Appeal in Smith's case, in my respectful opinion, instinctively recognised the logical difficulty inherent in the argument advanced by Mr McConachie, which difficulty has existed since the decision of the High Court in Registrar of the Workers' Compensation Commission. Gallop J in Hanley correctly observed that the observations of Aicken J were not adopted by the majority who decided the case on a different basis. However if the majority view is correct and it must be that there is a distinction between, on the one hand, description of trade or business, and on the other, a description of risk insured against, then one may ask, not rhetorically, if the description of trade or business is not to be taken as indicia of risk assumed by the insurer, then to what is it? Aicken J was, in my respectful opinion, quite correct to say that the Workers Compensation Act imposes a liability upon an employer to be insured with a licensed insurer for a liability which the employer may incur under the Act, or independently of the Act, in relation to an injury by a worker. The description by the employer of a trade or business in which the employer is engaged has nothing to do with the question of insuring against its liability under the Act or independently of the Act.

To adopt the traditional view means that the words appearing in section 155(1) are to have included in them the words, or words to the effect of, "in the trade or business declared by the employer". That would mean that this sub-section would read as follows:

"An employer (other than a self insurer) shall obtain from a licensed insurer, and maintain in force, a policy of insurance that complies with this Division for the full amount of the employer's liability under this Act in respect of all workers employed by the employer in the employer's trade or business and for an unlimited amount in respect of the employer's liability independently of this Act (being a liability under a law of New South Wales) for any injury to any such worker."

The rejection by the Court of Appeal in Smith of any notion that the insurer should be protected against the results of any injury arising from a risk which had not been anticipated and its emphasis upon the relationship between Jeff Miller Motors Pty Ltd and the deceased worker, Smith, assimilates, to a very large extent the views expressed by Aicken J and accords more closely, in my respectful view, with the expressed words of the statute and the scheme of the Act.

If a description of the trade or business has relevance to any subject matter, it is the subject matter of premium determination. That is a matter of risk assessment and experience as determined by a statutory Authority. It has nothing to do with an employer meeting its obligation to insure itself against a liability incurred under the Act or independently of the Act and the statutory obligation upon an insurer to issue such a policy.

Findings

I have decided therefore, firstly, there must be a finding that Nohil had obtained and was maintaining in force a policy of insurance as required of it by the Workers Compensation Act 1987 and that GRE was the insurer of the employer, and I so find.

Secondly, I find that GRE is obliged to indemnify Nohil for its liability to pay compensation to or in respect of Daniel Kojta, a worker employed by Nohil.

ORDERS

I order that GRE pay compensation to or in respect of Daniel Kojta and that that compensation be paid from the date of his injury on 18 December 1991.

I order that in partial satisfaction of that order that GRE reimburse the Authority for payments made to date by the Authority from the Uninsured Liability and Indemnity Scheme.

I order that the matter be listed before me to enable GRE to make submissions if it be so advised as to the rate of weekly compensation payable to the worker.

I further order that GRE pay the costs of Nohil, the Authority and the worker.

ORDERS ACCORDINGLY

Solicitors for the applicant: Astley Thompson & Valtas

Solicitors for the first respondent: Connery & Partners

Solicitors for the second respondent: McClellands

Solicitors for the third respondent: Gillis Delaney Brown

Solicitors for the third party (the applicant): Astley Thompson & Valtas