Employers Mutual Limited v Heise

By summons filed on 24 September 2021, Employers Mutual Ltd (EML) seeks to appeal as of right pursuant to s 52 of the Crimes (Appeal and Review) Act 2001 (NSW) (the CAR Act) against its conviction in the Local Court of failing to determine a claim as and when required, contrary to s 283 of the Workplace Injury Management and Workers Compensation Act 1998 (NSW) (the 1998 Act). EML seeks relief which includes orders that its conviction be quashed, that the costs order be set aside and that the charge be dismissed.

The summons was amended in the course of the hearing on 13 April 2022 to add a claim, in the alternative, for leave to appeal pursuant to s 53 of the CAR Act and to add the second ground below.

The grounds of appeal are as follows:

In substance, EML, for which Mr Chen SC and Mr Smartt appeared, submitted that it could not be a person who failed to determine a claim within the meaning of s 283(1) of the 1998 Act because it had no obligation to determine a claim in any event since it was neither the relevant insurer of the employer of Julie Heise (the claimant) nor her employer. Mr Chen contended that the grounds, as framed, involved questions of law alone and that, accordingly, EML could appeal against its conviction as of right.

It was submitted on behalf of the claimant, for whom Mr Morris SC and Mr Weightman appeared, that leave to appeal was required. On the substantive grounds, the claimant submitted that EML, having received the claimant’s claim in its capacity as claims manager had the obligation to determine it, as and when required, which EML failed to discharge. The claimant submitted that as EML was a licensed insurer (albeit not for claims such as the one brought by the claimant), it was a person who had failed to determine the claim as and when required by Part 3 of Ch 7 and was therefore guilty of an offence under s 283(1) of the 1998 Act.

It was common ground that the version of the 1998 Act which was relevant for present purposes was the historical version for 1 December 2017 to 14 June 2018. All references to legislation in these reasons are, unless otherwise indicated, references to this version of the 1998 Act.

The claimant was a police officer in the NSW Police Force. As a result of a motor vehicle accident on 12 May 2009 she suffered psychological injuries. On 11 April 2017, her solicitors sent to the Manager of EML’s Claims Department a claim for lump sum compensation pursuant to s 66 of the Workers Compensation Act 1987 (NSW) (the 1987 Act). Her claim was made on a form, entitled “Permanent Impairment Claim – Exempt Claimants” (which was a reference to government employees). The document header identified Treasury Managed Fund (TMF) and that EML was “acting as agent for the NSW Self Insurance Corporation” (SICorp). In the claim form, the claimant identified EML as the insurer.

On 14 September 2017, the claimant was examined by a doctor retained by EML. As at July 2018, her claim remained undetermined.

On about 24 July 2018, the claimant filed an application to resolve a dispute in the Workers Compensation Commission (the Commission). I understood it to be common ground that the claimant was entitled to file the application pursuant to s 289(3)(c) of the 1998 Act (see below) because the person on whom the claim was made had failed to determine it as and when required by the 1998 Act. Indeed, the claimant identified this failure in her application.

On 13 August 2018, the State of New South Wales, as respondent, filed a reply in which it identified, in the space left for “Name of Insurer/scheme agent”, “[EML] as agent for [SICorp].”

On 26 September 2018, the claimant filed a court attendance notice in the Local Court at Newcastle (the CAN). In the CAN, she identified herself as the prosecutor and described herself as a “Common Informer”.

On 14 November 2018, Dr John J Baker, an Approved Medical Specialist under the 1998 Act, certified that the claimant’s whole person impairment percentage, based on a psychiatric disorder, was 19%.

On 20 November 2018, EML filed a summons in this Court challenging the claimant’s standing to bring such proceedings as a private prosecutor. The amended summons was dismissed on 28 November 2018: Employers Mutual Limited v Heise [2018] NSWSC 1842 (McCallum J).

The claimant’s claim in the Commission was resolved by agreement on 23 November 2018. On 19 December 2018, the Commission made orders in terms of consent orders filed by the parties which included an order that the respondent/State of New South Wales (NSW Police Force) pay the applicant/claimant lump sum compensation of $43,600, which comprised $28,600 for 19% whole person impairment and $15,000 for pain and suffering. This sum was paid on 27 December 2018.

By notice of motion filed in the Local Court on 15 March 2019, EML applied for a permanent stay of the prosecution, in part on the basis that the claimant had given EML no notice of her intention to file the CAN. The notice of motion was dismissed by Maiden LCM on 25 March 2020.

By further notice of motion, EML moved to have the criminal proceedings dismissed on the basis of the argument set out above for which it contended in the present proceedings in this Court. On 2 December 2020, EML’s notice of motion was dismissed by Stone LCM who considered that EML’s argument was the principal issue in the criminal proceedings and ought be determined at a final hearing.

Lacy LCM made the following relevant findings, none of which was challenged in this Court or the Court below:

Her Honour noted that, by reason of the submissions made by EML, it was necessary for her to determine whether EML was “a person who determined the claim” or an “insurer” in order to determine whether EML was capable of committing an offence against s 283(1).

Her Honour made the following further findings:

Of these findings, the significance of (3) was challenged. The conclusion in (6) is the subject of these proceedings.

Her Honour relevantly found that the prosecutor was required to prove the following elements:

On 16 June 2021, her Honour found each of these elements proved beyond reasonable doubt. On 30 August 2021, her Honour ordered the conviction of EML of the offence charged and imposed a fine of $2,500 of which she ordered half of that amount to be paid to the prosecutor. On 15 September 2021, EML was ordered to pay the claimant’s costs of $170,942.80. As referred to above, EML filed a summons in this Court on 24 September 2021, which was amended on 13 April 2022.

Section 2A of the 1987 Act provides that the 1987 Act is to be construed with, and as if it formed part of, the 1998 Act and that, in the event of an inconsistency, the 1998 Act prevails to the extent of the inconsistency. Section 3(1AA) provides that in the 1987 Act, words and expressions have the same meaning as they do in the 1998 Act, unless the 1987 Act provides otherwise.

Section 3(1) of the 1987 Act contains the following relevant definitions:

Section 3(5) provides:

It was common ground that, by reason of s 3(5) of the 1987 Act, the State of New South Wales was the claimant’s employer and that, as it was covered by the Government’s managed fund scheme, it fell within the definition in (c) of self-insurer in s 3(1). Section 211B is set out in part later in these reasons.

Section 9, entitled “Liability of employers for injuries received by workers – general” provides that a worker who has received an injury shall receive compensation from the worker’s employer in accordance with the 1987 Act.

Section 65(3) provides that if there is a dispute about the degree of permanent impairment, the Commission may (as in must) not award permanent impairment compensation unless the degree of permanent impairment has been assessed by an approved medical specialist.

Section 66 makes provision for lump sum payments for permanent impairment where the degree of permanent impairment that results from an injury (defined as an employment-related injury) is greater than 10%.

Sections 154A, 154B, 154G, 154I, 154M and 155 were relied on by EML to show the detailed legislative provisions which were required to make scheme agents of the Workers Compensation Nominal Insurer (the Nominal Insurer), effective principals. EML submitted that the absence of any such provision which applied to it told against its being held liable under s 283. Thus although these provisions were not said to apply to the present case, their relevance to the argument put by EML requires them to be summarised.

Section 154A establishes the Nominal Insurer. Section 154B provides that the Nominal Insurer is taken to be a licensed insurer. Section 154G provides that the Nominal Insurer may enter into agency arrangements for the purpose of appointing persons to be “scheme agents” in connection with the exercise of any of its functions. Section 154I provides that the functions of the Nominal Insurer may be exercised in relation to scheme agents.

Section 154M(1) provides that certain references to licensed insurer or insurer includes a reference to a scheme agent acting on behalf of the Nominal Insurer in relation to that matter. Section 154M(2) relevantly provides:

Section 155(1) provides that an employer, other than a self-insurer, shall obtain from a licensed insurer and maintain in force a policy of insurance that covers the employer’s liability under the 1987 Act. Breach of s 155(1) amounts to a criminal offence. Section 159(2) provides that the policy of insurance shall provide that the insurer and the employer are directly liable to any worker insured under the policy and the insurer is bound by any judgment, order, award or decision given against the worker’s employer in respect of the injury for which compensation is payable.

Section 211B relevantly provides:

The effect of s 211B is that the claimant’s employer, the State of NSW, is taken to be a self-insurer for the purposes of the 1987 Act.

Section 4 defines “claim” as meaning, relevantly, “a claim for compensation … that a person has made or is entitled to make”. It defines “employer” as including a government employer and “government employer” as meaning “the Crown or any government agency.”

Chapter 4, entitled “Workers compensation”, in Pt 2, makes provision for compensation claims and proceedings. Section 74, which is in Pt 2, relevantly provides:

Section 281 (set out later in these reasons) imposes an obligation on a person who receives a claim to determine it by accepting or disputing liability.

Chapter 7 is entitled “New claims procedures”. Part 1 of Ch 7 contains s 250 which relevantly includes the following definition:

Section 250(3) provides:

Division 1 of Pt 2 (entitled “Giving notice of injury and making a claim”) of Ch 7 is entitled “Notice of injury” and contains s 254(1), which relevantly provides that compensation is not recoverable by an injured worker unless notice of the injury is given to the employer.

Division 2 of Pt 2 of Ch 7, entitled “Making a claim for compensation or damages” contains s 260, which relevantly provides that “a claim must be made in accordance with the applicable requirements of the Workers Compensation Guidelines” (the Guidelines). The relevant Guidelines will be extracted later in these reasons.

Section 264 relevantly provides:

Division 4 of Pt 3 of Ch 7 includes s 281, which relevantly provides:

Section 282 defines “relevant particulars about a claim” as being “full details” of certain listed matters “sufficient to enable the insurer, as far as practicable, to make a proper assessment of the claimant’s full entitlement on the claim.”

Division 5 of Pt 3 of Ch 7, entitled, “Enforcement of claims obligations” includes s 283, which creates the offence with which EML was charged and convicted. Section 283 relevantly provides:

Section 289(3)(c) provides that “[a] dispute about a claim for lump sum compensation cannot be referred for determination by the Commission unless the person on whom the claim is made … fails to determine the claim as and when required by [the 1998] Act.”

The Guidelines include the following introduction:

I understood it to be common ground that EML, in the present case, fell into the second category, namely one of SICorp’s three compensation claims management service providers.

Part C of the Guidelines referred to in s 260 makes provision for exempt categories of workers, police officers (such as the claimant), fire fighters and paramedics. It identifies which aspects of the Guidelines apply to such workers. The provisions which apply to persons such as the plaintiff in respect of lump sum claims for permanent impairment are as follows.

As referred to above, the claimant attended a medical appointment on 14 September 2017. Accordingly, she contended that her claim ought to have been determined within two months of that date and that the failure to determine the claim within that time was a breach of s 281 which attracted the penal provisions of s 283.

Section 8(1)(b) of the NSW Self Insurance Corporation Act provides that SICorp has as one of its functions with respect to Government managed fund schemes the function:

I understood it to be common ground that SICorp had entered into an agreement with EML to provide services in relation to the management of claims by government workers, such as the claimant, for the State of NSW, being the employer/self-insurer. The claims management agreement to which EML was a party was tendered neither in the Court below nor in this Court.

Section 52 of the CAR Act provides that a person who has been convicted of an offence in the Local Court may appeal to this Court against the conviction “but only on a ground that involves a question of law alone.” An appeal by leave arises in such circumstances on a ground that involves a question of fact or a question of mixed fact and law: s 53 of the CAR Act.

What amounts to a question of law alone was authoritatively stated by Gibbs CJ in Williams v The Queen (1986) 161 CLR 278 at 287; [1986] HCA 88:

In R v PL [2009] NSWCCA 256; (2009) 199 A Crim R 199, the Court of Criminal Appeal considered the distinction between a ground that involves a mixed question of fact and law and a ground that involves a question of law alone.

In R v PL, ground 2 was:

Ground 3 of the appeal was:

The Court (Spigelman CJ, McClellan CJ at CL and R A Hulme J agreeing) held that ground 2 involved a mixed question of fact and law and said at [26]:

However, ground 3 was held to involve a question of law. Spigelman CJ said at [27]:

In the present case, the question whether “a person” in ss 281 and 283 must be, as a matter of statutory construction, either an employer or an insurer involves a question of law alone. However, the real question, for present purposes, is whether EML is, relevantly, “a person” within the meaning of ss 281 and 283 in relation to the plaintiff’s claim for lump sum compensation. In my view, this question involves a mixed question of fact and law. This is so because the challenge to her Honour’s judgment is a challenge to the application of statutory provisions to the facts of the case. A mixed question of fact and law does not fall within the description of “question of law alone”: Attorney General for NSW v X (2000) 49 NSWLR 653; [2000] NSWCA 199 at [44] (Spigelman CJ, Priestley JA agreeing); Director of Public Prosecutions (NSW) v Illawarra Cashmart Pty Ltd (2006) 67 NSWLR 402; [2006] NSWSC 343 at [60] (Johnson J).

Accordingly, I am satisfied that leave to appeal is required under s 53 of the CAR Act.

For the reasons given below, I am persuaded that leave ought be granted. The decision of the Court below was affected by a fundamental error in statutory construction which ought be corrected by this Court.

The parties’ arguments in this Court reflected the submissions that they had put in the Court below.

In substance, EML argued that it was not, relevantly, “a person” within the meaning of s 281 and therefore could not be guilty of an offence under s 283. It submitted that “a person” in s 281 comprehended the relevant insurer, which was liable for the claim (in this case, the State of NSW, a self-insurer), and the claimant’s employer (also the State of NSW) but not the claims manager (EML). EML submitted that, as it was neither the claimant’s employer nor the insurer of the employer responsible for determining her claim, no statutory obligation to determine the claim was imposed on it and, accordingly, it could not “fail to determine a claim as and when required”. EML submitted further that the passage in the introduction to the Guidelines which said that it, as one of the three of SICorp’s workers compensation claims management service providers, was an insurer could not alter the definition of insurer in the 1998 Act, which did not include EML.

As a consequence, it submitted that the conviction ought be quashed and consequential orders made.

The claimant sought to resist the challenge to the conviction on the same basis on which she conducted the prosecution in the Court below. She argued that EML was an insurer within the meaning of s 281 and, as the claims manager, was required to determine the claim. As such, EML was “a person” within the meaning of ss 281 and 283. Mr Morris highlighted the objectives of the scheme, which included that claims be determined expeditiously by people, such as licensed insurers who, in effect, knew what they were doing. He submitted that there was a distinction between the insurer, being the person at risk, who was liable to pay the claim (being the insurer or an employer who was a self-insurer), and the person (an insurer or, indeed, any insurer) who had the responsibility of determining the claim. He contended that there was no particular reason for the insurer in each of the two categories to be the same.

Mr Morris submitted that because EML was the claims manager for claims such as the one made by the claimant, it was the person on whom the claim was made and, because it also happened to be a licensed insurer, it was obliged to determine the claim and, because it failed to determine the claim as and when required, it committed an offence against s 283(1). Mr Morris also called in aid the passage in the introduction to the Guidelines which said that insurers included, relevantly, EML. Thus, he argued that the conviction was lawful.

It is useful to set out, in general terms, the way in which the legislation (extracted above) provides for the workers compensation scheme to operate, by reference to the steps between the injury and the determination of a claim.

The process is as follows:

The meaning of the term “a person” in ss 281 and 283 is to be discerned from its legislative context. In Ch 7, which deals with the making of claims for lump sum compensation and their determination, there are three principal actors: the claimant, the employer and the employer’s insurer. When a claim is made against the Nominal Insurer, a scheme agent is also a potential principal actor by reason of s 154M of the 1987 Act, which makes a scheme agent a licensed insurer or insurer for certain purposes.

The claimant is, self-evidently, the person by whom a claim is made. An employer who is not a self-insurer is obliged to forward the claim to its insurer (being the insurer who it believes is liable to indemnify it in respect of the claim or injury) and to comply with a reasonable request made by the insurer of it: s 264. As long as the employer has fulfilled these obligations, the employer is “not required to determine the claim”: s 281(5). The insurer’s obligations to determine the claim require it either to accept or dispute liability: s 281. In the present case, as the employer is a self-insurer, the employer and the insurer are one and the same person, the State of NSW, which is obliged to determine the claimant’s claim.

The detailed provisions of the 1987 Act which deal with scheme agents are inconsistent with the claimant’s argument that EML, without an express statutory provision to that effect, ought be regarded as responsible, under the 1998 Act, for determining a claim and liable to criminal prosecution under s 283 if it fails to determine the claim, as and when required. Had Parliament intended a party who provides services to an employer/self-insurer to be treated as a licensed insurer or insurer, it can be expected that Parliament would have engaged in a similar process to that undertaken with respect to scheme agents of the Nominal Insurer, and would have included a provision similar to s 154M with respect to claims managers who are also insurers. There is no such corresponding section which provides that workers compensation claims management service providers such as EML be treated as licensed insurers or insurers for this purpose. To adopt the construction for which the claimant contended would give s 154M no work to do, which is a further reason for rejecting it: Plaintiff M70/2011 v Minister for Immigration and Citizenship; Plaintiff M106/2011 v Minister for Immigration and Citizenship (Malaysian Declaration Case) (2011) 244 CLR 144; [2011] HCA 32 at [97] (Gummow, Hayne, Crennan and Bell JJ).

In summary, the statutory scheme has the following effect:

I reject the claimant’s argument that all that needs to be proved to establish an offence under s 283 is that EML in fact received the claim and failed to determine it within the requisite period at a time when it happened to hold a licence as an insurer. First, EML received the claimant’s claim, not in its own right, but as agent for SICorp and the State of NSW, pursuant to an agreement made by SICorp in the exercise of its function under s 8(1)(b) under the NSW Self Insurance Corporation Act.

While EML may have had a contractual obligation, pursuant to its agreement with SICorp, to determine the claimant’s claim (as to which no judgment can be made as the agreement was not tendered in the Court below), it does not follow that EML had a statutory obligation under the 1998 Act to determine the claim. Its status as a licensed insurer for other unrelated purposes is, in this context, irrelevant since it was not the insurer for the plaintiff’s claim (the self-insurer being the State of NSW).

To the extent to which the introduction to the Guidelines included EML within the definition of “insurer”, the Guidelines cannot override the express terms of the Act, which are not sufficiently broad to include EML within the definition. Nor did the Guidelines purport, or intend, to have that effect as they specifically stated (in the passage extracted above) that words defined in the legislation have the same meaning in the Guidelines: see the discussion in Fletcher International Exports Pty Limited v Barrow [2007] NSWCA 244 at [41]-[43] (Mason P, Santow and Tobias JJA agreeing); referred to in Tan v National Australia Bank Ltd [2008] NSWCA 198 at [34] (Basten JA, Bell JA agreeing). This is consistent with the well-established principle that as a general rule it is impermissible to use delegated legislation to construe a statute: Mine Subsidence Board v Wambo Coal Pty Ltd [2007] NSWCA 137; (2007) 154 LGERA 60 at [41] (Tobias JA, Hodgson and Santow JJA agreeing). This principle may be displaced where a statutory provision is expressed to be “subject to the regulations”, as it was held to have been by s 8AA of the Police Regulation Act 1958 (Vic): O’Connell v Nixon (2007) 16 VR 440; [2007] VSCA 131 at [30]-[34] (Nettle JA, Chernov and Redlich JJA agreeing). I do not regard s 260(1) as having that effect since it provides only that a claim must be made in accordance with the Guidelines and does not purport to give primacy to them.

Indeed, the significance of identifying and notifying the insurer of the employer for the relevant claim (rather than anyone involved in claims administration who happens to be an insurer) is apparent from the following statement (extracted above):

Nor was EML the employer. Only an insurer, an employer and, in certain limited circumstances, a scheme agent (being an agent of the Nominal Insurer) are subject to a statutory obligation to determine the claim.

As EML was not itself obliged under the 1998 Act to determine the claim, it cannot be criminally liable for failing to determine it.

This is sufficient to determine that the appeal must be allowed. However, it is also useful to address why EML, which had a practical role in the determination of claims, could not be criminally liable for failure by the State of NSW (as employer and self-insurer) to determine the claim within the requisite time. The question of criminal responsibility for omissions was considered by the Court of Criminal Appeal in R v Iannelli (2003) 56 NSWLR 247; [2003] NSWCCA 1 (Iannelli), cited with approval in Director of Public Prosecutions (Cth) v Poniatowska (2011) 244 CLR 408; [2011] HCA 43 at [24], fn 33 (French CJ, Gummow, Kiefel and Bell JJ). In Iannelli, the appellant appealed against his conviction of “failing to pay tax instalment deductions to the Commissioner of Taxation” contrary to s 29D of the Crimes Act 1914 (Cth).

Handley JA said:

As claims manager, EML may have been in a position to prevent the commission by the State of NSW of an offence under s 283(1). However, for the reasons given by Handley JA in Iannelli, more is required to impose criminal liability on EML. That additional factor is not, as the claimant contended and as the Court below held, to be found in the circumstance that EML happened to be a licensed insurer (on the basis of a licence granted under the 1926 Act). To establish an offence against s 283(1), the claimant (as prosecutor) needed to establish that EML had a statutory duty to determine the claimant’s claim and had failed to determine it. In the circumstances of the present case, this required the claimant to prove that EML was her employer (there being no separate insurer as the State of NSW is a self-insurer with respect to its workers compensation liability for its employees). It could not do so since, as a matter of mixed fact and law, EML was not her employer.

It follows that leave to appeal ought be granted, the appeal must be allowed and the conviction must be set aside. I understood it to be common ground that in this event the costs order made in the Local Court ought also to be set aside, as sought by EML.

EML sought an order for costs in this Court and in the Court below. It is therefore necessary to address this Court’s power with respect to costs in an application such as the present. Section 72 of the CAR Act provides that an appeal court (in this case, this Court) that orders an appellant or respondent to pay costs must state a time within which the costs shall be paid.

If a matter is dismissed in the Local Court, the Local Court has power to award costs to an accused person under s 213(1) of the Criminal Procedure Act 1986 (NSW) in an amount that the Magistrate considers to be just and reasonable: s 213(2). For the reasons given above, the matter ought to have been dismissed in the Local Court. In that event, EML could have applied for costs under s 213 of the Criminal Procedure Act. The parties were not in a position to address me on whether this Court could order the claimant to pay EML’s costs of the proceedings in the Court below and asked me to reserve this question for future argument, if necessary.

Mr Morris argued that, if EML were successful, the appropriate order in this Court would be that there be no order as to costs. He submitted that, as EML required leave and no leave was sought until 13 April 2022, the appeal was incompetent until that date.

The question whether leave is required was a minor point in the proceedings which occupied little space in the submissions and even less time in the hearing. In these circumstances, I am not persuaded that the fact that leave was sought relatively late has any bearing on costs. I am satisfied that the claimant ought be ordered to pay EML’s costs of the proceedings in this Court. I am obliged to state a time within which those costs ought be paid. As it may be that the costs need to be assessed, I propose to order that the costs be paid within 28 days of agreement or assessment.

For the reasons given above, I make the following orders: