MANUFACTURERS MUTUAL INSURANCE LID v NAM MANUFACTURERS MUTUAL INSURANCE LTD v NEW WORLD FABRICATIONS PTY LTD SUPREME COURT OF NEW SOUTH WALES COURT OF APPEAL SAMUELS, MCHUGH and CLARKE JJA 4, 5 May 1988, 12 October 1988 [1988] NSWCA 91 WORKERS COMPENSATION — statutory employer's indemnity insurer consented to award in Compensation Court in ignorance (not induced by fraud) of fact that work related injury occurred before insurer came on the risk — application to Compensation Court to reopen award on ground of fresh evidence dismissed — appeal to Court of Appeal withdrawn and dismissed — appeal to Court of Appeal against primary judge's refusal to declare that insurer not bound to indemnify employer dismissed on ground that such a declaration would be no answer to application by worker to enforce award. CONTEMPT OF COURT — semble, obiter, that termination of payments by insurer in order to secure resolution of an award to which insurer had consented by mistake would not constitute a contempt of court. ORDER Each appeal is dismissed with costs. Samuels JA On 19 May 1982 a company called New World Fabrications Pty Limited ("New World") was incorporated. However, before incorporation its promoters had carried on its business of steel fabrication, and employed the second respondent, Jun Hee Nam ("the worker'), who on 13 May 1982 sustained a work related injury of which notice was given to those who were then employing him. It is to be assumed that on 13 May the promoters had no employers' indemnity insurance, because, shortly after noon on 14 May 1982, a telephone request for workers' compensation cover for New World, the first respondent, was made by insurance brokers, Forbes Dodds (Insurance) pty Limited ("the brokers") to Manufacturers' Mutual Insurance Limited ("the appellant"). A cover note was issued, expiring at 4 pm on 14 June 1982, and on 28 June 1982 a proposal was signed by the brokers on behalf of New World and submitted to and accepted by the appellant which on 3 September 1982 issued a statutory employers' indemnity policy in the form prescribed by the Workers' Compensation Act 1926 ("the 1926 Act") to commence on 14 May 1982 and to terminate on | May 1983 subject to renewal. In the proceedings before Campbell J, from whose order dismissing the appellant's summons this appeal comes, fairly detailed material was led in proof of the issue of the policy. His Honour refers to it more fully than I. It is sufficient for me to say that there seems to be no doubt that a policy in the statutory form was issued by the appellant to New World; and the contrary was not asserted. It was established also before Campbell J that a report of injury form signed on behalf of New World dated 5 August 1982, and a claim by the worker dated 6 August 1982, were received by the appellant late that month. The report of injury form asserted that the date of injury was 13 May 1982 and that the worker had given notice of injury on that day to a Mr Kim who, from other material, appears to have been one of the promoters of New World. 2 UNREPORTED JUDGMENTS I agree with Campbell J's conclusion that it is more than probable that at the time New World gave instructions to obtain cover it knew of the accident to the worker and that when the proposal was made both New World and the brokers were aware of it. Nevertheless the report of injury form appears to be accurate and, in particular, the injury is shown as having occurred on the day before the day on which the request for cover was made and the cover note commenced. The appellant at the time had a system which was designed to enable it to check that any claim made had arisen while the appellant was on the risk. Unfortunately, however, the system in this instance broke down. The appellant accepted the claim and compensation was paid from 14 May 1982 until 11 April 1983. Payments of compensation were then terminated on the strength of a medical opinion that the worker would be fit for work after 28 February 1983. On 23 December 1983 the worker filed an application for determination which named the appellant as the employer's insurer. The appellant acting under CL4 of the statutory policy took over the defence of the proceedings and instructed its present solicitors, Messrs A O Ellison and Co, to file an answer on behalf of New World denying incapacity. The proceeding came before Judge Herkes in the Compensation Court on 28 May 1985. After the worker had given some evidence the appellant consented to a continuing award which is still in force. On 11 November 1985 the appellant applied to the Compensation Court for the termination of the award. The grounds of the application were that New World was not incorporated until 19 May 1982, that is six days after the date of injury, so that the company could not have been the employer; and that the appellant did not come on risk until 14 May 1982, that is the day after the date of injury. In support of the application affidavits were filed showing that on 31 October 1985 and 1 November 1985 respectively the appellant first became aware of the date of New World's incorporation and of the fact that the injury occurred before the period of cover commenced. On 13 May 1986 Judge Herkes held that he had no jurisdiction to make the order sought, grounding this conclusion on the fact that the new evidence (which I have just summarised) upon which the appellant relied was not fresh evidence in the technical sense of that term, was not material which would authorise a new trial at common law and would not therefore justify reconsideration of the matter under s17(4) of the Compensation Court Act 1984. So, at least, I interpret what the learned judge said. The appellant filed an appeal from that award on 21 May 1986, and in July 1986, took out a summons for a declaration in the Supreme Court. That summons in its amended form sought declarations that the appellant was not bound to indemnify New World in respect of New World's liability to the worker and that at the time of the worker's injury the appellant did not insure New World in respect of that company's liability to any worker employed by it under the provisions of the Workers' Compensation Act and independently of that Act. To this summons the appellant joined as defendants New World, the worker and the State Compensation Board since, of course, in the event that the appellant succeeded, New World (which at least since November 1987 has ceased to trade and was then seeking to be struck off the register of companies) would lose its right to indemnity from the appellant and the worker would then be relegated to his rights against the Uninsured Liability and Indemnity Scheme represented by the State Compensation Board. As I have said Campbell J dismissed the summons and refused the declarations. WAANUFACTURERS MUTUAL INSURANCE LTD v NAM MANUFACTURERS MUTUA& INSURANCE LTD v NEW WORLD FABRICATIONS PTY LTD (Samuels JA) Both appeals came on before this Court and we were told that the appellant did not propose to proceed with the appeal from Judge Herkes. In the other appeal the primary point taken was that the appellant was not on the risk at the time the casualty occurred. Accordingly, the award was made by consent by reason of the appellant's mistaken belief that it was bound to indemnify New World and was directly liable to the worker by dint of the terms of s18(3)(a) of the 1926 Act, repeated in s159(2) of the Workers' Compensation Act 1987 ("the 1987 Act"), and the conforming provisions of the statutory policy: And it is hereby further agreed that the above indemnity is made subject to the due and proper observation and fulfilment by the Employer of the conditions hereunder provided that notwithstanding any failure of the Employer to observe any of the conditions hereunder the Policy shall continue in full force for the benefit of the worker and that the Insurer shall be (a) directly liable to any worker......to pay the compensation for which the Employer is liable and in respect of which the Employer is indemnified under this Policy: and (b) bound by or subject to any order, decision or award made against the Employer under the provisions of the said Act....... It is plain that on 13 May 1982 when the injury occurred the appellant was not on the risk. It accepted liability, paid compensation and consented to an award only because its warning system failed. It acted throughout under a mistaken belief that it was the insurer at the relevant time. Presumably the worker and his solicitors shared the mistake. It is not suggested that he knew the true situation. Hence both the principal parties acted innocently. New World, on the other hand, probably knew the truth. But that company may be excluded from any practical consideration of the matter. It is not trading and has no assets. Substituted service was effected upon it but it did not appear either before Campbell J or on the appeal. As I have said if it turns out that the appellant is not liable to indemnify New World because there never was a policy in force at the material time, and is therefore not liable directly to the worker, the latter could maintain a claim against the Uninsured Liability and Indemnity Scheme: see Miller v Law Union and Rock Insurance Co Ltd (1970) 91 WN 329, Devine v Devine and Queensland Insurance Co Ltd (1928) 28 SR 503 and Timber Trade Mutual Insurance Ltd v Schritt (1964) 64 SR 324. It would be necessary for the worker to re-establish his claim; but on the facts here there seems to be no reason to suppose that he would encounter any difficulty in doing so, even if the Board determined to oppose it. Ihave already indicated the nature of the relief which the appellant sought. The second and third respondents argued that the appellant was estopped by its conduct in consenting to an award from asserting the mistake upon which its claim for declarations was founded. The Court at the outset suggested to leading counsel for the appellant that a declaration would not answer proceedings to enforce the award (if the appellant stopped payment under it), and would not therefore be of practical utility; and so, as a matter of discretion, should not be made: Neeta (Epping) pty Ltd v Phillips (1974) 131 CLR 286 at 307. To this the appellant explained that if it ceased to make payments under the award - a step which reasonably enough was seen as a means of bringing the situation to a head - it would be liable to proceedings for contempt of the Compensation Court's order, to which the declarations might furnish a defence. Although the Court endeavoured to focus attention on the award and the available means of enforcing or avoiding it, the argument remained largely confined to questions of estoppel and waiver which do not, in my opinion, determine the issue. 4 UNREPORTED JUDGMENTS It is by no means clear to me what powers the Compensation Court possesses to punish disobedience of its awards, since s15(3)(d) which in certain circumstances confers on the Compensation Court the powers vested in the District Court, seems to be confined to disobedience of an order or summons in the nature of a subpoena to give evidence or to produce documents: see for example s64 and s66 of the District Court Act 1973 and Pt41 of its rules. At all events, any contempt arising by reason of the appellant's failure to continue to make payments under the award would be a civil contempt to which the principles established by the High Court in Australasian Meat Industry Employees' Union v Mudginberri Station Pty Ltd (1986) 60 ALJR 608 (see also New South Wales egg Corporation v Peek and Anor (1987) 10 NSWLR 72 at 81) would apply. I can scarcely imagine that if the appellant terminated payments under the award on the ground, which is undoubtedly well supported by evidence, that it was not on the risk at the time of the injury, such an act would be regarded as wilful disobedience of an order of the Court calculated to attract a significant sanction. Moreover, the use of the weapon of contempt, even civil contempt, is not either an appropriate or an efficient way of dealing with that type of situation. Unless the court hearing the contempt proceeding was minded to impose a continuing penalty, which would be apt only in a case of considerable gravity, such a proceeding would not of itself secure to the worker the weekly payments which were being withheld. Not only that, but since the proceeding would leave the award intact, being predicated upon the assumption that the award was wholly valid, it would place difficulties in the worker's way of initiating proceedings under the Uninsured Liability and Indemnity Scheme now found in Division 6 of Pt4 of the 1987 Act. All in all, it does not seem to me that the risk of exposure to proceedings for civil contempt constitutes any reasonable ground for the relief which the appellant seeks. It is more probable that the worker, if payments cease, would move to enforce the award by following the procedure set out in s23 of the Compensation Court Act and procuring its entry, and then enforcing it, as a judgment of the District Court. The award was, of course, made against New World as the employer, and New World is evidently not worth powder and shot. But by reason of the requirements of s18(3)(a) of the 1926 Act (or s159(2) of the 1987 Act) and by the terms of the statutory policy, the appellant, assuming it to have been on the risk at the relevant time, would have been bound by the award against New World as soon as it was made and by any judgment against the employer in respect of the injury for which compensation was payable Co-Operative Insurance Co of Australia Ltd v McNellee (1963-64) 64 SR 295. Accordingly, the worker would be entitled to a certificate from the Registrar of the Compensation Court recording the appellant's liability as well as that of New World, and to have judgment entered up in the District Court against the appellant. In my opinion neither of the declarations for which the appellant asks would answer such a judgment which would stand upon a consent award, not necessarily incompatible with the absence of liability and never the subject of any appeal or application to set it aside. I add that Campbell J expressly pointed to the form of the declarations sought when he said:- I should record that no claim was made, during argument or otherwise, in the alternative for a more restricted Declaration excluding reference to Nam either directly or in the temporal sense as in the second Declaration sought. I therefore have not considered MMI's entitlement to such a Declaration; however I would think that even WAANUFACTURERS MUTUAL INSURANCE LTD v NAM MANUFACTURERS MUTUAB INSURANCE LTD v NEW WORLD FABRICATIONS PTY LTD (Samuels JA) if an entitlement were otherwise shown, such a Declaration should not be made for lack of practical utility, particularly in the absence of any claim for consequential relief. I do not, with respect, agree wholly with that statement. But I mention it to indicate that the appellant was on notice of the problem whether a declaration would answer either the award itself or a judgment incorporating it. The process open to the appellant - and this was also raised during the argument - was to have commenced independent proceedings to set aside the award on the ground of mistake. There is no doubt that in cases where parties incorporate a compromise in an order of the court made by consent, jurisdiction exists to set aside the consent order upon any ground, including fraud and mistake, upon which the agreement for compromise could be impeached see Wilding v Sanderson [1897] 2 Ch 534 and Rogers v Wentworth (Court of Appeal, 18 April 1988, unreported). The present is not a case of compromise because I take it that the appellant required to hear some evidence which established the worker's continuing incapacity. But I see no reason why common mistake, even if induced wholly by one party, should not establish a ground for rescinding an order. In my view s17(4) of the Compensation Court Act, which the appellant invoked, is an appropriate vehicle for such an application. But unfortunately the proper ground of the appellant's claim was never identified. The application was framed as one to terminate the weekly payments under the award. As Judge Herkes said: "The present application seeks not a declaration that there was no policy of insurance held by the employer at the time of the injury to Mr Nam, but seeks rather the termination of payments to the worker." The real basis for relief which would have been open under s17(4) was never pursued. I am doubtful in any case whether Judge Herkes was right in denying jurisdiction. But this is not relevant since the appellant firmly indicated that it was inviting the Court to dismiss that appeal, an invitation which the Court has no reason to refuse. The point was not argued but there may well be room for a further application under the very wide provisions of s17(4). While I would refuse, for the reasons I have given, to make the declarations sought, there are other grounds upon which the same refusal is justified, if not demanded. S17(6) of the Compensation Court Act provides:- Subject to Pt4 of this Act or s42Q of the Workers' Compensation Act 1926 - (a) no proceedings, whether for an order in the nature of prohibition, certiorari or mandamus or for a declaration or injunction or for any other relief, shall lie in respect of any decision or proceeding of the Court relating to, or on the face of the proceedings appearing to relate to, any matter within its jurisdiction; and (b) the validity of any decision or proceeding of the Court shall not be challenged in any manner. Pt4 deals with appeals from the Compensation Court to the Supreme Court "in point of law" and s42Q (the 1926 Act is now repealed) concerned appeals from Commissioners. Subs(6) is evidently designed, together with subs3, to maintain the exclusivity of the Compensation Court's jurisdiction, which preceding Acts have always asserted: see the 1926 Act s36(1) and s37(1) and s53G of the 1987 Act. It is pertinent to note that the reference in s17(6)(a) to a declaration extends the prohibition contained in s37(1). Cases such as Southern Union Insurance Co of Australia Ltd v Altinier [1969] 2 NSWR 333 and Liverpool and London and Globe Insurance Co Ltd v D W Deaves Pty Ltd and Ors [1971] 2 NSWLR 131 considered whether claims for declarations concerning the existence or construction of employers' indemnity policies should be entertained in the face 6 UNREPORTED JUDGMENTS of s36. The conclusions were not congruent. However, although this point also was not argued, the present summons challenges the award and, I am inclined to think, infringes both subs(3) and subs(6) of s17. But it is unnecessary to express a final view about that. For the reasons earlier expressed I would dismiss each appeal with costs. McHugh JA I agree with the orders proposed by Samuels JA for the reasons givenby him. Clarke JA I agree with Samuels JA. Appeal dismissed with costs.