FAI WORKERS' COMPENSATION (NSW) LTD v BARNSLEY JOINERY WORKS PTY LTD SUPREME COURT OF NEW SOUTH WALES — COURT OF APPEAL MAHONEY P, CLARKE JA and HANDLEY JA 2 August 1996 [1996] NSWCA 179 WORKERS' COMPENSATION — agency — payment and renewal notice received by broker — transition between new and old Acts — transfer of policies between companies within insurance group upon operation of new Act — Workers' Compensation Act 1926 — Workers Compensation Act 1987. The respondent had taken out a workers' compensation policy with Traders Prudent Insurance Company Ltd covering its liabilities to workers which expired at 4 pm on 30 June 1987. That company was licensed under the Workers' Compensation Act 1926 and was part of the FAI Group. This business was transacted through an insurance broker with which the Group maintained agency agreements. The respondent received a renewal notice in June 1987 which required a declaration as to the actual wages paid in 1986 and an estimate for 1987. The notice was Mahoney P. The Court has had the benefit of the written submissions and oral argument and is in a position to give a judgment. I will ask Justice Handley to give the first judgment. Handley JA. This is an appeal from a decision of Nash DCJ in which he dismissed the appellant's claim to recover a premium from the respondent for the renewal of its workers" compensation policy, with effect from 30 June 1987. The respondent had taken out a workers" compensation policy with Traders Prudent Insurance Company Ltd, a company in the FAI Group, which was a licensed insurer under the Workers" Compensation Act 1926 covering its liabilities to workers for the 1986 year which expired at 4 pm on 30 June 1987. This business was transacted through an insuranceyear and to declare the estimated wages which it would be paying to its workers during the 1987 policy year. Mr DeBijl completed the renewal notice, dated it 25 June 1987 and gave it to the broker, together with two cheques drawn in favour of the broker, one for $4,000 in payment of the broker's fees, and the other for the deposit premium on the renewal of $13,754.48. Mr DeBijl had received help from the broker in completing the renewal form and in calculating the deposit premium. The Workers Compensation Act 1987 generally commenced at 4 pm on 30 June 1987, although some provisions relating to the licensing of insurers for the purposes of the new Act commenced when the Act received Royal Assent, which was on 10 June. The 1986 workers" compensation insurer did not become a licensed insurer under the new Act. Instead the appellant, another company in the FAI Group, which was incorporated on 5 May 1987 and commenced to carry on workers" compensation insurance business at 4 pm on 30 June became its licensed insurer under the new Act. In view of the judge's finding as to the agency arrangements between the FAI Group, including the 1986 insurer, and the broker, I would conclude that the relevant policy of insurance covering the 1987 year was entered into on or about 2 UNREPORTED JUDGMENTS 25 June 1987 when Mr DeBijl handed the renewal notice and the cheque for the deposit premium to the broker. As I have said, the renewal invitation came to the respondent through the broker and the course of business which had been followed in relation toFAI Traders Prudent Insurance Co Ltd on or about 25 June 1987. In those circumstances s 14(2) of the Insurance (Agents and Brokers) Act 1984 provides that payment of the premium to an insurance broker operates as a discharge of the liability of the insured. Mr Stack relied heavily on the decision in Manufacturer's Mutual Insurance Ltd v John H Boardman Insurance Brokers Pty Limited (1994) 179 CLR 650, where the High Court held that s 14(2) does not apply unless and until a contract of insurance is entered into between the insured and the insurer. However, for the reasons I have already expressed, that decision is distinguishable because of the findings as to the authority of the broker and the making of the contract of insurance on or about 25 June 1987. Payment to the broker as agent for the FAI Group licensed insurer therefore operated as payment to that insurer. The appellant commenced to operate as the licensed insurer under the 1987 Act at 4 pm on 30 June 1987. At the same time cl 10 of Pt 15 of Schedule 6 took effect. This provided: (1) This clause applies to policies of insurance: (a) issued or renewed by insurers licensed under section 27 of the former Act at or after 4 p.m. on 31 December 1986; and (b) the subject of a re-insurance agreement with the Government Insurance Office. (2) On the commencement of Division 3 of Part 7 of this. Act, policies of insurance to which this clause applies shall be assigned in accordance with the relevant re-insurance agreement to such licensedMahoney P I agree with the orders proposed by Mr Justice Handley and with his reasons. In deference to the submissions advanced by Mr Stack and in view of the circumstances of the matter, I shall add some observations of my own. It is clear that for the year here in question, that is from 30 June 1987 to 30 June 1988, the Barnsley Company required workers" compensation insurance. This was no small matter. The material before the Court indicates that wages paid by it in a relevant year were of the order of a million dollars. It was therefore necessary for it to effect its workers" compensation insurance. It had been dealing with the third party, described as Universal Brokers Newcastle Pty Limited. That company had been involved in business with, as it was described in the evidence, the FAI Insurance Group and his Honour found that that company, the Universal Company, was the 'agent' for the FAI Insurance Group of which the plaintiff company ultimately became, at the relevant times, a member. That finding is important in the present case. No appeal has been brought against it and it stands according to its terms. But in order to ensure that there be no misunderstanding of the matter, it is relevant to indicate that Mr Ferrier, who was a director of the Universal Company, was called in evidence and questioned about his relationship with the companies of the FAI Insurance Group. He said that he had 'agency agreements' with insurers and, in particular, with 'FAI and all their subsidiary companies of which there were many'. balance of that premium and it is the way in which the payment of the 25 June 1987 is to be treated which is at the heart of the present matter. UWRUJWORKERS' COMPENSATION (NSW) LTD v BARNSLEY JOINERY WORKS PTY LTB ((2) On the commencement of Division 3 of Part 7 of this) Prima facie, the matter would appear to be concluded by the finding by the judge that the Universal Company to whom the payment was made in respect of the proposed insurance for the relevant 1987/1988 year was the agent of, inter alia, the plaintiff company. As I would infer, the payment was received by the Universal Company as agent for the plaintiff company, and accordingly that payment would go towards the premium whenever the premium was fixed and, as I would understand the matter, whenever the contract was actually made. But, it was submitted, this result does not follow. Mr Stack's argument was put in a number of different ways, but essentially his submission was that the contract of insurance for the 1987/1988 year was made only after the 1987 Workers" Compensation Act came into effect on 30 June 1987 and that therefore, because of the provisions of that Act, the payment to the agent which had already been made on 25 June 1987 could not be taken into account. In fairness to the FAI Insurance Group it is proper to say, and the judgment found, that the amount of that payment of 25 June 1987 was never passed on to the FAI Insurance Group. Apparently the Universal Company retained it. Whether that was by arrangement with the FAI Insurance Group or otherwise does not appear. No doubt it was to pass over the amount or the benefit of the amount in due course. It does not appear to have done that; reference has been made to the deed whichInsurance Co Ltd, one of the group companies. On 5 May 1987 the appellant company was formed and appears to have been the only company which held a licence entitling it to carry on insurance business under the 1987 Workers" Compensation Act. But the existence of the plaintiff company does not appear to have been then brought to the attention of the Barnsley Company nor, as far as the matter goes, of Mr Ferrier and the Universal Company. The first reference to the plaintiff company appears to have been made some time in August when, as his Honour pointed out, a document was forwarded to the Barnsley Company with the logo or description "FAI Insurance Group' but with the name of the plaintiff company upon the top of the document. That document refers to 'renewal' in respect of the insurances. It does not appear to have been brought specifically to the attention of the Barnsley Company that the company with which it was to effect the relevant insurance was no longer the Traders Prudent Company but was to be another company in the FAI Insurance Group. In fact, when the certificate of insurance was ultimately issued under the hand of a person of the name Carla Brentwood, described as 'group manager for northern New South Wales' of the FAI Insurance Group, no mention was made of the plaintiff company, reference was made merely to the FAI Insurance Group. It is no doubt, or may well have been at the time, convenient for the FAI Insurance Group to change in this way the companies with which, in a legal sense, insurance was effected. I infer no criticism of what was done in that regard. But where an amount of money has been paid, as in Orders accordingly. Counsel for the appellant: D Stack Solicitors for the appellant: Hunt and Hunt Counsel for the respondent: P Greenwood Solicitors for the respondent: Attwaters: Newcastle