State Government Insurance Office (Q) v Rees

144 CLR 549
26 ALR 341

---

(Judgment by: Stephen J)

State Government Insurance Office (Q)
v Rees

Court:

Judges: Barwick C.J.
Gibbs J.

Stephen J.Mason J.
Aickin J.

Subject References:
Companies

Hearing date: Brisbane, 28 May 1979, 29 May 1979
Judgment date: 12 October 1979

Sydney

---

Judgment by:
Stephen J

A large Queensland employer, K. D. Morris & Sons Pty. Ltd., failed for a considerable period to pay premiums due to the State Government Insurance Office (Queensland) in respect of an accident policy issued under The Workers' Compensation Act 1916 (Q.), as amended. Then, in February 1975, this employer company was ordered to be wound up.

Meanwhile the S.G.I.O. had paid to this company's workers or their dependants over a quarter of a million dollars in workers' compensation payments during the period while the company was in default of payment of premiums. This amount the S.G.I.O. is, under the Act, entitled to recover from the company and it has proved for it in the winding up.

By s. 292 (1) (c) of the Companies Act 1961 (Q.) priority in payment in a winding up is accorded to "fifthly, all amounts not exceeding in any particular case one thousand pounds due in respect of workers' compensation under any law relating to workers' compensation accrued before the relevant date". The S.G.I.O. asserts that this amount for which it has proved is entitled to that priority and it obtained a declaration to that effect in the Supreme Court of Queensland. This was reversed on appeal to the Full Court, from whence the present appeal comes.

The correctness of the S.G.I.O.'s claim depends upon whether or not that total amount in question, comprised of course of many individual payments of compensation, is within the description of amounts "due in respect of workers' compensation" within s. 292 (1) (c) of the Companies Act 1961.

The answer does not lie in any analysis of the phrase "in respect of". That phrase, signifying some relationship between one thing and another, is capable of describing relationships over a very wide range of proximity (State Government Insurance Office v. Crittenden (1966) 117 CLR 412 , at p 416 ). Were the phrase devoid of significant context, it could, I think, be taken to be descriptive of the relationship between the present indebtedness owed to the State Government Insurance Office and the subject matter of workers' compensation. However a context does exist which is in my view sufficient to confine the operation of s. 292(1)(c) to bounds too narrow to be of service to the appellant.

That context is provided by s. 292 (8) (a) of the Companies Act, which is as follows:

"(8) Notwithstanding anything in subsection (1) of this section -

(a)

paragraph (c) of that subsection shall not apply in relation to the winding up of a company in any case where the company is being wound up voluntarily merely for the purpose of reconstruction or of amalgamation with another company and the right to the compensation has on the reconstruction or amalgamation been preserved to the person entitled thereto, or where the company has entered into a contract with an insurer in respect of any liability under any law relating to workers' compensation."

I read par. (a) of sub-s. (8) as containing two distinct limbs, each concerned, in a particular circumstance, to exclude, in the case of the winding up of a company, the operation of s. 292(1)(c) and with it the priority which it confers. The second limb, which is of particular concern, deals with the circumstance that the company "has entered into a contract with an insurer in respect of any liability under any law relating to workers' compensation": where this has occurred there is to be no priority. It is not because of any actual operation of this limb upon the S.G.I.O.'s claim to priority that I regard it as fatal to that claim: counsel for the respondent very properly did not seek to rely upon any positive disentitling operation of the limb. The importance of this limb is rather for the light that it throws upon the meaning to be given to s. 292(1)(c).

It is important to recall that the Companies Act 1961 is the first so-called "uniform" companies legislation in Queensland. This may serve to explain what may otherwise seem to be curious features of s. 292, features which may be thought to ill accord with the scheme of workers' compensation as it operates in that State. The Queensland workers' compensation legislation, unlike that of some other States, confers no enforceable right upon a worker to recover compensation directly from his employer; instead recovery is exclusively from the Workers' Compensation Fund established under the legislation. The S.G.I.O. is the sole workers' compensation insurer, with which insurance by employers is mandatory.

Where a State's scheme of workers' compensation involves both compulsory insurance by employers and a worker's entitlement to payment of compensation not from his employer but exclusively from a statutory fund backed by the State's consolidated revenue, it seems curious that there should appear in the State's companies legislation any such provision as s. 292(8)(a), and particularly its second limb, or, for that matter, the priority provision of s. 292(1)(c). Their presence, while capable of other explanations, including the possible incidence of the workers' compensation legislation of other jurisdictions, is, I think, more probably simply a result of attempting to attain near-uniformity in the wording of the Companies Acts throughout Australia. Part of the price to be paid for such near-uniformity is the risk that the standard text will imperfectly accommodate itself to the statutory background against which it must operate, varying as the latter does from State to State. Part of that variable background is provided by the different schemes of workers' compensation in each State.

The significance which the second limb of s. 292(8)(a) has for the meaning to be given to s. 292(1)(c) depends upon the form taken by earlier schemes of workers' compensation, since its origin lies in these schemes. In the United Kingdom workmen's compensation was essentially a matter between master and servant. The master might, but need not, insure against his liability to compensate his servant and only in 1934, and then only in the case of workers in coal mines - Workmen's Compensation (Coal Mines) Act, 1934 (UK) - was insurance made compulsory. Should an insolvent employer be insured the worker might stand in the employer's shoes and exercise the employer's rights against the insurer - Workmen's Compensation Act, 1925 (UK), s. 7(1): were the employer uninsured the amount of compensation due to the worker was given priority for purposes both of bankruptcy and of liquidation (s. 7 (3)). This latter provision was, by s. 7 (5), expressly made inapplicable when the employer was insured, that is, where "the bankrupt or the company (i.e., the employer) has entered into such a contract with insurers as aforesaid". This was, no doubt, because s. 7(1) was seen as caring for such cases. Moreover the section as a whole was inapplicable where an employer's liquidation was voluntary and was for the purpose of reconstruction or amalgamation - s. 7(6) - see generally Willis's Workmen's Compensation, 24th ed. (1926), pp. 146 et seq. These references are taken from the Act of 1925 to illustrate the statutory scheme in the United Kingdom; in essence the earlier Act of 1906 was to the same effect: Halsbury's Laws of England, 1st ed., vol. 20, pars. 423, 464. The origin of both limbs of s. 292(8)(a) may be seen in these provisions of the United Kingdom scheme of workmen's compensation, which, of course, also provides the model for s. 292(1)(c) itself.

Queensland's workers' compensation legislation never followed the United Kingdom model in the safeguards it provided against the insolvency of employers. The first such legislation, The Workers' Compensation Act 1905 (Q.), involved no principle of compulsory insurance. It sought to safeguard a worker against the employer's insolvency not by anticipating the means adopted one year later, in 1906, in the United Kingdom but rather by following the model of the earlier and then still current English Act of 1897, which conferred upon the worker a first charge over any amount due to the insolvent employer from a workers' compensation insurer - see Blair, Workers' Compensation (Q.) (1906), pp. 110-111. However in 1916 the State's legislative scheme of workers' compensation was altered radically. Following the pattern of the Workers' Compensation Act 1914 (Vict.), insurance became obligatory: The Workers' Compensation Act 1916 (Q.), s. 8. But, unlike the Victorian Act, a monopoly State insurer, then called the State Accident Insurance Office, was established (ss. 4 and 8), and the present system whereby a fund, rather than the employer, is made liable to meet claims for payment of compensation was established (s. 9(1)).

Since, under this new scheme, workers looked to a fund for their compensation it was no longer necessary to safeguard them against the insolvency of their employers. Accordingly neither the old remedy by way of first charge which the Act of 1905 afforded nor the remedies available to workers under United Kingdom legislation appeared in the Queensland legislation of 1916, nor were they expressly provided for in the insolvency or company legislation of that State, although the latter did referentially invoke the priorities of the Commonwealth bankruptcy legislation when such legislation came to govern the field. It was only upon the introduction of the Companies Act 1961 (Q.), the so-called Uniform Act, that by s. 292 the legislature of the State expressly conferred priority upon amounts due in respect of workers' compensation and qualified that priority by the terms of sub-s. (8).

Whatever may be thought of the need either for that priority or for qualifications upon it in the case of compensation due under Queensland's workers' compensation legislation, the origins both of the priority and of its associated qualifications are clear. Arising as they did in the context of schemes of workers' compensation where the worker looked to the employer for payment of compensation, they were designed to ensure so far as possible that those entitled to receive compensation from an employer would receive that compensation from the employer despite the latter's insolvency. When the Workmen's Compensation Act, 1906 (UK) spoke, in s. 5(3), of amounts "due in respect of" compensation, those were amounts due to and recoverable by the worker or his dependants from the employer. So too when the same words appeared in s. 7(3) of the later United Kingdom Act of 1925 and in s. 264 of the Companies Act, 1929 (UK). The proviso to s. 84(1)(f) of the Bankruptcy Act 1924 (Cth) affirms that the same words appearing in that paragraph bore an identical meaning.

The same phrase, amounts "due in respect of" workers' compensation, in s. 292 (1) (c) of the Companies Act 1961 (Q.) should be given no different meaning. There is, no doubt, a certain difficulty in attributing to a particular State legislature any distinct legislative intent in the case of individual sections of a measure which is enacted as so-called "uniform" legislation. Nevertheless, I would find it difficult to regard the legislative intent of the Queensland legislature as being to give to these words in s. 292(1)(c) any meaning different from that which they bore in these earlier Acts of other jurisdictions. Moreover, the words of s. 292(1)(c), while capable of the broad meaning for which the appellant contends, by no means make its adoption mandatory: they accord equally well with the narrower meaning urged on behalf of the respondents. In such circumstances I regard the considerations to which I have referred as compelling in favour of the respondents: the priority conferred by s. 292(1)(c) must, I think, be regarded as not extending to the debt proved for by the S.G.I.O.

I would accordingly dismiss this appeal.